EXHIBIT 3.1
FORM OF
CERTIFICATE OF DESIGNATION
OF
SERIES A CUMULATIVE PAY-IN-KIND
PREFERRED SHARES
OF
PAMECO CORPORATION
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Pursuant to Section 14-2-602 of the
Business Corporation Code of the State of Georgia
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Pameco Corporation (the "Company"), a corporation organized and
existing under the laws of the State of Georgia, certifies that pursuant to the
authority contained in Section 5.1 of its Amended and Restated Articles of
Incorporation (the "Articles of Incorporation") and in accordance with the
provisions of Section 14-2-602 of the Business Corporation Code of the State of
Georgia, the board of directors of the Company (the "Board of Directors"), at a
meeting duly called and held on February 14, 2000, approved and adopted the
following resolution which resolution remains in full force and effect on the
date hereof:
RESOLVED, that, pursuant to the authority vested in the Board of
Directors by the Articles of Incorporation, the Board of Directors does hereby
designate, create, authorize and provide for the issuance of Series A Cumulative
Pay-in-Kind Preferred Stock, par value $1.00 per share (the "Series A Preferred
Shares"), with a stated value of $250.00 per share at the time of initial
issuance, and initially consisting of 600,000 shares, for Series A Preferred
Shares (the "Certificate of Designation"). The Series A Preferred Shares will
have the following voting powers, preferences and relative, optional and other
special rights, and qualifications, limitations and restrictions set forth in
this certificate of designation (the "Certificate of Designation"):
1. Certain Definitions. Unless the context otherwise requires, the terms
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defined in this Section 1 shall have, for all purposes of this resolution and
this Certificate of Designation, the meanings herein specified (with terms
defined in the singular having comparable meanings when used in the plural).
"Additional Warrants" has the meaning set forth in Section 3(a)(iii)
hereof.
"Affiliate" of a Person means any Person which, directly or
indirectly, controls, is controlled by, or is under common control with such
Person. The term "control" (including,
with correlative meaning, the terms "controlled by" and "under common control
with"), as used with respect to any Person, means the possession, directly or
indirectly, of the power to elect a majority of the board of directors (or other
governing body) or to direct or cause the direction of the management and
policies of such Person, whether through the ownership of voting securities, by
contract or otherwise and, in any event and without limiting the generality of
the foregoing, any Person owning 10% or more of the voting securities of another
Person shall be deemed to control that Person.
"Approval Date" means the date on which the Holders of the requisite
number of shares of Common Stock approve, at a special meeting of the
shareholders entitled to vote thereon duly called and held in accordance with
applicable law, including the GBCC, and for which a proxy statement has been
distributed and filed in accordance with the Securities and Exchange Act of
1934, as amended, and the rules and regulations promulgated thereunder (the
"Exchange Act"), the agreement pursuant to which the Series A Preferred Shares
are being issued and the transactions contemplated thereby.
"Articles of Incorporation" means the articles of incorporation of the
Company, as in effect from time to time.
"Board of Directors" means the Board of Directors of the Company or
any authorized committee of the Board of Directors, as the same may be
constituted from time to time.
"Business Day" means any day other than a Legal Holiday.
"Business Combination Proposal" means any proposal made to the Company
or its shareholders involving (a) a sale of a substantial portion of the Capital
Stock of, or other equity interest in, the Company, (b) a sale of a substantial
portion of the assets of the Company, or (c) a merger, business combination,
recapitalization or other similar transaction involving the Company.
"Capital Stock" means (i) in the case of a corporation, corporate
stock, (ii) in the case of a limited liability company or association, any and
all shares, interests, participations, rights or other equivalents (however
designated) of corporate stock, (iii) in the case of a partnership, partnership
interests (whether general or limited) and (iv) any other interest or
participation that confers on a Person the right to receive a share of the
profits and losses of, or distributions of assets of, the issuing Person.
"Certificate of Designation" means the certificate of designation of
the Series A Preferred Shares, as in effect from time to time.
"Class A Common Stock" means the common stock, par value $.01 per
share, designated as "Class A Common Stock" in the Articles of Incorporation.
"Common Stock" means the common stock, par value $0.01 per share, of
the Company.
"Company" means Pameco Corporation.
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"Compounding Date" has the meaning set forth in Section 3(a)(i) below.
"Conversion Price" means $2.50, as the same may be adjusted from time
to time in accordance with Section 7 below.
"Dividend Series A Preferred Shares" means unissued Series A Preferred
Shares to which a Holder is entitled as of a particular date, assuming the
declaration of dividends payable in the form of Series A Preferred Shares under
Section 3(a)(i) or 3(a) (ii) below.
"GBCC" means the Georgia Business Corporation Code.
"Governmental Body" means any government, or governmental or
regulatory body thereof, or political subdivision thereof, whether federal,
state, local or foreign, or any agency or instrumentality thereof, or any court
or arbitrator (public or private).
"Holder" means the record holder of one or more Series A Preferred
Shares, as shown on the books and records of the Company.
"Initial Dividend Period" has the meaning set forth in Section 3(a)(i)
below.
"Initial Dividend Rate" has the meaning set forth in Section 3(a)(i)
below.
"Issue Date" means the first date on which any Series A Preferred
Shares are issued by the Company.
"Junior Securities" has the meaning set forth in Section 2 below.
"Legal Holiday" means a Saturday, a Sunday, a federal holiday or a day
on which banking institutions in the City of New York are authorized by law,
regulation or executive order to remain closed.
"Liquidation Date" has the meaning set forth in Section 4(a) below.
