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SCHEDULE 14C INFORMATION
INFORMATION STATEMENT
PURSUANT TO SECTION 14(C) OF THE SECURITIES EXCHANGE ACT OF 1934
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Check the appropriate box:
[ ] Preliminary Information Statement
[ ] Confidential, for Use of the Commission Only (as permitted by Rule
14c-5(d)(2))
[X] Definitive Information Statement
CONSUMERS FINANCIAL CORPORATION
(Name of registrant as Specified in its Charter)
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[ ] Fee computed on table below per Exchange Act Rules 14c-5(g) and 0-11
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the amount on which the filing fee is calculated and
state how it was determined): . . . . . . . . . . . . . . . .
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CONSUMERS FINANCIAL CORPORATION
132 Spruce Street
Cedarhurst, New York 11516
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NOTICE OF SPECIAL MEETING OF SHAREHOLDERS
TO BE HELD ON AUGUST 13, 2003
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Dear Shareholders:
A special meeting of shareholders of Consumers Financial Corporation, a
Pennsylvania corporation (the "Company"), will be held on August 13, 2003 at
10:00 a.m. local time, at 132 Spruce Street, Cedarhurst, New York for the
following purposes:
1. To consider and vote upon a proposal to amend the Company's Articles
of Incorporation:
a. To effect a one-for-10 reverse stock split of the Company's
common stock (the "Common Stock") by reducing the number of
issued and outstanding shares of Common Stock from 5,276,781 to
approximately 527,678 (the "Reverse Split"); and
b. To authorize 50 million shares of capital stock of the Company,
of which 40 million shares will relate to Common Stock and 10
million shares will relate to preferred stock (including the
existing 632,500 shares of convertible preferred stock, series
A), subject to further designation by the Board of Directors of
the Company; and
c. To permit action upon the written consent of less than all
shareholders of the Company, pursuant to section 2524 of the
Pennsylvania Business Corporation Law of 1988.
2. To transact such other business as may properly come before the
special meeting and any adjournment or postponement thereof.
Only shareholders of record at the close of business on July 23, 2003 will
be entitled to receive this Information Statement and notice of the special
meeting or any adjournment or postponement thereof.
By Order of the Board of Directors,
/S/ Shalom S. Maidenbaum
SHALOM S. MAIDENBAUM
Secretary
Cedarhurst, New York
July 24, 2003
CONSUMERS FINANCIAL CORPORATION
132 SPRUCE STREET
CEDARHURST, NEW YORK 11516
INFORMATION STATEMENT
FOR THE SPECIAL MEETING OF SHAREHOLDERS
TO BE HELD ON AUGUST 13, 2003
INTRODUCTION
This Information Statement is being furnished to the shareholders of
Consumers Financial Corporation, a Pennsylvania corporation (the "Company"), to
inform them of a special meeting of shareholders. This meeting (referred to
herein as the "Special Meeting") will be held on August 13, 2003 at 132 Spruce
Street, Cedarhurst, New York, at 10:00 a.m. local time. Only shareholders of
record at the close of business on July 23, 2003 (the "Record Date") will be
entitled to receive this Information Statement and to vote at the Special
Meeting. This Information Statement and the Notice of Special Meeting are first
being mailed to the Company's shareholders on or about July 24, 2003.
At the Special Meeting, holders of common stock (the "Common Stock") of the
Company will be asked to consider and vote upon a proposal to amend the
Company's Articles of Incorporation (i) to effect a one-for-10 reverse stock
split of the Company's common stock (the "Common Stock") by reducing the number
of issued and outstanding shares of Common Stock from 5,276,781 to approximately
527,678; (ii) to authorize 50 million shares of capital stock of the Company, of
which 40 million shares will relate to Common Stock and 10 million shares will
relate to preferred stock (including the existing 632,500 shares of convertible
preferred stock, series A), subject to further designation by the Board of
Directors of the Company; and (iii) to permit action upon the written consent of
less than all shareholders of the Company, pursuant to section 2524 of the
Pennsylvania Business Corporation Law of 1988 (the "PBCL").
