UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
SCHEDULE 13D/A
(Amendment No. 3)
Under the Securities Exchange Act of 1934
PAMECO CORPORATION
(Name of Issuer)
CLASS A COMMON STOCK, PAR VALUE $0.01 PER SHARE
(Title of Class of Securities)
697934107
(CUSIP Number)
Willem de Vogel
Three Cities Research, Inc.
650 Madison Avenue
New York, New York 10022
(212) 605-3213
(Name, Address and Telephone Number of Person Authorized
to Receive Notices and Communications)
February 18, 2000
(Date of Event Which Requires Filing of This Statement)
If the filing person has previously filed a statement on Schedule 13G to report
the acquisition that is the subject of this Schedule 13D, and is filing this
schedule because of Rule 13d-1(b)(3) or (4), check the following box. / /
The information required on the remainder of this cover page shall not be deemed
to be "filed" for the purpose of Section 18 of the Securities Exchange Act of
1934 ("Act") or otherwise subject to the liabilities of that section of the Act
but shall be subject to all other provisions of the Act (however, see the
notes).
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SCHEDULE 13D
CUSIP NO. 697934107
1 NAME OF REPORTING PERSON
S.S. OR I.R.S. IDENTIFICATION NO. OF ABOVE PERSON
Quilvest American Equity Ltd
2 CHECK THE APPROPRIATE BOX IF A MEMBER OF A GROUP (A) [ ]
(B) [ ]
3 SEC USE ONLY
4 SOURCE OF FUNDS
WC
5 CHECK BOX IF DISCLOSURE OF LEGAL PROCEEDINGS IS REQUIRED PURSUANT TO
ITEMS 2(d) or 2(e) [ ]
6 CITIZENSHIP OR PLACE OF ORGANIZATION
British Virgin Islands
7 SOLE VOTING POWER
NUMBER OF 1,850,000
SHARES
BENEFICIALLY OWNED 8 SHARED VOTING POWER
BY EACH REPORTING
PERSON -0-
WITH
9 SOLE DISPOSITIVE POWER
1,850,000
10 SHARED DISPOSITIVE POWER
-0-
11 AGGREGATE AMOUNT BENEFICIALLY OWNED BY EACH REPORTING PERSON
1,850,000
12 CHECK BOX IF THE AGGREGATE AMOUNT IN ROW (11) EXCLUDES CERTAIN
SHARES [ ]
13 PERCENT OF CLASS REPRESENTED BY AMOUNT IN ROW (11)
27.2% *
14 TYPE OF REPORTING PERSON
CO
* Percentage based on 5,947,329 shares of Class A Common Stock shown as
outstanding at December 31, 1999 on the Issuer's Report on Form 10-Q for its
fiscal quarter ended November 30, 1999.
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Amendment No. 3 to Schedule 13D
This Amendment No. 3 amends the statement on Schedule 13D, as previously
amended (the "Schedule 13D"), relating to the beneficial ownership by
Quilvest American Equity Ltd., a British Virgin Islands international
business company ("Quilvest"), of shares of Class A Common Stock, par value
$.01 per share, of Pameco Corporation, a Georgia corporation (the
"Company"). Capitalized terms used herein which are not defined herein have
the meanings given to them in the Schedule 13D.
Item 3. Source and Amount of Funds or Other Consideration.
Funding for the purchase of the shares of the preferred stock and warrants
referred to in response to Item 4 below will be obtained from Quilvest's
own resources.
Item 4. Purpose of the Transaction.
Item 4 is hereby amended and restated in its entirety to read as follows:
Quilvest acquired beneficial ownership of all its shares of Class A and
Class B Common Stock for investment purposes and for possible resale from
time to time in open market transactions or otherwise as market conditions
warrant.
As of February 18, 2000, the Company, Quilvest and Littlejohn Fund II,
L.P., a Delaware limited partnership ("Littlejohn"), entered into a
Securities Purchase Agreement (the "Securities Purchase Agreement")
pursuant to which, among other things, Quilvest has agreed to purchase from
the Company 28,000 shares of newly issued preferred stock and warrants to
purchase an additional 28,000 shares of newly issued preferred stock.
Subject to the approval of the Company's stockholders, the preferred stock
will become convertible into shares of Class A Common Stock and will give
the holder the right to vote on an "as-converted" basis with the Class A
Common Stock. The Securities Purchase Agreement also provides for changes
in the Board of Directors of the Company, effective as of the closing of
the purchase contemplated thereunder (the "Closing"). The Closing is
subject to various conditions. The information set forth in the Securities
Purchase Agreement and certain exhibits thereto, which are attached hereto
as Exhibits, is expressly incorporated herein by reference and the response
to this item is qualified in its entirety by such Exhibits.
Quilvest may at any time or from time to time acquire additional shares of
Class A or Class B Common Stock or dispose of shares of Class A or Class B
Common Stock. Except as described above, Quilvest has no plans or proposals
which relate to or would result in:
(a) The acquisition by any person of additional securities of the Company,
or the disposition of securities of the Company;
(b) An extraordinary corporate transaction, such as a merger,
reorganization or liquidation, involving the Company or any of its
subsidiaries;
(c) A sale or transfer of a material amount of assets of the Company or any
of its subsidiaries;
(d) Any change in the present board of directors or management of the
Company, including any plans or proposals to change the number or term of
directors or to fill any existing vacancies on the board;
(e) Any material change in the present capitalization or dividend policy of
the Company;
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(f) Any other material change in the Company's business or corporate
structure;
(g) Changes in the Company's charter, bylaws or instruments corresponding
thereto or other actions which may impede the acquisition of control of the
Company by any person;
(h) Causing a class of securities of the Company to be delisted from a
national securities exchange or to cease to be authorized to be quoted in
an inter-dealer quotation system of a registered national securities
association;
(i) A class of equity securities of the Company becoming eligible for
termination of registration pursuant to Section 12(g)(4) of the Securities
Exchange Act of 1934; or
(j) Any action similar to any of those enumerated above.
<PAGE>
Item 5. Interest in Securities of the Issuer.
Item 5 is hereby amended and restated in its entirety to read as follows:
(a) As of February 18, 2000, Quilvest owned 1,003,783 shares of Class A
Common Stock and 846,217 shares of Class B Common Stock. The Class B Common
Stock is convertible into a like number of shares of Class A Common Stock
at any time at the option of Quilvest. These shares represent, in the
aggregate, 27.2% of the outstanding shares of Class A Common Stock of the
Company.
(b) Quilvest has sole power to vote, direct the vote of, dispose of or
direct the disposition of any and all shares of the Class A and B Common
Stock held by Quilvest.
(c) Except as described above, to the best knowledge of Quilvest, none of
the persons listed in Item 2(a) has effected any transaction in the Class A
Common Stock of the Company within the past 60 days.
(d) Except as set forth in this Item 5, to the best knowledge of Quilvest,
none of the persons named in Item 2(a) beneficially owns any shares of
Common Stock of the Company. On the basis of its control, through an
intermediate holding company, of Quilvest, the board of directors of
Quilvest may be deemed to have the ultimate power to direct the voting or
disposition, as well as the application of dividends from, or the proceeds
of the sale of, the shares of Class A and B Common Stock owned by Quilvest.
Item 6. Contracts, Arrangements, Understandings or Relationships With Respect to
Securities of the Issuer.
Item 6 is hereby amended and restated in its entirety as follows:
Pursuant to the Securities Purchase Agreement, Quilvest has entered into a
Shareholders Agreement and has delivered to Littlejohn a proxy to vote
Quilvest's shares of Class A and Class B Common Stock. The Shareholders
Agreement and proxy will become effective upon, and are subject to, the
occurrence of the Closing. The Shareholders Agreement contains restrictions
on the transfer, and arrangements with respect to the voting, of the Class
A and Class B Common Stock held by Quilvest. The voting arrangements and
transfer restrictions described in the Shareholders Agreement, which are
attached hereto as Exhibits 5 and 6, are expressly incorporated herein by
reference and the response to this item is qualified in its entirety by
such Exhibit.
To the knowledge of Quilvest, except as set forth above, there exist no
contracts, arrangements, understandings or relationships legal or otherwise
among the persons named in Item 2 and between such persons and any persons
with respect to any securities of the Company, including, but not limited
to, transfer or voting of any securities, finders' fees, joint ventures,
loan or option agreements, put or calls, guarantees of profits, division of
profits or loss, or the giving or withholding of proxies.
Item 7. Material to be Filed as Exhibits.
The information set forth in the Exhibit Index is incorporated herein by
reference.
<PAGE>
SIGNATURE
After reasonable inquiry and to the best of my knowledge and belief, I
certify that the information set forth in this statement is true, complete
and correct.
Date: February 23, 2000
/s/ Willem F.P. de Vogel
---------------------------
Name: Willem F.P. de Vogel
Title: Attorney-in-Fact
<PAGE>
EXHIBIT INDEX
1. Power of Attorney
2. Securities Purchase Agreement dated as of February 18, 2000 by and among
the Company, Littlejohn and Quilvest.
3. Form of Certificate of Designation of Series A Cumulative Pay-in-Kind
Preferred Shares
4. Form of Warrant
5. Shareholders Agreement dated as of February 18, 2000 by and among the
Company, Littlejohn, Quilvest and Willem F.P. de Vogel
6. Irrevocable Proxy delivered by Quilvest
Exhibit 1
POWER OF ATTORNEY
KNOW ALL MEN BY THESE PRESENTS, that QUILVEST AMERICAN EQUITY LTD., a
British Virgin Islands international business company, does hereby constitute
and appoint Willem F.P. de Vogel and J. William Uhrig, each of Three Cities
Research, Inc. at 650 Madison Avenue, New York, New York 10022, and Carlo
Hoffman of Quilvest, 84 Grand-Rue, L-1660 Luxembourg, or any of them, its
Attorneys-In-Fact, with full power, discretion and authority to take on behalf
of QUILVEST AMERICAN EQUITY LTD. all actions which any said Attorney-In-Fact
shall in his sole discretion determine to be appropriate in connection with its
existing or any future investment in Pameco Corporation, including without
limitation (i) the execution of all agreements, instruments, certificates or
other documents required or desirable and all changes thereto desired or
necessary relating to Pameco Corporation and (ii) any filings with the United
States Securities and Exchange Commission in connection with Pameco Corporation.
In addition, QUILVEST AMERICAN EQUITY LTD. hereby gives and grants unto said
Attorneys-In-Fact full power, discretion and authority to execute all documents,
instruments and certificates upon such terms which any said Attorney-In-Fact may
determine to be appropriate, and to take all actions which any said
Attorney-In-Fact shall determine to be appropriate, and to take all actions
which any said Attorney-In- Fact shall determine to be desirable in connection
with the foregoing to the same extent as QUILVEST AMERICAN EQUITY LTD. might do
or could do by its duly authorized officers if personally present, and QUILVEST
AMERICAN EQUITY LTD. does hereby confirm, approve and ratify all that any said
Attorney-In-Fact or their designees shall lawfully do or cause to be done by
virtue hereof. This Power of Attorney will expire December 31, 2000.
This instrument may not be changed orally and shall be governed by and
construed in accordance with the laws of the State of New York, the United
States of America.
Dated: February 3, 2000
QUILVEST AMERICAN EQUITY LTD.
By: /s/ Christian Baillet
----------------------
By: /s/ Kurt Sonderegger
----------------------
Exhibit 2
SECURITIES PURCHASE AGREEMENT
BY AND AMONG
PAMECO CORPORATION,
LITTLEJOHN FUND II, L.P.,
and
QUILVEST AMERICAN EQUITY, LTD.
Dated as of February 18, 2000
<PAGE>
SECURITIES PURCHASE AGREEMENT
SECURITIES PURCHASE AGREEMENT (this "Agreement") is made and entered
into as of the 18th day of February, 2000, by and among the following parties:
o PAMECO Corporation, a Georgia corporation (the "Company");
o Littlejohn Fund II, a Delaware limited partnership ("Littlejohn");
o Quilvest American Equity Ltd., a British Virgin Islands international
business company ("Quilvest"; each of Littlejohn and Quilvest is a "Purchaser"
and both Littlejohn and Quilvest are, collectively, the "Purchasers").
BACKGROUND
A. WHEREAS, the Company is engaged in the business of marketing and
distributing heating, cooling and refrigeration systems and related products
(the "Business");
B. WHEREAS, the Company desires to issue and sell, and the Purchasers
desire to purchase, for an aggregate purchase price of $35 million, shares of
the Company's Series A Cumulative Pay-in-Kind Preferred Stock, par value $1.00
per share (the "Series A Preferred Shares"), having a stated value of $35
million, and warrants to purchase additional Series A Preferred Shares, in each
case pursuant to the terms, and subject to the conditions, set forth herein.
C. WHEREAS, subject to the terms and conditions set forth herein, the
Company may issue and sell, and the Purchasers may purchase shares, with an
aggregate stated value and an aggregate purchase price of up to $25 million, of
one or more additional series of the Company's Cumulative Pay-in-Kind Preferred
Stock, par value $1.00 per share (the "Additional Preferred Shares");
D. WHEREAS, on the date hereof, in support of the Contemplated
Transactions (as defined in Section 1 hereof), a Shareholders Agreement in the
form of Exhibit A attached hereto (the "Shareholders Agreement"), a series of
Voting Agreements with the shareholders of the Company listed on Schedule A
attached hereto, each in the form of Exhibit B attached hereto (the "Voting
Agreements"), a Registration Rights Agreement in the form of Exhibit C attached
hereto (the "Registration Rights Agreement"), and a series of irrevocable
proxies in favor of Littlejohn from each of the shareholders of the Company
party to the Shareholders Agreement and the Voting Agreements, in the forms
attached to the Shareholders Agreement and the Voting Agreements (the
"Irrevocable Proxies"), were executed and delivered, all of which are to become
effective as of the Initial Closing (as defined in Section 1 hereof).
<PAGE>
NOW, THEREFORE, in consideration of the premises and the mutual
representations, warranties, covenants and agreements hereinafter set forth, and
upon the terms and subject to the conditions hereinafter set forth, the Company
and the Purchasers, intending to be legally bound, hereby agree as follows:
ARTICLE I
DEFINITIONS
As used in this Agreement, the following terms have the following
meanings (such meanings to be equally applicable to both the singular and plural
forms of the terms defined):
"Additional Closing" means the consummation of a purchase and sale of
Additional Preferred Shares.
"Additional Closing Date" has the meaning set forth in Section 4.5
hereof.
"Additional Issue Event" means the determination by the Board of
Directors, including the determination of at least one of those directors
elected by the holders of the Class A Common Stock, to issue and sell Additional
Preferred Shares to fund, in whole or in part, an acquisition, capital
expenditure or working capital program for the growth of the Business approved
by the Board of Directors.
"Additional Preferred Share Designation" means the certificate of
designation for any series of Additional Preferred Shares to be issued pursuant
to this Agreement and in substantially the form attached hereto as Exhibit D.
"Additional Preferred Shares" has the meaning set forth in the recitals
hereof.
"Affiliate" of a Person means any Person which, directly or indirectly,
controls, is controlled by, or is under common control with such Person. The
term "control" (including, with correlative meaning, the terms "controlled by"
and "under common control with"), as used with respect to any Person, means the
possession, directly or indirectly, of the power to elect a majority of the
board of directors (or other governing body), or the power 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.
"Agreement" has the meaning set forth in the recitals hereof.
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"Alternative Transaction" has the meaning set forth in Section 7.2
hereof.
"Applicable Percentage" means (a) in the case of Littlejohn, 80%, and
(b) in the case of Quilvest, 20%.
"Benefit Plan" means any Plan established, sponsored, maintained or
contributed to by the Company or its ERISA Affiliates, or by any predecessor of
the Company or its ERISA Affiliates, or with respect to which the Company or any
of its ERISA Affiliates has any Liability.
"Board of Directors" means the board of directors of the Company, as
the same may be constituted from time to time.
"Business" has the meaning set forth in the recitals hereof.
"Claim" means any written demand, written claim, Legal Proceeding or
written notice by any Person, including any Environmental Claim, alleging actual
or potential Liability for any Loss, including any Environmental Loss, or
alleging any Default under any Law, Contract, License, Permit or Benefit Plan.
"Class A Common Stock" has the meaning set forth in Section 5.3 hereof.
"Class B Common Stock" has the meaning set forth in Section 5.3 hereof.
"Closing" means, as applicable, the consummation of the purchase of the
Series A Preferred Shares and the Warrants, or the consummation of the purchase
of Additional Preferred Shares, in each case as contemplated by this Agreement.
"Closing Date" means, as applicable, the date on which either the
Initial Closing or any Additional Closing occurs.
"Code" means the Internal Revenue Code of 1986, as amended, and the
rules and regulations promulgated thereunder.
"Commission" means the Securities and Exchange Commission.
"Common Stock" has the meaning set forth in Section 5.3 hereof.
"Company" has the meaning set forth in the heading hereof.
"Company Articles Amendment" means the articles of amendment to the
Company's articles of incorporation necessary to authorize the issuance of the
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Series A Preferred Shares, effective upon filing with the Secretary of State of
the State of Georgia.
"Company Auditor" has the meaning set forth in Section 3.2 hereof.
"Company Documents" means each agreement (other than this Agreement),
document, instrument or certificate contemplated by this Agreement to be
executed by or on behalf of the Company in connection with the consummation of
the Contemplated Transactions.
"Company Financial Advisors" means Houlihan, Lokey, Howard & Zukin
("HLHZ"), and The Lucas Group.
"Company Opinion" has the meaning set forth in Section 4.2 hereof.
"Confidential Information" shall mean (i) with respect to any party to
this Agreement, all financial, technical, commercial or other like information
disclosed by a party (the "Discloser") to another party (the "Recipient") in
connection with the Contemplated Transactions, and (ii) each of the terms,
conditions and other provisions contained in this Agreement and the agreements
or documents to be delivered pursuant to this Agreement. Notwithstanding the
preceding sentence, the definition of Confidential Information shall not include
any information that: (A) is in the public domain at the time of disclosure to
the Recipient or becomes part of the public domain after such disclosure through
no fault of the Recipient; (B) is already in the possession of the Recipient at
the time of disclosure to such Recipient; (C) is disclosed to a party by any
Person other than a party to this Agreement (provided, that the party to whom
such disclosure has been made does not have actual knowledge that such Person is
prohibited from disclosing such information, either by reason of contract or
legal or fiduciary obligation); (D) is developed independently by any party
without the use of any Confidential Information; or (E) is required to be
disclosed under Law or Order (provided that prompt notice of such disclosure
will be given as far in advance as reasonably possible to the Discloser).
"Contemplated Transactions" means the transactions contemplated by this
Agreement, and Company Documents and the Purchaser Documents.
"Contract" means any contract, agreement, indenture, note, bond, loan,
instrument, lease, conditional sale contract, mortgage, guarantee, license,
franchise, insurance policy, commitment or other legally binding arrangement,
and all rights and remedies thereunder.
"Current Employees" means all natural persons employed in the Business
on the day immediately prior to the Initial Closing Date, including any natural
persons on disability, sick leave or authorized leave of absence from the
Company or any of its subsidiaries.
4
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"Damages" means all monetary, non-monetary, direct, indirect,
incidental, consequential, special and punitive damages.
"Default" means (a) a violation, breach or default, (b) the occurrence
of an event which, with the passage of time or the giving of notice or both,
would constitute a violation, breach or default, or (c) the occurrence of an
event that (with or without the passage of time or the giving of notice or both)
would give rise to a right of damages, specific performance, termination,
renegotiation or acceleration (including the acceleration of payment).
"EBITDA Targets" has the meaning set forth in Section 7.11 hereof.
"Effective Time" means the opening of business on the Initial Closing
Date.
"Employees" means all Current Employees and all Former Employees.
"Environmental Claim" means any Claim arising out of, related to or in
connection with the use, treatment, removal, storage, disposal, presence,
migration, transport, handling, manufacture, possession, distribution, or the
actual or threatened emission, injection, escape, dumping, spill, leak,
discharge or release of Hazardous Materials.
"Environmental Laws" means all federal, state and local laws and
regulations relating to pollution or protection of human health or the
environment (including ambient air, surface water, groundwater, land surface or
subsurface strata), including the Comprehensive Environmental Response,
Compensation, and Liability Act ("CERCLA"), 42 U.S.C.A.ss.ss. 9601 et seq., the
Resource Conservation and Recovery Act, 42 U.S.C.A.ss.ss. 6901 et seq., the
Clean Water Act, 33 U.S.C.A. ss.ss. 1251 et seq., the Clean Air Act 42
U.S.C.A.ss.ss. 7401 et seq., the Occupational Safety and Health Act, 29
U.S.C.ss. 651 et seq., the Toxic Substances Control Act, 15 U.S.C.ss. 2601 et
seq., and laws and regulations relating to emissions, spills, leaks, discharges,
releases or threatened releases of Hazardous Materials, or otherwise relating to
the environmental, safety or health aspects of the manufacture, possession,
distribution, use, treatment, storage, disposal, presence, transport or handling
of Hazardous Materials.
"Environmental Loss" means any Liability or Loss arising out of,
related to or in connection with, the use, treatment, removal, storage,
disposal, presence, migration, transport, handling, manufacture, possession,
distribution, or the actual or threatened emission, injection, escape, dumping,
spill, leak, discharge or release of Hazardous Materials, including potential or
actual liability for investigatory costs, cleanup costs, governmental response
costs, natural resource damages, property damages, personal injuries or
penalties.
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"Equipment" means the furniture, fixtures, machinery, equipment, motor
vehicles, office equipment, computers and replacement parts currently used in
the operation of the Business.
"ERISA" means the Employee Retirement Income Security Act of 1974, as
amended.
"ERISA Affiliate" means, as to any person, any trade or business,
whether or not incorporated, which together with such person would be deemed, at
any time through the Closing Date, to be a single employer pursuant to the rules
set forth in Section 4001 of ERISA or Section 414(b), (c), (m) or (o) of the
Code.
"Exchange Act" means the Securities Exchange Act of 1934, as amended,
and the rules and regulations promulgated thereunder.
"Exhibit" means any of the lettered exhibits to this Agreement.
"Financial Statement Date" means February 28, 1999.
"Financial Statements" has the meaning set forth in Section 5.12
hereof.
"Former Employees" means any natural persons who were employed by the
Company or any of its subsidiaries at any time prior to the Initial Closing Date
and who are not Current Employees.
"GAAP" means generally accepted accounting principles as in effect from
time to time in the United States.
"GBCC" has the meaning set forth in 5.3(c) hereof.
"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).
"Governmental Consent" means any and all permits, licenses, waivers,
terminations, expirations, consents or approvals ("Consents") of or from any
Governmental Body, including the expiration of any periods of time under
statutory and regulatory notice provisions (with or without action on the part
of any Governmental Body), necessary to consummate the transactions contemplated
hereby or by any Exhibit hereto, or otherwise relating to any Contract with any
Governmental Body, or any Permit, including the transfer thereof in accordance
with the terms hereof.
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"HSR Act" means the Hart-Scott-Rodino Antitrust Improvements Act of
1976, as amended, and the rules and regulations promulgated thereunder.
"Hazardous Materials" means all explosive or regulated radioactive
materials or substances, hazardous or toxic substances, reactive, corrosive,
carcinogenic, flammable or hazardous pollutant, or other substance, wastes or
chemicals, petroleum or petroleum distillates, natural gas or synthetic gas,
asbestos or asbestos containing materials and all other materials or chemicals
regulated pursuant to any Environmental Laws, including any "hazardous
substance" or "hazardous waste" as defined in Environmental Laws, materials
listed in 49 C.F.R. ss. 172.101, materials defined as hazardous pursuant to
Section 101(14) of CERCLA, and special nuclear or by-product material as defined
by the Atomic Energy Act of 1954, 42 U.S.C.A. ss. 3011 et seq., and the
regulations promulgated thereto.
"Indemnitee" has the meaning set forth in Section 9.5 hereof.
"Indemnitor" has the meaning set forth in Section 9.5 hereof.
"Initial Closing" means the consummation of the purchase and sale of
the Series A Preferred Shares and the Warrants.
"Initial Closing Date" has the meaning set forth in Section 4.1 hereof.
"Intangible Assets" means collectively, (a) all inventions (whether
patentable or unpatentable, and whether or not reduced to practice), all
improvements thereto, and all Patents, (b) all Trademarks, trade dress, logos,
trade names, fictitious names, brand names, brand marks and corporate names,
together with all translations, adaptations, derivations, and combinations
thereof and including all goodwill associated therewith, and all applications,
registrations, and renewals in connection therewith, (c) all copyrightable
works, all copyrights (whether registered or not), and all copyright
applications, (d) all mask works and all applications, registrations, and
renewals in connection therewith, (e) all trade secrets and confidential
business information (including ideas, research and development, know-how,
formulas, compositions, manufacturing and production processes and techniques,
technical data, designs, drawings, specifications, customer and supplier lists,
pricing and cost information, and business and marketing plans, data and
proposals), (f) all computer software (including data, source codes and related
documentation), (g) all other proprietary, confidential or intellectual
information, property or rights, and (h) all copies and tangible embodiments
thereof (in whatever form or medium).
"Inventory" means packaging, finished goods, spare parts, work-in-
progress, cores, stock room inventory, supplies and raw materials of whatever
nature, wherever located and held for sale by the Company.
7
<PAGE>
"Investigatory and Legal Costs" means all reasonable fees, costs,
expenses and disbursements of attorneys, accountants, experts and other advisors
incurred in connection with the investigation, defense or prosecution of any
Legal Proceeding, Claim or Loss, or potential Legal Proceeding, Claim or Loss.
"Irrevocable Proxies" has the meaning set forth in the recitals hereof.
"Knowledge" means, (i) with respect to the Company, the actual
knowledge of its directors and executive officers, together with the knowledge
which such individuals should have if they had performed their duties on behalf
of the Company in a reasonably prudent manner, (ii) with respect to Littlejohn,
the actual knowledge of the officers of Littlejohn, together with the knowledge
which such individuals should have if they performed their duties on behalf of
Littlejohn in a reasonably prudent manner, and (iii) with respect to Quilvest,
the actual knowledge of the officers of Quilvest, together with the knowledge
which such individuals should have if they performed their duties on behalf of
Quilvest in a reasonably prudent manner.
"Labor Act" means the Labor Management Relations Act, and the rules and
regulations promulgated thereunder.
"Law" means any federal, state, local or foreign law (including common
law), statute, code, ordinance, rule, regulation or other requirement or
guideline.
"Legal Proceeding" means any judicial, administrative or arbitral
action, suit, proceeding (public or private), claim or governmental proceeding.
"Lender" means General Electric Capital Corporation, as agent for the
lenders to the Company under and pursuant to that certain Amended and Restated
Credit Agreement dated as of March 10, 1998, as amended to dated (the "Existing
Credit Facilities").
"Liabilities" means (a) all indebtedness (whether for borrowed money or
otherwise), obligations, Damages, deficiencies, Liens, penalties, fines, costs
(including any Investigatory and Legal Costs), expenses, and other liabilities,
whether direct or indirect, contingent (including loss contingency) or
otherwise, and (b) any guaranties, surety arrangements or endorsements (other
than endorsements for deposits or collection of checks in the ordinary course of
business) with respect to any of the Liabilities described in clause (a) of any
other Person, in any case whether or not ascertainable.
"Licenses" means all licenses, permits, authorizations, approvals,
franchises, rights, orders, variances (including zoning variances), easements,
rights of
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way, and similar consents or certificates granted or issued by any Person, other
than a Governmental Body, relating to the Business.
"Lien" means (a) any lien (including any lien relating to Taxes),
pledge or negative pledge, (b) any mortgage, deed of trust, security interest,
charge in the nature of a lien or security interest, (c) any title retention
agreement, right of first refusal, right of first purchase or other option, (d)
any conditional sale agreement, easement, right of way, variance or other real
estate declaration, or (e) any other claim, covenant, condition, restriction,
servitude, transfer restriction or other encumbrance.
"Littlejohn" has the meaning set forth in the heading hereof.
"Littlejohn Financial Advisor" means Schroders plc.
"Littlejohn Information" has the meaning set forth in Section 7.4
hereof.
"Loss" shall mean any and all losses, Damages or Liabilities or any
diminution in value of any real or personal property, including the Preferred
Stock or the Warrants acquired in connection with this Agreement.
"Material Adverse Effect" means any material adverse effect on, or any
effect, condition, event, or circumstance that has resulted or could reasonably
be expected to result in a material and adverse change in, the business,
properties, assets, liabilities, condition (financial or otherwise), results of
operations or cash flow of the Company and its subsidiaries, taken as a whole.
"Material Contracts" has the meaning set forth in Section 5.16 hereof.
"Maximum Amount" has the meaning set forth in Section 9.3 hereof.
"NLRA" has the meaning set forth in Section 5.17 hereof.
"Order" means any order, injunction, judgment, decree, ruling, writ,
assessment or arbitration award issued, granted, imposed or promulgated by a
Governmental Body.
"Outstanding Derivative Securities" has the meaning set forth in
Section 5.3 hereof.
"Permit" means all licenses, permits, authorizations, approvals,
franchises, rights, orders, variances (including zoning variances), easements,
rights of way, and similar consents or certificates granted or issued by any
Governmental Body.
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"Patents" means all letters patent and pending applications for patents
of the United States and all foreign countries, including regional patents,
certificates of invention and utility models, rights of license or otherwise to
or under letters patent, certificates of intention and utility models which have
been opened for public inspection and all reissues, divisions, continuations and
extensions thereof.
"Permitted Exceptions" means (i) statutory Liens for current taxes,
assessments or other governmental charges not yet delinquent or the amount or
validity of which is being contested in good faith by appropriate proceedings;
(ii) mechanics', carriers', workers', repairers' and similar Liens arising or
incurred in the ordinary course of business that are not in the aggregate
material to the Business or the assets of the Company; (iii) purchase money
security interests arising or incurred in the ordinary course of business; (iv)
zoning, entitlement and other land use regulations by Governmental Bodies,
provided that such regulations have not been violated; (v) Liens set forth in
Schedule 5.9 hereto; (vi) Liens in favor of the Lender or Quilvest, all of which
shall be released at the Initial Closing; (vii) from and after the Initial
Closing, Liens in favor of Fleet Capital Corporation, as agent under the Senior
Debt; (viii) deposits under workers compensation, unemployment insurance, social
security or similar Laws; (ix) Liens expressly consented to in writing by the
holders of a majority of the outstanding Series A Preferred Shares; and (x) such
other imperfections in title, charges, easements, restrictions and encumbrances
of public record which do not in the aggregate have a Material Adverse Effect or
do not materially interfere with the ownership, use, value, operation or
marketability of the affected material property.
"Per Share Series A Purchase Price" has the meaning set forth in
Section 2.3 hereof.
"Per Warrant Purchase Price" has the meaning set forth in Section 2.3
hereof.
"Person" means any individual, corporation, partnership, firm, joint
venture, limited liability company or partnership, association, joint-stock
company, trust, unincorporated organization or Governmental Body.
"Physical Inventory" has the meaning set forth in Section 3.2(a)
hereof.
"Plan" means any bonus, incentive compensation, deferred compensation,
pension, profit sharing, retirement, stock purchase, stock option, stock
ownership, stock appreciation rights, phantom stock, leave of absence, layoff,
vacation or holiday pay, day or dependent care, legal services, cafeteria, life,
health, accident, sickness, disability, workmen's compensation, medical, life,
dental or other insurance, severance, separation or other employee benefit,
fringe benefit, plan, program, trust, contract, practice, policy or arrangement
of any kind, whether written or oral, including any "employee benefit plan"
within the meaning of Section 3(3) of
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ERISA, whether in the nature of formal or informal understandings, whether or
not included in or described in any employment manual or handbook, and without
regard to the number of persons covered or otherwise benefiting thereunder.
"Preferred Stock" has the meaning set forth in Section 5.3(a) hereof.
"Principal Stock Exchange" means the principal national securities
exchange or other trading market on which the shares of Common Stock registered
under the Exchange Act are then listed or admitted for trading.
"Prohibited Transaction" means a transaction that is prohibited under
Section 4975 of the Code or Section 406 of ERISA and not exempt under Section
4975 of the Code or Section 408 of ERISA respectively.
"Proxy Statement" has the meaning set forth in Section 7.5 hereof.
"Purchaser" has the meaning set forth in the heading hereof.
"Purchaser Documents" means any agreement (other than this Agreement),
document, instrument or certificate contemplated by this Agreement to be
executed by or on behalf of either Purchaser in connection with the consummation
of the Contemplated Transactions.
"Purchaser Information" has the meaning set forth in Section 7.5
hereof.
