<PAGE>
UNITED STATES SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C.
FORM 10-Q
(MARK ONE)
(X) QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(D) OF
THE SECURITIES EXCHANGE ACT OF 1934
FOR THE PERIOD ENDED MAY 31, 1997
OR
( ) TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(D) OF
THE SECURITIES EXCHANGE ACT OF 1934
FOR THE TRANSITION PERIOD FROM ______________ TO ___________
COMMISSION FILE NUMBER 001-12837
PAMECO CORPORATION
(formerly known as
New Pameco Georgia Corp)
(Exact name of registrant as specified in its charter)
GEORGIA 51-0287654
(State or other jurisdiction (I.R.S. employer
of incorporation or identification
organization) number)
1000 CENTER PLACE
NORCROSS, GA 30093
(Address of principal executive offices) (Zip Code)
(770)-798-0700
(Registrant's telephone number, including area code)
Indicate by check mark whether the registrant (1) has filed
all reports required to be filed by Section 13 or 15(d) of the
Securities Exchange Act of 1934 during the preceding 12 months (or for
such shorter periods that the registrant was required to file such
reports), and (2) has been subject to such filing requirements for the
past 90 days Yes ___ No X
---
Indicate the number of shares outstanding of each of the
issuer's classes of common stock, as of the latest practical date.
Class A Common Stock, $.01 par value, 4,632,948 shares and Class B
Common Stock, $.01 par value, 4,046,346 shares, both as of July 9,
1997.
1
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PAMECO CORPORATION
INDEX
<TABLE>
<S> <C>
PART I. FINANCIAL INFORMATION
Item 1. Financial Statements (Unaudited)
Condensed Consolidated Balance Sheets-May 31, 1997
and February 28, 1997...................................... 3
Condensed Consolidated Statements of Income-three
months ended May 31, 1997 and 1996......................... 4
Condensed Consolidated Statements of Cash Flows-three
months ended May 31, 1997 and 1996......................... 5
Notes to Condensed Consolidated Financial Statements....... 6
Item 2. Management's Discussion and Analysis of Financial
Condition and Results of Operations........................ 9
PART II. OTHER INFORMATION
Item 1. Legal Proceedings.......................................... 11
Item 2. Changes in Securities...................................... 11
Item 4. Submission of Matters to a Vote of Security Holders........ 11
Item 6. Exhibits and Reports on Form 8-K........................... 11
SIGNATURES
</TABLE>
2
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PART I. FINANCIAL INFORMATION
PAMECO CORPORATION
CONDENSED CONSOLIDATED BALANCE SHEETS
(In thousands, except share amounts)
<TABLE>
<CAPTION>
May 31, February, 28
1997 1997
-------------- ------------
(UNAUDITED)
<S> <C> <C>
Assets
Current assets:
Cash and cash equivalents $ 146 $ 145
Accounts receivable, less allowance of $2,700 at
May 31, 1997 and $2,535 at February 28, 1997 19,128 17,811
Inventories 113,122 107,477
Prepaid expenses and other current assets 1,142 932
------------- -----------
Total current assets 133,538 126,365
Property and equipment, net 6,070 5,647
Excess of cost over acquired net assets, net 8,829 8,411
Other assets 432 693
Deferred income tax assets 8,253 8,253
------------- -----------
Total assets $ 157,122 $ 149,369
============= ===========
Liabilities and shareholders' equity
Current liabilities:
Accounts payable $ 75,346 $ 57,024
Accrued expenses 17,002 20,717
Notes payable to affiliate 6,600 14,100
Current portion of capital lease obligations and other debt 248 375
------------- -----------
Total current liabilities 99,196 92,216
Long-term liabilities:
Debt 29,282 29,800
Debt to affiliates 4,500 4,500
Capital lease obligations 69 79
Warranty reserves and other 1,920 1,920
------------- -----------
Total long-term liabilities 35,771 36,299
Excess of acquired net assets over cost, net 5,917 6,223
Shareholders' equity:
Common stock, $.01 par value-authorized 13,750 shares;
6,358 and 6,358 shares issued and outstanding at
May 31,1997 and February 28, 1997, respectively 64 64
Capital in excess of par value 2,433 1,841
Retained earnings 24,241 23,226
------------- -----------
26,738 25,131
Note receivable from shareholder (600) -
Less treasury stock at cost 1,161 and 1,250 shares at
May 31, 1997 and February 28, 1997, respectively (9,900) (10,500)
------------- -----------
Total shareholders' equity 16,238 14,631
------------- -----------
Total liabilities and shareholders' equity $ 157,122 $ 149,369
============= ===========
</TABLE>
3
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PAMECO CORPORATION
CONDENSED CONSOLIDATED STATEMENTS OF INCOME
(In thousands, except share amounts)
(UNAUDITED)
<TABLE>
<CAPTION>
Three Months Ended
May 31
---------------------------------
1997 1996
------------- -------------
<S> <C> <C>
Net sales $ 113,735 $ 94,328
Costs and expenses:
Cost of products sold 87,124 72,316
Warehousing, selling, and administrative expenses 23,515 19,747
Amortization of excess of acquired net assets over cost (306) (306)
------------ ------------
110,333 91,757
------------ ------------
Operating earnings 3,402 2,571
Other expense:
Interest expense, net (1,219) (899)
Other expense (696) (254)
------------ ------------
Income before income taxes 1,487 1,418
Provision for income taxes 472 369
------------ ------------
Net income 1,015 1,049
Redeemable preferred stock dividends -- 125
------------ ------------
Net income applicable to common shareholders $ 1,015 $ 924
============ ============
Net income per share $ 0.18 $ 0.14
============ ============
Weighted average number of common and common
equivalent shares outstanding 5,494 6,598
============ ============
</TABLE>
4
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PAMECO CORPORATION
CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS
(In thousands)
(UNAUDITED)
<TABLE>
<CAPTION>
Three Months Ended
May 31
----------------------------
1997 1996
------------ ------------
<S> <C> <C>
Cash flows from operating activities
Net income $ 1,015 $ 924
Adjustments to reconcile net income to net cash provided by (used by)
operating activities:
Amortization of excess of acquired net assets over cost (306) (306)
Depreciation and other amortization 467 386
Gain on sale of property and equipment (1) (6)
Changes in operating assets and liabilities net of assets
acquired and liabilities assumed:
Accounts receivable (1,005) 16,445
Inventories, prepaid expenses and other assets (5,267) (19,717)
Accounts payable and accrued liabilities 14,589 22,475
--------- ---------
Net cash provided by operating activities 9,492 20,201
Cash flows from investing activities
Purchases of property, plant, and equipment (675) (408)
Proceeds from sale of property and equipment 28 13
Business acquisitions (1,282) (3,263)
--------- ---------
Net cash used in investing activities (1,929) (3,658)
Cash flows from financing activities
Borrowings on working capital facility 116,773 96,366
Repayments on working capital facility (117,282) (112,862)
Repayments on term loan (7,500) --
Payments on capital lease obligations (134) (122)
Payments on other debt (11) (7)
Exercise of stock options 592 --
--------- ---------
Net cash used in financing activities (7,562) (16,625)
--------- ---------
Net increase (decrease) in cash and cash equivalents 1 (82)
Cash and cash equivalents at beginning of period 145 115
--------- ---------
Cash and cash equivalents at end of period $ 146 $ 33
========= =========
Issuance of common stock in exchange for note receivable $ 600 $ --
========= =========
</TABLE>
5
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NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (UNAUDITED)
MAY 31, 1997
1. BASIS OF PRESENTATION
The accompanying unaudited Condensed Consolidated Financial Statements
have been prepared in accordance with generally accepted accounting principles
for interim financial information and with the instructions to Form 10-Q and
Article 10 of Regulation S-X. Accordingly, they do not include all of the
information and footnotes required by generally accepted accounting principles
for complete financial statements. In the opinion of management, all adjustments
(consisting of normal recurring accruals) considered necessary for a fair
presentation have been included. Operating results for the three month period
ended May 31, 1997 are not necessarily indicative of the results that may be
expected for the year ending February 28, 1998. The sale of products by Pameco
Corporation (the "Company") is seasonal, with sales generally increasing during
the warmer months beginning in April and peak in the months of June, July, and
August. For further information, refer to the consolidated financial statements
and footnotes thereto included in the Company's Registration Statement on Form
S-1 (No. 333-24043) and final prospectus dated June 4, 1997 filed with the
Securities and Exchange Commission.
The balance sheet at February 28, 1997 included herein has been derived
from the audited financial statements at that date but does not include all the
information and footnotes required by generally accepted accounting principles
for complete financial statements.
2. INVENTORIES
Inventories consist of goods held for resale and are stated at the
lower of cost or market. Cost is determined by the first-in, first-out method.
3. INITIAL PUBLIC OFFERING
On June 4, 1997 the Company completed an initial public offering
("IPO") of its Class A Common Stock. A total of 4,115,441 shares were sold at
$14 per share, including 536,797 shares sold pursuant to the underwriters
overallotment option and 578,644 shares sold by certain selling shareholders.
The Company did not receive any of the proceeds from the sale of shares of Class
A Common Stock by the selling shareholders. The net proceeds to the Company were
approximately $45.4 million and were used to repay $11.1 million of outstanding
indebtedness to certain members and affiliates of a group of investors in the
Company, to repay approximately $33.1 million of the outstanding balance of the
Company's $100.0 million revolving credit line (the "Working Capital Facility"),
and to repurchase 206,847 shares of Common Stock from certain shareholders,
including members of the aforementioned investor group, for an aggregate
purchase price of approximately $1.2 million.
On June 3, 1997, Pameco Holdings Inc. ("PHI") and Pameco Corporation,
both Delaware corporations, were merged with and into the Company, and in
connection therewith the shareholders of PHI received 1.25 shares of the
Company's Class A Common Stock or Class B Common Stock, as agreed upon among
themselves, for each share of Class A Common Stock and Class B Common Stock of
PHI held by them immediately prior to the merger. The Company's Class A Common
Stock entitles its holder to one vote per share, whereas the Class B Common
Stock generally entitles its holder to ten votes per share.
Prior to the IPO, certain shareholders of the Company agreed to sell to
the Company shares of Common Stock equal to the number of shares issued as
certain stock options were exercised at a price equal to the exercise price of
such stock options. The Company has repurchased the 206,847 shares subject to
this arrangement from such investors, and such shares have been retired. Upon
exercise of these stock options, the Company will issue its Common Stock.
6
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4. EARNINGS PER SHARE
Historical earnings per share was computed using the requirements of
Accounting Principles Board Opinion No. 15 and SEC Staff Accounting Bulletin No.
83.