CFC Partners, Ltd., a New York corporation ("CFC Partners"), owns a
majority (51.2%) of the Company's issued and outstanding shares of Common Stock
and intends to vote to approve the proposal described in this Information
Statement. Accordingly, no proxies will be solicited and no action is required
on your behalf. The cost of printing and distributing this Information Statement
and holding the Special Meeting (including the reimbursement of certain parties
for their expenses in forwarding this Information Statement to beneficial owners
of the Common Stock) will be paid by the Company.
The Company's principal executive offices are located at 132 Spruce Street,
Cedarhurst, New York 11516. The Company also maintains an office at 1525 Cedar
Cliff Drive, Camp Hill, Pennsylvania 17011.
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THIS DOCUMENT IS REQUIRED UNDER THE FEDERAL SECURITIES LAWS AND IS
PROVIDED SOLELY FOR YOUR INFORMATION. WE ARE NOT ASKING YOU FOR A
PROXY AND YOU ARE REQUESTED NOT TO SEND US A PROXY.
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1
INFORMATION REGARDING THE PROPOSAL
GENERAL
The proposal to amend the Company's Articles of Incorporation is described
below. A copy of the Articles of Incorporation, as amended to reflect the
changes contemplated by the proposal, is attached to this Information Statement
as Exhibit A.
AMENDMENT OF ARTICLES OF INCORPORATION TO EFFECT A REVERSE STOCK SPLIT
Purpose: The Company's Board of Directors has unanimously adopted a
resolution seeking shareholder approval to amend the Articles of Incorporation
to effect a one-for-10 reverse stock split (the "Reverse Split") of the
Company's Common Stock. The Board of Directors believes that the Reverse Split
is in the Company's best interests in that it may increase the trading price of
the Common Stock. An increase in the price of the Common Stock should, in turn,
generate greater investor interest in the Common Stock, thereby enhancing the
marketability of the Common Stock to the financial community. In addition, the
resulting reduction in the number of issued and outstanding shares of Common
Stock, together with the proposed increase in the number of authorized shares of
Common Stock, as discussed below, will provide the Company with additional
authorized but unissued shares which could be utilized for future acquisitions
or mergers or to otherwise carry out the Company's business objectives.
Effect: The immediate effect of the Reverse Split will be to reduce the
number of issued and outstanding shares of Common Stock from 5,276,781 to
approximately 527,678. Although the Reverse Split may also increase the market
price of the Common Stock, the actual effect of the Reverse Split on the market
price cannot be predicted. The market price of the Common Stock may not rise in
proportion to the reduction in the number of shares outstanding as a result of
the Reverse Split. Further, there is no assurance that the Reverse Split will
lead to a sustained increase in the market price of the Common Stock. The
market price of the Common Stock may also change as a result of other unrelated
factors, including the Company's operating performance and other factors related
to its business as well as general market conditions. The Reverse Split will
affect all of the holders of the Company's Common Stock uniformly and will not
affect any shareholder's percentage ownership interest in the Company or
proportionate voting power, except for insignificant changes that will result
from the rounding of fractional shares either up or down (see discussion below).
Procedure for Effecting Reverse Split: The Reverse Split of the
Company's Common Stock will become effective upon the filing by the Company of
its amended Articles of Incorporation with the Pennsylvania Secretary of State
(the "Effective Date"). The Reverse Split will take place on the Effective Date
without any action on the part of the holders of the Common Stock and without
regard to the date current certificates representing shares of Common Stock are
physically surrendered for certificates representing the number of shares of
Common Stock each shareholder is entitled to receive as a result of the Reverse
Split. New certificates of Common Stock will be issued in due course as old
certificates are tendered to the Company's transfer agent, StockTrans, Inc.,
which firm is also acting as the exchange agent in connection with the Reverse
Split.
Fractional Shares: No fractional shares will be issued in connection
with the Reverse Split. Shareholders who would otherwise be entitled to receive
fractional shares because they hold a number of shares of Common Stock that is
not evenly divisible by 10 will have the number of new shares to which they are
entitled rounded to the nearest whole number of shares. The number of new
shares will be rounded up if the fractional share is equal to or greater than
0.5 and rounded down if the fraction is less than 0.5. No shareholders will
receive cash in lieu of fractional shares.
