SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
FORM 8-K
CURRENT REPORT
Pursuant to Section 13 or 15(d) of the
Securities Exchange Act of 1934
0-10869
Date of Report: June 1, 1996
(Date of Earliest Event Reported)
FORT WAYNE NATIONAL CORPORATION
(Exact name of issuer as specified in its charter)
110 West Berry Street
Post Office Box 110
Fort Wayne, Indiana 46802
(219) 426-0555
(Address of Principal Executive Office)
(Registrant's Telephone Number)
Indiana
(State of Incorporation)
35-1502812
(IRS Employer Identification No.)
This Report contains 17 pages including Exhibits.
The Exhibit Index appears on page 4.
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Item 2. Acquisition or Disposition of Assets.
Acquisition of Valley American Bank and Trust Company.
On June 1, 1996, Fort Wayne National Corporation (the "Corporation")
acquired, through a merger of Valley Financial Services, Inc., Mishawaka,
Indiana ("VFS"), with and into the Corporation (the "Merger"), all of the
issued and outstanding stock of VFS's only banking subsidiary, Valley American
Bank and Trust Company ("Valley American Bank"). The Merger was completed in
accordance with an Agreement and Plan of Merger between VFS and the
Corporation, dated November 6, 1995 (the "Merger Agreement").
Valley American Bank offers a broad range of commercial and consumer
banking services and products, and it competes with other commercial banks,
small loan companies, sales finance companies, credit unions and savings and
loan institutions. Valley American Bank is chartered under the banking laws
of the State of Indiana and conducts its commercial banking business from its
headquarters in South Bend, Indiana, and 20 other branch offices located
throughout northwestern Indiana. Valley American Bank employs approximately
340 persons. At December 31, 1995, VFS had consolidated assets of
approximately $819 million, consolidated deposits of approximately $564
million and consolidated shareholders' equity of approximately $44.7 million.
Based on its total assets at December 31, 1995, VFS believed that it was the
sixth largest independent bank holding company headquartered in the State of
Indiana.
As of the effective time of the Merger, which was 12:01 a.m. on June 1,
1996, each outstanding share of VFS Preferred Stock was cancelled and
converted into the right to receive cash in the amount of $16.50. Each
outstanding share of VFS Common Stock was cancelled and converted into the
right to receive cash in the amount of $254.67; 3.1555 shares of the
Corporation's Common Stock; and 3.6135 shares of the Corporation's Class B
Preferred Stock, Series 1. The terms of the Corporation's Class B Preferred
Stock, Series 1, are described in the Designation and Other Terms and
Conditions of the FWNC Class B Preferred Stock, Series 1, attached hereto as
Exhibit 99. Shareholders of VFS Common Stock received cash in lieu of
fractional shares resulting from the exchange ratios described above.
Total Merger consideration paid by the Corporation to VFS shareholders
was approximately $110 million, of which approximately $53 million was paid in
cash. The number of shares of the Corporation's Common Stock which were or
will be issued in respect of each share of VFS Common Stock was determined by
dividing $97.66 by the FWNC Common Stock Average Price, as defined in the
Merger Agreement, being the average of the closing prices of a single share of
the Corporation's Common Stock as reported on the Nasdaq Stock Market's
National Market System, as reported in The Wall Street Journal (Midwest
Edition), during the 20 trading days preceding the fifth calendar date prior
to May 31, 1996 (the "Closing Date"). The FWNC Common Stock Average Price
was, and the calculations described above were based on a per share value of,
$30.95.
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Prior to execution of the Merger Agreement on November 6, 1995, there had
been no material affiliation between the Corporation and VFS or their
respective banking subsidiaries. No director or material shareholder of VFS
owned shares in the Corporation, nor did any director or material shareholder
of the Corporation own shares in VFS. Neither VFS nor the Corporation, or
Valley American Bank nor any of FWNC's banking subsidiaries, engaged in
any material business transactions together.
In accordance with the Merger Agreement, the Board of Directors of the
Corporation has elected Dennis J. Schwartz, President of Valley American Bank,
to membership on the Corporation's Board of Directors.
