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EXHIBIT 3.1
CERTIFICATE OF INCORPORATION OF
PAMECO ACQUISITION CORPORATION
ARTICLE I. NAME.
The name of the corporation is Pameco Acquisition Corporation (hereinafter
referred to as the "Company").
ARTICLE II. REGISTERED OFFICE AND AGENT.
The name and address of the registered office of the Company in the State of
Delaware is Corporate Trust Company, Corporate Trust Center, 1209 Orange Street
Wilmington, Delaware 19801.
ARTICLE III. NATURE OF BUSINESS.
The nature of the business or purposes to be conducted by the Company is to
engage in any lawful act or activity for which companies may be organized under
the Delaware General Corporation Law ("DGCL").
ARTICLE IV. CAPITAL STOCK.
The Company shall have authority to issue Twenty Million (20,000,000) shares of
common stock, par value $.01 per share (the "Common Stock). The Company shall
also have authority to issue Five Million (5,000,000) shares of Preferred Stock,
par value $1.00 per share (the "Preferred Stock"). Shares of Common Stock and
Preferred Stock are referred to herein as the "Shares."
SECTION 1. COMMON STOCK. All shares of Common Stock shall be identical,
and shall entitle the holders thereof to the same rights and preferences, all
dividends declared and all assets of the Company upon dissolution, subject to
the rights and preferences, if any, of the holders of the Preferred Stock to
such dividends and assets upon dissolution pursuant to applicable law and the
resolution or resolutions of the Board of Directors providing for the issue of
one or more series of Preferred Stock. At each meeting of stockholders of the
Company, each holder of the Company's Common Stock shall be entitled to one vote
for each share on each matter to come before the meeting. Subject to the rights
of the holders of Preferred Stock outstanding from time to time, dividends may
be declared upon and paid to the holders of the Common Stock as the Board of
Directors shall determine, and in the event of voluntary or involuntary
liquidation or dissolution of the Company, the holders of the Common Stock shall
be entitled to share ratably in all assets of the Company.
SECTION 2. PREFERRED STOCK. The Board of Directors is authorized, subject
to the limitations prescribed by law and the provisions of this Article IV, to
provide for the issuance of shares of Preferred Stock from time to time in one
or more series, and by filing any certificate of designations required under
Section 151(g) of the GCL(or its successor statute as in effect from time to
time), to fix or alter the number of shares of any series of Preferred Stock,
and to fix the powers, designations,
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preferences and relative, participating, optional or other rights, and the
qualifications, limitations or restrictions granted to or imposed upon the
shares of any unissued series of Preferred Stock. The authority of the Board of
Directors with respect to each series shall include, but not be limited to, the
determination of:
(A) the number of shares constituting and the distinctive designation of
such series;
(B) the dividend rights of the shares of such series, including whether
dividends shall be cumulative and, if so, from which date or dates, and the
relative rights of priority, if any, of payment of dividends on shares of such
series;
(C) whether such series shall have voting rights, and, if so, the terms of
such voting rights, including the number of votes per share, the number of
members of the Board of Directors or the percentage of members of the Board of
Directors each class or series of Preferred Stock may be entitled to elect;
(D) whether such series shall have conversion rights and, if so, the terms
and conditions of such conversion, including provision for adjustment of the
conversion rate in such events as the Board of Directors shall determine;
(E) whether or not the shares of such series shall be redeemable, and, if
so, the terms and conditions of such redemption, including the date or dates
upon or after which they shall be redeemable, and the amount per share payable
in case of redemption, which amount may vary as the Board of Directors
determines under different conditions and at different redemption dates;
(F) whether such series shall have a sinking fund for the redemption or
purchase of shares of such series, and, if so, the terms and amount of such
sinking fund;
(G) the rights of the shares of such series in the event of voluntary or
involuntary liquidation, dissolution or winding up of the Company, and the
relative rights of priority, if any, of payment of shares of such series: and
(H) any other relative rights, preferences and limitations of such series.
The Board of Directors may, within the limits and restrictions stated in any
resolution or resolutions of the Board of Directors originally fixing the number
of shares constituting any series, increase or decrease (but not below the
number of shares of such series then outstanding) the number of shares of any
such series subsequent to the issue of shares of that series. Shares of
Preferred Stock that are redeemed, purchased or otherwise acquired by the
Company may be reissued except as otherwise provided by law or the applicable
certificate of designations.
SECTION 3. SERIES A PREFERRED SHARES. The first such series of Preferred
Stock shall consist of 600,000 shares of Series A Cumulative Pay-In-Kind
Preferred Shares ("Series A Preferred Shares"), and shall have the following
powers, designations, preferences and rights:
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(A) Definitions.
"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 (Georgia Business Corporation Code "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.
"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.
"Compounding Date" has the meaning set forth in Section 3(C)(1) below.
"Conversion Price" means $7.50, as the same may be adjusted from time to time.
"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(C)(1)
or 3(C)(2) below.
"Holder" means the record holder of one or more Series A Preferred Shares, as
shown on the books and records of the Company.
"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 3(B) 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
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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.
"Penalty Amount" means the contingent amount that exists only if the Company 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 dividend rate set
forth in Section 3(C) of this Certificate 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.
"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, Pameco Corporation, a
Georgia corporation, Littlejohn Fund II, L.P. and Quilvest American Equity,
Ltd., other than the Series A Preferred Shares.
"Trading Day" means with respect to the 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.
"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 3(H)(4), the Weighted Average Trading Price shall
be proportionally adjusted to the extent not so reflected in the report of
Bloomberg Information Systems, Inc.
(B) Ranking. The Series A Preferred Shares shall, with respect to
dividends, distributions and distributions upon the liquidation, winding-up or
dissolution
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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 this Article IV 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").
(C) Dividends.
(1) 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 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(C)(1), 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.
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(2) 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.
(3) To the extent a Holder of Series A Preferred Shares receives
payment of a dividend pursuant to Sections 3(C)(1) or 3(C)(2) 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 12,500% 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").