"Quilvest" has the meaning set forth in the heading hereof.
"Quilvest Opinion" has the meaning set forth in Section 4.3 hereof.
"Registration Rights Agreement" has the meaning set forth in Section
4.7(f) hereof.
"Required Approval" means the approval by the holders of a majority of
the outstanding Common Stock, voting as one class of securities, of the
convertibility of any Preferred Stock issued or to be issued pursuant to this
Agreement into shares of Class A Common Stock and the ability of the holders of
any Preferred Stock issued or to be issued pursuant to this Agreement to vote
such shares, together with the Class A Common Stock as a single class, as if
such shares of Preferred Stock had been converted.
"Schedule" means any of the numbered or lettered schedules to this
Agreement.
"Schedule 14f-1" has the meaning set forth in Section 4.1 hereof.
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"SEC Reports " has the meaning set forth in Section 5.11 hereof.
"Securities Act" means the Securities Act of 1933, as amended, and the
rules and regulations promulgated thereunder.
"Senior Debt" means the $130 million of senior secured debt arranged by
Fleet Capital Corporation, as agent, and the lenders pursuant to a Loan and
Security Agreement, dated the date of this Agreement, having terms and
conditions reasonably satisfactory to Littlejohn, and as may be amended from
time to time after the Initial Closing.
"Series A Designation" means the certificate of designation for the
Series A Preferred Shares attached hereto as Exhibit E.
"Series A Preferred Shares" has the meaning set forth in the recitals
hereof.
"Shareholders Meeting" has the meaning set forth in Section 7.5 hereof.
"Shareholders Agreement" has the meaning set forth in Section 4.2(g)
hereof.
"Special Committee" means the special committee of the Board of
Directors formed for the purpose of considering this Agreement and the
Contemplated Transactions and where none of its members is an Affiliate or an
"associate" (as defined in the Exchange Act) of Quilvest.
"Subordinated Debt" means the $20 million of subordinated debt issued
by the Company on the date hereof on terms and conditions reasonably
satisfactory to Littlejohn, and as may be amended from time to time after the
Initial Closing.
"Superior Alternative Transaction" has the meaning set forth in Section
7.2 hereof.
"Taxes" means all federal, state, local and foreign income, property
and sales taxes and tariffs and all charges, fees, levies or other assessments
whether federal, state, local or foreign based upon or measured by income,
capital, net worth or gain and any other tax including but not limited to all
net income, gross income, gross receipts, sales, use, ad valorem, transfer,
franchise, profits, withholding, payroll, employment, social security,
unemployment, FICA, FUTA, excise, occupation, property or other taxes, customs,
duties, fees, assessments or charges of any kind whatsoever including all
interest and penalties thereon, and additions to tax or additional amounts
imposed or charged by any Governmental Body.
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"TCR Management" means Willem F.P. de Vogel.
"Terbem" means Terbem Limited, a British Virgin Islands international
business company.
"Threshold Amount" has the meaning set forth in Section 9.3 hereof.
"Voting Agreement" has the meaning set forth in Section 4.2(h) hereof.
"Warrant" shall have the meaning set forth in Section 2.2 hereof.
"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 defined in the Series A Designation) as
set forth in Section 7(b)(iv) of the Series A Designation, the Weighted Average
Trading Price shall be proportionally adjusted to the extent not so reflected in
the report of Bloomberg Information Systems, Inc.
ARTICLE II
SERIES A PREFERRED SHARE AND WARRANT PURCHASE
2.1 Sale and Purchase of Series A Preferred Shares. On the terms and
subject to the conditions set forth in this Agreement, at the Initial Closing,
the Company agrees to issue and sell to each Purchaser, and each Purchaser,
severally and not jointly, agrees to purchase from the Company, that number of
Series A Preferred Shares which are set forth opposite such Purchaser's name on
Schedule 2.1 attached hereto. The Series A Preferred Shares shall have the
rights, preferences, privileges and other terms and conditions set forth in the
Series A Designation.
2.2 Warrants. On the terms and subject to the conditions set forth in
this Agreement, at the Initial Closing, the Company agrees to issue and sell to
each Purchaser, and each Purchaser, severally and not jointly, agrees to
purchase from the Company immediately exercisable warrants in substantially the
form of Exhibit F attached hereto (the "Warrants"), to purchase that number of
Series A Preferred Shares set forth opposite such Purchaser's name in Schedule
2.2 attached hereto.
2.3 Purchase Price. The purchase price for each Series A Preferred
Share to be purchased pursuant to this Agreement shall be $249.99 (the "Per
Share Series A Purchase Price") and the purchase price for each Warrant to
purchase one Series A Preferred Share shall be $0.01 (the "Per Warrant Purchase
Price").
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ARTICLE III
PURCHASES OF ADDITIONAL PREFERRED SHARES
From time to time after the Required Approval has been obtained and
continuing until the third anniversary of the Initial Closing Date, upon the
occurrence of an Additional Issue Event, the Company agrees to issue and sell to
each Purchaser, and each Purchaser, severally and not jointly, agrees to
purchase from the Company, at an Additional Closing, that stated value of
Additional Preferred Shares determined by multiplying the Applicable Percentage
of such Purchaser by the aggregate stated value of Additional Preferred Shares
to be issued and sold at such Additional Closing. The aggregate purchase price
and the aggregate stated value for all Additional Preferred Shares to be issued
and sold pursuant to this Section 3 shall not exceed $25,000,000.
ARTICLE IV
THE CLOSINGS
4.1 Initial Closing. The Initial Closing shall be effective as of the
Effective Time, and shall take place on the 10th day (or if such day is not a
Business Day, on the next Business Day) after the date that the Company mailed,
or caused to be mailed, to its shareholders the Schedule 14f-1 contemplated by
Section 7.4 hereof, provided that the conditions to the Initial Closing set
forth in Sections 8.1 and Section 8.3 hereof have been satisfied (or have been
waived by the party entitled to the benefit of the condition being waived), or
in the event such conditions are not so satisfied or waived at such time, on the
next Business Day after the satisfaction or waiver of such conditions, at 10:00
a.m. New York time, at the offices of Pepper Hamilton LLP, 3000 Two Logan
Square, Philadelphia, PA, or at such other place and at such other time and date
as may be mutually agreed upon by the parties hereto (the "Initial Closing
Date").
4.2 Deliveries to the Purchaser at the Initial Closing. On the Initial
Closing Date, except as otherwise indicated, the Company shall deliver, or shall
cause to be delivered, to the Purchasers, the following:
(a) the Articles of Incorporation of the Company, including the
Company Articles Amendment authorizing the proper issuance of the Series A
Preferred Shares in the form of the Series A Designation, certified by the
Secretary of State of the State of Georgia;
(b) certificates representing the Series A Preferred Shares duly
executed by authorized officers of the Company;
(c) the Warrants being purchased at the Initial Closing duly
executed by an authorized officer of the Company in the name of such Purchaser;
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(d) the legal opinions of Cadwalader Wickersham & Taft, Kilpatrick
Stockton LLP and McLain & Merritt, in substantially the forms of Exhibits G-1,
H-1 and I-1, respectively, attached hereto (the "Company Opinions") hereof;
(e) resolutions duly adopted by the Special Committee recommending
the adoption of the Contemplated Transactions to the Board of Directors, and
resolutions duly adopted by the Board of Directors authorizing the Contemplated
Transactions, in each case in form and substance reasonably satisfactory to
Littlejohn and certified by the Company's Secretary;
(f) certificates issued by appropriate governmental authorities
evidencing, as of a recent date reasonably acceptable to the Purchasers, the
good standing (or subsistence) and nondelinquent tax status of the Company and
its subsidiaries in the states in which they are incorporated or qualified to
transact business as a foreign corporation;
(g) a copy of the By-laws, including all amendments thereto, of
the Company, certified by the Company's Secretary;
(h) intentionally omitted;
(i) a certificate, executed by the Secretary of the Company (whose
incumbency and specimen signature is certified by an executive officer of the
Company), certifying as to the incumbency of the Company's officers and as to
their respective specimen signatures;
(j) a certificate, executed by the chief executive officer and the
chief financial officer of the Company certifying that conditions in Sections
8.1(a) through 8.1(e) hereof have been satisfied.
(k) evidence of mailing of the Schedule 14f-1 to all of its
shareholders of record at least 10 days prior to the Initial Closing Date and
otherwise reasonably satisfactory in form and substance to Littlejohn;
(l) evidence that the directors' and officers' liability insurance
referred to in Section 8.1(h) hereof is in full force and effect as of the
Initial Closing Date and that the premium for the one-year period commencing as
of the Initial Closing Date has been paid;
(m) a copy of the fairness opinion issued by HLHZ to the Special
Committee and the Board of Directors in form and substance reasonably acceptable
to Littlejohn; and
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(n) the other agreements, instruments and documents referred to in
Section 8.1 hereof and such other agreements, instruments and documents as the
Purchasers may reasonably request.
4.3 Deliveries to the Company at the Initial Closing. On the Initial
Closing Date, except as otherwise indicated, each Purchaser, severally and not
jointly, shall deliver, or shall cause to be delivered, to the Company, the
following:
(a) immediately available funds in an amount equal to the sum of
(a) number of Series A Preferred Shares to be purchased by such Purchaser hereby
multiplied by the Per Share Series A Purchase Price and (b) the number of
Warrants to be purchased by such Purchaser at the Initial Closing Date
multiplied by the Per Warrant Purchase Price;
(b) resolutions duly adopted by the managing body of such
Purchaser authorizing the contemplated transactions certified by an appropriate
officer of such Purchaser;
(c) the charter or other organizational document of such
Purchaser, certified by an appropriate Governmental Body or, in the case of
Quilvest, by an appropriate officer of Quilvest; and
(d) a certificate duly executed by an authorized officer of such
Purchaser certifying as to the fulfillment of the conditions set forth in
Sections 8.3(a) and (b) hereof.
4.4 Additional Closings. Any Additional Closing shall be effective as
of the opening of business on the applicable Additional Closing Date and shall
take place, if at all, on the third Business Day following the satisfaction of
the conditions to Closing set forth in Section 8.2 and Section 8.4 hereof (or
the waiver by the party entitled to the benefit of the condition being waived)
at 10:00 a.m. at the offices of Pepper Hamilton LLP, 3000 Two Logan Square,
Philadelphia, PA, but in no event earlier than 12 Business Days following the
date the Company gives the Purchasers written notice of the occurrence of the
applicable Additional Issue Event, or at such other place and at such other time
and date as may be mutually agreed upon by the parties hereto (an "Additional
Closing Date").
4.5 Deliveries to the Purchasers at an Additional Closing. At any
Additional Closing, the Company shall deliver, or shall cause to be delivered,
to the Purchasers the following:
(a) the Articles of Incorporation of the Company certified by the
Secretary of State of Georgia amended to authorize the Additional Preferred
Shares to be issued at the applicable Additional Closing in substantially the
form of the Additional Preferred Share Designation;
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(b) certificates representing the Additional Preferred Shares to
be issued at such Additional Closing, duly executed by authorized officers of
the Company;
(c) a certificate, executed by the chief executive officer and the
chief financial officer of the Company certifying that conditions in Sections
8.2(a) through 8.2(f) hereof have been satisfied;
(d) resolutions duly adopted by the Board of Directors authorizing
the Contemplated Transactions to be consummated at such Additional Closing and
evidencing the Additional Issue Event, certified by the Company's Secretary; (e)
a copy of the By-laws, including all amendments thereto, of the Company,
certified by the Company's Secretary;
(e) a copy of the By-Laws, including all amendments thereto, of
the Company, certified by the Company's Secretary;
(f) a certificate, executed by the Secretary of the Company (whose
incumbency and specimen signature is certified by an executive officer of the
Company), certifying as to the incumbency of the Company's officers and as to
their respective specimen signatures;
(g) any Governmental Consents as the Purchasers shall reasonably
request;
(h) evidence that the shares of Class A Common Stock to be
received upon conversion of the Additional Preferred Shares to be issued at such
Additional Closing have been duly and properly listed on the Principal Stock
Exchange, subject to notice of issuance; and
(i) such other agreements, instruments and documents as the
Purchasers or their counsel may reasonably request, including with respect to
the events, facts and circumstances giving rise to the applicable Additional
Issue Event.
4.6 Deliveries to the Company at Additional Closing. At any Additional
Closing, each Purchaser, severally and not jointly, shall deliver, or shall
cause to be delivered, to the Company, the following:
(a) immediately available funds in an amount equal to the number
of Additional Preferred Shares to be purchased by such Purchaser multiplied by
the stated value per share of such Additional Preferred Shares;
(b) resolutions duly adopted by the managing body of such
Purchaser authorizing the purchase of the Additional Preferred Shares to be
purchased by such Purchaser at such Additional Closing;
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(c) the charter or other organizational document of such
Purchaser, certified by an appropriate Governmental Body or, in the case of
Quilvest, by an appropriate officer of Quilvest; and
(d) a certificate executed by a duly authorized officer of such
Purchaser certifying as to the fulfillment of the conditions set forth in
Sections 8.4(a) and (b) hereof.
ARTICLE V
REPRESENTATIONS AND WARRANTIES OF THE COMPANY
To induce each Purchaser to enter into and consummate this Agreement,
the Company hereby represents and warrants to each Purchaser as follows:
5.1 Organization and Good Standing. The Company and each of its
subsidiaries is a corporation duly organized, validly existing and in good
standing under the laws of the jurisdiction of its incorporation, and has full
corporate power and authority to carry on its business as it is now being
conducted, and, in the case of the Company, to execute, deliver and perform
fully its obligations under this Agreement and each of the Company Documents,
and to consummate the Contemplated Transactions. The Company and each of its
subsidiaries is qualified to do business as a foreign corporation in each state
in which the failure to qualify could reasonably be expected to result in a
Material Adverse Effect.
5.2 Authorization. This Agreement has been, and each of the Company
Documents to be delivered at a particular Closing will be at such Closing, duly
executed and delivered by the Company (including, for purposes of the Initial
Closing, by a special committee of the Board of Directors which does not include
any director who is an affiliate of either Purchaser), and (assuming the due
authorization, execution and delivery by the other parties hereto and thereto)
this Agreement constitutes, and the Company Documents when so executed and
delivered will constitute, legal, valid and binding obligations of the Company,
enforceable against the Company in accordance with their respective terms,
subject to applicable bankruptcy, insolvency, reorganization, moratorium and
similar laws affecting creditors' rights and remedies generally and subject, as
to enforceability, to general principles of equity (regardless of whether
enforcement is sought in a proceeding at law or in equity). Neither the
execution and delivery by the Company of this Agreement or of the Company
Documents to be delivered at a particular Closing, nor the consummation by the
Company of the Contemplated Transactions to be consummated at a particular
Closing, nor the compliance by the Company with any of the provisions hereof or
thereof, does or will (i) conflict with or result in a Default under any
provision of the Articles of Incorporation or By-laws of the Company (ii)
subject to the receipt of the consents set forth in Schedule 5.2 hereto,
conflict with or result in a Default under any Material Contract (including the
Company's listing
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and other Contracts with the Principal Stock Exchange), Permit, Order or
material License relating to the Business to which the Company or any of its
subsidiaries is a party or by which any of their respective assets is bound or
subject, (iii) constitute a violation of any Law applicable to the Company or
any of its subsidiaries which could reasonably be expected to have a Material
Adverse Effect, or (iv) other than pursuant to or as expressly contemplated by
this Agreement, result in the creation of any Lien (other than a Permitted Lien)
upon any of the Company's or any of its subsidiaries' properties or assets.
5.3 Capitalization; Georgia Anti-Takeover Laws.
(a) The authorized capital stock of the Company consists of (i)
40,000,000 shares of Class A Common Stock, par value $0.01 per share, (ii)
20,000,000 shares of Class B Common Stock par value $0.01 per share (such Class
A Common Stock and Class B Common Stock collectively the "Common Stock") and
(iii) 5,000,000 shares of preferred stock, par value $1.00 per share (the
"Preferred Stock"). As of February 11, 2000, 5,959,534 shares of Class A Common
Stock, 3,272,929 shares of Class B Common Stock and no shares of Preferred Stock
are issued and outstanding. As of the date of the Initial Closing, the issued
and outstanding capital stock of the Company will be as set forth in the
immediately preceding sentence, adjusted only for issuances of Common Stock
pursuant to (A) options, warrants, or rights to purchase Common Stock
outstanding on the date of this Agreement, or (B) issued and outstanding
securities which are convertible into or exchangeable for Common Stock (all of
the foregoing are collectively, the "Outstanding Derivative Securities"). The
warrants to purchase shares of Class A Common Stock originally issued to the
Lender on June 11, 1999 are not currently exercisable and, assuming the Initial
Closing occurs on or prior to February 28, 2000, and all outstanding principal,
interest, fees and expenses due and owing under the Existing Credit Facilities
are repaid in full on or prior to such date, such warrants will terminate
unexercised.
(b) All outstanding shares of Common Stock are duly authorized,
validly issued and fully paid and nonassessable. There are no preemptive or
other similar rights, whether by statute, contract or otherwise, relating to the
capital stock of the Company. Other than the Outstanding Derivative Securities,
which are accurately and completely described on Schedule 5.3(b) hereto, and the
Warrants and the Preferred Stock to be issued and sold in connection with the
Contemplated Transactions, there are no outstanding options, warrants, rights,
puts, calls, commitments, or other contracts, arrangements, or understandings
issued by or binding upon the Company requiring, and there are no outstanding
debt or equity securities of the Company which upon the conversion, exchange or
exercise thereof would require, the issuance, sale or transfer by the Company of
any new or additional equity interests in the Company (or any other securities
of the Company or any of its subsidiaries which, whether after notice, lapse of
time or payment of monies, are or would be convertible into or exercisable or
exchangeable for equity interests in the
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Company). Except for the Shareholders Agreement to be executed and delivered at
the Initial Closing, there are no voting trusts or other agreements or
understandings to which the Company or any of its subsidiaries is a party with
respect to the voting of capital stock of the Company. Each share of Class A
Common Stock is entitled to vote for the election of up to two directors of the
Company and for no other directors. Each of the Holders of each share of Class B
Common Stock is entitled to vote for the election of all directors of the
Company (other that the two directors who are elected by the holders of the
Class A Common Stock). On all other matters, including with respect to the
Required Approval, each holder of Class A Common Stock is entitled to one vote
per share and each holder of Class B Common Stock is entitled to 10 votes per
share, and the Class A Common Stock and the Class B Common Stock vote together
as one class of securities. Neither the execution, delivery, or performance of
the Shareholders Agreement, nor the grant of the irrevocable proxy contemplated
thereby, will result in an automatic conversion of the Class B Common Stock
owned by Quilvest, Terbem or any of the members of the TCR Management into Class
A Common Stock pursuant to the Amended and Restated Articles of Incorporation or
the GBCC.
(c) The provisions of Section 14-2-1132 of the Georgia Business
Corporation (the "GBCC") prohibiting a "business combination" (as defined in the
GBCC for the purpose of Section 14-2-1132 with any "interested stockholder" (as
defined in the GBCC for the purpose of Section 14-2-1132) will not be applicable
to either Purchaser as a result of the transactions contemplated by this
Agreement or any other Company Document or as a result of any investment of any
Purchaser in the Company prior to the date hereof which is known to the Company
as of the date hereof.
(d) The transactions contemplated by this Agreement and the
Company Documents have been duly approved in accordance with the provisions of
Section 14-2-1110 through 14-2-1113 of the GBCC.
5.4 Sale of Shares of Capital Stock; Offering Exemption.
(a) The Series A Preferred Shares, the Additional Preferred Shares
and the Warrants being sold by the Company to the Purchasers hereunder will,
upon the issuance thereof following the payment therefor in accordance with the
terms of this Agreement, be (i) validly issued and outstanding, (ii) fully paid
and nonassessable, (iii) not subject to or issued in violation of any preemptive
or other rights of the shareholders of the Company or others, and (iv) free and
clear of any and all Liens (other than those imposed by applicable securities
laws or those imposed by the Shareholders Agreement to be executed and delivered
at the Initial Closing).
(b) The Series A Preferred Shares will have on the Initial Closing
Date, the designations, powers, preferences, and relative and other special
rights, and the qualifications, limitations and restrictions, contained in the
Series A
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Designation. The Additional Preferred Shares will have on the applicable
Additional Closing Date the designations, powers, preferences, and relative and
other special rights, and the qualifications, limitations and restrictions,
contained in the applicable Additional Preferred Share Designation.
(c) Assuming the accuracy of each Purchaser's representation and
warranty set forth in Section 6.6 below, the offering for sale by the Company,
and the actual sale by the Company, of the Series A Preferred Shares, any
Additional Preferred Shares and the Warrants being offered and sold by the
Company to the Purchasers hereunder, are each exempt from registration under the
Securities Act, and from registration or qualification under applicable state
securities or blue sky laws.
5.5 Subsidiaries. Except as listed in Schedule 5.5 attached hereto, the
Company does not have any subsidiaries nor does it own, or have the right to
acquire, directly or indirectly, any capital stock or other ownership interest
in any corporation, partnership, joint venture, limited liability Company or
Partnership or other entity. The Company owns all of the equity securities in
each subsidiary, free and clear of all Liens (other than Permitted Exceptions),
and there are no options, warrants or other agreements, commitments or
understandings to issue any equity securities of any subsidiary, or any
outstanding securities which are convertible into or exchangeable for equity
securities of any subsidiary, or any agreements, commitments or understandings
to issue any of the foregoing.
5.6 Consents. No Order or Permit or declaration or filing with, or
notification to any Governmental Body is required on the part of the Company, in
connection with (i) the execution and delivery by the Company of this Agreement
or the Company Documents, (ii) the compliance by the Company with any of the
provisions hereof or thereof, and (iii) the performance of the Company of the
Contemplated Transactions, in each case except as set forth in Schedule 5.6
hereto and except that the Required Approval is necessary in order to permit the
holders of the Series A Preferred Shares and the Additional Preferred Shares to
exercise the conversion feature thereof or to vote such shares on an
"as-converted" basis with the Common Stock as provided therein.
5.7 Litigation. Schedule 5.7 hereto sets forth all pending Legal
Proceedings against the Company or any of its subsidiaries, and all those Legal
Proceedings which, to the knowledge of the Company, are threatened against the
Company or any of its subsidiaries, in each case which (i) is not covered by
insurance, (ii) seeks in excess of $50,000 from the Company or any of its
subsidiaries, (iii) seeks to enjoin or obtain damages in respect of the
consummation of any of the Contemplated Transactions, (iv) questions the
validity of this Agreement, any of the Company Documents or any action taken or
to be taken by the Company in connection with the Contemplated Transactions or
(v) if adversely determined, could reasonably be expected to have a Material
Adverse Effect. There is no Order
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outstanding against the Company or any of its subsidiaries having any of the
effects or which could reasonably be expected to have such an effect.
5.8 Compliance with Law. The Company and each of its subsidiaries has
complied and currently is in compliance with all applicable Laws and Orders
except for such non-compliance which individually or in the aggregate could not
reasonably be expected to have a Material Adverse Effect. Neither the Company
nor any of its subsidiaries has received, or knows of the issuance of, any
written notice by any person of any such violation or alleged violation. The
Company and each of its subsidiaries has in full force and effect all Permits
necessary for it to own, lease or operate its properties and assets and to carry
on the Business as now conducted, except where the failure to have such Permits
could not, individually or in the aggregate, reasonably be expected to have a
Material Adverse Effect, and the Company has complied, with all of the terms and
conditions of such Permits, and there is no Default under any thereof, in each
case which could reasonably be expected to have a Material Adverse Effect.
Neither the Company nor any of its subsidiaries has taken or failed to take any
act which act or failure to act has resulted in or enabled, or could reasonably
be expected to result in or enable, with or without notice or lapse of time or
both, the revocation or termination of any such Permit or the imposition of any
restrictions thereon, in each case which could reasonably be expected to have a
Material Adverse Effect.
5.9 Title to Assets. The Company or one of its subsidiaries owns and
has good and marketable title to or, in the case of leased properties, valid
leasehold interests in, all of its assets, tangible or intangible, including all
of such assets reflected on the most recent Financial Statements, except for
assets disposed of in the ordinary course of business since the Financial
Statement Date. The Company or one of its subsidiaries holds title to its assets
free and clear of all Liens other than Permitted Exceptions. The tangible
personal property included in the properties and assets (including all
Equipment) owned or used by the Company or one of its subsidiaries in the
operation of the Business are in good working order, repair and condition,
reasonable wear and tear excepted.
5.10 Other Representations Regarding the Company's Assets and
Liabilities.
(a) Accounts Receivable. All of the accounts receivable of the
Company and each of its subsidiaries constitute a valid claim in the full amount
thereof (subject only to the allowance for doubtful accounts set forth on the
Financial Statements) against the debtor charged therewith on the consolidated
books of the Company. Except as expressly set forth on Schedule 5.10(a) hereto,
no account debtor has any valid set-off, deduction or defense with respect
thereto, and no account debtor has asserted such set-off, deduction or defense.
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(b) Inventory. All items of Inventory reflected in the Financial
Statements are in good and merchantable condition, of a quantity and quality
salable in the ordinary course of business consistent with past practices at
normal mark-ups (subject to customary allowances consistent with past
experience), except for damaged, defective or obsolete Inventory. Such Inventory
is valued at the lower of cost or market on a first-in, first out basis in
accordance with GAAP consistently applied and maintained. Except as set forth on
Schedule 5.10(b) hereto, neither the Company nor any of its subsidiaries holds
any items of Inventory on consignment. All Inventory is located at premises
owned or leased by the Company or one of its subsidiaries, except for Inventory
in transit to the Company.
(c) Leasehold Improvements. All material leasehold improvements,
fixtures and appurtenances attached to any real property leased by the Company
or one of its subsidiaries are in good working order, repair and condition,
ordinary wear and tear excepted.
(d) Real Property. The Company or one of its subsidiaries owns the
real property listed on Schedule 5.10(d) attached hereto. The Company has made
available to the Purchaser correct and complete copies of the leases and
subleases for all real property leased by the Company or one of its
subsidiaries. With respect to each such lease and sublease:
(i) the lease or sublease is legal, valid, binding,
enforceable, and in full force and effect;
(ii) neither the Company nor any of its subsidiaries has
violated the terms of, or is in Default under, any such lease or sublease, and
no event has occurred which, with or without notice or lapse of time, would
constitute, or could reasonably be expected to constitute, a breach or Default
thereof, or permit termination, modification, or acceleration thereunder; and
(iii) to the best knowledge of the Company, no other Person
to the lease or sublease is in breach or Default, and no event has occurred
which, with or without notice or lapse of time, would constitute a breach or
Default thereof, or permit termination, modification, or acceleration
thereunder.
(e) Intangible Assets. Except as set forth in Schedule 5.10(e)
attached hereto, each of the material Intangible Assets owned by the Company or
any of its subsidiaries is owned by the Company or any of its subsidiaries free
and clear of any and all Liens (other than Permitted Exceptions) and, to the
knowledge of the Company, no other Person has any Claim of ownership with
respect thereto. The Company and each of its subsidiaries have adequate Licenses
or other valid rights to use all of the material Intangible Assets which it does
not own which are utilized by the Company or any of its subsidiaries and which
are material to the conduct of the business as presently conducted. Except as
set forth in
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Schedule 5.10(e) hereto, the use of its Intangible Assets by the Company or any
of its subsidiaries does not conflict with, infringe upon, violate or interfere
with any intellectual property rights of any other Person, nor is any other
Person infringing upon, violating or interfering with any rights of the Company
or any of its subsidiaries in and to ownership or use of any such material
Intangible Assets, except in each case which could not reasonably be expected to
have a Material Adverse Effect.
5.11 SEC Reports. Except as set forth on Schedule 5.11 attached hereto,
the Company has filed all reports, proxy statements, registration statements,
prospectuses and other documents (the "SEC Reports") required to be filed by it
when due in accordance with the Exchange Act or the Securities Act. As of their
respective dates, the SEC Reports complied with all applicable requirements of
the Exchange Act or the Securities Act, as the case may be. Except as set forth
on Schedule 5.11 attached hereto, as of their respective dates, none of the SEC
Reports contained any untrue statement of a material fact or omitted to state a
material fact required to be stated or incorporated by reference therein or
necessary in order to make the statements therein, in light of the circumstances
under which they were made, not misleading.
5.12 Financial Statements. Except as set forth on Schedule 5.12
attached hereto, the consolidated financial statements of the Company and its
subsidiaries contained in the SEC Reports complied as to form in all material
respects with the published rules and regulations of the Commission with respect
thereto, were prepared in accordance with GAAP applied on a consistent basis
during the periods involved and fairly present, in conformity with GAAP, the
consolidated financial position of the Company and its consolidated subsidiaries
as of the dates thereof and their consolidated results of operations, cash flows
and changes in shareholders' equity for the periods then ended (subject to
normal year-end adjustments in the case of any unaudited interim financial
statements.
5.13 Taxes. Except as set forth in Schedule 5.13, the Company and each
of its subsidiaries has duly and timely filed all information and tax returns
and reports required to be filed by it with any federal, state or local
governmental taxing authority, body or agency, and all Taxes due and payable by
the Company or any of its subsidiaries have been paid, withheld or reserved for
or, to the extent they relate to periods on or prior to the date of the latest
Financial Statements, are reflected as a Liability on the balance sheet included
therein. Without limiting the generality of the foregoing, the Company and each
of its subsidiaries has properly withheld all amounts required by Law to be
withheld for income taxes, FICA and unemployment taxes, including without
limitation, with respect to social security and unemployment compensation,
relating to its employees, and has remitted all withheld amounts required to be
remitted to the appropriate taxing authority, agency or body.
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5.14 No Undisclosed Liabilities. Neither the Company nor any of its
subsidiaries has any indebtedness or Liabilities (whether accrued, absolute,
contingent or otherwise, and whether due or to become due) except for (i) those
reflected or reserved against (which reserves the Company represents are
adequate to cover such Liabilities) in the Financial Statements, (ii) those
which are specifically disclosed in this Agreement or a Schedule attached hereto
and (iii) those incurred in the ordinary course of business which could not
reasonably be expected, individually or in the aggregate, to have a Material
Adverse Effect.
5.15 Absence of Certain Developments. Except as set forth in Schedule
5.15 hereto, as expressly set forth in the Company's Quarterly Report on Form
10-Q for the three- and nine-month periods ended November 30, 1999, or as
expressly contemplated by this Agreement, (x) since November 30, 1999, there has
not been any Material Adverse Effect and, (y) since February 28, 1999, the
Company and each of its subsidiaries has operated the Business in the ordinary
course consistent with past practice, and there has not been:
(a) any event or condition of any nature whatsoever which,
individually or in the aggregate, could reasonably be expected to result in a
Material Adverse Effect;
(b) any amendment to the Articles of Incorporation or Bylaws of
the Company or any of its subsidiaries, except for those expressly approved by
the holders of a majority of the outstanding Series A Preferred Shares;
(c) any declaration, setting aside or payment of any dividend or
other distribution (whether in cash, stock or property) with respect to the
Company's or any of its subsidiaries' capital stock;
(d) the creation or attachment, or notice thereof, of any Lien
(other than Permitted Exceptions) on any of the assets of the Company or any of
its subsidiaries;
(e) the establishment or assumption of any Benefit Plan, or the
amendment of any existing Benefit Plan (or any agreement relating to or issued
in connection with any Benefit Plan), other than an amendment necessary to
conform a Benefit Plan to the requirements of applicable laws;
(f) any change in the accounting methods or practices (including
any change in depreciation or amortization policies or rates) with respect to
the Business or otherwise by the Company or any of its subsidiaries except for
those expressly approved by the holders of a majority of the outstanding Series
A Preferred Shares; or
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(g) any agreement by the Company or any of its subsidiaries to do
any act referred to in any of the preceding clauses.
5.16 Material Contracts. Each Contract presently in effect to which the
Company or any of its subsidiaries is a party, or by which the Company, any of
its subsidiaries, or any of their respective assets or properties is bound,
which the Company is required to file as an exhibit to any SEC Report pursuant
to Item 601 Regulation S-K promulgated by the Securities and Exchange
Commission, including the employment contracts listed in Schedule 5.16 attached
hereto, and any listing agreement with a national securities exchange to which
the Company is a party (collectively, the "Material Contracts"), is in full
force and effect, there is no Default under any such Material Contract by the
Company or any of its subsidiaries or, to the knowledge of the Company, by any
of the other parties thereto, except for such Defaults as will not individually
or in the aggregate, with the giving of notice or the passage of time or both,
result in a Material Adverse Effect. Except as set forth in Schedule 5.16
attached hereto, there has been no cancellation, termination, limitation or
modification or any notice of cancellation, termination, limitation or material
modification of any such Material Contract. Each of the Material Contracts (i)
constitutes a legal, valid and binding obligation of the Company or its
subsidiaries, and (ii) to the knowledge of the Company, constitutes a legal,
valid and binding obligation of such other party thereto.