The Merger is a business combination which is being accounted for by the
purchase method of accounting. The source of funds for the $53 million cash
component of the Merger consideration described above is the Corporation's
general capital cash reserves. The Corporation has strengthened these cash
reserves by causing to be declared a special $11.5 million dividend payment
from certain of the Corporation's subsidiary banks, having the effect of
reallocating and adjusting the capital structure of these banks in the context
of the capital structure of the Corporation. The result of these dividends
has been to align the capital structure of the Corporation's system of banking
subsidiaries to comparable levels which remain considerably higher than
regulatory guidelines. Each of the subsidiary banks remains well capitalized,
with adequate capital resources to meet anticipated future growth in their
respective banking businesses.
In addition, Fort Wayne National Corporation has made arrangements to
maintain adequate total cash reserves by securing loan facilities totalling
$30 million from the Northern Trust Company, Chicago, Illinois. Two
facilities have been obtained. The first, a $15 million term loan, was drawn
on or about May 31, 1996. The term loan has a seven-year maturity and is
payable in equal quarterly payments with a fixed interest rate. The second
facility is a $15 million line of credit available to the Corporation to fund
general working capital and/or repurchases of Corporation stock in the open
market. This facility is payable on demand and bears interest at a floating
rate. The Corporation has not drawn against this available line of credit.
As a result of the Merger, Valley American Bank has become one of the
Corporation's banking subsidiaries. Under the Merger Agreement, the
Corporation will not allow the name of Valley American Bank to be changed for
two years after the Merger without the written consent of its former
principals. It is anticipated that Valley American Bank will continue to
operate as an independent state chartered banking association, maintaining its
own identity, assets and traditional methods of doing banking business. It is
anticipated that Valley American Bank will continue to make use of its plant,
equipment or other physical property in the conduct of its banking business
without significant change.
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Item 7. Financial Statement, Pro Forma Financial Information and
Exhibits.
(a) Financial Statements of Businesses Acquired. Pursuant to Item
7(a)(4), as amended effective July 1, 1985, the Company hereby states that it
is impracticable to provide the required financial statements for the acquired
business at the time this Form 8-K Current Report is filed. Required
financial statements will be filed on or before August 13, 1996.
(b) Pro Forma Financial Information. Pursuant to Item 7(a)(4), as
amended effective July 1, 1985, the Company hereby states that it is
impracticable to provide the required pro forma financial information at the
time this Form 8-K Current Report is filed. Required pro forma financial
information will be filed on or before August 13, 1996.
(c) Exhibits. The following documents are filed as Exhibits to this
Form 8-K Current Report:
Designation Number Under
Item 601 of Regulation S-K Exhibit Description
2 Merger Agreement Between Fort Wayne
National Corporation and Valley
Financial Services, Inc., dated
November 6, 1995, incorporated by
reference to the Fort Wayne
National Corporation Annual Report
on Form 10-K for the year ended
December 31, 1995
4 Designation and Other Terms and
Conditions of the FWNC Class B
Preferred Stock, Series 1
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SIGNATURES
Pursuant to the requirements of the Securities Exchange Act of 1934, the
Registrant has duly caused this Current Report to be signed on its behalf by
the undersigned officer hereunto duly authorized.
Dated June 17, 1996.
Registrant
FORT WAYNE NATIONAL CORPORATION
By: /S/ Stephen R. Gillig
Stephen R. Gillig, Executive Vice
President and Chief Financial Officer
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Exhibit 4
Subsection 5.03.7. Designation and Other Terms of 6% Cumulative
Convertible Class B Preferred Stock, Series 1.
(a) Designation and Rank.
(i) The designation of this series of Class B Preferred
Stock is the 6% Cumulative Convertible Class B Preferred Stock,
Series 1 (hereinafter referred to as the "Series 1 Stock"), and
the number of shares constituting such series shall be 740,000.
Series 1 stock shall be without value but shall have a stated value
of fifty dollars per share ($50.00).