(4) In addition to the dividends described in Section 3(C), if the
Company declares and pays a dividend on the 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 Common Stock pursuant to Section G immediately prior to the record
date for the distribution. Dividend distributions under this Section 3(C) shall
be made pro rata among the Holders of Series A Preferred Shares and holders of
Class A Common Stock.
(5) All dividends paid with respect to Series A Preferred Shares
pursuant to this Section 3(C) 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(C) 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.
(6) 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.
(7) Each fractional Series A Preferred Share outstanding shall also be
entitled to a ratably proportionate amount of any other distributions made with
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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.
(D) Distributions upon liquidation, dissolution or winding up. Upon any
voluntary or involuntary liquidation, dissolution or winding up of the affairs
of the Company (which for purposes of Section 3 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:
(1) first, payments on any Senior Securities;
(2) 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 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 Common Stock immediately prior to the
Liquidation Date; and (ii) due on Parity Securities; and
(3) third, payments on any Junior Securities.
(E) Redemption by the Company.
(1) 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 DGCL to the Company's repurchase of any such shares,
the Company shall use its best efforts to remove or remedy such impediment.
(2) 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.
(3) 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
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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 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.
(4) If notice has been sent in accordance with Section 3(E)(3) 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.
(5) 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
3(G) hereof shall be repaid to the Company upon such conversion.
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(F) Put Right.
(1) 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 DGCL 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.
(2) 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.
(G) Conversion.
(1) 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 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 (3)(E) above
or repurchased in connection with Section 3(F) 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 3(E) above) or repurchase (in
the case of Section 3(F) 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
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 Common
Stock are to be issued.
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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.
(2) 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.
(3) 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 Common Stock to which such Person shall be entitled as aforesaid,
together with a cash adjustment in respect of any fraction a share of Common
Stock as hereinafter provided. Subject to the following provisions of this
paragraph (3), 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 (1) and (2) above, and the
Person or Persons entitled to receive the 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 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.
(4) 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.
(H) The Conversion Price at which Series A Preferred Shares are
convertible into Common Stock shall be subject to adjustment from time to time,
as follows:
(1) 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
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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 (1), the number of shares of Common Stock at any time outstanding
shall not include 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 paragraph (1) 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.
(2) 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 (8) of this Section
3(H)) 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 (2), 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 paragraph (2), and such
securities expire unexercised,
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then the Conversion Price shall be readjusted as if such expired securities had
never been issued.
(3) 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 purchase, such decrease to become effective
immediately after the opening of business on the day following the date of such
issuance.
(4) 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.
(5) 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
(2) of this Section 3(H)) 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
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Section 3(H)(5) 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.
(6) The reclassification of Common Stock into securities other than
Common Stock (other than any reclassification upon a consolidation or merger to
which Section 3(J) 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 (2) of this Section 3(H)), 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 (4) of this Section 3(H)).
(7) Intentionally Omitted.
(8) For the purpose of any computation under paragraphs (2), (3) or
(5) of this Section 3(H), 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.
(9) Notwithstanding any other provision of this Section 6, 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.
(10) Notwithstanding any other provision of this Section 3(H), 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.
(11) Whenever the Conversion Price is adjusted as herein provided:
(a) 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
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(b) 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.
(12) In any case in which this Section 3(H) 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 3(I).
(I) 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.
(J) 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
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adjustments provided for in this Section 3. The above provisions shall similarly
apply to successive recapitalization, reclassifications, consolidations,
mergers, sales, transfers or share exchanges.
(K) 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 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 Delaware, 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 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 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 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.
(L) In case:
(1) the Company shall authorize or take an action that would, upon
consummation, require a Conversion Price adjustment pursuant to paragraphs (1),
(3), (4) or (5) of Section 3(H); or
(2) 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
(3) 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,
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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).
(M) 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.
(N) For purposes of this Section 3, 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.
(O) Voting Rights
(1) Holders shall vote their Series A Preferred Shares as a separate
class as set forth in paragraph (3) hereof and as otherwise expressly permitted
by the DGCL.
(2) In addition to the rights set forth in Section 3(O)(1) 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 (3)(O) hereof, whether or not such Holder has actually converted such
shares, and shall vote such shares together with the Common Stock as a single
class on all matters brought before a vote of the holders of the Common Stock.
(3) The Company shall not, without the affirmative vote of the
Holders of a majority of the Series A Preferred Shares then outstanding:
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(a) 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
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;
(b) amend or otherwise alter this Certificate of Incorporation
in any manner that adversely affects the rights, privileges and preferences of
the Series A Preferred Shares set forth herein; or
(c) 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.
(P) Payment.
(1) 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.
(2) 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.
(Q) 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 Certificate of Designation (as it may be amended
from time to time) and in the Certificate of Incorporation. The Series A
Preferred Shares shall have no preemptive or subscription rights.
(R) 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 Section 3 (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 Section 3
(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
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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.
(S) 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 DGCL) 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.
(T) Amendments. This Section 3 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 Section 3 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.
ARTICLE V. INCORPORATOR.
The name and mailing address of the incorporator is Sedesh Doobay, Pepper
Hamilton LLP, 3000 Two Logan Square, Eighteenth and Arch Streets, Philadelphia,
Pennsylvania 19103.
ARTICLE VI. BOARD OF DIRECTORS.
SECTION 1. NUMBER OF DIRECTORS. The properties, business and affairs of
the Company shall be managed and controlled by a Board of Directors, which shall
consist of nine (9) members. The number of directors may be changed from time to
time by resolution duly adopted by the affirmative vote of a majority of the
Board of Directors then in office, provided that a quorum is present. In no case
shall a decrease in the number of directors shorten the term of any incumbent
director.
SECTION 2. INITIAL DIRECTORS. The initial directors shall be W. Michael
Clevy, Earl Dolive, James R. Balkcom, Jr., Edmund J. Feeley, Michael Ira Klein,
Angus C. Littlejohn, Jr., Dixon R. Walker, Harry F. Weyher III and Willem F.P.
de Vogel.