5.17 Employee Relations.
(a) The Company and each of its subsidiaries has complied and is
in compliance, in all material respects, with all Laws which relate to wages,
hours, discrimination in employment and collective bargaining, and is not liable
for any arrears of wages, Taxes or penalties for failure to comply, in all
material respects, with any of the foregoing. Except as described in Schedule
5.17 attached hereto, (i) none of the Employees of the Company or any of its
subsidiaries is represented for purposes of their employment by a labor
organization, (ii) to the knowledge of the Company, no petition has been filed
for recognition of a labor union or association as the exclusive bargaining
agent for any and all of the Employees of the Company or any of its
subsidiaries, and (iii) to the knowledge of the Company, there has not been in
the past five years any general solicitation of representation cards by any
union seeking to represent any or all of the Employees of the Company or any of
its subsidiaries as their bargaining agent. Except as set forth in Schedule 5.17
attached hereto, there is no, and during the past three years there has been no,
(i) unfair labor practice charge, complaint or other proceeding against the
Company or any of its subsidiaries pending or, to the knowledge of the Company,
threatened before the National Labor Relations Board nor, to the knowledge of
the Company, any commitment or involvement in the commission of any acts or
omissions which could give rise to any unfair labor practices by the Company or
any of its subsidiaries, (ii) Claim or Litigation against the Company or any of
its subsidiaries or any of the Employees or agents of the Company or any of its
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subsidiaries pending or, to the knowledge of the Company, threatened under the
National Labor Relations Act, as amended, and the rules and regulations
promulgated thereunder (the "NLRA") nor, to the knowledge of the Company, any
commitment or involvement in the commission of any acts or omissions which could
give rise to any Liability under the Labor Act on the part of the Company or any
of its subsidiaries, (iii) labor strike, dispute, slowdown or stoppage pending
or, to the knowledge of the Company, threatened against or involving the Company
or any of its subsidiaries, (iv) labor grievance filed with the Company which
has had or could reasonably be expected to have a Material Adverse Effect; or
(v) any pending, or to the knowledge of the Company, threatened Claim against
the Company or any of its subsidiaries or Litigation involving the Company or
any of its subsidiaries, or Litigation which has arisen out of or under a
collective bargaining or other labor Contract. Except as set forth in Schedule
5.17 attached hereto, there is no Claim or Litigation against the Company or any
of its subsidiaries (whether under federal, state or local Law, under any
employment Contract, or otherwise) brought or, to the knowledge of the Company,
threatened by any Employee on account of or for: (i) overtime pay, other than
overtime pay for work done during the current payroll period; (ii) wages or
salary for any period other than the current payroll period; (iii) any amount of
vacation pay or pay in lieu of vacation time, other than vacation time or pay in
lieu thereof earned in or in respect of the current fiscal year; or (iv) any
violation of any Law relating to minimum wages or maximum hours of work. Except
as set forth in Schedule 5.17 attached hereto, there is no Claim against the
Company or any of its subsidiaries or Litigation (whether under federal, state
or local Law, under any employment Contract, or otherwise) brought or, to the
knowledge of the Company, threatened by any Person (including any Governmental
Body) relating to discrimination or occupational safety in employment or
employment practices (including the Occupational Safety and Health Act of 1970,
as amended, The Fair Labor Standards Act, as amended, Title VII of the Civil
Rights Act of 1964, as amended, or the Age Discrimination in Employment Act of
1967, as amended).
5.18 ERISA Matters.
(a) Benefit Plans Generally. Schedule 5.18(a) attached hereto
contains a true and complete list of all Benefit Plans and each "multiemployer
plan" (within the meaning of Section 3(37) of ERISA) with respect to which the
Company or any of its ERISA Affiliates has ever contributed to or otherwise had
any obligation. Except as set forth on Schedule 5.18(a), neither the Company nor
any of its ERISA Affiliates has ever sponsored, maintained, contributed to or
otherwise had any obligation in connection with any pension plan or welfare
benefit plan that is a "multiemployer plan" (within the meaning of Section 3(37)
of ERISA), a "multiple employer plan" (within the meaning of Section 413 of the
Code) or a "multiple employer welfare arrangement" (within the meaning of
Section 3(40) of ERISA). Every Benefit Plan which is an "employee welfare
benefit plan" (within the meaning of Section 3(1) of ERISA) provides benefits
either by making direct payments out of general corporate assets and/or through
the purchase of insurance.
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(b) Multiemployer Plans. Except as specifically set forth on
Schedule 5.18(b), with respect to each multiemployer plan listed on Schedule
5.18(a):
(i) there has never been a complete or partial withdrawal
from the plan by the Company and/or any of its ERISA Affiliates; and
(ii) there has never been an assessment of withdrawal
liability against the Company and/or any of its ERISA Affiliates; and
(iii) if the Company and its ERISA Affiliates completely
withdrew from the plan (as determined under Section 4203 of ERISA) on the date
hereof, there would be no basis for the plan to assess against the Company or
any of its ERISA Affiliates any amount of withdrawal liability.
(c) Qualified Plans; Compliance. With respect to each of the
Benefit Plans, such Benefit Plan has been maintained and administered at all
times in compliance, in all material respects, with its terms and applicable
Law, including (without limitation) ERISA and the Code. With respect to each
Benefit Plan intended to qualify under Section 401(a) or 403(a) of the Code, the
Internal Revenue Service has issued a favorable determination notification
letter as to its form. Except as disclosed on Schedule 5.18(b), the Company has
timely filed or caused to be timely filed with the Internal Revenue Service
annual reports on Form 5500 or 5500C/R, as applicable, for each Benefit Plan for
all years and periods for which such reports were required. All statements made
on documents or forms filed with any Government Body with respect to any Benefit
Plan have been true and complete in all material respects and have been filed
timely. No Benefit Plan has been assessed any excise tax Liability. Any Benefit
Plan required by ERISA to maintain a fidelity bond pursuant to Section 412 of
ERISA, has had a fidelity bond in effect for all years and periods for which
such bond was required.
(d) Defined Benefit Pension Plans. Except as set forth on Schedule
5.18(c), neither the Company nor any ERISA affiliate maintains, sponsors or has
any obligation with respect to (or has ever maintained, sponsored or had any
obligation with respect to) any Plan subject to Title IV of ERISA. With respect
to each Plan set forth on Schedule 5.18(c), the following are true:
(i) No "reportable event" (as described in Section 4043(c) of
ERISA and regulations thereunder) has occurred, other than an event the
reporting of which has been waived by the Pension Benefit Guaranty Corporation
("PBGC");
(ii) To the knowledge of the Company, there exist no facts
that would give PBGC a basis upon which to institute proceedings to terminate
the plan or apply for the appointment of a trustee to administer the Plan. The
PBGC
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has not asserted any Liability against the Company or any of its ERISA
Affiliates, and all PBGC premiums due before the Closing Date have been paid;
(iii) There exists no accumulated funding deficiency (within
the meaning of Section 302(a)(2) of ERISA or Section 412(a) of the Code), there
has not been issued any waiver of the minimum funding standard under Section 412
of the Code and there does not exist any Liability for any tax imposed by
Section 4971 of the Code; and
(iv) If the Plan was terminated as of the Closing Date, the
assets of the trust maintained in connection with the Plan would be sufficient
(on a termination basis) to provide all benefits accrued under the Plan.
(e) Contributions. All payments and contributions to all Benefit
Plans have been made on a timely basis as required by the terms of each such
Benefit Plan and any applicable Law. All such payments and contributions
relating to the completed taxable years have been deducted fully by the Company
for federal income tax purposes. Such deductions have not been challenged or
disallowed by any Governmental Body, and the Company has no reason to believe
that such deductions are not properly allowable. The Company has funded or will
fund prior to Closing each Benefit Plan in accordance with the terms of each
such Benefit Plan, any associated insurance contract and all applicable Laws.
Except as set forth in Schedule 5.18(c) attached hereto, no Benefit Plan is
subject to Section 302 of ERISA or Section 412 of the Code.
(f) Documentation. The Company has provided or made available to
the Purchaser true and complete copies of the following documents: (i) all plan
documents, amendments and trust agreements relating to each Benefit Plan,
including any insurance contracts under which benefits are provided, as
currently in effect; (ii) the most recent annual and periodic accountings of
Benefit Plan assets; (iii) the most recent Internal Revenue Service
determination or notification letters relating to each Benefit Plan intended to
satisfy the qualification requirements of Section 401(a) of the Code and a list
identifying all amendments to each such Benefit Plan not covered by such
determination or notification letter, including the date such amendments were
adopted and effective; (iv) to the extent such reports were required, all annual
reports filed on Form 5500 or 5500C/R, as applicable, for the past two years,
including accompanying schedules; (v) the current summary plan description, if
any was required by ERISA to be prepared and distributed to participants, for
each Benefit Plan; and (vi) all insurance contracts, annuity Contracts,
investment management and advisory Contracts, fiduciary liability policies, if
any, and related applications, and all filings, applications to and material
correspondence with any Governmental Body, written disputed and unsettled claims
made by or against any Benefit Plan, administration Contracts, service provider
Contracts, audit reports, material written legal advice relating to any Benefit
Plan
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received within the past six years, prohibited transaction exemption
applications, and resolutions of the Board of Directors of the Company relating
to any of the foregoing.
(g) Prohibited Transactions, etc. There (i) has not occurred any
Prohibited Transaction, with respect to any Benefit Plan, for which no
statutory, class or other exemption exists and (ii) has not occurred any
fiduciary violations, as defined in Section 404 of ERISA, with respect to which
the Company could have any material present or future Liability.
(h) Communications. To the knowledge of the Company, all
communications regarding each Benefit Plan by the Company or any Employee or
agent of the Company reflect and have always reflected accurately the material
terms of that Benefit Plan.
(i) Litigation. There are no pending or, to the knowledge of the
Company, threatened Claims by or on behalf of any Benefit Plan, or by or on
behalf of any individual participants or beneficiaries of any Benefit Plan,
alleging any violation of ERISA or any other Laws applicable to any Benefit Plan
(other than benefit claims made in the ordinary course of the operation of such
plans), nor is there, to the knowledge of the Company, any basis for any such
Claim. No Benefit Plan is the subject of any pending (or to the knowledge of the
Company, any threatened) investigation or audit by the Internal Revenue Service,
the U.S. Department of Labor, the Pension Benefit Guaranty Corporation or any
other regulatory agency, foreign or domestic.
(j) Taxes. Neither the Company nor any trust existing in
connection with any Benefit Plan has not incurred any Liabilities for Taxes or
excise taxes relating to any Benefit Plan, and no event has occurred and no
circumstance exists or has existed that could give rise to any such Liabilities.
(k) Parachute Payments. Except as set forth on Schedule 5.18(k),
the execution of and performance of the transactions contemplated by this
Agreement will not (either alone or upon the occurrence of any additional or
subsequent events) result in any payment, acceleration, vesting or increase in
benefits with respect to any employee or former employee of the Company.
Moreover, the execution of and performance of the transactions contemplated by
this Agreement will not (either alone or upon the occurrence of any additional
or subsequent events) result in any payment, acceleration, vesting or increase
in benefits with respect to any employee or former employee of the Company that
would be an "excess parachute payment" under Section 280G of the Code.
(l) Retiree Health. The Company does not maintain any plan or
arrangement that provides post retirement medical benefits, post retirement
death benefits or other post retirement welfare benefits, other than to the
extent required by Part 6 of Title I of ERISA.
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(m) Non-Conforming Group Health Plans. Neither the Company nor any
of its ERISA Affiliate has contributed to a non-conforming group health plan (as
that term is defined in Code section 5000(c)) or incurred any tax liability
under Code section 5000(a).
5.19 Environmental Laws.
(a) Except as set forth in Schedule 5.19(a) attached hereto, (i)
the Company and each of its subsidiaries have complied in all material respects
with each, and are not in violation in any material respect of any,
Environmental Laws, (ii) neither the Company nor any of its subsidiaries has
received any written or oral communication from a Governmental Body or any other
Person alleging that the Company or any of its subsidiaries is not in compliance
in any material respect with, or has a material Liability under (including being
a potentially responsible party or allegedly liable for costs associated for
remediation of any site), any Environmental Laws, (iii) the Company and each of
its subsidiaries hold, have complied with and are in compliance with, all
necessary Permits required to conduct its business in compliance with all
Environmental Laws, including any Permits necessary or appropriate to store,
treat, dispose of and otherwise handle Hazardous Materials except for such
Permits, the non-compliance with which could not individually or in the
aggregate reasonably be expected to have a Material Adverse Effect, and (iv)
neither the Company nor any of its subsidiaries has any knowledge of any
Environmental Claim or Environmental Loss other than as set forth in Schedule
5.19(a) attached hereto which could reasonably be expected to have a Material
Adverse Effect.
(b) There have been no locations on any real property owned by the
Company or, with respect to any real property leased by the Company or any of
its subsidiaries, since the date such real property was leased by the Company or
any such subsidiary where Hazardous Materials were discharged, leaked, emitted
or entered into the atmosphere, ground, soil, surface water, ground water, any
body of water or sewer system by the Company where such discharge, leak,
emission or entrance could result in an Environmental Claim which could
reasonably be expected to have a Material Adverse Effect. Except as set forth in
Schedule 5.19(b) attached hereto, there are no and have been no above-ground or
under-ground storage tanks located on or in any real property currently or
formerly owned or leased by the Company or its predecessors in interest which
could reasonably be expected to have a Material Adverse Effect.
(c) There is no on-site or off-site location to which the Company
or any of its agents or Affiliates has transported Hazardous Materials, or
arranged for the transportation thereof from the Company's facilities, which
location is the subject of any federal, state or local enforcement litigation
under any Environmental Laws which could reasonably be expected to lead to
Claims against the Company for clean-up costs, remedial work, damages to natural
resources or for
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personal injury claims, including Claims under CERCLA which could reasonably be
expected to have a Material Adverse Effect.
(d) Except as set forth in Schedule 5.19(d) attached hereto no
polychlorinated biphenyl or substances containing polychlorinated biphenyl are
present, in use or stored in any real property owned, leased or used by the
Company or any of its subsidiaries, and no asbestos or materials containing
asbestos have been brought upon, kept or used in or about or discharged, leaked,
emitted or entered into or onto any such real property, in either case which are
reasonably likely to result in a Claim giving rise to a material Liability on
the part of the Company or any of its subsidiaries.
(e) Except as set forth in Schedule 5.19(e) attached hereto,
neither the Company nor any of its subsidiaries has, either expressly, by merger
or similar transaction or, to the knowledge of the Company, otherwise by
operation of law, assumed or undertaken any Liability including, without
limitation, any Liability for corrective remedial action of any other Person
relating to Environmental Law other than any indemnity obligation by the Company
or a subsidiary, as a tenant, or any of its agents to a landlord under any of
the leases or sublease set forth in Schedule 5.10(d).
5.20 Brokers. Except for the Company Financial Advisors, no Person has
acted directly or indirectly as a broker, finder or financial advisor for the
Company, in connection with the negotiations relating to the Contemplated
Transactions or will be entitled to any fee, commission or like payment from the
Company in respect thereof based in any way on any agreement, arrangement or
understanding made by or on behalf of the Company. The Company will be
responsible for the payment of all fees and expenses of the Company Financial
Advisors, has delivered to the Purchasers an accurate and complete copy of the
agreements pursuant to which it has retained the Company Financial Advisors, and
will not amend, modify or supplement such agreements or enter into any new
agreements relating thereto.
5.21 No Illegal Payments. Neither the Company, any of its subsidiaries,
nor any of their respective officers, directors, employees, agents or other
representatives, has (i) made any contributions, payments or gifts to or for the
private use of any governmental official, employee or agent where either the
payment or the purpose of such contribution, payment or gift is illegal under
the laws of the United States or the jurisdiction in which made or (ii)
established or maintained any unrecorded fund or asset for any purpose or made
any false or artificial entries on its books.
5.22 Year 2000 Compliance. All computer software and computerized
systems owned or used by the Company or any of its subsidiaries, or licensed by
the Company or any of its subsidiaries, as licensor or as licensee, other
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than any shrinkwrap software available to retail customers, is "Year 2000
Compliant" (as hereinafter defined), except where the failure to be Year 2000
Compliant could reasonably be expected to have a Material Adverse Effect. For
purposes of this Agreement, "Year 2000 Compliant" shall mean that the applicable
computer applications are able to recognize and properly perform date sensitive
functions involving dates after December 31, 1999.
5.23 Disclosure. The representations and warranties of the Company set
forth in this Agreement (including all Schedules hereto) and in any Company
Document do not contain any untrue statement of a material fact or omit any
material fact necessary in order to make the statements and information
contained herein or therein, as applicable, not misleading.
ARTICLE VI
REPRESENTATIONS AND WARRANTIES OF THE PURCHASERS
To induce the Company and the other Purchaser to enter into and
consummate this Agreement, each Purchaser, severally and not jointly, hereby
represents and warrants to the Company, and to each other, as follows, provided,
however, that with respect to representations and warranties related to the
Purchasers, each Purchaser only represents and warrants as to itself, and not to
any other Purchaser:
6.1 Organization and Good Standing. Such Purchaser is, in the case of
Littlejohn, a limited partnership, or, in the case of Quilvest, a British Virgin
Islands international company, duly organized, validly existing and in good
standing under the laws of the jurisdiction of its formation, and has all
requisite power and authority to carry on its business as it is now being
conducted, and to execute, deliver and perform this Agreement and to consummate
the Contemplated Transactions.
6.2 Authorization. This Agreement has been, and each of the Purchaser
Documents to be delivered at a particular Closing by such Purchaser will be at
such Closing, duly authorized, executed and delivered by such Purchaser and
(assuming due authorization, execution and delivery by the other parties hereto
and thereto) this Agreement constitutes, and the Purchaser Documents when so
executed and delivered by such Purchaser will constitute, legal, valid and
binding obligations of such Purchaser, enforceable in accordance with their
respective terms, subject to applicable bankruptcy, insolvency, reorganization,
moratorium and similar laws affecting creditors rights and remedies generally
and subject, as to enforceability, to general principles of equity (regardless
of whether enforcement is sought in a proceeding at law or in equity).
6.3 Consents. No Order, Permit, License, or declaration or filing with,
or notification to, any Person or Governmental Body is required on the part of
any of such Purchaser in connection with the execution and delivery of this
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Agreement or the Purchaser Documents to which it is a party or the compliance by
such Purchaser with any of the provisions hereof or thereof.
6.4 Litigation. There is no Legal Proceeding pending or, to the
knowledge of such Purchaser, threatened, against such Purchaser that seeks to
enjoin or obtain damages in respect of the consummation of the Contemplated
Transactions or that questions the validity of this Agreement, the Purchaser
Documents to which such Purchaser is a party or any action taken or to be taken
by Purchaser in connection with the consummation of the Contemplated
Transactions.
6.5 Brokers. Except for the Littlejohn Financial Advisor, no third
party has acted directly or indirectly as a broker, finder or financial advisor
for such Purchaser in connection with the negotiations relating to this
Agreement or the Contemplated Transactions or will be entitled to any fee or
commission or like payment in respect thereof based in any way on agreements,
arrangements or understandings made by or on behalf of such Purchaser.
6.6 Investment Intent of the Purchasers. Such Purchaser acknowledges
that the Series A Preferred Shares, the Additional Preferred Shares and the
Warrants being purchased pursuant to this Agreement have not been registered
under the Securities Act or any state securities laws. Each Purchaser is
acquiring the Series A Preferred Shares, the Additional Preferred Shares and the
Warrants for its own account and not with the present intent to distribute them
in violation of any securities laws. The Purchaser is an "accredited investor"
or a "qualified institutional buyer" within the meaning of the Securities Act.
Such Purchaser acknowledges and agrees that the certificates, if any,
representing the Series A Preferred Shares, the Additional Preferred Shares and
the Warrants will contain substantially the following legends, to the extent
applicable to the particular Purchaser:
THE SECURITIES REPRESENTED BY THIS CERTIFICATE HAVE NOT BEEN
REGISTERED UNDER THE SECURITIES ACT OF 1933, AS AMENDED (THE
"ACT"), OR ANY OTHER STATE OR FEDERAL SECURITIES STATUTE. NO
REOFFER, SALE, TRANSFER, PLEDGE OR OTHER DISPOSITION THEREOF
MAY BE MADE UNLESS THE SECURITIES ARE REGISTERED UNDER THE
ACT AND ANY OTHER APPLICABLE SECURITIES STATUTE, OR AN
EXEMPTION FROM SUCH REGISTRATION REQUIREMENTS IS APPLICABLE
TO SUCH TRANSACTION.
THE SHARES REPRESENTED BY THIS CERTIFICATE (I) MAY NOT BE
SOLD, EXCHANGED OR OTHERWISE TRANSFERRED OR DISPOSED OF
EXCEPT IN COMPLIANCE WITH THE TERMS AND CONDITIONS OF
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THE SHAREHOLDERS AGREEMENT, AND (II) ARE SUBJECT TO THE
TERMS AND CONDITIONS OF THE SHAREHOLDERS AGREEMENT AND THE
IRREVOCABLE PROXY REFERRED TO THEREIN, EACH DATED AS OF
FEBRUARY 18, 2000, AS SUCH AGREEMENT MAY BE AMENDED FROM
TIME TO TIME, AND COPIES OF WHICH ARE ON FILE AT THE
PRINCIPAL EXECUTIVE OFFICES OF THE ISSUER.
6.7 Disclosure. The representations and warranties of such Purchaser
set forth in this Agreement or in any Purchaser Document to which it is a party
do not contain any untrue statement of a material fact or omit any material fact
necessary in order to make the statements and information contained herein or
therein, as applicable, not misleading.
ARTICLE VII
CERTAIN COVENANTS AND OTHER MATTERS
7.1 Confidentiality Agreement. Each party hereto shall and shall cause
its counsel, accountants, financial advisors and lenders to: (a) keep all
Confidential Information confidential and not to disclose or reveal any
Confidential Information to any Person other than its officers, directors,
partners, affiliates, employees, attorneys, accountants, other agents and
representatives, including engineers, financial advisors, current and
prospective lenders and debt securities underwriters who are participating in
the evaluation of the Company and the Contemplated Transactions or who otherwise
need to know the Confidential Information in connection with any investigation
of the Company or the negotiation, preparation or performance of this Agreement
or any document to be delivered hereunder or for the purpose of evaluating the
Company and/or the Contemplated Transactions; and (b) not to use the
Confidential Information for any purpose other than (i) in connection with the
evaluation and/or consummation of the Contemplated Transactions, (ii) to the
extent necessary to obtain the termination of the waiting period under the HSR
Act or to obtain any other Governmental Consent or the approval of the Principal
Stock Exchange, or (iii) to enforce such party's rights and remedies under this
Agreement. The obligations of each party hereto under this Section 7.1 shall
terminate two years from the date of this Agreement. If the Initial Closing is
not consummated, each party upon the request of the other party shall destroy or
return to such party all Confidential Information which is in writing or can
otherwise be destroyed or returned and will so certify to the parties hereto.
7.2 Restriction on Certain Discussions and Actions. Until the earliest
of (a) the Required Approval being obtained, (b) the termination of this
Agreement in accordance with its terms, or (c) July 31, 2000, the Company will
refrain, and will cause any of its Affiliates, and each of the respective
officers, directors, employees, attorneys, accountants and other agents and
representatives, to
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refrain, from taking any action, directly or indirectly, to solicit, encourage,
initiate or participate in any way in discussions or negotiations with, or
furnish any information with respect to the Company to any Person (other than
the Purchaser and its representatives) in connection with any possible or
proposed sale of a substantial portion of the capital stock, a sale of a
substantial portion of the assets, a merger or other business combination
involving the Company, or the acquisition of a substantial equity interest in
the Company, or any similar transaction involving the Company, or any other
transaction (including any recapitalization, refinancing or reorganization)
which could impair the ability of the Company to consummate the Contemplated
Transactions ("Alternative Transaction"). The Company will cease and cause to be
terminated any existing activities, discussions or negotiations with any other
Person conducted heretofore with respect to any Alternative Transaction and will
promptly notify the Purchasers, following receipt of any request by any Person
(other than a Purchaser or its representatives) relating to any possible
Alternative Transaction of information concerning the business, properties,
assets, liabilities, financial condition, results of operations, cash flow or
prospects of the Company. Notwithstanding the foregoing, after the Initial
Closing, the Company may provide information with respect to the Company to a
Person who makes a proposal in writing to effect a Superior Alternative
Transaction (as defined below), which proposal was not solicited, encouraged or
initiated in violation of this Section 7.2, and the Company may have discussions
with such Person and engage in negotiations with such Person with respect to
effecting such Superior Alternative Transactions so long as the Person making
such proposal enters into a customary confidentiality and standstill agreement.
As used herein, "Superior Alternative Transaction" means an Alternative
Transaction which HLHZ advises the Board of Directors in writing is, in the
long-term, superior from a financial point of view to the holders of Common
Stock as compared to the Contemplated Transactions taking into account, among
other things, the status of the financing for such Alternative Transaction. The
Company shall keep the Purchasers fully informed of all material developments
relating to any such proposal and any discussions or negotiations relating
thereto.
7.3 Conduct of Business Prior to the Initial Closing Date. During the
period from the date of this Agreement to the Initial Closing Date or earlier if
this Agreement is terminated in accordance with its terms:
(a) the Company and each of its subsidiaries will conduct the
Business, operations, activities and practices in the usual and ordinary course,
consistent with its past practices;
(b) neither the Company nor any of its subsidiaries will take or
suffer or permit any action which would render untrue any of the representations
or warranties of the Company herein contained, and neither Company nor any of
its subsidiaries will omit to take any action the omission of which would render
untrue any such representation or warranty;
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(c) except as expressly permitted by this Agreement, neither the
Company nor any of its subsidiaries will cause or permit any of the events,
facts or circumstances described in Section 5.15 to occur;
(d) neither the Company nor any of its subsidiaries will grant or
otherwise make, or agree to grant or otherwise make, any increase in the
compensation payable or to become payable by it to any employees (including
executive officers) of the Company or any of its subsidiaries;
(e) neither the Company nor any of its subsidiaries will sell or
dispose of any of its material assets used or useful in the operation of the
Business (otherwise than in the ordinary course of business consistent with past
practice);
(f) except as expressly permitted by this Agreement, neither the
Company nor any of its subsidiaries will enter into any material agreement,
contract, arrangement or understanding and neither the Company nor any of its
subsidiaries will amend or modify any of its material agreements, contracts,
arrangements or understandings (including any agreement with the Lender); and
(g) except as expressly permitted by this Agreement and in
connection with any Outstanding Derivative Securities, neither the Company nor
any of its subsidiaries will not make or authorize any sale, transfer or
issuance of any capital stock, equity security or debt security of the Company
or any option, warrant, right or commitment or agreement entered into requiring
or permitting any such sale, transfer or issuance.
7.4 Conversion of Class B Common Stock. On the date hereof, Quilvest
has caused to be delivered to the Company irrevocable notices of Conversion from
the holders of at least 1,400,000 shares of Class B Common Stock, other than
from Quilvest, Terbem or the members of TCR Management, to convert the shares of
Class B Common Stock beneficially owned by them into shares of Class A Common
Stock effective as of the Initial Closing Date. In no event shall Quilvest
permit shares of Class B Common Stock to be converted prior to the receipt of
the Required Approval such that, when measured after any such conversion, the
number of outstanding shares of Series B Common Stock shall be less than 10% of
the number of outstanding shares of both the Series A Common Stock and the
Series B Common Stock in the aggregate then outstanding. In no event shall
Quilvest permit the conversion of any shares of Class B Common Stock
beneficially owned by it, Terbem or members of TCR Management until after the
Required Approval is obtained. The Company hereby agrees to cooperate in all
respects with Quilvest in connection with this Section 7.4.
7.5 Board of Directors. The Company shall take all steps necessary so
that on the Initial Closing Date, upon consummation of the Contemplated
Transactions at the Initial Closing, a majority of the members of the Board of
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Directors shall consist of nominees of Littlejohn. In furtherance thereof, on
the date hereof, the Company shall cause to be filed with the Commission and
mailed to each of its shareholders a Schedule 14f-1 in form and substance
satisfactory to Littlejohn and the Company (the "Schedule 14f-1"). The Company
represents and warrants to the Purchasers that the Schedule 14f-1 will comply as
to form in all material respects with the applicable provisions of the Exchange
Act and that the Schedule 14f-1 will not contain, at the time of mailing thereof
and as of the date which is 10 days thereafter (the "Effective Date"), an untrue
statement of a material fact or omit to state a material fact required to be
stated therein or necessary to make the statements therein, in light of the
circumstances under which they were made, not misleading; provided, however, no
representation or warranty is deemed made by the Company to the Purchasers with
respect to information to be supplied to the Company by Littlejohn or its
director nominees in writing expressly for use by the Company in the Schedule
14f-1 (the "Littlejohn Information"). Littlejohn hereby represents and warrants
to the Company and Quilvest that the Littlejohn Information to be supplied will
not contain, at the time of the mailing of the Schedule 14f-1 and on the
Effective Date, an untrue statement of a material fact or omit to state a
material fact required to be stated therein or necessary to make the statements
therein, in light of the circumstances under which they were made, not
misleading. The Company will provide the Purchasers with a reasonable
opportunity to review and comment on any amendment or supplement to the Schedule
14f-1 prior to filing such with the Commission, will provide the Purchasers with
a copy of all such filings made with the Commission and will notify the
Purchasers as promptly as practicable after the receipt of any comments or any
request for additional information from the Commission or its staff, and upon
request of the Purchasers, will supply the Purchasers and their legal counsel
with copies of all correspondence between the Company or any of its
representatives, on the one hand, and the Commission, its staff or any state
securities administrators, on the other hand, with respect to the Schedule
14f-1. No amendment or supplement to the Littlejohn information shall be made
without the prior written approval of Littlejohn, which approval shall not be
unreasonably withheld or delayed. If any event relating to a Purchaser or the
Company, or any of their respective Affiliates, officers or directors, is
discovered by a Purchaser or the Company, as the case may be, that is required
by the Exchange Act to be set forth in a supplement to the Schedule 14f-1, such
Purchaser or the Company, as the case may be, will as promptly as practicable
inform the other, and such amendment or supplement will be promptly filed with
the Commission and disseminated to the shareholders of the Company to the extent
required by applicable securities laws.
7.6 Required Approval. In order to satisfy the requirements of its
Principal Stock Exchange, the Company will take all action in accordance with
applicable law, its Articles of Incorporation and By-laws, to convene a meeting
of its shareholders (the "Shareholders Meeting") as soon as reasonably
practicable in order that its shareholders may consider and vote upon (i) the
convertibility of any Preferred Stock issued or to be issued pursuant to this
Agreement into shares of
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Class A Common Stock, and (ii) the ability of the holders of any Preferred Stock
issued or to be issued pursuant to this Agreement to vote such shares, together
with the Series A Common Stock as a single class, as if such shares of Preferred
Stock had been converted. As soon as practicable and, in any event, within 14
days following the date hereof, the Company shall, in cooperation with the
Purchasers, prepare and file with the Commission preliminary proxy materials in
order to enable the Company's shareholders to consider and vote upon, at the
Shareholders' Meeting, the foregoing matters and a reverse stock split (such
proxy statement and any amendments or supplements thereto, the "Proxy
Statement"). The record date for those shareholders of the Company entitled to
vote at the Shareholders' Meeting shall be after the Initial Closing Date. The
Company represents and warrants that the Proxy Statement shall comply as to form
in all material respects with the applicable provisions of the Exchange Act and
represents and warrants that the Proxy Statement, at the time it is mailed to
its Shareholders and at the date of the Shareholders' Meeting, will not contain
an untrue statement of a material fact or omit to state a material fact required
to be stated therein or necessary to make the statements therein, in light of
the circumstances under which they were made, not misleading; provided, however,
no representation or warranty is deemed made by the Company to the Purchasers
with respect to information supplied to the Company by any of the Purchasers in
writing and expressly for use by the Company in the Proxy Statement (the
"Purchaser Information"). Each Purchaser, severally and not jointly, hereby
represents and warrants to the Company and the other Purchaser that none of the
Purchaser Information supplied or to be supplied by it for inclusion in the
Proxy Statement, at the time of mailing thereof to the Company's shareholders
and at the time of the Shareholders Meeting will contain an untrue statement of
a material fact or omit to state a material fact required to be stated therein
or necessary to make the statements therein, in light of the circumstances under
which they were made, not misleading. The Company will provide the Purchasers
with a reasonable opportunity to review and comment on any amendment or
supplement to the Proxy Statement prior to filing such with the Commission, will
provide the Purchasers with a copy of all such filings made with the Commission
and will notify the Purchasers as promptly as practicable after the receipt of
any comments or any request for additional information from the Commission or
its staff, and upon request of the Purchasers, will supply the Purchasers and
their legal counsel with copies of all correspondence between the Company or any
of its representatives, on the one hand, and the Commission, its staff or any
state securities administrators, on the other hand, with respect to the Proxy
Statement. No amendment or supplement to the Purchaser Information shall be made
without the approval of such Purchaser, which approval shall not be unreasonably
withheld or delayed. If any event relating to a Purchaser or the Company, or any
of their respective Affiliates, officers or directors, is discovered by a
Purchaser or the Company, as the case may be, that is required by the Exchange
Act to be set forth in a supplement to the Proxy Statement, such Purchaser or
the Company, as the case may be, will as promptly as practicable inform the
other, and such amendment or supplement will be promptly filed with the
Commission and
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disseminated to the stockholders of the Company to the extent required by
applicable securities laws.
