SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM 10
General Form for Registration of Securities
Pursuant to Section 12(b) or (g) of
the Securities Exchange Act of 1934
Western Pennsylvania Adventure Capital Fund
(Exact name of registrant as specified in its charter)
Pennsylvania 25-1792727
(State or other jurisdiction of (I.R.S. Employer
incorporation or organization) Identification No.)
4516 Henry Street, Pittsburgh, PA 15213
(Address of principal executive offices) (Zip Code)
Registrant's telephone number, including area code
(412) 578-3481
Securities to be registered pursuant to Section 12(b) of the Act:
Title of each class Name of each exchange on which
to be so registered each class is to be registered
(None) (Not applicable)
Securities to be registered pursuant to Section 12(g) of the Act:
Common Stock, par value $0.01 per share
(Title of Class)
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Item 1. Business
Western Pennsylvania Adventure Capital Fund (the "Registrant" or the
"Fund") is a Pennsylvania corporation which was incorporated on May 23, 1996 and
has conducted no active business operations. The Fund has been formed to become
a business development company under the Investment Company Act of 1940, as
amended (the "1940 Act"). The Fund is a closed-end non-diversified company, as
that term is defined in the 1940 Act.
Management believes that the Fund will be positioned to take advantage of
investment opportunities which become available with development stage companies
located in Western Pennsylvania due to its anticipated close ties, through the
Fund's investment adviser, to the technology transfer functions at the areas two
main research institutions, the University of Pittsburgh and Carnegie Mellon
University, the Commonwealth of Pennsylvania's Ben Franklin partnership and
other economic development agencies.
Investment Objective
The objective of the Fund is to seek to achieve long-term appreciation in
the value of the shares of the Fund's common stock (the "Shares") through
appreciation in the value of the securities (the "Portfolio Securities") it
holds in eligible portfolio companies (the "Portfolio Companies"), including
through the reinvestment of interest, dividends and distributions from Portfolio
Companies and the proceeds from the sale of its Portfolio Securities. The Fund
intends to reinvest rather than distribute to investors receipts from its
portfolio. No assurance can be given that the Portfolio Companies will ever
realize gains or generate cash upon the sale, financing or refinancing of assets
or issue dividends or make other distributions, or that the Portfolio Securities
will ever achieve a market value in excess of the price paid by the Fund.
Investment Policies
Fundamental Investment Policies. The Fund intends to make capital available
to companies that management believes offer significant profit potential for
long-term capital appreciation. The Fund intends to invest primarily in the
equity and/or debt securities of development stage companies located in Western
Pennsylvania. The Fund will seek to identify companies with annual sales of less
than $1 million which, in the opinion of management, have the potential within
five years to achieve annual sales of at least $5 million, or an internal rate
of return on invested capital of in excess of 30%. However, the Fund may invest
in Portfolio Companies which have higher initial sales or which do not meet
these specified financial targets if management of the Fund otherwise believes
that the investment offers the potential for long-term capital appreciation.
The Fund does not have a policy of investing any specified percentage of
its assets in debt or equity securities, and may invest 100% of its assets in
either type of security.
The Fund generally intends to invest from $50,000 to $250,000 per Portfolio
Company, but is not prohibited from making larger or smaller investments if
management of the Fund believes that it is in the interest of the Fund to do so.
For instance, the Fund may make an initial investment within the above range and
later find it necessary to make a "follow-on" investment if management
determines that additional financing is required to enable a particular
Portfolio Company to continue its operations or to complete an important
contract or research and development project or the like. Accordingly, although
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it is a policy of the Fund to seek to diversify its investments, the Fund is not
prohibited from investing more than 10% of its funds available for investment in
the Portfolio Securities of a single issuer. In certain circumstances, the Fund
may invest in particular Portfolio Companies on an installment, phase-in or
staged basis with subsequent installments conditioned upon the Portfolio Company
achieving specified performance milestones.
In pursuit of the Fund's objectives and policies, management of the Fund
will endeavor (but shall not be required) to make its investments in conjunction
with a consortium of investment partners. Such investment partners may include
individual investors, private nonprofit or for-profit companies or foundations,
and federal, state or local public, quasi-public or publicly-supported economic
development organizations, agencies or authorities which provide investment
capital or low interest or other financing for economic development.
The Fund has no policy with respect to concentrating in a particular
industry or group of industries nor with respect to investing in a company with
any particular investing partner. The Fund intends to invest all or
substantially all of its available assets (except assets invested in short-term
obligations as described under "-- Interim Investments") in companies which are
headquartered or conduct significant operations in Western Pennsylvania.
Furthermore, except for such short-term investments, the Company intends
initially to invest only in Portfolio Companies which constitute "eligible
portfolio companies" within the meaning of such term under the 1940 Act.
Generally, "eligible portfolio securities" are companies the securities of which
are not publicly-traded. However, the Fund shall be permitted to make additional
investments (including "follow-on" investments) of up to 30% of its assets in
the Portfolio Securities of companies which are not "eligible portfolio
companies" so long as they were "eligible portfolio companies" when the Fund
originally invested in them. Such investments may be made through the exercise
of warrants, the conversion of convertible debt securities, the purchase of debt
or equity securities from the issuer or any holder of such securities or in any
other manner permitted under the applicable provisions of the 1940 Act and the
investment policies of the Fund.
Change in Investment Objective or Policies. All Fund policies and
objectives are determined by the Fund's management without shareholder approval,
except as may be required by the 1940 Act. However, the Fund will not change its
investment objective or policies or withdraw its election as a business
development company under the 1940 Act without the approval of the holders of a
majority of the shares of Common Stock then outstanding.
Participation in Portfolio Company Management. The Fund will offer to make
available to each Portfolio Fund in which it invests significant managerial
assistance, and, if accepted, will provide significant guidance and counsel
concerning the management, operations or business objectives or policies of the
Portfolio Company.
Generally, if the Fund's investment is to be significant, the Fund will
seek to require as a condition to investing in any Portfolio Company that the
Fund (or a consortium member or investment partner) have at least one designee
to the board of directors of the Portfolio Company.
To the extent circumstances require, the Fund may have additional
involvement with the operations of its Portfolio Companies. Additionally, the
Fund may in some circumstances, elect to require the Portfolio Company to allow
the Fund to have greater controls over its operations by reviewing its
operational plans, making approvals regarding major capital expenditures or
significant leases or contracts
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and instituting other policies that may be necessary for the effective
management of the Portfolio Company. The Fund will maintain regular contact with
each Portfolio Company through at least quarterly (and, in some cases, monthly)
reporting requirements and at least annual site visits.
Selection of Investments. Candidates for investment ("Investment
Candidates") will initially be identified by the Fund's investment adviser, The
Enterprise Corporation of Pittsburgh ("Enterprise") or introduced by other
sources. If Enterprise believes that an Investment Candidate satisfies the
Fund's investment criteria, Enterprise will conduct such due diligence review as
it deems appropriate under the circumstances in order to be able to make
preliminary recommendations to the Board. In the event that the Board determines
that the Fund should pursue an Investment Candidate, Enterprise will conduct
further discussions with the Investment Candidate and potential investment
partners to attempt to agree upon an investment structure or strategy. The Fund
will seek to make its investments in conjunction with a consortium of investment
partners such as individual investors, private nonprofit or for-profit companies
or foundations, and federal, state or local public, quasi-public or
publicly-supported economic development organizations, agencies or authorities
which provide investment capital or low interest or other financing for economic
development.
In many cases, it is expected that prospective investors outside of the
Fund will take the leading role in the negotiations of terms. If the parties
reach agreement on a plan for the Fund to purchase Portfolio Securities, it is
generally expected that a letter of intent will be presented to the Board by
Enterprise for consideration. If approved by the Board, it is expected that
Enterprise will direct the Fund's efforts in satisfying any conditions to
closing, including, among other things, full due diligence review.
Interim Investments. Pending investment or reinvestment in Portfolio
Securities or other use of the net proceeds of the Offering, such proceeds will
be invested in cash equivalents, Government securities or high quality debt
securities maturing in one year or less from the date of investment, including
certificates of deposit and deposits in interest-bearing savings accounts.