Pursuant to SEC Staff Accounting Bulletin No. 83, common stock and
common stock equivalents issued at prices below the initial public offering
price per share ("cheap stock") during the twelve month period immediately
preceding the initial filing date of the Company's Registration Statement for
the IPO have been included in historical earnings per share as if outstanding
for all periods presented (using the treasury stock method at the IPO price).
Supplemental net income per common share was computed using the
weighted average number of common and common equivalent shares outstanding as
described above, and also considering the reduction in interest expense from the
repayment of long term debt of $44.2 million with proceeds of the IPO, as if
such shares had been issued and repayment had occurred at the beginning of the
fiscal period. Supplemental historical net income per share for the three months
ended May 31, 1997 was $.18.
5. ACQUISITIONS
In March 1997, the Company purchased the heating, ventilating, and air
conditioning ("HVAC") operations and related assets of Bellows-Evans, Inc., a
distributor of HVAC equipment in Birmingham, Alabama, a new market for the
Company. The acquired business had revenues in excess of $3.0 million for the
year ended May 31, 1996 and derived substantially all of its revenues from the
sale of HVAC products.
In April 1997, the Company purchased the HVAC operations and related
assets of Trigg Supply, Inc., a distributor of HVAC products in Ft. Worth,
Texas. The acquired business had revenues of approximately $1.3 million for the
year ended December 31, 1996 and derived all of its revenue from the sale of
HVAC products.
6. RECENT PRONOUNCEMENTS
In February 1997, the Financial Accounting Standards Board issued
Financial Accounting Standards No. 128, "Earnings per Share" ("SFAS 128") which
is required to be adopted for the year ending February 28, 1998. At that time,
the Company will be required to change the method currently used to compute
earnings per share and restate prior periods. Under the new requirements for
calculating earnings per share, the dilutive effect of stock options will be
excluded. Management believes the impact of the adoption of SFAS No. 128 will
not be material.
7. CONTINGENCIES
On November 18, 1996, United Refrigeration, Inc. ("United"), a
competitor of the Company, filed suit against Pameco in the United States
District Court for the Eastern District of Pennsylvania claiming that Pameco had
tortiously interfered with United's alleged contract to purchase Sid Harvey's
southeastern business operations (the "Southeastern Assets"). United asserts
that beginning on or about August 23, 1996, it met with Sid Harvey and
thereafter negotiated an agreement (allegedly finalized on or about October 24,
1996) to purchase the Southeastern Assets for approximately $26 million and that
Pameco tortiously interfered with this alleged contract by offering "substantial
inducements" to Sid Harvey and by itself purchasing the Southeastern Assets. In
the alternative, United claims that, should the agreement be deemed
unenforceable, Pameco tortiously interfered with United's prospective
contractual relations with Sid Harvey. On February 18, 1997, United filed an
amended complaint adding Sid Harvey as a defendant. In the amended complaint,
United claims that Sid Harvey (i) breached its agreement to sell the
Southeastern Assets to United; (ii) committed fraud in the inducement of that
alleged contract; (iii) negligently misrepresented certain facts concerning the
sale of
7
<PAGE>
the operations and Sid Harvey's intention to carry out the sale of those assets
and (iv) was unjustly enriched by certain information obtained from United
during the United-Sid Harvey negotiations.
Although the amended complaint does not demand specified damages, it
asserts that United should recover the "loss of its bargain," which United
estimates to be $11.4 million. Upon consummation of the Southeastern Assets
acquisition, Pameco agreed, based on certain written representations made by Sid
Harvey about the status of its discussions with United, to indemnify Sid Harvey
against all liabilities arising out of any action filed by United in connection
with the purchase of the Southeastern Assets.
On July 5, 1996, three former employees filed suit against Pameco and a
Company supervisor in the Superior Court of the State of California, County of
Stanislaus, alleging various tortious acts and that the Company maintained a
hostile work environment. The suit also asserts that in permitting the alleged
harassment of the plaintiffs by its supervisor that Pameco violated the
California Fair Employment Housing Act by failing to provide a harassment free
work place. The plaintiffs have cumulatively sought $1.8 million in damages,
including $1.5 million in punitive damages from Pameco.
The Company is involved in other claims and legal proceedings which
have arisen in the ordinary course of its business. The Company intends to
vigorously defend all such claims and does not believe any such matters or the
actions described above will have a material adverse affect on the Company's
results of operations or financial condition.
8
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PAMECO CORPORATION, INC
ITEM 2. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND
RESULTS OF OPERATIONS
The following table sets forth the percentage relationship of certain statement
of operations data to net revenue for the periods indicated.
<TABLE>
<CAPTION>
Three Months Ended
May 31
-----------------------------
1997 1996
----------- -----------
<S> <C> <C>
Net sales 100.0% 100.0%
Cost of products sold 76.6% 76.7%
----------- -----------
Gross profit 23.4% 23.3%
Warehousing, selling, and administrative expenses 20.7% 20.9%
Amortization of excess of acquired net assets over cost (0.3)% (0.3)%
----------- -----------
Operating earnings 3.0% 2.7%
Other expense:
Interest expense, net (1.1)% (1.0)%
Other expense (0.6)% (0.2)%
----------- -----------
Income before income taxes 1.3% 1.5%
Provision for income taxes 0.4% 0.4%
----------- -----------
Net income 0.9% 1.1%
=========== ===========
</TABLE>
RESULTS OF OPERATIONS
Net sales of $113.7 million in the first quarter ended May 31, 1997
increased 20.6% from $94.3 million for the comparable period in 1996. Same store
daily sales increased 6.9% in the first quarter compared to the prior year.
The net sales increase was a result of an 29.5% increase in the sales
of heating, ventilating, and air conditioning (HVAC) products. This increase is
primarily attributable to sales increases in the Company's ThermalZone private
label equipment line. Other factors influencing this increase included marketing
programs focused at compensating for the effects of unseasonably mild weather in
a large portion of the United States this spring as compared to the same period
in the prior year. Sales of refrigeration equipment, parts, and supplies
increased 13.6% in the first quarter compared to the prior year.
Gross profit in the quarter ended May 31, 1997 increased 20.9% to $26.6
million from $22.0 million in the previous year. The gross profit percentage
increased to 23.4% during the quarter ended May 31, 1997 as compared to 23.3%
during the previous year.
Warehousing, selling, and administrative expenses during the first
quarter ended May 31, 1997 increased 19.1% to $23.5 million from $19.7 million
in the previous year. Specifically, distribution expenses increased 13.0% due to
additional costs incurred to support acquired branches. As a percentage of net
sales, warehousing, selling, and administrative expenses decreased to 20.7% from
20.9% in the
9
<PAGE>
previous year. Similarly, distribution expenses decreased to 2.8% of net sales
from 3.0%. Salaries and wages also increased as the Company added to its sales
force at the local and national account levels.
Interest expense during the quarter ended May 31, 1997 increased to
$1.2 million from $899,000 in the previous year. The Company's average
borrowings increased by $36.5 million in the three months ended May 31, 1997
over the previous year. In the past twelve months, the Company has incurred
additional borrowings for strategic acquisitions and the repurchase of common
and preferred stock in November 1996. The Company successfully completed a
refinancing of its Credit Facilities (as defined below), including the addition
of an accounts receivable program (the "Securitization Program"), in early 1996,
lowering the rate of interest that it pays on its debt. The Securitization
Program was recorded as a sale of assets; therefore, approximately $44.6 million
of accounts receivable and debt are not reflected on the Company's balance sheet
at May 31, 1997. The discount on the sale of accounts receivable of $669,000 and
$194,000 for the three months ended May 31, 1997 and May 31, 1996, respectively,
was recorded as other expense on the income statement. The Company also
refinanced its subordinated debt in early 1996, achieving lower rates of
interest in the process. The average rate of interest on all debt, including the
Securitization Program, for the quarter ended May 31, 1997 was 8.17% as compared
to 8.78% for the previous year.
Income taxes increased $103,000 to $472,000 for the quarter ended May
31, 1997 due to the increase in the effective tax rate. The Company's effective
rate of 31.7% for the quarter ending May 31, 1997 is lower than the statutory
rate due primarily to nontaxable amortization income.
LIQUIDITY AND CAPITAL RESOURCES
The Company's liquidity needs arise from seasonal working capital
requirements, capital expenditures, interest and principal payment obligations,
and acquisitions. The Company has historically met its liquidity and capital
investment needs with internally generated funds and borrowings under its Credit
Facilities. For the three months ended May 31, 1997, cash from operating
activities was $9.5 million compared to cash from operating activities of $20.3
million for the three months ended May 31, 1996. The decrease in cash flows
from operating activities was primarily due to the sale of a substantial portion
of the Company's accounts receivable under the Securitization Program. Net cash
used in investing activities was $1.9 million for the three months ended May 31,
1997 as compared to $3.7 million for the three months ended May 31, 1996. In the
three months ended May 31, 1997, the Company purchased the HVAC operations and
related assets of Bellows-Evans, Inc. and Trigg Supply, Inc. for a combined
total of $1.3 million. Net cash used in financing activities was $7.6 million
for the three months ended May 31, 1997 as compared to $16.7 million for the
three months ended May 31, 1996. During the three months ended May 31, 1997, the
Company repaid $7.5 million of a $15 million term loan.
On June 4, 1997, the Company completed the IPO. A total of 4,115,441
shares were sold at $14 per share, including 536,797 shares sold pursuant to the
underwriters overallotment option and 578,644 shares sold by certain selling
shareholders. The Company did not receive any of the proceeds from the sale of
shares of Class A Common Stock by the selling shareholders. The net proceeds to
the Company were approximately $45.4 million and were used to repay $11.1
million of outstanding indebtedness to certain members and affiliates of a group
of investors in the Company, to repay approximately $33.1 million of the
outstanding balance of the Working Capital Facility, and to repurchase 206,847
shares of Common Stock from certain shareholders, including members of the
aforementioned investor group, for an aggregate purchase price of approximately
$1.2 million.
The Company's working capital increased to $34.3 million at May 31,
1997 from $34.2 million at February 28, 1997.
At May 31, 1997, the Company had senior borrowings of $73.9 million
under its $100 million Credit Facilities, of which $17.3 million was unused and
available. The Company's senior indebtedness consists of $29.3 million under the
Working Capital Facility and $44.6 million under the Securitization Program
(collectively, the "Credit Facilities"). The Securitization Program is an off
balance sheet
10
<PAGE>
arrangement that provides for the transfer and sale of accounts receivable to a
special purpose corporation. The weighted average interest rate on the Credit
Facilities at May 31, 1997 was 7.45%. This rate fluctuates with the commercial
paper and LIBOR rates. The Credit Facilities expire in November 2001 and have no
principal payment requirements prior to that date. The Company repaid a portion
of the Working Capital Facility with the net proceeds of the IPO. Following
consummation of the IPO, the Company has available approximately $48.5 million
of unused credit under the Credit Facilities.