Federal Income Tax Consequences of Reverse Split: The following summary
of certain material federal income tax consequences of the Reverse Split does
not purport to be a complete discussion of all of the possible federal income
tax consequences and is included for general information only. Further, it does
not address any state, local, foreign or other income tax consequences, nor does
it address the tax consequences to shareholders that are subject to special tax
rules, such as banks, insurance companies, regulated investment companies,
personal holding companies, foreign entities, nonresident alien individuals,
broker-dealers and tax-exempt entities. The discussion is based on the United
States federal income tax laws as of the date of this Information Statement.
Such laws are subject to change retroactively as well as prospectively. This
summary also assumes that the shares of the Company's Common Stock are held as
"capital assets," as defined in the Internal Revenue Code of 1986, as amended
(i.e., generally, property held for investment). The tax treatment of a
shareholder may vary depending on the facts and circumstances of such
shareholder. EACH SHAREHOLDER IS URGED TO CONSULT WITH SUCH SHAREHOLDER'S TAX
ADVISOR WITH RESPECT TO THE PARTICULAR TAX CONSEQUENCES OF THE REVERSE SPLIT.
2
No gain or loss should be recognized by a shareholder upon the
shareholder's exchange of shares pursuant to the Reverse Split. The aggregate
tax basis of the shares received in the Reverse Split will be the same as the
shareholder's aggregate tax basis in the shares exchanged. The shareholder's
holding period for the shares received in the Reverse Split will include the
period during which the shareholder held the shares surrendered as a result of
the Reverse Split. The Company's views regarding the tax consequences of the
Reverse Split are not binding upon the Internal Revenue Service or the courts,
and there is no assurance that the Internal Revenue Service or the courts would
accept the positions expressed above. The state and local tax consequences of
the Reverse Split may vary significantly as to each shareholder, depending on
the state in which such shareholder resides.
No Dissenters' Rights: Pursuant to the PBCL, the holders of the Company's
Common Stock are not entitled to dissenters' rights in connection with the
Reverse Split. Furthermore, the Company does not intend to independently provide
those shareholders with any such rights.
AMENDMENT OF ARTICLES OF INCORPORATION TO INCREASE NUMBER OF AUTHORIZED SHARES
Purpose: The Company's Board of Directors has unanimously adopted a
resolution seeking shareholder approval to amend the Articles of Incorporation
to increase the number of authorized shares of capital stock to 50 million, 40
million of which will relate to Common Stock and 10 million of which will relate
to preferred stock. The Board of Directors believes that this increase in the
number of authorized shares is in the best interest of the Company in that it
will provide the Company with available shares which could be issued for various
corporate purposes, including acquisitions, stock dividends, stock splits, stock
options, convertible debt and equity financings, as the Board of Directors
determines in its discretion. The Board further believes that the increase in
the number of authorized shares of Common Stock will enable the Company to
promptly take advantage of market conditions and the availability of favorable
opportunities without the delay and expense associated with holding a special
meeting of shareholders. Except for the issuance of 353,000 shares of Common
Stock to consultants of the Company to be effective prior to the Reverse Split
(and therefore to become 35,300 shares of Common Stock after the Reverse Split)
and registered pursuant to the filing of an S-8 Registration Statement, the
Company presently has no specific plans, arrangements or understandings, either
written or oral, to issue any of the additional authorized shares of Common
Stock or preferred stock.
Effect: The issuance by the Company of any additional shares of Common
Stock would dilute both the equity interests and the earnings per share of
existing holders of the Common Stock. Such dilution may be substantial,
depending upon the amount of shares issued. The newly authorized shares of
Common Stock will have voting and other rights identical to those of the
currently authorized shares of Common Stock. The newly authorized preferred
stock will have voting and other rights as determined by the Board of Directors.
No Dissenters' Rights: Pursuant to the PBCL, the holders of the
Company's Common Stock are not entitled to dissenters' rights in connection with
the increase in the number of authorized shares. Furthermore, the Company does
not intend to independently provide those shareholders with any such rights.
AMENDMENT OF ARTICLES OF INCORPORATION TO PERMIT ACTION UPON WRITTEN CONSENT
Purpose: The Company's Board of Directors has unanimously adopted a
resolution seeking shareholder approval to amend the Articles of Incorporation
to permit action upon the written consent of less than all shareholders of the
Company, pursuant to section 2524 of the PBCL. The Board of Directors believes
that this amendment is in the best interest of the Company because it will
reduce the time and expense associated with proxy solicitations.