(ii) The Series 1 Stock shall, with respect to dividend
rights, rights upon liquidation, winding up or dissolution, and
redemption rights, rank (A) junior to any other class or series of
Class A Preferred Stock or Class B Preferred Stock hereafter duly
established by the Board of Directors of the Corporation, the
terms of which shall specifically provide that such series shall
rank prior to the Series 1 Stock as to the payment of dividends
and distribution of assets upon liquidation (the "Senior Preferred
Stock") (B) pari passu with any other class of series of Class A
Preferred Stock or Class B Preferred Stock hereafter duly
established by the Board of Directors of the Corporation, the
terms of which shall specifically provide that such class or series
shall rank pari passu with the Series 1 Stock as to the payment of
dividends and distribution of assets upon liquidation (the "Parity
Preferred Stock") and (C) prior to any other class or series of
capital stock of or other equity interests in the Corporation,
including, without limitation, the Common Stock of the Corporation,
whether now existing or hereafter created (all of such classes or
series of capital stock and other equity interests of the
Corporation, including, without limitation, the Common Stock of the
Corporation are collectively referred to herein as the "Junior
Securities").
(b) Dividend Rights.
(i) The holders of shares of Series 1 Stock shall be entitled
to receive, when and as declared by the Board of Directors, out of
funds legally available therefor, cash dividends, accruing from the
date of initial issuance (the "Issue Date"), at the annual rate of
6.00% per annum, and no more, computed on the stated value of
$50.00 for each share. Dividends shall be payable, when and as
declared by the Board of Directors, quarterly on April 1, July 1,
October 1, and January 1 of each year (each quarterly period ending
on any such date being hereinafter referred to as a "dividend
period"), commencing July 1, 1996. Each dividend will be payable
to holders of record as they appear on the stock books of the
Corporation on such record dates as shall be fixed by the Board of
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Directors of the Corporation. Dividends payable on the Series 1
Stock (A) for any period other than a full dividend period shall be
computed based upon the actual number of days elapsed up to but not
including the dividend payment date divided by 365, and (B) for
each full dividend period shall be computed by dividing the annual
dividend rate by four.
(ii) Holders of shares of the Series 1 Stock shall not
be entitled to any dividend, whether payable in cash, property or
stock, in excess of full cumulative dividends on such shares. No
interest or sum of money in lieu of interest shall be payable in
respect of any dividend payment or payments which may be in arrears.
(iii) Unless full cumulative dividends on all outstanding
shares of the Series 1 Stock shall have been paid or declared and
set aside for payment for all past dividend periods, no dividend
(other than a dividend in Common Stock or in any Junior Securities)
shall be declared upon the Junior Securities, nor shall any Junior
Securities be redeemed, purchased or otherwise acquired for any
consideration (or any moneys be paid to or made available for a
sinking fund for the redemption of any shares of any such Junior
Securities) by the Corporation except for any redemption, purchase
or acquisition relating to a conversion of or exchange for such
Junior Securities.
(C) Liquidation Preferences.
(i) In the event of any liquidation, dissolution or winding up
of the affairs of the Corporation, whether voluntary or involuntary,
the holders of Series 1 Stock shall be entitled to receive out of
the assets of the Corporation available for distribution to
shareholders an amount equal to $50.00 per share plus an amount
equal to any accrued and unpaid dividends thereon to and including
the date of such distribution, and no more, before any distribution
shall be made to the holders of any Junior Securities. After
payment of such liquidating distributions, the holders of shares of
Series 1 Stock shall not be entitled to any further participation in
any distribution of assets by the Corporation.
(ii) In the event the assets of the Corporation available
for distribution to shareholders upon any liquidation, dissolution
or winding up of the affairs of the Corporation, whether voluntary
or involuntary, shall be insufficient to pay in full the amounts
payable with respect to the Series 1 Stock and any other Parity
Preferred Stock, the holders of Series 1 Stock and the holders of
such Parity Preferred Stock shall share ratably in any distribution
of assets of the Corporation in proportion to the full respective
amounts to which they are entitled.
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(iii) The merger or consolidation of the Corporation into or
with any other corporation, the merger or consolidation of any
other corporation into or with the Corporation or the sale of the
assets of the Corporation substantially as an entirety shall not be
deemed a liquidation, dissolution or winding up of the affairs of
the Corporation within the meaning of this subsection (c).
(d) Redemption.
