-----BEGIN PRIVACY-ENHANCED MESSAGE----- Proc-Type: 2001,MIC-CLEAR Originator-Name: webmaster@www.sec.gov Originator-Key-Asymmetric: MFgwCgYEVQgBAQICAf8DSgAwRwJAW2sNKK9AVtBzYZmr6aGjlWyK3XmZv3dTINen TWSM7vrzLADbmYQaionwg5sDW3P6oaM5D3tdezXMm7z1T+B+twIDAQAB MIC-Info: RSA-MD5,RSA, JZKj96vlwucliBmtOfmj9AbxM+nSRJdRzt71wCsD1uXk1MOcuz8Q20O1c3PtezyT iIxXpYN0+uHjPKB2B09M0w== 0000950148-02-000037.txt : 20020413 0000950148-02-000037.hdr.sgml : 20020413 ACCESSION NUMBER: 0000950148-02-000037 CONFORMED SUBMISSION TYPE: SC 13D PUBLIC DOCUMENT COUNT: 3 FILED AS OF DATE: 20020110 FILED BY: COMPANY DATA: COMPANY CONFORMED NAME: LC ACQUISITION CORP /CA/ CENTRAL INDEX KEY: 0001164022 STANDARD INDUSTRIAL CLASSIFICATION: [] IRS NUMBER: 943408610 STATE OF INCORPORATION: CA FISCAL YEAR END: 1231 FILING VALUES: FORM TYPE: SC 13D BUSINESS ADDRESS: STREET 1: 200 PARK AVENUE SOUTH CITY: NEW YORK STATE: NY ZIP: 10003 BUSINESS PHONE: 2124758880 SUBJECT COMPANY: COMPANY DATA: COMPANY CONFORMED NAME: MEGO FINANCIAL CORP CENTRAL INDEX KEY: 0000736035 STANDARD INDUSTRIAL CLASSIFICATION: REAL ESTATE DEALERS (FOR THEIR OWN ACCOUNT) [6532] IRS NUMBER: 135629885 STATE OF INCORPORATION: NY FISCAL YEAR END: 0831 FILING VALUES: FORM TYPE: SC 13D SEC ACT: 1934 Act SEC FILE NUMBER: 005-34539 FILM NUMBER: 2506214 BUSINESS ADDRESS: STREET 1: 4310 PARADISE RD CITY: LAS VEGAS STATE: NV ZIP: 89109 BUSINESS PHONE: 7027373700 MAIL ADDRESS: STREET 1: 4310 PARADISE RD CITY: LAS VEGAS STATE: NV ZIP: 89109 SC 13D 1 v78321sc13d.txt SCHEDULE 13D UNITED STATES SECURITIES AND EXCHANGE COMMISSION Washington, D.C. 20549 SCHEDULE 13D Under the Securities Exchange Act of 1934 (AMENDMENT NO. __)* MEGO FINANCIAL CORP. (Name of Issuer) COMMON STOCK, $.01 PAR VALUE (Title of Class of Securities) 585162100 (CUSIP Number) Paula J. Peters, Esq., Greenberg Glusker Fields Claman Machtinger & Kinsella LLP 1900 Avenue of the Stars, Suite 2100, Los Angeles, California 90067 December 13, 2001 (Date of Event which Requires Filing of this Statement) If the filing person has previously filed a statement on Schedule 13G to report the acquisition which is the subject of this Schedule 13D, and is filing this schedule because of Rule 13d-l(b)(3) or (4), check the following box [ ]. Note: Six copies of this statement, including all exhibits, should be filed with the Commission. See Rule 13d-l(a) for other parties to whom copies are to be sent. *The remainder of this cover page shall be filled out for a reporting person's initial filing on this form with respect to the subject class of securities, and for any subsequent amendment containing information which would alter disclosures provided in a prior cover page. The information required on the remainder of this cover page shall not be deemed to be "filed" for the purpose of Section 18 of the Securities Exchange Act of 1934 ("Act") or otherwise subject to the liabilities of that section of the Act but shall be subject to all other provisions of the Act (however, see the Notes). Page 1 of 7 SCHEDULE 13D - ------------------------- --------------- CUSIP No. 585162100 2 - ------------------------- --------------- - -------------------------------------------------------------------------------- 1 NAME OF REPORTING PERSON S.S. OR I.R.S. IDENTIFICATION NO. OF ABOVE PERSON LC ACQUISITION CORP. EMPLOYER IDENTIFICATION NO. 94-3408610 - -------------------------------------------------------------------------------- 2 CHECK THE APPROPRIATE BOX IF MEMBER OF A GROUP* (a) [ ] (b) [ ] - -------------------------------------------------------------------------------- 3 SEC USE ONLY - -------------------------------------------------------------------------------- 4 SOURCE OF FUNDS* OO - -------------------------------------------------------------------------------- 5 CHECK BOX IF DISCLOSURE OF LEGAL PROCEEDINGS IS [ ] REQUIRED PURSUANT TO ITEMS 2(d) or 2(e) - -------------------------------------------------------------------------------- 6 CITIZENSHIP OR PLACE OF ORGANIZATION CALIFORNIA - -------------------------------------------------------------------------------- 7 SOLE VOTING POWER 289,134(1) NUMBER OF -------------------------------------------------------- SHARES 8 SHARED VOTING POWER BENEFICIALLY 0 OWNED BY -------------------------------------------------------- EACH 9 SOLE DISPOSITIVE POWER REPORTING 289,134(1) PERSON WITH -------------------------------------------------------- 10 SHARED DISPOSITIVE POWER 0 - -------------------------------------------------------------------------------- 11 AGGREGATE AMOUNT BENEFICIALLY OWNED BY EACH REPORTING PERSON 289,134(1) - -------------------------------------------------------------------------------- 12 CHECK BOX IF THE AGGREGATE AMOUNT IN ROW (11) [ ] EXCLUDES CERTAIN SHARES* (1) - -------------------------------------------------------------------------------- 13 PERCENT OF CLASS REPRESENTED BY AMOUNT IN ROW (11) 6.1%(1) - -------------------------------------------------------------------------------- Page 2 of 7 - -------------------------------------------------------------------------------- 14 TYPE OF PERSON REPORTING* CO - -------------------------------------------------------------------------------- *SEE INSTRUCTIONS BEFORE FILLING OUT - -------------- (1) does not include 1,730,500 shares of Issuer's Common Stock that are required by Reporting Person's Articles of Incorporation to be distributed to the holders of Reporting Person's Series A and Series B Exchangeable Preferred Stock in redemption of their shares. ITEM 1. SECURITY AND ISSUER. This Schedule 13D relates to the Common Stock of Mego Financial Corp. The principal executive offices of Mego Financial Corp. are located at 4310 Paradise Road, Las Vegas, Nevada 89109 ITEM 2. IDENTITY AND BACKGROUND. (a)-(c). This statement on Schedule 13D is being filed by LC Acquisition Corp. The address of LC Acquisition Corp. is 200 Park Avenue South, New York, New York 10003. The directors and executive officers of LC Acquisition Corp. are as follows: Name, Address, etc. Position - ------------------- -------- Floyd W. Kephart Chairman of the Board and President 4310 Paradise Road Las Vegas, Nevada 89109 President and Chief Executive Officer of the Issuer Anees Din Director 2 Old Army Road Scarsdale, New York 10583 Accountant BDO Seidman, LLP 330 Madison Avenue New York, New York 10017 George Teichner Director 9601 Collins Avenue Bal Harbour, Florida 33154 Certified Public Accountant Self-employed Page 3 of 7 Alessandra Scornaienchi Secretary 200 Park Avenue South New York, New York 10003 Office Manager Union Square Partners, Ltd. Financial Advisory Services (d)-(e). During the last five years, neither LC Acquisition Corp. nor any of its executive officers or directors: (i) has been convicted in a criminal proceeding (excluding traffic violations or similar misdemeanors); or (ii) was not a party to a civil proceeding of a judicial or administrative body of competent jurisdiction and as a result of such proceeding was or is subject to a judgement, decree or final order enjoining future violations of, or prohibiting or mandating activities subject to, federal or state securities laws or finding any violation with respect to such laws. (f) LC Acquisition Corp. is a California corporation. Each of its directors and executive officers is a citizen of the United States. ITEM 3. SOURCE AND AMOUNT OF FUNDS OR OTHER CONSIDERATION. LC Acquisition Corp. was formed to make debt and equity investments in the travel and related businesses. LC Acquisition Corp. has agreed to purchase 750,000 shares of Common Stock of Mego Financial Corp. from the Issuer and 1,269,634 shares of Common Stock of the Issuer from certain selling shareholders an aggregate cash purchase price of $8,078,536. LC Acquisition Corp. is required by its Articles of Incorporation to distribute, immediately upon receipt, 1,730,500 of those shares to the holders of its Series A and Series B Exchangeable Preferred Stock in redemption of their shares. The funds for the purchases were obtained from the sale of Common and Preferred Stock of LC Acquisition Corp. Further details concerning the transaction and copies of the purchase documents are set forth in the Issuer's Proxy Statement dated January 3, 2002 (the "Proxy Statement"). ITEM 4. PURPOSE OF TRANSACTION. LC Acquisition Corp. is acquiring 289,134 shares of Common Stock of Mego Financial Corp. for investment purposes. Depending on general market and economic conditions affecting Mego Financial Corp. and other relevant factors, LC Acquisition Corp. may purchase additional securities of Mego Financial Corp. or dispose of some or all of the securities from time to time in open market transactions, private transactions or otherwise. Except as set forth herein and in the Proxy Statement, LC Acquisition Corp. has no present plans or proposals with respect to any material change in Mego Financial Corp.'s business or corporate structure or which relate to or would result in: Page 4 of 7 (a) the acquisition by any person of additional securities of Mego Financial Corp., or the disposition of securities of Mego Financial Corp.; (b) an extraordinary corporate transaction, such as a merger, reorganization or liquidation, involving Mego Financial Corp. or any of its subsidiaries; however, it is anticipated that Mego Financial Corp. will explore expansion opportunities in the travel and related businesses. (c) a sale or transfer of a material amount of assets of Mego Financial Corp. or any of its subsidiaries, other than the disposition of non-core assets; (d) any change in the present board of directors or management of Mego Financial Corp. including any plans or proposals to change the number or term of directors or to fill any existing vacancies on the board; (e) any material change in the present capitalization or dividend policy of Mego Financial Corp.; (f) any other material changes in Mego Financial Corp.'s business or corporate structure; (g) changes in Mego Financial Corp.'s charter, bylaws or instruments corresponding thereto or other actions which may impede the acquisition of control of Mego Financial Corp. by any person; (h) causing a class of securities of Mego Financial Corp. to be delisted from a national securities exchange or cease to be authorized to be quoted in an inter-dealer quotation system of a registered national securities association; (i) a class of equity securities of Mego Financial Corp. becoming eligible for termination of registration pursuant to Section 12(g)(4) of the Securities Exchange Act of 1934; or (j) any action similar to any of those enumerated above. ITEM 5. INTEREST IN SECURITIES OF THE ISSUER. (a) LC Acquisition Corp. beneficially owns 289,134 shares of Common Stock of Mego Financial Corp., or 6.1% of the number of shares to be outstanding upon the consummation of LC Acquisition Corp. 's purchases and the other transactions described in the Proxy Statement. It is anticipated that the transactions will be consummated on January 17, 2002, immediately following the Special Meeting of Shareholders of Mego Financial Corp. The Page 5 of 7 executed stock purchase arguments and the consideration for the purchases have been placed in escrow to be released upon confirmation that the shareholders of Mego Financial Corp. have approved the transactions. (b) LC Acquisition Corp. will have the sole power to vote or to direct the vote and the sole power to dispose or to direct the disposition of all the shares beneficially owned by it. (c) LC Acquisition Corp. has not during the past sixty (60) days engaged in any transactions with respect to the Common Stock of Mego Financial Corp., other than the pending purchase of 750,000 shares of Common Stock from the Issuer and 1,269,634 shares of Common Stock from certain selling shareholders, in each case for a purchase price of $4.00 per share, as reported herein and in the Proxy Statement. (d) Not applicable ITEM 6. CONTRACTS, ARRANGEMENTS, UNDERSTANDINGS OR RELATIONSHIPS WITH RESPECT TO SECURITIES OF THE ISSUER. LC Acquisition Corp. is required by its