Effect: This amendment will have the practical effect of permitting CFC
Partners to approve, in most instances, actions requiring shareholder consent.
The Company will continue to be subject to the reporting obligations of the
Securities Exchange Act of 1934, including distribution of an information
statement in instances where a full proxy solicitation is not required.
No Dissenters' Rights: Pursuant to the PBCL, the holders of the
Company's Common Stock are not entitled to dissenters' rights in connection with
this amendment. Furthermore, the Company does not intend to independently
provide those shareholders with any such rights.
3
INTERESTS OF CERTAIN PERSONS IN THE PROPOSAL
No director, executive officer, associate of any director or executive
officer or any other person has any substantial interest, direct or indirect, by
security holdings or otherwise, in the proposal to amend the Articles of
Incorporation which is not shared by all other holders of the Company's Common
Stock. Two of the Company's current directors and officers are affiliated with
CFC Partners, the Company's majority shareholder. Donald J. Hommel and Shalom S.
Maidenbaum, who are the directors and officers of the Company are also the
directors, officers and, together with Michael P. Ehrenhaus, the sole
shareholders of CFC Partners. Although neither Mr. Hommel, Mr. Maidenbaum nor
Mr. Ehrenhaus own any shares of Common Stock directly, each of these individuals
may be deemed to be the beneficial owner of the 2,700,000 shares of Common Stock
owned by CFC Partners. See "Security Ownership of Certain Beneficial Owners and
Management."
DESCRIPTION OF CAPITAL STOCK
The authorized capital stock of the Company consists of the following:
COMMON STOCK
As of the Record Date, there were 10,000,000 authorized shares of Common
Stock with a stated value of $.01 per share, of which 5,276,781 shares were
issued and outstanding (including 2,700,000 owned by CFC Partners) and 4,723,219
shares were authorized but unissued. Immediately following the approval of the
increase in the number of authorized shares of Common Stock and the Reverse
Split, as described previously, there will be 40 million shares of Common Stock
authorized, of which approximately 527,678 will be issued and outstanding and
approximately 39,472,322 will be authorized but unissued. The holders of the
Common Stock vote as a single class and are entitled to one vote per share on
all matters to be voted on by the shareholders and have the right of cumulative
voting in connection with the election of directors. The holders of Common Stock
are entitled to receive pro rata dividends, when and as declared by the Board of
Directors in its discretion, out of funds legally available therefor, but only
if all dividends on the preferred stock have been paid in accordance with the
terms of such preferred stock and there exists no deficiency in the sinking fund
for the preferred stock.
Dividends on the Common Stock are declared by the Board of Directors. The
payment of dividends on the Common Stock in the future, if any, will be
subordinate to the preferred stock, must comply with the provisions of the PBCL
and will be determined by the Board of Directors. In addition, the payment of
such dividends will depend on the Company's financial condition, results of
operations, capital requirements and such other factors as the Board of
Directors deems relevant. See "Description of Capital Stock - Common Stock."
8 1/2% CONVERTIBLE PREFERRED STOCK, SERIES A
As of the Record Date, there were 632,500 authorized shares of preferred
stock (the "Preferred Stock"), of which 75,326 shares were issued and
outstanding. The Preferred Stock has a liquidation preference of $10.00 per
share and is currently convertible at any time, unless previously redeemed, into
shares of Common Stock at the rate of 1.482 shares of Common Stock for each
share of Preferred Stock (equivalent to a conversion price of $6.75). The
Preferred Stock is currently redeemable at the option of the Company at $10.00
per share. On the Effective Date of the Reverse Split, as described above, the
Preferred Stock will become convertible, unless previously redeemed, into shares
of Common Stock at the rate of .1482 shares of Common Stock for each share of
Preferred Stock (equivalent to a conversion price of $67.50).
The terms of the Preferred Stock require the Company to make annual
payments to a sinking fund. Such payments were to have commenced on July 1,
1998. The Preferred Stock terms also provide that any purchases of Preferred
Stock by the Company will reduce the sinking fund requirements by an amount
equal to the redemption value ($10.00 per share) of the shares acquired. As a
result of the Company's purchases of Preferred Stock in the open market and in a
tender offer completed on August 23, 2002, no sinking fund payment for the
Preferred Stock is due until July 1, 2006. Following the completion of the
tender offer, the Company deposited $331,434 into a bank trust account for the
benefit of the holders of the Preferred Stock who did not tender their shares of
Preferred Stock. The Company is required to use the funds deposited into the
trust account only to pay dividends due on the Preferred Stock or for other
distributions to the remaining preferred shareholders.
