Exhibit 3.1
ARTICLES OF AMENDMENT
TO THE
ARTICLES OF INCORPORATION
of
PRECISION AUTO CARE, INC.
TO CREATE A NEW SERIES OF PREFERRED STOCK
DESIGNATED AS
SERIES A CUMULATIVE REDEEMABLE PREFERRED STOCK
Pursuant to Section 13.1-639 of the Virginia Stock Corporation Act
I.
The name of the corporation is Precision Auto Care, Inc.(the
"Corporation").
II.
Pursuant to Section 13.1-639 of the Virginia Stock Corporation Act and
the authority conferred upon the Board of Directors of the Corporation (the
"Board of Directors") by Article IV of the Articles of Incorporation of the
Corporation (the "Articles of Incorporation"), the Articles of Incorporation are
hereby amended to create a new series of shares of Preferred Stock, par value
$0.01 per share, designated as "Series A Cumulative Redeemable Preferred Stock,"
by adding the following additional Section 4:
SECTION 4. Series A Cumulative Redeemable Preferred Stock. There is hereby
established a series of the Corporation's authorized Preferred Stock, to be
designated and to have the relative rights, preferences and limitations, insofar
as not already fixed by any other provision of the Articles of Incorporation, as
follows:
(a) Designation and Number. A series of the preferred stock, designated
the "Series A Cumulative Redeemable Preferred Stock" (the "Series A Preferred"),
is hereby established. The number of shares of the Series A Preferred shall be
1,000,000.
(b) Relative Seniority. In respect of rights to receive dividends and to
participate in distributions or payments in the event of any liquidation,
dissolution or winding up of the Corporation, the Series A Preferred shall rank
senior to the common stock and all other classes and series of capital stock of
the Corporation (collectively, "Junior Stock").
(c) Dividends.
(i) The holders of the then outstanding Series A Preferred shall be
entitled to receive, when and as declared by the Board of Directors out of any
funds legally available therefor, cumulative preferential cash dividends at the
rate of 2.0% of the Liquidation Preference of the Series A Preferred per annum,
payable quarterly in arrears in cash on the last day, or the next succeeding
Business Day, of January, April, July and October in each year, beginning
January 31, 2003 (each such day being hereinafter called a "Dividend Payment
Date" and each period beginning on the day next following a Dividend Payment
Date and ending on the next following Dividend Payment Date being hereinafter
called a "Dividend Period"), to shareholders of record at the close of business
on the Friday occurring between the tenth and fifteenth days of the calendar
month in which the applicable Dividend Payment Date falls or such date as shall
be fixed by the Board of Directors at the time of declaration of the dividend
(the "Dividend Record Date"), which shall be not less than 10 nor more than 30
days preceding the Dividend Payment Date. The amount of any dividend payable for
the initial Dividend Period and for any other partial Dividend Period shall be
computed on the basis of a 360-day year consisting of twelve 30-day months.
Dividends on the shares of Series A Preferred shall accrue and be cumulative
from and including the date of original issue thereof (the "Issue Date"),
whether or not (i) the Corporation has earnings, (ii) dividends on such shares
are declared or (iii) on any Dividend Payment Date there shall be funds legally
available for the payment of such dividends, so that if in any fiscal year or
years dividends in whole or in part are not paid upon the Series A Preferred
when due, such unpaid dividends shall accumulate in preference to the holders of
the Junior Stock until paid in full. "Business Day" shall mean any day, other
than a Saturday or Sunday, that is neither a legal holiday nor a day on which
banking institutions in New York City, New York are authorized or required by
law, regulation or executive order to close.
(ii) Until such time as all of the shares of Series A Preferred
have been redeemed and full cumulative dividends on the Series A Preferred have
been paid, no dividends (other than in Junior Stock) shall be declared or paid
or set aside for payment or other distribution or shall be declared or made upon
any Junior Stock, nor shall any Junior Stock 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 Junior Stock) by the
Corporation or any subsidiary of the Corporation (except by conversion into or
exchange for Junior Stock).