SECTION 3. TERM. The initial directors shall hold office for a term
expiring at the next succeeding annual meeting. Subject to the foregoing, at
each annual meeting of stockholders the successors to the directors whose term
shall then expire shall
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be elected to hold office for a term expiring at the next annual meeting and
each director so elected shall hold office until his or her successor is elected
and qualified, or until his or her earlier resignation or removal.
SECTION 4. REMOVAL. Directors may be removed with or without cause.
SECTION 5. VACANCIES. Any vacancy on the Board of Directors for any
reason, whether arising through death, resignation or removal of a director or
through an increase in the number of directors, shall be filled by a majority
vote of the remaining directors, although less than a quorum, or by a sole
remaining director. The term of office of any director elected to fill such a
vacancy shall expire at the expiration of the term of office in which the
vacancy occurred.
SECTION 6. ELECTIONS. Elections of the Board of Directors need not be by
written ballot except to the extent provided in the Bylaws of the Company.
ARTICLE VII. BYLAWS.
A majority of the Board of Directors is expressly authorized to make, alter,
amend or repeal the Bylaws of the Company. The stockholders, by a majority vote
of shares entitled to vote, of the Company may adopt, amend or repeal the Bylaws
of the Company.
ARTICLE VIII. STOCKHOLDER MEETINGS; BOOKS.
Meetings of stockholders shall be held at such time, on such date and at such
place (within or without the State of Delaware) as provided in the Bylaws of the
Company. Any action required or permitted to be taken by the stockholders,
whether voting as a single voting group or as separate voting groups, must be
effected at a duly called annual or special meeting of stockholders of the
Company and may not be effected by any consent in writing by such stockholders.
The books of the Company may be kept, subject to any applicable statutory
provision, outside the State of Delaware at such place or places as may be
designated from time to time by the Board of Directors or in the Bylaws of the
Company.
ARTICLE IX. SPECIAL STOCKHOLDER MEETINGS.
A special meeting of stockholders may be called at any time by a majority of the
Board of Directors or Chief Executive Officer of the Company. At any time when
a special meeting of stockholders has been called pursuant hereto and upon
receipt of request from the persons calling the meeting, it shall be the duty of
the Secretary to fix the time and place of the meeting, which shall be held not
more than sixty (60) days after receipt of the request. If the Secretary
neglects or refuses to fix the time or place of the meeting, the person(s)
calling the meeting may do so.
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ARTICLE X. VESTING OF POWER.
All of the powers of the Company, insofar as the same may now or hereafter be
lawfully vested by this Certificate of Incorporation in the Board of Directors,
are hereby conferred upon the Company's Board of Directors. In furtherance and
not in limitation of that power, the board shall have the power to make, adopt,
alter, amend and repeal from time to time bylaws of the Company, subject to the
right of the stockholders entitled to vote with respect thereto to adopt, amend
and repeal bylaws.
ARTICLE XI. INDEMNIFICATION.
SECTION 1. Officers and Directors - Direct Actions. The company shall
indemnify any director or officer of the company (as used in this Article XI;
the phrase "director or officer of the company" shall mean any person who is or
was a director or officer of the company, or is or was serving at the request of
the company as a director or officer of another domestic or foreign company for
profit or not-for-profit, partnership, joint venture, trust or other
enterprise), any person who was or is a party (other than a party plaintiff
suing on his or her own behalf), or who is threatened to be made such a party,
to any threatened, pending or completed action, suit or proceeding, whether
civil, criminal, administrative or investigative (other than an action by or in
the right of the company) by reason of the fact that he or she is or was a
director or officer of the company, against expenses (including fees for legal
counsel), judgments, fines and amounts paid in settlement actually and
reasonably incurred by him or her in connection with such action, suit or
proceeding if he or she met the standard of conduct of (a) acting in good faith
and in a manner he or she reasonably believed to be in, or not opposed to, the
best interests of the company and (b) with respect to any criminal proceeding,
having no reasonable cause to believe his or her conduct was unlawful. The
termination of any action or proceeding by judgement, order, settlement or
conviction or upon a plea of nolo contendere or its equivalent shall not of
---- ----------
itself create a presumption that the person (a) did not act in good faith and in
a manner that he or she reasonably believed to be in, or not opposed to, the
best interests of the company and (b) with respect to any criminal proceeding,
had reasonable cause to believe that his or her conduct was unlawful.
SECTION 2. Officers and Directors - Derivative Actions. The company shall
indemnify any director or officer of the company who was or is a party (other
than a party suing in the right of the company), or is threatened to be made a
party, to any threatened, pending or completed action, suit or proceeding by or
in the right of the corporation to procure a judgment in the company's favor by
reason of the fact that he or she is or was a director or officer of the
company, against expenses (including fees for legal counsel) actually and
reasonably incurred by him or her in connection with the defense or settlement
of the action, suit or proceeding if he or she met the standard of conduct of
acting in good faith and in a manner he or she reasonably believed to be in, or
not opposed to, the best interests of the company. Indemnification shall not be
made under this Section 2 in respect of any claim, issue or matter as to which
the person has been adjudged to be liable to the company unless and only to the
extent that the Court of Chancery is located or the court in which the action,
suit or proceeding was brought determines upon application that, despite the
adjudication of liability but in view of all
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the circumstances of the case, such person is fairly and reasonably entitled to
indemnity for the expenses that the Court of Chancery or other court deems
proper.
SECTION 3. Employees and Agents. The company may, to the extent permitted
by applicable law, indemnify any employee or agent of the corporation (as used
in this Article XI; the phrase "employee or agent of the company" shall mean any
person who is or was an employee or agent of the company, other than an officer,
or is or was serving at the request of the company as an employee or agent of
another domestic or foreign company for profit or not-for-profit, partnership,
joint venture, trust or other enterprise) who was or is a party, or who is
threatened to be made such a party, to any threatened, pending or completed
action, suit or proceeding, whether civil, criminal, administrative or
investigative, against expenses (including fees for legal counsel), judgments,
fines and amounts paid in settlement actually and reasonably incurred by him or
her in connection with such action, suit or proceeding by reason of the fact
that he or she is or was an employee or agent of the company, provided he or she
has met the standard of conduct set forth in Section 1 and 2 of this Article XI,
subject to the limitations set forth in Section 2 of this Article XI in the case
of an action, suit or proceeding by or in the right of the corporation to
procure a judgement in the corporation's favor.