4
Annual dividends at the rate of $.85 per share are cumulative from the date
of original issue and are payable quarterly on the first day of January, April,
July and October. The dividends payable on January 1 and April 1, 2003 were not
declared or paid by the Company. When the Company is in arrears as to the
preferred dividends or sinking fund appropriations for the Preferred Stock,
dividends to the holders of the Common Stock, as well as redemptions and
acquisitions by the Company of shares of Common Stock, are restricted. If the
Company is in default in an aggregate amount equal to four quarterly preferred
dividends, the holders of Preferred Stock are entitled to elect two additional
board members to the then existing Board of Directors while such arrearage
exists.
Except in certain limited circumstances, the holders of Preferred Stock
have no voting rights; however, they can vote as a single class when the Company
attempts to (i) sell, transfer or dispose of all or substantially all of the
property, business or assets of the Company or participate in a statutory share
exchange whereby the Preferred Stock or the Common Stock is converted into other
securities or property or in a consolidation or merger of the Company with any
corporation, provided, however, that this restriction shall not prevent any such
statutory share exchange, consolidation or merger or require such separate class
vote if none of the preferences or other rights of the holders of the Preferred
Stock shall be adversely affected thereby, and if the corporation resulting from
or surviving any such statutory share exchange, consolidation or merger shall
not have authorized or outstanding, after such transaction, any preferred stock
or other class of shares ranking prior to or on a parity with the Preferred
Stock with respect to the payment of dividends or the distribution of assets in
liquidation; or (ii) amend the Articles of Incorporation or By-Laws of the
Company so as to affect adversely any of the preferences or other rights of the
holders of the Preferred Stock; or (iii) authorize any additional series of
preferred stock, any class of stock ranking prior to the Preferred Stock with
respect to either the payment of dividends or the distribution of assets in
liquidation or any securities convertible into preferred stock or any such
shares ranking prior thereto.
CHANGE IN CONTROL OF COMPANY
At a special meeting of shareholders held on January 9, 2003, the Company's
common shareholders voted in favor of a proposal to reinstate the voting rights
of the 2,700,000 shares of the Company's Common Stock owned by CFC Partners. As
a result, CFC Partners controls approximately 51.2% of the total issued and
outstanding shares of Common Stock. CFC Partners acquired the 2,700,000 shares
on August 28, 2002 through the issuance by the Company of new common shares.
Under Pennsylvania laws, these shares were not entitled to vote on any matters
unless and until such voting rights were restored by the holders of a majority
of the outstanding common shares of the Company, excluding the shares owned by
CFC Partners. CFC Partners paid $.04 per share, or $108,000, for its shares of
Common Stock of the Company and used funds from its available cash balances to
complete the acquisition.
[THE REMAINDER OF THIS PAGE INTENTIONALLY LEFT BLANK]
5
SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND MANAGEMENT
The following table sets forth, as of July 23, 2003, the beneficial
ownership of the Company's Common Stock (i) by any person or group known by the
Company to beneficially own more than 5% of the outstanding Common Stock, (ii)
by each Director and executive officer and (iii) by all Directors and executive
officers as a group. Unless otherwise indicated, the holders of the shares shown
in the table have sole voting and investment power with respect to such shares.
The address of all individuals for whom an address is not otherwise indicated is
132 Spruce Street, Cedarhurst, New York 11516.
AMOUNT AND
NATURE OF
BENEFICIAL PERCENT OF
NAME AND ADDRESS OF BENEFICIAL OWNER OWNERSHIP CLASS
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Principal Shareholders:
CFC Partners, Ltd.