In addition to the Credit Facilities, at May 31, 1997, the Company had
$11.1 million of indebtedness to certain members and an affiliate of the
Investor Group, all of which was repaid from the proceeds of the IPO.
The Company's capital expenditures, excluding acquisitions, for the
three months ended May 31, 1997, were $675,000 as compared to $408,000 for the
previous year. Such capital expenditures were primarily for branch and
distribution center leasehold improvements, forklifts and delivery vehicles, and
computer equipment and software.
Management believes that, with the consummation of the IPO, the Company
has adequate resources and liquidity to meet its borrowing obligations, fund all
required capital expenditures, and pursue its business strategy for existing
operations. However, the Company may require additional funding in order to
pursue significant acquisition opportunities. Future acquisitions may be
financed by bank borrowings, public offerings, or private placements of equity
or debt securities or a combination of the foregoing. Such financings may
require the consent of the Company's existing lenders.
PART II. OTHER INFORMATION
Item 1. Legal Proceedings
The Registrant hereby incorporates Note 7 to the Condensed Consolidated
Financial Statements (Unaudited) contained in Part I of this Report.
Item 2. Changes in Securities
In connection with the IPO, the Company issued shares of Class A and
Class B Common Stock. Holders of shares of Class A Common Stock and Class B
Common Stock vote as a single class on all matters submitted to a vote of the
shareholders, with each share of Class A Common Stock entitled to one vote and
each share of Class B Common Stock entitled to ten votes, except (i) for the
election of directors, (ii) with respect to any proposed "going private"
transaction between the Company and a Principal Shareholder (as defined in the
Company's Articles of Incorporation), and (iii) as otherwise provided by law.
The holders of the Class A Common Stock, voting as a separate class, are
entitled to elect two of the Company's directors, and the holders of the Class B
Common Stock, voting as a separate class, are entitled to elect the remaining
directors.
Item 4. Submission of Matters to a Vote of Security Holders
On March 24, 1997, the sole shareholder ratified the actions taken by
the incorporator and directors in incorporating the Company and ratified and
approved the Company's bylaws. On April 23, 1997, the sole shareholder approved
the merger of Pameco Corporation and Pameco Holdings, Inc., both Delaware
corporations, with and into the Company, a change of the Company's name from New
Pameco Georgia Corporation to Pameco Corporation, and Amended and Restated
Articles of Incorporation and Bylaws.
Item 6. Exhibits and Reports on Form 8-K
(a) Exhibits
10.14a Waiver and Tenth Amendment between Pameco Corporation and
General Electric Capital Corporation
10.19a Amendent No. 2 to Securitization Agreements among
Pameco Securitization Corporation, the Registrant,
Redwood Receivables Corporation, and General Electric
Capital Corporation, dated June 3, 1997.
11.1 Computation of Historical Earnings Per Share for the Quarters
Ended May 31, 1997 and 1996
11
<PAGE>
11.2 Computation of Supplemental Historical Earnings Per Share
27. Financial Data Schedule (for SEC use only)
(b) Reports on Form 8-K
None were filed.
SIGNATURES
Pursuant to the requirements of the Securities Exchange Act of 1934, the
Registrant has duly caused this report to be signed on its behalf by the
undersigned thereunto duly authorized.
PAMECO CORPORATION
-------------------------------
(Registrant)
By: /s/ THEODORE R. KALLGREN
-------------------------------
Theodore R. Kallgren
Chief Financial Officer
July 11, 1997 (Mr. Kallgren has been duly
authorized to sign on behalf
of the registrant)
12
<PAGE>
Exhibit Index
<TABLE>
<CAPTION>
Exhibit No. Exhibit
----------- -------
<S> <C>
10.14a Waiver and Tenth Amendment between
Pameco Corporation and General
Electric Capital Corporation
10.19a Amendment No. 2 to Securitization
Agreements among Pameco
Securitization Corporation, the
Registrant, Redwood Receivables
Corporation, and General Electric
Capital Corporation, dated June 3,
1997
11.1 Computation of Historical Earnings
Per Share for the Quarters Ended May
31, 1997 and 1996
11.2 Computation of Supplemental
Historical Earnings Per Share
27. Financial Data Schedule (for SEC use
only)
</TABLE>
13
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EXHIBIT 10.14a
WAIVER AND TENTH AMENDMENT
WAIVER AND TENTH AMENDMENT (this "Tenth Amendment"), dated as of June
---------------
3, 1997, among PAMECO CORPORATION (formerly named MLX Refrigeration & Air
Conditioning Group, Inc.), a Delaware corporation (the "Company"), NEW PAMECO
-------
GEORGIA CORPORATION, a Georgia corporation ("New Pameco"), and GENERAL ELECTRIC
----------
CAPITAL CORPORATION, a New York corporation ("GE Capital"), as the sole Lender
----------
and the Agent under the Credit Agreement described below.
W I T N E S S E T H :
-------------------
WHEREAS, the Company and GE Capital, as the Agent and as the sole
Lender, are parties to a Credit Agreement, dated as of March 19, 1992 (as
amended prior to the date hereof and as the same is being and may be further
amended, supplemented or otherwise modified from time to time, the "Credit
------
Agreement"); and
- ---------
WHEREAS, it is contemplated that the Company and its parent, Pameco
Holdings, Inc., a Delaware corporation ("Holdings"), be merged on this date with
--------
and into New Pameco, with New Pameco being the surviving corporation from such
merger (the "New Pameco Merger") and with New Pameco changing its name to
-----------------
"Pameco Corporation" upon the closing of the New Pameco Merger; and
WHEREAS, the purpose of the New Pameco Merger is to facilitate the
initial public offering of shares of the common stock of New Pameco (the "New
---
Pameco IPO") which is expected to close on or before June 10, 1997; and
- ----------
WHEREAS, the Company and New Pameco have requested that the Lenders
and the Agent consent to the New Pameco Merger and the New Pameco IPO and agree
to certain waivers and amendments in connection with the New Pameco Merger and
the New Pameco IPO; and
WHEREAS, the Lenders and the Agent are willing to grant such consent
and agree to such waivers and modifications upon the terms and subject to the
conditions set forth herein.
NOW, THEREFORE, in consideration of the premises and the mutual
covenants contained herein, the parties hereto hereby agree as follows:
1. Defined Terms. Terms defined in the Credit Agreement are used
-------------
herein with the meanings set forth in the Credit Agreement unless otherwise
defined herein.
2. Consent and Waivers. (a) The Agent and the Lenders hereby consent
-------------------
to, and the Agent and Lenders hereby waive any Default or any Event of Default
which may arise
<PAGE>
under Section 6.3 or 6.7 of the Credit Agreement solely as a result of, the
consummation of the New Pameco Merger and the New Pameco IPO, provided that the
New Pameco Merger and the New Pameco IPO are consummated on the terms and
conditions disclosed in the registration statement (file number 333-24043) filed
by New Pameco with the Securities and Exchange Commission (as amended as of the
date hereof, the "Registration Statement") or on such other terms and conditions
-----------------------
as may be approved in writing by the Lenders.
(b) Provided that New Pameco applies the proceeds of the New Pameco
IPO as provided in the Registration Statement, the Agent and the Lenders hereby
waive any requirement under Section 2.06(a) and 2.06(b) of the Credit Agreement
that the Company make any mandatory prepayment from the proceeds of the New
Pameco IPO.
3. Assignment and Assumption. (a) Effective upon the consummation of
-------------------------
the New Pameco Merger, and without the necessity of any further action, (i) the
Company shall be have assigned to New Pameco all of the Company's rights, titles
and interests in and to the Credit Agreement and the other Loan Documents
executed by the Company and New Pameco hereby agrees to accept such assignment
(and the Lenders and the Agent hereby consent to such assignment), and (ii) the
Company shall have assigned to New Pameco all of the Company's covenants,
representations, warranties, obligations, duties, indebtedness and liabilities
under the Credit Agreement and the other Loan Documents executed by the Company
(whether arising or accruing before, on or after the consummation of the New
Pameco Merger) and New Pameco shall have assumed such covenants,
representations, warranties, obligations, duties, indebtedness and liabilities
and to perform and observe the same to the same extent as if it were an original
signatory to the Credit Agreement and such other Loan Documents (and the Lenders
and the Agent hereby consent to such assumption).
(b) New Pameco agrees that all rights, titles and interests acquired
by it in any and all Collateral of the Company acquired by it as a result of the
consummation of the New Pameco Merger shall continue to be subject to the Liens
and other rights, titles and interests of the Lenders and the Agent under the
Company Security Agreement, the Company Pledge Agreement, the Company Patent and
Trademark Assignment, the Lock Box Agreement and any other Collateral Documents
or Loan Documents executed by the Company.
(c) For avoidance of doubt, New Pameco agrees that, from and after
the consummation of the New Pameco Merger, (i) New Pameco shall be deemed to
have granted Liens to the Agent, for the benefit of the Lenders, under the
Company Security Agreement, the Company Pledge Agreement, the Company Patent and
Trademark Assignment, the Lock Box Agreement and any other Collateral Documents
or Loan Documents executed by the Company on any and all Collateral then owned
or thereafter acquired by New Pameco, all in accordance with (and to the same
extent as if New Pameco were an original signatory to) such Collateral Documents
and Loan Documents, (ii) New Pameco shall be and serve as the "Company" for all
purposes of the Credit Agreement and the other Loan Documents executed by the
Company and shall perform and observe all of the covenants, agreements, terms,
conditions, obligations, duties and liabilities of the "Company" thereunder and
shall be deemed to have granted to the Agent (for
-2-
<PAGE>
the benefit of the Lenders) all of the Liens granted by the "Company"
thereunder, all to the same extent as if New Pameco were an original signatory
thereto and on the terms and subject to the conditions of the Credit Agreement
and such other Loan Documents, and (iii) all references to the "Company" or
"Holdings" in any of the Loan Documents shall be deemed to be references to New
Pameco as successor by merger to Old Pameco and Holdings.