Item 2. Financial Information
See Item 13 hereof for the Company's financial statements.
The Fund has no historical performance for management to discuss and
analyze. The Fund is using the proceeds of $2,500 from the sale of 250,000
shares of common stock at $0.01 per share to Enterprise in connection with its
services in organizing the formation and development of the Fund (the "Founder's
Shares") for working capital purposes. The Fund intends to obtain capital
principally for investment in Portfolio Securities by offering 5,000,000 shares
of its common stock at $1.00 per share in an initial offering of its shares
pursuant to Regulation E (the "Initial Offering") under the Securities Act of
1933, as amended (the "1933 Act").
Item 3. Properties
The Fund does not own or lease any physical property or other tangible
assets.
Item 4. Security Ownership of Certain Beneficial Owners and Management
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In connection with its services in organizing the formation and development
of the Fund, Enterprise purchased 250,000 shares of Common Stock for $.01 per
Share. As of October 7, 1996, Enterprise is the sole shareholder of the Fund
and, accordingly, would be deemed to control the Fund. Enterprise's address is
4516 Henry Street, Pittsburgh, Pennsylvania 15213.
Item 5. Directors and Executive Officers
Management
The Fund's Board of Directors, which will be elected by the shareholders
annually, will have responsibility for management of the Fund, including
authority to select Portfolio Securities for investment by the Fund. The Board
will be advised by the officers of the Fund and by Enterprise. Enterprise will
screen potential Portfolio Companies and present them to the Fund's Board for
investment consideration, conduct due diligence reviews of investment candidates
and manage the day-to-day operations of the Fund including, portfolio
management, preparing reports to shareholders and performing administrative
services. The recommendations of Enterprise as to investments are advisory only
and will not be binding on the Fund or its Board of Directors.
Directors and Executive Officers
The following table and text sets forth the names and ages of all directors
and executive officers of the Fund and their positions and offices with the Fund
as of October 7, 1996. All of the directors will serve until the next annual
meeting of the shareholders and until their successors are elected and qualified
or their earlier death, retirement, resignation or removal. Officers serve at
the discretion of the Board of Directors. A brief description of the business
experience of each director and executive officer during the past five years,
and an indication of directorships held by each director in other companies
subject to the reporting requirements under the federal securities laws, is also
provided. There are no family relationships among directors and executive
officers.
Name Title Director Since
G. Richard Patton President and Director June 1, 1996
Alvin J. Catz Treasurer and Director June 1, 1996
William F. Rooney Secretary and Director June 1, 1996
Philip Samson Director June 1, 1996
Douglas Schofield Director June 1, 1996
G. Richard Patton, President and Director. Dr. Patton holds a Ph.D. in
Strategic Management and an M.S. in Industrial Administration from the Krannert
Graduate School of Management, Purdue University, and a B.S. in Chemistry from
the University of Michigan.
From 1978-1981, Dr. Patton was Vice-President and Chief Administration
Officer of the Mellon Institute in Pittsburgh and a senior staff member of the
Energy Productivity Center in Washington, D.C.
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In 1976, Dr. Patton was the recipient of the first General Electric Award for
Outstanding Research in the field of strategic planning.
Dr. Patton has been a faculty member of the University of Pittsburgh's
Joseph M. Katz Graduate School of Business since 1976, and is currently an
Associate Professor. He teaches in the area of strategic management, planning
and control systems and entrepreneurship and new venture management in graduate
and executive programs. He also taught at Carnegie Mellon University's Graduate
School of Industrial Administration and at Chulalongkorn University's Graduate
Institute of Business Administration in Bangkok, Thailand.
Dr. Patton is currently an active consultant, with clients that include
Fortune 500 firms, family-owned firms, new ventures, and research and industry
associates in the U.S., Europe and Asia. His consulting activities include
executive development programs, strategy development, strategic planning systems
design and development, competitive analysis, technology and market assessment
and new venture analysis and start-up. He also currently serves as the Chairman
of the Board for several companies.
Alvin J. Catz, Treasurer and Director. Mr. Catz is currently a principal
with Catz Consulting Associates, Inc. The firm offers services in the areas of
finance/accounting and computers/data processing. He is actively involved in
assisting new ventures in all aspects of their early stage development including
business plans, financing, organizational, and other typical start-up related
issues.
Mr. Catz has over 25 years of diversified business and financial experience
including management consulting, Fortune 500 Corporation Financial Officer, and
major certified public accounting firm management. Mr. Catz's background offers
an unusual combination of major mature company experience and dynamic smaller
growth company experience. This experience includes over five years as Corporate
Controller with H. J. Heinz Company in Pittsburgh, Pennsylvania. As Corporate
Controller, he was responsible for internal and external accounting and
financial reporting, accounting/internal control systems, financial policies,
and coordination of employee benefit plans.
Prior to joining Heinz in 1974, Mr. Catz served as Assistant Corporate
Controller for KDI Corporation ("KDI") in Cincinnati, Ohio, a conglomerate with
interests in defense, recreation, manufacturing and distribution. His earlier
experience includes serving as a Group Financial Manager with Cincinnati
Milacron, a major machine tool manufacturer based in Cincinnati, Ohio. He began
his business career with Peat, Marwick, Mitchell & Co., a major certified public
accounting firm.
Mr. Catz has a Master of Business Administration degree in Advanced
Business Economics from Xavier University, and a Bachelor of Business
Administration degree in Accounting from the University of Pittsburgh. He is a
Certified Public Accountant and a member of the American Institute of Certified
Public Accountants and the Pennsylvania Institute of Certified Public
Accountants.
William F. Rooney, Secretary and Director. Mr. Rooney is the founder and
Vice-President of Sales for Transline Communications Corporation, an
international provider of voice and data services to the financial services
industry between the U.S. and major financial service centers in Europe, a
position he has held since its founding in 1992.
Mr. Rooney has over 25 years of experience in the telecommunications
industry including senior management and operating positions. From 1986 to 1994
Mr. Rooney was Vice-President of Sales for
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Republic Telcom Systems Corporation, a telecommunications company specializing
in multiplexer products ("Republic Telcom"). In this capacity, he assisted
Republic Telcom in the start up phase and helped to raise funding through
venture capital firms. Republic Telcom was successfully acquired by Netrix
Corporation in 1994. He is also co-founder, Vice-President and Secretary for the
East Coast Hockey League Toledo Storm, an affiliate of the Detroit Red Wings, an
NHL hockey team.
Mr. Rooney holds a B.S. degree in Industrial Management from LaSalle
University (1962) and an M.B.A. from Fordham University (1975).
Philip Samson, Director. Mr. Samson is President of Profitable Joint
Solutions, a consulting and investment firm wholly owned by Mr. Samson.
Mr. Samson's background includes several appointments within Mellon Bank.
From 1981 to 1983, he worked for Mellon's Economics Department where he
completed advanced financial modeling assignments. In 1983, he joined Mellon's
Corporate Consulting Department where he managed a number of innovative projects
including designing a corporate credit scoring system, an internal credit
network, a retail bank strategy, and a profitability analysis and tactical plan
for credit cards. Mr. Samson became Vice President of Mellon's Credit Card
Department in 1989. In this capacity, he initiated numerous profit improvement
programs, including line increases, incentive pricing, cross selling and related
matters.
Mr. Samson left Mellon Bank in 1993 to found Profitable Joint Solutions. In
1993 and 1994, Mr. Samson conceptualized, developed and implemented a 100%
interest rebate credit card offered by a major financial institution. This
innovative product has had a marked impact in the credit card industry.
Philip J. Samson holds an M.B.A. from Pennsylvania State University and a
Bachelor of Science degree in Engineering from the University of Maryland.
Douglas Schofield, Director. Dr. Schofield currently conducts business
through his own firm, Schofield Financial Counseling, providing financial advice
to individuals and families, and administrative services to families in the
handling of their financial affairs.
Dr. Schofield has sought throughout his career to build a strong foundation
in a variety of fields related to finance and planning. In addition to two years
working in an analytic and planning capacity in the Federal Government
(Transportation Department), Dr. Schofield has 12 years experience in the
banking industry. At Mellon Bank in Pittsburgh, he managed the bank's investment
strategy, managed foreign exchange trading worldwide, and planned the bank's
statewide expansion through the acquisition of other banks. Thereafter, Dr.