(iii) Any dividend payment made on shares of the Series A Preferred
shall first be credited against the earliest accrued but unpaid dividend due
with respect to such shares which remains payable.
(iv) The amount of any dividends accrued on any shares of Series A
Preferred at any Dividend Payment Date shall be the amount of any unpaid
dividends accumulated thereon, to and including such Dividend Payment Date,
whether or not earned or declared, and the amount of dividends accrued on any
shares of Series A Preferred at any date other than a Dividend Payment Date
shall be equal to the sum of the amount of any unpaid dividends accumulated
thereon, to and including the last preceding Dividend Payment Date, whether or
not earned or declared, plus an amount calculated on the basis of the annual
dividend rate for the period after such last preceding Dividend Payment Date to
and including the date as of which the calculation is made, based on a 360-day
year of twelve 30-day months.
(v) Accrued but unpaid dividends on the Series A Preferred will
not bear interest. Holders of the Series A Preferred will not be entitled to any
dividends in excess of full cumulative dividends as described above.
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(vi) No dividends on shares of Series A Preferred shall be declared
by the Board of Directors of the Corporation or paid or set apart for payment by
the Corporation at such time as the terms and provisions of any agreement of the
Corporation, including any agreement relating to its indebtedness, prohibits
such declaration, payment or setting apart for payment or provides that such
declaration, payment or setting apart for payment would constitute a breach
thereof or a default thereunder, or if such declaration or payment shall be
restricted or prohibited by law.
(vii) Except as provided in these Articles, the Series A Preferred
shall not be entitled to participate in the earnings or assets of the
Corporation.
(d) Liquidation Rights.
(i) Upon the voluntary or involuntary dissolution, liquidation or
winding up of the Corporation, the holders of shares of the Series A Preferred
then outstanding shall be entitled to receive and to be paid out of the assets
of the Corporation legally available for distribution to its shareholders,
before any distribution shall be made to the holders of Junior Stock, a
liquidation preference of $10.36 per share (subject to adjustment for any stock
dividends, stock splits or similar capitalization transactions)(the "Liquidation
Preference"), plus accrued and unpaid dividends thereon (whether or not
declared) to the date of payment.
(ii) After the payment to the holders of the shares of the Series A
Preferred of the full Liquidation Preference provided for in this Section
(4)(including accrued and unpaid dividends), the holders of the Series A
Preferred as such shall have no right or claim to any of the remaining assets of
the Corporation.
(iii) If, upon any voluntary or involuntary dissolution,
liquidation, or winding up of the Corporation, the amounts payable with respect
to the Liquidation Preference of the shares of the Series A Preferred and any
other shares of stock of the Corporation ranking as to any such distribution on
a parity with the shares of the Series A Preferred are not paid in full, the
holders of the shares of the Series A Preferred and of such other shares will
share ratably in any such distribution of assets of the Corporation in
proportion to the full respective liquidation preferences to which they are
entitled.
(iv) The sale, lease, transfer or conveyance of all or
substantially all the property or business of the Corporation, or the merger or
consolidation of the Corporation into or with any other corporation or the
merger or consolidation of any other corporation into or with the Corporation,
shall be deemed to be a dissolution, liquidation or winding up, voluntary or
involuntary, for the purposes of this Section (4), unless the holders of a
majority of the then outstanding shares of Series A Preferred elect in writing
to waive the effect of the foregoing clause with respect to a sale, lease
transfer, conveyance, merger or consolidation.
(e) Redemption by Shareholder.
(i) Right of Optional Redemption by Shareholder.