(i) Subject to obtaining the prior approval of the Board of
Governors of the Federal Reserve System, if necessary, the
Corporation, at its option, may redeem any or all shares of Series
1 Stock, at any time or from time to time, on or after April 1,
2002 at a redemption price of $50.00 per share, plus an amount
equal to accrued and unpaid dividends thereon to but not including
the date of redemption (the "Redemption Price").
(ii) If less than all the outstanding shares of Series 1 Stock
are to be redeemed, the shares to be redeemed shall be selected pro
rata as nearly as practicable.
(iii) Notice of any redemption shall be given by first
class mail, postage prepaid, mailed not less than 30 nor more than
60 days prior to the date fixed for redemption to the holders of
record of the shares of Series 1 Stock to be redeemed, at their
respective addresses appearing on the books of the Corporation.
Notice so mailed shall be conclusively presumed to have been duly
given whether or not actually received. Such notice shall state (A)
the date fixed for redemption; (B) the Redemption Price; (C) that
the holder has the right to convert such shares into Common Stock
until the close of business on the tenth day preceding the
redemption date; (D) the then effective Conversion Ratio (as defined
in section (e) below) and the place where certificates for such
shares may be surrendered for conversion; (E) the number of shares
of Series 1 Stock to be redeemed and if less than all the shares
held by such holder are to be redeemed, the number of such shares to
be so redeemed from such holder; (F) the place where certificates
for such redemption the shares to be redeemed shall not accrue
dividends. If such notice is mailed as aforesaid, and if on or
before the date fixed for redemption funds sufficient to redeem the
shares called for redemption are set aside by the Corporation in
trust for the account of the holders of the shares to be redeemed,
notwithstanding the fact that any certificate for shard from such
holder; (F) the place where certificates for such shares are
to be surrendered for payment of the Redemption Price; and (G) that
after such date fixed for redemption the shares to be redeemed shall
not accrue dividends. If such notice is mailed as aforesaid, and if
on or before the date fixed for redemption funds sufficient to
redeem the shares called for redemption are set aside by the
Corporation in trust for the account of the holders of the shares to
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be redeemed, notwithstanding the fact that any certificate for
shares called for redemption shall not have been surrendered for
cancellation, on and after the redemption date the shares
represented thereby so called for redemption shall be deemed to be
no longer outstanding, dividends thereon shall cease to accrue
and all rights of the holders of such shares as shareholders of the
Corporation shall cease (except the right to receive the Redemption
Price, without interest, upon surrender of the certificate
representing such shares). Upon surrender in accordance with the
aforesaid notice of the certificate for any shares so redeemed (duly
endorsed or accompanied by appropriate instruments of transfer, if
so required by the Corporation in such notice), the holders of
record of such shares shall be entitled to receive the Redemption
Price, without interest. Notwithstanding the foregoing, however, as
and to the extent that the Corporation is required or permitted
under the abandoned property laws of any jurisdiction to escheat any
redemption funds held in trust for the benefit of any holder, the
Corporation shall be absolved of any further obligation or liability
to such holder to the full extent provided by any such law. In case
fewer than all the shares represented by any such certificate are
redeemed, a new certificate shall be issued representing the
unredeemed shares without cost to the holder thereof.
(iv) At the option of the Corporation, if notice of redemption
is mailed as aforesaid, and if prior to the date fixed for
redemption funds sufficient to pay in full the Redemption Price are
deposited in trust, for the account of the holders of the shares to
be redeemed, with a bank or trust company named in such notice
doing business in the State of Indiana or the Borough of Manhattan,
The City of New York, State of New York, and having capital and
surplus of at least $50 million (which bank or trust company also
may be the transfer agent and/or paying agent for the Series 1
Stock) notwithstanding the fact that any certificate(s) for shares
called for redemption shall not have been surrendered for
cancellation, on and after such date of deposit the shares
represented thereby so called for redemption shall be deemed to be no
longer outstanding, and all rights of the holders of such shares
as shareholders of the Corporation shall cease, except the right of
the holders thereof to convert such shares in accordance with the
provisions of section (e) below at any time prior to the close of
business on the tenth day preceding the redemption date and the
right of the holders thereof to receive out of the funds so deposited
in trust the Redemption Price, without interest, upon surrender of
the certificate(s) representing such shares. Any funds so deposited
with such bank or trust company in respect of shares of Series 1
Stock converted before the close of business on the tenth day
preceding the redemption date shall be returned to the Corporation
upon such conversion. Unless otherwise required by law, any funds
so deposited with such bank or trust company which shall remain
unclaimed by the holders of shares called for redemption at the end
of two years after the redemption date shall be repaid to the
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Corporation, on demand, and thereafter the holder of any such shares
shall look only to the Corporation for the payment, without interest,
of the Redemption Price. Notwithstanding the foregoing, however, as
and to the extent that the Corporation is required or permitted under
the abandoned property laws of any jurisdiction to escheat any
redemption funds held in trust for the benefit of any holder, the
Corporation shall be absolved of any further obligation or liability
to such holder to the full extent provided by any such laws.