Schofield was employed by Equibank and worked with the Chairman in a special
capacity raising capital for the bank. For the three years prior to forming his
own firm, he worked as president in the firm of French, Schofield & Associates
providing comprehensive financial advice to individuals and families.
Dr. Schofield received a Bachelors degree from Yale University, with
honors, in 1967, with a major in Chemistry and Chemical Engineering. He then
attended Harvard Business School and received an M.B.A. and a Doctorate in
Strategic Planning. Dr. Schofield has taught M.B.A. courses at Atlanta
University and at the University of Pittsburgh. He is the past President of the
Harvard Business School Association of Pittsburgh and has held several chair
positions, as well as served as trustee, for LaRoche College.
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Investment Adviser
As the Fund's investment adviser, Enterprise will provide investment
advisory services to the Fund. Enterprise will screen potential investments and
present them to the Fund's Board of Directors for ultimate investment
determination. Enterprise is a private, nonprofit corporation affiliated with
Carnegie Mellon University and the University of Pittsburgh. It was established
principally to assist entrepreneurs in developing new businesses in the Western
Pennsylvania area. Since its inception in 1983, Enterprise has assisted more
than 1,600 clients in developing business plans, raising capital and assisting
entrepreneurs in the establishment and expansion of companies with growth
potential. Enterprise has not, however, served as an investment adviser to any
other business development companies. Enterprise is exempt from registration
under Section 203(b)(1) of the Investment Adviser's Act of 1940 (the "Adviser's
Act") and is not a registered investment adviser under the Adviser's Act.
Enterprise's address is 4516 Henry Street, Pittsburgh, Pennsylvania 15213.
In addition to presenting Portfolio Securities to the Fund's Board for
investment consideration, Enterprise will conduct due diligence reviews of
investment candidates and manage the day-to-day operations of the Fund
including, portfolio management, preparing reports to shareholders and
performing administrative services.
The principal officers of Enterprise who will perform services on behalf of
the Fund are:
Thomas Canfield, age 51, is the President and Chief Executive Officer of
Enterprise, a position he has held since its founding in 1983. Mr. Canfield is
also a General Partner of the Pittsburgh Seed Fund, a $10 million private
limited partnership formed in 1985 to fund Portfolio Companies whose profile is
similar to Portfolio Companies of the Fund. Additionally, Mr. Canfield is an
Adjunct Professor of Entrepreneurship at Carnegie Mellon University Graduate
School of Industrial Administration ("GSIA"). He is past president of the
Pittsburgh Venture Capital Association. Mr. Canfield also served as director of
corporate and business planning for Rockwell International. Mr. Canfield
received his B.S.E.E. from Purdue University and an M.B.A. from Harvard Business
School.
L. Frank Demmler, age 47, is a Vice President of Enterprise, a position he
has held since 1984. He is also a general partner of the Pittsburgh Seed Fund.
Mr. Demmler has over 20 years of business experience ranging from participation
in embryonic entrepreneurial enterprises to an executive management position
with an operating unit of McGraw Edison. Mr. Demmler is also an Adjunct
Profession of Entrepreneurship and Venture Capital at Carnegie Mellon
University's GSIA. Mr. Demmler received his B.S.E. Degree from Princeton
University and an M.B.A. from U.C.L.A. Graduate School of Management.
John T. Freyhof, age 41, is the Director of Venture Development at
Enterprise, a position he has held since 1987. Prior thereto, Mr. Freyhof was
manager of end user computing at Mellon Bank in Pittsburgh, Pennsylvania and
served as a senior Consulting Officer in Mellon Bank's Corporate Consulting
Department. Mr. Freyhof also served as a member of the audit staff of Coopers &
Lybrand and was an account manager at NCR where he sold business computers to
small manufacturing firms. Mr. Freyhof received his B.S. in accounting from
Syracuse University and an M.B.A. in finance from the University of Pittsburgh's
Joseph M. Katz Graduate School of Business.
Item 6. Executive Compensation
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Compensation of Officers and Directors of the Fund
No officer receives any remuneration for serving as an officer of the Fund.
Each director receives a $300 meeting attendance fee. It is anticipated that
meetings will be held monthly.
Item 7. Certain Relationships and Related Transactions
Transactions with Founder
In connection with its services in organizing the formation and development
of the Fund, Enterprise purchased the Founder's Shares (250,000 shares of Common
Stock) for $.01 per Share. As of the date of this Registration Statement,
Enterprise is the sole shareholder of the Fund and, accordingly, would be deemed
to control the Fund. If all five million Shares offered hereby are sold in the
Initial Offering, the Founders Shares will represent 4.8% of the issued and
outstanding shares of the Fund. No other Shares have been issued and were
outstanding as of Ocotber 7, 1996. If less than five million Shares are sold in
the Initial Offering, the Fund shall have the right to repurchase from
Enterprise for $.01 per Share such number of Shares as will result in
Enterprise's ownership percentage in the Fund immediately following the Initial
Offering being 4.8%.
Investment Advisory Fee
Enterprise will receive a fee equal to 5% of the aggregate amount of assets
invested by the Fund in Portfolio Securities for providing investment advisory
and administrative services to the Fund. Enterprise may also receive
compensation from investment partners or members of any investment consortium
that invest with the Fund in Portfolio Securities, all on such basis as such
other parties and Enterprise shall agree.
Effective upon the date the Initial Offering commences, Enterprise and the
Fund will enter into an Investment Advisory and Administration Services
Agreement (the "Advisory Agreement") which provides that (i) it will continue in
effect for a period of two years from the date of execution only so long as its
continuance is approved at least annually by the Fund's Board or by the holders
of a majority of the then outstanding Shares, (ii) it may be terminated at any
time by the Fund's Board or upon the vote of the holders of a majority of the
then outstanding Shares, without the payment of any penalty, on not more than 60
days' notice to Enterprise, and (iii) it shall terminate automatically in the
event of its purported assignment by Enterprise.
Item 8. Legal Proceedings
There are no pending legal proceedings, material or otherwise, to which the
Fund or any of the Fund's property is subject.
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Item 9. Market Price of and Dividends on the Registrant's Common Equity and
Related Stockholder Matters
The Registrant is a recently formed Pennsylvania corporation which has
conducted no active business operations. Accordingly, there is no established
public trading market for the Company's common shares.
The Fund will be required to comply with the reporting requirements of the
Securities Exchange Act of 1934 (the "Exchange Act") and the Shares are expected
to be freely tradeable. However, the Fund has no intention of listing the Shares
on any national or regional securities exchange or in causing the Shares to be
qualified for listing on the Nasdaq National Market or Small Cap systems.
Dividends
The objective of the Fund is to seek to achieve long-term appreciation in
the value of the Shares through appreciation in the value of its Portfolio
Securities, including through the reinvestment of interest, dividends and
distributions from Portfolio Companies and the proceeds from the sale of its
Portfolio Securities. The Fund intends to reinvest rather than distribute to
investors receipts from its portfolio. If the Board elects to declare and pay
dividends, it may pay dividend in cash, Shares or in-kind distributions of
Portfolio Securities. It is the policy of the Fund not to make in-kind
distributions unless it determines that it may legally transfer the Portfolio
Securities in question (many of which are expected to be subject to restrictions
on transfer). The Board further intends to consider the likely tax consequences
of a distribution on the Fund and the shareholders.
Item 10. Recent Sales of Unregistered Securities
On August 1, 1996, the Fund sold, for cash in the amount of $0.01 per
share, 250,000 shares to Enterprise, for aggregate proceeds to the Fund of
$2,500. The sale to Enterprise was made pursuant to the private placement
exemption available under section 4(2) of the Securities Act of 1933, as
amended.
Item 11. Description of Registrant's Securities to Be Registered
The Certificate of Incorporation of the Fund authorizes the issuance of 10
million shares of the Fund's $.01 par value common stock (the "Common Stock").
As of the date of this Registration Statement, there were 250,000 shares of
Common Stock issued and outstanding. All of such stock is owned by Enterprise.
See "Principal Shareholder."