132 Spruce Street
Cedarhurst, New York 11516 2,700,000(1) 51.17%
Stephen J. Burns
3922 Wrexam Court
Bensalem, Pennsylvania 19020 323,000 6.12%
Michael P. Ehrenhaus, M.D. 0(1) ---
Directors and Executive Officers:
Jack I. Ehrenhaus 0 ---
Donald J. Hommel(2) 0(1) ---
Shalom S. Maidenbaum, Esq.(2) 0(1) ---
William T. Konzynin, M.D. 0 ---
All Directors and Executive Officers as a group 0(1) ---
(4 persons)
(1) Mr. Hommel, Mr. Maidenbaum and Dr. Ehrenhaus each own one-third of the
outstanding common stock of CFC Partners. These individuals may each
be deemed to be beneficial owners of the 2,700,000 shares pursuant to
Rule 13d-3 of the Securities and Exchange Act of 1934, as amended.
These individuals have shared voting and investment power with respect
to the 2,700,000 shares of Common Stock.
(2) Mr. Hommel and Mr. Maidenbaum are also deemed to be principal
shareholders due to their beneficial ownership of the 2,700,000 shares
owned by CFC Partners.
AVAILABLE INFORMATION
The Company is subject to the periodic reporting requirements of the
Securities Exchange Act of 1934, as amended, and, in accordance therewith, files
reports and other information with the Commission. Such reports and other
information can be inspected and copied at the public reference facilities
maintained by the Commission at 450 Fifth Street, N.W., Washington, D.C. 20549,
at prescribed rates. Please call the Commission at (800) SEC-0330 for further
information. Copies of such materials may also be accessed electronically by
means of the Commission's home page on the Internet at "http://www.sec.gov."
6
INCORPORATION OF DOCUMENTS BY REFERENCE
The following documents filed by the Company with the Commission are
incorporated herein by reference and shall be deemed to be a part hereof:
- The Company's Annual Report on Form 10-K for the year ended December
31, 2002
- The Company's Quarterly Report on Form 10-Q for the three months ended
March 31, 2003
- The Company's Current Report on Form 8-K filed on April 29, 2003
Any document incorporated herein by reference can be obtained by contacting
the Commission as described above under "Available Information" or by contacting
the Company by mail at 132 Spruce Street, Cedarhurst, New York 11516, by
telephone at (516) 792-0900 or by facsimile at (516) 792-0800. The Company will
provide the documents incorporated by reference without charge upon such written
or oral request.
OTHER BUSINESS
The management of the Company knows of no matter other than the approval of
the proposal to amend the Company's Articles of Incorporation that is to be
brought before the Special Meeting.
The foregoing Notice and Information Statement are sent by order of the
Board of Directors.
/S/ Shalom S. Maidenbaum
SHALOM S. MAIDENBAUM, Secretary
July 24, 2003
7
EXHIBIT A
REVERSE STOCK SPLIT: At the close of business on ______________, 2003 (the
--------------------
"Effective Date"), each ten (10) shares of Common Stock of the corporation
issued and outstanding (the "Old Common Stock") shall be changed and combined
into one (1) share of Common Stock. On the Effective Date, the certificates
representing the Old Common Stock shall be deemed cancelled and shall not be
recognized as outstanding on the books of the corporation for any purpose.
Thereupon, as promptly as possible after the Effective Date, once the
corporation has received from a holder of Common Stock the certificate(s)
representing the shares of Old Common Stock he held, the corporation shall issue
and deliver to that holder of Old Common Stock in his name and at his address as
shown on the records of the corporation, a certificate for the number of shares
of Common Stock into which the shares of Old Common Stock were combined dated
the Effective Date; provided, however, that the Corporation shall not issue any
fractional shares of Common Stock but shall round the number of shares of Common
Stock to the nearest whole number of shares which each holder of Old Common
Stock would otherwise be entitled. The number of new shares will be rounded up
if the fractional share is equal to or greater than 0.5 and rounded down if the
fraction is less than 0.5. No shareholders will receive cash in lieu of
fractional shares. On the Effective Date and taking into consideration the
foregoing 10-for-1 reverse stock split, the articles of incorporation of the
corporation shall be amended and restated in full as follows:
AMENDED AND RESTATED ARTICLES OF INCORPORATION
OF
CONSUMERS FINANCIAL CORPORATION
ARTICLE I. NAME. The name of the corporation is: Consumers Financial
----
Corporation.
ARTICLE II. REGISTERED OFFICE. The address of the corporation's
------------------
registered office in this Commonwealth is 1513 Cedar Cliff Drive, Camp Hill,
Pennsylvania 17011.