4. Amendments of Section 1.1. Section 1.1 of the Credit Agreement is
-------------------------
hereby amended by:
(a) Deleting therefrom the definitions of the following terms:
"Adjusted Interest Coverage Ratio", "Guarantees", "Holdings", "Holdings
Guarantee", "Holdings Interest Expense", "Holdings Patent and Trademark
Assignment", "Holdings Pledge Agreement", "Holdings Preferred Stock",
"Holdings Security Agreement", "Management Services Agreement", "New
Subordinated Bridge Note", "Series A Preferred Stockholder Agreement", and
"Stockholder Agreements";
(b) Deleting therefrom the definition of the term "Applicable
Margin", and by substituting the following new definition of such term in
lieu thereof:
"Applicable Margin" for each Type of Loan shall mean for the period
-----------------
commencing with the Effective Date and each subsequent Adjustment Date and
ending on the day immediately preceding the next succeeding Adjustment
Date, the rate per annum set forth under the relevant column heading below
opposite the Interest Coverage Ratio for such period:
<TABLE>
<CAPTION>
Period Index Rate Loans Eurodollar Loans
------ ----------------- -----------------
<S> <C> <C>
Interest Coverage 0.00% 2.00%
Ratio less than 2.75 to 1.0
Interest Coverage 0.00% 1.75%
Ratio equal to or greater than
2.75 to 1.0
</TABLE>
(c) Adding thereto in correct alphabetical order the following new
definitions:
"IPO Documents" shall mean (i) the Underwriting Agreement, dated as of
-------------
June 3, 1997, among Pameco, Donaldson Lufkin & Jenrette Securities
Corporation and the other underwriters parties thereto, and (ii) the
Agreement and Plan of Merger, dated as of May 9, 1997, among New Pameco,
Holdings and the Company.
"New Pameco" shall have the meaning assigned to it in the Tenth
----------
Amendment.
-3-
<PAGE>
"New Pameco IPO" shall have the meaning assigned to it in the Tenth
--------------
Amendment.
"New Pameco Merger" shall have the meaning assigned to it in the Tenth
-----------------
Amendment.
"Registration Statement" shall have the meaning assigned to it in the
----------------------
Tenth Amendment.
"Tenth Amendment" shall mean the Waiver and Tenth Amendment, dated as
---------------
of June 3, 1997, among Pameco Corporation, New Pameco Georgia Corporation,
the Lender signatory thereto and the Agent.
"Tenth Amendment Effective Date" shall have the meaning given such
------------------------------
term in the Tenth Amendment.
5. Amendment of Section 2.13. Section 2.13 of the Credit Agreement
-------------------------
is hereby amended by deleting therefrom the date "November 21, 1996" as it
appears and substituting therefor the date "June 3, 1997".
6. Amendment of Section 2.18. Section 2.18 of the Credit Agreement
-------------------------
is hereby amended by deleting such section in its entirety and by substituting
the following new section in lieu thereof:
2.18 Use of Proceeds. The proceeds of the Loan shall be
---------------
used by the Company to finance the working capital and capital
expenditure requirements of the Company and its Subsidiaries in the
ordinary course of business.
7. Amendment of Section 3.1. Section 3.1 of the Credit
------------------------
Agreement shall be deleted in its entirety and the following new Section 3.1
shall be substituted in lieu thereof:
3.1 Financial Condition. (a)The audited consolidated
-------------------
balance sheets of the Company and its Consolidated Subsidiaries as at
February 28, 1997, and the related audited consolidated statements of
income, shareholder's equity and cash flows for the year then ended,
copies of which have heretofore be furnished to each Lender, are
complete and correct and present fairly the consolidated financial
condition of each such Person as at such date and the consolidated
results of its operations and its consolidated cash flows for the
fiscal period then ended. Also such financial statements have been
prepared in accordance with GAAP applied consistently throughout the
periods involved. The Company and its Consolidated Subsidiaries do
not have any material Contingent Obligation, contingent liability or
liability for taxes or long-term lease or unusual forward or long-term
commitment likely (individually or in the aggregate) to result in a
Material Adverse Effect that is not reflected in said financial
statements or in the notes thereto. During the
-4-
<PAGE>
period from February 28, 1997 to and including the date hereof there
has been no sale, transfer or other disposition by the Company or any
of its Consolidated Subsidiaries of any material part of its business
or property and no purchase or other acquisition of any business or
property (including any capital stock of any other Person) material in
relation to the consolidated financial condition of the Company and
its Consolidated Subsidiaries at February 28, 1997, except pursuant to
the New Pameco Merger as disclosed in the aforesaid audited financial
statements.
(b) Except as set forth on Schedule VII, there has been no
material adverse change in the business, operations, property or
condition (financial or otherwise) of the Company and its Consolidated
Subsidiaries taken as a whole since February 28, 1997.
(c) No dividends or other distributions have been declared,
paid or made upon any shares of capital stock of the Company or any of
its Subsidiaries, nor have any shares of capital stock of the Company
or any of its Subsidiaries been redeemed, retired, purchased or
otherwise acquired for value by the Company or any of its Subsidiaries
since February 28, 1997, except as may be permitted hereunder.
(d) The pro forma consolidated balance sheet of the Company
--- -----
and its Consolidated Subsidiaries as at February 28, 1997, a copy of
which has been furnished to each Lender, has been prepared in
accordance with GAAP (except that, in lieu of footnotes, the Company
may provide to the Agent such supporting information as it shall have
reasonably available), adjusted as if the New Pameco Merger, the New
Pameco IPO and all transactions contemplated by the IPO Documents and
the Registration Statement had occurred as at the date of such balance
sheet, and present fairly on a pro forma basis the consolidated
--- -----
financial condition of the Company and its Consolidated Subsidiaries
at such date assuming that the events described in this sentence had
actually occurred on such date.
8. Amendment of Section 3.18. Section 3.18 of the Credit
-------------------------
Agreement shall be deleted in its entirety and the following new Section 3.18
shall be substituted in lieu thereof:
3.18 Solvency and Equivalent Value. After giving effect to the
-----------------------------
New Pameco Merger, the New Pameco IPO, the transactions contemplated by the
IPO Documents, the repayment in full of the Junior Subordinated Debt, the
New Subordinated Debt and the Subordinated Bridge Loan and the payment of
all legal, investment banking, accounting and other fees and expenses
related hereto and thereto, each of the Company and its Subsidiaries will
be Solvent as of and on each of (i) the Tenth Amendment Effective Date and
(ii) the date on which the New Pameco IPO is consummated.
-5-
<PAGE>
9. Amendment of Section 3.22. Section 3.22 of the Credit Agreement
-------------------------
is hereby deleted in its entirety and the following new Section 3.22 is
substituted in lieu thereof:
3.22 IPO Documents and Registration Statement. A true and
----------------------------------------
complete copy of the form of each of the IPO Documents and Registration
Statement (including all exhibits, schedules and amendments to any thereof)
has been delivered to each Lender. Each of the IPO Documents and the
Registration Statement has been duly executed and delivered by the parties
thereto and is in full force and effect in accordance with its terms. As of
the Tenth Amendment Effective Date, the representations and warranties of
Holdings, the Company and New Pameco contained in the IPO Documents are
true and correct in all material respects as if made as of such date
(unless stated to relate to a specific earlier date, in which case such
representations and warranties shall be true and correct in all material
respects as of such earlier date); the Agent and the Lenders are entitled
to rely upon such representations and warranties to the same extent as
though the same were set in full herein. Neither Holdings, the Company,
New Pameco nor any of their respective Subsidiaries is in default under any
of the IPO Documents and, to the best knowledge of the Company after due
inquiry, no event or condition exists which would give any party the right
to terminate any of the IPO Documents or to fail to consummate the
transactions contemplated thereby.
10. Amendment of Section 3.24. Section 3.24 of the Credit Agreement
-------------------------
is hereby amended by deleting therefrom the references to the names "Brian R.
Esher" and "Thomas Twells" and by substituting reference to the name "Gerald V.
Gurbacki".
11. Addition of Section 3.34. A new Section 3.34 shall be inserted
------------------------
after Section 3.33 of the Credit Agreement and shall read as follows;
3.34 New Pameco Merger and IPO. As of the Tenth Amendment
-------------------------
Effective Date, all actions necessary for the consummation the New Pameco
Merger in accordance with the terms and conditions of the IPO Documents
have been duly taken.
12. Amendment of Section 6.1(b). Section 6.1(b) of the Credit
---------------------------
Agreement is hereby amended in its entirety to read as follows:
(b) Indebtedness of the Company in respect of the Junior
Subordinated Debt, the New Subordinated Debt, and the Subordinated
Bridge Loan; provided, however, that all Indebtedness with respect to
-------- -------
the foregoing subordinated debt shall be repaid in full by the Company
from the proceeds of the New Pameco IPO on the date on which the New
Pameco IPO is consummated, which date shall be no later than June 10,
1997, and shall not be outstanding thereafter;
13. Amendment of Section 6.3. Section 6.3 of the Credit
------------------------
Agreement is hereby amended by deleting the reference therein to the "Transfer
Agreement" and by substituting in lieu thereof a reference to the "Transfer
Agreement or the IPO Documents".
-6-
<PAGE>
14. Amendment of Section 6.4. Section 6.4 of the Credit
------------------------
Agreement is hereby deleted in its entirety and the following new Section 6.4
is substituted in lieu thereof:
6.4 Limitation on Dividends and Restricted Payments. The
-----------------------------------------------
Company shall not, and shall not permit any of its Subsidiaries to, declare
or pay any dividend (other than dividends payable solely in common stock of
the Company) on, or make any payment on account of, or set part assets for
a sinking or other analogous fund for, the purchase, redemption,
defeasance, retirement or other acquisition of, any shares of any class of
capital stock of the Company or any of its Subsidiaries, or any warrants or
options to purchase such stock, whether now or hereafter outstanding, or
make any other distribution in respect thereof, either directly or
indirectly, whether in cash or property or in obligations of the Company or
any of its Subsidiaries (collectively, "Restricted Payments"), except that:
-------------------
(a) any Subsidiary of the Company may make Restricted Payments to the
Company; and (b) the Company may make Restricted Payments in any one fiscal
year of the Company, beginning with the fiscal year ended February 28,
1998, so long as the aggregate amount of such payments for any such fiscal
year shall not exceed 75% of the Consolidated Net Income of the Company for
the immediately preceding fiscal year (as reflected in the audited
financial statements required by subsection 5.1(a) of the Credit Agreement
for such prior fiscal year of the Company, which financial statements must
have been prepared in accordance with GAAP applied consistently throughout
such fiscal year and certified with an Unqualified Opinion by an accountant
of nationally recognized standings selected by the Company and acceptable
to the Agent) and provided further, that no such payment shall be made
pursuant to this clause (b) when any Default or Event of Default has
occurred and is continuing.
15. Amendment of Section 6.5. Section 6.5 of the Credit Agreement is
------------------------
amended by deleting clause (g) thereof in its entirety and by substituting the
following new clause (g) in lieu thereof:
(g) the acquisition by purchase or otherwise of the capital
stock of or all or substantially all of the business, properties or assets
of any one or more Persons for aggregate consideration not to exceed
$1,000,000 in any one such acquisition transaction or in any series of
related acquisition transactions; provided that the aggregate consideration
for all acquisitions made pursuant to this paragraph (g) in any fiscal year
of the Company ending on or after February 28, 1997 shall not exceed
$5,000,000.
16. Amendment of Section 6.6. Section 6.6 of the Credit Agreement is
------------------------
amended by deleting clause (c) thereof in its entirety and by substituting the
following new clause (c) in lieu thereof:
(c) pursuant to the terms of the Transfer Agreement, the
Purchase Agreement or the IPO Documents.