(1) On or at any time (and from time to time) after the third
anniversary of the Issue Date, each holder of shares of Series A Preferred then
outstanding (each,
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an "Electing Holder") may, at their option and in their sole discretion, and on
thirty (30) days prior written notice to the Corporation (each, a "Redemption
Request" ), specify a date (each, an "Investor Designated Redemption Date") on
which the Corporation shall redeem all of the shares of Series A Preferred then
held by such holder, at a price per share, payable in cash of $10.36, plus all
accrued and unpaid dividends (whether or not declared) to and including the date
fixed for redemption (the "Series A Redemption Price"). Upon receipt of a
Redemption Request, the Corporation shall provide notice of its receipt of a
Redemption Request, specifying the date, manner and place of redemption (a
"Pending Redemption Notice") by first class mail, postage prepaid, to each
holder of the Series A Preferred at his or its post office address last shown on
the records of the Corporation, not less than five (5) days prior to the
Investor Designated Redemption Date. Each holder of the Series A Preferred
(other than a holder who has previously made the Redemption Request and is then
an Electing Holder) may elect to become an Electing Holder on such Investor
Designated Redemption Date by so indicating in a written notice delivered to the
Corporation at least five (5) days prior to the Investor Designated Redemption
Date (also for purposes hereof, a "Redemption Request"). Except as set forth
below, the Corporation shall redeem from each Electing Holder all of his or its
shares of Series A Preferred that are subject to a Redemption Request at a price
per share in cash equal to the Series A Redemption Price.
(2) If all funds necessary to honor the Redemption Requests shall
have been irrevocably set aside by the Corporation, separate and apart from its
other funds in trust for the benefit of any holders of the shares of Series A
Preferred so called for redemption, so as to be, and to continue to be available
therefor, then, from and after the Investor Designated Redemption Date,
dividends on such shares of Series A Preferred shall cease to accrue.
(3) The deposit of funds with a bank or trust company for the
purpose of redeeming Series A Preferred shall be irrevocable except that:
(A) the Corporation shall be entitled to receive from such
bank or trust company the interest or other earnings, if any, earned on any
money so deposited in trust, and the holders of any shares redeemed shall have
no claim to such interest or other earnings; and
(B) any balance of moneys so deposited by the Corporation and
unclaimed by the holders of the Series A Preferred entitled thereto at the
expiration of two years from the applicable Investor Designated Redemption Date
shall be repaid, together with any interest or other earnings earned thereon, to
the Corporation, and after any such repayment, the holders of the shares
entitled to the funds so repaid to the Corporation shall look only to the
Corporation for payment without interest or other earnings.
(4) If the Corporation is unable at any Investor Designated
Redemption Date to redeem any shares of Series A Preferred then to be redeemed
because such redemption would violate the Virginia Business Corporation Act,
then the Corporation shall redeem such shares as soon thereafter as redemption
would not violate such laws. In the event of any redemption of only a part of
the Series A Preferred requested to be redeemed pursuant to all Redemption
Requests, the Corporation shall effect such redemption pro rata among the
Electing Holders (based on the number of shares of Series A Preferred held on
the date of notice of
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redemption). At any time hereafter when additional funds become legally
available for the redemption of the Series A Preferred, such funds will be used
to redeem the balance of the shares which the Corporation was theretofore
obligated to redeem, ratably on the basis set forth in the preceding sentence.
(5) On the Investor Designated Redemption Date, each Electing
Holder shall surrender his or its certificate or certificates representing
shares of Series A Preferred to the Corporation, in the manner and at the place
designated in the Pending Redemption Notice, and thereupon the Series A
Redemption Price payable in respect of such shares shall be paid to the order of
the person whose name appears on such certificate or certificates as the owner
thereof and each surrendered certificate shall be canceled. In the event less
than all the shares represented by any such certificate are redeemed, a new
certificate shall be issued representing the unredeemed shares. From and after
the Investor Designated Redemption Date, unless there shall have been a default
in payment of the Series A Redemption Price, all rights of the Electing Holders
(except the right to receive the Series A Redemption Price upon surrender of
their certificate or certificates) shall cease with respect to such shares, and
such shares shall not thereafter be transferred on the books of the Corporation
or be deemed to be outstanding for any purpose whatsoever.
(ii) Rights to Dividends on Shares Called for Redemption. If the
Investor Designated Redemption Date is after a Dividend Record Date and before
the related Dividend Payment Date, the dividend payable on such Dividend Payment
Date shall be paid to the holder in whose name the shares of Series A Preferred
to be redeemed are registered at the close of business on such Dividend Record
Date notwithstanding the redemption thereof between such Dividend Record Date
and the related Dividend Payment Date or the Corporation's default in the
payment of the dividend due. Except as provided in this Section (5), the
Corporation will make no payment or allowance for unpaid dividends, whether or
not in arrears, on called Series A Preferred.