ARTICLE III. CORPORATE PURPOSES. The corporation is incorporated under
-------------------
the Pennsylvania Business Corporation Law for the following purposes: to engage
in, and to do any lawful act concerning, any or all lawful business for which
corporations may be incorporated under said Business Corporation Law, including,
but not limited to, manufacturing, processing, owning, using and dealing in
personal property of every class and description, engaging in research and
development, furnishing services, and acquiring, owning, using and disposing of
real property of any nature whatsoever.
ARTICLE IV. TERM OF EXISTENCE. The term for which the corporation is to
------------------
exist is perpetual.
ARTICLE V. CAPITAL STOCK. The aggregate number of shares which the
--------------
corporation shall have authority to issue is 50,000,000, divided into 40,000,000
shares of Common Stock, without par value, and 10,000,000 shares of Preferred
Stock, par value $1.00 ("Preferred Stock"). The board of directors of the
corporation shall have the full authority permitted by law to determine the
designation and number of shares of any class or series of any class that may be
desired, and the voting rights, preferences, limitations and special rights, if
any, of the shares of any class or series of any class to the extent not
determined by or pursuant to these Articles of Incorporation.
The following is a statement of the voting rights, designations,
preferences, limitations and other special rights granted to or imposed upon the
Preferred Stock and the Common Stock. Unless otherwise provided, all section
references in this Article V shall refer to sections of the Part of Article V in
which such references are contained.
PART A
PREFERRED STOCK
The Board of Directors shall have the power and authority to divide and
classify shares of the Preferred Stock into one or more series, by determining,
fixing and altering one or more of the following:
(1) The distinctive designation of such series and the number of shares
to constitute such series; provided that, unless otherwise prohibited by the
terms of such or any other series, the number of shares of any series may be
decreased by the Board of Directors in connection with any classification or
reclassification of unissued shares and the number of shares of such series may
be increased by the Board of Directors in connection with any such
classification
or reclassification, and any shares of any series which have been redeemed,
purchased, otherwise acquired or converted into shares of Common Stock or any
other series shall become part of the authorized capital stock and be subject to
classification and reclassification as provided in this Section.
(2) Whether or not and, if so, the rates, amounts and times at which,
and the conditions under which, dividends shall be payable on shares of such
series, whether any such dividends shall rank senior or junior to or on a parity
with the dividends payable on any other series of stock, and the status of any
such dividends as cumulative, cumulative to a limited extent or non-cumulative
and as participating or non-participating.
(3) Whether or not shares of such series shall have voting rights, in
addition to any voting rights provided by law and, if so, the terms of such
voting rights.
(4) Whether or not shares of such series shall have conversion or
exchange privileges and, if so, the terms and conditions thereof, including
provision for adjustment of the conversion or exchange rate in such events or at
such times as the Board of Directors shall determine.
(5) Whether or not shares of such series shall be subject to redemption
and, if so, the terms and conditions of such redemption, including the date or
dates upon or after which they shall be redeemable and the amount per share
payable in case of redemption, which amount may vary under different conditions
and at different redemption dates; and whether or not there shall be any sinking
fund or purchase accounting respect thereof, and if so, the terms thereof.
(6) The rights of the holders of shares of such series upon the
liquidation, dissolution or winding up of the affairs of, or upon any
distribution of the assets of, the Corporation, which rights may vary depending
upon whether such liquidation, dissolution or winding up is voluntary or
involuntary and, if voluntary, may vary at different dates, and whether such
rights shall rank senior or junior to or on a parity with such rights of any
other series of stock.
(7) Whether or not there shall be any limitations applicable, while
shares of such series are outstanding, upon the payment of dividends or making
of distributions on, or the acquisition of, or the use of moneys for purchase or
redemption of, any stock of the Corporation, or upon any other action of the
Corporation, including action under this Section, and, if so, the terms and
conditions thereof.
(8) Any other preferences, rights, restrictions, including restrictions
on transferability, and qualifications of shares of such series, not
inconsistent with law and the Articles of Incorporation of the Corporation.