SECTION 4. Any indemnification under Sections 1, 2 or 3 of this Article XI
(unless ordered by a court) shall be made by the company only as authorized in
the specific case upon a determination that indemnification of the director,
officer, employee or agent is proper in the circumstances because he has met the
applicable standard of conduct set forth in such section. Such determination
shall be made:
(A) by the board of directors by a majority vote of a quorum consisting of
directors who were not parties to such action, suit or proceeding, or
(B) if such a quorum is not obtainable, or, even if obtainable a quorum of
disinterested directors so directs, by independent legal counsel in a written
opinion, or
(C) by the stockholders.
SECTION 5. Expenses (including attorney's fees) incurred by an officer or
director in defending a civil, criminal, administrative or investigative action,
suit or proceeding may be paid by the company in advance of the final
disposition of such action, suit or proceeding upon receipt of an undertaking by
or on behalf of the director or officer to repay such amount if it shall
ultimately be determined that he is not entitled to be indemnified by the
company as authorized in this Article XI. Such expenses (including attorney's
fees) incurred by employees and agents may be so paid upon such terms and
conditions, if any, as the board of directors deems appropriate.
SECTION 6. The indemnification and advancement of expenses provided by, or
granted pursuant to, this Article XI shall not be deemed exclusive of any other
rights to which those seeking indemnification or advancement of expenses may be
entitled under any bylaw, agreement, vote of stockholders or disinterested
directors or
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otherwise, both as to action in his official capacity and as to action in
another capacity while holding such office.
SECTION 7. The Company shall have power to purchase and maintain insurance
on behalf of any person who is or was a director, officer, employee or agent of
the Company, or is or was serving at the request of the Company as a director,
officer, employee or agent of another corporation, partnership, joint venture,
trust or other enterprise against any liability asserted against him and
incurred by him in any such capacity, or arising out of his status as such,
whether or not the Company would have the power to indemnify him against such
liability under the provisions of this Article.
SECTION 8. The indemnification and advancement of expenses provided by or
granted pursuant to, this Article XI shall, unless otherwise provided when
authorized or ratified, continue as to a person who has ceased to be a director,
officer, employee or agent and shall inure to the benefit of the heirs,
executors and administrators of such a person.
SECTION 9. For purposes of this Article XI, references to "the Company"
shall include, in addition to the resulting Company" any constituent corporation
(including any constituent of a constituent) absorbed in a consolidation or
merger which, if its separate existence had continued, would have had power and
authority to indemnify its directors, officers, employees or agents so that any
person who is or was a director, officer, employee or agent of such constituent
corporation or is or was serving at the request of such constituent corporation
as a director, officer, employee or agent of another corporation, partnership,
joint venture, trust or other enterprise, shall stand in the same position under
this Article with respect to the resulting or surviving corporation as he would
have with respect to such constituent corporation if its separate existence had
continued.
SECTION 10. For purposes of this Article, references to "other
enterprises" shall include employee benefit plans; references to "fines" shall
include any excise taxes assessed on a person with respect to any employee
benefit plan; and references to "serving at the request of the company" shall
include any service as a director, officer, employee or agent of the company
which imposes duties on, or involves services by, such director, officer,
employee or agent with respect to an employee benefit plan, its participants or
beneficiaries; and a person who acted in good faith and in a manner he
reasonably believed to be in the interest of the participants and beneficiaries
of an employee benefit plan shall be deemed to have acted in a manner "not
opposed to the best interests of the company" as referred to in this Article XI.
SECTION 11. No director of the Company or such other person or persons, if
any, who, pursuant to a provision of this Certificate of Incorporation or in
accordance with the DGCL (S)141(a), exercise or perform any of the powers or
duties otherwise conferred or imposed upon the board of directors, shall be
personally liable to the or to any stockholder of the Company for monetary
damages for breach of fiduciary duty as a director or officer, provided that
this provision shall not limit the liability of a director or officer (i) for
any breach of the director's or the officer's duty of loyalty to the
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<PAGE>
Company or its stockholders, (ii) for acts or omissions not in good faith or
which involve intentional misconduct or a knowing violation of law, (iii) under
DGCL 174, or (iv) for any transaction from which the director or officer derived
an improper personal benefit.
ARTICLE XII. NO PERSONAL LIABILITY.
The personal liability of the directors of the Company is hereby eliminated to
the fullest extent expressly or otherwise permitted by Section 102(b)(7) (or any
other provision) of the DGCL, as the same may be amended from time to time.
ARTICLE XIII. AMENDMENTS.
The Company reserves the right to amend this Certificate of Incorporation in any
manner permitted by the Delaware General Corporation Law and all rights and
powers conferred upon stockholders, directors and officers herein are granted
subject to this reservation. Notwithstanding the foregoing, the provisions set
forth in Articles X, XI, XII and this Article XIII may not be repealed or
amended in any respect, and no other provision may be adopted, amended or
repealed which would have the effect of modifying or permitting the
circumvention of the provisions set forth in Articles X, XI, XII and this
Article XIII, unless such action is approved by the affirmative vote of the
holders of not less than 80% of the outstanding shares of the Company entitled
to vote on the matter.
IN WITNESS WHEREOF, the undersigned, being the incorporator hereinabove
named for the purpose of forming a corporation to do business both within and
without the State of Delaware, do make and file this Certificate, hereby
declaring under penalties of perjury that it is my act and deed and that the
facts stated herein are true
ARTICLE XIV.