7.7 HSR. To the extent legally required, promptly after the filing of
the Proxy Statement, the parties shall file with the Federal Trade Commission
and the Department of Justice, to permit the issuance of any Additional
Preferred Shares or the exercise of the Warrants, the notifications and reports
required to be filed pursuant to the HSR Act and shall file any supplemental
information which may be reasonably be requested in connection therewith, which
notifications and reports and filing of supplemental information will comply in
all material respects with the requirements of HSR Act. The Company shall be
responsible for payment of the filing fees required to be made in connection
with such notification. Each party shall furnish to the other party such
information as such other party may reasonably request to assist it to make such
filings as it may be legally required to make under the HSR Act. As promptly as
practicable after the date of this Agreement, the parties shall each further
prepare and file all other filings required under any foreign, federal, state or
local laws relating to the transactions contemplated hereby and shall promptly
respond to any request for additional information with respect thereof.
7.8 Use of Proceeds. The Company shall use the net proceeds from the
sale of the Series A Preferred Shares, the Warrants and the Series A Preferred
Shares issued upon exercise of the Warrants, to repay outstanding debt under
Existing Credit Facilities, and thereafter, to the extent permitted by the terms
of such credit facility, to repay outstanding trade payables and for general
working capital. The Company shall use the net proceeds from the sale of any
Additional Preferred Shares for acquisitions, capital expenditures and working
capital programs designed for the future growth of the Company, each as approved
by the Board of Directors.
7.9 Cooperation; Access to Books and Records. The Company will
cooperate generally with the Purchasers in connection with the Contemplated
Transactions and, until the Initial Closing Date or earlier if this Agreement is
terminated in accordance with its terms or in connection with any Additional
Closing, shall afford to each Purchaser, its agents, attorneys, accountants and
other authorized representatives, including engineers, financial advisors,
current and prospective lenders and debt underwriters, reasonable access to all
of the properties, assets, financial condition, operations, books, records,
files, correspondence, computer output, data, files, log books, technical and
operating manuals and other materials of the Company (including those in the
possession or control or their accountants, attorneys and any other third party)
for the purpose of permitting each Purchaser to make such due diligence
investigation and examination of the business, assets, properties and Books and
Records of the Company as such Purchaser in its discretion, shall deem to be
reasonably necessary or appropriate. Any such investigation, access and
examination shall be conducted during regular business hours and upon reasonable
prior notice under the circumstances and will be conducted in a manner that will
not materially disrupt the operation of the Business. The Company will
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cause its counsel, accountants and representatives, and the Company's directors,
officers and employees, to cooperate fully with the employees and
representatives of each Purchaser in connection with such investigation, access
and examination. The results of such investigation and examination shall not
relieve the Company from its obligations with respect to the representations and
warranties made in this Agreement or reduce the Purchaser's right to pursue such
remedies at Law or hereunder, as it would otherwise have in the absence of
having conducted such investigation. Neither Purchaser will contact any
employee, customer or supplier of the Company without the prior consent of the
Company, which consent will not be unreasonably withheld, delayed or
conditioned. Each Purchaser agrees to treat all of the information learned in
connection with any examination performed by it pursuant to this Section 7.7 as
Confidential Information for purposes of Section 7.1 hereof.
7.10 Commercially Reasonable Efforts. Upon the terms and subject to the
conditions set forth in this Agreement, the parties shall use their good faith
commercially reasonable efforts to take, or cause to be taken, without any party
being obligated to make any payment or payments to any third party or parties
which, individually or in the aggregate, is material and is not otherwise due,
all actions, and to do, or cause to be done, and to assist and cooperate with
the other parties in doing, all things necessary, proper or advisable to
consummate and make effective, in the most expeditious manner practicable, each
Closing, and the other Contemplated Transactions, including (a) if legally
required to consummate any of the Contemplated Transactions, obtaining the
termination of the waiting period under the HSR Act and all other Governmental
Consents, (b) complying with applicable provisions under the Securities Act,
Exchange Act or any stock exchange on which the Company's securities are listed,
(c) defending any Legal Proceeding or Claims challenging this Agreement or the
consummation of any of the Contemplated Transactions, including, if the
circumstances warrant, seeking to have any stay or temporary restraining Order
vacated or reversed, and (d) the execution and delivery of any additional
documents, agreements and instruments (in form and substance reasonably
satisfactory to the parties) necessary to consummate the Contemplated
Transactions by, and to fully carry out the purposes of, this Agreement.
7.11 Amendment to Articles of Incorporation. The Company shall take all
action necessary, in accordance with applicable law and its Articles of
Incorporation and By-laws, to effect the Company Articles Amendment and any
other amendment to the Articles of Incorporation to permit the issuance of
Additional Preferred Shares. At any time, and from time to time, as any holder
of a series of Preferred Stock shall reasonably request, the Company shall cause
an amendment to the applicable certificate of designation for a particular
series of Preferred Stock to be filed so as to increase the number of authorized
shares in such series of Preferred Stock to (a) take into consideration the
accrual of dividends thereon which are payable in additional shares of such
series of Preferred Stock (the "PIK Dividends"), and (b) to permit the issuance
of additional shares of such series of Preferred Stock which may be issued
pursuant to the exercise of Warrants to purchase shares of such series
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of Preferred Stock to be issued in connection with the PIK Dividends. If the
Company consummates an acquisition from and after the Initial Closing, then
Littlejohn and the Company will in good faith appropriately adjust the targeted
earnings before interest, taxes, depreciation and amortization ("EBITDA
Targets") set forth in section 3(a)(i) of the Series A Preferred Designation,
and the Company shall promptly file an amendment thereto to reflect the adjusted
EBITDA Targets as agreed to by the Company and Littlejohn.
7.12 Restrictive Legends. The Company shall cause any Series A
Preferred Shares, Additional Preferred Shares or Warrants issued in connection
with this Agreement to bear legends in substantially the following form, to the
extent such restriction is applicable to a particular Purchaser:
THE SECURITIES REPRESENTED BY THIS CERTIFICATE HAVE NOT BEEN
REGISTERED UNDER THE SECURITIES ACT OF 1933, AS AMENDED (THE
"ACT"), OR ANY OTHER STATE OR FEDERAL SECURITIES STATUTE. NO
REOFFER, SALE, TRANSFER, PLEDGE OR OTHER DISPOSITION THEREOF
MAY BE MADE UNLESS THE SECURITIES ARE REGISTERED UNDER THE
ACT AND ANY OTHER APPLICABLE SECURITIES STATUTE, OR AN
EXEMPTION FROM SUCH REGISTRATION REQUIREMENTS IS APPLICABLE
TO SUCH TRANSACTION.
THE SHARES REPRESENTED BY THIS CERTIFICATE (I) MAY NOT BE
SOLD, EXCHANGED OR OTHERWISE TRANSFERRED OR DISPOSED OF
EXCEPT IN COMPLIANCE WITH THE TERMS AND CONDITIONS OF THE
SHAREHOLDERS AGREEMENT, AND (II) ARE SUBJECT TO THE TERMS
AND CONDITIONS OF THE SHAREHOLDERS AGREEMENT AND THE
IRREVOCABLE PROXY REFERRED TO THEREIN, EACH DATED AS OF
FEBRUARY 18, 2000, AS SUCH AGREEMENT MAY BE AMENDED FROM
TIME TO TIME, AND COPIES OF WHICH ARE ON FILE AT THE
PRINCIPAL EXECUTIVE OFFICES OF THE ISSUER.
7.13 Reservation of Shares. For so long as any of the Series A
Preferred Shares, Additional Preferred Shares or Warrants are outstanding, the
Company shall keep reserved for issuance a sufficient number of shares of Common
Stock to satisfy its conversion obligations under the Series A Designation, and
the Additional Preferred Share Designations.
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7.14 Listing of Common Stock. Prior to each Closing Date (other than
the Initial Closing), the Company shall take all steps necessary to list for
trading on its Principal Stock Exchange a sufficient number of shares of Class A
Common Stock to enable the conversion of all Series A Preferred Shares,
(including Series A Preferred Shares which will be obtained upon exercise of the
Warrants) and all Additional Preferred Shares to be outstanding immediately
after a particular Closing. After the Required Approval, the Company shall
promptly list on the Principal Stock Exchange a sufficient number of shares of
Class A Common Stock to enable the conversion of all Series A Preferred Shares.
ARTICLE VIII
CONDITIONS TO CLOSING
8.1 Conditions to Obligations of the Purchasers - Initial Closing. The
obligation of each Purchaser to consummate the Contemplated Transactions to be
consummated on the Initial Closing Date is subject to the satisfaction, on or
prior to the Initial Closing Date and as of the Initial Closing Date of the
following conditions, any of which may be waived in writing by such Purchasers:
(a) Representations and Warranties. Each of the representations
and warranties of the Company contained in this Agreement shall be true and
correct on and as of the Initial Closing Date, as if made on the Initial Closing
Date (except to the extent a representation or warranty is expressly made as of
a particular date), except to the extent such inaccuracies or omissions,
individually or in the aggregate, could not reasonably be expected to result in
a Material Adverse Effect (it being understood that for purposes of determining
whether this condition has been satisfied, references to "material" and
"Material Adverse Effect" in a particular representation or warranty shall be
disregarded).
(b) Performance of Covenants. The Company shall have performed and
complied with the covenants and provisions of this Agreement required to be
performed or complied with by it on or prior to the Initial Closing Date.
(c) Effectiveness of Certain Agreements and Instruments. The
Shareholders Agreement, each of the Voting Agreements, the Registration Rights
Agreement and each of the Irrevocable Proxies shall all become effective and be
in full force without any Default thereunder simultaneous with the completion of
the Initial Closing.
(d) Senior Debt. The Senior Debt shall be in full force and effect
and shall have funded on the Initial Closing Date, and there shall not be any
Default thereunder.
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(e) Subordinated Debt. The Subordinated Debt shall be in full
force and effect and shall have funded on the Initial Closing Date, and there
shall not be any Default thereunder.
(f) Intentionally Omitted.
(g) Delivery of Documents, etc. All documents, agreements,
instruments and other items required to have been delivered at the Initial
Closing shall have been duly and properly delivered.
(h) Directors' and Officers' Liability Insurance. The Company
shall have in full force and effect as of the Initial Closing Date, directors'
and officers' liability insurance in form and substance reasonably acceptable to
Littlejohn covering those persons who were nominated by Littlejohn to serve as
members of the Board of Directors, and the premium for the one-year period
commencing on the Initial Closing Date shall have been paid in full.
(i) Other Conditions Precedent to the Purchasers' Obligations.
(i) The Company shall have paid all of the out-of- pocket
fees and expenses of the Purchasers (including the fees and disbursements of (A)
Littlejohn's outside counsel, including Pepper Hamilton LLP, (B) Quilvest's
outside counsel, including Paul, Weiss, Rifkind, Wharton, Garrison, (C) the
Purchaser Financial Advisor (to the extent set forth on Schedule 8.1(i) attached
hereto), (D) accountants and (E) other advisors) related to the Contemplated
Transactions incurred through the Initial Closing Date.
(ii) There shall not have been any action taken or
threatened, or any Law or Order, promulgated, enacted, entered, enforced or
deemed applicable to this Agreement or the Contemplated Transactions, by or
before any Governmental Body that could reasonably be expected to prohibit
consummation of the Contemplated Transactions or the appointment of Littlejohn's
nominees to the Board of Directors, and Littlejohn's nominees shall have been
appointed to serve as directors of the Company until the next annual meeting of
shareholders or until their successors are elected and qualify.
(iii) Littlejohn shall have determined reasonably and in good
faith that no objections to the rights, preferences and privileges of the Series
A Preferred Shares, the Additional Preferred Shares or the Warrants or otherwise
to the terms and conditions of this Agreement and the Contemplated Transactions,
shall have been raised by the Principal Stock Exchange which have not been
remedied to the reasonable satisfaction of Littlejohn.
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(iv) Holders of Class B Common Stock shall have converted
their respective shares of Class B Common Stock as described in Section 7.4
hereof.
(v) That certain advisory agreement between the Company and
Three Cities Research, Inc. dated March 1, 1997 shall have been terminated
without any payments thereunder except for those due and payable in accordance
with the terms thereof in effect on January 1, 2000.
8.2 Conditions to Obligations of the Purchasers - Additional Closings.
The obligation of each Purchaser to consummate the Contemplated Transactions to
the consummated at a particular Additional Closing is subject to the
satisfaction on or prior to such Additional Closing Date and as of such
Additional Closing Date, of the following conditions, any of which may be waived
in writing by such Purchaser:
(a) Representations and Warranties. Each of the representations
and warranties of the Company contained herein shall be true and correct on and
as of the applicable Additional Closing Date with the same force and effect as
though the same had been made on and as of the applicable Additional Closing
Date (except to the extent a particular representation or warranty is expressly
made as of a particular date), except to the extent such inaccuracies or
omissions, individually or in the aggregate, could not reasonably be expected to
result in a Material Adverse Effect (it being understood that for purposes of
determining whether this condition has been satisfied, references to "material"
and "Material Adverse Effect" in a particular representation or warranty shall
be disregarded).
(b) Performance of Covenants. The Company shall have performed and
complied with the covenants and provisions of this Agreement required to be
performed or complied with by it from and after the Initial Closing Date to and
including the applicable Additional Closing Date.
(c) Intentionally Omitted.
(d) Additional Issue Event. An Additional Issue Event shall have
occurred and there shall be no revocation or termination thereof.
(e) Senior Debt. No Default shall have occurred and be continuing
with respect to the Senior Debt.
(f) Subordinated Debt. No Default shall have occurred and be
continuing with respect to the Subordinated Debt.
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(g) Governmental Consents. All Governmental Consents shall have
been obtained and shall be in full force and effect as of such Additional
Closing Date.
(h) Delivery of Documents, etc. All documents, agreements,
instruments and other items required to have been delivered at such Additional
Closing shall have been duly and properly delivered.
(i) Other Conditions Precedent to the Purchasers' Obligations.
(i) There shall not have been any action taken or threatened,
or any Law or Order, promulgated, enacted, entered, enforced or deemed
applicable to this Agreement or the Contemplated Transactions, by or before any
Governmental Body, that could reasonably be expected to prohibit consummation of
the Contemplated Transactions to be consummated at such Additional Closing.
(ii) The Additional Preferred Share Designation shall have
been approved and duly adopted and shall have been duly filed with the Secretary
of State of Georgia.
(iii) The shares of Class A Common Stock issuable upon
conversion of the Additional Preferred Shares to be issued at such Additional
Closing shall have been approved for listing by the Principal Stock Exchange,
subject to notice of issuance.
(iv) Persons nominated by Littlejohn shall constitute a
majority of the members of the Board of Directors and no action shall be pending
to seek the removal of any such Person as directors of the Company.
(v) All proceedings to be taken and all the Company Documents
in connection with the consummation of the Contemplated Transactions at the
applicable Additional Closing shall be reasonably satisfactory in form and
substance to the Purchasers and their counsel.
8.3 Conditions to the Obligations of the Company - Initial Closing.
The obligation of the Company to consummate the Contemplated
Transactions to be consummated on the Initial Closing Date is subject to the
satisfaction, on or prior to the Initial Closing Date and as of the Initial
Closing Date of the following conditions which may be waived in writing by the
Company:
(a) Representations and Warranties. Each of the representations
and warranties of the Purchasers contained herein shall be true and correct on
and as of the Initial Closing Date with the same force and effect as though
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the same had been made on and as of the Initial Closing Date (except to the
extent a particular representation or warranty is expressly made as of a
particular date), except to the extent such inaccuracies or omissions,
individually or in the aggregate, could not reasonably be expected to result in
a material adverse effect on the ability of such Purchaser to consummate the
Contemplated Transactions to be consummated at the Initial Closing (it being
understood that for purposes of determining whether this condition has been
satisfied, references to "material" and "material adverse effect" in a
particular representation or warranty shall be disregarded).
(b) Performance of Obligations. The Purchasers shall have
performed and complied with the covenants and provisions of this Agreement
required to be performed or complied with by it on or prior to the Initial
Closing.
(c) Delivery of Documents, etc. All documents, agreements,
instruments and other items required to have been delivered at such Additional
Closing shall have been duly and properly delivered.
(d) Orders and Laws. There shall not be any action taken or
threatened, or any Law or Order, promulgated, enacted, entered, enforced or
deemed applicable to this Agreement or the Contemplated Transactions, by or
before any Governmental Body that could reasonably be expected to prohibit
consummation of the Contemplated.
8.4 Conditions to Obligations of the Company - Additional Closings.
The obligation of the Company to consummate the Contemplated
Transactions on any Additional Closing Date is subject to the satisfaction, on
or prior to the applicable Additional Closing Date and as of the applicable
Additional Closing Date of the following conditions, any of which may be waived
in writing by the Company:
(a) Representations and Warranties. Each of the representations
and warranties of the Purchasers contained herein shall be true and correct on
and as of such Additional Closing Date with the same force and effect as though
the same had been made on and as of the applicable Additional Closing Date
(except to the extent a particular representation or warranty is expressly made
as of a particular date), except to the extent such inaccuracies or omissions,
individually or in the aggregate, could not reasonably be expected to result in
a material adverse effect on the ability of such Purchaser to consummate the
Contemplated Transactions to be consummated at the applicable Additional Closing
(it being understood that for purposes of determining whether this condition has
been satisfied, references to "material" and "Material Adverse Effect" in a
particular representation or warranty shall be disregarded).
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(b) Performance of Obligations. The Purchasers shall have
performed and complied with the covenants and provisions of this Agreement
required to be performed or complied with by them from and after the Initial
Closing to the applicable Additional Closing Date.
(c) Delivery of Documents, etc. All documents, agreements,
instruments and other items required to have been delivered at such Additional
Closing shall have been duly and properly delivered.
(d) Governmental Consents. All Governmental consents shall have
been obtained and shall be in full force and effect as of such Additional
Closing Date.
(e) Orders and Laws. There shall not have been any action taken or
threatened, or any Law or Order proposed, sought, promulgated, enacted, entered,
enforced or deemed applicable to this Agreement or the Contemplated
Transactions, by or before any Governmental Body, that could reasonably be
expected to prohibit consummation of the Contemplated Transactions to be
consummated at such Additional Closing.
ARTICLE IX
INDEMNIFICATION AND RELATED MATTERS
9.1 By the Company. Subject to the provisions of this Article IX, from
and after the Initial Closing, the Company agrees to indemnify, defend and hold
each Purchaser harmless from and against all Losses, Claims, and Investigatory
and Legal Costs resulting from or arising out of:
(a) any misstatement in or omission from any of the
representations or warranties of the Company contained in this Agreement or in
any Company Document; and
(b) the failure of the Company to perform any of its obligations
under or comply with any of its respective covenants contained in this Agreement
or in any Company Document.
9.2 By the Purchaser. Subject to the provisions of this Article IX,
from and after the Initial Closing, each Purchaser, severally and not jointly,
agrees to indemnify, defend and hold the Company harmless from and against all
Losses, Claims, and Investigatory and Legal Costs resulting from or arising out
of:
(a) any misstatement in or omission from any of the
representations and warranties made by such Purchaser to the Company contained
in this Agreement or in any Purchase Document executed by such Purchaser; and
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(b) the failure of such Purchaser to perform any of its
obligations under or to comply with any of the covenants to be performed or
complied by it contained in this Agreement or in any Purchaser Document executed
by such Purchaser.
9.3 Survival of Representations, Warranties and Covenants; Limitation
on Indemnification. The parties hereto agree that the representations and
warranties made in this Agreement shall survive for a period ending on the
earlier of (a) the second anniversary of the Closing Date or (b) 30 days after
the Company has delivered to the Purchasers a copy of its audited financial
statements for the fiscal year ended February 28, 2001 accompanied by an
executed opinion of the Company's independent auditors. Notwithstanding anything
to the contrary contained herein, indemnification under Sections 9.1(a) or under
Section 9.2(a), may be brought or maintained unless and until the aggregate
dollar amount of all Losses, Claims and Investigatory and Legal Costs sought to
be indemnified against under such aforesaid Sections exceeds $300,000 (the
"Threshold Amount"), and then for the full amount of such Losses, Claims and
Investigatory and Legal Costs, including the Threshold Amount, up to, but not
exceeding, the aggregate purchase price for all Series A Preferred Shares,
Additional Preferred Shares and Warrants purchased pursuant to this Agreement
(the "Maximum Amount").
9.4 Notice of Indemnification. In the event any Legal Proceeding shall
be threatened or instituted or any Claim or demand shall be asserted by any
Person in respect of which payment may be sought by one party hereto from the
other party, the party seeking indemnification (the "Indemnitee") shall promptly
cause written notice of the commencement of such Legal Proceeding or the
assertion of any such Claim, of which it has knowledge and which is covered by
this indemnity, to be forwarded to the other party (the "Indemnitor"); provided,
however, that failure of the Indemnitee to give the Indemnitor notice promptly
as provided in this Section shall not relieve the Indemnitor of its obligations
hereunder except to the extent that the Indemnitor shall have been prejudiced by
such failure. In all events, notice must be received by the Indemnitor prior to
the expiration of the survival terms of the underlying representations and
warranties as described in Section 9.3 above.
9.5 Indemnification Procedure for Third-Party Claims. Except as
otherwise provided herein, in the event of the initiation of any Legal
Proceeding against an Indemnitee by a third party, the Indemnitor shall be
entitled to assume the defense thereof, at the Indemnitor's sole expense. If the
Indemnitor assumes the defense of any Legal Proceeding, it will not settle the
Legal Proceeding without the prior written consent of the Indemnitee (which
shall not be unreasonably withheld or delayed). The Indemnitee shall cooperate
in all reasonable respects with the Indemnitor and its attorneys in the
investigation, trial and defense of any Legal Proceeding and any appeal arising
therefrom (including the filing in the Indemnitee's name of appropriate cross
claims and counterclaims). The Indemnitee may, at its own cost, participate in
any investigation, trial and defense of such Legal Proceeding
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controlled by the Indemnitor and any appeal arising therefrom. If after receipt
of a written notice pursuant to Section 9.4 hereof, the Indemnitor does not
undertake to defend any such Legal Proceeding, the Indemnitee may, but shall
have no obligation to, contest or defend against any Legal Proceeding and the
Indemnitor shall be bound by the result obtained with respect thereto by the
Indemnitee (including, without limitation, the settlement thereof without the
consent of the Indemnitor). If there are one or more legal defenses available to
the Indemnitee that conflict with those available to the Indemnitor, the
Indemnitee shall have the right to assume the defense of the Legal Proceeding at
the expense of the Indemnitor with counsel reasonably acceptable to the
Indemnitor; provided, however, that the Indemnitee may not settle such Legal
Proceeding without the consent of the Indemnitor, which consent shall not be
unreasonably withheld or delayed.
9.6 Payment of Indemnification Amounts. Amounts determined to be owing
under Sections 9.1 or 9.2 hereof by an Indemnitor to an Indemnitee in respect of
any Third Party Claim shall be payable by the Indemnitor as incurred by the
Indemnitee. All other amounts owed under Sections 9.1 or 9.2 by an Indemnitor to
an Indemnitee shall be paid upon admission or other final determination of
liability under such Sections. All amounts paid pursuant to this Article IX
shall be deemed to be an adjustment to the purchase price paid for securities
issued pursuant to this Agreement.
ARTICLE X
TERMINATION
10.1 Termination Prior to Initial Closing. This Agreement may be
terminated prior to the Initial Closing as follows:
(a) by mutual written consent of the Company and Littlejohn;
(b) by Littlejohn or the Company if the Initial Closing has not
occurred by 4:59 p.m. New York City time on February 29, 2000.
10.2 Termination After Initial Closing. This Agreement may be
terminated after the Initial Closing occurs, as follows:
(a) by either Purchaser or the Company if, without violating the
provisions of Section 7.2 hereof, prior to the receipt of the Required Approval
the Company enters into a definitive agreement with respect to an unsolicited
Superior Alternative Transaction, but only after having received the written
opinion of outside counsel that approval, acceptance and recommendation of such
Superior Alternative Proposal is required in order for the Board of Directors to
properly discharge its fiduciary obligations to the Company's stockholders under
applicable Law;
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(b) by mutual written consent of the Company and the Purchasers;
(c) by the Company, so long as the Company has not breached any of
its obligations hereunder, if Littlejohn (i) fails to perform any covenant or
agreement required to be performed by it pursuant to this Agreement when
performance thereof is due or (ii) breached any of its representations or
warranties, and, in either case, does not cure such failure within 20 business
days after the Company delivers written notice thereof to Purchaser;
(d) by Littlejohn so long as it has not breached any of its
obligations hereunder, if the Company (i) fails to perform any covenant or
agreement required to be performed by it pursuant to in this Agreement when
performance thereof is due or (ii) breached any of its representations or
warranties, and, in either case, does not cure the failure within 20 business
days after Littlejohn delivers written notice thereof to the Company; or
(e) by Littlejohn or the Company, upon a Change of Control (as
defined in the Series A Designation).
10.3 Effect of Termination Under 10.1. If this Agreement is terminated
pursuant to Section 10.1, all rights and obligations of the parties hereunder
shall terminate, except for the confidentiality covenants referenced in Section
7.1 and the provisions set forth in Article XI hereof; provided, however, if
such termination results from any breach by any party of any of its
representations, warranties, covenants or agreements set forth in this
Agreement, then the non-breaching party shall continue to have all rights and
remedies under applicable Law available to it as a result of such breach.
10.4 Effect of Termination Under 10.2. If this Agreement terminates
pursuant to Section 10.2, all rights and obligations of the parties hereunder
shall terminate, except for the confidentiality covenants referenced in Section
7.1, the indemnification provisions set forth in Article IX hereof and the
provisions set forth in Article XI hereof; provided, however, if such
termination results from the breach by any party of any of its representations,
warranties, covenants or agreements set forth in this Agreement, then the
non-breaching party shall continue to have all rights and remedies under
applicable Law available to it as a result of such breach.
ARTICLE XI
MISCELLANEOUS
11.1 Entire Agreement. This Agreement (with its Schedules and Exhibits)
contains, and is intended as, a complete statement of all of the terms and the
arrangements between the parties hereto with respect to the matters provided for
51
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herein, and supersedes any and all previous agreements and understandings
between the parties hereto with respect to those matters.
11.2 Specific Performance. The parties hereto agree that, in the event
of any such breach of any covenant or agreement contained herein or in the
Company Documents or the Purchaser Documents, the non-breaching parties will be
entitled to seek a decree of specific performance, mandamus or any other
appropriate remedy to enforce such provisions without any requirement that a
bond be posted.
11.3 Governing Law. This Agreement shall be construed and enforced in
accordance with the laws of the State of New York without regard to the
application of the principles of conflicts or choice of laws.
11.4 Expenses. The Company shall pay and be responsible for the payment
of all fees, costs and expenses (including, without limitation, fees and
disbursements of counsel, accountants, financial advisors, lenders and experts)
that it, Littlejohn and Quilvest have incurred or will incur in connection with
the preparation, negotiation, execution, delivery, performance and enforcement
of this Agreement, each of the Company Documents or the Purchaser Documents, and
all amendments and modifications to any such documents, agreements or
instruments. Notwithstanding the foregoing, if the Initial Closing shall not
occur for any reason other than solely as a result of a breach by Littlejohn of
its representations, warranties, covenants or agreements contained in this
Agreement, then the Company's obligation to reimburse Littlejohn for fees, costs
and expenses shall be limited to $250,000, plus all fees, costs and expenses
(including, without limitation, fees and disbursements of counsel, accountants,
financial advisors, lenders and experts) incurred by Littlejohn in connection
with the preparation and filing of the Schedule 14f-1, the Proxy Statement, and
the negotiation, preparation, execution and delivery of the Senior Debt and the
Subordinated Debt.
11.5 Public Announcements. Except for the initial press release which
will be made promptly after the execution of this Agreement, the text of which
shall be reasonably acceptable to both parties, no party shall make any public
announcement relating to this Agreement or the Contemplated Transactions without
the prior written consent of the other party; provided, however, any party shall
be permitted (a) to make announcements to the extent it is advised in writing by
its counsel that such announcement is required to be made by applicable Law or
Order and the other parties are afforded a reasonable opportunity to comment on
the content of such announcement prior to it being made, and (b) to make filings
with the Commission (including filings pursuant to Section 13(d) of the Exchange
Act) and any stock exchanges so long as it is advised by its counsel that such
filing is required to be made by applicable Law or Order and, subject to any
requirements of law, the other parties are afforded a reasonable opportunity to
comment on the content of any such filing prior to it being filed.
52
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11.6 Intentionally Omitted.
11.7 Notices. All notices and other communications hereunder shall be
in writing and shall be given to the Person either by hand delivery by facsimile
transmission, by United States express mail, postage prepaid, or by overnight
courier services guaranteeing next business day delivery, charges prepaid, to:
If to the Company, to:
Pameco Corporation
1000 Center Place
Norcross, GA 30093
Attention: Vice Chairman and Chief Financial Officer
Facsimile: 770-798-7141
Telephone: 770-798-0700
with a copy to:
Cadwalader, Wickersham & Taft
100 Maiden Lane
New York, NY 10038
Attention: E. David Robertson, Esquire
Facsimile: 212-504-6666
Telephone: 212-504-6000
If to Littlejohn, to:
Littlejohn & Co., LLC
115 East Putnam Avenue
Greenwich, CT 06830
Attention: Mr. Angus C. Littlejohn, Jr.
Facsimile: 203-861-4009
Telephone: 203-861-4005
with a copy to:
Pepper Hamilton LLP
3000 Two Logan Square
Eighteenth and Arch Streets
Philadelphia, PA 19103-2799
Attention: James D. Epstein, Esquire
Facsimile: 215-981-4750
Telephone: 215-981-4000
53
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If to Quilvest, to:
c/o Three Cities Research, Inc.
650 Madison Avenue
New York, NY 10022
Attention: Mr. Willem F.P. De Vogel
Facsimile: 212-980-1142
Telephone: 212-838-9660
with a copy to:
Paul, Weiss, Rifkind, Wharton & Garrison
1285 Avenue of the Americas
New York, NY 10019-6046
Attention: Richard Borisoff, Esquire
Facsimile: 212-757-3990
Telephone: 212-373-3000
If the notice is sent by United States express mail or by overnight
courier services, it shall be deemed to have been given to the Person entitled
thereto one business day after deposited with the post office or the courier
service for delivery to that Person or, in the case of a notice given by hand
delivery or telecopier, when received. Notice of any change in any such address
shall also be given in the manner set forth above. Whenever the giving of notice
is required, the giving of such notice may be waived by the party entitled to
receive such notice.
11.8 Severability. Whenever possible, each provision of this Agreement
will be interpreted in such manner as to be effective and valid under applicable
law, but if any provision of this Agreement is held to be invalid, illegal or
unenforceable in any respect under any applicable law or rule in any
jurisdiction, such invalidity, illegality or unenforceability will not affect
any other provision or the effectiveness or validity of any provision in any
other jurisdiction, and this Agreement will be reformed, construed and enforced
in such jurisdiction as if such invalid, illegal or unenforceable provision had
never been contained herein.