(iii) No Reissuance. Any shares of Series A Preferred so redeemed
shall be permanently retired, shall no longer be deemed outstanding and shall
not under any circumstances be reissued, and the Corporation may from time to
time take such appropriate corporate action as may be necessary to reduce the
authorized Series A Preferred accordingly. Nothing herein contained shall
prevent or restrict the purchase by the Corporation, from time to time either at
public or private sale, of the whole or any part of the Series A Preferred at
such price or prices as the Corporation may determine, subject to the provisions
of applicable law.
(f) Redemption by Corporation.
(i) Right of Optional Redemption by Corporation. The Corporation
may, at its option, redeem at any time all or, from time to time, part of the
Series A Preferred at the Series A Redemption Price, together with all accrued
and unpaid dividends to and including the date fixed for redemption (the
"Company Redemption Date"), without interest. In case of redemption of less than
all shares of Series A Preferred at the time outstanding, the shares of Series A
Preferred to be redeemed shall be selected pro rata from all holders of record
of such shares in proportion to the number of shares of Series A Preferred held
by such holders (as nearly as may be practicable without creating fractional
shares).
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(ii) Procedures for Redemption.
(1) Notice of any redemption pursuant to Section 6 will be
mailed by the Corporation, postage prepaid, not less than 30 nor more than 60
days prior to the Company Redemption Date, addressed to the holders of record of
the Series A Preferred at their respective addresses as they appear on the stock
transfer records of the Corporation. No failure to give such notice or any
defect therein or in the mailing thereof shall affect the validity of the
proceedings for the redemption of any Series A Preferred except as to the holder
to whom the Corporation 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: (a) the Company Redemption Date; (b) the Series A Redemption
Price; (c) the number of shares of Series A Preferred to be redeemed; (d) the
place or places where certificates for such shares are to be surrendered for
payment of the Series A Redemption Price; and (e) that dividends on the shares
to be redeemed will cease to accumulate on the Company Redemption Date.
(2) If notice of redemption of any shares of Series A
Preferred has been mailed in accordance with Section (6)(B)(i) above and
provided that on or before the Company Redemption Date specified in such notice
all funds necessary for such redemption shall have been irrevocably set aside by
the Corporation, separate and apart from its other funds in trust for the
benefit of any holders of the shares of Series A Preferred so called for
redemption, so as to be, and to continue to be available therefor, then, from
and after the Company Redemption Date, dividends on such shares of Series A
Preferred shall cease to accrue, and such shares shall no longer be deemed to be
outstanding and shall not have the status of Series A Preferred and all rights
of the holders thereof as shareholders of the Corporation (except the right to
receive the Series A Redemption Price) shall terminate. Upon surrender, in
accordance with said notice, of the certificates for any shares of Series A
Preferred so redeemed (properly endorsed or assigned for transfer, if the
Corporation shall so require and the notice shall so state), such shares of
Series A Preferred shall be redeemed by the Corporation at the Series A
Redemption Price. In case less than all the shares of Series A Preferred
represented by any such certificate are redeemed, a new certificate or
certificates shall be issued representing the unredeemed shares of Series A
Preferred without cost to the holder thereof.
(3) The deposit of funds with a bank or trust company for the
purpose of redeeming Series A Preferred shall be irrevocable except that:
(A) the Corporation shall be entitled to receive from
such bank or trust company the interest or other earnings, if any, earned on any
money so deposited in trust, and the holders of any shares redeemed shall have
no claim to such interest or other earnings; and
(B) any balance of monies so deposited by the
Corporation and unclaimed by the holders of the Series A Preferred entitled
thereto at the expiration of two years from the applicable Company Redemption
Date shall be repaid, together with any interest or other earnings earned
thereon, to the Corporation, and after any such repayment, the holders of the
shares entitled to the funds so repaid to the Corporation shall look only to the
Corporation for payment without interest or other earnings.