"Liquidation Preference" means an amount per Series A Preferred Share,
equal to $250.00 plus accrued and unpaid dividends (whether or not declared and
including, without limitation, Dividend Series A Preferred Shares and Warrant
Series A Preferred Shares, if any), and the Penalty Amount (if any), subject to
adjustment from time to time to accurately reflect stock splits, subdivisions or
combinations with respect to the Series A Preferred Shares.
"Parity Securities" has the meaning set forth in Section 2 below.
"Penalty Amount" means the contingent amount that exists only if the
Company, in accordance with Section 3(a)(ii), has not notified the Holders that
it elected to accrue and pay dividends after the Initial Dividend Period in the
same manner as during the Initial Dividend Period and the Company thereafter
failed to declare and pay the applicable cash dividend in full on a relevant
Compounding Date, and which is equal to the difference between the accrued and
unpaid dividend attributable to the relevant Compounding Date and the amount
that would have been the accrued and unpaid dividend attributable to the
relevant Compounding Date had the
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dividend rate set forth in Section 3(a)(ii) below been calculated at 16% per
annum, not 14% per annum.
"Person" means any individual, corporation, partnership, firm, joint
venture, association, limited liability company or partnership, joint-stock
company, trust, unincorporated organization or Governmental Body.
"Put Date" has the meaning set forth in Section 6(b) below.
"Put Price" has the meaning set forth in Section 6(a) below.
"Put Right" has the meaning set forth in Section 6(a) below.
"Redemption Date" has the meaning set forth in Section 5(c) below.
"Redemption Price" has the meaning set forth in Section 5(a) below.
"Senior Securities" has the meaning set forth in Section 8(c)(i)
below.
"Series A Preferred Shares" means the Company's Series A Cumulative
Pay-in-Kind Preferred Stock, par value $1.00 per share, as the same may be
amended or modified from time to time.
"Stated Value" means an amount per Series A Preferred Share, equal to
$250.00, subject to adjustment from time to time to accurately reflect stock
splits, subdivisions or combinations with respect to the Series A Preferred
Shares.
"Subsequent Preferred Shares" means any shares of preferred stock, par
value $1.00 per share, of the Company, issued pursuant to that certain
Securities Purchase Agreement dated as of February 18, 2000, among the Company,
Littlejohn Fund II, L.P. and Quilvest American Equity, Ltd., other than the
Series A Preferred Shares.
"Subsidiary" means, with respect to any Person, (i) any corporation,
association or other business entity of which more than 50% of the total voting
power of shares of Capital Stock entitled (without regard to the occurrence of
any contingency) to vote in the election of directors, managers or trustees
thereof is at. the time owned or controlled, directly or indirectly, by such
Person or one or more of the other Subsidiaries of that Person (or a combination
thereof) and (ii) any partnership (a) the sole general partner or the managing
general partner of which is such Person or a Subsidiary of such Person or (b)
the only general partners of which are such Person or of one or more
Subsidiaries of such Person (or any combination thereof).
"Trading Day" means with respect to the Class A Common Stock (x) if
the applicable security is listed or admitted for trading on the New York Stock
Exchange or another national securities exchange, a day on which the New York
Stock Exchange or such other national securities exchange is open for business
or (y) if the applicable security is quoted on the Nasdaq National Market, a day
on which trading may be made on the Nasdaq National Market or (z) if the
applicable security is not otherwise listed, admitted for trading or quoted, any
day other than a Legal Holiday.
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"Warrant Series A Preferred Shares" means, as of a relevant date, the
Series A Preferred Shares to which a Holder would be entitled upon a cashless
exercise of all Additional Warrants held by such Holder on such date (including
any unissued Additional Warrants to which such Holder would be entitled to as of
such date assuming the declaration of dividends, under Section 3(a)(iii). For
purposes of this definition of Warrant Series A Preferred Shares, "cashless
exercise" means the exercise of Additional Warrants whereby the Holder thereof
shall receive only (i) the aggregate number of Series A Preferred Shares to
which the Holder is entitled under such Additional Warrants less (ii) the
aggregate number of Series A Preferred Shares with a fair market value equal to
the exercise price of such Additional Warrants.
"Weighted Average Trading Price" means the volume weighted average
sales price per share of Class A Common Stock as reported by Bloomberg
Information Systems, Inc.; provided, however, if there shall occur any
adjustment to the Conversion Price as a result of Section 7(b)(iv) below, the
Weighted Average Trading Price shall be proportionally adjusted to the extent
not so reflected in the report of Bloomberg Information Systems, Inc.
2. Ranking. The Series A Preferred Shares shall, with respect to
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dividends, distributions and distributions upon the liquidation, winding-up or
dissolution of the Company, rank: (i) senior to all classes of Common Stock of
the Company and to each other class of Capital Stock or series of preferred
stock established after the Issue Date by the Board of Directors, the terms of
which do not expressly provide that it ranks senior to or on a parity with the
Series A Preferred Shares as to dividends, distributions and distributions upon
the liquidation, winding-up and dissolution of the Company (together with the
Common Stock of the Company, collectively referred to as "Junior Securities");
and (ii) on a parity with any additional shares of Series A Preferred Shares
issued by the Company in the future in accordance with Section 3 hereof and any
other class of Capital Stock or series of preferred stock established after the
Issue Date by the Board of Directors (including any series of Subsequent
Preferred Shares), the terms of which expressly provide that such class or
series will rank on a parity with the Series A Preferred Shares as to dividends,
distributions and distributions upon the liquidation, winding-up and dissolution
of the Company (collectively referred to as "Parity Securities").