Amended and Restated Articles of Incorporation and by its Certificate of Determination, Preferences and Rights of Series B Exchangeable Preferred Stock, filed herewith as Exhibits 1 and 2 respectively, to distribute 1,730,500 shares of Issuer's Common Stock in redemption of its Series A and Series B Exchangeable Preferred Stock. LC Acquisition Corp. is a party to the following agreements, all dated December 13, 2001, with respect to Issuer's Common Stock. (i) Subscription Agreement between Mego Financial Corp. and LC Acquisition Corp. with respect to the sale and issuance of 750,000 shares of common Stock (filed as Annex B to the Proxy Statement). (ii) Securities Purchase Agreement by and among LC Acquisition Corp. and the Sellers named therein (the "Selling Shareholders") with respect to the purchase by LC Acquisition Corp. of 1,269,634 shares of Issuer's Common Stock (filed as Annex D to the Proxy Statement). (iii) Escrow Agreement No. 2 among Issuer, Reporting Person, the Selling Shareholders, the Banks named therein and Swidler Berlin Shereff Friedman, LLP as Escrow Agent (filed as Annex J to the Proxy Statement). Page 6 of 7 (iv) Escrow Agreement No. 3 among Issuer, certain of Issuer's subsidiaries, LC Acquisition Corp., certain of the Selling Shareholders and Swidler Berlin Shereff, Friedman, LLP as Escrow Agent (filed as Annex K to the Proxy Statement). (v) Registration Rights Agreement among Issuer, Reporting Person and Doerge Capital Management (filed as Annex L to the Proxy Statement). ITEM 7. MATERIAL TO BE FILED AS EXHIBITS. Exhibit 1 Amended and Restated Articles of Incorporation of LC Acquisition Corp. filed with the Secretary of State of the State of California on October 15, 2001. Exhibit 2 Certificate of Determination, Preferences and Rights of Series B Exchangeable Preferred Stock of LC Acquisition Corp., filed with the Secretary of State of the State of California on November 14, 2001. Exhibit 3 Proxy Statement for Special Meeting of Shareholders of Mego Financial Corp. dated January 3, 2002. * - -------------- * Filed with the Securities and Exchange Commission on December 31, 2001, and incorporated herein by reference. SIGNATURE After reasonable inquiry and to the best of my knowledge and belief, I certify that the information set forth in this statement is true, complete and correct. LC ACQUISITION CORP. By: /s/ FLOYD W. KEPHART -------------------------------- Floyd W. Kephart, President Dated: January 8, 2002 S-1 EX-1 3 v78321ex1.txt EXHIBIT 1 EXHIBIT 1 AMENDED AND RESTATED ARTICLES OF INCORPORATION OF LC ACQUISITION CORP. A CALIFORNIA CORPORATION The undersigned Floyd W. Kephart and Gary Horowitz hereby certify that: ONE: They are the duly elected and acting President and Secretary, respectively, of said corporation. TWO: The Articles of Incorporation of said corporation shall be amended and restated to read in full as follows: ARTICLE I The name of this corporation is LC Acquisition Corp. ARTICLE II The purpose of this corporation is to engage in any lawful act or activity for which a corporation may be organized under the General Corporation Law of California other than the banking business, the trust company business or the practice of a profession permitted to be incorporated by the California Corporations Code. ARTICLE III The name and address in the State of California of this corporation's initial agent for service of process are: Michael V. Bales, Esq. c/o Greenberg Glusker Fields Claman Machtinger & Kinsella LLP 1900 Avenue of the Stars, Suite 2100 Los Angeles, CA 90067 ARTICLE IV A. Classes of Stock. This corporation is authorized to issue two classes of stock to be designated, respectively, "COMMON STOCK" and "PREFERRED STOCK." The total number of shares which the corporation is authorized to issue is Twenty Million (20,000,000) shares. Ten Million (10,000,000) shares shall be Common Stock and Ten Million (10,000,000) shares shall be Preferred Stock. B. Rights Preferences and Restrictions of Preferred Stock. The Preferred Stock authorized by these Amended and Restated Articles of Incorporation may be issued from time to time in one or more series. The rights, preferences, privileges, and restrictions granted to and imposed on the Series A Exchangeable Preferred Stock, which Series shall consist of Two Million (2,000,000) shares, are as set forth below in this Article IV(B). The Board of Directors is hereby authorized to fix or alter the rights, preferences, privileges and restrictions granted to or imposed upon additional Series of Preferred Stock, and the number of shares constituting any such Series and the designation thereof, or of any of them. Subject to compliance with applicable protective voting rights which have been or may be granted to the Preferred Stock or Series thereof in Certificates of Determination or the corporation's Articles of Incorporation ("PROTECTIVE PROVISIONS"), but notwithstanding any other rights of the Preferred Stock or any Series thereof, the rights, privileges, preferences and restrictions of any such additional Series may be subordinated to, pari passu with (including, without limitation, inclusion in provisions with respect to liquidation and acquisition preferences, redemption and/or approval of matters by vote or written consent), or senior to any of those of any present or future class or Series of Preferred Stock or Common Stock. Subject to compliance with applicable Protective Provisions, the Board of Directors is also authorized to increase or decrease the number of shares of any Series, prior or subsequent to the issue of that Series, but not below the number of shares of such Series then outstanding. In case the number of shares of any Series shall be so decreased, the shares constituting such decrease shall resume the status which they had prior to the adoption of the resolution originally fixing the number of shares of such Series. 