Every share of Common Stock is entitled to one vote on any matter to be
voted upon by the holders of Common Stock. There are no cumulative rights with
respect to the election of directors. Upon liquidation, each share of Common
Stock is entitled to share equally in any assets remaining after payment of
liabilities. The Common Stock is not subject to any redemption provisions or
preemptive rights, except that the Fund has the right to repurchase certain
shares of Enterprise to maintain its ownership interest in the Fund at 4.8% upon
completion of the Initial Offering. See "Principal Shareholder." All shares of
Common Stock will, when issued, be fully paid and nonassessable. The Fund may
not issue any shares of Stock having a priority as to dividends or distributions
upon liquidation except upon amendment of the Fund's Articles of Incorporation,
which shall require the approval of the holders of a majority of the Shares.
Although the Board of Directors has no present intention of declaring any
dividends, the holders
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of the Common Stock are entitled to dividends and other distributions if, as and
when declared out of funds legally available therefor.
The objective of the Fund is to seek to achieve long-term appreciation in
the value of the Shares through appreciation in the value of its Portfolio
Securities, including through the reinvestment of interest, dividends and
distributions from Portfolio Companies and the proceeds from the sale of its
Portfolio Securities. The Fund intends to reinvest rather than distribute to
investors receipts from its portfolio. If the Board elects to declare and pay
dividends, it may pay dividend in cash, Shares or in-kind distributions of
Portfolio Securities. It is the policy of the Fund not to make in-kind
distributions unless it determines that it may legally transfer the Portfolio
Securities in question (many of which are expected to be subject to restrictions
on transfer). The Board further intends to consider the likely tax consequences
of a distribution on the Fund and the shareholders.
Item 12. Indemnification of Directors and Officers
Sections 1741 and 1742 of the Pennsylvania Business Corporation Law (the
"BCL") provide that a business corporation may indemnify directors, officers and
other representatives of the corporation against liabilities they may incur as
such provided that the particular person acted in good faith and in a manner he
or she reasonably believed to be in, or not opposed to, the best interests of
the corporation, and, with respect to any criminal proceeding, had no reasonable
cause to believe his or her conduct was unlawful. In the case of actions against
a director or officer by or in the right of the corporation, the power to
indemnify extends only to expenses (not judgments and amounts paid in
settlement) and such power generally does not exist if the person otherwise
entitled to indemnification shall have been adjudged to be liable to the
corporation unless it is judicially determined that, despite the adjudication of
liability but in view of all the circumstances of the case, the person is fairly
and reasonably entitled to indemnification for specified expenses. Under Section
1743 of the BCL, the corporation is required to indemnify directors, officers
and other representatives of the corporation against expenses they may incur in
defending actions against them in such capacities if they are successful on the
merits or otherwise in the defense of such actions. Under Section 1745 of the
BCL, a corporation may pay the expenses of a director, officer or other
representative incurred in defending an action or proceeding in advance of the
final disposition thereof upon receipt of an undertaking from such person to
repay the amounts advanced unless it is ultimately determined that such person
is entitled to indemnification from the corporation.
Section 1746 of the BCL grants a corporation broad authority to indemnify
its directors, officers and other representatives of the Registrant for
liabilities and expenses incurred in such capacity, except in circumstances
where the act or failure to act giving rise to the claim for indemnification is
determined by a court to have constituted willful misconduct or recklessness.
Pursuant to the authority of Section 1746 of the BCL, Article VI, Sections 1 and
3 of the Registrant's Bylaws provides for mandatory indemnification of Directors
and officers and permissive indemnification of employees and representatives,
and advancement of expenses to, directors, officers and other representatives of
the Registrant to the extent otherwise permitted by Sections 1741, 1742 and 1745
of the BCL and also in circumstances not otherwise expressly permitted by such
sections.
Insofar as indemnification for liabilities arising under the Securities Act
may be permitted to directors, officers or persons controlling the Registrant
pursuant to the foregoing provisions, the Registrant has been informed that in
the opinion of the Securities and Exchange Commission such indemnification is
against public policy as expressed in the Securities Act and is therefore
unenforceable.
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Item 13. Financial Statements and Supplementary Data
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Western Pennsylvania Adventure Capital Fund
Index to Audited Financial Statement
August 9, 1996
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INDEX TO FINANCIAL STATEMENTS
Page
Independent Auditor's Report............................................ 13
Financial Statements
Balance Sheet........................................................... 14
Note to Financial Statement............................................. 15
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INDEPENDENT AUDITOR'S REPORT
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To the Directors
Western Pennsylvania Adventure Capital Fund
We have audited the accompanying balance sheet of Western Pennsylvania Adventure
Capital Fund (a Business Development Company, incorporated in Pennsylvania) as
of August 9, 1996. This financial statement is the responsibility of the
Company's management. Our responsibility is to express an opinion on this
financial statement based on our audit.
We conducted our audit in accordance with generally accepted auditing standards.
Those standards require that we plan and perform the audit to obtain reasonable
assurance about whether the financial statement is free of material
misstatement. An audit includes examining, on a test basis, evidence supporting
the amounts and disclosures in the financial statement. An audit also includes
assessing the accounting principles used and significant estimates made by
management, as well as evaluating the overall financial statement presentation.
We believe that our audit provides a reasonable basis for our opinion.
In our opinion, the financial statement referred to above presents fairly, in
all material respects, the financial position of Western Pennsylvania Adventure
Capital Fund as of August 9, 1996, in conformity with generally accepted
accounting principles.
Pittsburgh, Pennsylvania
August 12, 1996
13
<PAGE>
- ------------------------------------------------------------------------------
Western Pennsylvania Adventure Capital Fund
Balance Sheet
August 9, 1996
- ------------------------------------------------------------------------------
ASSETS
Cash $ 2,500
---------
Total assets $ 2,500
=========
LIABILITIES AND STOCKHOLDER'S EQUITY
Total liabilities $ --
Stockholder's equity:
Common stock, $.01 par value per share,
10,000,000 shares authorized, 250,000
shares issued and outstanding (Note 1). 2,500
---------
Total equity 2,500
---------
Total liabilities and stockholder's equity $ 2,500
=========
See Independent Auditor's Report and Note to Audited Financial Statements.
14
<PAGE>
- ------------------------------------------------------------------------------
Western Pennsylvania Adventure Capital Fund
Note to Financial Statement
August 9, 1996
- ------------------------------------------------------------------------------
Note 1 - Summary of Significant Accounting Policies:
This summary of significant accounting policies of Western Pennsylvania
Adventure Capital Fund ("the Fund") is presented to assist in understanding the
Fund's financial statement. These accounting policies conform with generally
accepted accounting principles and have been consistently applied in the
preparation of the financial statement.
Nature of Operations
The Fund is a newly-formed Pennsylvania corporation which has conducted no
active business operations. The Fund has been formed to become a Business
Development Company ("BDC") and to be subject to the applicable provisions of
the Investment Company Act of 1940, as amended (the "1940 Act"). The Fund
intends to invest primarily in the equity and/or debt securities of development
stage companies located in Western Pennsylvania. The Fund will seek to make its
investments in conjunction with a consortium of investment partners such as
individual investors, private nonprofit or for-profit companies or foundations,
and federal, state or local public, quasi-public or publicly-supported economic
development organizations, agencies or authorities which provide investment
capital or low interest or other financing for economic development.
The Fund's Board of Directors, which will be elected by the shareholders
annually, will have responsibility for management of the Fund, including
authority to select portfolio securities for investment by the Fund. The Board
will be advised by the officers of the Fund and by The Enterprise Corporation of
Pittsburgh ("Enterprise"), the Fund's investment adviser. Enterprise will screen
potential Portfolio Companies and present them to the Fund's Board for
investment consideration, conduct due diligence reviews of investment candidates
and manage the day-to-day operations of the Fund including, portfolio
management, preparing reports to shareholders and performing administrative
services. The recommendations of Enterprise as to investments are advisory only
and will not be binding on the Fund or its Board of Directors. Enterprise is a
private, nonprofit consulting firm founded in 1983 for the purpose of assisting
entrepreneurs in developing new businesses in Western Pennsylvania.