3. Dividends.
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(a) (i) For the three-year period following the Issue Date (the
"Initial Dividend Period"), the Holders of the Series A Preferred Shares shall
be entitled to receive on each such share, when, as and if declared by the Board
of Directors, out of funds of the Company legally available therefor, cumulative
preferential dividends, compounding quarterly to the extent unpaid on each
March 1, June 1, September 1 and December 1 (each a "Compounding Date"),
commencing on June 1, 2000, and accruing from the date of issuance at the rate
of 14% per annum on the Stated Value of each Series A Preferred Share and of
each Dividend Series A Preferred Share then deemed to have been issued (the
"Initial Dividend Rate"); provided, however, if with respect to a particular
period, the Company's earnings before interest, taxes, depreciation and
amortization, as determined in accordance with generally accepted accounting
principles consistently applied and maintained, is at least equal to $25.5
million for the year ended February 28, 2002 and/or $35.4 million for the year
ended February 28, 2003, then with respect to a particular one-year period, the
rate at which dividends would accrue, accumulate and compound during such one
year period would be recalculated retroactively to 8% instead of 14%, such
recalculation to occur as soon as practicable after the receipt of the Company's
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audited financial statements, accompanied by a signed opinion of its independent
accountants, relating to the applicable one year period. When and if declared
by the Board of Directors, such dividends shall be payable by issuance of such
number of additional Series A Preferred Shares (including fractional shares)
determined by dividing the dollar amount of the dividend to be paid by the
Stated Value on the date such dividend is so paid; provided, however, if a
dividend is declared and paid in the form of Series A Preferred Shares and the
dividend rate is subsequently recalculated pursuant to this Section 3(a)(i),
then the Company shall promptly advise the Holders of the recalculated dividend
amount (which recalculation shall be binding absent manifest error) and the
Holders shall promptly surrender for cancellation certificates representing a
sufficient number of Series A Preferred Shares so that the number of Series A
Preferred Shares issued to them in such dividend is appropriately adjusted to
reflect the retroactive reduction of the dividend rate.
(ii) From and after the Initial Dividend Period, the Holders of
the Series A Preferred Shares shall be entitled to receive on each such share,
when, as and if declared by the Board of Directors, out of funds of the Company
legally available therefor, cumulative preferential cash dividends, compounding
quarterly to the extent unpaid, on each Compounding Date commencing on June 1,
2003 and accruing thereafter at the rate of 14% per annum on the Stated Value of
each Series A Preferred Share and of each Dividend Series A Preferred Share then
deemed to have been issued, except that the Company may provide written notice
to the Holders at least 30 days prior to the end of the Initial Dividend Period,
that such dividends, with respect to periods after the Initial Dividend Period
shall continue to accrue and be payable in the same manner as during the Initial
Dividend Period.
(iii) To the extent a Holder of Series A Preferred Shares
receives payment of a dividend pursuant to subsections (i) or (ii) in the form
of additional Series A Preferred Shares, then, such Holder shall also be
entitled to receive a warrant to purchase such number of additional Series A
Preferred Shares equal to the number of Series A Preferred Shares received in
payment of such dividend, having an exercise price equal to 125% of the
conversion price of the Series A Preferred Shares in effect at the time of
payment of such dividend, such warrant to be in substantially the form of the
warrants originally issued to Holders on the Issue Date (the "Additional
Warrants").
(b) In addition to the dividends described in Section 3(a), if the
Company declares and pays a dividend on the Class A Common Stock, a Holder of
Series A Preferred Shares shall be entitled to 50% of the dividends such Holder
would have been entitled to had such Holder fully converted the Series A
Preferred Shares into Class A Common Stock pursuant to Section 7 immediately
prior to the record date for the distribution. Dividend distributions under
this Section 3(b) shall be made pro rata among the Holders of Series A Preferred
Shares and holders of Class A Common Stock.
(c) All dividends paid with respect to Series A Preferred Shares
pursuant to this Section 3 shall be made pro rata among the Holders based upon
the aggregate Series A Preferred Shares held by each such Holder. If and when
any Series A Preferred Shares are issued under Section 3 for the payment of
dividends, such Shares shall be validly issued and outstanding and fully paid
and nonassessable, and shall initially have a Conversion Price equal to that of
the Series A Preferred Shares then in effect on the date such Series A Preferred
Shares are issued.
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(d) In the case of Series A Preferred Shares issued on the Issue
Date, dividends shall accrue from such date. In the case of Series A Preferred
Shares issued as a dividend on Shares of Series A Preferred Shares or the Series
A Preferred Shares issued upon exercise of any warrants to purchase Series A
Preferred Shares, dividends shall accrue from the date on which such Series A
Preferred Shares were issued.
(e) Each fractional Series A Preferred Share outstanding shall also
be entitled to a ratably proportionate amount of any other distributions made
with respect to each outstanding or due to be issued and outstanding Series A
Preferred Share, and all such distributions shall be payable in the same manner
and at the same time as distributions on each outstanding or due to be issued
and outstanding Series A Preferred Share.
4. Distributions Upon Liquidation, Dissolution or Winding Up. Upon any
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voluntary or involuntary liquidation, dissolution or winding up of the affairs
of the Company (which for purposes of this Certificate of Designation shall
include any transaction effected pursuant to a Business Combination Proposal),
or any reduction or decrease in its Capital Stock resulting in a distribution of
assets to the Holders of any class or series of the Company's Capital Stock (the
date of such occurrence, the "Liquidation Date"), the Company shall, out of the
assets of the Company available for distribution, make the following payments in
respect of its Capital Stock:
(a) first, payments on any Senior Securities;
(b) second, on a pro rata basis, (i) to Holders of the Series A
Preferred Shares equal to the greater of (A) the aggregate Liquidation
Preference with respect to the Series A Preferred Shares held by such Holder on
the Liquidation Date (including the Dividend Series A Preferred Shares to which
such Holder would be entitled as of such date), plus the aggregate Liquidation
Preference with respect to the Warrant Series A Preferred Shares deemed held by
such Holder on the Liquidation Date (which cannot be less than zero), or (B) the
amount which would be payable to such Holder in respect of Class A Common Stock
if such Holder had been deemed to have converted all Series A Preferred Shares,
all Dividend Series A Preferred Shares and all Warrant Series A Preferred Shares
whether or not convertible by the terms hereof, held (or deemed held) by such
Holder as of the Liquidation Date into Class A Common Stock immediately prior to
the Liquidation Date; and (ii) due on Parity Securities; and
(c) third, payments on any Junior Securities.