1. Dividend Rights. Commencing one hundred eighty (180) days after the date of issuance of the Series A Exchangeable Preferred Stock and subject to the prior rights of holders of all classes of stock at the time outstanding having prior rights as to dividends, the holders of the Series A Exchangeable Preferred Stock shall be entitled to receive, when and as declared by the Board of Directors, out of any assets of the corporation legally available therefor, cumulative dividends at an annual rate of $0.60 per share per annum. Such dividends shall be payable solely in Series A Exchangeable Preferred Stock of the corporation valued for this purpose at $6.00 per share. The Board of Directors shall not pay any dividend (other than those payable solely in the Common Stock of the corporation) to the holders of the Common Stock during any fiscal year of the corporation until it has paid all cumulative but unpaid dividends to the holders of the Series A Exchangeable Preferred Stock. 2. Liquidation Preference. (a) In the event of any liquidation, dissolution or winding up of this corporation, either voluntary or involuntary, subject to the rights of Series of Preferred Stock that may from time to time come into existence, the holders of Series A Exchangeable Preferred Stock shall be entitled to receive, prior and in preference to any distribution of any of the assets of this corporation to the holders of Common Stock by reason of their ownership thereof, an amount per share equal to the sum of $6.00 for each outstanding share of Series A Exchangeable Preferred Stock (the "ORIGINAL SERIES A ISSUE PRICE") plus all cumulative but unpaid dividends. If upon the occurrence of such event, the assets and funds thus distributed among the holders of the Series A Exchangeable Preferred Stock shall be insufficient to permit the payment to such holders of the full aforesaid preferential amounts, then, subject to the rights of Series of Preferred Stock that may from time to time come into existence, the entire assets and funds of the corporation legally available for distribution shall be distributed ratably among the holders of the Series A Exchangeable Preferred Stock in proportion to the amount of such stock owned by each such holder. (b) Upon the completion of the distribution required by subparagraph (a) of this Section 2 and any other distribution that may be required with respect to Series of Preferred Stock that may from time to time come into existence, if assets remain in this corporation, the remaining assets of this corporation shall be distributed to the holders of the Common Stock. 2 (c) (i) For purposes of this Section 2, a liquidation, dissolution or winding up of this corporation shall be deemed to be occasioned by, or to include, (A) the acquisition of the corporation by another entity by means of any transaction or series of related transactions (including, without limitation, any reorganization, merger or consolidation but, excluding any merger effected exclusively for the purpose of changing the domicile of the corporation); or (B) a sale of all or substantially all of the assets of the corporation; unless the corporation's shareholders of record as constituted immediately prior to such acquisition or sale will, immediately after such acquisition or sale (by virtue of securities issued as consideration for the corporation's acquisition or sale or otherwise) hold at least 50% of the voting power of the surviving or acquiring entity. (ii) In any of such events, if the consideration received by the corporation is other than cash, its value will be deemed its fair market value. Any securities shall be valued as follows: (A) Securities not subject to investment letter or other similar restrictions on free marketability: (1) If traded on a securities exchange or through NASDAQ-NMS, the value shall be deemed to be the average of the closing prices of the securities on such exchange over the thirty-day period ending three (3) days prior to the closing; (2) If actively traded over-the-counter, the value shall be deemed to be the average of the closing bid or sale prices (whichever is applicable) over the thirty-day period ending three (3) days prior to the closing; and (3) If there is no active public market, the value shall be the fair market value thereof, as mutually determined by the corporation and the holders of at least a majority of the voting power of all then outstanding shares of Series A Exchangeable Preferred Stock. (B) The method of valuation of securities subject to investment letter or other restrictions on free marketability (other than restrictions arising solely by virtue of a shareholder's status as an affiliate or former affiliate) shall be to make an appropriate discount from the market value determined as above in (A)(1), (2) or (3) to reflect the approximate fair market value thereof, as mutually determined by the corporation and the holders of at least a majority of the voting power of all then outstanding shares of such Series A Exchangeable Preferred Stock. (iii) In the event the requirements of this Section 2(c) are not complied with, this corporation shall forthwith either: (A) cause such closing to be postponed until such time as the requirements of this Section 2 have been complied with; or (B) cancel such transaction, in which event the rights, preferences and privileges of the holders of the Series A Exchangeable Preferred Stock shall 3 revert to and be the same as such rights, preferences and privileges existing immediately prior to the date of the first notice referred to in Section 2(c)(iv) hereof. (iv) The corporation shall give each holder of record of Series A Exchangeable Preferred Stock written notice of such impending transaction not later than ten (10) days prior to the shareholders' meeting called to approve such transaction, or ten (10) days prior to the closing of such transaction, whichever is earlier, and shall also notify such holders in writing of the final approval of such transaction. The first of such notices shall describe the material terms and conditions of the impending transaction and the provisions of this Section 2, and the corporation shall thereafter give such holders prompt notice of any material changes. The transaction shall in no event take place sooner than ten (10) days after the corporation has given the first notice provided for herein or sooner than ten (10) days after the corporation has given notice of any material changes provided for herein; provided, however, that such periods may be shortened upon the written consent of the holders of Series A Exchangeable Preferred Stock that are entitled to such notice rights or similar notice rights and that represent at least a majority of the voting power of all then outstanding shares of such Preferred Stock. 