11.9 Binding Effect; Successors and Assigns. Nothing in this Agreement,
express or implied, is intended, except as set forth herein, to confer upon any
third party any rights, remedies, obligations or liabilities. No party can
assign its interests herein to any third party without the prior written consent
of the other parties, except that either Purchaser may assign its rights to
acquire securities pursuant to this Agreement to an Affiliate so long as it
guarantees the obligations of its assignee. This Agreement shall inure to the
benefit of and be binding upon the parties hereto and their respective
successors and permitted assigns.
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11.10 Interpretation. Unless the context of this Agreement otherwise
requires, (i) words of any gender include each gender and the neuter; (ii) words
using the singular or plural number also include the plural or singular number,
respectively; (iii) the terms "hereof," "herein," "hereby" and derivative or
similar words refer to this entire Agreement; (iv) the terms "Article" or
"Section" refer to the specified Article or Section of this Agreement; and (v)
the term "including" or similar words shall be construed as to refer to such
matter without limitation thereof. Whenever this Agreement refers to a number of
days, such number shall refer to calendar days unless Business Days are
specified. The table of contents and headings contained in this Agreement are
for reference purposes only and shall not affect in any way the meaning or
interpretation of this Agreement.
11.11 Amendments and Warranties. The provisions of this Agreement,
including the provisions of this sentence, may not be amended, modified or
supplemented except in a writing signed by all of the parties hereto, and
waivers or consents to departures from the provisions hereof may not be given
without the written consent of party so waiving or consenting.
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11.12 Counterparts and Facsimile Signatures. This Agreement may be
executed, including by facsimile signature, in one or more counterparts, each of
which when so executed shall be deemed to be an original and all of which
together shall constitute one and the same instrument.
IN WITNESS WHEREOF, the parties hereto have executed this instrument as
of the date and year first above written.
PAMECO CORPORATION
By: /s/ Mark Sellers
--------------------------------
Name: Mark Sellers
Title: CFO
LITTLEJOHN FUND II, L.P.
By: Littlejohn Associates II, LLC,
its General Partner
By: /s/ Angus C. Littlejohn, Jr.
--------------------------------
Name: Angus C. Littlejohn, Jr.
Title: Managing Member
QUILVEST AMERICAN EQUITY, LTD.
By: /s/ Willem F.P. de Vogel
--------------------------------
Name: Willem F.P. de Vogel
Title: Attorney-in-Fact
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TABLE OF CONTENTS
Page
BACKGROUND....................................................................1
ARTICLE I DEFINITIONS.................................................2
ARTICLE II SERIES A PREFERRED SHARE AND WARRANT
PURCHASE...................................................13
2.1 Sale and Purchase of Series A Preferred Shares.............13
2.2 Warrants...................................................13
2.3 Purchase Price.............................................13
ARTICLE III PURCHASES OF ADDITIONAL PREFERRED
SHARES.....................................................14
ARTICLE IV THE CLOSINGS...............................................14
4.1 Initial Closing............................................14
4.2 Deliveries to the Purchaser at the Initial Closing.........14
4.3 Deliveries to the Company at the Initial Closing...........16
4.4 Additional Closings........................................16
4.5 Deliveries to the Purchasers at an Additional Closing......16
4.6 Deliveries to the Company at Additional Closing............17
ARTICLE V REPRESENTATIONS AND WARRANTIES OF THE
COMPANY....................................................18
5.1 Organization and Good Standing.............................18
5.2 Authorization..............................................18
5.3 Capitalization; Georgia Anti-Takeover Laws.................19
5.4 Sale of Shares of Capital Stock; Offering Exemption........20
5.5 Subsidiaries...............................................21
5.6 Consents...................................................21
5.7 Litigation.................................................21
5.8 Compliance with Law........................................22
5.9 Title to Assets............................................22
5.10 Other Representations Regarding the Company's Assets
and Liabilities............................................22
5.11 SEC Reports................................................24
5.12 Financial Statements.......................................24
5.13 Taxes......................................................24
5.14 No Undisclosed Liabilities.................................25
5.15 Absence of Certain Developments............................25
5.16 Material Contracts.........................................26
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Page
5.17 Employee Relations.........................................26
5.18 ERISA Matters..............................................27
5.19 Environmental Laws.........................................31
5.20 Brokers....................................................32
5.21 No Illegal Payments........................................32
5.22 Year 2000 Compliance.......................................32
5.23 Disclosure.................................................33
ARTICLE VI REPRESENTATIONS AND WARRANTIES OF THE
PURCHASERS.................................................33
6.1 Organization and Good Standing.............................33
6.2 Authorization..............................................33
6.3 Consents...................................................33
6.4 Litigation.................................................34
6.5 Brokers....................................................34
6.6 Investment Intent of the Purchasers........................34
6.7 Disclosure.................................................35
ARTICLE VII CERTAIN COVENANTS AND OTHER MATTERS........................35
7.1 Confidentiality Agreement..................................35
7.2 Restriction on Certain Discussions and Actions.............35
7.3 Conduct of Business Prior to the Initial Closing Date......36
7.4 Conversion of Class B Common Stock.........................37
7.5 Board of Directors.........................................37
7.6 Required Approval..........................................38
7.7 HSR........................................................40
7.8 Use of Proceeds............................................40
7.9 Cooperation; Access to Books and Records...................40
7.10 Commercially Reasonable Efforts............................41
7.11 Amendment to Articles of Incorporation.....................41
7.12 Restrictive Legends........................................42
7.13 Reservation of Shares......................................42
7.14 Listing of Common Stock....................................43
ARTICLE VIII CONDITIONS TO CLOSING......................................43
8.1 Conditions to Obligations of the Purchasers - Initial
Closing....................................................43
8.2 Conditions to Obligations of the Purchasers - Additional
Closings...................................................45
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Page
8.3 Conditions to the Obligations of the Company - Initial
Closing....................................................46
8.4 Conditions to Obligations of the Company - Additional
Closings...................................................47
ARTICLE IX INDEMNIFICATION AND RELATED MATTERS........................48
9.1 By the Company.............................................48
9.2 By the Purchaser...........................................48
9.3 Survival of Representations, Warranties and Covenants;
Limitation on Indemnification..............................49
9.4 Notice of Indemnification..................................49
9.5 Indemnification Procedure for Third-Party Claims...........49
9.6 Payment of Indemnification Amounts.........................50
ARTICLE X TERMINATION................................................50
10.1 Termination Prior to Initial Closing.......................50
10.2 Termination After Initial Closing..........................50
10.3 Effect of Termination Under 10.1...........................51
10.4 Effect of Termination Under 10.2...........................51
ARTICLE XI MISCELLANEOUS..............................................51
11.1 Entire Agreement...........................................51
11.2 Specific Performance.......................................52
11.3 Governing Law..............................................52
11.4 Expenses...................................................52
11.5 Public Announcements.......................................52
11.6 Intentionally Omitted......................................53
11.7 Notices....................................................53
11.8 Severability...............................................54
11.9 Binding Effect; Successors and Assigns.....................54
11.10 Interpretation.............................................55
11.11 Amendments and Warranties..................................55
11.12 Counterparts and Facsimile Signatures......................56
EXHIBITS
A - SHAREHOLDERS AGREEMENT..................................................A-1
B - VOTING AGREEMENT........................................................B-1
C - REGISTRATION RIGHTS AGREEMENT...........................................C-1
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D - ADDITIONAL PREFERRED SHARES DESIGNATION STATEMENT.......................D-1
E - SERIES A PREFERRED SHARES DESIGNATION STATEMENT.........................E-1
F - WARRANT.................................................................F-1
G - CADWALADER OPINION......................................................G-1
H - KILPATRICK OPINION......................................................H-1
I - McLAIN & MERRITT OPINION................................................I-1
iv
Exhibit 3
FORM OF
CERTIFICATE OF DESIGNATION
OF
SERIES A CUMULATIVE PAY-IN-KIND
PREFERRED SHARES
OF
PAMECO CORPORATION
-----------------------------------------
Pursuant to Section 14-2-602 of the
Business Corporation Code of the State of Georgia
-----------------------------------------
Pameco Corporation (the "Company"), a corporation organized and
existing under the laws of the State of Georgia, certifies that pursuant to the
authority contained in Section 5.1 of its Amended and Restated Articles of
Incorporation (the "Articles of Incorporation") and in accordance with the
provisions of Section 14-2-602 of the Business Corporation Code of the State of
Georgia, the board of directors of the Company (the "Board of Directors"), at a
meeting duly called and held on February 14, 2000, approved and adopted the
following resolution which resolution remains in full force and effect on the
date hereof:
RESOLVED, that, pursuant to the authority vested in the Board of
Directors by the Articles of Incorporation, the Board of Directors does hereby
designate, create, authorize and provide for the issuance of Series A Cumulative
Pay- in-Kind Preferred Stock, par value $1.00 per share (the "Series A Preferred
Shares"), with a stated value of $250.00 per share at the time of initial
issuance, and initially consisting of 600,000 shares, for Series A Preferred
Shares (the "Certificate of Designation"). The Series A Preferred Shares will
have the following voting powers, preferences and relative, optional and other
special rights, and qualifications, limitations and restrictions set forth in
this certificate of designation (the "Certificate of Designation"):
1. Certain Definitions. Unless the context otherwise requires, the
terms 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).
<PAGE>
"Additional Warrants" has the meaning set forth in Section
3(a)(iii) hereof.
"Affiliate" of a Person means any Person which, directly or
indirectly, controls, is controlled by, or is under common control with such
Person. The term "control" (including, with correlative meaning, the terms
"controlled by" and "under common control with"), as used with respect to any
Person, means the possession, directly or indirectly, of the power to elect a
majority of the board of directors (or other governing body) or to direct or
cause the direction of the management and policies of such Person, whether
through the ownership of voting securities, by contract or otherwise and, in any
event and without limiting the generality of the foregoing, any Person owning
10% or more of the voting securities of another Person shall be deemed to
control that Person.
"Approval Date" means the date on which the Holders of the
requisite number of shares of Common Stock approve, at a special meeting of the
shareholders entitled to vote thereon duly called and held in accordance with
applicable law, including the GBCC, and for which a proxy statement has been
distributed and filed in accordance with the Securities and Exchange Act of
1934, as amended, and the rules and regulations promulgated thereunder (the
"Exchange Act"), the agreement pursuant to which the Series A Preferred Shares
are being issued and the transactions contemplated thereby.
"Articles of Incorporation" means the articles of incorporation of
the Company, as in effect from time to time.
"Board of Directors" means the Board of Directors of the Company
or any authorized committee of the Board of Directors, as the same may be
constituted from time to time.
"Business Day" means any day other than a Legal Holiday.
"Business Combination Proposal" means any proposal made to the
Company or its shareholders involving (a) a sale of a substantial portion of the
Capital Stock of, or other equity interest in, the Company, (b) a sale of a
substantial portion of the assets of the Company, or (c) a merger, business
combination, recapitalization or other similar transaction involving the
Company.
"Capital Stock" means (i) in the case of a corporation, corporate
stock, (ii) in the case of a limited liability company or association, any and
all shares, interests, participations, rights or other equivalents (however
designated) of corporate stock, (iii) in the case of a partnership, partnership
interests (whether general or limited) and (iv) any other interest or
participation that confers on a Person the right to receive a share of the
profits and losses of, or distributions of assets of, the issuing Person.
- 2 -
<PAGE>
"Certificate of Designation" means the certificate of designation
of the Series A Preferred Shares, as in effect from time to time.
"Class A Common Stock" means the common stock, par value $.01 per
share, designated as "Class A Common Stock" in the Articles of Incorporation.
"Common Stock" means the common stock, par value $0.01 per share,
of the Company.
"Company" means Pameco Corporation.
"Compounding Date" has the meaning set forth in Section 3(a)(i)
below.
"Conversion Price" means $2.50, as the same may be adjusted from
time to time in accordance with Section 7 below.
"Dividend Series A Preferred Shares" means unissued Series A
Preferred Shares to which a Holder is entitled as of a particular date, assuming
the declaration of dividends payable in the form of Series A Preferred Shares
under Section 3(a)(i) or 3(a) (ii) below.
"GBCC" means the Georgia Business Corporation Code.
"Governmental Body" means any government, or governmental or
regulatory body thereof, or political subdivision thereof, whether federal,
state, local or foreign, or any agency or instrumentality thereof, or any court
or arbitrator (public or private).
"Holder" means the record holder of one or more Series A Preferred
Shares, as shown on the books and records of the Company.
"Initial Dividend Period" has the meaning set forth in Section
3(a)(i) below.
"Initial Dividend Rate" has the meaning set forth in Section
3(a)(i) below.
"Issue Date" means the first date on which any Series A Preferred
Shares are issued by the Company.
"Junior Securities" has the meaning set forth in Section 2 below.
"Legal Holiday" means a Saturday, a Sunday, a federal holiday or a
day on which banking institutions in the City of New York are authorized by law,
regulation or executive order to remain closed.
- 3 -
<PAGE>
"Liquidation Date" has the meaning set forth in Section 4(a)
below.
"Liquidation Preference" means an amount per Series A Preferred
Share, equal to $250.00 plus accrued and unpaid dividends (whether or not
declared and including, without limitation, Dividend Series A Preferred Shares
and Warrant Series A Preferred Shares, if any), and the Penalty Amount (if any),
subject to adjustment from time to time to accurately reflect stock splits,
subdivisions or combinations with respect to the Series A Preferred Shares.
"Parity Securities" has the meaning set forth in Section 2 below.
"Penalty Amount" means the contingent amount that exists only if
the Company, in accordance with Section 3(a)(ii), has not notified the Holders
that it elected to accrue and pay dividends after the Initial Dividend Period in
the same manner as during the Initial Dividend Period and the Company thereafter
failed to declare and pay the applicable cash dividend in full on a relevant
Compounding Date, and which is equal to the difference between the accrued and
unpaid dividend attributable to the relevant Compounding Date and the amount
that would have been the accrued and unpaid dividend attributable to the
relevant Compounding Date had the dividend rate set forth in Section 3(a)(ii)
below been calculated at 16% per annum, not 14% per annum.
"Person" means any individual, corporation, partnership, firm,
joint venture, association, limited liability company or partnership,
joint-stock company, trust, unincorporated organization or Governmental Body.
"Put Date" has the meaning set forth in Section 6(b) below.
"Put Price" has the meaning set forth in Section 6(a) below.
"Put Right" has the meaning set forth in Section 6(a) below.
"Redemption Date" has the meaning set forth in Section 5(c) below.
"Redemption Price" has the meaning set forth in Section 5(a)
below.
"Senior Securities" has the meaning set forth in Section 8(c)(i)
below.
"Series A Preferred Shares" means the Company's Series A
Cumulative Pay-in-Kind Preferred Stock, par value $1.00 per share, as the same
may be amended or modified from time to time.
"Stated Value" means an amount per Series A Preferred Share, equal
to $250.00, subject to adjustment from time to time to accurately reflect stock
splits, subdivisions or combinations with respect to the Series A Preferred
Shares.
- 4 -
<PAGE>
"Subsequent Preferred Shares" means any shares of preferred stock,
par value $1.00 per share, of the Company, issued pursuant to that certain
Securities Purchase Agreement dated as of February 18, 2000, among the Company,
Littlejohn Fund II, L.P. and Quilvest American Equity, Ltd., other than the
Series A Preferred Shares.
"Subsidiary" means, with respect to any Person, (i) any
corporation, association or other business entity of which more than 50% of the
total voting power of shares of Capital Stock entitled (without regard to the
occurrence of any contingency) to vote in the election of directors, managers or
trustees thereof is at. the time owned or controlled, directly or indirectly, by
such Person or one or more of the other Subsidiaries of that Person (or a
combination thereof) and (ii) any partnership (a) the sole general partner or
the managing general partner of which is such Person or a Subsidiary of such
Person or (b) the only general partners of which are such Person or of one or
more Subsidiaries of such Person (or any combination thereof).
"Trading Day" means with respect to the Class A Common Stock (x)
if the applicable security is listed or admitted for trading on the New York
Stock Exchange or another national securities exchange, a day on which the New
York Stock Exchange or such other national securities exchange is open for
business or (y) if the applicable security is quoted on the Nasdaq National
Market, a day on which trading may be made on the Nasdaq National Market or (z)
if the applicable security is not otherwise listed, admitted for trading or
quoted, any day other than a Legal Holiday.
"Warrant Series A Preferred Shares" means, as of a relevant date,
the Series A Preferred Shares to which a Holder would be entitled upon a
cashless exercise of all Additional Warrants held by such Holder on such date
(including any unissued Additional Warrants to which such Holder would be
entitled to as of such date assuming the declaration of dividends, under Section
3(a)(iii). For purposes of this definition of Warrant Series A Preferred Shares,
"cashless exercise" means the exercise of Additional Warrants whereby the Holder
thereof shall receive only (i) the aggregate number of Series A Preferred Shares
to which the Holder is entitled under such Additional Warrants less (ii) the
aggregate number of Series A Preferred Shares with a fair market value equal to
the exercise price of such Additional Warrants.
"Weighted Average Trading Price" means the volume weighted average
sales price per share of Class A Common Stock as reported by Bloomberg
Information Systems, Inc.; provided, however, if there shall occur any
adjustment to the Conversion Price as a result of Section 7(b)(iv) below, the
Weighted Average Trading Price shall be proportionally adjusted to the extent
not so reflected in the report of Bloomberg Information Systems, Inc.
- 5 -
<PAGE>
2. Ranking. The Series A 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 A Preferred Shares as to dividends, distributions and distributions upon
the liquidation, winding-up and dissolution of the Company (together with the
Common Stock of the Company, collectively referred to as "Junior Securities");
and (ii) on a parity with any additional shares of Series A Preferred Shares
issued by the Company in the future in accordance with Section 3 hereof and any
other class of Capital Stock or Series of preferred stock established after the
Issue Date by the Board of Directors (including any Series of Subsequent
Preferred Shares), the terms of which expressly provide that such class or
Series will rank on a parity with the Series A Preferred Shares as to dividends,
distributions and distributions upon the liquidation, winding-up and dissolution
of the Company (collectively referred to as "Parity Securities").
3. Dividends.
(a) (i) For the three-year period following the Issue Date (the
"Initial Dividend Period"), the Holders of the Series A Preferred Shares shall
be entitled to receive on each such share, when, as and if declared by the Board
of Directors, out of funds of the Company legally available therefor, cumulative
preferential dividends, compounding quarterly to the extent unpaid on each March
1, June 1, September 1 and December 1 (each a "Compounding Date"), commencing on
June 1, 2000, and accruing from the date of issuance at the rate of 14% per
annum on the Stated Value of each Series A Preferred Share and of each Dividend
Series A Preferred Share then deemed to have been issued (the "Initial Dividend
Rate"); provided, however, if with respect to a particular period, the Company's
earnings before interest, taxes, depreciation and amortization, as determined in
accordance with generally accepted accounting principles consistently applied
and maintained, is at least equal to $25.5 million for the year ended February
28, 2002 and/or $35.4 million for the year ended February 28, 2003, then with
respect to a particular one- year period, the rate at which dividends would
accrue, accumulate and compound during such one year period would be
recalculated retroactively to 8% instead of 14%, such recalculation to occur as
soon as practicable after the receipt of the Company's audited financial
statements, accompanied by a signed opinion of its independent accountants,
relating to the applicable one year period. When and if declared by the Board of
Directors, such dividends shall be payable by issuance of such number of
additional Series A Preferred Shares (including fractional shares) determined by
dividing the dollar amount of the dividend to be paid by the Stated Value on the
date such dividend is so paid; provided, however, if a dividend is declared and
paid in the form of Series A Preferred Shares and the dividend rate is
subsequently recalculated pursuant to this Section 3(a)(i), then the Company
shall promptly advise the Holders of the recalculated dividend amount (which
recalculation
- 6 -
<PAGE>
shall be binding absent manifest error) and the Holders shall promptly surrender
for cancellation certificates representing a sufficient number of Series A
Preferred Shares so that the number of Series A Preferred Shares issued to them
in such dividend is appropriately adjusted to reflect the retroactive reduction
of the dividend rate.
(ii) From and after the Initial Dividend Period, the Holders
of the Series A Preferred Shares shall be entitled to receive on each such
share, when, as and if declared by the Board of Directors, out of funds of the
Company legally available therefor, cumulative preferential cash dividends,
compounding quarterly to the extent unpaid, on each Compounding Date commencing
on June 1, 2003 and accruing thereafter at the rate of 14% per annum on the
Stated Value of each Series A Preferred Share and of each Dividend Series A
Preferred Share then deemed to have been issued, except that the Company may
provide written notice to the Holders at least 30 days prior to the end of the
Initial Dividend Period, that such dividends, with respect to periods after the
Initial Dividend Period shall continue to accrue and be payable in the same
manner as during the Initial Dividend Period.
(iii) To the extent a Holder of Series A Preferred Shares
receives payment of a dividend pursuant to subsections (i) or (ii) in the form
of additional Series A Preferred Shares, then, such Holder shall also be
entitled to receive a warrant to purchase such number of additional Series A
Preferred Shares equal to the number of Series A Preferred Shares received in
payment of such dividend, having an exercise price equal to 125% of the
conversion price of the Series A Preferred Shares in effect at the time of
payment of such dividend, such warrant to be in substantially the form of the
warrants originally issued to Holders on the Issue Date (the "Additional
Warrants").
(b) In addition to the dividends described in Section 3(a), if the
Company declares and pays a dividend on the Class A Common Stock, a Holder of
Series A Preferred Shares shall be entitled to 50% of the dividends such Holder
would have been entitled to had such Holder fully converted the Series A
Preferred Shares into Class A Common Stock pursuant to Section 7 immediately
prior to the record date for the distribution. Dividend distributions under this
Section 3(b) shall be made pro rata among the Holders of Series A Preferred
Shares and holders of Class A Common Stock.
(c) All dividends paid with respect to Series A Preferred Shares
pursuant to this Section 3 shall be made pro rata among the Holders based upon
the aggregate Series A Preferred Shares held by each such Holder. If and when
any Series A Preferred Shares are issued under Section 3 for the payment of
dividends, such Shares shall be validly issued and outstanding and fully paid
and nonassessable, and shall initially have a Conversion Price equal to that of
the Series A Preferred Shares then in effect on the date such Series A Preferred
Shares are issued.
- 7 -
<PAGE>
(d) In the case of Series A Preferred Shares issued on the Issue
Date, dividends shall accrue from such date. In the case of Series A Preferred
Shares issued as a dividend on Shares of Series A Preferred Shares or the Series
A Preferred Shares issued upon exercise of any warrants to purchase Series A
Preferred Shares, dividends shall accrue from the date on which such Series A
Preferred Shares were issued.
(e) Each fractional Series A Preferred Share outstanding shall
also be entitled to a ratably proportionate amount of any other distributions
made with respect to each outstanding or due to be issued and outstanding Series
A Preferred Share, and all such distributions shall be payable in the same
manner and at the same time as distributions on each outstanding or due to be
issued and outstanding Series A Preferred Share.
4. Distributions Upon Liquidation, Dissolution or Winding Up. Upon any
voluntary or involuntary liquidation, dissolution or winding up of the affairs
of the Company (which for purposes of this Certificate of Designation shall
include any transaction effected pursuant to a Business Combination Proposal),
or any reduction or decrease in its Capital Stock resulting in a distribution of
assets to the Holders of any class or Series of the Company's Capital Stock (the
date of such occurrence, the "Liquidation Date"), the Company shall, out of the
assets of the Company available for distribution, make the following payments in
respect of its Capital Stock:
(a) first, payments on any Senior Securities;
(b) second, on a pro rata basis, (i) to Holders of the Series A
Preferred Shares equal to the greater of (A) the aggregate Liquidation
Preference with respect to the Series A Preferred Shares held by such Holder on
the Liquidation Date (including the Dividend Series A Preferred Shares to which
such Holder would be entitled as of such date), plus the aggregate Liquidation
Preference with respect to the Warrant Series A Preferred Shares deemed held by
such Holder on the Liquidation Date (which cannot be less than zero), or (B) the
amount which would be payable to such Holder in respect of Class A Common Stock
if such Holder had been deemed to have converted all Series A Preferred Shares,
all Dividend Series A Preferred Shares and all Warrant Series A Preferred Shares
whether or not convertible by the terms hereof, held (or deemed held) by such
Holder as of the Liquidation Date into Class A Common Stock immediately prior to
the Liquidation Date; and (ii) due on Parity Securities; and
(c) third, payments on any Junior Securities.
5. Redemption by the Company.
(a) From time to time, on and after the sixth anniversary of the
Issue Date, the Company may redeem the Series A Preferred Shares held by a
Holder on the Redemption Date at a price per share, payable in cash, equal to
105% of the
- 8 -
<PAGE>
Liquidation Preference (the "Redemption Price"). If there shall be a legal
impediment imposed by the GBCC to the Company's repurchase of any such shares,
the Company shall use its best efforts to remove or remedy such impediment.
(b) In case of redemption of less than all of the Series A
Preferred Shares, such Series A Preferred Shares to be redeemed shall be
redeemed on a pro rata basis among all Holders.
(c) Notice of any redemption shall be sent by or on behalf of the
Company not less than 30 nor more than 60 days prior to the date specified for
redemption in such notice (the "Redemption Date"), by U.S. express mail,
overnight courier guaranteeing next Business Day delivery, postage or charges
prepaid, to all Holders of record of the Series A Preferred Shares at their last
addresses as they shall appear on the books of the Company; provided, however,
the validity of the proceedings for the redemption of any Series A Preferred
Shares shall only be affected with respect to any Holder to whom the Company has
failed to give notice or except as to the Holder to whom notice was defective.
In addition to any information required by law, such notice shall state: (i) the
Redemption Date; (ii) the Redemption Price; (iii) the number of Series A
Preferred Shares to be redeemed and, if less than all such shares held by such
Holder are to be redeemed, the number of such shares to be redeemed; (iv) the
place or places where certificates for the Series A Preferred Shares are to be
surrendered for payment of the Redemption Price; (v) the Conversion Price then
in effect; (vi) that the Holder's right to convert the Series A Preferred Shares
into Class A Common Stock shall terminate on the close of business on the third
Business Day preceding such Redemption Date; and (vii) that dividends on the
Series A Preferred Shares to be redeemed will cease to accumulate on the
Redemption Date. Upon the sending of any such notice of redemption, the Company
shall become obligated to redeem on the applicable Redemption Date all such
Series A Preferred Shares called for redemption and the Company shall take all
steps necessary to pay the Redemption Price on the Redemption Date.
(d) If notice has been sent in accordance with Section 5(c) above
and provided that on or before the Redemption Date specified in such notice, all
funds necessary for such redemption shall have been set aside by the Company,
separate and apart from its other funds in trust for the pro rata benefit of the
Holders of such Series A Preferred Shares so called for redemption, so as to be,
and to continue to be available therefor, then, from and after the applicable
Redemption Date, dividends on the Series A Preferred Shares so called for
redemption shall cease to accumulate, and such shares shall no longer be deemed
to be outstanding and shall not have the status of Series A Preferred Shares,
and all rights of the Holders thereof as shareholders of the Company (except the
right to receive from the Company the Redemption Price) shall cease. Upon
surrender, in accordance with said notice, of the certificates for any Series A
Preferred Shares so redeemed (properly endorsed or assigned for transfer, if the
Company shall so require and the notice shall so state), such shares shall be
redeemed by the Company at the Redemption Price.
- 9 -
<PAGE>
(e) Any deposit of funds with a bank or trust company for the
purpose of redeeming Series A Preferred Shares shall be irrevocable except that
any balance of monies so deposited by the Company and unclaimed by the Holders
of the Series A Preferred Shares entitled thereto at the expiration of one year
from the applicable Redemption Date shall be repaid, together with any interest
or other earnings earned thereon, to the Company, and after any such repayment,
the Holders of the shares entitled to the funds so repaid to the Company shall
look only to the Company for payment without interest or other earnings;
provided, however, that any funds deposited for the purpose of redeeming Series
A Preferred Shares which are subsequently converted in accordance with Section 7
hereof shall be repaid to the Company upon such conversion.
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 A
Preferred Shares held by a Holder, and to require the Company to purchase from
such Holder such shares at a per share price, payable in cash, equal to the
Liquidation Preference (the "Put Price") applicable to such shares (the "Put
Right"). The Company shall take all necessary actions to pay the Put Price on
the Put Date. If there shall be a legal impediment imposed by the GBCC to the
Company's repurchase of any such shares, the Company shall use its best efforts
to remove or remedy such impediment. The Company shall pay the Put Price on a
pro rata basis among all Holders exercising a Put Right based on the number of
shares sought to be repurchased.
(b) Notice of any Put Right shall be sent to the Company by or on
behalf of a Holder exercising such right not less than 5 nor more than 30 days
prior to the date specified for sale in such notice (the "Put Date"), by U.S.
express mail or overnight courier guaranteeing next Business Day delivery,
postage or charges prepaid. Such notice shall state: (i) the Put Date; (ii) the
number of Series A Preferred Shares to be sold to the Company; and (iii) the
date and the place where for the closing of the Put Right so as to pay the Put
Price as soon as possible as set forth herein.
7. Conversion.
(a) (i) At any time after the Approval Date and subject to
compliance with applicable law, including the HSR Act, by a particular Holder,
any such Holder shall have the right to convert any of the then outstanding
Series A Preferred Shares owned by it which have not been previously redeemed or
repurchased into fully paid, nonassessable shares of Class A Common Stock. For
the purpose of conversion, each Series A Preferred Share shall be valued at the
Liquidation Preference, which shall be divided by the Conversion Price in effect
on the conversion date to determine the number of shares issuable upon such
conversion. In case any Series A Preferred Shares are to be redeemed pursuant to
Section 5 above
- 10 -
<PAGE>
or repurchased in connection with Section 6 above, such right of conversion
shall cease and terminate as to the Series A Preferred Shares to be redeemed or
repurchased at the close of business on the third Business Day preceding the
date fixed for redemption (in the case of Section 5 above) or repurchase (in the
case of Section 6 above), unless the Company shall default in the payment of the
applicable price prior to the close of business on the date fixed for redemption
or repurchase. Any Holder desiring to convert such shares into Class A Common
Stock shall surrender the certificate or certificates (unless such certificates
have not yet been issued by the Company but are otherwise due such Holder
pursuant to Section 3 hereof) evidencing such Series A Preferred Shares at the
office of the transfer agent (which may be the Company) for the Series A
Preferred Shares, which certificate or certificates, if the Company shall so
require, shall be duly endorsed to the Company or in blank, or accompanied by
proper instruments of transfer to the Company or in blank, accompanied by an
irrevocable written notice to the Company that the Holder elects so to convert
such Series A Preferred Shares and specifying the name or names (with address or
addresses) in which a certificate or certificates evidencing shares of Class A
Common Stock are to be issued. In the event that a Holder fails to notify the
Company of the number of Series A Preferred Shares which such Holder wishes to
convert, such Holder shall be deemed to have elected to convert all shares
represented by the certificate or certificates so surrendered for conversion.
(ii) Holders at the close of business on a record date for
such dividend actually paid shall be entitled to receive the dividend payable on
the Series A Preferred Shares being converted on the corresponding dividend
payment date notwithstanding the conversion thereof following such record date
and prior to such dividend payment date.
(iii) The Company shall, as soon as practicable after such
deposit of certificates (to the extent required above) evidencing Series A
Preferred Shares accompanied by the written notice and compliance with any other
conditions herein contained, deliver at such office of such transfer agent to
the person for whose account such Series A Preferred Shares were so surrendered,
or to the nominee or nominees of such Person, certificates evidencing the number
of full shares of Class A Common Stock to which such Person shall be entitled as
aforesaid, together with a cash adjustment in respect of any fraction a share of
Class A Common Stock as hereinafter provided. Subject to the following
provisions of this paragraph (iii), each conversion shall be deemed to have been
effected immediately prior to the close of business on the date on which the
certificates for Series A Preferred Shares to be converted shall have been
surrendered (to the extent required above) together with the irrevocable written
notice and payment of taxes (if applicable) as provided for in paragraphs (i)
and (ii) above, and the Person or Persons entitled to receive the Class A Common
Stock deliverable upon conversion of such Series A Preferred Shares shall be
treated for all purposes as the record holder or holders of such Class A Common
Stock at such time on such date, unless the stock transfer books of the Company
shall be closed on such date, in which event such Person or Persons shall be
deemed to
- 11 -
<PAGE>
have become such holder or holders of record at the close of business on the
next succeeding day on which such stock transfer books are open, but such
conversion shall be at the Conversion Price in effect on the date on which such
Series A Preferred Shares shall have been surrendered for conversion and such
notice (and, if applicable, payment) received by the Company. Immediately
following such conversion, the rights of the Holders with respect to converted
Series A Preferred Shares shall cease.