Enterprise will receive a fee equal to 5% of the aggregate amount of assets
invested by the Fund in portfolio securities for providing investment advisory
and administrative services to the Fund. Enterprise may also receive
compensation from investment partners or members of any investment consortium
that invest with the Fund in portfolio securities, all on such basis as such
other parties and Enterprise shall agree.
15
<PAGE>
- ------------------------------------------------------------------------------
Western Pennsylvania Adventure Capital Fund
Note to Financial Statement
August 9, 1996
- ------------------------------------------------------------------------------
Stockholder's Equity
The Fund is offering a total of 5,000,000 shares of its common stock, par value
$.01, at an offering price of $1.00 per share ("the Offering"). In connection
with its services in organizing the formation and development of the Fund,
Enterprise purchased 250,000 shares of Common Stock for $.01 per Share. If all
five million Shares offered hereby are sold in the Offering, the Shares held by
Enterprise will represent 4.8% of the issued and outstanding shares of the Fund.
If less than five million Shares are sold in the Offering, the Fund shall have
the right to repurchase from Enterprise for $.01 per Share such number of Shares
as will result in Enterprises's ownership percentage in the Fund immediately
following the Offering being 4.8%. The Shares purchased by Enterprise represent
founder's shares.
Offering Costs
Legal, accounting and other costs incurred or to be incurred in connection with
the public offering can not be reasonably determined as of the balance sheet
date. All costs incurred or to be incurred in connection with the Offering of
its common stock will be deferred. Such costs will be charged to equity or paid
in capital upon the successful completion of the offering.
16
<PAGE>
Item 14. Changes in and Disagreements with Accountants on Accounting and
Financial Disclosure
The Registrant has not changed accountants or had any disagreements with
its accountant.
Item 15. Financial Statements and Exhibits
(a) Financial Statements
See Index to Financial Statements in Item 13 hereof.
(b) Exhibits
3.1 Articles of Incorporation of the Fund, as filed May 23, 1996
3.2 Bylaws of the Fund, dated August 1, 1996
17
<PAGE>
Signatures
Pursuant to the requirements of Section 12 of the Securities Exchange Act of
1934, the registrant has duly caused this registration statement to be signed on
its behalf by the undersigned, thereunto duly authorized.
WESTERN PENNSYLVANIA
ADVENTURE CAPITAL FUND
By /s/ G. Richard Patton
-------------------------------
Name: G. Richard Patton
Title: President
Date: October 8, 1996
18
<PAGE>
EXHIBIT INDEX
Exhibit Number Description
- -------------- -----------
3.1 Articles of Incorporation of the Fund, as filed
May 23, 1996
3.2 Bylaws of the Fund, dated August 1, 1996
19
EXHIBIT 3.1
Microfilm Number Filed with the Department of State on
Entity Number Secretary of the Commonwealth
ARTICLES OF INCORPORATION-FOR PROFIT
OF
WESTERN PENNSYLVANIA ADVENTURE CAPITAL FUND
Name of Corporation
A TYPE OF CORPORATION INDICATED BELOW
DSCB:15-1306/2102/2303/2702/2903/3101/7102A (Rev 91)
Indicate type of domestic corporation:
X Business-stock (15 Pa.C.S.ss.1306) Management (15
- ---- ------
Pa.C.S.ss.2702)
Business-nonstock (15 Pa.C.S.ss.2102) ___ Professional (15
- -----
Pa.C.S.ss.2903)
Business-statutory close (15 Pa.C.S.ss.2303) Insurance (15
- ----- ------
Pa.C.S.ss.3101)
Cooperative (15 Pa.C.S. ss. 7102)
In compliance with the requirements of the applicable provisions of 15
Pa.C.S. (relating to corporations and unincorporated associations) the
undersigned, desiring to incorporate a corporation for profit hereby, state(s)
that:
1. The name of the corporation is: Western Pennsylvania Adventure Capital Fund
2. The (a) address of this corporation's initial registered office in this
Commonwealth or (b) name of its commercial registered office provider and
the county of venue is:
(a) 4516 Henry Street Pittsburgh Pennsylvania 15213 Allegheny
Number and Street City State Zip County
(b) c/o:
Name of Commercial Registered Office Provider
For a corporation represented by a commercial registered office provider,
the county in (b) shall be deemed the county in which the corporation is
located for venue and official publication purposes.
3. The corporation is incorporated under the provisions of the Business
Corporation Law of 1988.
4. The aggregate number of shares authorized is: 10,000,000 common stock x
$.01 par value (other provisions, if any, attach 8 1/2 x 11 sheet)
5. The name and address, including number and street, if any, of each
incorporator is:
Name Address
Jeffrey W. Letwin Doepken Keevican & Weiss
37th Floor, USX Tower
600 Grant Street
Pittsburgh, PA 15219
<PAGE>
DSCB:15-1306/2102/2303/2702/2903/3101/7102A (Rev 91)-2
6. The specified effective date, if any, is: Not applicable
7. Additional provisions of the articles, if any, attach an 8 1/2 x 11 sheet.
IN TESTIMONY WHEREOF, the incorporator(s) has (have) signed these Articles of
Incorporation this
day of May, 1996.
By:
/s/ Jeffrey W. Letwin
- -----------------------------------
Jeffrey W. Letwin, Incorporator
EXHIBIT 3.2
<PAGE>
WESTERN PENNSYLVANIA ADVENTURE CAPITAL FUND
BYLAWS
I. MEETINGS OF SHAREHOLDERS AND RECORD DATES
1. ANNUAL MEETING. An annual meeting of Shareholders for the election of
Directors and the transaction of such other business as may properly come before
the meeting commencing with the year 1996 shall be held at 10:00 a.m. on
Thursday during the second week of August each year if not a legal holiday or on
such other day and at such hour as the Board of Directors may designate. If the
day fixed for the meeting is a legal holiday, the meeting shall be held at the
same hour on the next succeeding full business day which is not a legal holiday.
2. SPECIAL MEETINGS. Special meetings of Shareholders may be called at any
time by the President, the Board of Directors, or, unless otherwise provided in
the Corporation's Articles of Incorporation, Shareholders entitled to cast at
least 20% of the votes which all Shareholders are entitled to cast at the
particular meeting. Upon written request of any person or persons who shall have
duly called a special meeting, it shall be the duty of the Secretary to fix the
date and hour of the meeting to be held not more than sixty days after the
receipt of the request.
3. PLACE. Each annual or special meeting of Shareholders shall be held at
the principal office of the Corporation or at such other place in Pennsylvania
or elsewhere as the Board of Directors may designate.
4. NOTICE. Written notice stating the place, day and hour of each annual or
special meeting of Shareholders and, in the case of special meetings, the
general nature of the business to be transacted, shall be mailed by, or at the
direction of, the Secretary or other authorized person at least ten days before
the meeting called to consider a fundamental change under Chapter 19 (as
amended) of the Pennsylvania Business Corporation Law of 1986, as amended, being
Subpart B of Title 15 of the Pennsylvania Consolidated Statutes (herein, the
"BCL") or its successor provisions and at least five days before the meeting
called in any other case to each Shareholder of record entitled to vote at the
meeting to the address of the Shareholder appearing on the books of the
Corporation or supplied by the Shareholder to the Corporation for the purpose of
notice. If the Secretary or other authorized person neglects or refuses to give
notice of a meeting, the person or persons calling the meeting may do so.
5. QUORUM. The presence, in person or by proxy, of Shareholders entitled to
cast at least a majority of the votes which all Shareholders are entitled to
cast on a particular matter shall constitute a quorum for the purpose of
considering and acting upon such matter at a meeting of Shareholders. The
Shareholders present at a duly organized meeting can continue to do business
until adjournment notwithstanding the withdrawal of enough Shareholders to leave
less
<PAGE>
than a quorum. If a meeting cannot be organized because a quorum is not present
in person or by proxy, those present may adjourn the meeting to such time and
place as they may determine. Those Shareholders entitled to vote who are present
at a meeting called for the election of Directors that has been previously
adjourned for lack of a quorum, although less than a quorum as fixed in this
Section 5, shall nevertheless constitute a quorum (i) for the purpose of
electing Directors, if such previously adjourned meeting was called for the
purpose of electing Directors; and (ii) for the purpose of acting on any other
matter set forth in the notice of the previously adjourned meeting if (a) the
previously adjourned meeting has been adjourned for one or more periods
aggregating at least 15 days and (b) the notice for such meeting states that
those Shareholders present at the adjourned meeting shall nevertheless
constitute a quorum for the purpose of acting on the matter. Presence of a
Shareholder either in person or by proxy at any meeting shall constitute a
waiver of notice of the meeting except where a Shareholder is present at a
meeting for the express purpose of objecting, at the beginning of the meeting,
to the transaction of any business because the meeting was not lawfully called
or conveyed.