(v) Any provision of this section (d) to the contrary
notwithstanding, in the event that any dividends payable on the
Series 1 Stock shall be in arrears and until all such dividends in
arrears shall have been paid or declared and set apart for payment
the Corporation shall not redeem any shares of Series 1 Stock unless
all outstanding shares of Series 1 Stock are simultaneously redeemed
and shall not purchase or otherwise acquire any shares of Series 1
Stock except in accordance with a purchase or exchange offer made on
the same terms to all holders of record of Series 1 Stock for the
purchase of all outstanding shares thereof.
(e) Conversion Rights. The holders of shares of Series 1 Stock
shall have the right, at their option, to convert such shares into shares of
Common Stock on the following terms and conditions:
(i) Each Share of Series 1 Stock shall be convertible at any
time into fully paid and nonassessable shares of Common Stock at a
conversion ratio (the "Conversion Ratio") equal to $50 divided by
120% of the average of the per share closing prices of a share of
Common Stock as reported on the Nasdaq Stock Market's National Market
as reported in the Wall Street Journal (Midwest Edition) during the
twenty (20) trading day period preceding the fifth (5th) calendar day
preceding the Issue Date. The Conversion Ratio shall be subject to
adjustment from time to time as hereinafter provided. No payment or
adjustment shall be made on account of any accrued and unpaid
dividends on shares of Series 1 Stock surrendered for conversion
prior to the record date for the determination of shareholders
entitled to such dividends or on account of any dividends on the
shares of Common Stock issued upon such conversion subsequent to the
record date for the determination of shareholders entitled to such
dividends. If any shares of Series 1 Stock shall be called for
redemption, the right to convert the shares designated for redemption
shall terminate at the close of business on the tenth day preceding
the date fixed for redemption unless default is made in the payment
of the Redemption Price. In the event of default in the payment of
the Redemption Price, the right to convert the shares designated for
redemption shall terminate at the close of business on the business
day immediately preceding the date that such default is cured.
(ii) In order to convert shares of Series 1 Stock into Common
Stock, the holder thereof shall surrender the certificates therefor,
duly endorsed if the Corporation shall so require, or accompanied by
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appropriate instruments of transfer satisfactory to the Corporation,
at the office of the transfer agent for the Series 1 Stock, or at
such other office as may be designated by the Corporation, together
with written notice that such holder irrevocably elects to convert
such shares. Such notice shall also state the name and address in
which such holder wishes the certificate for the shares of Common
Stock issuable upon conversion to be issued. As soon as practicable
after receipt of the certificates representing the shares of Series 1
Stock to be converted and the notice of election to convert the same,
the Corporation shall issue and deliver at said office a certificate
for the number of whole shares of Common Stock issuable upon
conversion of the shares of Series 1 Stock surrendered for
conversion, together with a cash payment in lieu of any fraction of
a share, as hereinafter provided, to the person entitled to receive
the same. If more than one stock certificate for Series 1 Stock
shall be surrendered for conversion at one time by the same holder,
the number of full shares of Common Stock issuable upon conversion
thereof shall be computed on the basis of the aggregate number of
shares represented by all the certificates so surrendered. Shares of
Series 1 Stock shall be deemed to have been converted immediately
prior to the close of business on the date such shares are
surrendered for conversion and notice of election to convert the same
is received by the Corporation in accordance with the foregoing
provision, and the person entitled to receive the Common Stock
issuable upon such conversion shall be deemed for all purposes as the
record holder of such Common Stock as of such date.