5. Redemption by the Company.
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(a) From time to time, on and after the sixth anniversary of the
Issue Date, the Company may redeem the Series A Preferred Shares held by a
Holder on the Redemption Date at a price per share, payable in cash, equal to
105% of the Liquidation Preference (the "Redemption Price"). If there shall be a
legal impediment imposed by the GBCC to the Company's repurchase of any such
shares, the Company shall use its best efforts to remove or remedy such
impediment.
(b) In case of redemption of less than all of the Series A Preferred
Shares, such Series A Preferred Shares to be redeemed shall be redeemed on a pro
rata basis among all Holders.
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(c) Notice of any redemption shall be sent by or on behalf of the
Company not less than 30 nor more than 60 days prior to the date specified for
redemption in such notice (the "Redemption Date"), by U.S. express mail,
overnight courier guaranteeing next Business Day delivery, postage or charges
prepaid, to all Holders of record of the Series A Preferred Shares at their last
addresses as they shall appear on the books of the Company; provided, however,
the validity of the proceedings for the redemption of any Series A Preferred
Shares shall only be affected with respect to any Holder to whom the Company has
failed to give notice or except as to the Holder to whom notice was defective.
In addition to any information required by law, such notice shall state: (i) the
Redemption Date; (ii) the Redemption Price; (iii) the number of Series A
Preferred Shares to be redeemed and, if less than all such shares held by such
Holder are to be redeemed, the number of such shares to be redeemed; (iv) the
place or places where certificates for the Series A Preferred Shares are to be
surrendered for payment of the Redemption Price; (v) the Conversion Price then
in effect; (vi) that the Holder's right to convert the Series A Preferred Shares
into Class A Common Stock shall terminate on the close of business on the third
Business Day preceding such Redemption Date; and (vii) that dividends on the
Series A Preferred Shares to be redeemed will cease to accumulate on the
Redemption Date. Upon the sending of any such notice of redemption, the Company
shall become obligated to redeem on the applicable Redemption Date all such
Series A Preferred Shares called for redemption and the Company shall take all
steps necessary to pay the Redemption Price on the Redemption Date.
(d) If notice has been sent in accordance with Section 5(c) above and
provided that on or before the Redemption Date specified in such notice, all
funds necessary for such redemption shall have been set aside by the Company,
separate and apart from its other funds in trust for the pro rata benefit of the
Holders of such Series A Preferred Shares so called for redemption, so as to be,
and to continue to be available therefor, then, from and after the applicable
Redemption Date, dividends on the Series A Preferred Shares so called for
redemption shall cease to accumulate, and such shares shall no longer be deemed
to be outstanding and shall not have the status of Series A Preferred Shares,
and all rights of the Holders thereof as shareholders of the Company (except the
right to receive from the Company the Redemption Price) shall cease. Upon
surrender, in accordance with said notice, of the certificates for any Series A
Preferred Shares so redeemed (properly endorsed or assigned for transfer, if the
Company shall so require and the notice shall so state), such shares shall be
redeemed by the Company at the Redemption Price.
(e) Any deposit of funds with a bank or trust company for the purpose
of redeeming Series A Preferred Shares shall be irrevocable except that any
balance of monies so deposited by the Company and unclaimed by the Holders of
the Series A Preferred Shares entitled thereto at the expiration of one year
from the applicable Redemption Date shall be repaid, together with any interest
or other earnings earned thereon, to the Company, and after any such repayment,
the Holders of the shares entitled to the funds so repaid to the Company shall
look only to the Company for payment without interest or other earnings;
provided, however, that any funds deposited for the purpose of redeeming Series
A Preferred Shares which are subsequently converted in accordance with Section 7
hereof shall be repaid to the Company upon such conversion.
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6. Put Right.
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(a) Commencing upon the fifth anniversary of the Issue Date, each
Holder may elect to sell to the Company all or any part of the Series A
Preferred Shares held by a Holder, and to require the Company to purchase from
such Holder such shares at a per share price, payable in cash, equal to the
Liquidation Preference (the "Put Price") applicable to such shares (the "Put
Right"). The Company shall take all necessary actions to pay the Put Price on
the Put Date. If there shall be a legal impediment imposed by the GBCC to the
Company's repurchase of any such shares, the Company shall use its best efforts
to remove or remedy such impediment. The Company shall pay the Put Price on a
pro rata basis among all Holders exercising a Put Right based on the number of
shares sought to be repurchased.
(b) Notice of any Put Right shall be sent to the Company by or on
behalf of a Holder exercising such right not less than 5 nor more than 30 days
prior to the date specified for sale in such notice (the "Put Date"), by U.S.
express mail or overnight courier guaranteeing next Business Day delivery,
postage or charges prepaid. Such notice shall state: (i) the Put Date; (ii) the
number of Series A Preferred Shares to be sold to the Company; and (iii) the
date and the place where for the closing of the Put Right so as to pay the Put
Price as soon as possible as set forth herein.