(iv) Any conversion of Series A Preferred Shares hereunder
shall also be deemed, automatically and without any further action on the part
of the Holder or the Company, to be a conversion of the Series A Preferred
Shares issuable upon exercise of the Warrant Series A Preferred Shares.
(b) The Conversion Price at which Series A Preferred Shares are
convertible into Class A Common Stock shall be subject to adjustment from time
to time, as follows:
(i) In case at any time after the date hereof, the Company
shall pay or make a dividend or other distribution on all or any portion of its
Common Stock or shall make a dividend or other distribution on any other class
of Capital Stock of the Company, which dividend or distribution consists of
Common Stock, the Conversion Price in effect at the opening of business on the
day following the date fixed for the determination of shareholders entitled to
receive such dividend or other distribution shall be decreased by multiplying
such Conversion Price by a fraction of which the numerator shall be the number
of shares of Common Stock outstanding at the close of business on the date fixed
for such determination and the denominator shall be the sum of such number of
shares plus the total number of shares constituting such dividend or other
distribution, such decrease to become effective immediately after the opening of
business on the day following the date fixed for such determination. For the
purposes of this paragraph (i), the number of shares of Common Stock at any time
outstanding shall not include shares held in the treasury of the Company, but
shall include shares issuable in respect of scrip Common Stock. If any dividend
or distribution of the type described in this Section 7(b)(i) is declared but
not so paid or made, the Conversion Price shall again be adjusted to be the
Conversion Price which would then be in effect if such dividend or distribution
had not been declared.
(ii) In case at any time after the date hereof, the Company
shall pay or make a dividend or other distribution on all of its Common Stock
consisting of, or shall otherwise issue, rights, warrants, options, or
convertible or exchangeable securities (not being available on an equivalent
basis to Holders upon conversion) entitling the holders thereof to subscribe for
or purchase, Common Stock at a price per share less than the Current Market
Price Per Share of the Common Stock (determined as provided in paragraph (viii)
of this Section 7(b)) on the date of or distribution or issuance such rights,
warrants, options, or convertible or
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<PAGE>
exchangeable securities (other than pursuant to a dividend reinvestment plan),
the Conversion Price in effect at the opening of business on the day following
the date of such distribution or issuance shall be decreased by multiplying such
Conversion Price by a fraction of which the numerator shall be the number of
shares of Common Stock immediately prior to such distribution or issuance plus
the number of shares of Common Stock which the aggregate of the offering price
of the total number of shares of Common Stock so offered for subscription or
purchase would receive at such Current Market Price Per Share, and the
denominator shall be the number of shares of Common Stock outstanding at the
close of business on the date of such distribution or issuance plus the number
of shares of Common Stock so offered for subscription or purchase, such decrease
to become effective immediately after the opening of business on the day
following the date fixed for such determination. For the purposes of this
paragraph (ii), the number of shares of Common Stock at any time outstanding
shall not include shares held in the treasury of the Company but will include
shares issuable in respect of scrip certificates, if any, issued in lieu of
fractions of shares of Common Stock. The Company will not issue any rights,
warrants or options in respect of Common Stock held in the treasury of the
Company (or, if rights, warrants or options are issued in respect of all of the
Common Stock of the Company, will not exercise any such rights, warrants or
options in respect of Common Stock held in the treasury of the Company). The
value of such consideration, if other than cash, shall be determined in the
reasonable good faith judgment of the Board of Directors, whose determination
shall be conclusive. To the extent any securities are issued which give rise to
an adjustment to the Conversion Price pursuant to this clause (ii), and such
securities expire unexercised, then the Conversion Price shall be readjusted as
if such expired securities had never been issued.
(iii) In case at any time after the date hereof, the Company
shall issue Common Stock at a price per share less than the Current Market Price
Per Share of the Common Stock on the date of such issuance of Common Stock, the
Conversion Price in effect at the opening of business on the day following such
issuance date shall be decreased by multiplying such Conversion price by a
fraction of which the numerator shall be the number of shares of Common Stock
outstanding immediately prior to issuance plus the number of shares of Common
Stock which the aggregate of the offering price of the shares of Common Stock so
offered for subscription or purchase would purchase at such Current Market Price
Per Share, and the denominator shall be the number of shares of Common Stock
outstanding immediately prior to such issuance plus the number of shares of
Common Stock so offered for subscription or 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
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<PAGE>
or any portion of the shares of Common Stock outstanding shall each be combined
into a smaller number of shares of Common Stock, the Conversion Price in effect
at the opening of business on the day following the day upon which such
combination becomes effective shall be proportionately increased, such reduction
or increase, as the case may be, to become effective immediately after the
opening of business on the day following the day upon which such subdivision or
combination becomes effective.
(v) In case at any time after the date hereof, the Company
shall, by dividend or otherwise, distribute to all holders of its Common Stock
evidences of its indebtedness or assets (including securities, rights, warrants
or options, but excluding any rights, warrants, or options referred to in
paragraph (ii) of this Section 7(b)) entitling the holders of Common Stock to
subscribe for or purchase Common Stock at a price per share less than the
Current Market Price Per Share of the Common Stock, the Conversion Price in
effect at the opening of business on the date fixed for the determination of
shareholders entitled to such distribution shall be by multiplying the
Conversion Price in effect immediately prior to the close of business on the
date fixed for the determination of shareholders entitled to receive such
distribution by a fraction of which the numerator shall be the Current Market
Price Per Share of the Common Stock on the date fixed for such determination
less the then fair market value (as determined by the Board of Directors, whose
determination shall be conclusive) of the portion of the assets or evidence of
indebtedness so distributed applicable to one share of Common Stock and the
denominator shall be such Current Market Price Per Share of the Common Stock,
such adjustment to become effective immediately prior to the opening of business
on the day following the date fixed for the determination of shareholders
entitled to receive such distribution. If any dividend or distribution of the
type described in this Section 7(b)(v) is declared but not so paid or made, the
Conversion Price shall again be adjusted to the Conversion Price which would
then be in effect if such dividend or distribution had not been declared.
(vi) The reclassification of Common Stock into securities
other than Common Stock (other than any reclassification upon a consolidation or
merger to which Section 7(d) below applies) shall be deemed to involve (A) a
distribution of such securities other than Common Stock to all holders of Common
Stock (and the effective date of such reclassification shall be deemed to be
"the date fixed for the determination of shareholders entitled to receive such
distribution" and "the date fixed for such determination within the meaning of
paragraph (ii) of this Section 7(b)) and (B) a subdivision or combination, as
the case may be, of the number of Common Stock outstanding immediately prior to
such reclassification into the number of Common Stock outstanding immediately
thereafter (and the effective date of such reclassification shall be deemed to
be "the day upon which such subdivision becomes effective," as the case may be,
and "the day upon which such subdivision or combination becomes effective"
within the meaning of the paragraph (iv) of this Section 7(b)).
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<PAGE>
(vii) Intentionally Omitted.
(viii) For the purpose of any computation under para graphs
(ii), (iii), or (v) of this Section 7(b), the Current Market Price Per Share of
Common Stock on any date shall be deemed to be the Weighted Average Trading
Price for the 20 consecutive Trading Days immediately preceding the day in
question.
(ix) Notwithstanding any other provision of this Section 7,
no adjustment to the Conversion Price shall reduce the Conversion Price below
the then par value per share of the Common Stock, and any such purported
adjustment shall instead reduce the Conversion Price to such par value. The
Company hereby covenants not to take any action (A) to increase the par value
per share of the Common Stock or (B) that would or does result in any adjustment
in the Conversion Price that would cause the Conversion Price to be less than
the then par value per share of the Common Stock.
(x) Notwithstanding any other provision of this Section 7, no
adjustment in the Conversion Price need be made until all cumulative adjustments
amount to 1% or more of the Conversion Price as last adjusted. Any adjustments
that are not made shall be carried forward and taken into account in any
subsequent adjustment.
(xi) Whenever the Conversion Price is adjusted as herein
provided:
(1) the Company shall compute the adjusted Conversion
Price and shall prepare a certificate signed by the Treasurer of the Company
setting forth the adjusted Conversion Price and showing in reasonable detail the
facts upon which such adjustment is based, and such certificate shall forthwith
be filed with the transfer agent for the Series A Preferred Shares; and
(2) a notice stating that the Conversion Price has been
adjusted and setting forth the adjusted Conversion Price shall as soon as
practicable be mailed by the Company to all record Holders at their last
addresses as they shall appear upon the stock transfer books of the Company.
(xii) In any case in which this Section 7(b) provides that an
adjustment shall become effective immediately after a record date for an event,
the Company may defer until the occurrence of such event (A) issuing to the
Holder of any Series A Preferred Share converted after such record date and
before the occurrence of such event the additional shares of Common Stock
issuable upon such conversion by reason of the adjustment required by such event
over and above the Common Stock issuable upon such conversion before giving
effect to such adjustment and (B) paying to such Holder any amount in cash in
lieu of any fractional share of Common Stock pursuant to Section 7(c).
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<PAGE>
(c) The Company shall not issue fractional shares or scrip
representing fractional shares of Common Stock upon conversion of Series A
Preferred Shares. Instead the Company shall make a cash payment equal to the
value of such fractional amount. If more than one certificate evidencing Series
A Preferred Shares shall be surrendered for conversion at one time by the same
Holder, the number of shares issuable upon conversion thereof shall be computed
on the basis of the aggregate number of Series A Preferred Shares so
surrendered.
(d) In the event that the Company shall be a party to any
transaction, including without limitation any (i) recapitalization or
reclassification of the Common Stock (other than a change in par value, or from
par value to no par value, or from no par value to par value, or as a result of
a subdivision or combination of the Common Stock), (ii) any consolidation of the
Company with, or merger of the Company into, any other Person, any merger of
another Person into the Company (other than a merger which does not result in a
reclassification, conversion, exchange or cancellation of outstanding shares of
Common Stock of the Company), (iii) any sale or transfer of all or substantially
all of the assets of the Company or (iv) any compulsory share exchange, pursuant
to which the Common Stock is converted into the right to receive other
securities, cash or other property, then lawful provision shall be made as part
of the terms of such transaction whereby the Holder of each Series A Preferred
Share then outstanding shall have the right thereafter, to convert such share
into the kind and amount of securities, cash and other property receivable upon
such recapitalization, reclassification, consolidation, merger, sale, transfer
or share exchange by a holder of the number of shares of Common Stock into which
such Series A Preferred Share might have been converted immediately prior to
such recapitalization, reclassification, consolidation, merger, sale, transfer
or share exchange. The Company or the Person formed by such consolidation or
resulting from such merger or which acquires such assets or which acquires the
Company's shares, as the case may be, shall make provisions in its certificate
or articles of incorporation or other constituent document to establish such
right. Such certificate or articles of incorporation or other constituent
document shall provide for adjustments which, for events subsequent to the
effective date of such certificate or articles of incorporation or other
constituent document, shall be as nearly equivalent as may be practicable to the
adjustments provided for in this Section 7. The above provisions shall similarly
apply to successive recapitalization, reclassifications, consolidations,
mergers, sales, transfers or share exchanges.
(e) The Company shall at all times reserve and keep available, out
of its authorized and unissued Capital Stock, solely for the purpose of
effecting the conversion of the Series A Preferred Shares, such number of shares
of its Class A Common Stock, free of preemptive rights, as shall from time to
time be sufficient to effect the conversion of all Series A Preferred Shares
from time to time outstanding. The Company shall from time to time, in
accordance with the laws of the State of Georgia, use its best efforts to
increase the authorized number of shares of Common Stock if at any time the
number of shares of authorized and unissued Class A
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<PAGE>
Common Stock shall not be sufficient to permit the conversion of all the then
outstanding shares of Series A Preferred Shares. The Company shall pay any and
all issue or other taxes that may be payable in respect of any issue or delivery
of shares of Class A Common Stock on conversion of the Series A Preferred
Shares. The Company shall not, however, be required to pay any tax which may be
payable in respect of any transfer involved in the issue or delivery of Class A
Common Stock (or other securities or assets) in a name other than that in which
the Series A Preferred Shares so converted were registered, and no such issue or
delivery shall be made unless and until the Person requesting such issue has
paid to the Company the amount of such tax or has established, to the
satisfaction of the Company, that such tax has been paid.
(f) In case:
(i) the Company shall authorize or take an action that would,
upon consummation, require a Conversion Price adjustment pursuant to
subparagraphs (i), (iii), (iv) or (v) of Section 7(b); or
(ii) of any reclassification of Common Stock (other than a
subdivision or combination of the outstanding Common Stock, or a change in par
value, or from par value to no par value, or from no par value to par value), or
of any consolidation or merger to which the Company is a party and for which
approval of any stockholders of the Company shall be required, or of the sale or
transfer of all or substantially all of the assets of the Company or of any
compulsory share exchange whereby the Common Stock is converted into other
securities, cash or other property; or
(iii) of the voluntary or involuntary dissolution,
liquidation or winding up of the Company;
then the Company shall cause to be mailed to the Holders, at their last
addresses as they shall appear upon the stock transfer books of the Company, at
least 20 days prior to the proposed record or effective date, as the case may
be, notice stating (x) the date on which a record (if any) is to be taken for
the purpose of such action, dividend or distribution, or, if a record is not to
be taken, the date as of which the holders of Common Stock of record to be
entitled to such dividend or distribution are to be determined or (y) the date
on which such action, reclassification, consolidation, merger, sale, transfer,
share exchange, dissolution, liquidation or winding up is expected to become
effective, and the date as of which it is expected that holders of Common Stock
of record shall be entitled to exchange their shares of Common Stock for
securities or other property deliverable upon such action, reclassification,
consolidation, merger, sale, transfer, share exchange, dissolution, liquidation
or winding up (but no failure to mail such notice or any defect therein or in
the mailing thereof shall affect the validity of the corporate action required
to be specified in such notice).
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<PAGE>
(g) Notwithstanding the foregoing provisions, (i) neither the
issuance of any shares of Common Stock pursuant to any plan providing for the
reinvestment of dividends or interest payable on securities of the Company and
the investment of dividends or interest payable on securities of the Company and
the investment of additional optional amounts in shares of Common Stock under
any such plan and the issuance of any shares of Common Stock or options or
rights to purchase such shares pursuant to any employee benefit plan or program
of the Company or pursuant to any option, warrant, right or exercisable,
exchangeable or convertible security outstanding as of the Issue Date, nor (ii)
the issuance of any Subsequent Preferred Shares, shall be deemed to constitute
an issuance of Common Stock or exercisable, exchangeable or convertible
securities by the Company to which any of the adjustment provisions described
above applies.
(i) For purposes of this Section 7, the number of shares of
Common Stock at any time outstanding shall not include any shares of Common
Stock then owned or held by or for the account of the Company.
8. Voting Rights.
(a) Holders shall vote their Series A Preferred Shares as a
separate class as set forth in paragraph (c) hereof, as may be further set forth
in the Company's Articles of Incorporation and as otherwise expressly permitted
by the GBCC.
(b) In addition to the rights set forth in Section 8(a) above,
after the Approval Date, and subject to compliance with applicable law,
including the HSR Act, by a particular Holder, with no further action upon the
part of such Holder or the Company, such Holder shall be entitled to one vote
for each share of Common Stock to which such Holder is entitled to receive at
such time upon conversion of the Series A Preferred Shares in accordance with
Section 7 hereof, whether or not such Holder has actually converted such shares,
and shall vote such shares together with the Class A Common Stock as a single
class on all matters brought before a vote of the holders of the Common Stock.
(c) The Company shall not, without the affirmative vote of the
Holders of a majority of the Series A Preferred Shares then outstanding:
(i) authorize, create (by way of reclassification or
otherwise) or issue any securities which are senior to the Series A Preferred
Shares as to dividends, distributions or distributions upon liquidation, winding
up or dissolution of the Company ("Senior Securities"), any Parity Securities
(other than additional Series A Preferred Shares issued in accordance with
Section 3(a) hereof or Subsequent Preferred Shares) or any obligation or
security convertible into, exchangeable for or evidencing the right to purchase
any Senior Securities or Parity Securities;
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<PAGE>
(ii) amend or otherwise alter its Articles of Incorporation
in any manner that adversely affects the rights, privileges and preferences of
the Series A Preferred Shares set forth in this Certificate of Designation; or
(iii) take any action requiring a vote of shareholders of the
Company that adversely affects the rights, preferences and privileges of the
Series A Preferred Shares set forth in this Certificate of Designation.
9. Payment.
(a) All amounts payable in cash with respect to the Series A
Preferred Shares shall be payable in United States dollars at the principal
executive office of the Company or, at the option of the Holder, payment of
dividends (if any) may be made by official bank check sent by overnight courier
guaranteeing next Business Day delivery to such Holder of the Series A Preferred
Shares at its address set forth in the register of Holders maintained by the
Company.
(b) Any payment on the Series A Preferred Shares due on any day
that is not a Business Day need not be made on such day, but may be made on the
next succeeding Business Day with the same force and effect as if made on such
due date.
10. Exclusion of Other Rights. Except as may otherwise be required by
law, the Series A Preferred Shares shall not have any voting powers, preferences
and relative, participating, optional or other special rights, other than those
specifically set forth in this Certificate of Designation (as it may be amended
from time to time) and in the Articles of Incorporation. The Series A Preferred
Shares shall have no preemptive or subscription rights.
11. Headings of Subdivisions. The headings of the various subdivisions
hereof are for convenience of reference only and shall not affect the
interpretation of any of the provisions hereof.
12. Severability of Provisions. If any voting powers, preferences and
relative, participating, optional and other special rights of the Series A
Preferred Shares and qualifications, limitations and restrictions thereof set
forth in this Certificate of Designation (as it may be amended from time to
time) is invalid, unlawful or incapable of being enforced by reason of any rule
of law or public policy, all other voting powers, preferences and relative,
participating, optional and other special rights of Series A Preferred Shares
and qualifications, limitations and restrictions thereof set forth in this
Certificate of Designation (as it may be amended from time to time) which can be
given effect without the invalid, unlawful or unenforceable voting powers,
preferences and relative, participating, optional and other special rights of
Series A Preferred Shares and qualifications, limitations and restrictions
thereof shall, nevertheless, remain in full force and effect, and no voting
powers, preferences and relative, participating, optional or other special
rights of
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<PAGE>
Series A Preferred Shares and qualifications, limitations and restrictions
thereof herein set forth shall be deemed dependent upon any other such voting
powers, preferences and relative, participating, optional or other special
rights of Series A Preferred Shares and qualifications, limitations and
restrictions thereof unless so expressed herein.
13. Reissuance of Series A Preferred Shares. Series A Preferred Shares
that have been issued and reacquired in any manner, including shares purchased,
redeemed, exchanged or converted, shall (upon compliance with any applicable
provisions of the GBCC) have the status of authorized but unissued shares of
preferred stock of the Company undesignated as to Series and may be designated
or redesignated and issued or reissued, as the case may be, as part of any
Series of preferred stock of the Company, provided that any issue of such shares
as Series A Preferred Shares must be in compliance with the terms hereof.
14. Amendments. The Certificate of Designation may be amended only with
the consent of the Holders of a majority of the Series A Preferred Shares then
outstanding, except that the Board of Directors may file amendments to this
Certificate of Designation without the consent of the Holders of the Series A
Preferred Shares in order to increase the number of Series A Preferred Shares
authorized by this Designation but only to permit the issuances of such Series A
Preferred Shares as Dividend Series A Preferred Shares and Warrant Series A
Preferred Shares, and only if such additional shares are reserved for issuance
as Dividend Series A Preferred Shares or Warrant Series A Preferred Shares.
IN WITNESS WHEREOF, the Company has caused this Certificate of
Designation to be duly executed this ____ of February, 2000.
PAMECO CORPORATION
By:___________________________
Name:
Title:
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Exhibit 4
THE WARRANT REPRESENTED HEREBY HAS NOT BEEN REGISTERED UNDER THE SECURITIES ACT
OF 1933, AS AMENDED, OR THE SECURITIES LAWS OF ANY STATE AND IS BEING OFFERED
AND SOLD IN RELIANCE ON EXEMPTIONS FROM THE REGISTRATION REQUIREMENTS OF SAID
ACT AND SUCH LAWS. THE WARRANT REPRESENTED HEREBY IS SUBJECT TO RESTRICTIONS ON
TRANSFERABILITY AND RESALE AND MAY NOT BE TRANSFERRED OR RESOLD EXCEPT AS
PERMITTED UNDER SAID ACT AND SUCH LAWS PURSUANT TO REGISTRATION OR EXEMPTION
THEREFROM. THE WARRANT REPRESENTED HEREBY AND THE SHARES EXERCISABLE HEREUNDER
ARE ALSO SUBJECT TO RESTRICTIONS ON TRANSFERABILITY AND RESALE SET FORTH IN THE
SHAREHOLDERS AGREEMENT (AS DEFINED HEREIN). THE WARRANT REPRESENTED HEREBY HAS
NOT BEEN APPROVED OR DISAPPROVED BY THE SECURITIES AND EXCHANGE COMMISSION, ANY
STATE SECURITIES COMMISSION OR ANY OTHER REGULATORY AUTHORITY, NOR HAVE ANY OF
THE FOREGOING AUTHORITIES PASSED UPON OR ENDORSED THE MERITS OF THE OFFERING OF
THE WARRANTS REPRESENTED HEREBY. ANY REPRESENTATION TO THE CONTRARY IS UNLAWFUL.
Warrant to Purchase
Series A Preferred Shares
PAMECO CORPORATION
WARRANT
To Subscribe for and Purchase
Series A Cumulative Pay-in-Kind Preferred Stock of
PAMECO CORPORATION
THIS CERTIFIES that, for value received, ____________________ (the
"Purchaser") is the owner of a warrant (the "Warrant") which entitles Purchaser
to purchase from Pameco Corporation (the "Company"), in accordance with the
terms herein, at any time after the date hereof until 5:00 p.m., New York, New
York time on [insert date which is 8 years following the Initial Closing Date],
______(1) shares, subject to adjustment as set forth herein, of Series A
Cumulative Pay-in-Kind Preferred Stock of the Company, par value $1.00 per share
(the "Preferred Shares") at the price and on the other terms and conditions set
forth herein. This Warrant is one of the Warrants issued pursuant to that
certain Securities Purchase Agreement dated as of February ___, 2000, among the
Purchaser, Quilvest American Equity,
- ----------
(1) Total of 140,000 for all Warrants issued at the Initial Closing.
<PAGE>
Ltd. and the Company (as amended, from time to time, the "Purchase Agreement"),
and is subject to the following provisions, terms and conditions.
1. Payment of Exercise Price and Exercise of Warrant.
(a) Exercise of Warrant. This Warrant shall be immediately
exercisable, in whole or in part commencing on the date hereof and continuing
from time to time hereafter during its term. This Warrant shall be exercisable
to purchase an initial amount of _________ Series A Preferred Shares (the
"Initial Amount") and such other Series A Preferred Shares as set forth in
Section 2 hereof (collectively, the "Warrant Shares").
(b) Exercise Price. This Warrant shall be exercisable at an
initial exercise price of [insert 12,000% of initial conversion price then in
effect] per Warrant Share, subject to adjustment as set forth in Section 2
hereof (the "Exercise Price").
(c) Payment of Exercise Price. The Purchaser may pay the Exercise
Price for that number of Warrant Shares sought to be purchased (the "Exercised
Shares") in one or a combination of the following methods:
(1) by delivering immediately available funds to the Company
in an amount equal to the Exercise Price; or
(2) by instructing the Company to issue to the Purchaser that
number of Warrant Shares determined by multiplying the number of Exercised
Shares to which it would otherwise be entitled if it paid the Exercise Price in
accordance with clause (1) above, by a fraction, the numerator of which shall be
the excess, if any, of the Fair Market Price Per Share of the Preferred Shares
(as defined herein), as of the date of exercise, over the Exercise Price, and
the denominator of which shall be the Fair Market Price Per Share of the
Preferred Shares as of the date of exercise.
For the purposes hereof, the Fair Market Price Per Share of the Preferred Shares
on any date shall be determined by the Board of Directors of the Company
reasonably and in good faith taking into account the convertibility of such
shares into shares of Class A Common Stock, par value $.01 per share, of the
Company (the "Class A Common Stock"), to the extent such shares are convertible.
(d) Method of Exercise. This Warrant shall be exercisable during
its term by written notice ("Purchaser Notice"), substantially in the form
attached as Exhibit A. Such Purchaser Notice shall be signed by the Purchaser
and shall be delivered in person, by certified mail or by overnight courier
guaranteeing next business day delivery, to the Company, or such other person as
may be designated by the Company, at the location designated in Section 9
herein, or at such
2
<PAGE>
other address as the Company may from time to time designate in writing. The
Purchaser Notice shall be accompanied by full payment of the Exercise Price in
one or a combination of the methods as described in subsection 1(c) above. The
certificate or certificates for the Exercised Shares shall be registered in the
name of the Purchaser and shall be legended as may be reasonably required by the
Company and/or applicable law. Subject to subsection (e) below, the Company
agrees that the Exercised Shares so purchased shall be and are deemed to be
issued to Purchaser as the record owner of such shares as of the close of
business on the date on which this Warrant shall have been surrendered and
payment made for such shares as aforesaid. Subject to subsection (e) below,
certificates for the Exercised Shares so purchased shall be delivered to
Purchaser within a reasonable time, not exceeding five days, after the rights
represented by this Warrant shall have been so exercised, and unless this
Warrant shall have been so exercised, or shall have expired, a new Warrant
representing the number of Warrant Shares, if any, with respect to which this
Warrant shall not then have been exercised, shall also be delivered to Purchaser
within such time.
(e) Restrictions on Exercise and Transfer. This Warrant may not be
exercised if the issuance of the Warrant Shares upon such exercise or the method
of payment of consideration for such Warrant Shares would constitute a violation
of any applicable federal or state securities laws, the rules and regulations of
an applicable securities exchange or quotation, system, or the Hart-Scott-Rodino
Antitrust Improvements Act of 1976, as amended, and the rules and regulations
promulgated thereunder (the "HSR Act"). In furtherance of the foregoing, and not
in limitation thereof, upon receipt of notice from the Purchaser that it intends
to exercise the Warrant, the Company shall promptly comply with the provisions
of Section 7.7 of the Purchase Agreement. The Purchaser acknowledges that as of
the date hereof it has entered into the Shareholders Agreement dated as of
February 18, 2000 (as amended, from time to time, the "Shareholders Agreement"),
among the Purchaser, the Company and certain other shareholders of the Company,
which pertains to the transferability of this Warrant and the Warrant Shares.
2. Adjustment of Exercise Price and Number of Warrant Shares. The
number and kind of securities purchasable upon the exercise of this Warrant and
the Exercise Price shall be subject to adjustment from time to time upon the
happening of certain events, as described in this Section 2.
(a) Certain Proportional Adjustments. In case at any time after
the date hereof, there shall be paid a dividend on, or a distribution is made
with respect to, the Preferred Shares (other than the dividends payable pursuant
to Section 3(a) of the Preferred Designation), and such dividend or distribution
is paid or made in the form of additional Preferred Shares, or all or any
portion of the outstanding Preferred Shares shall be subdivided into a greater
number of shares of Preferred Shares, then the Exercise Price in effect at the
opening of business on the day following the day upon which such dividend is
paid, such distribution is made or
3
<PAGE>
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 Preferred Shares outstanding shall each be combined into a smaller
number of shares of Preferred Shares, the Exercise 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 dividend, distribution,
subdivision or combination becomes effective.
(b) Minimum Adjustment. Notwithstanding any other provision of
this Section 3, no adjustment to the Exercise Price shall reduce the Exercise
Price below the then par value per share of the Preferred Shares, and any such
purported adjustment shall instead reduce the Exercise Price to such par value.
The Company hereby covenants not to take any action (A) to increase the par
value per share of the Preferred Shares or (B) that would or does result in any
adjustment in the Exercise Price that would cause the Exercise Price to be less
than the then par value per share of the Preferred Shares. Notwithstanding any
other provision of this Section 2, no adjustment in the Exercise Price need be
made until all cumulative adjustments amount to 1% or more of the Exercise Price
as last adjusted. Any adjustments that are not made shall be carried forward and
taken into account in any subsequent adjustment.
(c) Fractional Interests. The Company shall not issue fractional
shares or scrip representing fractional shares of Preferred Shares upon exercise
of Warrants. Instead the Company shall pay a cash adjustment based upon the Fair
Market Price Per Share of the Preferred Shares on the business day immediately
preceding the date of exercise. If more than one Warrant shall be surrendered
for exercise at one time by the same Holder, the number of shares issuable upon
exercise thereof shall be computed on the basis of the aggregate number of
Warrants so surrendered.
(d) Merger, Consolidation, Etc. In the event that the Company
shall be a party to any transaction, including without limitation any (i)
recapitalization or reclassification of the Preferred Shares (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 Preferred
Shares), (ii) any consolidation of the Company with, or merger of the Company
into, any other individual, corporation, partnership, firm, joint venture,
association, limited liability company or partnership, trust, unincorporated
organization or governmental body (each referred to as a "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 Preferred Shares), (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 Preferred Shares is converted into the right to receive other
securities, cash or other property, then lawful provision shall be made
4
<PAGE>
as part of the terms of such transaction whereby the Purchaser of each Warrant
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 Preferred Shares into
which such Warrant Share might have been exercised 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 in other constituent documents, to establish
such right. Such certificate or articles of incorporation, or other constituent
documents, shall provide for adjustments which, for events subsequent to the
effective date of such certificate or articles of incorporation, or other
constituent documents, shall be as nearly equivalent as may be practicable to
the adjustments provided for in this Section 2. The above provisions shall
similarly apply to successive recapitalization, reclassifications,
consolidations, mergers, sales, transfers or share exchanges.
(e) Reservation of Shares. 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 exercise of the Warrants, such number of shares of
Preferred Shares, free of preemptive rights, as shall from time to time be
sufficient to effect the exercise of all Warrants from time to time outstanding.
The Company shall from time to time, in accordance with the laws of the State of
Georgia, use its best efforts to increase the authorized number of Preferred
Shares if at any time the number of shares of authorized and unissued Preferred
Shares shall not be sufficient to permit the conversion of all the then
outstanding Warrants. The Company shall pay any and all issue or other taxes
that may be payable in respect of any issue or delivery of Preferred Shares on
conversion of the Warrants. 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 Preferred Shares (or other securities or assets) in a name other
than that in which the Warrants so exercised were registered.
(f) Certain Company Obligations.
In case:
(i) of any reclassification of the Preferred Shares or the
Class A Common Stock (other than a subdivision or combination of the outstanding
preferred or 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 shareholders 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
Preferred
5
<PAGE>
Shares or the Class A Common Stock is converted into other securities, cash or
other property; or
(ii) of the voluntary or involuntary dissolution, liquidation
or winding up of the Company;
then the Company shall cause to be mailed to the Purchasers, 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 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 record of the Preferred Shares or the Class A Common
Stock shall be entitled to exchange their Preferred Shares or Class A 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) Shares Deemed Outstanding. For purposes of this Section 2, the
number of Series A Preferred Shares at any time outstanding shall not include
any Preferred Shares then owned or held by or for the account of the Company.
3. Redemption by Company.
(a) The Company shall have the option to redeem (subject to the
legal availability of funds therefor) all, or any part of, the outstanding (and
due to be issued and outstanding as of such date pursuant to Section 2 above)
Warrants as set forth below. From time to time, on and after the sixth
anniversary of the Issue Date (as defined in the Preferred Designation), the
Company may redeem the Warrants at a price per share of Class A Common Stock
into which the Series A Preferred Shares for which this Warrant is then
exercisable are then convertible, payable in cash, equal to 105% of the excess
of (i) the fair market value of such Class A Common Stock (the "Common Fair
Market Value") over (ii) the Exercise Price then in effect (the "Redemption
Price"). As used herein, the Common Fair Market Value shall equal (A) the
Weighted Average Trading Price (as defined in the Purchase Agreement) during the
10 trading days immediately prior to the date of the Redemption Notice or (B) if
the Class A Common Stock is not traded on a national securities exchange or
Nasdaq, then as determined reasonably and in good faith by the Board of
Directors. If the Redemption price as calculated is negative, then the
Redemption Price shall be $0.01.
6
<PAGE>
(b) In case of redemption of less than all of the outstanding
Warrants issued pursuant to or in connection with the Purchase Agreement, such
Warrants to be redeemed shall be redeemed on a pro rata basis among all
Purchasers.