Dated: May 24, 2000 By: /s/ Sedesh Doobay
-----------------------------
Incorporator
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<PAGE>
CERTIFICATE OF DESIGNATION
OF
SERIES B CUMULATIVE PAY-IN-KIND
CONVERTIBLE PREFERRED SHARES
OF
PAMECO CORPORATION
_________________________________________
Pursuant to Section 151 of the Delaware General Corporation Law
("DGCL")
_________________________________________
Pameco Corporation (the "Company"), a corporation organized and
existing under the laws of the State of Delaware on May 24, 2000, certifies that
pursuant to the authority contained in Article IV of its Certificate of
Incorporation (the "Certificate of Incorporation") and in accordance with the
provisions of Section 151 of the DGCL, the board of directors of the Company
(the "Board of Directors"), approved and adopted the following resolution on
August 23, 2000, (by way of Unanimous Written Consent of the Board of
Directors), 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 Certificate of Incorporation, the Board of Directors does
hereby designate, create, authorize and provide for the issuance of Series B
Cumulative Pay-in-Kind Convertible Preferred Stock, par value $1.00 per share
(the "Series B Stock"), with a stated value of $200 per share at the time of
initial issuance, and initially consisting of 312,500 shares. The Series B
stock will have the following voting powers, preferences and relative, optional
and other special rights, and qualifications, limitations and restrictions set
forth in the certificate of designation (the "Certificate of Designation"):
1. Certain Definitions. Unless the context otherwise requires, the terms
-------------------
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).
"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
<PAGE>
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.
"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.
"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 B Preferred Shares, as in effect from time to time.
"Certificate of Incorporation" means the Certificate of incorporation
of the Company, as in effect from time to time.
"Common Stock" means the common stock, par value $.01 per share,
designated as "Common Stock" in the Certificate of Incorporation.
"Company" means Pameco Corporation.
"Compounding Date" has the meaning set forth in Section 3(a)(i) below.
"Conversion Price" means $3.38,/1/ as the same may be adjusted from
time to time in accordance with Section 7 below.
"DGCL" means the Delaware General Corporation Law.
"Dividend Series B Preferred Shares" means unissued Series B Preferred
Shares to which a Holder is entitled as of a particular date, assuming the
declaration of dividends payable in the form of Series B Preferred Shares under
Section 3(a)(i) or 3(a)(ii) below.
"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).
-----------------------------
/1/ Equal to 85% of the Weighted Average Trading Price for the 20 trading days
immediately preceding the third trading day prior to the first public
announcement of the event giving rise to the issuance or to the investment.
2
<PAGE>
"Holder" means the record holder of one or more Series B 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 B 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 B Preferred Share,
equal to $200 accrued and unpaid dividends (whether or not declared and
including, without limitation, Dividend Series B 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 B 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 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.
3
<PAGE>
"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 described in the
Certificate of Incorporation as the same may be amended or modified from time to
time.
"Series B Preferred Shares" means the Company's Series B 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 B Preferred Share, equal to
$200 subject to adjustment from time to time to accurately reflect stock splits,
subdivisions or combinations with respect to the Series B Preferred Shares.
"Subsequent Preferred Shares" means any shares of preferred stock, 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 and the
Series B 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 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.
"Weighted Average Trading Price" means the volume weighted average
sales price per share of 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 B Preferred Shares shall, with respect to
-------
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 B Preferred Shares as to dividends, distributions and distributions upon
the liquidation,
4
<PAGE>
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 the Series A Preferred Shares, any additional shares of Series B 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 B 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.
---------
(a) (i) For the three-year period following the Issue Date (the
"Initial Dividend Period"), the Holders of the Series B 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
September 1, 2000,and accruing from the date of issuance at the rate of 14% per
annum on the Stated Value of each Series B Preferred Share and of each Dividend
Series B Preferred Share then deemed to have been issued (the "Initial Dividend
Rate"). When and if declared by the Board of Directors, such dividends shall be
payable by issuance of such number of additional Series B 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.
(ii) From and after the Initial Dividend Period, the Holders of
the Series B 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 September
1, 2003, and accruing thereafter at the rate of 14% per annum on the Stated
Value of each Series B Preferred Share and of each Dividend Series B 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.
(b) In addition to the dividends described in Section 3(a), if the
Company declares and pays a dividend on the Common Stock, a Holder of Series B
Preferred Shares shall be entitled to 50% of the dividends such Holder would
have been entitled to had such Holder fully converted the Series B Preferred
Shares into 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 B Preferred Shares and holders of
Common Stock.
(c) All dividends paid with respect to Series B Preferred Shares
pursuant to this Section 3 shall be made pro rata among the Holders based upon
the aggregate Series B Preferred Shares held by each such Holder. If and when
any Series B Preferred Shares are issued under Section 3 for the payment of
dividends, such Shares shall be validly issued and outstanding
5
<PAGE>
and fully paid and nonassessable, and shall initially have a Conversion Price
equal to that of the Series B Preferred Shares then in effect on the date such
Series B Preferred Shares are issued.
(d) In the case of Series B Preferred Shares issued on the Issue Date,
dividends shall accrue from such date. In the case of Series B Preferred Shares
issued as a dividend on Shares of Series B Preferred Shares, dividends shall
accrue from the date on which such Series B Preferred Shares were issued.
(e) Each fractional Series B 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 B
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 B Preferred Share.
4. Distributions Upon Liquidation, Dissolution or Winding Up. Upon any
---------------------------------------------------------
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 B
Preferred Shares equal to the greater of (A) the aggregate Liquidation
Preference with respect to the Series B Preferred Shares held by such Holder on
the Liquidation Date (including the Dividend Series B Preferred Shares to which
such Holder would be entitled as of such date), or (B) the amount which would be
payable to such Holder in respect of Common Stock if such Holder had been deemed
to have converted all Series B Preferred Shares and all Dividend Series B
Preferred Shares, whether or not convertible by the terms hereof, held (or
deemed held) by such Holder as of the Liquidation Date into 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.
-------------------------
(a) From time to time, on and after the sixth anniversary of the Issue
Date, the Company may redeem the Series B 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 DGCL 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 B Preferred
Shares, such Series B Preferred Shares to be redeemed shall be redeemed on a pro
rata basis among all Holders.