-7-
<PAGE>
17. Amendment of Section 6.8. Section 6.8 of the Credit Agreement is
------------------------
hereby deleted in its entirety and the following new Section 6.8 is substituted
in lieu thereof:
6.8 Financial Condition Covenants. The Company shall not
-----------------------------
violate any of the financial covenants set forth on Schedule XX hereto.
-----------
18. Deletion of Section 6.10. Section 6.10 of the Credit Agreement
------------------------
is hereby deleted in its entirety.
19. Amendment of Section 7. Section 7 of the Credit Agreement shall
----------------------
be amended by deleting therefrom paragraphs (o), (p), (s), (t), (u), (v), (w),
(y), (z), and (ad).
20. Revision of Certain Schedules; New Schedule. Schedule II and
-------------------------------------------
Schedule III to the Credit Agreement are hereby deleted and replaced with the
updated Schedule II and Schedule III attached hereto, respectively. In
addition, Schedule XX attached hereto is deemed incorporated in the Credit
Agreement by this reference.
21. Termination of Holdings Loan Documents. On the Tenth Amendment
--------------------------------------
Effective Date, the Holdings Guarantee, the Holdings Security Agreement, the
Holdings Pledge Agreement, and the Holdings Patent and Trademark Assignment
shall be deemed terminated; provided, however, that such termination shall not
-------- -------
release, modify or impair the obligations, liabilities and indebtedness of New
Pameco, as successor by merger to the Company and Holdings, under the Collateral
Documents and other Loan Documents executed by the Company, all of which shall
remain in effect as amended or supplemented by this Tenth Amendment except as
provided in this Section 21.
22. New Promissory Note. On the Tenth Amendment Effective Date, New
-------------------
Pameco shall execute and deliver to the Agent a Promissory Note (the "New
---
Promissory Note"), substantially in the form of Annex A to this Tenth Amendment,
- ---------------
in substitution and exchange for, but not in payment of, that certain promissory
note of the Company made in favor of GE Capital in the principal amount of
$100,000.000.00.
23. New Fee Letter. On the Tenth Amendment Effective Date, the
--------------
Company, New Pameco, PSC, GE Capital and Redwood Receivables Company shall have
entered into a Fee Letter dated June 3, 1997 (the "New Fee Letter").
--------------
24. Conditions to Effectiveness. This Tenth Amendment shall become
---------------------------
effective (the actual date of such effectiveness, the "Tenth Amendment Effective
-------------------------
Date") as of the date first above written when:
- ----
(a) counterparts hereof shall have been duly executed and
delivered by each of the parties hereto and acknowledged by Holdings;
-8-
<PAGE>
(b) the Agent shall have received a Promissory Note, executed
and delivered by a duly authorized officer New Pameco, which conforms to
the requirements of the Credit Agreement and Section 22 of this Tenth
Amendment;
(c) the Agent shall have received, with a copy for each Lender,
a certificate of the Secretary or an Assistant Secretary of each of the
Company, New Pameco and Holdings (collectively, the "Credit Parties"),
--------------
dated as of the Tenth Amendment Effective Date, and certifying (i) that
attached thereto is a true and complete copy of the resolutions (which
resolutions are in form and substance reasonably satisfactory to each
Lender) of the board of directors of such Credit Party authorizing, as
applicable, the execution, delivery and performance of this Tenth
Amendment, the Consent and Acknowledgment attached hereto, the New
Promissory Note, the New Fee Letter, and related matters, in each case
certified by the Secretary or an Assistant Secretary of such Credit Party
as of the Tenth Amendment Effective Date and (ii) as to the incumbency and
specimen signature of such Credit Party's officers executing this Tenth
Amendment and all other documents required or necessary to be delivered
hereunder or in connection herewith. Such certificate shall state that the
resolutions thereby certified have not been amended, modified, revoked or
rescinded as of the date of such certificate;
(d) the Agent shall have received, with a copy for each Lender,
true and complete copies of the certificate of incorporation and by-laws of
each Credit Party, certified as of the Tenth Amendment Effective Date as
complete and correct copies thereof by the Secretary or an Assistant
Secretary of such Credit Party;
(e) the Agent shall have received with a counterpart for each
Lender the executed legal opinion of Kilpatrick Stockton LLP., counsel to
the Credit Parties, in form and substance satisfactory to the Agent;
(f) the consummation of the transactions contemplated hereby and
by the IPO Documents shall not contravene, violate or conflict with, or
involve the Agent or any Lender in a violation of, any Requirement of Law;
(g) the Agent shall have received evidence of the filing of such
Uniform Commercial Code financing statements as the Agent has requested in
order to continue in favor of the Agent, for the benefit of the Agent and
the Lenders, a perfected First Lien on the Collateral;
(h) the Agent shall have received copies of all lien searches
that it deems appropriate with respect to New Pameco, and none of such
searches shall have revealed that any existing liens or encumbrances on the
assets of New Pameco exists other than those liens or encumbrances that are
permitted under Section 6.2 of the Credit Agreement as amended hereby;
-9-
<PAGE>
(i) the Agent shall have received a Certificate of Existence,
dated no more than ten (10) days prior to the Tenth Amendment Effective
Date, with respect to New Pameco from the Secretary of State of Georgia;
(j) the New Pameco Merger shall have been consummated as
contemplated by the IPO Documents and the Registration Statement, the Agent
shall have received a fully executed copy of the related Agreement and Plan
of Merger, dated as of May 9, 1997, among Old Pameco, Holdings and New
Pameco, and the Agent shall have received a copy of the Certificate of
Merger for the New Pameco Merger as filed in the Offices of the Secretaries
of State of the States of Delaware and Georgia; and
(k) the Company and New Pameco shall have taken such other
actions and provided such other documentation as the Agent may request.
25. Conditions Subsequent. (a) (i) The New Pameco IPO shall
---------------------
have been consummated as contemplated by the IPO Documents and the Registration
Statement on or before June 10, 1997 and (ii) on the date that the New Pameco
IPO is consummated (which date shall be no later than June 10, 1997) (the "IPO
---
Closing Date"), New Pameco shall provide to the Agent evidence satisfactory to
- ------------
the Agent of the consummation of the New Pameco IPO;
(b) (i) On the IPO Closing Date, New Pameco shall have repaid in
full all of the then-outstanding Junior Subordinated Debt, New Subordinated Debt
and Subordinated Bridge Loan and (ii) the Agent shall have received on the IPO
Closing Date evidence satisfactory to the Agent that all such Indebtedness has
been paid in full and is no longer outstanding; and
(c) Within thirty (30) days after the Tenth Amendment Effective
Date, the Agent shall have received the results of a recent search by a Person
satisfactory to the Agent of the Uniform Commercial Code filings which may have
been filed in the jurisdictions set forth on Schedule III with respect to Old
Pameco, Holdings and New Pameco, or such other evidence satisfactory to Agent of
the filing of the financing statements filed pursuant to the Tenth Amendment and
any other financing statements that may have been filed by third party
creditors; all such searches and other evidence will be obtained at the expense
of New Pameco.
Any default by New Pameco in the observance or performance of any
of the foregoing conditions subsequent shall be deemed an "Event of Default"
under the Credit Agreement.
26. Representations and Warranties of the Company and New
-----------------------------------------------------
Pameco. Each of the Company and New Pameco represents and warrants that:
(a) each of this Tenth Amendment, the Credit Agreement as
amended by this Tenth Amendment, and the New Promissory Note has been duly
authorized, executed and delivered by each such party which is a signatory
thereto;
-10-
<PAGE>
(b) each of this Tenth Amendment, the Credit Agreement as
amended by this Tenth Amendment, and the New Promissory Note constitutes
the legal, valid and binding obligation of each such party which is a
signatory thereto;
(c) each of the representations and warranties set forth in
Section 3 of the Credit Agreement is true and correct as of the Tenth
Amendment Effective Date; provided that (i) references in the Credit
Agreement to "this Agreement" shall be deemed references to the Credit
Agreement as amended to date and by this Tenth Amendment and references to
the "Note" in the Credit Agreement shall be deemed references to the New
Promissory Note, (ii) all references to Schedule II and Schedule III to the
Credit Agreement shall be deemed to be references to Schedule II and
Schedule III attached to this Tenth Amendment, respectively, and (iii)
references in the Credit Agreement and the other Loan Documents to the
"Company" or "Holdings" shall be deemed to be references to New Pameco as
successor by merger to Old Pameco and Holdings, and New Pameco hereby makes
each such representation and warranty to and for the benefit of the Lenders
and the Agent as if the same were set forth in full herein;
(d) prior to the consummation of the Merger, New Pameco was not
engaged in any business activities and had incurred no Indebtedness;
(e) except for the actions and filings expressly provided for
herein and taken or made by the Pameco Entities, no further action is
required to be taken, or filings to be made, in order for each of the Loan
Documents to continue to be in full force and effect;
(f) after giving effect to this Tenth Amendment, there does not
exist any Default or Event of Default, and after giving effect to the New
Pameco Merger and the New Pameco IPO, there will not exist any Default or
Event of Default; and
(g) neither the Company, Holdings nor New Pameco has any trade
name, fictitious name, assumed name or "doing business as" name except as
disclosed on the updated Schedule II to the Credit Agreement attached
hereto and such schedule also lists the locations of New Pameco's chief
executive office and principal place of business (both before and after
giving effect to the New Pameco Merger) as well as all other locations
where New Pameco will be doing business after giving effect to the New
Pameco Merger.
27. Continuing Effects. Except as expressly waived hereby, the
------------------
Credit Agreement shall continue to be and shall remain in full force and effect
in accordance with its terms.
28. Expenses. New Pameco agrees to pay and reimburse the Agent for
--------
all of its out-of-pocket costs and expenses incurred in connection with (a) any
and all periodic field examinations relating to the Credit Agreement which have
been undertaken by General Electric
-11-
<PAGE>
Capital Corporation through and after the date hereof and (b) the negotiation,
preparation, execution, and delivery of this Tenth Amendment, including the
reasonable fees and expenses of counsel to the Agent.
29. Counterparts. This Tenth Amendment may be executed in any number
------------
of separate counterparts and all of said counterparts taken together shall be
deemed to constitute one and the same instrument.
30. GOVERNING LAW. THIS TENTH AMENDMENT SHALL BE GOVERNED BY, AND
-------------
CONSTRUED AND INTERPRETED IN ACCORDANCE WITH, THE LAW OF THE STATE OF NEW YORK.
-12-
<PAGE>
IN WITNESS WHEREOF, the parties hereto have caused this Tenth
Amendment to be duly executed and delivered by their proper and duly authorized
officers as of the day and year first above written.