7. Conversion.
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(a) (i) At any time after the Approval Date and subject to
compliance with applicable law, including the HSR Act, by a particular Holder,
any such Holder shall have the right to convert any of the then outstanding
Series A Preferred Shares owned by it which have not been previously redeemed or
repurchased into fully paid, nonassessable shares of Class A Common Stock. For
the purpose of conversion, each Series A Preferred Share shall be valued at the
Liquidation Preference, which shall be divided by the Conversion Price in effect
on the conversion date to determine the number of shares issuable upon such
conversion. In case any Series A Preferred Shares are to be redeemed pursuant
to Section 5 above or repurchased in connection with Section 6 above, such right
of conversion shall cease and terminate as to the Series A Preferred Shares to
be redeemed or repurchased at the close of business on the third Business Day
preceding the date fixed for redemption (in the case of Section 5 above) or
repurchase (in the case of Section 6 above), unless the Company shall default in
the payment of the applicable price prior to the close of business on the date
fixed for redemption or repurchase. Any Holder desiring to convert such shares
into Class A Common Stock shall surrender the certificate or certificates
(unless such certificates have not yet been issued by the Company but are
otherwise due such Holder pursuant to Section 3 hereof) evidencing such Series A
Preferred Shares at the office of the transfer agent (which may be the Company)
for the Series A Preferred Shares, which certificate or certificates, if the
Company shall so require, shall be duly endorsed to the Company or in blank, or
accompanied by proper instruments of transfer to the Company or in blank,
accompanied by an irrevocable written notice to the Company that the Holder
elects so to convert such Series A Preferred Shares and specifying the name or
names (with address or addresses) in which a certificate or certificates
evidencing shares of Class A Common Stock are to be issued. In the event that a
Holder fails to notify the Company of the number of Series A Preferred Shares
which such Holder wishes to convert, such Holder shall be deemed to have elected
to convert all shares represented by the certificate or certificates so
surrendered for conversion.
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(ii) Holders at the close of business on a record date for such
dividend actually paid shall be entitled to receive the dividend payable on the
Series A Preferred Shares being converted on the corresponding dividend payment
date notwithstanding the conversion thereof following such record date and prior
to such dividend payment date.
(iii) The Company shall, as soon as practicable after such
deposit of certificates (to the extent required above) evidencing Series A
Preferred Shares accompanied by the written notice and compliance with any other
conditions herein contained, deliver at such office of such transfer agent to
the person for whose account such Series A Preferred Shares were so surrendered,
or to the nominee or nominees of such Person, certificates evidencing the number
of full shares of Class A Common Stock to which such Person shall be entitled as
aforesaid, together with a cash adjustment in respect of any fraction a share of
Class A Common Stock as hereinafter provided. Subject to the following
provisions of this paragraph (iii), each conversion shall be deemed to have been
effected immediately prior to the close of business on the date on which the
certificates for Series A Preferred Shares to be converted shall have been
surrendered (to the extent required above) together with the irrevocable written
notice and payment of taxes (if applicable) as provided for in paragraphs (i)
and (ii) above, and the Person or Persons entitled to receive the Class A Common
Stock deliverable upon conversion of such Series A Preferred Shares shall be
treated for all purposes as the record holder or holders of such Class A Common
Stock at such time on such date, unless the stock transfer books of the Company
shall be closed on such date, in which event such Person or Persons shall be
deemed to have become such holder or holders of record at the close of business
on the next succeeding day on which such stock transfer books are open, but such
conversion shall be at the Conversion Price in effect on the date on which such
Series A Preferred Shares shall have been surrendered for conversion and such
notice (and, if applicable, payment) received by the Company. Immediately
following such conversion, the rights of the Holders with respect to converted
Series A Preferred Shares shall cease.
(iv) Any conversion of Series A Preferred Shares hereunder shall
also be deemed, automatically and without any further action on the part of the
Holder or the Company, to be a conversion of the Series A Preferred Shares
issuable upon exercise of the Warrant Series A Preferred Shares.
(b) The Conversion Price at which Series A Preferred Shares are
convertible into Class A Common Stock shall be subject to adjustment from time
to time, as follows:
(i) In case at any time after the date hereof, the Company shall
pay or make a dividend or other distribution on all or any portion of its Common
Stock or shall make a dividend or other distribution on any other class of
Capital Stock of the Company, which dividend or distribution consists of Common
Stock, the Conversion Price in effect at the opening of business on the day
following the date fixed for the determination of shareholders entitled to
receive such dividend or other distribution shall be decreased by multiplying
such Conversion Price 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 plus the total number of shares constituting such dividend or other
distribution, such decrease to become effective immediately after the opening of
business on the day following the date fixed for such determination. For the
purposes of this paragraph (i), the number of shares of Common Stock at any time
outstanding shall not include
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shares held in the treasury of the Company, but shall include shares issuable in
respect of scrip Common Stock. If any dividend or distribution of the type
described in this Section 7(b)(i) is declared but not so paid or made, the
Conversion Price shall again be adjusted to be the Conversion Price which would
then be in effect if such dividend or distribution had not been declared.
(ii) In case at any time after the date hereof, the Company
shall pay or make a dividend or other distribution on all of its Common Stock
consisting of, or shall otherwise issue, rights, warrants, options, or
convertible or exchangeable securities (not being available on an equivalent
basis to Holders upon conversion) entitling the holders thereof to subscribe for
or purchase, Common Stock at a price per share less than the Current Market
Price Per Share of the Common Stock (determined as provided in paragraph (viii)
of this Section 7(b)) on the date of or distribution or issuance such rights,
warrants, options, or convertible or exchangeable securities (other than
pursuant to a dividend reinvestment plan), the Conversion Price in effect at the
opening of business on the day following the date of such distribution or
issuance shall be decreased by multiplying such Conversion Price by a fraction
of which the numerator shall be the number of shares of Common Stock immediately
prior to such distribution or issuance 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 receive at such
Current Market Price Per Share, and the denominator shall be the number of
shares of Common Stock outstanding at the close of business on the date of such
distribution or issuance plus the number of shares of Common Stock so offered
for subscription or purchase, such decrease to become effective immediately
after the opening of business on the day following the date fixed for such
determination. For the purposes of this paragraph (ii), the number of shares of
Common Stock at any time outstanding shall not include shares held in the
treasury of the Company but will include shares issuable in respect of scrip
certificates, if any, issued in lieu of fractions of shares of Common Stock. The
Company will not issue any rights, warrants or options in respect of Common
Stock held in the treasury of the Company (or, if rights, warrants or options
are issued in respect of all of the Common Stock of the Company, will not
exercise any such rights, warrants or options in respect of Common Stock held in
the treasury of the Company). The value of such consideration, if other than
cash, shall be determined in the reasonable good faith judgment of the Board of
Directors, whose determination shall be conclusive. To the extent any securities
are issued which give rise to an adjustment to the Conversion Price pursuant to
this clause (ii), and such securities expire unexercised, then the Conversion
Price shall be readjusted as if such expired securities had never been issued.