6
<PAGE>
(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 B 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 shares pursuant to
this Section 5 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 B 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 shares to be deemed 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 B Preferred
Shares into 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 B 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
shares called for redemption pursuant to this Section 5 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 B 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 B Preferred Shares 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 B 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 B
Preferred Shares so redeemed (properly endorsed or assigned for transfer, if the
Company shall so require and the notice shall so state), such Series B
Preferred 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 shares pursuant to this Section 5 shall be irrevocable except that
any balance of monies so deposited by the Company and unclaimed by the Holders
thereof 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 B Preferred Shares which
are subsequently converted in accordance with Section 7 hereof shall be repaid
to the Company upon such conversion.
7
<PAGE>
6. Put Right.
---------
(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 B
Preferred Shares held by a Holder, and to require the Company to purchase from
such Holder such Series B Preferred 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 DGCL 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 B 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.
----------
(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 B
Preferred Shares owned by it which have not been previously redeemed or
repurchased into fully paid, nonassessable shares of Common Stock. For the
purpose of conversion, each Series B 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 B 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 B 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 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 B Preferred Shares
at the office of the transfer agent (which may be the Company) for the Series B
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 B Preferred Shares and specifying the name or names (with address or
addresses) in which a certificate or certificates evidencing shares of Common
Stock are to be issued. In the event that a Holder fails to notify the Company
of the number of Series B Preferred Shares which such Holder wishes to convert,
such Holder shall be deemed to have
8
<PAGE>
elected to convert all shares represented by the certificate or certificates so
surrendered for conversion.
(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 B 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 B 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 B Preferred Shares were so surrendered,
or to the nominee or nominees of such Person, certificates evidencing the number
of full shares of Common Stock to which such Person shall be entitled as
aforesaid, together with a cash adjustment in respect of any fraction a share of
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 B 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 Common Stock
deliverable upon conversion of such Series B Preferred Shares shall be treated
for all purposes as the record holder or holders of such 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 B 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 B Preferred Shares shall cease.
(b) The Conversion Price at which Series B Preferred Shares are
convertible into Common Stock shall be subject to adjustment from time to time,
as follows:
(ii) 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 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
9
<PAGE>
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.
(iii) 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.
(iv) 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 purchase, such decrease to become
effective immediately after the opening of business on the day following the
date of such issuance.
10
<PAGE>
(v) 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.
(vi) 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.
(vii) 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)).
(viii) Intentionally Omitted.
11
<PAGE>
(ix) 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.
(x) 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.
(xi) 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.
(xii) 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 B 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.
(xiii) 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 B 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 B 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 B 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 B Preferred Shares so surrendered.
12
<PAGE>
(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 B 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 B 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 B Preferred Shares, such number of shares of its
Common Stock, free of preemptive rights, as shall from time to time be
sufficient to effect the conversion of all Series B Preferred Shares from time
to time outstanding. The Company shall from time to time, in accordance with the
laws of the State of Delaware, 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 Common Stock shall not be sufficient to permit the
conversion of all the then outstanding shares of Series B 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 Common Stock on conversion of the
Series B 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 Common Stock (or other securities or assets) in a name other than
that in which the Series B 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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<PAGE>
(ii) 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
(iii) 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
(iv) 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.
(ii) 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.
14
<PAGE>
8. Voting Rights.
-------------
(a) Holders shall vote their Series B Preferred Shares as a separate
class as set forth in paragraph (c) hereof, as may be further set forth in the
Company's Certificate of Incorporation and as otherwise expressly permitted by
the DGCL.
(b) In addition to the rights set forth in Section 8(a) above, subject
to compliance with applicable law, including the HSR Act, by a particular
Holder, with no further action on 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 B
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
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 B Preferred Shares then outstanding:
(i) authorize, create (by way of reclassification or otherwise) or
issue any securities which are senior to the Series B 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 B 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 Certificate of Incorporation in
any manner that adversely affects the rights, privileges and preferences of the
Series B 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 B Preferred Shares set forth in this Certificate of Designation.
9. Payment.
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(a) All amounts payable in cash with respect to the Series B 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 B Preferred Shares at
its address set forth in the register of Holders maintained by the Company.
(b) Any payment on the Series B 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 B Preferred Shares shall not have any voting powers, preferences
and relative,
15
<PAGE>
participating, optional or other special rights, other than those specifically
set forth in this Certificate of Designation (as it may be amended from time to
time) and in the Certificate of Incorporation. The Series B 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 B
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 B 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 B 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 B 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 B Preferred Shares. Series B 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 DGCL) 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 B 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 B 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 B
Preferred Shares in order to increase the number of Series B Preferred Shares
authorized by this Designation but only to permit the issuances of such Series B
Preferred Shares as Dividend Series B Preferred Shares, and only if such
additional shares are reserved for issuance as Dividend Series B Preferred
Shares.
16
<PAGE>
IN WITNESS WHEREOF, the Company has caused this Certificate of
Designation to be duly executed this 24th of August 2000.
PAMECO CORPORATION
By: /s/ Robert J. Davis
-------------------
Name: Robert J. Davis
Title: Chief Financial Officer
17
<PAGE>
CERTIFICATE OF DESIGNATION
OF
SERIES C CUMULATIVE PAY-IN-KIND
CONVERTIBLE PREFERRED SHARES
OF
PAMECO CORPORATION
_________________________________________
Pursuant to Section 151 of the Delaware General Corporation Law
("DGCL")
_________________________________________
Pameco Corporation (the "Company"), a corporation organized and
existing under the laws of the State of Delaware, certifies that pursuant to the
authority contained in Article IV of its Certificate of Incorporation (the
"Certificate of Incorporation") and in accordance with the provisions of Section
151 of the DGCL, the board of directors of the Company (the "Board of
Directors"), approved and adopted the following resolution on November 30,
2000, (by way of Unanimous Written Consent of the Board of Directors),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 Certificate of Incorporation, the Board of Directors does
hereby designate, create, authorize and provide for the issuance of Series C
Cumulative Pay-in-Kind Convertible Preferred Stock, par value $1.00 per share
(the "Series C Preferred Shares"), with a stated value of $200.00 per share at
the time of initial issuance, and initially consisting of 312,500 shares. The
Series C 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 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).
"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,
<PAGE>
any Person owning 10% or more of the voting securities of another Person shall
be deemed to control that Person.
