The conflict between Illini Bancorp and its principal shareholders took another turn this week when Ida R. Noll sued the company over its poison pill plan.
The Noll family owns about one-third of Springfield, Ill.-based Illini. The family has been feuding with management since Ms. Noll's husband, Jon Gray Noll, was banned from banking in 1992.
"This is the seventh attempt by members of the Noll family to harass in the last two years," said Bernard McHone, president of $120 million-asset Illini.
In her lawsuit Ms. Noll is asking the court to nullify Illini's shareholder rights plan-the poison pill-or to activate it. Nullifying it would let the Nolls sell their shares without fear of Illini diluting their stake in the company. Activating it would reduce Ms. Noll's stake but, since the poison pill can only be activated once, let other family members sell their shares as a package.
"The Nolls want the restriction lifted off of their stock," said Thomas C. Erb, their lawyer. "They're trying to exit their ownership interest."
Illini's board adopted the poison pill in June 1997, Mr. McHone said, so that all shareholders would be treated equally should a buyer approach the company. The plan calls for Illini to dilute its stock if a hostile party accumulates more than 10% of the company's shares; the holder of the 10%- plus stake would be denied any extra shares under the plan.
Ms. Noll crossed the 10% threshold in April when she received a gift of stock from her mother, but Illini's board ruled she was not a hostile party. By not activating the poison pill, Illini prevented the remaining Nolls from selling to a potential hostile acquirer, who would then become subject to the plan.
The board then amended the poison pill to allow gifts of stock among the Nolls.
Ms. Noll controls shares in Illini once owned by her husband. The stake was transferred to her after the Federal Deposit Insurance Corp. banned Mr. Noll from banking for violating rules that govern loans to bank insiders.
Mr. Noll, then Illini's chief executive officer and attorney, did not disclose to Illini's board that he intended to use an $800,000 loan to buy State Bank of Havana (Ill.). He was later forced to divest his interest in State Bank because he had misrepresented his financing in his acquisition application, according to FDIC records.
Since then, tensions have run high between the family and Illini's management. In 1996, Mae H. Noll, Mr. Noll's mother, sued Illini and its chairman, alleging that it was positioning itself for a sale without the Nolls' approval. That suit was later dropped.
Mae Noll shifted her outlook in February 1997 when she filed a letter with the Securities and Exchange Commission suggesting that Illini be sold. She criticized Illini for lackluster performance and promised to sell her stock to the highest bidder if Illini could not find a buyer.
Illini this year offered to buy Ms. Noll's shares "for an attractive price," according to Theodore L. Eissfeldt, Illini's lawyer, but she refused. Mr. Erb, however, noted that Illini had not made its offer to buy the shares until after it adopted the poison pill.
Ida Noll is not the first shareholder to sue over Illini's poison pill. Mary Quinn filed a class-action this month to try to force Illini to dilute its shares.
Mr. McHone said Ms. Quinn was fired from the company in October 1996 for leaking confidential bank documents to Jon Gray Noll. Ms. Quinn's lawyer, James W. Ackerman, would not comment on his client's employment history at Illini.
Mr. McHone said he is looking forward to an opportunity to meet Ms. Quinn and the Nolls in court. But Mr. Erb said Illini's defense is weak because its poison pill discriminates against the Nolls.
"They're hanging by a thread," Mr. Erb said.
