Item 4. Submission of Matters to a Vote of Security Holders.
On August 16, 1996, the Company held its annual meeting of
Shareholders. At that time, various matters were submitted for a vote of the
Shareholders. The Company's Certificate of Incorporation in effect as of that
date provided that certain matters required the affirmative vote of
shareholders of record entitled to vote at least 80% of the Class A Common
Stock. For purposes of this requirement, the Class B Common Stock at all times
had equal voting rights and was deemed to be converted into Class A Common
Stock with equal voting privileges.
Subsequent to the annual meeting, the Company reported that the
shareholders had approved various actions.
In or about January 1997, the then Board of Directors approved a filing
with the Secretary of State for the State of Delaware in which the Directors
voided the "supermajority" provision requirement set forth in the Company's
Articles of Incorporation had not been validly adopted and, therefore, a
majority of the issued and outstanding Class A Common Stock was sufficient to
amend the Articles of Incorporation and initiate certain actions. In reliance
upon this position, the then Board of Directors authorized the Company to
prepare and file various documents with the Secretary of State for the State of
Delaware increasing authorized number of shares and taking other corporate
The Plan of Reorganization specifically provides that the action taken
for the Board of Directors in January, 1997 was inaccurate, illegal and rescinds
all such filings.
The Plan of Reorganization, as confirmed by the United States
Bankruptcy Court, authorized the Company to file Amended Articles of
Incorporation which, among other things, established a new class of stock, to be
known as "Special Shares." The Amended Articles of Incorporation authorize the
issuance of seven shares of Special Stock, of which, three have been issued. The
Shareholders owning the Special Stock are entitled to elect two members to the
Board of Directors, the remaining Directors to be elected by the Class A
Shareholders. The three shares of Special Stock elected Messrs. Richard
Cascarilla and Jeff Hartman as members of the Company's Board of Directors. The
remaining Director, was elected by the owners of the Class B Common Stock,
pursuant to certain preferential voting rights, which have since been rescinded.
Pursuant to the Amended Articles of Incorporation, the Board of
Directors, which is currently fixed at three, can be increased to no more than
seven members. The number of Directors can be increased only by the affirmative
vote of the Board of Directors.
The rights of the "Special Stock" can be modified only by consent of
the majority of the Directors.