3. Redemption. Subject to the provisions of the California General Corporation Law and to any other applicable restrictions on the right of a corporation to redeem its own shares, all shares of Series A Exchangeable Preferred Stock shall be redeemed within thirty (30) days of the acquisition by the corporation of shares of capital stock ("ACQUIRED SHARES") of a corporation organized under the laws of a state of the United States in a transaction that meets the following criteria: (a) The Acquired Shares shall be fully paid and nonassessable shares of a class of equity securities that is registered under Section 12 of the Securities Exchange Act of 1934, as amended, and is traded on the New York Stock Exchange, the American Stock Exchange or the NASDAQ National Market Systems; (b) The issuers of the Acquired Shares shall have shareholders' equity of at least $25 million according to its most recent balance sheet filed with the Securities and Exchange Commission; (c) The net book value of the Acquired Shares shall be at least $8.00 per share according to the most recent balance sheet filed with the Securities and Exchange Commission; and (d) The number of Acquired Shares shall equal or exceed the number of shares of Series A Exchangeable Preferred Stock then outstanding. Upon redemption the corporation shall pay for each share redeemed one share of the Acquired Shares (the "REDEMPTION PRICE"). Less than all of the Series A Exchangeable Preferred Stock at any time outstanding may not be redeemed. 4 At least ten (10) days' previous notice by mail, postage prepaid, shall be given to the holders of record of the Series A Exchangeable Preferred Stock as of the date of mailing or as of a record date lawfully fixed. Such notice shall be addressed to each such shareholder at the address of that holder appearing on the books of the corporation or given by that holder to the corporation for the purpose of notice, or if no such address appears or is given, at the place where the principal office of the corporation is located. The notice shall state the date fixed for redemption and the Redemption Price and shall call upon that holder to surrender to the corporation on the date fixed and at the place designated in the notice the holder's certificate or certificates representing shares of Series A Exchangeable Preferred Stock. On or after the date fixed for redemption and stated in that notice, each holder of shares of Series A Exchangeable Preferred Stock shall surrender the certificate evidencing the shares to the corporation at the place designated in the notice and shall thereupon be entitled to receive the Redemption Price. If the notice of redemption shall have been duly given and if on the date fixed for redemption the Acquired Shares necessary for the redemption shall be available to pay the Redemption Price, then, notwithstanding that the certificates evidencing any shares of Series A Exchangeable Preferred Stock shall not have been surrendered, dividends with respect to the Series A Exchangeable Preferred Stock shall cease to accrue after the date fixed for redemption and all rights with respect to shares of Series A Exchangeable Preferred Stock shall after that date cease and determine, except only the right of the holders to receive the Redemption Price upon surrender of those certificates. 4. Voting Rights. The holder of each share of Series A Exchangeable Preferred Stock shall have the right to one vote and shall be entitled to notice of any shareholders' meeting in accordance with the bylaws of this corporation, and shall be entitled to vote, together with holders of Common Stock, with respect to any question upon which holders of Common Stock have the right to vote. 5. Protective Provisions. Subject to the rights of Series of Preferred Stock which may from time to time come into existence, so long as one million (1,000,000) shares of Series A Exchangeable Preferred Stock are outstanding, this corporation shall not, without first obtaining the approval (by vote or written consent, as provided by law) of the holders of at least a majority of the then outstanding shares of Series A Exchangeable Preferred Stock; (a) alter or change the rights, preferences or privileges of the shares of Series A Exchangeable Preferred Stock so as to materially and adversely affect such shares; (b) authorize, create or issue a senior or pari passu class of Preferred Stock; (c) amend this corporation's Articles of Incorporation or Bylaws so as to materially and adversely affect the shares of Series A Exchangeable Preferred Stock; or (d) redeem or repurchase Common Stock of this corporation. 6. Status of Redeemed Stock. In the event any shares of Series A Exchangeable Preferred Stock shall be redeemed pursuant to Section 3 hereof, the shares so redeemed shall be cancelled and shall not be issuable by the corporation. The Articles of 5 Incorporation of this corporation shall be appropriately amended to effect the corresponding reduction in the corporation's authorized capital stock. C. Common Stock. 1. Dividend Rights. Subject to the prior rights of holders of all classes of stock at the time outstanding having prior rights as to dividends, the holders of the Common Stock shall be entitled to receive, when and as declared by the Board of Directors, out of any assets of the corporation legally available therefor, such dividends as may be declared from time to time by the Board of Directors. 