(iii) In case at any time after the date hereof, the Company
shall issue Common Stock at a price per share less than the Current Market Price
Per Share of the Common Stock on the date of such issuance of Common Stock, the
Conversion Price in effect at the opening of business on the day following such
issuance date shall be decreased by multiplying such Conversion price by a
fraction of which the numerator shall be the number of shares of Common Stock
outstanding immediately prior to issuance plus the number of shares of Common
Stock which the aggregate of the offering price of the shares of Common Stock so
offered for subscription or purchase would purchase at such Current Market Price
Per Share, and the denominator shall be the number of shares of Common Stock
outstanding immediately prior to such issuance plus the number of shares of
Common Stock so offered for subscription or
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purchase, such decrease to become effective immediately after the opening of
business on the day following the date of such issuance.
(iv) In case at any time after the date hereof, all or any
portion of the Common Stock outstanding shall be subdivided into a greater
number of shares of Common Stock, the Conversion Price in effect at the opening
of business on the day following the day upon which such subdivision becomes
effective shall be proportionately reduced and, conversely in case at any time
after the date hereof, all or any portion of the shares of Common Stock
outstanding shall each be combined into a smaller number of shares of Common
Stock, the Conversion Price in effect at the opening of business on the day
following the day upon which such combination becomes effective shall be
proportionately increased, 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.
(v) In case at any time after the date hereof, the Company
shall, by dividend or otherwise, distribute to all holders of its Common Stock
evidences of its indebtedness or assets (including securities, rights, warrants
or options, but excluding any rights, warrants, or options referred to in
paragraph (ii) of this Section 7(b)) entitling the holders of Common Stock to
subscribe for or purchase Common Stock at a price per share less than the
Current Market Price Per Share of the Common Stock, the Conversion Price in
effect at the opening of business on the date fixed for the determination of
shareholders entitled to such distribution shall be by multiplying the
Conversion Price 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 Per Share 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) of the portion of the assets or evidence of
indebtedness so distributed applicable to one share of Common Stock and the
denominator shall be such Current Market Price Per Share 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. If any dividend or distribution of the
type described in this Section 7(b)(v) is declared but not so paid or made, the
Conversion Price shall again be adjusted to the Conversion Price which would
then be in effect if such dividend or distribution had not been declared.
(vi) The reclassification of Common Stock into securities other
than Common Stock (other than any reclassification upon a consolidation or
merger to which Section 7(d) below applies) shall be deemed to involve (A) a
distribution of such securities other than Common Stock to all holders of Common
Stock (and the effective date of such reclassification shall be deemed 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
paragraph (ii) of this Section 7(b)) and (B) a subdivision or combination, as
the case may be, of the number of Common Stock outstanding immediately prior to
such reclassification into the number of Common Stock outstanding immediately
thereafter (and the effective date of such reclassification shall be deemed to
be "the day upon which such subdivision becomes effective," as the case may be,
and " the day upon which such subdivision or combination becomes effective"
within the meaning of the paragraph (iv) of this Section 7(b)).
(vii) Intentionally Omitted.
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(viii) For the purpose of any computation under paragraphs (ii),
(iii), or (v) of this Section 7(b), the Current Market Price Per Share of Common
Stock on any date shall be deemed to be the Weighted Average Trading Price for
the 20 consecutive Trading Days immediately preceding the day in question.
(ix) Notwithstanding any other provision of this Section 7, no
adjustment to the Conversion Price shall reduce the Conversion Price below the
then par value per share of the Common Stock, and any such purported adjustment
shall instead reduce the Conversion Price to such par value. The Company hereby
covenants not to take any action (A) to increase the par value per share of the
Common Stock or (B) that would or does result in any adjustment in the
Conversion Price that would cause the Conversion Price to be less than the then
par value per share of the Common Stock.
(x) Notwithstanding any other provision of this Section 7, no
adjustment in the Conversion Price need be made until all cumulative adjustments
amount to 1% or more of the Conversion Price as last adjusted. Any adjustments
that are not made shall be carried forward and taken into account in any
subsequent adjustment.
(xi) Whenever the Conversion Price is adjusted as herein
provided:
(1) the Company shall compute the adjusted Conversion
Price and shall prepare a certificate signed by the Treasurer of the Company
setting forth the adjusted Conversion Price and showing in reasonable detail the
facts upon which such adjustment is based, and such certificate shall forthwith
be filed with the transfer agent for the Series A Preferred Shares; and
(2) a notice stating that the Conversion Price has been
adjusted and setting forth the adjusted Conversion Price shall as soon as
practicable be mailed by the Company to all record Holders at their last
addresses as they shall appear upon the stock transfer books of the Company.