6. TELEPHONIC MEETINGS. One or more persons may participate in a meeting of
the Shareholders by means of conference telephone or similar communications
equipment by means of which all persons participating in the meeting can hear
each other. Participation in a meeting pursuant to this Section 6 shall
constitute presence in person at the meeting.
7. VOTING. Every Shareholder shall be entitled, unless otherwise provided
herein, in the Corporation's Articles of Incorporation or by law, to one vote
for every share of capital stock standing in the name of said Shareholder on the
books of the Corporation. Every Shareholder entitled to vote at a meeting of
Shareholders or to express consent or dissent to corporate action in writing may
authorize another person or persons to act for said Shareholder by proxy. All
proxies shall be executed in writing by the Shareholder or by the duly
authorized attorney-in-fact of the Shareholder and filed with the Secretary.
Unless otherwise provided by law, all questions shall be decided by the vote of
a majority of the outstanding stock represented at any meeting.
8. RECORD DATES. The Board of Directors may fix a time not more than 90
days prior to the date of any meeting of Shareholders, or the date fixed for the
payment of any dividend or distribution, or the date for the allotment of
rights, or the date when any change or conversion or exchange of shares will be
made or go into effect, or the date of any other action or purpose for which the
Board of Directors desires to set a record date, as a record date for the
determination of the Shareholders entitled to notice of or to vote at any such
meeting or to receive payment of any such dividend or distribution, or to
receive any such allotment of rights, or to exercise the rights in respect to
any such change, conversion or exchange of shares or for any other action or
purpose. In such case, only such Shareholders as shall be Shareholders of record
at the close of business on the date so fixed shall be entitled to notice of or
to vote at such meeting or to receive payment of such dividend or distribution,
or to receive such allotment of rights, or to exercise such rights in respect to
any change, conversion or exchange of shares, or for such other action or
purpose for which a record date was set, as the case may be, notwithstanding any
transfer of any shares on the books of the Corporation after the record date is
fixed as aforesaid.
<PAGE>
9. CONSENT ACTION. Any action which may be taken at a meeting of the
Shareholders may be taken without a meeting upon the written consent of
Shareholders who would have been 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. The action shall not become effective until
after at least ten days' written notice of the action has been given to each
Shareholder entitled to vote thereon who has not consented thereto.
10. REPORTS TO SHAREHOLDERS. Unless otherwise agreed to in writing between
the Corporation and a Shareholder, the Corporation shall furnish to each
Shareholder the annual financial statements of the Corporation, which shall be
in the form required by the BCL and shall consist of at least a balance sheet
and a statement of income and expenses, which shall be mailed by the Corporation
to each of the Shareholders entitled thereto within 120 days after the close of
each fiscal year and after such mailing to any other Shareholder or beneficial
owner upon written request.
II. DIRECTORS
1. NUMBER AND TERM. The Board of Directors of the Corporation shall consist
of one or more members. Each Director shall be a natural person of full age and
need not be a resident of the Commonwealth of Pennsylvania. Each Director shall
be elected at the annual meeting of the Shareholders to serve for a term of one
year and until a successor has been selected and qualified or until earlier
death, resignation or removal of said Director. The Board of Directors shall
have power to increase or decrease the number of Directors to the extent
permitted by the BCL.
2. RESTRICTIONS. In the event an investment adviser of the Corporation, or
an affiliated person of such investment adviser, receives any amount or benefit
in connection with a sales of securities of, or a sale of any other interest in,
such investment adviser which results in an assignment of an investment advisory
contract with the Corporation, then, for a period of three years after the time
of such action, at least 75 per centum of the members of the Board of Directors
of the Corporation, may not be (i) interested persons of the investment adviser
of the Corporation, or (ii) interested persons of the predecessor investment
adviser.
3. VACANCIES. Vacancies in the Board of Directors, including vacancies
resulting from an increase in the number of Directors, may be filled by a
majority vote of the remaining Directors, though less than a quorum, or by a
sole remaining Director, and each person so selected shall serve for the balance
of the unexpired term. When one or more Directors resigns from the Board of
Directors effective at a future date, the Directors then in office, including
those who have so resigned, shall have the power by the applicable vote to fill
the vacancies and the vote thereon will take effect when said resignations
become effective.
<PAGE>
Vacancies in the Board of Directors occurring in connection with compliance
with Section 2 herein shall be filled only by a person (1) who has been selected
and proposed for election by a majority of the directors of the Corporation who
are not interested persons of the investment adviser or the predecessor
investment adviser, and (2) who has been elected by the holders of the
outstanding voting securities of the Corporation, except that in the case of the
death, disqualification, or bona fide resignation of a director selected and
elected pursuant to clauses (1) and (2) of this Section 3, the vacancy created
may be filled in any otherwise legal manner if immediately after filling such
vacancy at least two-thirds of the directors then holding office shall have been
elected to such office by the holders of the outstanding voting securities of
the Corporation at an annual or special meeting duly called for that purpose.
4. EXECUTIVE COMMITTEE. An Executive Committee of three or more directors
may be appointed by resolution adopted by the directors. Such Committee, when
appointed, shall have all the powers and exercise all the authority of the Board
in the management of the business and affairs of the Corporation for the period
designated, except as specifically limited by the Board of the BCL. Meetings of
the Executive Committee may be called at any time by any member, to be held at
such place and day and hour as shall be specified by the person or persons
calling the meeting, or by the Secretary. Notice of every meeting of the
Executive Committee, which shall state briefly the place, day and hour thereof,
but need not state the purposes thereof, shall be given to each member either by
being mailed on at least the second calendar day prior to the date of the
meeting, or by being sent by telegraph or given personally or be telephone prior
to the date of the meeting. Notice of such meeting may be waived in writing,
whether before or after the time stated therein, or by attendance in person at
the meeting. The presence in person of two members of the Committee shall be
necessary and sufficient to constitute a quorum for the transaction of business,
and any action of the Committee upon any matter shall be taken and be valid with
the affirmative vote of at least a majority of the members present at a meeting
duly convened. The Executive Committee shall keep a record of all action taken
and report such action to the Board of Directors at its next meeting thereafter.
Any action taken by the Executive Committee shall be subject to alteration or
revocation by the Board of Directors; provided, however, that third parties
shall not be prejudiced by such alteration or revocation.
5. OTHER COMMITTEES. Other standing or temporary committees may be
appointed, from its own number or otherwise, by the Board of Directors from time
to time, and the Board may from time to time invest committees with such powers,
subject to such conditions, as it may see fit. All committees so appointed shall
keep such record of the transactions of their meetings as the Board shall
direct.
6. REGULAR MEETING. A meeting of the Board of Directors shall be held each
year as soon as practicable after the annual meeting of Shareholders, at the
place where such meeting of Shareholders was held or at such other place as the
Directors may determine, for the purposes of organization, election or
appointment of officers and the transaction of such other business as shall come
before the meeting. The Board of Directors shall hold such other regular
meetings at such times as the Directors may determine. Written notice of each
meeting of the Board of Directors shall be given to each director at least five
(5) days before the day named for
<PAGE>
the meeting. Neither the business to be transacted at, nor the purpose of, any
regular or special meeting of the Board of Directors need be specified in any
notice of the meeting.
7. SPECIAL MEETINGS. Special meetings of the Board of Directors may be
called by the President or a majority of the Directors in office, to be held at
such time and at such place in the Commonwealth of Pennsylvania or elsewhere as
may be designated by the person or persons calling the meeting.