2. Liquidation Rights. Upon the liquidation, dissolution or winding up of the corporation, the assets of the corporation shall be distributed as provided in Section 2 of Division (B) of this Article IV hereof. 3. Redemption. The Common Stock is not redeemable. 4. Voting Rights. The holder of each share of Common Stock shall have the right to one vote, and shall be entitled to notice of any shareholders' meeting in accordance with the bylaws of this corporation, and shall be entitled to vote upon such matters and in such manner as may be provided by law. ARTICLE V A. The liability of the directors of this corporation for monetary damages shall be eliminated to the fullest extent permissible under California law. B. This corporation is authorized to provide indemnification of agents (as defined in Section 317 of the California Corporations Code) through bylaw provisions, agreements with the agents, vote of shareholders or disinterested directors, or otherwise in excess of the indemnification otherwise permitted by Section 317 of the California Corporations Code, subject only to applicable limits set forth in Section 204 of the California Corporations Code with respect to actions for breach of duty to the corporation and its shareholders. * * * THREE: The foregoing amendment has been approved by the Board of Directors of said corporation. FOUR: No shares have been issued. 6 We further declare under penalty of perjury under the laws of the State of California that the matters set forth in this certificate are true and correct of our own knowledge. Date: 10/3/01 --------------- /s/ FLOYD W. KEPHART ------------------------------------ Floyd W. Kephart, President /s/ GARY HOROWITZ ------------------------------------ Gary Horowitz, Secretary [SEAL] 7 EX-2 4 v78321ex2.txt EXHIBIT 2 EXHIBIT 2 CERTIFICATE OF DETERMINATION, PREFERENCES AND RIGHTS OF SERIES B EXCHANGEABLE PREFERRED STOCK OF LC ACQUISITION CORP., A CALIFORNIA CORPORATION Pursuant to Section 401 of the General Corporation Law of the State of California I. The undersigned, being the duly elected President and Secretary of LC Acquisition Corp., a corporation organized and existing under the General Corporation Law of the State of California, in accordance with the provisions of Section 401 thereof (the "Corporation"), certify that pursuant to authority given by the Corporation's Amended and Restated Articles of Incorporation, the Board of Directors of the Corporation has duly adopted the following recitals and resolutions: WHEREAS, the Amended and Restated Articles of Incorporation of the Corporation provide for a class of shares known as Preferred Stock, issuable from time to time in one or more series; and WHEREAS, the Board of Directors of the Corporation is authorized, within the limitations and restrictions stated in the Amended and Restated Articles of Incorporation, to determine or alter the rights, preferences, privileges, and restrictions granted to or imposed upon any wholly unissued series of Preferred Stock, to fix the number of shares constituting any such series, and to determine the designation thereof; and WHEREAS, the Corporation has not issued any shares of Series B Exchangeable Preferred Stock, and the Board of Directors of the Corporation desires, pursuant to its authority, to determine and fix the rights, preferences, privileges and restrictions of the Series B Exchangeable Preferred Stock and the number of shares constituting and the designation of the Series B Exchangeable Preferred Stock; NOW, THEREFORE, BE IT RESOLVED, that pursuant to the authority conferred upon the Board of Directors of this Corporation in accordance with the provisions of the Amended and Restated Articles of Incorporation, there is hereby established a series of the authorized preferred stock of the Corporation, which series shall be designated as "Series B Exchangeable Preferred Stock," and which shall consist of two million five hundred thousand (2,500,000) shares and shall have the following dividend rights, voting rights, terms of redemption, redemption prices, liquidation preferences and other rights, qualifications, limitations and restrictions. 1. Dividend Rights. Commencing one hundred eighty (180) days after the date of issuance of the Series B Exchangeable Preferred Stock and subject to the prior payment in full of all cumulative dividends to holders of the Series A Exchangeable Preferred Stock and other classes of stock at the time outstanding having prior rights as to dividends, the holders of the Series B Exchangeable Preferred Stock shall be entitled to receive, when and as declared by the Board of Directors, out of any assets of the corporation legally available therefor, cumulative dividends at an 1 annual rate of $0.40 per share per annum. Such dividends shall be payable solely in Series B Exchangeable Preferred Stock of the corporation valued for this purpose at $4.00 per share. The Board of Directors shall not pay any dividend (other than those payable solely in the Common Stock of the corporation) to the holders of the Common Stock during any fiscal year of the corporation until it has paid all cumulative but unpaid dividends to the holders of the Series A Exchangeable Preferred Stock and Series B Exchangeable Preferred Stock. 