PAMECO CORPORATION
By: _____________________________________________
Treasurer
NEW PAMECO GEORGIA CORPORATION
By: _____________________________________________
Treasurer
GENERAL ELECTRIC CAPITAL CORPORATION,
as Agent and as the sole Lender
By: _____________________________________________
Title:___________________________________________
ACKNOWLEDGMENT AND CONSENT
The undersigned does hereby acknowledge and consent to the within and
foregoing Waiver and Tenth Amendment.
PAMECO HOLDINGS, INC.
By:______________________________________________
Treasurer
-13-
<PAGE>
PROMISSORY NOTE
---------------
$100,000,000.00 New York, New York
March 19, 1992
Amended and Restated
June 3, 1997
FOR VALUE RECEIVED, the undersigned, PAMECO CORPORATION (the
"Company"), a Georgia corporation formerly known as New Pameco Georgia
-------
Corporation and the successor by merger to Pameco Corporation, a Delaware
corporation, hereby unconditionally promises to pay on the Termination Date, to
the order of GENERAL ELECTRIC CAPITAL CORPORATION, a New York corporation (the
"Lender") at the office of General Electric Capital Corporation, as agent for
- -------
the lenders parties to the Credit Agreement referred to below (in such capacity,
the "Agent"), located at 201 High Ridge Road, Stamford, CT 06927, in lawful
-----
money of the United States of America and in immediately available funds, the
principal amount equal to the lesser of (a) ONE HUNDRED MILLION AND 00/100
DOLLARS ($100,000,000.00) and (b) the aggregate unpaid principal amount of all
Loans made by the Lender to the undersigned pursuant to subsection 2.1 of said
Credit Agreement and all other Loans made or deemed made by the Company under
the Credit Agreement.
The undersigned further agrees to pay interest in like money at such
office on the unpaid principal amount hereof from time to time from the date
hereof at the applicable rate per annum as specified in subsection 2.4 of said
Credit Agreement until any such amount shall become due and payable (whether at
the stated maturity, by acceleration or otherwise), and thereafter on such
overdue amount at the rate per annum set forth in subsection 2.4(c) of said
Credit Agreement until paid in full (both before and after judgment). Interest
shall be due and payable in arrears on each Interest Payment Date, as such term
is defined in the Credit Agreement, provided that interest accruing pursuant to
subsection 2.4(c) shall be payable on demand.
The holder of this Note is authorized to record the date, Type and
amount of each Loan made by such Lender, each continuation thereof, each
conversion of all or a portion thereof to another Type, the date and amount of
each payment or prepayment of principal thereof and the length of each Interest
Period with respect thereto, and any such recordation shall constitute prima
-----
facie evidence of the accuracy of the information so recorded in the absence of
- -----
manifest error, provided that failure by the Lender to make such recordation on
--------
this Note shall not affect any of the obligations of the Company under this Note
or said Credit Agreement.
This Note is one of the Notes referred to in the Credit Agreement,
dated as of March 19, 1992 (as amended, supplemented or otherwise modified from
time to time, the "Credit Agreement"), among the undersigned, the Lender, the
----------------
other lenders and financial institutions parties thereto and General Electric
Capital Corporation, as Agent, is entitled to the benefits thereof, is secured
as provided therein and is subject to optional and mandatory prepayment in whole
or in part as provided therein. Terms used herein which are defined in the
Credit
<PAGE>
2
Agreement shall have such defined meanings unless otherwise defined herein or
unless the context otherwise requires.
This Note is being issued in replacement of and substitution for that
certain Promissory Note dated November 21, 1996 by the Company to the order of
the Lender in the principal amount of $100,000,000, which was issued in
replacement of and substitution for those certain prior notes executed by the
Company in favor of Lender. In addition to the indebtedness evidenced by this
Note, this Note shall also evidence any accrued and unpaid interest on such
preceding notes.
Upon the occurrence of any one or more of the Events of Default
specified in such Credit Agreement, all amounts then remaining unpaid on this
Note shall become, or may be declared to be, immediately due and payable all as
provided therein.
THIS NOTE SHALL BE GOVERNED BY, AND CONSTRUED AND INTERPRETED IN
ACCORDANCE WITH, THE LAWS OF THE STATE OF NEW YORK.
PAMECO CORPORATION, a Georgia corporation
By:_____________________________________________
Treasurer
<PAGE>
SCHEDULE I
TO NOTE
-------
BASE RATE LOANS AND CONVERSIONS
AND REPAYMENTS OF PRINCIPAL
<TABLE>
<CAPTION>
Amount of Amount of
Base Rate Eurodollar
Loans Con- Loans Amount of
Amount of verted into Converted Principal Unpaid Notation
Date Interest of Base Rate Eurodollar into Base Repaid Principal Made
- ---- ------ ----
Period Loans Loans Rate Loans Balance By
------ ----- ----- ---------- ------- --
<S> <C> <C> <C> <C> <C> <C> <C>
______ ________ __________ ____________ _______ ________ __________ _______
______ ________ __________ ____________ _______ ________ __________ _______
______ ________ __________ ____________ _______ ________ __________ _______
______ ________ __________ ____________ _______ ________ __________ _______
______ ________ __________ ____________ _______ ________ __________ _______
______ ________ __________ ____________ _______ ________ __________ _______
______ ________ __________ ____________ _______ ________ __________ _______
______ ________ __________ ____________ _______ ________ __________ _______
______ ________ __________ ____________ _______ ________ __________ _______
______ ________ __________ ____________ _______ ________ __________ _______
______ ________ __________ ____________ _______ ________ __________ _______
______ ________ __________ ____________ _______ ________ __________ _______
______ ________ __________ ____________ _______ ________ __________ _______
______ ________ __________ ____________ _______ ________ __________ _______
______ ________ __________ ____________ _______ ________ __________ _______
______ ________ __________ ____________ _______ ________ __________ _______
</TABLE>
<PAGE>
SCHEDULE II
TO NOTE
-----------
EURODOLLAR LOANS AND CONVERSIONS
AND REPAYMENTS OF PRINCIPAL
<TABLE>
<CAPTION>
Amount of Amount of
Base Rate Eurodollar
Loans Con- Loans
Amount of verted into Converted Amount of Unpaid
Eurodollar Interest Eurodollar into Base Principal Principal Notation
Date Loan Period Loans Rate Loans Repaid Balance Made By
- ---- ----- ------ ----- ---------- ------ ------- -------
<S> <C> <C> <C> <C> <C> <C> <C>
______ ________ __________ ____________ _______ ________ __________ _______
______ ________ __________ ____________ _______ ________ __________ _______
______ ________ __________ ____________ _______ ________ __________ _______
______ ________ __________ ____________ _______ ________ __________ _______
______ ________ __________ ____________ _______ ________ __________ _______
______ ________ __________ ____________ _______ ________ __________ _______
______ ________ __________ ____________ _______ ________ __________ _______
______ ________ __________ ____________ _______ ________ __________ _______
______ ________ __________ ____________ _______ ________ __________ _______
______ ________ __________ ____________ _______ ________ __________ _______
______ ________ __________ ____________ _______ ________ __________ _______
______ ________ __________ ____________ _______ ________ __________ _______
______ ________ __________ ____________ _______ ________ __________ _______
______ ________ __________ ____________ _______ ________ __________ _______
______ ________ __________ ____________ _______ ________ __________ _______
______ ________ __________ ____________ _______ ________ __________ _______
</TABLE>
<PAGE>
SCHEDULE II
to
Credit Agreement
LIST OF CHIEF EXECUTIVE OFFICE AND
PRINCIPAL PLACE OF BUSINESS OF THE COMPANY
-------------------------------------------
1000 Center Place
Norcross, Georgia 30093
LIST OF OTHER PLACES OF
BUSINESS OF THE COMPANY
-----------------------
See Attachment I
TRADE NAMES, FICTITIOUS NAMES, ASSUMED NAMES
AND "DOING BUSINESS AS" NAMES OF THE COMPANY
--------------------------------------------
Pameco Corp. Knoxville Refrigeration
National Temperature Control Centers R&R Supply
NTCC Thermal Company
Melchoir, Armstrong, Dessau Thermal Supply
Melco Westbrook Distribution
Graves Refrigeration Pameco-Aire
Graves Brothers Gulf Coast Air Conditioning
J & P Supply Rick's Supply
Chase Supply
Trigg Supply
Bellow-Evans
<PAGE>
SCHEDULE III
to
Credit Agreement
FILING OFFICES
<TABLE>
<CAPTION>
- --------------------------------------------------------------------------------
STATE FILING OFFICE
- --------------------------------------------------------------------------------
<S> <C>
Alabama Secretary of State
- --------------------------------------------------------------------------------
Alaska Department of Natural Resources
- --------------------------------------------------------------------------------
Arizona Secretary of State
- --------------------------------------------------------------------------------
Arkansas Secretary of State
Sebastian County Recorder
Washington County Recorder
- --------------------------------------------------------------------------------
California Secretary of State
- --------------------------------------------------------------------------------
Colorado Secretary of State
- --------------------------------------------------------------------------------
Connecticut Secretary of State
- --------------------------------------------------------------------------------
Delaware Secretary of State
- --------------------------------------------------------------------------------
Florida Secretary of State
- --------------------------------------------------------------------------------
Georgia Clerk of Superior Court of Gwinnett County
- --------------------------------------------------------------------------------
Hawaii Registrar of Conveyances
- --------------------------------------------------------------------------------
Idaho Secretary of State
- --------------------------------------------------------------------------------
Illinois Secretary of State
- --------------------------------------------------------------------------------
Indiana Secretary of State
- --------------------------------------------------------------------------------
Iowa Secretary of State
- --------------------------------------------------------------------------------
Kentucky Secretary of State
Jefferson County Recorder
Christian County Recorder
Daviess County Recorder
McCracken County Recorder
- --------------------------------------------------------------------------------
Lousiana Clerk of Court of Quachita Parish
- --------------------------------------------------------------------------------
Maryland State Department of Assessment and Taxation
- --------------------------------------------------------------------------------
Massachusetts Secretary of State
Town Clerk, Waltham, MA
Town Clerk, West Springfield, MA
- --------------------------------------------------------------------------------
Michigan Secretary of State
- --------------------------------------------------------------------------------
Minnesota Secretary of State
- --------------------------------------------------------------------------------
</TABLE>
<PAGE>
2
<TABLE>
<S> <C>
- --------------------------------------------------------------------------------
Mississippi Secretary of State
Washington County Recorder
Hinds County Recorder
Adams County Recorder
Pike County Recorder
Jones County Recorder
Lauderdale County Recorder
Lafayette County Recorder
Lee County Recorder
Lowndes County Recorder
- --------------------------------------------------------------------------------
Missouri Secretary of State
Cape Girardeau County Recorder
- --------------------------------------------------------------------------------
Montana Secretary of State
- --------------------------------------------------------------------------------
Nebraska Secretary of State
- --------------------------------------------------------------------------------
Nevada Secretary of State
- --------------------------------------------------------------------------------
New Jersey Secretary of State
- --------------------------------------------------------------------------------
New Mexico Secretary of State
- --------------------------------------------------------------------------------
New York Secretary of State
Nassau County Recorder
Albany County Recorder
Onondaga County Recorder
Monroe County Recorder
Erie County Recorder
Bronx County Recorder
Queens County Recorder
- --------------------------------------------------------------------------------
North Carolina Secretary of State
Buncombe County Recorder
Mecklenburg County Recorder
Guilford County Recorder
Catawba County Recorder
Forsyth County Recorder
Wake County Recorder
Pitt County Recorder
Cumberland County Recorder
Onslow County Recorder
New Hanover County Recorder
Durham County Recorder
- --------------------------------------------------------------------------------
North Dakota Secretary of State
- --------------------------------------------------------------------------------
Oklahoma Secretary of State
- --------------------------------------------------------------------------------
Oregon Secretary of State
- --------------------------------------------------------------------------------
</TABLE>
<PAGE>
3
<TABLE>
<S> <C>
- --------------------------------------------------------------------------------
Pennyslvania Secretary of State
Dauphin County Recorder
Luzerne County Recorder
Philadelphia County Recorder
Lehigh County Recorder
Montgomery County Recorder
Prussia County Recorder
- --------------------------------------------------------------------------------
Rhode Island Secretary of State
- --------------------------------------------------------------------------------
South Carolina Secretary of State
- --------------------------------------------------------------------------------
South Dakota Secretary of State
- --------------------------------------------------------------------------------
Tennessee Secretary of State
- --------------------------------------------------------------------------------
Texas Secretary of State
- --------------------------------------------------------------------------------
Utah Division of Corporation and Commercial Code
- --------------------------------------------------------------------------------
Virginia State Corporation Commission
County Clerk of Fairfax County, VA
City Clerk of Danville, VA
City Clerk of Lynchburg, VA
- --------------------------------------------------------------------------------
Washington Department of Licensing
- --------------------------------------------------------------------------------
Wisconsin Department of Financial Division of Corporate
and Consumer Services
- --------------------------------------------------------------------------------
Wyoming Natron County Recorder
- --------------------------------------------------------------------------------
</TABLE>
<PAGE>
SCHEDULE XX
to
Credit Agreement
FINANCIAL COVENANTS
-------------------
The Company shall not breach or fail to comply with any of the following
financial covenants, each of which shall be calculated in accordance with GAAP,
consistently applied:
(a) Company EBITDA. As of any date of determination, the Company
--------------
EBITDA for the preceding twelve consecutive fiscal months shall not be less than
$7,800,000.