8. TELEPHONIC MEETINGS. One or more Directors may participate in a meeting
of the Board of Directors by means of conference telephone or similar
communications equipment by means of which all persons participating in the
meeting can hear each other. Participation in a meeting pursuant to this Section
8 shall constitute presence in person at the meeting.
9. QUORUM. A majority of the Directors in office shall constitute a quorum
for the transaction of business but less than a quorum may adjourn from time to
time to reconvene at such time and place as they may determine.
10. CONSENT ACTION. Any action required or permitted to be taken at a
meeting of the Board of Directors may be taken without a meeting if, prior or
subsequent to the action, a consent or consents in writing, setting forth the
action so taken, shall be signed by all of the Directors, and shall be filed
with the Secretary of the Corporation.
11. NOTATION OF DISSENT. A Director of the Corporation who is present at a
meeting of the Board of Directors at which action on any corporate matter is
taken shall be presumed to have assented to the action taken unless the dissent
of such Director is entered in the minutes of the meeting or unless the Director
files a written dissent to the action with the secretary of the meeting before
the adjournment thereof or transmits such dissent in writing to the Secretary of
the Corporation immediately after the adjournment of the meeting. The right to
dissent shall not be available to a Director who has voted in favor of such
action.
12. COMPENSATION. Directors shall receive such compensation for their
services as shall be determined by the Board of Directors.
13. DUTIES OF DIRECTORS AND RELIANCE UPON THIRD PARTIES. Each Director
shall stand in a fiduciary relation to the Corporation and shall perform such
duties as a Director, including duties as a member of any committee of the Board
of Directors upon which such Director may serve, in good faith, in a manner such
Director reasonably believes to be in the best interests of the Corporation, and
with such care, including reasonable inquiry, skill and diligence, as a person
of ordinary prudence would use under similar circumstances. In performing such
duties, each Director shall be entitled to rely in good faith on information,
opinions, reports or statements, including financial statements and other
financial data, in each case prepared or presented by any of the following: (i)
one or more officers or employees of the Corporation whom the Director
reasonably believes to be reliable and competent in the matters presented; (ii)
counsel, public accountants or other persons as to matters which the Director
<PAGE>
reasonably believes to be within the professional or expert competence of such
person; and (iii) a committee of the Board of Directors upon which such Director
does not serve, duly designated in accordance with law, as to matters within its
designated authority, which committee the Director reasonably believes to merit
confidence. No Director of the Corporation shall be considered to be acting in
good faith if such Director has knowledge concerning the matter in question that
would cause such reliance to be unwarranted.
14. CONSIDERATION OF FACTS. In discharging the duties of their respective
positions, the Board of Directors, committees of the Board of Directors and
individual Directors may, in considering the best interests of the Corporation,
consider the effects of any action upon employees, upon suppliers and upon
customers of the Corporation and upon communities in which offices or other
establishments of the Corporation are located, and all other pertinent factors.
15. PRESUMPTION. Absent breach of fiduciary duty, lack of good faith or
self-dealing, actions taken as a Director or any failure to take any action
shall be presumed to be in the best interests of the Corporation.
16. LIMITATION OF LIABILITY. No Director of the Corporation shall be
personally liable, as such, for monetary damages for any action taken, or any
failure to take any action, unless (i) the Director has breached or failed to
perform the duties of office under Section 1721(e) of Title 15 of the
Pennsylvania Consolidated Statutes ("Title 15") (relating to personal liability
of director) and (ii) the breach or failure to perform constitutes self-dealing,
willful misconduct or recklessness; provided, however, that the foregoing
provisions of this Section 16 shall not apply to (i) the responsibility or
liability of a Director pursuant to any criminal statute; or (ii) the liability
of a Director for the payment of taxes pursuant to local, state or federal law.
Neither the amendment nor the repeal of this Section 16 nor adoption of any
other provision of these Bylaws or the Corporation's Articles of Incorporation
shall eliminate or reduce the effect of this Section 16 with respect to any
matter occurring, or any cause of action, suit or claim that but for this
Section 16 would accrue or arise, prior to such amendment or repeal. If Title 15
of the Pennsylvania Consolidated Statutes is amended, after approval by the
Shareholders of this Section 16, to authorize corporate action further
eliminating or limiting the personal liability of Directors, then the liability
of a Director of the Corporation shall be eliminated or limited to the fullest
extent permitted by Title 15 as amended from time to time.
III. WAIVER OF NOTICE
1. WAIVER OF NOTICE. Whenever any written notice is required to be given
under the provisions of the BCL or these Bylaws, a waiver thereof in writing,
signed by the person or persons entitled to such notice, whether before or after
the time stated therein, shall be deemed equivalent to the giving of such
notice. Neither the business to be transacted at, nor the purpose of, a meeting
need be specified in the waiver of notice of the meeting, except in the case of
a special meeting of Shareholders whereby the waiver of notice shall specify the
general nature of the business to be transacted. Attendance of a person at any
meeting shall constitute a waiver
<PAGE>
of notice of the meeting except where a person attends a meeting for the express
purpose of objecting, at the beginning of the meeting, to the transaction of any
business to be taken at the meeting because such meeting was not lawfully called
or convened.
IV. OFFICERS
1. OFFICERS. The Board of Directors at any time shall elect a President, a
Treasurer and a Secretary; may designate any one or more Vice Presidents and any
one or more of those so designated may be named as Executive Vice Presidents,
First Vice President, Vice President-Sales, Vice President-Operations or
otherwise; and may elect or appoint such additional officers, assistant officers
and agents as the Board of Directors may deem advisable. Any two or more offices
may be held by the same person. The President, each Vice President and the
Secretary of the Corporation shall be a natural person of 18 years of age or
older. The Treasurer of the Corporation may be a corporation or a natural person
of 18 years of age or older.
2. TERM. Each officer and each agent shall hold office until a successor is
elected or appointed and qualified or until the death, resignation or removal of
said officer or agent by the Board of Directors. Any officer of the Corporation
may be removed by the Board of Directors with or without cause, and such removal
shall be without prejudice to the contract rights, if any, of any person so
removed. Election or appointment of an officer shall not of itself create
contract rights.
3. AUTHORITY, DUTIES AND COMPENSATION. All elected or appointed officers
and agents shall have such authority and perform such duties as may be provided
in these Bylaws or as may be determined by the Board of Directors or as may be
determined by the President. Officers shall receive such compensation for their
services as may be determined by the Board of Directors or in a manner approved
by it. Notwithstanding any other provisions of these Bylaws, the Board of
Directors shall have power from time to time by resolution to prescribe by what
officers or agents particular documents or instruments or particular classes of
documents or instruments shall be signed, countersigned, endorsed or executed;
provided, however, that any person, firm or corporation shall be entitled to
accept and to act upon any document or instrument signed, countersigned,
endorsed or executed by officers or agents of the Corporation pursuant to the
provisions of these Bylaws unless prior to receipt of such document or
instrument such person, firm or corporation has been furnished with a certified
copy of a resolution of the Board of Directors prescribing a different
signature, countersignature, endorsement or execution.
4. STANDARD OF CARE. Subject to any contrary provision contained in the
Corporation's Articles of Incorporation, an officer of the Corporation shall
perform such duties as an officer in good faith, in a manner reasonably believed
to be in the best interests of the Corporation and with such care, including
reasonable inquiry, skill and diligence, as a person of ordinary prudence would
use under similar circumstances. A person who so performs such duties shall not
be liable by reason of having been an officer of the Corporation.
<PAGE>
5. PRESIDENT. The President shall preside at all meetings of the
Shareholders and of the Board of Directors. The President shall be the chief
executive officer of the Corporation and shall be charged with and have the
direction and supervision of all of its business and operations. The President
shall sign all certificates of stock of the Corporation or cause them to be
signed in facsimile or otherwise as permitted by law.
6. VICE PRESIDENTS. In the absence of the President or in the event of the
death of the President, or inability or refusal to act by the President, the
Vice President (or in the event that there be more than one Vice President, the
Vice Presidents, in the order designated at the time of their election, or in
the absence of any designation, then in the order of their election) shall
perform the duties of the President, and when so acting, shall have all the
powers of and be subject to all the restrictions upon the President. Any Vice
President may sign, with the Secretary or Assistant Secretary, certificates for
shares of the Corporation and shall perform such other duties as from time to
time may be assigned by the President or the Board of Directors.