For the purposes hereof and of any action of the Board of Directors
providing for the classification or reclassification of any shares of capital
stock or of any other charter document of the Corporation (unless otherwise
provided in any such action or document), any series of stock of the Corporation
shall be deemed to rank:
(1) prior to another series either/as to dividends or upon liquidation,
if the holders of such series shall be entitled to the receipt of dividends or
of amounts distributable on liquidation, dissolution or winding up, as the case
may be, in preference or priority to holders of such other series;
(2) on a parity with another series either as to dividends or upon
liquidation, whether or not the dividend rates, dividend payment dates or
redemption or liquidation price per share thereof be different from those of
such others, if the holders of such series of stock shall be entitled to receipt
of dividends or amounts distributable upon liquidation, dissolution or winding
up, as the case may be, in proportion to their respective dividend rates or
redemption or liquidation prices, without preference or priority over the
holders of such other series; and
(3) junior to another series either as to dividends or upon
liquidation, if the rights of the holders of such series shall be subject or
subordinate to the rights of the holders of such other series in respect of the
receipt of dividends or the amounts distributable upon liquidation, dissolution
or winding up, as the case may be.
The foregoing authority is subject to the designation of 632,500 shares of
Preferred Stock as "Convertible Preferred Stock, Series A" by the Board of
Directors on July 28, 1987 (the "Preferred Stock Designation"). The Board of
Directors shall have no authority pursuant to these Articles to designate any
series of Preferred Stock which shall have dividend or liquidation preferences
senior to or on a parity with the Convertible Preferred Stock, Series A or which
would be senior or superior in any respect to the shares of any other class of
preferred stock now authorized except as permitted by the terms of authorization
of such shares as long as such shares remain issued and outstanding. The
conversion rate of the Series A Preferred Stock shall be adjusted, as described
in paragraph (j)(2)(A) of the Preferred Stock Designation, for the Reverse Stock
Split described in Section 4 below.
PART B
COMMON STOCK
Section 1. Voting Rights. At all meetings of the shareholders of the
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corporation, the holders of Common Stock shall be entitled to one vote for each
share of Common Stock held by them, respectively.
Section 2. Dividend and Other Distribution Rights. Whenever full
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dividends or other distributions on all classes or series of any class of the
Preferred Stock at the time outstanding having preferential dividend or other
distribution rights shall have been paid or declared and set apart for payment
or otherwise made, then such dividends (payable in cash or otherwise) or other
distributions, as may be determined by the board of directors may be declared
and paid or otherwise made on the Common Stock, but only out of funds legally
available for the payment of such dividends under 15 Pa.C.S. Sec. 1551 (relating
to distributions to shareholders) or any superseding provision of law.
Section 3. Liquidation Rights. In the event of any liquidation,
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dissolution or winding up of the corporation, the assets and funds of the
corporation available for distribution to shareholders, after paying or
providing for the payment to the holders of shares of all classes or series of
any class of the Preferred Stock of the full distributive amounts to which they
are respectively entitled, as provided in Part A, shall be divided among and
paid to the holders of Common Stock, according to their respective shares.
Section 4. Reverse Stock Split. At the close of business on _________,
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2003 (the "Effective Date"), each ten (10) shares of Common Stock issued and
outstanding (the "Old Common Stock") shall be changed and combined into one (1)
share of Common Stock. On the Effective Date, the certificates representing the
Old Common Stock shall be deemed cancelled and shall not be recognized as
outstanding on the books of the corporation for any purpose. Thereupon, as
promptly as possible after the Effective Date, once the corporation has received
from a holder of Common Stock the certificate(s) representing the shares of Old
Common Stock he held, the corporation shall issue and deliver to that holder of
Old Common Stock in his name and at his address as shown on the records of the
corporation, a certificate for the number of shares of Common Stock into which
the shares of Old Common Stock were combined dated the Effective Date; provided,
however, that the Corporation shall not issue any fractional shares of Common
Stock but shall round the number of shares of Common Stock to which each holder
of Old Common Stock would otherwise be entitled to the nearest number of whole
shares.
ARTICLE VI. ACTION BY LESS THAN UNANIMOUS CONSENT. Any action which may
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be taken at a meeting of shareholders or a class of shareholders may be taken
without a meeting if a consent or consents in writing to such action, setting
forth the action so taken, shall be signed by shareholders entitled to cast the
minimum number of votes that would be necessary to authorize the action at a
meeting at which all shareholders entitled to vote thereon were present and
voting. The consents shall be filed with the secretary of the corporation.