(xii) In any case in which this Section 7(b) provides that an
adjustment shall become effective immediately after a record date for an event,
the Company may defer until the occurrence of such event (A) issuing to the
Holder of any Series A Preferred Share converted after such record date and
before the occurrence of such event the additional shares of Common Stock
issuable upon such conversion by reason of the adjustment required by such event
over and above the Common Stock issuable upon such conversion before giving
effect to such adjustment and (B) paying to such Holder any amount in cash in
lieu of any fractional share of Common Stock pursuant to Section 7(c).
(c) The Company shall not issue fractional shares or scrip
representing fractional shares of Common Stock upon conversion of Series A
Preferred Shares. Instead the Company shall make a cash payment equal to the
value of such fractional amount. If more than one certificate evidencing Series
A Preferred Shares shall be surrendered for conversion at one time by the same
Holder, the number of shares issuable upon conversion thereof shall be computed
on the basis of the aggregate number of Series A Preferred Shares so
surrendered.
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(d) In the event that the Company shall be a party to any
transaction, including without limitation any (i) recapitalization or
reclassification of the Common Stock (other than a change in par value, or from
par value to no par value, or from no par value to par value, or as a result of
a subdivision or combination of the Common Stock), (ii) any consolidation of the
Company with, or merger of the Company into, any other Person, any merger of
another Person into the Company (other than a merger which does not result in a
reclassification, conversion, exchange or cancellation of outstanding shares of
Common Stock of the Company), (iii) any sale or transfer of all or substantially
all of the assets of the Company or (iv) any compulsory share exchange, pursuant
to which the Common Stock is converted into the right to receive other
securities, cash or other property, then lawful provision shall be made as part
of the terms of such transaction whereby the Holder of each Series A Preferred
Share then outstanding shall have the right thereafter, to convert such share
into the kind and amount of securities, cash and other property receivable upon
such recapitalization, reclassification, consolidation, merger, sale, transfer
or share exchange by a holder of the number of shares of Common Stock into which
such Series A Preferred Share might have been converted immediately prior to
such recapitalization, reclassification, consolidation, merger, sale, transfer
or share exchange. The Company or the Person formed by such consolidation or
resulting from such merger or which acquires such assets or which acquires the
Company's shares, as the case may be, shall make provisions in its certificate
or articles of incorporation or other constituent document to establish such
right. Such certificate or articles of incorporation or other constituent
document shall provide for adjustments which, for events subsequent to the
effective date of such certificate or articles of incorporation or other
constituent document, shall be as nearly equivalent as may be practicable to the
adjustments provided for in this Section 7. The above provisions shall similarly
apply to successive recapitalization, reclassifications, consolidations,
mergers, sales, transfers or share exchanges.
(e) The Company shall at all times reserve and keep available, out of
its authorized and unissued Capital Stock, solely for the purpose of effecting
the conversion of the Series A Preferred Shares, such number of shares of its
Class A Common Stock, free of preemptive rights, as shall from time to time be
sufficient to effect the conversion of all Series A Preferred Shares from time
to time outstanding. The Company shall from time to time, in accordance with
the laws of the State of Georgia, use its best efforts to increase the
authorized number of shares of Common Stock if at any time the number of shares
of authorized and unissued Class A Common Stock shall not be sufficient to
permit the conversion of all the then outstanding shares of Series A Preferred
Shares. The Company shall pay any and all issue or other taxes that may be
payable in respect of any issue or delivery of shares of Class A Common Stock on
conversion of the Series A Preferred Shares. The Company shall not, however, be
required to pay any tax which may be payable in respect of any transfer involved
in the issue or delivery of Class A Common Stock (or other securities or assets)
in a name other than that in which the Series A Preferred Shares so converted
were registered, and no such issue or delivery shall be made unless and until
the Person requesting such issue has paid to the Company the amount of such tax
or has established, to the satisfaction of the Company, that such tax has been
paid.
(f) In case:
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(i) the Company shall authorize or take an action that would,
upon consummation, require a Conversion Price adjustment pursuant to
subparagraphs (i), (iii), (iv) or (v) of Section 7(b); or
(ii) of any reclassification of Common Stock (other than a
subdivision or combination of the outstanding Common Stock, or a change in par
value, or from par value to no par value, or from no par value to par value), or
of any consolidation or merger to which the Company is a party and for which
approval of any stockholders of the Company shall be required, or of the sale or
transfer of all or substantially all of the assets of the Company or of any
compulsory share exchange whereby the Common Stock is converted into other
securities, cash or other property; or
(iii) of the voluntary or involuntary dissolution, liquidation or
winding up of the Company;
then the Company shall cause to be mailed to the Holders, at their last
addresses as they shall appear upon the stock transfer books of the Company, at
least 20 days prior to the proposed record or effective date, as the case may
be, notice stating (x) the date on which a record (if any) is to be taken for
the purpose of such action, dividend or distribution, 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 or distribution are to be determined or (y) the date
on which such action, reclassification, consolidation, merger, sale, transfer,
share exchange, dissolution, liquidation or winding up is expected to become
effective, and the date as of which it is expected that holders of Common Stock
of record shall be entitled to exchange their shares of Common Stock for
securities or other property deliverable upon such action, reclassification,
consolidation, merger, sale, transfer, share exchange, dissolution, liquidation
or winding up (but no failure to mail such notice or any defect therein or in
the mailing thereof shall affect the validity of the corporate action required
to be specified in such notice).
(g) Notwithstanding the foregoing provisions, (i) neither the
issuance of any shares of Common Stock pursuant to any plan providing for the
reinvestment of dividends or interest payable on securities of the Company and
the investment of dividends or interest payable on securities of the Company and
the investment of additional optional amounts in shares of Common Stock under
any such plan and the issuance of any shares of Common Stock or options or
rights to purchase such shares pursuant to any employee benefit plan or program
of the Company or pursuant to any option, warrant, right or exercisable,
exchangeable or convertible security outstanding as of the Issue Date, nor (ii)
the issuance of any Subsequent Preferred Shares, shall be deemed to constitute
an issuance of Common Stock or exercisable, exchangeable or convertible
securities by the Company to which any of the adjustment provisions described
above applies.