(b) Interest Coverage Ratio. As of any date of determination, the
-----------------------
Interest Coverage Ratio for the preceding twelve consecutive fiscal months shall
not be less than 1.07 to 1.0.
(c) Fixed Charge Coverage Ratio. As of any date of determination, the
---------------------------
ratio of (i) Company EBITDA to (ii) Company Fixed Charges for the preceding
twelve consecutive fiscal months shall not be less than 1.05 to 1.0.
(d) Maintenance of Net Worth. The Company Net Worth on the last day
------------------------
of each fiscal quarter ending on the last day of any fiscal year set forth below
shall not be less than the amount set forth opposite such fiscal year:
<TABLE>
<CAPTION>
FISCAL YEAR ENDING AMOUNT
------------------ ------
<S> <C>
February 28, 1998 $52,500,000
February 28, 1999 $56,000,000
Each Fiscal Year
ending thereafter $59,500,000
</TABLE>
<PAGE>
EXHIBIT 10.19a
AMENDMENT NO. 2
TO SECURITIZATION AGREEMENTS
AMENDMENT NO. 2, dated as of June 3, 1997, among PAMECO
SECURITIZATION CORPORATION, a Delaware corporation ("PSC"), PAMECO CORPORATION,
---
a Delaware corporation ("Old Pameco"), NEW PAMECO GEORGIA CORPORATION, a Georgia
----------
corporation ("New Pameco"), REDWOOD RECEIVABLES CORPORATION ("Redwood") and
---------- -------
GENERAL ELECTRIC CAPITAL CORPORATION, a New York corporation ("GECC").
----
WHERAS, Old Pameco, as originator (in such capacity, the "Originator
----------
and PSC are parties to a Receivables Transfer Agreement, dated as of April 29,
1996 (as heretofore amended, supplemented or otherwise modified, the "Transfer
--------
Agreement"); and
- ---------
WHEREAS, PSC, as seller (in such capacity, the "Seller"), Redwood, as
------
purchaser (in such capacity, the "Purchaser"), GECC, as operating agent (in such
---------
capacity, the "Operating Agent") and collateral agent (in such capacity, the
---------------
"Collateral Agent") and Old Pameco, as servicer (in such capacity, the
- -----------------
"Servicer") are parties to a Receivables Purchase and Servicing Agreement, dated
--------
as of April 29, 1996 (as heretofore amended, supplemented or otherwise modified,
the "Purchase Agreement"); and
------------------
WHEREAS, Old Pameco, PSC, Redwood and GECC, as Operating Agent,
Collateral Agent and as lenders' agent, are parties to an Intercreditor
Agreement, dated as of April 29, 1996 (as heretofore amended, supplemented or
otherwise modified, the "Intercreditor Agreement"); and
-----------------------
WHEREAS, Redwood and GECC are parties to a Liquidity Loan Agreement,
dated as of April 29, 1996 (as heretofore amended, supplemented or otherwise
modified, the "Liquidity Agreement"; together with the Transfer Agreement, the
-------------------
Purchase Agreement, and the Intercreditor Agreement, the "Securitization
--------------
Agreements"); and
- ----------
WHEREAS, it is contemplated that Old Pameco and its parent company
Pameco Holding, Inc., a Delaware corporation ("Holdings"), will be merged with
--------
and into New Pameco with New Pameco being the surviving corporation from such
merger (the "New Pameco Merger"), and it is further contemplated that New Pameco
-----------------
will change its name to "Pameco Corporation" upon the closing of the New Pameco
Merger; and
WHEREAS, as a result of the New Pameco Merger, Old Pameco will assign
to New Pameco, and New Pameco will assume, all of Old Pameco's rights and
obligations under the Securitization Agreements and the other Related Documents,
and Redwood and GECC are willing to consent to the New Pameco Merger and permit
such assignment and assumption to occur on the terms and subject to the
conditions of this Amendment No. 2; and
<PAGE>
WHEREAS, the parties hereto also desire to further amend the
Securitization Agreements and certain ancillary documents and agreements
referred to therein in the manner set forth in this Amendment.
NOW, THEREFORE, in consideration of the premises and the mutual
covenants contained herein, the parties hereto agree as follows:
ARTICLE I
DEFINITIONS
SECTION 1.1 DEFINITIONS. All capitalized terms used herein, unless
-----------
otherwise defined, are used as defined in the Purchase Agreement.
ARTICLE II
CONSENTS, ACKNOWLEDGMENTS AND ASSUMPTIONS
SECTION 2.1 CONSENTS AND AGREEMENTS RELATING TO THE NEW PAMECO MERGER
---------------------------------------------------------
AND INITIAL PUBLIC OFFERING. (a) Redwood and GECC (in their respective
- ---------------------------
capacities as the Purchaser, the Operating Agent and the Collateral Agent)
hereby consent to the consummation of the New Pameco Merger and the related
initial public offering of shares of the c ommon stock of New Pameco (the "New
--------
Pameco IPO") and agree that the New Pameco Merger and the New Pameco IPO will
- ----------
not cause a Termination Event under Section 9.01(i) of the Purchase Agreement
provided that the New Pameco Merger and the New Pameco IPO are consummated on
the terms and conditions disclosed in the registration statement (file number
333-24043) filed by New Pameco with the Securities and Exchange Commission (as
amended as of the date hereof, the "Registration Statement") or on such other
----------------------
terms and conditions as may be approved in writ ing by Redwood and GECC.
(b) Redwood and GECC (in their respective capacities as the Purchaser,
the Operating Agent and the Collateral Agent) hereby further consent to Seller's
amending its Certificate of Incorporation as provided on Annex E attached hereto
-------
and Seller agrees to so amend its Certificate of Incorporation within two (2)
Business Days after the effective date of the New Pameco Merger, Seller shall
provide Redwood and GECC with copies of such amendment as filed with the
Secretary of State of Delaware.
SECTION 2.2 ASSIGNMENT AND ASSUMPTION. (a) On the Second Amendment
-------------------------
Effective Date (as defined below), and without the necessity of any further
action, (i) Old Pameco shall have assigned to New Pameco all of Old Pameco's
rights, titles and interests in and to the Securitization Agreements and the
other Related Documents and New Pameco hereby agrees to accept such assignment,
and (ii) Old Pameco shall have assigned to New Pameco all of Old Pameco's
covenants, representations, warranties, duties, obligations, indebtedness and
liabilities under the Securitization Agreements and the other Related Documents
(whether arising or accruing before, on or after the consummation of the New
Pameco Merger) and New Pameco shall have assumed such covenants,
representations, warranties, duties, obligations, indebtedness
2
<PAGE>
and liabilities and agrees to perform and observe them to the same extent as if
it were an original signatory to the Securitization Agreements and the other
Related Documents.
(b) New Pameco agrees that all rights, titles and interests acquired
by New Pameco in the Transferred Receivables of Old Pameco as a result of the
consummation of the New Pameco Merger shall continue to be subject to the
rights, titles and interests of Redwood under the Purchase Agreement and the
other Related Documents. For avoidance of doubt, New Pameco agrees that, from
and after the consummation of the New Pameco Merger, (i) New Pameco shall sell
or contribute to PSC all Receivables originated by New Pameco, all in accordance
with the Transfer Agreement, (ii) New Pameco shall be and shall serve as the
"Originator" and the "Servicer" for all purposes of the Securitization
Agreements and the other Related Documents and shall perform and observe all of
the covenants, duties, agreements, terms, conditions, obligations and
liabilities of the "Originator" and the "Servicer" thereunder to the same extent
as if it were an original signatory thereto and on the terms and subject to the
conditions of the Securitization Agreements and the other Related Documents, and
(iii) all references to the "Originator", the "Parent", the "Servicer" or the
"Inventory Borrower" in any of the Securitization Agreements or the other
Related Documents shall be deemed to be references to New Pameco as successor by
merger to Old Pameco and Holdings.