2. Liquidation Preference. (a) In the event of any liquidation, dissolution or winding up of this corporation, either voluntary or involuntary, subject to the prior payment in full of the liquidation preference of the Series A Exchangeable Preferred Stock and to the rights of Series of Preferred Stock that may from time to time come into existence, the holders of Series B Exchangeable Preferred Stock shall be entitled to receive, prior and in preference to any distribution of any of the assets of this corporation to the holders of Common Stock by reason of their ownership thereof, an amount per share equal to the sum of $4.00 for each outstanding share of Series B Exchangeable Preferred Stock (the "Original Series B Issue Price") plus all cumulative but unpaid dividends. If upon the occurrence of such event, the assets and funds thus distributed among the holders of the Series B Exchangeable Preferred Stock shall be insufficient to permit the payment to such holders of the full aforesaid preferential amounts, then, subject to the rights of series of preferred stock that may from time to time come into existence, the entire assets and funds of the corporation legally available for distribution shall be distributed ratably among the holders of the Series B Exchangeable Preferred Stock in proportion to the amount of such stock owned by each such holder. (b) Upon the completion of the distribution required by subparagraph (a) of this Section 2 and any other distribution that may be required with respect to Series of Preferred Stock that may from time to time come into existence, if assets remain in this corporation, the remaining assets of this corporation shall be distributed to the holders of the Common Stock. (c) (i) For purposes of this Section 2, a liquidation, dissolution or winding up of this corporation shall be deemed to be occasioned by, or to include, (A) the acquisition of the corporation by another entity by means of any transaction or series of related transactions (including, without limitation, any reorganization, merger or consolidation but, excluding any merger effected exclusively for the purpose of changing the domicile of the corporation); or (B) a sale of all or substantially all of the assets of the corporation; unless the corporation's shareholders of record as constituted immediately prior to such acquisition or sale will, immediately after such acquisition or sale (by virtue of securities issued as consideration for the corporation's acquisition or sale or otherwise) hold at least 50% of the voting power of the surviving or acquiring entity. 2 (ii) In any of such events, if the consideration received by the corporation is other than cash, its value will be deemed its fair market value. Any securities shall be valued as follows: (A) Securities not subject to investment letter or other similar restrictions on free marketability: (1) If traded on a securities exchange or through NASDAQ-NMS, the value shall be deemed to be the average of the closing prices of the securities on such exchange over the thirty (30) day period ending three (3) days prior to the closing; (2) If actively traded over-the-counter, the value shall be deemed to be the average of the closing bid or sale prices (whichever is applicable) over the thirty (30) day period ending three (3) days prior to the closing; and (3) If there is no active public market, the value shall be the fair market value thereof, as mutually determined by the corporation and the holders of at least a majority of the voting power of all then outstanding shares of Series B Exchangeable Preferred Stock. (B) The method of valuation of securities subject to investment letter or other restrictions on free marketability (other than restrictions arising solely by virtue of a shareholder's status as an affiliate or former affiliate) shall be to make an appropriate discount from the market value determined as above in (A)(1), (2) or (3) to reflect the approximate fair market value thereof, as mutually determined by the corporation and the holders of at least a majority of the voting power of all then outstanding shares of such Series B Exchangeable Preferred Stock. (iii) In the event the requirements of this Section 2(c) are not complied with, this corporation shall forthwith either: (A) cause such closing to be postponed until such time as the requirements of this Section 2 have been complied with; or (B) cancel such transaction, in which event the rights, preferences and privileges of the holders of the Series B Exchangeable Preferred Stock shall revert to and be the same as such rights, preferences and privileges existing immediately prior to the date of the first notice referred to in Section 2(c)(iv) hereof. (iv) The corporation shall give each holder of record of Series B Exchangeable Preferred Stock written notice of such impending transaction not later than ten (10) days prior to the shareholders' meeting called to approve such transaction, or ten (10) days prior to the closing of such transaction, whichever is earlier, and shall also notify such holders in writing of 3 the final approval of such transaction. The first of such notices shall describe the material terms and conditions of the impending transaction and the provisions of this Section 2, and the corporation shall thereafter give such holders prompt notice of any material changes. The transaction shall in no event take place sooner than ten (10) days after the corporation has given the first notice provided for herein or sooner than ten (10) days after the corporation has given notice of any material changes provided for herein; provided, however, that such periods may be shortened upon the written consent of the holders of Series B Exchangeable Preferred Stock that are entitled to such notice rights or similar notice rights and that represent at least a majority of the voting power of all then outstanding shares of such Preferred Stock. 