"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 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.
"Business Day" means any day other than a Legal Holiday.
"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 C Preferred Shares, as in effect from time to time.
"Certificate of Incorporation" means the Certificate of Incorporation
of the Company, as in effect from time to time.
"Common Stock" means the common stock, par value $0.01 per share,
designated as "Common Stock" in the Certificate of Incorporation.
"Company" means Pameco Corporation.
"Compounding Date" has the meaning set forth in Section 3(a)(i) below.
"Conversion Price" means $1.65 as the same may be adjusted from time
to time in accordance with Section 6 below.
"DGCL" means the Delaware General Corporation Law.
"Dividend Series C Preferred Shares" means unissued Series C Preferred
Shares to which a Holder is entitled as of a particular date, assuming the
declaration of dividends payable in the form of Series C Preferred Shares under
Section 3(a)(i) or 3(a) (ii) below.
"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).
-2-
<PAGE>
"Holder" means the record holder of one or more Series C 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 C 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 C Preferred Share,
equal to $200.00 plus accrued and unpaid dividends (whether or not declared and
including, without limitation, Dividend Series C 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 C 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 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.
"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 7(c)(i)
below.
-3-
<PAGE>
"Series A Preferred Shares" means the Company's Series A Cumulative
Pay-in-Kind Preferred Stock, par value $1.00 per share, as described in the
Certificate of Incorporation as the same may be amended or modified from time to
time.
"Series B Certificate of Designation" means the certificate of
designation of the Series B Preferred Shares, as in effect from time to time.
"Series B Preferred Shares" means the Company's Series B Cumulative
Pay-in-Kind Convertible Preferred Stock, par value $1.00 per share, as described
in the Series B Certificate of Designation.
"Series C Preferred Shares" means the Company's Series C Cumulative
Pay-in-Kind Convertible Preferred Stock, par value $1.00 per share, as described
in the Certificate of Designation.
"Stated Value" means an amount per Series C Preferred Share, equal to
$200.00, subject to adjustment from time to time to accurately reflect stock
splits, subdivisions or combinations with respect to the Series C 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 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.
"Weighted Average Trading Price" means the volume weighted average
sales price per share of 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 6(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 C Preferred Shares shall, with respect to
-------
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 C Preferred Shares as to dividends, distributions and distributions upon
the liquidation,
-4-
<PAGE>
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 the Series A Preferred Shares, the Series B Preferred Shares, and any
additional shares of Series C 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, the terms of which expressly provide that such class or series will
rank on a parity with the Series C 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.
---------
(a) (i) For the three-year period following the Issue Date (the
"Initial Dividend Period"), the Holders of the Series C 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
March 1, 2001, and accruing from the date of issuance at the rate of 14% per
annum on the Stated Value of each Series C Preferred Share and of each Dividend
Series C Preferred Share then deemed to have been issued (the "Initial Dividend
Rate"). When and if declared by the Board of Directors, such dividends shall be
payable by issuance of such number of additional Series C 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.
(ii) From and after the Initial Dividend Period, the Holders of
the Series C 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 December
1, 2003 and accruing thereafter at the rate of 14% per annum on the Stated Value
of each Series C Preferred Share and of each Dividend Series C 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.
(b) In addition to the dividends described in Section 3(a), if the
Company declares and pays a dividend on the Common Stock, a Holder of Series C
Preferred Shares shall be entitled to receive, concurrently with the payment of
such dividend, an amount equal to 50% of the dividends such Holder would have
been entitled to had such Holder fully converted the Series C Preferred Shares
into Common Stock pursuant to Section 6 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 C Preferred Shares, holders of Parity
Securities and holders of Common Stock based on the aggregate number of shares
of Common Stock held by each such holder (assuming conversion of all Series C
Preferred Shares and Parity Securities).
(c) All dividends paid with respect to Series C Preferred Shares
pursuant to this Section 3 shall be made pro rata among the Holders based upon
the aggregate number of
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Series C Preferred Shares held by each such Holder. If and when any Series C
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 C
Preferred Shares then in effect on the date such Series C Preferred Shares are
issued.
(d) In the case of Series C Preferred Shares issued on the Issue
Date, dividends shall accrue from such date. In the case of Series C Preferred
Shares issued as a dividend on Shares of Series C Preferred Shares, dividends
shall accrue from the date on which such Series C Preferred Shares were issued.
(e) Each fractional Series C 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 C
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 C Preferred Share.
4. Distributions Upon Liquidation, Dissolution or Winding Up. Upon any
---------------------------------------------------------
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) payments to Holders of the
Series C Preferred Shares equal to the greater of (A) the aggregate Liquidation
Preference with respect to the Series C Preferred Shares held by such Holder on
the Liquidation Date (including the Dividend Series C Preferred Shares to which
such Holder would be entitled as of such date), or (B) the amount which would be
payable to such Holder in respect of Common Stock if such Holder had been deemed
to have converted all Series C Preferred Shares and all Dividend Series C
Preferred Shares, whether or not convertible by the terms hereof, held (or
deemed held) by such Holder as of the Liquidation Date into Common Stock
immediately prior to the Liquidation Date; and (ii) payments due on Parity
Securities; and
(c) third, payments on any Junior Securities.
5. Redemption by the Company.
-------------------------
(a) From time to time, on and after the sixth anniversary of the
Issue Date, the Company may redeem the Series C 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 DGCL to the Company's repurchase of any such
shares, the Company shall use its best efforts to remove or remedy such
impediment.
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(b) In case of redemption of less than all of the Series C Preferred
Shares, such Series C Preferred Shares to be redeemed shall be redeemed on a pro
rata basis among all Holders based upon the aggregate number of Series C
Preferred Shares held by each such Holder.
(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 C 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 shares pursuant to
this Section 5 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 C 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 shares to be deemed 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 C Preferred
Shares into 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 C 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
shares called for redemption pursuant to this Section 5 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 C 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 C Preferred Shares 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 C 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 C
Preferred Shares so redeemed (properly endorsed or assigned for transfer, if the
Company shall so require and the notice shall so state), such Series C Preferred
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 shares pursuant to this Section 5 shall be irrevocable except that
any balance of monies so deposited by the Company and unclaimed by the Holders
thereof 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 C Preferred Shares which
are subsequently
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<PAGE>
converted in accordance with Section 6 hereof shall be repaid to the Company
upon such conversion.