(iii) In the case of any share of Series 1 Stock which is
converted after any record date with respect to the payment of a
dividend on the Series 1 Stock and on or prior to the date on which
such dividend is payable by the Corporation (the "Dividend Due
Date"), the dividend due on such Dividend Due Date shall be payable
on such Dividend Due Date to the holder of record of such shares as
of such preceding record date notwithstanding such conversion.
Shares of Series 1 Stock surrendered for conversion during the
period from the close of business on any record date with respect
to the payment of a dividend on the Series 1 Stock next preceding
any Dividend Due Date to the opening of business on such Dividend
Due Date shall (except in the case of shares of Series 1 Stock which
have been called for redemption on a redemption date within such
period) be accompanied by payment of an amount equal to the dividend
payable on such Dividend Due Date on the shares of Series 1 Stock
being surrendered for conversion. The dividend with respect to a
share of Series 1 Stock called for redemption on a redemption date
during the period from the close of business on any record date with
respect to the payment of a dividend on the Series 1 Stock next
preceding any Dividend Due Date to the opening of business on such
Dividend Due Date shall be payable on such Dividend Due Date to the
holder of record of such share on such dividend record date,
notwithstanding the conversion of such share of Series 1 Stock after
such record date and prior to such Dividend Due Date, and the holder
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converting such share of Series 1 Stock called for redemption need
not include a payment of such dividend amount upon surrender of such
share of Series 1 Stock for conversion. Except as provided in this
subsection (iii), no payment or adjustment shall be made upon any
conversion on account of any dividends accrued on shares of Series 1
Stock surrendered for conversion or on account of any dividends on
the shares of Common Stock issued upon conversion.
(iv) No fractional shares of Common Stock shall be issued upon
conversion of any shares of Series 1 Stock. If the conversion of any
shares of Series 1 Stock results in a fractional share of Common
Stock, the Corporation shall pay cash in lieu thereof in an amount
equal to such fraction multiplied by the Current Market Price of the
Common Stock (as defined below), on the date on which the shares of
Series 1 Stock were duly surrendered for conversion, or if such date
is not a trading date, on the next succeeding trading date.
(v) The Conversion Ratio shall be adjusted from time to time
after the Issue Date, as follows:
(A) In case the Corporation shall pay or make a dividend
or other distribution on shares of Common Stock in Common Stock,
the Conversion Ratio in effect at the opening of business on the
date following the date fixed for the determination of
shareholders entitled to receive such dividend or other
distribution shall be increased by dividing such Conversion
Ratio by a fraction of which the numerator shall be the number
of shares of Common Stock outstanding at the close of business
on the date fixed for such determination and the denominator
shall be the sum of such number of shares and the total number
of shares constituting such dividend or other distribution, such
increase to become effective immediately after the opening of
business on the day following the date fixed for such
determination.
(B) In case the Corporation shall issue additional rights
or warrants to all holders of its Common Stock entitling them to
subscribe for or purchase shares of Common Stock at a price per
share less than the Current Market Price of the Common Stock on
the date fixed for the determination of shareholders entitled to
receive such rights or warrants (other than pursuant to a
dividend reinvestment plan), the Conversion Ratio in effect at
the opening of business on the day following the date fixed for
such determination shall be increased by dividing such
Conversion Ratio by a fraction of which the numerator shall be
the number of shares of Common Stock outstanding at the close of
business on the date fixed for such determination plus the
number of shares of Common Stock which the aggregate of the
offering price of the total number of shares of Common Stock so
offered for subscription or purchase would purchase at the
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Current Market Price of the Common Stock and the denominator
shall be the number of shares of Common Stock outstanding at the
close of business on the date fixed for such determination plus
the number of shares of Common Stock so offered for subscription
or purchase, such increase to become effective immediately after
the opening of business on the day following the date fixed for
such determination.
(C) In case outstanding shares of Common Stock shall be
subdivided into a greater number of shares of Common Stock, the
Conversion Ratio in effect at the opening of business on the
day following the day upon which such subdivision becomes
effective shall be proportionately increased, and, conversely,
in case outstanding shares of Common Stock shall be combined
into a smaller number of shares of Common Stock, the Conversion
Ratio in effect at the opening of business on the day following
the day upon which such combination becomes effective shall be
proportionately reduced, such reduction or increase, as the
case may be, to become effective immediately after the
opening of business on the day following the day upon which
such subdivision or combination becomes effective.