(c) Notice of any redemption (the "Redemption Notice") 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 the Purchaser at its last address as it shall
appear on the books of the Purchaser; provided, however, the validity of the
proceedings for the redemption of any Warrants shall only be affected with
respect to any Purchaser to whom the Company has failed to give notice or except
as to the Purchaser 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 Warrants to be redeemed and, if less than
all such shares held by such Purchaser are to be redeemed, the number of such
shares to be redeemed; (iv) the place or places where the Warrants are to be
surrendered for payment of the Redemption Price; (v) the Exercise Price then in
effect; and (vi) that the Purchaser's right to exercise the Warrants for
Preferred Shares shall terminate on the close of business on the third business
day preceding such 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 Warrants called for redemption and the Company shall
take all steps necessary to pay the Redemption Price on the Redemption Date.
(d) If notice has been sent in accordance with Section 3(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
Purchaser of such Warrants so called for redemption, so as to be, and to
continue to be available therefor, then, from and after the applicable
Redemption Date, the Warrants so called for redemption shall no longer be deemed
to be outstanding and shall no longer be exercisable, and all rights of the
Purchaser thereof as Warrant holders (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 Warrants so redeemed (properly endorsed
or assigned for transfer, if the Company shall so require and the notice shall
so state), such shares shall be redeemed by the Company at the Redemption Price.
(e) Any deposit of funds with a bank or trust company for the
purpose of redeeming Warrants shall be irrevocable except that any balance of
monies so deposited by the Company and unclaimed by the Purchaser of the
Warrants 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 Purchaser of
the Warrants entitled to the
7
<PAGE>
funds so repaid to the Company shall look only to the Company for payment
without interest or other earnings.
4. Put Right.
(a) The Purchaser is entitled to sell all, or any part of, the
outstanding (and due to be issued and outstanding as of such date pursuant to
Section 2 hereof) Warrants to the Company as set forth below in this Section 4.
The Company shall take all necessary actions to pay the applicable put price on
the Put Date (as defined below), subject to the provisions of the Georgia
Business Corporation Code, as amended ("GBCC") applicable to the repurchase of
its securities. If there shall be a legal impediment imposed by the GBCC to the
Company's repurchase of the Warrant pursuant to this Section 4, the Company
shall use its best efforts to remove or remedy such impediment and pay the Put
Price as soon as possible. Commencing upon the fifth anniversary of the Issue
Date, Purchaser may require the Company to purchase, and the Company shall
purchase, all or any part of the Warrants owned by it (the "Put Right") at a
price per share of Class A Common Stock into which the Series A Preferred Shares
for which this Warrant is then exercisable are then convertible, payable in
cash, equal to the excess of (x) the Common Fair Market Value over (y) the
Exercise Price then in effect (the "Put Price").
(b) Notice of any Put Right shall be sent to the Company by or on
behalf of the Purchasers exercising 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
Warrants to be sold to the Company; and (iii) the date and the place where for
the closing of the Put Right as set forth herein.
5. Blue Sky Exemption. The purchase of this Warrant and the underlying
Warrant Shares is expressly conditioned upon the exemption from qualification of
the offer and sale of this Warrant and the underlying Warrant Shares from
applicable Federal and state securities laws. The Company shall not be required
to qualify this transaction under the securities laws of any jurisdiction and,
should qualification be necessary, the Company may rescind any sale contracted
in the jurisdiction.
6. Exchange and Replacement of Warrant. Upon receipt by the Company of
evidence reasonably satisfactory to it of the loss, theft, destruction or
mutilation of this Warrant, and, in case of loss, theft or destruction, of an
indemnity reasonably satisfactory to it, and reimbursement to the Company of all
reasonable expenses incidental thereto, and upon surrender and cancellation of
this Warrant, if mutilated, the Company will make and deliver a new Warrant of
like tenor, in lieu thereof.
8
<PAGE>
7. Reservation and Listing of Securities. The Company shall at all
times reserve and keep available out of its authorized shares of preferred
stock, solely for the purpose of issuance upon the exercise of this Warrant,
such number of shares of preferred stock or other securities, properties or
rights as shall be issuable upon the exercise thereof. The Company covenants and
agrees that, upon exercise of this Warrant and payment of the Exercise Price
therefor, all shares of preferred stock and other securities issuable upon such
exercise shall be duly and validly issued, fully paid, nonassessable and not
subject to the preemptive rights of any stockholder.
8. No Rights as Shareholders. Nothing contained herein shall be
construed as conferring upon the Purchaser or its transferees the right to vote
or to receive dividends or to consent to or receive notice as shareholders in
respect of any meeting of shareholders for the election of directors of the
Company or any other matter, or any rights whatsoever as shareholders of the
Company.
9. Notices. All notices required to be given to the parties hereunder
shall be in writing and shall be deemed to have been given sufficiently for all
purposes when presented personally to such party, sent by facsimile to such
party or sent by U.S. express mail, return receipt requested, or by overnight
courier guaranteeing next business day delivery, to such party at its address
set forth below:
Company: Pameco Corporation
1000 Center Place
Norcross, GA 30093
Attention: Vice Chairman and Chief Financial Officer
Telecopier: 770-798-7141
Telephone: 770-798-0700
Purchaser: ________________________
________________________
________________________
Attention: ____________
Telecopier: ___________
Telephone: ____________
Such notice shall be deemed to be given when received if delivered personally,
at the time of transmittal if sent via facsimile during regular business hours
(if sent outside of such regular business hours then at 9:00 a.m. on the next
business day) or the next business day after the date mailed as aforesaid or
delivered to an overnight courier. Any notice of any change in such address
shall also be given in the manner set forth above. Whenever the giving of notice
is required, the giving of such notice may be waived in writing by the party
entitled to receive such notice.
10. Governing Law; Jurisdiction, Etc. This Warrant Certificate shall be
governed by and construed in accordance with the laws of the State of New
9
<PAGE>
York without regard to its conflicts of laws principles. The Purchaser and the
Company each agrees to submit to the jurisdiction of the courts of the State of
New York in New York County and to the jurisdiction of the United States
District Court for the Southern District of New York, and hereby agrees that
service of process may be effected in accordance with the delivery methods
described in Section 9 above.
11. Amendment. The Company may from time to time supplement or amend
this Warrant in order to cure any ambiguity or to correct or supplement any
provision contained herein which may be defective or inconsistent with any
provisions herein, or to make any other provisions in regard to matters or
questions arising hereunder which the Company may deem necessary or desirable
and which shall not be inconsistent with the provisions of this Warrant and, so
long as in the case of any of the foregoing, it shall not adversely affect the
interests of the Purchaser. Any other amendments hereto may only be made in a
writing signed by both the Company and the Purchaser.
12. Successors. All the covenants and provisions hereof by or for the
benefit of the Company or the Purchaser shall bind and inure to the benefit of
their respective successors and permitted assigns hereunder, except as otherwise
provided herein.
13. No Benefits to Others. Nothing herein shall be construed to give to
any person or corporation, other than the Company and the Purchaser (and their
successors and permitted assigns), any legal or equitable right, remedy or claim
hereunder.
14. Captions. The Captions of the sections and subsections hereof have
been inserted for convenience only and shall have no substantive effect.
IN WITNESS WHEREOF, the Company has duly executed this Warrant as of
the _____ day of ____________, ____.
PAMECO CORPORATION
By: __________________________
Name:
Title:
10
Exhibit 5
SHAREHOLDERS AGREEMENT
by and among
PAMECO CORPORATION
LITTLEJOHN FUND II, L.P.
QUILVEST AMERICAN EQUITY, LTD.
and
Willem F.P. de Vogel
dated as of
February 18, 2000
<PAGE>
TABLE OF CONTENTS
Page
1. Certain Defined Terms.............................................1
2. Agreements to Vote; Irrevocable Proxy.............................5
3. Transfers of Securities...........................................7
4. Participation Rights..............................................9
5. Joinder Requirements.............................................10
6. Composition, Nomination and Election of Board....................11
7. Stock Splits.....................................................13
8. Representations and Warranties of Littlejohn.....................13
9. Representations and Warranties of Quilvest and de Vogel..........14
10. Representations and Warranties of the Company....................15
11. Termination; Securities Free from Agreement......................16
12. Expenses.........................................................16
13. Fees.............................................................16
14. Certain Covenants of Quilvest and de Vogel.......................17
15. Financial Reports and Information................................18
16. Transaction with Affiliates......................................19
17. Legend and Stop Transfer Instructions............................19
18. Survival of Representations and Warranties.......................19
19. Notices..........................................................19
20. Entire Agreement; Amendment......................................21
21. Successors and Assigns...........................................21
22. Governing Law; Consent to Jurisdiction...........................21
23. Injunctive Relief................................................21
24. Counterparts; Facsimile Signatures...............................22
25. Severability.....................................................22
26. Further Assurances...............................................22
27. No Third Party Beneficiaries; No Partnership or Fiduciary
Relationship ...................................................22
28. Legal Expenses...................................................22
29. Interpretation...................................................22
30. Effectiveness....................................................23
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SHAREHOLDERS AGREEMENT
SHAREHOLDERS AGREEMENT (this "Agreement"), dated as of February 18,
2000, by and among Littlejohn Fund II, L.P., a Delaware limited partnership
("Littlejohn"), Quilvest American Equity, Ltd., a British Virgin Islands
international business company ("Quilvest"), Willem F.P. de Vogel, a resident of
the State of New York ("de Vogel"; and together with Littlejohn and Quilvest,
the "Shareholders"), and Pameco Corporation, a Georgia corporation (the
"Company").
W I T N E S S E T H:
WHEREAS, as of the Effective Time (as defined in Section 1 below) each
of the Shareholders owns such number of shares of Common Stock, par value $.01
per share (the "Common Stock"), such number of shares of Series A Preferred
Shares (as defined in Section 1 hereof) and such number of warrants to purchase
Series A Preferred Shares (the "Warrants"), in each case indicated next to his
or its name on Schedule 1 attached hereto;
WHEREAS, the Company and the Shareholders have agreed to provide for
certain restrictions with respect to the ownership and transfer of Securities
(as defined in Section 1 hereof) owned by the Shareholders and certain other
rights incident to the ownership of such Securities pursuant to this Agreement;
and
WHEREAS, this Agreement is being entered into in order to induce
Littlejohn to enter into the Purchase Agreement (as defined in Section 1 hereof)
and to consummate the Contemplated Transactions (as defined in Section 1
hereof).
NOW, THEREFORE, in consideration of the mutual covenants and
agreements herein contained and other, good and valuable consideration, and
intending to be legally bound hereby, the parties hereto, hereby agree, as of
the Effective Time, as follows:
1. Certain Defined Terms.
As used in this Agreement, the following terms have the following
meanings (such meanings to be equally applicable to both the singular and plural
forms of the terms defined):
"Additional Closing" has the meaning set forth in the Purchase
Agreement.
"Affiliate" of a Person shall mean 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"
<PAGE>
and "under common control with"), as used with respect to any Person, shall mean
the possession, directly or indirectly, of the power to elect a majority of the
board of directors (or other governing body) or to direct or cause the direction
of the management and policies of such Person, whether through the ownership of
voting securities, by contract or otherwise and, in any event and without
limiting the generality of the foregoing, any Person owning 10% or more of the
voting securities of another Person shall be deemed to control that Person.
"Aggregate Proceeds" shall be determined as of the date of an
applicable Participation Notice and shall equal the gross proceeds received as
of the date of determination by Littlejohn or Littlejohn Permitted Transferees
from sales, if any, of shares of Common Stock or Preferred Stock to any Person
who is not a Littlejohn Permitted Transferee (a) pursuant to an effective
registration statement, (b) pursuant to Rule 144 under the Securities Act or (c)
in transactions otherwise exempt from the registration requirements of the
Securities Act.
"Applicable Percentage" has the meaning set forth in the Purchase
Agreement.
"Articles of Incorporation" means the Articles of Incorporation of the
Company, as they may hereafter be amended or modified.
"Beneficial Owner" and "beneficial ownership" shall be determined in
accordance with Rule 13d-3 promulgated under the Exchange Act.
"Board" has the meaning set forth in Section 2.1(c) hereof.
"Business Day" has the meaning set forth in the Purchase Agreement.
"By-laws" means the By-laws of the Company, as they may hereafter be
amended or modified.
"Class A Common Stock" means the Class A Common Stock of the Company,
par value $0.01 per share .
"Class B Common Stock" means the Class B Common Stock of the Company,
par value $0.01 per share.
"Commission" means the United States Securities and Exchange
Commission, or any successor thereto.
"Common Stock" means the Class A Common Stock and Class B Common Stock
of the Company.
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<PAGE>
"Contemplated Transactions" has the meaning set forth in the Purchase
Agreement.
"Credit Agreement" has the meaning set forth in Section 13(a) hereof.
"Effective Time" shall mean the time when the Initial Closing is
completed.
"Exchange Act" means the Securities and Exchange Act of 1934, as
amended and the rules and regulations promulgated thereunder.
"Family Trust" means with respect to any Shareholder who is a natural
person, a trust for the benefit of a member of such Shareholder's Immediate
Family.
"GBCC" means the Georgia Business Corporation Code, as amended.
"Immediate Family" means with respect to any Shareholder who is a
natural person, such Shareholder's parents, children, siblings, grandparents,
grandchildren, nieces and nephews.
"Initial Closing" has the meaning set forth in the Purchase Agreement.
"Initiating Holder" has the meaning set forth in Section 5.1 hereof.
"Irrevocable Proxy" has the meaning set forth in Section 2.3 hereof.
"Lenders" shall have the meaning set forth in the Credit Agreement.
"Littlejohn" means Littlejohn Fund II, L.P., a Delaware limited
partnership.
"Littlejohn Permitted Transferee" means (a) any Affiliate of
Littlejohn, or (b) any Immediate Family Member, or Family Trust established by
an Immediate Family Member, of an Affiliate of Littlejohn who is a natural
person.
"Management Fee" has the meaning set forth in Section 13(a) hereof.
"Offered Securities" has the meaning set forth in Section 4.1 hereof.
"Option Period" has the meaning set forth in Section 4.3 hereof.
"Overadvance Fee" has the meaning set forth in Section 13(b) hereof.
"Participation Notice" has the meaning set forth in Section 4.1
hereof.
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<PAGE>
"Participation Right" has the meaning set forth in Section 4.3 hereof.
"Participating Shareholder" has the meaning set forth in Section 4.2
hereof.
"Person" means any individual, corporation, partnership, firm, joint
venture, limited liability company or partnership, association, joint-stock
company, trust, unincorporated organization or Governmental Body.
"Preferred Stock" means any series of preferred stock, par value $1.00
per share, of the Company, including the Series A Preferred Shares.
"Purchase Agreement" means that certain Securities Purchase Agreement,
dated as of February 18, 2000, by and among the Company, Quilvest and
Littlejohn, as amended from time to time.
"Purchaser" has the meaning set forth in Section 4.1 hereof.
"Quilvest" means Quilvest American Equity, Ltd., a British Virgin
Islands international company.
"Registrable Securities" has the meaning set forth in the Registration
Rights Agreement.
"Registration Rights Agreement" means that certain registration rights
agreement, dated today's date, among the Company, Littlejohn and Quilvest, as
the same may be amended or modified from time to time.
"Required Approval" has the meaning set forth in the Purchase
Agreement.
"Return Amount" has the meaning set forth in Section 4.5 hereof.
"Securities Act" means the Securities Act of 1933, as amended, and the
rules and regulations promulgated thereunder.
"Selling Shareholder" has the meaning set forth in Section 4.1 hereof.
"Securities" means and include (a) all shares of the Common Stock and
Preferred Stock of the Company, (b) all options, warrants or rights to acquire
shares of Common Stock or Preferred Stock, (c) all securities which are
convertible into or exchangeable or exercisable for, Common Stock or Preferred
Stock, and (d) all other securities of the Company which may be issued in
exchange for or in respect of shares of Common Stock or Preferred Stock (whether
by way of stock split, stock dividend, combination, reclassification,
reorganization or any other means).
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<PAGE>
"Series A Preferred Shares" means the Series A Cumulative Pay-in- Kind
Preferred Stock of the Company, as the same may be amended or modified from time
to time.
"Subsequent Preferred Shares" has the meaning set forth in the
Certificate of Designation for the Series A Preferred Shares.
"Third Party Offer Terms" has the meaning set forth in Section 4.1
hereof.
"Transfer" means any transfer of Securities, whether by sale,
assignment, gift, will, devise, bequest, operation of the laws of descent and
distribution, or in trust, pledge, hypothecation, mortgage, encumbrance or other
disposition. The verb to "transfer" shall mean to sell, assign, give, dispose,
transfer (including by gift, will, devise, bequest, or operation of laws of
descent and distribution, or in trust), pledge, hypothecate, mortgage, or
encumber.
"Voting Securities" has the meaning set forth in Section 2.1(a)
hereof.
"Warrants" has the meaning set forth in the preamble hereof.
2. Agreements to Vote; Irrevocable Proxy.
2.1 Voting for Matters to be Considered. Each of the Shareholders
hereby agrees that, until the Required Approval is obtained or the Company's
shareholders vote to reject the matters contemplated to be voted on pursuant to
Section 7.6 of the Purchase Agreement (the "Matters to be Considered"),
whichever shall occur first, at any meeting of the shareholders, however called,
such Shareholder shall:
(a) vote all Securities which are entitled by the GBCC, the
Articles of Incorporation or the By-laws to be voted ("Voting Securities") and
which are beneficially owned by it, in favor of the Matters to be Considered;
(b) vote all Voting Securities beneficially owned by him or
it against any action or agreement that would result, to its or his knowledge,
in a breach of any covenant, obligation or agreement or any representation or
warranty of the Company or Quilvest under or pursuant to the Purchase Agreement;
(c) vote all Voting Securities beneficially owned by him or
it against any action or agreement that would impede, interfere with, delay,
postpone or attempt to discourage obtaining the Required Approval, including (i)
any corporate transaction not entered into in the ordinary course of business,
including a merger, other business combination, reorganization, consolidation,
recapitalization, dissolution or liquidation involving the Company, (ii) a sale
or transfer of a material
-5-
<PAGE>
amount of assets of Company, (iii) any change in the board of directors of
Company (the "Board"), except in accordance with the Purchase Agreement, (iv)
any change in the capitalization of the Company, except in accordance with the
Purchase Agreement, (v) any change in the Articles of Incorporation, By-laws or
other organizational or constitutive documents of the Company, except in
accordance with the Purchase Agreement, or (vi) any other material change in the
corporate structure or business of the Company. Each Shareholder acknowledges
receipt and review of a copy of the Purchase Agreement.
2.2 Agreement to Vote on All Other Matters. Quilvest and de Vogel
hereby agree that, so long as the Purchase Agreement has not been terminated in
accordance with its terms, at any meeting of the shareholders, however called,
such Shareholder shall vote all Voting Securities which are beneficially owned
by him or it in accordance with written instructions which such Shareholder
reasonably believes in good faith after reasonable inquiry were signed by an
authorized officer of Littlejohn. In the absence of receipt of such written
instructions as to how such Voting Securities should be voted with respect to a
particular meeting, Quilvest and de Vogel shall refrain from voting such Voting
Securities on such particular matter. Notwithstanding anything to the contrary,
Littlejohn shall be entitled to exercise the voting rights attributable to such
Voting Securities at any time pursuant to the Irrevocable Proxy without notice
to Quilvest or de Vogel. Nothing contained in this Section 2.2 shall require
Quilvest or de Vogel, or shall permit Littlejohn through the exercise of the
Irrevocable Proxy, to vote the Voting Securities beneficially owned by Quilvest
or de Vogel, in the case of the election of members of the Board, in
contravention of the provision of Section 6 hereof.
2.3 Irrevocable Proxy. Contemporaneously with the execution of
this Agreement: (a) Quilvest and de Vogel shall deliver to Littlejohn a proxy in
the form attached hereto as Exhibit A, which shall become effective as of the
Effective Time and shall be irrevocable to the fullest extent permitted by law
(the "Irrevocable Proxy"), with respect to all Voting Securities owned of record
by each of them as of the Effective Time; and (b) Quilvest and de Vogel shall
cause to be delivered to Littlejohn additional Irrevocable Proxies executed on
behalf of each record owner of any Voting Securities owned beneficially (but not
owned of record) by him or it. From time to time after the date of this
Agreement: (i) if Quilvest or de Vogel shall become the record owner of
additional Voting Securities, it shall immediately deliver to Littlejohn an
Irrevocable Proxy with respect to such additional Voting Securities; and (ii) if
Quilvest or de Vogel shall become the beneficial owner (but not the record
owner) of additional Voting Securities, it shall immediately cause to be
delivered to Littlejohn an Irrevocable Proxy with respect to such additional
Voting Securities from the record holder of such additional Voting Securities.
The terms of any Irrevocable Proxy executed and delivered by de Vogel shall auto
matically terminate and be of no further force or effect at and after the
earlier of (x) such time as he no longer beneficially owns any shares of Class B
Common Stock or (y) he is no longer a member of the Board. The terms of any
Irrevocable Proxy
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executed and delivered by a record owner of Voting Securities which are
beneficially owned by de Vogel shall automatically terminate and be of no
further force or effect at and after the earlier of (x) such time as de Vogel no
longer beneficially owns any shares of Class B Common Stock or (y) de Vogel is
no longer a member of the Board.
2.4 Written Consents. The provisions of this Article 2 shall be
equally applicable to any action taken or proposed to be taken by the Company's
shareholders without a meeting, including any such action taken or proposed to
be taken by written consent pursuant to Section 14-2-704 of the GBCC.
2.5 General. The Company agrees to use its best efforts to cause
the Matters to be Considered to be presented for a vote of the Company's
shareholders as soon as practicable. Quilvest and de Vogel hereby confirm each
and every action to be taken by Littlejohn pursuant to the Irrevocable Proxy (so
long as such action was taken when the Irrevocable Proxy was in effect) as if it
were its own and waives any right to make any claim against Littlejohn that may
arise, directly or indirectly, as a result of Littlejohn's voting of any of the
Voting Securities pursuant to the Irrevocable Proxy. Each of Quilvest and de
Vogel hereby agrees, severally and not jointly, to defend, indemnity and hold
Littlejohn harmless from and against any Losses and Investigatory and Defense
Costs (as such terms are defined in the Purchase Agreement) that Littlejohn may
sustain, suffer or incur, directly or indirectly, as a result of a breach by it
of any of its representations, warranties, covenants or agreements contained in
this Agreement.
3. Transfers of Securities.
3.1 Except as expressly permitted by the terms of this Agreement,
each of de Vogel and Quilvest hereby agrees that he or it shall not Transfer, or
permit the Transfer of, all or any of the Securities beneficially owned by him
or it. Littlejohn agrees that it will not transfer any Securities if such
Transfer is prohibited by the terms and conditions of this Agreement. As a
condition to any Transfer to a Littlejohn Permitted Transferee, such Littlejohn
Permitted Transferee shall execute a counterpart agreeing to be bound by the
terms and conditions of this Agreement to the same extent as its transferor. No
Transfer shall be effective and the Company shall not, and shall not be
compelled to, recognize any Transfer or record any Transfer on its books if such
Transfer is prohibited by this Agreement, or issue any certificate representing
any Securities to any Person who has received such Securities in a Transfer made
in contravention of the terms of this Agreement, and only if such Person has
delivered to the Company and Littlejohn an executed counterpart where one is
required to be delivered hereunder.
3.2 Each of Quilvest and de Vogel shall be permitted to Transfer
Securities beneficially owned by it to any Affiliate of such Shareholder, and de
Vogel shall be permitted to transfer Securities beneficially owned by him to a
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member of his Immediate Family or to a Family Trust, provided that, in any such
case, any such transferee shall, as a condition to such Transfer, execute a
counterpart, and deliver such counterpart to the Company and Littlejohn,
providing that such transferee shall be bound by the terms and provisions of
this Agreement to the same extent as the transferor was bound.
3.3 In the case of a proposed Transfer of Securities by Quilvest
or de Vogel to someone other than one of its Affiliates, or, in the case of de
Vogel, to a member of his Immediate Family or to a Family Trust, then Quilvest
or de Vogel shall provide Littlejohn with written notice at least 20 days prior
to the anticipated Transfer. Such notice shall contain (a) the identity of the
proposed transferor and (b) the proposed number of Securities to be transferred.
Within 15 days of receipt of written notice of a proposed Transfer, Littlejohn
shall provide either (i) written consent to the proposed Transfer, which consent
may be denied for any reason or for no reason, and which may be given or denied
in Littlejohn's sole and absolute discretion, (ii) written notice specifying an
alternate number of shares to be transferred to which it would be prepared to
provide consent, or (iii) written notice to the applicable Shareholder of
Littlejohn's decision not to consent to the proposed Transfer. If Littlejohn
shall fail to respond, it shall be deemed not to have consented to such
Transfer. The proposed transferor shall provide Littlejohn with such other
information as Littlejohn shall reasonably request, including the terms and
conditions of the Transfer and information concerning the proposed transferee.
Upon receipt of the written consent of Littlejohn, if at all, the transferring
Shareholder may consummate the proposed Transfer. Such Shareholder may also
consummate a transfer of the number of Securities set forth in the alternate
proposal of Littlejohn, provided, however, that such Shareholder shall notify
Littlejohn of its decision to accept the Littlejohn alternate proposed number of
Securities to be transferred not less than 10 days after receipt of the same
from Littlejohn, if at all. No Transfer may be effected pursuant to this Section
3.3 until after receipt of the Required Approval.
3.4 Except as otherwise consented to in writing by Littlejohn,
which consent may be denied for any reason or for no reason, and which may be
given or denied in Littlejohn's sole and absolute discretion, in no event shall
any Transfer by Quilvest or de Vogel of its or his Class B Common Stock be
permitted under Section 3.3 if such Transfer would result in a conversion of the
Class B Common Stock into shares of Class A Common Stock.
3.5 Notwithstanding the provisions of Sections 3.3 and 3.4
hereof, commencing on the date which is five years after the date hereof, and
from time to time thereafter, so long as Littlejohn beneficially owns and is
entitled to the economic benefits of greater than 50% of the then outstanding
Common Stock and Preferred Stock (determined after giving effect to any Transfer
contemplated by this Section 3.5), Quilvest and de Vogel may sell Securities
pursuant to Rule 144 promulgated under the Securities Act and in private
transactions exempt from the Securities Act; provided, however, the amount of
Securities sold in all such
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transactions shall not exceed, in the aggregate for any three-month period, the
volume limitation set forth in Rule 144, regardless if such rule or limitation
is applicable to the sale.
3.6 Notwithstanding the provisions of Sections 3.3 and 3.4
hereof, Quilvest and de Vogel shall be entitled to sell Registrable Securities
pursuant to and in accordance with the terms and conditions of the Registration
Rights Agreement.
3.7 The parties agree that the transfer restrictions set forth in
this Article 3 are not manifestly unreasonable.
4. Participation Rights.
4.1 If Littlejohn or a Littlejohn Permitted Transferee (for
purposes of this section, a "Selling Shareholder") proposes to sell a portion of
the Securities beneficially owned by it ("Offered Securities") in a transaction
which is exempt from the registration requirements of the Securities Act and the
proposed transferee is not a Littlejohn Permitted Transferee (the "Purchaser"),
it shall give written notice ("Participation Notice") to Quilvest and de Vogel
hereunder and comply with this Section 4 before making such sale. The
Participation Notice shall identify the third party purchaser and the material
terms (including the proposed closing date) of the proposed sale of the Offered
Securities (the "Third Party Offer Terms").
4.2 Quilvest or de Vogel may elect to participate (such
Shareholder so electing being herein a "Participating Shareholder") in the
Selling Shareholder's sale of Offered Securities to the Purchaser in accordance
with this Section 4.
4.3 For a period of 15 days after receipt of the Participation
Notice (the "Option Period"), any such Participating Shareholder shall have the
right ("Participation Right") to Transfer to the Purchaser, on the same terms
and conditions as the Selling Shareholder, part or all of the Offered Securities
to be sold to the Purchaser.
4.4 The Participation Right shall be exercised, if at all, by any
Participating Shareholder giving written notice of exercise of the Participation
Right, including the number of Securities it desires to sell, to the Selling
Shareholder before the expiration of the Option Period.
4.5 The number of Offered Securities to be sold by the
Shareholders in a transaction governed by this Section 4 shall be determined as
follows: (a) until Littlejohn and the Littlejohn Permitted Transferees shall
have received Aggregate Proceeds equal to the amount invested by Littlejohn and
its
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Affiliates to purchase Securities, plus the amount of accrued and unpaid
dividends, if any, thereon (whether or not declared), in each case through the
date of the particular Participation Notice (the "Return Amount"), the Offered
Securities shall be allocated (without priority between the two groups described
below), between Littlejohn and the Littlejohn Permitted Affiliates, on the one
hand, and Quilvest, de Vogel and their respective permitted transferees who are
party to this Agreement, on the other hand, such that Littlejohn and the
Littlejohn Permitted Transferees will be permitted to sell up to Littlejohn's
Applicable Percentage of the Offered Securities, allocated among them as they
shall so determine, and Quilvest, de Vogel and their respective permitted
transferees who are party to this Agreement will be permitted to sell up to
Quilvest's Applicable Percentage of the Offered Securities, allocated among them
as they shall so determine; and (b) after Littlejohn shall have received the
Return Amount, the Offered Securities shall be allocated among Littlejohn,
Quilvest, de Vogel and their respective permitted transferees who are party to
this Agreement pro rata based upon the number of shares of Common Stock
beneficially owned by them. If this Section 4 shall have terminated as to de
Vogel pursuant to Section 11.3 hereof, this Section 4.5 shall be construed to
exclude de Vogel and his permitted transferees from all aspects hereof.
4.6 Notwithstanding anything to the contrary contained in this
Section 4, any sale of Securities in connection with an effective registration
statement, or pursuant to the provisions of Rule 144 of the Securities Act,
shall not be restricted by Section 4 or 5 of this Agreement.
5. Joinder Requirements.
5.1 If at any time Littlejohn (for purposes of this section, the
"Initiating Holder") proposes to sell at least 90% of the Securities
beneficially owned by it to a prospective purchaser which is not an Affiliate of
Littlejohn, and the purchaser of such Securities requires as a condition of the
sale that it acquire the same percentage of the Securities beneficially owned by
Quilvest and de Vogel, then Quilvest and de Vogel shall be required to sell the
same percentage of its respective Securities to the purchaser as Littlejohn is
selling to the purchaser on terms providing Quilvest and de Vogel with
substantially the same economic benefit as was provided to the Initiating
Holder, after taking into consideration the relative rights, preferences and
privileges of the various Securities to be purchased and sold, and otherwise on
the same terms and conditions as those offered to the Initiating Holder. Each of
Quilvest and de Vogel agrees to execute an irrevocable proxy in favor of the
purchaser under this Section 5 if the purchaser so requires it in order to
retain voting control of the Company, which proxy shall be in substantially the
form of Exhibit A attached hereto.
5.2 Any sale of Securities pursuant to this Section 5 shall not
be subject to the provisions of Sections 3 and 4 of this Agreement. Nothing
contained
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in this Section 5 shall apply to sales made pursuant to Rule 144 under the
Securities Act or pursuant to an effective registration statement.
6. Composition, Nomination and Election of Board.
(a) The Board shall at all times have nine directors.
(b) So long as there shall be any shares of Class B Common
Stock outstanding, the Board shall be comprised of two persons elected by the
holders of the Class A Common Stock (the "Class A Directors") and seven persons
elected by the holders of the Class B Common Stock (the "Class B Directors").
The Class A Directors, neither of whom shall be Affiliates or Associates (as
defined for purposes of the Securities Act or the GBCC) of Littlejohn or
Quilvest, shall be nominated in accordance with the requirements of the GBCC,
and the rules and regulations of the Commission and the New York Stock Exchange.