7. SECRETARY. The Secretary shall give or cause to be given all required
notices of meetings of Shareholders and of the Board of Directors, shall attend
such meetings when practicable, shall record and keep the minutes and all other
proceedings thereof, shall attest such records after every meeting by signature
of the Secretary, shall safely keep all documents and papers which shall come
into the possession of the Secretary, shall truly keep the books and accounts of
the Corporation appertaining to such office, shall countersign all certificates
of stock of the Corporation or cause them to be countersigned in facsimile or
otherwise as permitted by law, may make and record all transfers of certificates
of stock of any class of the Corporation in the share register which shall be
kept at the registered office of the Corporation, may sign all bills, notes,
checks and other negotiable instruments of the Corporation or cause them to be
signed in facsimile or otherwise as the Board of Directors may determine, and
shall present statements thereof when required by the Board of Directors. In the
absence or disability of the Secretary, an Assistant Secretary shall have the
authority and perform the duties of the Secretary.
V. CORPORATE SEAL
1. CORPORATE SEAL. A corporate seal may be prepared, which seal or a
facsimile thereof may be impressed, affixed or reproduced, and attested by the
Secretary or an Assistant Secretary of the Corporation.
VI. INDEMNIFICATION
1. DIRECTORS, OFFICERS, EMPLOYEES AND REPRESENTATIVES. The Corporation
shall indemnify each Director and officer, and it may indemnify each employee
and representative, of the Corporation to the fullest extent permitted by
Pennsylvania law, as in effect under Section 1741 of Title 15 of the
Pennsylvania Consolidated Statutes or as thereafter amended, against all
liabilities and expenses, including, without limitation, judgments, fines,
attorney's fees and amounts paid in settlement actually and reasonably incurred
in connection with any threatened,
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pending or completed action, or proceeding, whether civil, criminal,
administrative, investigative or other (whether brought by or in the right of
the Corporation or otherwise), in which such Director, officer, employee or
representative may become involved as a party or otherwise by reason of being or
having been such Director, officer, employee or representative or by reason of
serving or having served at the request of the Corporation as a director,
officer, employee or other representative of another domestic or foreign
corporation for profit or not-for-profit, partnership, joint venture, trust or
other enterprise if said Director, officer, employee or representative acted in
good faith and in a manner reasonably believed to be in, or not opposed to, the
best interests of the Corporation and, with respect to any criminal proceeding,
had no reasonable cause to believe the conduct was unlawful; provided, however,
that the foregoing indemnification provisions shall not apply to a threatened,
pending or completed claim, action, suit or proceeding which is initiated by a
Director, officer, employee or representative. The termination of any action or
proceeding by judgment, order, settlement or conviction or upon plea of nolo
contendre or its equivalent shall not of itself create a presumption that the
person did not act in good faith and in a manner reasonably believed to be in,
or not opposed to, the best interests of the Corporation and, with respect to
any criminal proceeding, had reasonable cause to believe that such conduct was
unlawful.
2. DETERMINATION OF RIGHT OF INDEMNIFICATION. The indemnification provided
or permitted by Section 1 above shall apply (i) whether or not the Director,
officer, employee or representative continues to be such at the time such
liabilities or expenses are imposed or incurred, whether the act or failure to
act, which is the subject of such claim, action, suit or proceeding, occurred
before or after the adoption of this Bylaw, and whether or not the indemnified
liability or expenses arose or arise from a threatened, pending or completed
claim, action, suit or proceeding by or in the right of the Corporation, and
(ii) both to acts or omissions in an official capacity and to acts or omissions
in another capacity while holding such office. The indemnification and
advancement of expenses provided by, or granted pursuant to, this Article VI
shall not be exclusive of any other rights to which persons seeking
indemnification or advancement of expenses may be entitled under any bylaw,
agreement, vote of Shareholders or Directors or otherwise, both as to an act or
omission in an official capacity and as to an act or omission in another
capacity while holding such office, and shall inure to the benefits of the heirs
and personal representatives of said persons. A Director, officer, employee or
representative shall be entitled to indemnification for expenses actually and
reasonably incurred in connection with any action brought by such persons
against the Corporation only if (i) such person is successful in whole or in
part in the action for which expenses are claimed or (ii) the indemnification
for expenses is included in a settlement of the action or is awarded by a court.
3. PAYMENT OF EXPENSES. Expenses incurred by a Director, officer, employee
or representative of the Corporation in defending a civil or criminal action,
suit or proceeding may be paid by the Corporation in advance of the final
disposition thereof upon receipt of an undertaking by or on behalf of such
person to repay such amount if it shall ultimately be determined that such
person is not entitled to be indemnified by the Corporation.
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4. INSURANCE. The Corporation may purchase and maintain insurance on behalf
of any person who is or was a Director, officer, employee or representative of
the Corporation or who is or was serving at the request of the Corporation as a
Director, officer, employee or other representative of another domestic or
foreign corporation for profit or not-for-profit, partnership, joint venture,
trust or other enterprise for any liability asserted against such Director,
officer, employee or representative and incurred by such Director, officer,
employee or representative in any such capacity, or arising out of status as
such, whether or not the Corporation would have the power to indemnify against
such liability under the laws of the Commonwealth of Pennsylvania. The
Corporation may create a fund of any nature, which may, but need not be, under
the control of a trustee, or otherwise secure or insure in any manner its
indemnification obligations arising under or pursuant to this Article VI or
otherwise.
VII. FISCAL YEAR
The fiscal year of the Corporation shall end each year on December 31st, or
such other fiscal year as shall be fixed from time to time by resolution of the
Board of Directors.
VIII. SHARE CERTIFICATES, TRANSFERS AND RECORDS
1. SHARE CERTIFICATES, TRANSFERS AND RECORDS. Shares of the Corporation's
stock shall be represented by certificates. The Board of Directors may appoint a
transfer agent or transfer agents and a registrar or registrars to make and
record all transfers of shares of stock of the Corporation of any class. Each
transfer agent shall prepare transfer records showing transfers made through the
office of such agent. A share register shall be kept at the registered office of
the Corporation. Such share register shall constitute books of the Corporation
with respect to shares of stock of any class and the holders of record thereof,
provided that the Board of Directors may designate instead as the books of the
Corporation for this purpose a share register kept at the office of a transfer
agent or registrar. If the Board of Directors shall have appointed a transfer
agent or transfer agents and a registrar or registrars for stock of any class,
all transfers of stock of such class shall be made only by such transfer agent
or transfer agents at their offices and shall be recorded in their books and in
the books of the registrar or registrars. In case of loss, destruction or theft
of a certificate of stock, another may be issued in lieu thereof in such manner
and upon such terms as the Board of Directors shall authorize.
2. DIVIDENDS. The Corporation shall not pay any dividend, or make any
distribution in the nature of a dividend payment, wholly or partly from any
source other than (1) the Corporation's accumulated undistributed net income,
determined in accordance with good accounting practice and not including profits
or losses realized upon the sale of securities or other properties, or (2) the
Corporation's net income so determined for the current or preceding fiscal year,
unless such payment is accompanied by a written statement which adequately
discloses the source or sources of such payment.
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IX. AMENDMENTS
Except with respect to those matters that are by statute reserved
exclusively to the Shareholders, the Board of Directors may adopt, amend or
repeal the Bylaws by a vote of a majority of all votes cast on the adoption,
amendment or repeal at any regular or special meeting duly convened for that
purpose; subject, however, to the power of the Shareholders by a vote of a
majority of all votes cast to change or repeal the Bylaws at any annual or
special meeting duly convened for such purpose. Any meeting of Shareholders for
the purpose of changing or repealing the Bylaws shall be preceded by the giving
of written notice to each Shareholder stating that the purpose or one of the
purposes of the meeting is to consider the adoption, amendment or repeal of the
Bylaws, and such notice shall contain or include a copy of the proposed
amendment or a summary of the changes to be effected thereby. Any change in the
Bylaws shall take effect when adopted unless otherwise provided in the
resolution effecting the change.