(i) For purposes of this Section 7, the number of shares of
Common Stock at any time outstanding shall not include any shares of Common
Stock then owned or held by or for the account of the Company.
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8. Voting Rights.
-------------
(a) Holders shall vote their Series A Preferred Shares as a separate
class as set forth in paragraph (c) hereof, as may be further set forth in the
Company's Articles of Incorporation and as otherwise expressly permitted by the
GBCC.
(b) In addition to the rights set forth in Section 8(a) above, after
the Approval Date, and subject to compliance with applicable law, including the
HSR Act, by a particular Holder, with no further action upon the part of such
Holder or the Company, such Holder shall be entitled to one vote for each share
of Common Stock to which such Holder is entitled to receive at such time upon
conversion of the Series A Preferred Shares in accordance with Section 7 hereof,
whether or not such Holder has actually converted such shares, and shall vote
such shares together with the Class A Common Stock as a single class on all
matters brought before a vote of the holders of the Common Stock.
(c) The Company shall not, without the affirmative vote of the
Holders of a majority of the Series A Preferred Shares then outstanding:
(i) authorize, create (by way of reclassification or otherwise)
or issue any securities which are senior to the Series A Preferred Shares as to
dividends, distributions or distributions upon liquidation, winding up or
dissolution of the Company ("Senior Securities"), any Parity Securities (other
than additional Series A Preferred Shares issued in accordance with Section 3(a)
hereof or Subsequent Preferred Shares) or any obligation or security convertible
into, exchangeable for or evidencing the right to purchase any Senior Securities
or Parity Securities;
(ii) amend or otherwise alter its Articles of Incorporation in
any manner that adversely affects the rights, privileges and preferences of the
Series A Preferred Shares set forth in this Certificate of Designation; or
(iii) take any action requiring a vote of shareholders of the
Company that adversely affects the rights, preferences and privileges of the
Series A Preferred Shares set forth in this Certificate of Designation.
9. Payment.
-------
(a) All amounts payable in cash with respect to the Series A
Preferred Shares shall be payable in United States dollars at the principal
executive office of the Company or, at the option of the Holder, payment of
dividends (if any) may be made by official bank check sent by overnight courier
guaranteeing next Business Day delivery to such Holder of the Series A Preferred
Shares at its address set forth in the register of Holders maintained by the
Company.
(b) Any payment on the Series A Preferred Shares due on any day that
is not a Business Day need not be made on such day, but may be made on the next
succeeding Business Day with the same force and effect as if made on such due
date.
10. Exclusion of Other Rights. Except as may otherwise be required by law,
-------------------------
the Series A Preferred Shares shall not have any voting powers, preferences and
relative, participating, optional or other special rights, other than those
specifically set forth in this
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Certificate of Designation (as it may be amended from time to time) and in the
Articles of Incorporation. The Series A Preferred Shares shall have no
preemptive or subscription rights.
11. Headings of Subdivisions. The headings of the various subdivisions
------------------------
hereof are for convenience of reference only and shall not affect the
interpretation of any of the provisions hereof.
12. Severability of Provisions. If any voting powers, preferences and
--------------------------
relative, participating, optional and other special rights of the Series A
Preferred Shares and qualifications, limitations and restrictions thereof set
forth in this Certificate of Designation (as it may be amended from time to
time) is invalid, unlawful or incapable of being enforced by reason of any rule
of law or public policy, all other voting powers, preferences and relative,
participating, optional and other special rights of Series A Preferred Shares
and qualifications, limitations and restrictions thereof set forth in this
Certificate of Designation (as it may be amended from time to time) which can be
given effect without the invalid, unlawful or unenforceable voting powers,
preferences and relative, participating, optional and other special rights of
Series A Preferred Shares and qualifications, limitations and restrictions
thereof shall, nevertheless, remain in full force and effect, and no voting
powers, preferences and relative, participating, optional or other special
rights of Series A Preferred Shares and qualifications, limitations and
restrictions thereof herein set forth shall be deemed dependent upon any other
such voting powers, preferences and relative, participating, optional or other
special rights of Series A Preferred Shares and qualifications, limitations and
restrictions thereof unless so expressed herein.
13. Reissuance of Series A Preferred Shares. Series A Preferred Shares
---------------------------------------
that have been issued and reacquired in any manner, including shares purchased,
redeemed, exchanged or converted, shall (upon compliance with any applicable
provisions of the GBCC) have the status of authorized but unissued shares of
preferred stock of the Company undesignated as to series and may be designated
or redesignated and issued or reissued, as the case may be, as part of any
series of preferred stock of the Company, provided that any issue of such shares
as Series A Preferred Shares must be in compliance with the terms hereof.
14. Amendments. The Certificate of Designation may be amended only with
----------
the consent of the Holders of a majority of the Series A Preferred Shares then
outstanding, except that the Board of Directors may file amendments to this
Certificate of Designation without the consent of the Holders of the Series A
Preferred Shares in order to increase the number of Series A Preferred Shares
authorized by this Designation but only to permit the issuances of such Series A
Preferred Shares as Dividend Series A Preferred Shares and Warrant Series A
Preferred Shares, and only if such additional shares are reserved for issuance
as Dividend Series A Preferred Shares or Warrant Series A Preferred Shares.
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IN WITNESS WHEREOF, the Company has caused this Certificate of Designation
to be duly executed this , 2000.
PAMECO CORPORATION
By:
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Name:
Title:
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