Littlejohn shall nominate five persons to stand for election to serve as Class B
Directors, Quilvest shall nominate one person to stand for election to serve as
a Class B Director and the directors then in office, acting by a majority, shall
nominate one person to stand for election to serve as a Class B Director, which
nominee shall not be an Affiliate or Associate of Littlejohn. Each of the
Shareholders shall vote their Voting Securities, to the extent entitled to vote
for the election of Class B Directors, in favor of the seven persons nominated
as provided above in this Section 6. If there shall occur a vacancy for any
reason, whether by resignation, removal or otherwise, in the position of any
Class B Director, then the Shareholder who originally nominated such Class B
Director, or the Board, acting by a majority of the directors then in office, if
such Class B Director was nominated by the Board, shall be entitled to nominate
such Class B Director's successor, and the Shareholders shall promptly take such
action, including causing such Shareholder's nominee(s) for Class B Director(s),
if any, to take such action, so as to cause the successor Class B Director to be
duly and properly elected or appointed. No Shareholder shall take any action, or
permit any Class B Director nominated by it to take any action, to remove a
Class B Director which was nominated by another Shareholder without the consent
of such other Shareholder. Any person nominated to serve as a Class B Director
by a Shareholder may be removed from such position, with or without cause, only
by the Shareholder nominating such Class B Director, and the other Shareholders
shall promptly take such action, including causing such Shareholder's nominee(s)
for Class B Director(s), if any, to take such action, as may be requested by the
Shareholder who nominated the Class B Director sought to be removed, to duly and
properly effect the removal of such Class B Director from such position. If
there shall occur a vacancy for any reason, whether by resignation, removal or
otherwise, in the position of any Class A Director, then the remaining Class A
Director, if there shall be one, shall be entitled to nominate an individual
(who shall be qualified to serve as a director by reason of his experience) to
fill the vacancy, and the other directors and the Shareholders shall promptly
take such action, including causing such Shareholder's nominee(s) for Class B
Director(s), if any, to take such action, so as to cause the proposed successor
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Class A Director to be duly and properly elected or appointed. If there shall be
no Class A Directors, then the vacancies in such directorships shall be filled
by the Class B Directors with persons who are not Affiliates or Associates of
Littlejohn or Quilvest.
(c) From and after the time that there are no longer any
shares of Class B Common Stock outstanding, Littlejohn shall nominate five
persons to stand for election to serve as directors, Quilvest shall nominate one
person to stand for election to serve as a director, and three persons, neither
of whom shall be Affiliates or Associates of Littlejohn or Quilvest, shall be
nominated in accordance with the requirements of the GBCC and the rules and
regulations of the Commission and the New York Stock Exchange. Each of the
Shareholders shall vote their Voting Securities in favor of the nine persons
nominated as provided above in this Section 6(c). If there shall occur a vacancy
for any reason, whether by resignation, removal or otherwise, in the position of
any director who was nominated by a particular Shareholder pursuant to this
Agreement, then the Shareholder who originally nominated such director, shall be
entitled to nominate such director's successor, and the Shareholders shall
promptly take such action, including causing such Shareholder's nominee(s) for
director(s), if any, to take such action, so as to cause the successor director
to be duly and properly elected or appointed. No Shareholder shall take any
action, or permit any director nominated by it to take any action, to remove a
director which was nominated by another Shareholder without the consent of such
other Shareholder. Any person nominated to serve as a director by a Shareholder
pursuant to this Agreement may be removed from such position, with or without
cause, only by the Shareholder nominating such director, and the other
Shareholders shall promptly take such action, including causing such
Shareholder's nominee(s) for director(s), if any, to take such action, as may be
requested by the Shareholder who nominated the director sought to be removed, to
duly and properly effect the removal of such director from such position. If
there shall occur a vacancy for any reason, whether by resignation, removal or
otherwise, in the position of any director who was not nominated by a particular
Shareholder pursuant to this Agreement, then the successor to any such director
(who shall be qualified to serve as a director by reason of his experience and
who shall not be an Affiliate or Associate of Littlejohn or Quilvest) shall be
nominated by the remaining directors, if any, who were not themselves nominated
by any Shareholder pursuant to this Agreement, and the other directors and the
Shareholders shall promptly take such action, including by causing the director
nominee(s), to cause the successor director to be duly and properly elected or
appointed. If there shall be no directors in office who were not nominated by a
Shareholder pursuant to this Agreement, then the vacancies in such directorships
shall be filled by the remaining directors then in office with persons who are
not Affiliates or Associates of Littlejohn or Quilvest.
(d) Notwithstanding the foregoing, the provisions of
subsections (b) and (c) shall remain in full force and effect, in the case of
Littlejohn, so long as it beneficially owns at least 25% of the Class A Common
Stock then
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outstanding on a fully-diluted basis; and the provisions of subsections (b) and
(c) shall remain in full force and effect, in the case of Quilvest, so long as
it beneficially owns at least 5% of Class A Common Stock then outstanding on a
fully-diluted basis and Littlejohn beneficially owns at least 25% of the Class A
Common Stock then outstanding on a fully-diluted basis. After such time, if any,
that either Littlejohn or Quilvest shall no longer be entitled to nominate
persons to stand for election to serve as a director in accordance with clause
(i) or clause (ii) above, upon the expiration of the term, resignation or
removal of any director nominated by such Purchaser which is no longer entitled
to nominate persons to stand for election to serve as a director, the successor
to such director(s) shall be designated or nominated in accordance with the
requirements of the GBCC and the rules and regulation of the Commission and the
principal national securities exchange or trading market on which shares of the
Class A Common Stock are then listed.
(e) Quilvest's initial director nominee shall be de Vogel.
Notwithstanding anything to the contrary, if, from and after the Effective Time
de Vogel ceases to serve as a member of the Board for any reason, he may not be
renominated or reappointed by Quilvest without the consent of Littlejohn.
(f) Each Shareholder shall vote their Voting Securities
against any proposal brought before the Company's Shareholders, including a
proposal to amend the Articles of Incorporation or the By-laws, which, if
adopted, would frustrate the provisions of this Section 6.
7. Stock Splits. If there shall be any change in the Securities of the
Company as a result of any merger, consolidation, reorganization,
recapitalization, stock dividend, split-up, combination, exchange or otherwise,
the provisions of this Agreement shall apply with equal force to additional
and/or substitute Securities, if any, received by each Shareholder in exchange
for or by virtue of its ownership of Securities.
8. Representations and Warranties of Littlejohn. Littlejohn represents
and warrants to Quilvest, de Vogel and the Company as follows:
8.1 Ownership of Shares. The Securities listed by its name on
Schedule 1 are all of the Securities beneficially owned by Littlejohn.
Littlejohn has with respect to the Securities listed by its name on Schedule 1
as of the consummation of the Initial Closing, good, valid and marketable title,
free and clear of all liens, encumbrances, restrictions, options, warrants,
rights to purchase, voting agreements or voting trusts, and claims of every kind
(other than the encumbrances created by this Agreement and other than
restrictions on transfer under applicable Federal and State securities laws).
8.2 Power; Non-Contravention; Binding Agreement. Littlejohn has
the full power and authority to enter into this Agreement and perform
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all of its obligations herewith. Neither the execution, delivery nor performance
by Littlejohn will violate its charter, by-laws or other organizational or
constitutive documents, or any other agreement, contract or arrangement to which
it is a party or is bound, including any voting agreement, shareholders
agreement or voting trust. This Agreement has been duly executed and delivered
by Littlejohn and constitutes a legal, valid and binding agreement of
Littlejohn, enforceable in accordance with its terms. Neither the execution or
delivery of this Agreement nor the consummation by Littlejohn of the
transactions contemplated hereby will (a) require any consent or approval of or
filing with any governmental or other regulatory body, other than filings
required under the federal or state securities laws, or (b) constitute a
violation of, conflict with or constitute a default under (i) any law, rule or
regulation applicable to Littlejohn, or (ii) any order, judgment or decree to
which Littlejohn is bound.
8.3 Finder's Fees. No person is, or will be, entitled to any
commission or finder's fees from Littlejohn in connection with this Agreement or
the transactions contemplated hereby exclusive of any commission or finder's
fees referred to in the Purchase Agreement.
9. Representations and Warranties of Quilvest and de Vogel. Each of
Quilvest and de Vogel represents and warrants, as to itself, to Littlejohn, each
other and the Company, as follows:
9.1 Ownership of Securities. The Securities listed by his or its
name on Schedule 1 are all of the Securities beneficially owned by him or it as
of the consummation of the Initial Closing. Such Shareholder does not have any
rights to acquire any additional Securities other than, in the case of Quilvest,
pursuant to (a) the Warrants issued in connection with the Initial Closing, (b)
Securities to be issued in the future pursuant to the Purchase Agreement, and
(c) pursuant to the terms of, or upon the exercise or conversion of, or any of
the Securities described in clauses (a) or (b). It has with respect to the
Securities listed by his, her or its name on Schedule 1 good, valid and
marketable title, free and clear of all liens, encumbrances, restrictions,
options, warrants, rights to purchase, voting agreements or voting trusts, and
claims of every kind (other than the encumbrances created by this Agreement and
other than restrictions on transfer under applicable Federal and State
securities laws). Neither the execution, delivery or performance of this
Agreement nor the consummation of the Contemplated Transactions will result in
or otherwise trigger an automatic conversion of the Class B Common Stock owned
by Quilvest or de Vogel into shares of Class A Common Stock, except as expressly
set forth in Section 14.2 hereof.
9.2 Power; Non-Contravention; Binding Agreement. Each of Quilvest
and de Vogel has the full, right, power and authority (and in the case of de
Vogel, legal capacity) to enter into this Agreement and perform all of its
obligations hereunder. Neither the execution, delivery nor performance of this
Agreement by such Shareholder will, in the case of Quilvest, violate the
charter, by- laws or other organizational or constitutive documents of Quilvest,
or, in the case of either Quilvest or de Vogel, any other agreement, contract or
arrangement to which each such Shareholder is a party or is bound, including any
voting agreement, shareholders agreement or voting trust. This Agreement has
been duly executed and delivered by each such Shareholder and constitutes a
legal, valid and binding agreement of such Shareholder, enforceable in
accordance with its terms. Neither the execution or delivery of this Agreement
nor the consummation by such Shareholder of the transactions contemplated hereby
will (a) require any consent or approval of or filing with any governmental or
other regulatory body, other than filings required under the federal or state
securities laws, or (b) constitute a violation of, conflict with or constitute a
default under (i) any law, rule or regulation applicable to any such
Shareholder, or (ii) any order, judgment or decree to which any such Shareholder
is bound.
9.3 Finder's Fees. No person is, or will be, entitled to any
commission or finder's fees from Quilvest or de Vogel in connection with this
Agreement or the transactions contemplated hereby. Quilvest hereby represents
and warrants to Littlejohn that the issuance of the shares of Common Stock
issued to Tinvest Limited pursuant to that certain merger of Pameco Holdings
Inc. with and into the Company on June 3, 1997 was approved by the Board, and
such merger was approved by the Board and, accordingly, the transaction which
resulted in Tinvest Limited, an Affiliate of Quilvest, becoming an "interested
shareholder" as defined in GBCC section 14-2-1110 was approved by the Board.
10. Representations and Warranties of the Company. The Company
represents and warrants to each Shareholder as follows:
10.1 Power Authority; Non-Contravention; Binding Agreement. The
Company has full right, power and authority to enter into and perform all of its
obligations under this Agreement. Neither the execution, delivery nor
performance of this Agreement by the Company will violate the charter, by-laws
or other organizational or constitutive documents of the Company or any of its
Subsidiaries, or any other agreement, contract or arrangement to which the
Company or any of its Subsidiaries is a party or is bound. This Agreement has
been duly executed and delivered by the Company and constitutes a legal, valid
and binding agreement of the Company, enforceable in accordance with its terms.
Neither the execution of this Agreement nor the consummation by the Company of
the transactions contemplated hereby will (a) require any consent or approval of
or filing with any governmental or other regulatory body other than filings
required under federal or state securities laws, or (b) constitute a violation
of, conflict with or constitute a default under (i) any law, rule or regulation
applicable to the Company or any of its Subsidiaries, or (ii) any order,
judgment or decree to which the Company or any of its Subsidiaries is bound.
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10.2. Finder's Fees. No person is, or will be, entitled to any
commission or finder's fee from the Company in connection with this Agreement or
the transactions contemplated hereby exclusive of any commission or finder's
fees referred to in the Purchase Agreement.
11. Termination; Securities Free from Agreement.
11.1 This Agreement (other than the provisions of the second and
third sentences of Section 2.5, and the provisions of Section 12 and Sections 18
through 30 which shall survive any termination of this Agreement), shall
terminate on the earliest of (i) 10 years from the date hereof, (ii) the mutual
agreement of the Shareholders which beneficially own a majority of the Class A
Common Stock issued or issuable upon conversion of the Series A Preferred Shares
or the Subsequent Preferred Shares or upon the exercise of the Warrants, in each
case which are subject to this Agreement, and (iii) the sale of 90% or more of
the Securities described in clause (ii) to a Person which is not a Littlejohn
Permitted Transferee or a permitted transferee of either Quilvest or de Vogel
who becomes party to this Agreement.
11.2 Securities which are sold by a Shareholder pursuant to and
in accordance with the provisions of Section 3.5, Article IV or Article V
hereof, or Registrable Securities which are sold pursuant to and in accordance
with the terms and conditions of the Registration Rights Agreement, shall be
deemed sold, upon the consummation of such sale in accordance therewith, free
and clear of this Agreement and the Irrevocable Proxy granted to Littlejohn.
11.3 From and after such time as de Vogel is no longer a member
of the Board, the provisions of Sections 3, 4 and 5 hereof will no longer be
applicable to him.
12. Expenses. Except as provided in Section 28, each party hereto will
pay all of its expenses in connection with the transactions contemplated by this
Agreement, including, without limitation, the fees and expenses of its counsel
and other advisors.
13. Fees. (a) Commencing August 31, 2001, the Company shall pay to
Littlejohn & Co., LLC and Quilvest or its designees, pro rata based upon their
respective Applicable Percentages, a management fee in such amount, not to
exceed $500,000 for each annual period ended on August 31st, determined by
Littlejohn and the Company (the "Management Fee"), payable on the last Business
Day in February and August of each year, or on such dates as the parties shall
otherwise agree. The foregoing fee shall continue as long as Littlejohn has the
right to elect a majority of the members of the Board, whether through the
ownership of securities, by contract or otherwise. Notwithstanding the
foregoing, the Management Fee shall not be paid (and shall not accrue), if (i)
at the time of the payment of the Management Fee the Company would not be, in
violation of the financial covenants contained in the Loan
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and Security Agreement between the Company, Fleet Bank, as agent, and the
lenders named therein), or (ii) the Board determines that the payment of the
Management Fee is reasonably likely to result in the Company not being able to
achieve its budgeted earnings before interest, takes, depreciation and
amortization (determined in accordance with generally accepted accounting
principles) for such fiscal year.
(b) To induce Littlejohn to enter into an agreement to
purchase or guarantee from the Lender any funds lent to the Company pursuant to
any overadvance under the Credit Agreement, up to $5 million, the Company agrees
to pay to Littlejohn a fee calculated at a rate of 8% per annum of the actual
amount of such overadvance outstanding from time to time (the "Overadvance Fee")
which Littlejohn is then so required to guarantee or purchase. The Overadvance
Fee shall be payable quarterly in arrears commencing three months after the
first day in which there is an overadvance pursuant to the Credit Agreement and
only with respect to such days in which there is an overadvance. Notwithstanding
the foregoing, the Company shall not be required to pay an Overadvance Fee to
the extent that, at the time of the payment thereof, or after giving effect to
the payment thereof, the Company is, or would be in violation of the financial
covenants contained in the Credit Agreement, in which case any such Overadvance
Fee would accrue and be payable as soon as possible.
14. Certain Covenants of Quilvest and de Vogel.
14.1. Except in accordance with the provisions of this Agreement
and the Purchase Agreement, each of Quilvest and de Vogel agree not to, directly
or indirectly:
(a) grant any proxies, deposit any Securities into a voting
trust or enter into a voting agreement with respect to any Securities; or
(b) except in connection with a Transfer permitted by and
made in accordance with Section 3.3, 3.5 or 3.6 or Article 4 or Article 5
hereof, and except as required in accordance with Section 14.2 below, convert
any shares of Class B Common Stock beneficially owned by it into shares of Class
A Common Stock or take any action or omit to take any action which could
reasonably be expected to result in the conversion of any Class B Common Stock
beneficially owned by it into shares of Class A Common Stock.
14.2 Immediately after the Required Approval is obtained, each
Shareholder shall take such action pursuant to the Articles of Incorporation and
otherwise to cause any Class B Common Stock beneficially owned by it to be
converted into shares of Class A Common Stock as soon as possible thereafter.
14.3 Each Shareholder agrees, while this Agreement is in effect
and to the extent disclosure would be required under the Exchange Act, to
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notify the Company, as soon as practicable, of the number of any Voting
Securities, beneficial ownership of which is acquired by such Shareholder after
the date hereof, and to prepare and file with the Commission an amendment to its
Schedule 13D, as and when required to be filed, which amendment shall comply as
to form in all material respects with the applicable provisions of the Exchange
Act. Such Shareholder represents and warrants that any such Schedule 13D
amendment, at the time it is filed with the Commission, will not contain an
untrue statement of a material fact or omit to state a material fact required to
be stated therein or necessary to make the statements therein, in light of the
circumstances under which they were made, not misleading; provided, no
representation or warranty is deemed made by such Shareholder with respect to
information supplied by any other Shareholder for use in preparing the Schedule
13D or any such Schedule 13D amendment. Such Shareholder will provide the other
Shareholders who are members of the "group" (within the meaning of the Exchange
Act) filing such Schedule 13D with a reasonable opportunity to review and
comment on any proposed Schedule 13D amendment prior to filing such with the
Commission (subject to any requirements of law to file promptly), will provide
such other Shareholders with a copy of all such filings made with the Commission
and will notify such other shareholders as promptly as practicable after the
receipt of any comments or any request for additional information from the
Commission or its staff and, upon request of any such other Shareholder, will
supply each of them and their legal counsel with copies of all correspondence
between it or any of its representatives, on the one hand, and the Commission,
its staff or any state securities administrators, on the other hand.
14.4 In the event the Company determines to raise additional
monies through the sale of additional Securities and Littlejohn is afforded the
opportunity to purchase from the Company such additional Securities then, from
time to time after the date hereof, subject to applicable law, Littlejohn shall
permit Quilvest to purchase from the Company such additional securities offered
for sale to Littlejohn in proportion with Littlejohn pro rata based upon their
respective Applicable Percentages. Notwithstanding the foregoing, the provisions
of this Section 14.4 shall not be applicable to any additional issuances of
securities set forth in or contemplated by the Purchase Agreement.
14.5 Quilvest shall deliver to Littlejohn, as a condition to the
effectiveness of this Agreement and the Initial Closing under the Purchase
Agreement, (a) an opinion of Paul Weiss Rifkind Wharton & Garrison to
Littlejohn, (b) an opinion of Harney, Westwood & Riegels and (c) an opinion of
Smith, Gambrell & Russell LLP. in substantially the form as set forth in
Exhibits B, C and D, respectively.
15. Financial Reports and Information. If the Company is not required
to file periodic reports under the Exchange Act, it will furnish to each
Shareholder financial statements (including accompanying notes) similar in form
and substance to those which would be required to be filed by it in any annual
or
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<PAGE>
quarterly report filed under the Exchange Act if the Company were subject to
such Exchange Act. Such reports will be furnished within 45 days after the end
of the first, second and third fiscal quarters of each year, and within 90 days
after the end of each fiscal year.
16. Transaction with Affiliates. The Company hereby agrees that it
shall not enter into any transaction with an Affiliate except upon fair and
reasonable terms that are no less favorable to it than it reasonably believes it
could obtain in a comparable arm's length transaction with a Person not its
Affiliate.
17. Legend and Stop Transfer Instructions. Immediately after the
execution of this Agreement (and from time to time prior to the termination of
this Agreement), each Shareholder, if the particular restriction is applicable
to it, shall request the Company to provide that each certificate representing
Securities beneficially owned by it will bear a legend in substantially the
following form:
THE SHARES REPRESENTED BY THIS CERTIFICATE (I) MAY NOT BE
SOLD, EXCHANGED OR OTHERWISE TRANSFERRED OR DISPOSED OF
EXCEPT IN COMPLIANCE WITH THE TERMS AND CONDITIONS OF THE
SHAREHOLDERS AGREEMENT, AND (II) ARE SUBJECT TO THE TERMS
AND CONDITIONS OF THE SHAREHOLDERS AGREEMENT DATED AS OF
FEBRUARY 18, 2000, AND THE IRREVOCABLE PROXY REFERRED TO
THEREIN, AS SUCH AGREEMENT MAY BE AMENDED FROM TIME TO TIME,
AND COPIES OF WHICH ARE ON FILE AT THE PRINCIPAL EXECUTIVE
OFFICES OF THE ISSUER.
Immediately after the execution of this Agreement (and from time to time prior
to the termination of this Agreement), each Shareholder shall request the
Company to require that the transfer agent for its Securities shall make a
notation in its records prohibiting the transfer of any of the Securities owned
of record by such Shareholder, except in accordance with the terms and
conditions of this Agreement. Each Shareholder agrees to surrender to the
Company each certificate representing Securities in order to effectuate the
provisions of this Section 17.
18. Survival of Representations and Warranties. Except as expressly
set forth herein, the representations, warranties, covenants and agreements made
by the Shareholders, or the Company in this Agreement shall survive the Initial
Closing.
19. Notices. All notices or other communications required or permitted
hereunder shall be in writing, shall be given by hand delivery, U.S. Express
Mail (return receipt requested), overnight courier guaranteeing next business
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<PAGE>
day delivery, or facsimile, and shall be deemed duly given when received,
addressed as follows:
If to the Company, to:
Pameco Corporation
1000 Center Place
Norcross, GA 30093
Attention: Vice Chairman and Chief Financial Officer
Facsimile: 770-798-7141
Telephone 770-798-0700
with a copy to:
Cadwalader, Wickersham & Taft
100 Maiden Lane
New York, NY 10038
Attention: E. David Robertson, Esquire
Facsimile: 212-504-6666
Telephone: 212-504-6000
If to Littlejohn, to:
Littlejohn & Co., LLC
115 East Putnam Avenue
Greenwich, CT 06830
Attention: Mr. Angus C. Littlejohn, Jr.
Facsimile: 203-861-4009
Telephone: 203-861-4005
with a copy to:
Pepper Hamilton LLP
3000 Two Logan Square
Eighteenth and Arch Streets
Philadelphia, PA 19103-2799
Attention: James D. Epstein, Esquire
Facsimile: 215-981-4750
Telephone: 215-981-4000
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<PAGE>
If to Quilvest or de Vogel, to:
c/o Three Cities Research, Inc.
650 Madison Avenue
New York, NY 10022
Attention: Mr. Willem F. P. de Vogel
Facsimile: 212-980-1142
Telephone: 212-605-3213
with a copy to:
Paul, Weiss, Rifkind, Wharton & Garrison
1285 Avenue of the Americas
New York, NY 10019-6046
Attention: Richard Borisoff, Esquire
Facsimile: 212-757-3990
Telephone: 212-373-3000
20. Entire Agreement; Amendment. This Agreement, together with the
documents expressly referred to herein, constitute the entire agreement among
the parties hereto with respect to the subject matter contained herein and
supersede all prior agreements and understandings among the parties with respect
to such subject matter (including any agreements between Quilvest and the
Company regarding shareholder rights.) This Agreement may not be modified,
amended, altered or supplemented except by an agreement in writing executed by
the party against whom such modification, amendment, alteration or supplement is
sought to be enforced.
21. Successors and Assigns. This Agreement shall be binding upon and
inure to the benefit of the parties hereto and their respective successors, and
assigns, but neither this Agreement nor any of the rights, interests or
obligations hereunder shall be assigned by any of the parties hereto without the
prior written consent of the other parties.
22. Governing Law; Consent to Jurisdiction. This Agreement shall be
construed and enforced in accordance with the laws of the State of Georgia
without regard to the application of the principles of conflicts or choice of
laws. Each party hereto submits to the jurisdiction of the courts of the State
of Georgia in Fulton County and to the jurisdiction of the United States
District Court for the Northern District of Georgia, and hereby agrees that
service of process may be effected in accordance with the delivery methods
described in Section 19 hereof.
23. Injunctive Relief. The parties agree that in the event of a breach
of any provision of this Agreement, the aggrieved party may be without an
adequate remedy at law. The parties therefore agree that in the event of a
breach of any provision of this Agreement, the aggrieved party shall be entitled
to obtain in any
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<PAGE>
court of competent jurisdiction a decree of specific performance or to enjoin
the continuing breach of such provision, in each case without the requirement
that a bond be posted, as well as to obtain damages for breach of this
Agreement. By seeking or obtaining such relief, the aggrieved party will not be
precluded from seeking or obtaining any other relief to which it may be
entitled.
24. Counterparts; Facsimile Signatures. This Agreement may be executed
in any number of counterparts (including by facsimile signature), each of which
shall be deemed to be an original and all of which together shall constitute one
and the same documents.
25. Severability. Any term or provision of this Agreement which is
invalid or unenforceable in any jurisdiction shall, as to such jurisdiction, be
ineffective to the extent of such invalidity or unenforceability without
rendering invalid or unenforceable the remaining terms and provisions of this
Agreement or affecting the validity or enforceability of any of the terms or
provisions of this Agreement in any other jurisdiction. If any provision of this
Agreement is so broad as to be unenforceable, such provision shall be
interpreted to be only so broad as is enforceable.
26. Further Assurances. Each party hereto shall execute and deliver
such additional documents as may be necessary or desirable to consummate the
transactions contemplated by this Agreement.
27. No Third Party Beneficiaries; No Partnership or Fiduciary
Relationship. Nothing in this Agreement, expressed or implied, shall be
construed to give any person, other than the parties hereto, any legal or
equitable right, remedy or claim under or by reason of this Agreement or any
provision contained herein. Nothing in this Agreement shall create, or is
intended to create, a fiduciary relationship among Quilvest, de Vogel and
Littlejohn or a partnership or similar relationship among Quilvest, de Vogel and
Littlejohn.
28. Legal Expenses. In the event any legal proceeding is commenced by
any party to this Agreement to enforce, or recover damages for any breach of,
the provisions hereof, the prevailing party in such legal proceeding shall be
entitled to recover in such legal proceeding from the losing party such
prevailing party's costs and expenses incurred in connection with such legal
proceedings, including reasonable attorneys fees and disbursements.
29. Interpretation. Unless the context of this Agreement otherwise
requires, (i) words of any gender include each gender and the neuter; (ii) words
using the singular or plural number also include the plural or singular number,
respectively; (iii) the terms "hereof," "herein," "hereby and derivative or
similar words refer to this entire Agreement; (iv) the term "Article" or
"Section" refer to the specified Article or Section of this Agreement; and (v)
the term "including" or similar words
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<PAGE>
shall be construed as to refer to such matter without limitation thereof.
Whenever this Agreement refers to a number of days, such number shall refer to
calendar days unless Business Days are specified. The table of contents and
headings contained in this Agreement are for reference purposes only and shall
not affect in any way the meaning or interpretation of this Agreement.
30. Effectiveness. This Agreement shall become effective as of the
Effective Time, and only if the Initial Closing actually occurs.
IN WITNESS WHEREOF, the parties have caused this Agreement to be
executed as of the date and year first above written.
PAMECO CORPORATION
By: /s/ Richard Martin
----------------------------
Name: Richard Martin
Title: VP
LITTLEJOHN FUND II, L.P.
By: Littlejohn Associates II, L.L.C.
its General Partner
By: /s/ Angus C. Littlejohn, Jr.
------------------------------
Name: Angus C. Littlejohn, Jr.
Title: Managing Member
QUILVEST AMERICAN EQUITY, LTD.
By: /s/ J. William Uhrig
----------------------------
Name: J. William Uhrig
Title: Attorney-in-Fact
/s/ Willem F.P. deVogel
----------------------------
Willem F.P. de Vogel
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EXHIBIT 6
IRREVOCABLE PROXY
The undersigned shareholder of Pameco Corporation, a Georgia
corporation (the "Company"), hereby irrevocably (to the fullest extent permitted
by law) appoints and constitutes Littlejohn Fund II, L.P., a Delaware limited
partnership ("Littlejohn"), the attorney and proxy of the undersigned with full
power of substitution and resubstitution, to the full extent of the
undersigned's rights with respect to (i) the issued and outstanding shares of
voting Securities of the Company, whether common stock, preferred stock or
otherwise, owned of record by the undersigned as of the date of this proxy,
which Securities are specified on the final page of this proxy and (ii) any and
all other Securities of the Company as to which the undersigned may acquire
record ownership after the date hereof (the Securities of the Company referred
to in (clauses (i) and (ii) of the immediately preceding sentence are
collectively referred to as the "Subject Shares"). As of the Effective Time, all
prior proxies given by the undersigned with respect to any of the Subject Shares
are hereby revoked, and no subsequent proxies will be given with respect to any
of the Subject Shares.
This proxy is irrevocable, is coupled with an interest and is granted
in connection with a Shareholders Agreement, dated as of the date hereof,
between the Company, Littlejohn and the undersigned, a copy of which is attached
hereto and made a part hereof (as hereafter amended from time to time, the
"Shareholders Agreement"), and is granted in consideration of Littlejohn
entering into the Securities Purchase Agreement, dated as of the date hereof,
among Littlejohn, Quilvest American Equity, Ltd. ("Quilvest") and the Company
(as hereafter amended from time to time, the "Purchase Agreement"). Capitalized
terms used but not otherwise defined in this proxy have the meanings ascribed to
such terms in the Purchase Agreement.
The attorney and proxy named above will be empowered, and may exercise
this proxy, to vote the Subject Shares, at any time and from time to time, in
its sole and absolute discretion (subject only to the terms and conditions of
the Shareholders Agreement), at any meeting of the shareholders of the Company,
however called, or in any written action by consent of shareholders of the
Company, with respect to:
(a) the Matters to be Considered;
(b) any action or agreement that would result in a breach of any
covenant, obligation or agreement or any representation or warranty of the
Company or Quilvest under or pursuant to the Purchase Agreement;
(c) any action or agreement that would impede, interfere with, delay,
postpone or attempt to discourage obtaining the Required Approval (as defined in
the Purchase Agreement), including (i) any corporate transaction not entered
into in the ordinary course of business, including a merger, other business
combination,
<PAGE>
reorganization, consolidation, recapitalization, dissolution or liquidation
involving the Company, (ii) a sale or transfer of a material amount of assets of
Company, (iii) any election of members to the board of directors of Company,
(iv) any change in the capitalization of the Company, except in accordance with
the Purchase Agreement, (v) any change in the Articles of Incorporation, By-laws
or other organizational or constitutive documents of the Company, except in
accordance with the Purchase Agreement, or (vi) any other material change in the
corporate structure or business of the Company; and
(d) so long as the Purchase Agreement has not been terminated in
accordance with its terms, on all other matters brought before a vote of the
shareholders, including a vote for the election of directors; provided, that
nothing contained in this proxy shall permit Littlejohn to vote the Subject
Shares in contravention of the provision of the Shareholders Agreement.
This proxy shall be binding upon the heirs, successors and assigns of
the undersigned (including any transferee of any of the Subject Shares in
accordance with the Shareholders Agreement).
The undersigned hereby confirms each and every action to be taken by
Littlejohn pursuant to this proxy as if it were its own and waives any right to
make any claim against Littlejohn that may arise, directly or indirectly, as a
result of Littlejohn's voting of any of the Subject Shares by virtue of this
proxy.
Any term or provision of this proxy which is invalid or unenforceable,
in any jurisdiction shall, as to that jurisdiction, be ineffective to the extent
of such invalidity or unenforceability without rendering invalid or
unenforceable the remaining terms and provisions of this proxy or affecting the
validity or enforceability of any of the terms or provisions of this proxy in
any other jurisdiction. If any provision of this proxy is so broad as to be
unenforceable, the provision shall be interpreted to be only so broad as is
enforceable.
Notwithstanding anything to the contrary, this proxy shall become
effective only as of, and subject to, the occurrence of the Effective Time, and
shall terminate immediately upon the termination of the Shareholders Agreement
pursuant to Section 11 thereof and shall terminate earlier as to particular
Subject Shares to the extent set forth in Section 11 of the Shareholders
Agreement. This proxy shall automatically terminate and be of no further force
or effect as of such date that the undersigned no longer beneficially owns any
shares of Class B Common Stock, par value $.01 per share, of the Company.
<PAGE>
Dated: February 18, 2000
Name: QUILVEST AMERICAN EQUITY, LTD.
By: /s/ J. William Uhrig
--------------------
Name: J. William Uhrig
Title: Attorney-in-Fact
Number of shares of Class A Common Stock,
$.01 par value per share, of the Company
owned of record as of the date of this proxy: 1,003,783
Number of shares of Class B Common Stock,
$.01 par value per share, of the Company
owned of record as of the date of this proxy: 846,217
Number of shares of Series A Cumulative
Convertible Pay-in-Kind Preferred Stock,
$1.00 par value per share, of the Company
owned of record as of the date of this proxy: _________