(D) In case the Corporation shall, by dividend or
otherwise, distribute to all holders of its Common Stock
evidences of its indebtedness or assets (including securities,
but excluding (1) any rights or warrants referred to in clause
(B) above, (2) any dividend or distribution paid in cash out of
the retained earnings of the Corporation, and (3) any dividend
or distribution referred to in clause (A) above), the
conversion Ratio shall be adjusted so that the same shall equal
the ratio determined by multiplying the Conversion Ratio in
effect immediately prior to the close of business on the date
fixed for the determination of shareholders entitled to receive
such distribution by a fraction of which the numerator shall be
the Current Market Price of the Common Stock on the date fixed
for such determination less the then fair market value (as
determined by the Board of Directors, whose determination shall
be conclusive and shall be described in a statement filed with
the transfer agent for the Series 1 Stock) of the portion of
the evidences of indebtedness or assets so distributed
applicable to one share of Common Stock and the denominator
shall be the Current Market Price of the Common Stock, such
adjustment to become effective immediately prior to the opening
of business on the day following the date fixed for the
determination of shareholders entitled to receive such
distribution.
(E) For the purposes of this section (e), the
reclassification of Common Stock into securities including
securities other than Common Stock (other than any
reclassification upon a consolidation or merger to which
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subsection (vi) below applies) shall be deemed to involve (1) a
distribution of such securities other than Common Stock to
all holders of Common Stock (and the effective date of such
reclassification shall be determined to be "the date fixed for
the determination of shareholders entitled to receive such
distribution" and the "date fixed for such determination" within
the meaning of clause (D) above), and (2) a subdivision or
combination, as the case may be, of the number of shares of
Common Stock outstanding immediately prior to such
reclassification into the number of shares of Common Stock
outstanding immediately thereafter (and the effective date of
such reclassification shall be deemed to be "the day upon which
such subdivision became effective" or "the day upon which such
combination becomes effective" as the case may be, and "the day
upon which such subdivision or combination becomes effective"
within the meaning of clause above).
(F) For purposes of this section (e), (other than
subsection e(i)) the Current Market Price of the Common
Stock on any day shall be deemed to be the average of the
daily closing prices for the 30 consecutive trading days
commencing 45 trading days before the day in question. The
closing price for each day shall be the reported last sale price
or, in case no such reported sale takes place on such day, the
average of the reported closing bid and asking prices, in either
case on the Nasdaq Stock Market's National Market ("Nasdaq") or,
if the Common Stock is no longer quoted for trading on such
system, on the principal national securities exchange on which
the Common Stock is then listed or admitted to trading or, if
the Common Stock is not quoted on Nasdaq or listed or admitted
to trading on any national securities exchange, the average of
the closing bid and asked prices in the over-the-counter market
as furnished by any New York Stock Exchange member firm selected
from time to time by the Board of Directors for that purpose.
(G) Notwithstanding the foregoing, no adjustment in the
Conversion Ratio for the Series 1 Stock shall be required unless
such adjustment would require an increase or decrease of at
least 1% in such ratio; provided, however, that any adjustments
which are not required to be made shall be carried forward and
taken into account in any subsequent adjustment. All
calculations under this section (e) shall be made to the nearest
cent or to the nearest one-ten thousandth of a share (0.0001),
as the case may be.
(vi) Whenever the Conversion Ratio shall be adjusted as herein
provided (A) the Corporation shall forthwith make available at the
office of the transfer agent for the Series 1 Stock a statement
describing in reasonable detail the adjustment, the facts requiring
such adjustment and the method of calculation used; and (B) the
Corporation shall cause to be mailed by first class mail, postage
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prepaid, as soon as practicable to each holder of record of shares
of Series 1 Stock a notice stating that the Conversion Ratio has been
adjusted and setting forth the adjusted Conversion Ratio.