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(iii) Limitations on Redemption Unless full cumulative dividends on
all shares of Series A Preferred shall have been or contemporaneously are
declared and paid or declared and a sum sufficient for the payment thereof set
apart for payment for all past Dividend Periods and the then current Dividend
Period, no Series A Preferred shall be redeemed (unless all outstanding shares
of Series A Preferred are simultaneously redeemed) or purchased or otherwise
acquired directly or indirectly; provided, however, that the foregoing shall not
prevent the purchase or acquisition of Series A Preferred pursuant to a purchase
or exchange offer made on the same terms to holders of all outstanding shares of
Series A Preferred.
(iv) Rights to Dividends on Shares Called for Redemption. If the
Series A Redemption Date is after a Dividend Record Date and before the related
Dividend Payment Date, the dividend payable on such Dividend Payment Date shall
be paid to the holder in whose name the shares of Series A Preferred to be
redeemed are registered at the close of business on such Dividend Record Date
notwithstanding the redemption thereof between such Dividend Record Date and the
related Dividend Payment Date or the Corporation's default in the payment of the
dividend due. Except as provided in this Section (6), the Corporation will make
no payment or allowance for unpaid dividends, whether or not in arrears, on
called Series A Preferred.
(g) Voting Rights.
(i) Except as otherwise provided in this Section 7 and as
otherwise required by law, the holders of the Series A Preferred shall not be
entitled to vote at any meeting of the shareholders for election of directors or
for any other purpose or otherwise to participate in any action taken by the
Corporation or the shareholders thereof, or to receive notice of any meeting of
shareholders.
(ii) In addition to any other rights provided by law, so long as
any shares of Series A Preferred remain outstanding, the Corporation shall not,
without the affirmative vote of the holders of at least a majority of the shares
of the Series A Preferred outstanding at the time:
(1) issue any additional shares of Series A Preferred, except
as required under that certain Exchange Agreement dated October 29, 2002, among
the Corporation, Precision Funding, LLC, Desarollo Integrado, S.A. de C.V. and
Arthur C. Kellar;
(2) authorize or create, or increase the authorized or issued
amount of, any class or series of capital stock ranking prior to or on a parity
with the Series A Preferred with respect to payment of dividends or the
distribution of assets upon liquidation, dissolution or winding up or reclassify
any authorized capital stock of the Corporation into any such shares, or create,
authorize or issue any obligation or security convertible into or evidencing the
right to purchase any such shares; or
(3) amend, alter or repeal the provisions of these Articles,
whether by merger, consolidation or otherwise, so as to materially and adversely
affect any right, preference, privilege or voting power of the Series A
Preferred or the holders thereof; provided, however, that any increase in the
amount of the authorized preferred stock or the creation or issuance of any
other series of preferred stock, or any increase in the amount of authorized
shares of such
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series, in each case ranking junior to the Series A Preferred with respect to
payment of dividends or the distribution of assets upon liquidation, dissolution
or winding up, shall not be deemed to materially and adversely affect such
rights, preferences, privileges or voting powers.
(h) Conversion of Series A Preferred. The Series A Preferred is not
convertible into or exchangeable for any other property or securities of the
Corporation.
(i) Registration of Transfer The Corporation shall keep at its principal
office a register for the registration of shares of Series A Preferred. Upon the
surrender at its principal office of any certificate representing shares of
Series A Preferred, the Corporation shall, at the request of the record holder
of such certificate, execute and deliver (at the Corporation's expense) a new
certificate or certificates in exchange therefor representing in the aggregate
the number of shares represented by the surrendered certificate. Each such new
certificate will be registered in such name and will represent such number of
shares as is requested by the holder of the surrendered certificate and will be
substantially identical in form to the surrendered certificate.
III.
The foregoing amendment was duly adopted by the Board of Directors on
October 28, 2002. No shareholder action was required.
PRECISION AUTO CARE, INC.
Dated: October 28, 2002 By: /s/ Robert R. Falconi
Name: Robert R. Falconi
Title: Chief Financial Officer
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