3. Redemption. Subject to the provisions of the California General Corporation Law and to any other applicable restrictions on the right of a corporation to redeem its own shares, and subject to the redemption in full of all shares of Series A Exchangeable Preferred Stock, all shares of Series B Exchangeable Preferred Stock shall be redeemed within thirty (30) days of the acquisition by the corporation of shares of capital stock ("Acquired Shares") of a corporation organized under the laws of a state of the United States in a transaction that meets the following criteria: (a) The Acquired Shares shall be fully paid and nonassessable shares of a class of equity securities that is registered under Section 12 of the Securities Exchange Act of 1934, as amended, and is traded on the New York Stock Exchange, the American Stock Exchange or the NASDAQ National Market Systems; (b) The issuers of the Acquired Shares shall have shareholders' equity of at least $25 million according to its most recent balance sheet filed with the Securities and Exchange Commission; (c) The net book value of the Acquired Shares shall be at least $8.00 per share according to the most recent balance sheet filed with the Securities and Exchange Commission; and (d) The number of Acquired Shares shall equal or exceed the number of shares of Series B Exchangeable Preferred Stock then outstanding. Upon redemption the corporation shall pay for each share redeemed one share of the Acquired Shares (the "Redemption Price"). Less than all of the Series B Exchangeable Preferred Stock at any time outstanding may not be redeemed. At least ten (10) days' previous notice by mail, postage prepaid, shall be given to the holders of record of the Series B Exchangeable Preferred Stock as of the date of mailing or as of a record date lawfully fixed. Such notice shall be addressed to each such shareholder at the address 4 of that holder appearing on the books of the corporation or given by that holder to the corporation for the purpose of notice, or if no such address appears or is given, at the place where the principal office of the corporation is located. The notice shall state the date fixed for redemption and the Redemption Price and shall call upon that holder to surrender to the corporation on the date fixed and at the place designated in the notice the holder's certificate or certificates representing shares of Series B Exchangeable Preferred Stock. On or after the date fixed for redemption and stated in that notice, each holder of shares of Series B Exchangeable Preferred Stock shall surrender the certificate evidencing the shares to the corporation at the place designated in the notice and shall thereupon be entitled to receive the Redemption Price. If the notice of redemption shall have been duly given and if on the date fixed for redemption the Acquired Shares necessary for the redemption shall be available to pay the Redemption Price, then, notwithstanding that the certificates evidencing any shares of Series B Exchangeable Preferred Stock shall not have been surrendered, dividends with respect to the Series B Exchangeable Preferred Stock shall cease to accrue after the date fixed for redemption and all rights with respect to shares of Series B Exchangeable Preferred Stock shall after that date cease and determine, except only the right of the holders to receive the Redemption Price upon surrender of those certificates. 4. Voting Rights. The holder of each share of Series B Exchangeable Preferred Stock shall have the right to one vote and shall be entitled to notice of any shareholders' meeting in accordance with the bylaws of this corporation, and shall be entitled to vote, together with holders of Series A Exchangeable Preferred Stock and Common Stock, with respect to any question upon which holders of Common Stock have the right to vote. 5. Protective Provisions. Subject to the rights of Series A Exchangeable Preferred Stock, so long as three hundred fifty thousand (350,000) shares of Series B Exchangeable Preferred Stock are outstanding, this corporation shall not, without first obtaining the approval (by vote or written consent, as provided by law) of the holders of at least a majority of the then outstanding shares of Series B Exchangeable Preferred Stock; (a) alter or change the rights, preferences or privileges of the shares of Series B Exchangeable Preferred Stock so as to materially and adversely affect such shares; (b) authorize, create or issue a senior or pari passu class of Preferred Stock; (c) amend this corporation's Articles of Incorporation or Bylaws so as to materially and adversely affect the shares of Series B Exchangeable Preferred Stock; or (d) redeem or repurchase Common Stock of this corporation. 6. Status of Redeemed Stock. In the event any shares of Series B Exchangeable Preferred Stock shall be redeemed pursuant to Section 3 hereof, the shares so redeemed shall be cancelled and shall not be issuable by the corporation. The Articles of Incorporation of this 5 corporation shall be appropriately amended to effect the corresponding reduction in the corporation's authorized capital stock. RESOLVED FURTHER, that the President or any Vice President and the Secretary or any Assistant Secretary of the Corporation are each authorized to do or cause to be done all such acts or things and to make, execute and deliver or cause to be made, executed and delivered all such agreements documents, instruments and certificates in the name and on behalf of the Corporation or otherwise as they deem necessary, desirable or appropriate to execute or carry out the purpose and intent of the foregoing resolutions the making, execution, or delivery being conclusive evidence thereof. II. The authorized number of shares of preferred stock of the Corporation is ten million (10,000,000) and the number of shares constituting Series B Exchangeable Preferred Stock, none of which has been issued, is two million five hundred thousand (2,500,000). IN WITNESS WHEREOF, the undersigned have executed this Certificate as of ____________________________, 2001. /s/ FLOYD W. KEPHART ---------------------------------------- Floyd W. Kephart, President /s/ ALESSANDRA SCORNAIENCHI ---------------------------------------- Alessandra Scornaienchi, Secretary The undersigned, Floyd W. Kephart and Alessandra Scornaienchi, the President and Secretary, respectively, of LC Acquisition Corp. each declare under penalty of perjury that the matters set out in the foregoing Certificate are true of his or her own knowledge. Executed at Washington, D.C. on November 6, 2001. /s/ FLOYD W. KEPHART ---------------------------------------- Floyd W. Kephart, President /s/ ALESSANDRA SCORNAIENCHI ---------------------------------------- Alessandra Scornaienchi, Secretary 6 -----END PRIVACY-ENHANCED MESSAGE-----