6. Conversion.
----------
(a) (i) At any time after the Issue Date and subject to compliance
with applicable law, any Holder shall have the right to convert any of the then
outstanding Series C Preferred Shares owned by it which have not been previously
redeemed into fully paid, nonassessable shares of Common Stock. For the purpose
of conversion, each Series C 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 C Preferred Shares are to be redeemed pursuant to Section 5
above, such right of conversion shall cease and terminate as to the Series C
Preferred Shares to be redeemed at the close of business on the third Business
Day preceding the date fixed for redemption, unless the Company shall default in
the payment of the applicable price prior to the close of business on the date
fixed for redemption. Any Holder desiring to convert such shares into 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 C Preferred Shares at the
office of the transfer agent (which may be the Company) for the Series C
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 C Preferred Shares and specifying the name or names (with address or
addresses) in which a certificate or certificates evidencing shares of Common
Stock are to be issued. In the event that a Holder fails to notify the Company
of the number of Series C 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.
(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 C 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 C
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 C Preferred Shares were so surrendered,
or to the nominee or nominees of such Person, certificates evidencing the number
of full shares of Common Stock to which such Person shall be entitled as
aforesaid, together with a cash adjustment in respect of any fraction a share of
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 C 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 Common Stock
deliverable upon conversion of such Series C Preferred Shares shall
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<PAGE>
be treated for all purposes as the record holder or holders of such 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 C 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 C Preferred Shares shall cease.
(b) The Conversion Price at which Series C Preferred Shares are
convertible into 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 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 6(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 6(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
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<PAGE>
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 paragraph (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 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 6(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
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<PAGE>
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 6(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 6(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 6(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 6(b)).
(vii) Intentionally Omitted.
(viii) For the purpose of any computation under paragraphs (ii),
(iii) or (v) of this Section 6(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 6, 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 6, 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
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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 C 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. In
any case in which this Section 6(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 C
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 6(c).
(xii) The Company shall not issue fractional shares or scrip
representing fractional shares of Common Stock upon conversion of Series C
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
C 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 C Preferred Shares so
surrendered.
(c) 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 C 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 C 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 6. The above
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provisions shall similarly apply to successive recapitalization,
reclassifications, consolidations, mergers, sales, transfers or share exchanges.
(d) 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 C Preferred Shares, such number of shares of its
Common Stock, free of preemptive rights, as shall from time to time be
sufficient to effect the conversion of all Series C Preferred Shares from time
to time outstanding. The Company shall from time to time, in accordance with
the laws of the State of Delaware, 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 Common Stock shall not be sufficient to permit the
conversion of all the then outstanding shares of Series C 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 Common Stock on conversion of the
Series C 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 Common Stock (or other securities or assets) in a name other than
that in which the Series C 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.
(e) In case:
(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 6(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,
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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).
(f) Notwithstanding the foregoing provisions, 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, shall not 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 6, 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.
7. Voting Rights.
-------------
(a) Holders shall vote their Series C Preferred Shares as a separate
class as set forth in paragraph (c) hereof, as may be further set forth in the
Company's Certificate of Incorporation and as otherwise expressly permitted by
the DGCL.
(b) In addition to the rights set forth in Section 7(a) above,
subject to compliance with applicable law, with no further action on 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 C Preferred Shares in accordance with Section 6
hereof, whether or not such Holder has actually converted such shares, and shall
vote such shares together with the 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 C Preferred Shares then outstanding:
(i) authorize, create (by way of reclassification or otherwise)
or issue any securities which are senior to the Series C 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 B Preferred Shares issued in accordance with Section 3(a)
of the Series B Certificate of Designation or additional Series C Preferred
Shares issued in accordance with Section 3(a)) 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 Certificate of Incorporation
in any manner that adversely affects the rights, privileges and preferences of
the Series C Preferred Shares set forth in this Certificate of Designation; or
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(iii) take any action requiring a vote of shareholders of the
Company that adversely affects the rights, preferences and privileges of the
Series C Preferred Shares set forth in this Certificate of Designation.
8. Payment.
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(a) All amounts payable in cash with respect to the Series C
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 C Preferred
Shares at its address set forth in the register of Holders maintained by the
Company.
(b) Any payment on the Series C 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.
9. Exclusion of Other Rights. Except as may otherwise be required by
-------------------------
law, the Series C 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 Certificate of Designation (as it may be amended
from time to time) and in the Certificate of Incorporation. The Series C
Preferred Shares shall have no preemptive or subscription rights.
10. 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.
11. Severability of Provisions. If any voting powers, preferences and
--------------------------
relative, participating, optional and other special rights of the Series C
Preferred Shares and qualifications, limitations and restrictions thereof set
forth in this Certificate of Designation (as it may be amended from time to
time) are 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 C 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 C 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 C 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 C Preferred Shares and qualifications, limitations and
restrictions thereof unless so expressed herein.
12. Reissuance of Series C Preferred Shares. Series C 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 DGCL) have the status of authorized but unissued shares of
preferred stock of the Company undesignated as to series
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<PAGE>
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 C Preferred Shares must be in compliance with the
terms hereof.
13. Amendments. The Certificate of Designation may be amended only with
----------
the consent of the Holders of a majority of the Series C 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 C
Preferred Shares in order to increase the number of Series C Preferred Shares
authorized by this Certificate of Designation but only to permit the issuances
of such Series C Preferred Shares as Dividend Series C Preferred Shares, and
only if such additional shares are reserved for issuance as Dividend Series C
Preferred Shares.
IN WITNESS WHEREOF, the Company has caused this Certificate of
Designation to be duly executed this 6 of December, 2000.
PAMECO CORPORATION
By: /s/ Robert J. Davis
-------------------------------------
Name: Robert J. Davis
Title: Chief Financial Officer
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