(vii) In the event of any consolidation of the Corporation with
or merger of the Corporation into any other corporation (other than a
merger in which the Corporation is the surviving corporation) or a
sale, lease or conveyance of the assets of the Corporation as an
entirety or substantially as an entirety, or any statutory exchange
of securities with another corporation, the holder of each share of
Series 1 Stock shall have the right, after such consolidation,
merger, sale or exchange to convert such share into the number and
kind of shares of stock or other securities and the amount and kind
of property which such holder would have been entitled to receive
upon such consolidation, merger, sale or exchange of the number of
shares of Common Stock that would have been issued to such holder had
such shares of Series 1 Stock been converted immediately prior to
such consolidation, merger or sale. The provisions of this subsection
(vii) shall similarly apply to successive consolidations, mergers,
sales or exchanges.
(viii) The Corporation shall pay any taxes that may be payable
in respect of the issuance of shares of Common Stock upon conversion
of shares of Series 1 Stock, but the Corporation shall not be
required to pay any taxes which may be payable in respect of any
transfer involved in the issuance of shares of Common Stock in the
name other than that in which the shares of Series 1 Stock so
converted are registered, and the Corporation shall not be required
to issue or deliver any such shares unless and until the person
requesting such issuance shall have paid to the Corporation the
amount of any such taxes, or shall have established to the
satisfaction of the Corporation that such taxes have been paid.
(ix) The Corporation may (but shall not be required to) make
such increases and reductions in the Conversion Ratio, in addition
to those required by clauses (A) through (D) of subsection (v)
above, as it considers to be advisable in order that any event
treated for federal income tax purposes as a dividend of stock or
stock rights shall not be taxable to the recipients.
(x) The Corporation shall at all times reserve and keep
available out of its authorized but unissued Common Stock the full
number of shares of Common Stock issuable upon the conversion of
all shares of Series 1 Stock then outstanding.
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(xi) In the event that:
(A) the Corporation shall declare a dividend or any other
distribution on its Common Stock, payable otherwise than in
cash out of retained earnings; or
(B) the Corporation shall authorize the granting to the
holders of its Common Stock of rights to subscribe for or
purchase any shares of capital stock of any class or of any
other rights; or
(C) any capital reorganization of the Corporation,
reclassification of the capital stock of the Corporation,
consolidation or merger of the Corporation with or into
another corporation (other than a merger in which the
Corporation is the surviving corporation), or sale, lease or
conveyance of the assets of the Corporation as an entirety or
substantially as an entirety to another corporation occurs; or
(D) the voluntary or involuntary dissolution, liquidation
or winding up of the Corporation occurs, the Corporation shall
cause to be mailed to the holders of record of Series 1 Stock
at least 15 days prior to the applicable date hereinafter
specified a notice stating (x) the date on which a record is
to be taken for the purpose of such dividend, distribution of
rights or, if a record is not to be taken, the date as of
which the holders of Common Stock of record to be entitled to
such dividend, distribution or rights are to be determined, or
(y) the date on which such reorganization, reclassification,
consolidation, merger, sale, lease, conveyance, dissolution,
liquidation or winding up is expected to take place, and the
date, ff any is to be fixed, as of which holders of Common
Stock of record shall be entitled to exchange their shares of
Common Stock for securities or other property deliverable upon
such reorganization, reclassification, consolidation, merger,
sale, lease, conveyance, dissolution, liquidation or
winding up. Failure to give such notice, or any defect
therein, shall not affect the legality or validity of such
dividend, distribution, reorganization, reclassification,
consolidation, merger, sale, lease, conveyance, dissolution,
liquidation or winding up.
(f) Voting Rights. Other than as required by applicable law
or as expressly provided in subsection 5.03.3 of the Corporation's
Amended Articles of Incorporation, the holders of Series 1 Stock
shall not have any voting rights.
(g) Reacquired Shares. Shares of Series 1 Stock converted,
redeemed, or otherwise purchased or acquired by the Corporation shall
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be restored to the status of authorized but unissued shares of Class
B Preferred Stock without designation as to series and may thereafter
be issued, but not as Series 1 Stock.
(h) No Sinking Fund. Shares of Series 1 Stock are not
subject to the operation of a sinking fund or other obligation of the
Corporation to redeem or retire the Series 1 Stock.
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