SECTION 2.3 NEW PAMECO NOTE AND ASSIGNMENT. On the Second Amendment
------------------------------
Effective Date, New Pameco shall execute and deliver to PSC a Pameco Note (the
"New Pameco Note") in substantially in the form of Annex A attached hereto, in
- ---------------- -------
substitution and exchange for, but not in payment of, that certain Pameco Note
of Old Pameco dated May 1, 1996, as amended and restated, made in favor of PSC
in the principal amount of $50,000,000, and New Pameco also shall execute and
deliver to PSC an Assignment (the "New Assignment") in substantially in the form
--------------
of the Annex B attached hereto, in substitution and exchange for the Assignment
-------
dated April 29, 1996 executed by Old Pameco in favor of PSC.
ARTICLE III
AMENDMENTS TO TRANSFER AGREEMENT
SECTION 3.1 AMENDMENTS TO SCHEDULE 1 AND 2. Schedules 1 and 2 to the
------------------------------
Transfer Agreement are deleted in their entireties and the updated Schedules 1
and 2 attached hereto are hereby substituted in lieu thereof, respectively.
ARTICLE IV
AMENDMENTS TO PURCHASE AGREEMENT
SECTION 4.1 AMENDMENT OF SECTION 4.01(C). Section 4.01(c) of the
----------------------------
Purchase Agreement is amended by deleting that Section in its entirety and
substituting therefor the following:
(c) The Seller is and has been a wholly-owned Subsidiary of Pameco
Corporation, a Georgia corporation and the successor by merger to Pameco
Corporation and Pameco Holdings, Inc., both formerly Delaware corporations.
3
<PAGE>
SECTION 4.2 AMENDMENT OF SCHEDULE 3. Schedule 3 to the Purchase
-----------------------
Agreement is amended by deleting therefrom the definitions of the terms "Daily
-----
Margin" and "Daily Default Margin" and by substituting the following new
- ------ --------------------
definitions of such terms in lieu thereof:
"Daily Margin" and "Daily Default Margin" mean the following
------------ --------------------
percentages divided by 360:
<TABLE>
<CAPTION>
Daily Margin Daily Default Financial Covenants
------------ ------------- -------------------
Margin
------
<S> <C> <C>
1.25% 3.25% Interest Coverage Ratio less than 2.75 to
1.0
1.00% 3.00% Interest Coverage Ratio equal to or
more than 2.75 to 1.0
</TABLE>
SECTION 4.3 AMENDMENTS TO EXHIBIT H. Exhibit H of the Purchase
-----------------------
Agreement is deleted in its entirety and the revised Exhibit H attached hereto
is hereby substituted in lieu thereof.
ARTICLE V
AMENDMENT TO ANNEX X
SECTION 5.1 AMENDMENT TO ANNEX X. Annex X is hereby amended by:
--------------------
(a) deleting from the definition of "Fee Letter" the date
----------
"January 24, 1997" and substituting therefor the date "June 3, 1997";
(b) deleting from the definition of "Originator" the reference to
"Pameco Corp., a Delaware corporation" and by substituting therefor a
reference to "Pameco Corporation, a Georgia corporation formerly known as
New Pameco Georgia Corporation and the successor by merger to Pameco
Corporation and Pameco Holdings, Inc."; and
(c) adding thereto in correct alphabetical order the following
new definitions:
"Amendment No. 2" shall mean the Amendment No. 2 to
---------------
Securitization Agreements, dated as of June 3, 1997, among the Seller,
Pameco Corporation, New Pameco Georgia Corporation, the Purchaser, the
Operating Agent and the Collateral Agent.
"New Pameco" shall have the meaning assigned to it in Amendment
----------
No. 2.
"Second Amendment Effective Date" shall have the meaning assigned
-------------------------------
to it in Amendment No. 2.
4
<PAGE>
ARTICLE VI
REPRESENTATIONS AND WARRANTIES
SECTION 6.1 REPRESENTATIONS AND WARRANTIES OF PSC, OLD PAMECO AND NEW
---------------------------------------------------------
PAMECO. Each of PSC, Old Pameco and New Pameco represents and warrants that:
- ------
(a) each of this Amendment No. 2, the New Pameco Note, the New
Assignment and the Fee Letter described in Section 7.1(b) hereof (the "New Fee
-------
Letter") has been duly authorized, executed and delivered by each such party
- ------
which is a signatory thereto;
(b) each of this Amendment No. 2, the New Pameco Note, the New
Assignment and the New Fee Letter constitutes the legal, valid and binding
obligation of each such party which is a signatory thereto;
(c) prior to the consummation of the Merger, New Pameco was not
engaged in any business activities and had incurred no Indebtedness (as defined
in the Credit Agreement); and
(d) each of the representations and warranties of such party set forth
in the Securitization Agreements or in this Amendment No. 2 is true and correct
as of the Second Amendment Effective Date (as defined below); provided, that (i)
-------- ----
all references in the Securitization Agreements to the Purchase Agreement and to
the Transfer Agreement, shall be deemed references to the Purchase Agreement as
amended by this Amendment No. 2 and to the Transfer Agreement as amended by this
Amendment No. 2, respectively, and all references to the Pameco Note and the
Assignment shall be deemed references to the New Pameco Note and the New
Assignment, respectively, and (ii) all references in the Securitization
Agreements to the "Originator", the "Servicer" or the "Parent" shall be deemed
to be references to New Pameco as successor by merger to Old Pameco and Holdings
(and New Pameco hereby makes each such representation and warranty to and for
the benefit of the Seller, the Purchaser, the Operating Agent and the Collateral
Agent as if the same were set forth in full herein).
SECTION 6.2 REPRESENTATIONS AND WARRANTIES OF REDWOOD. Redwood
-----------------------------------------
represents and warrants that:
(a) this Amendment No. 2 and the New Fee Letter have been duly
authorized, executed and delivered by Redwood;
(b) this Amendment No. 2 and the New Fee Letter constitute the legal,
valid and binding obligations of Redwood; and
(c) each of the representations and warranties of Redwood party set
forth in the Securitization Agreements is true an correct as of the Second
Amendment Effective Date (as defined below); provided, that references in the
-------- ----
Securitization Agreements to the Purchase Agreement and to the Transfer
Agreement, shall be deemed references to the Purchase Agreement as amended by
this Amendment No. 2 and to the Transfer Agreement as amended by this Amendment
No. 2, respectively, and references to the Pameco Note and the Assignment shall
be deemed references to the New Pameco Note and the New Assignment,
respectively.
5
<PAGE>
ARTICLE VII
CONDITIONS PRECEDENT
SECTION 7.1 CONDITIONS PRECEDENT. This Amendment No. 2 shall become
--------------------
effective (the actual date of such effectiveness, the "Second Amendment
----------------
Effective Date") as of the date first above written subject to the satisfaction
- --------------
of the following conditions precedent: that the Purchaser, the Operating Agent
and the Collateral Agent shall each have received the following, in form and
substance satisfactory to the Operating Agent:
(a) Counterparts hereof shall have been duly executed and delivered by
the parties hereto;
(b) PSC shall have received the New Pameco Note and the New
Assignment, executed and delivered by a duly authorized officer of New Pameco;
(c) the Fee Letter dated June 3, 1997, in the form of Annex D attached
-------
hereto, from the Operating Agent to Redwood shall have been entered into by all
parties thereto;
(d) the Purchaser, the Operating Agent and the Collateral Agent shall
have received executed legal opinions (including true sale and substantive
consolidation opinions) of Kilpatrick Stockton LLP, counsel to PSC, Old Pameco
and New Pameco, in form and substance satisfactory to the Operating Agent;
(e) the Operating Agent shall have received a certificate of the
Secretary or an Assistant Secretary of each of PSC, Old Pameco and New Pameco,
dated as of the Second Amendment Effective Date, and certifying (i) the names
and true signatures of the officers authorized on its behalf to sign this
Amendment No. 2 (and in the case of New Pameco, the New Pameco Note and the New
Assignment), (ii) a copy of such party's certificate of incorporation and by-
laws, and (iii) a copy of the resolutions of the board of directors of such
party approving this Amendment No. 2 and the related transactions to which it is
a party, all in form and substance satisfactory to the Operating Agent, and such
certificate shall state that the resolutions thereby certified have not been
amended, modified, revoked or rescinded as of the date of such certificate;
(f) the Operating Agent shall have received an Officer's Certificate
from each of PSC and New Pameco in the forms of Annexes C-1 and C-2 hereto,
-------------------
respectively;
(g) the Operating Agent shall have received a Certificate of
Existence, dated no more than ten (10) days prior to the Second Amendment
Effective Date, with respect to New Pameco from the Secretary of State of
Georgia;
(h) the Operating Agent shall have received certified copies of
requests for information or copies on form UCC-11 (or a similar search report
certified by a party acceptable to the Operating Agent), dated a date no more
than fourteen (14) days prior to the Second Amendment Effective Date, listing
all effective financing statements and other similar instruments and documents
which name New Pameco (under its present names and any previous names) as
debtor, together with copies of such financing statements none of which shall
cover any of the
6
<PAGE>
Transferred Receivables unless termination statements or statements of release
are provided with respect thereto;
(i) executed financing statements (form UCC-1), in respect of
Transferred Receivables, naming New Pameco as the assignee, or other similar
instruments or documents as may be necessary, or in the opinion of the Operating
Agent desirable, under the UCC of all appropriate jurisdictions or any other
applicable law (including the Assignment of Claims Act) to perfect the
Purchaser's and the Collateral Agent's interest in all Transferred Receivables
in which an interest may be assigned under the Securitization Agreement;
(j) the consummation of the transactions contemplated hereby and by
the Registration Statement shall not contravene, violate or conflict with, or
involve the Agent or any Lender in a violation of, any Requirement of Law (as
defined in the Credit Agreement);
(k) the New Pameco Merger shall have been consummated as contemplated
by the IPO documents and the Registration Statement , Redwood and GECC shall
have received a fully executed copy of the related Agreement and Plan of Merger,
dated as of May 9, 1997, among Old Pameco, New Pameco and Holdings, and Redwood
and GECC shall have received a copy of the Certificate of Merger for the New
Pameco Merger as filed with the offices of the Secretaries of State of the
States of Delaware and Georgia ; and
(l) PSC, Old Pameco and New Pameco shall have taken such other actions
and provided such other documentation as the Operating Agent may request.
SECTION 7.2 CONDITIONS SUBSEQUENT. (a) The New Pameco IPO shall be
---------------------
consummated as contemplated by the Registration Statement on or before June 10,
1997 and on the date that the New Pameco IPO is consummated (which date shall be
no later than June 10, 1997) (the "IPO Closing Date"), New Pameco shall provide
----------------
to Redwood and GECC evidence satisfactory to Redwood and GECC of the
consummation of the New Pameco IPO.
(b) Within two (2) Business Days after the effective date of the New
Pameco Merger, Seller shall provide Redwood and GECC with evidence satisfactory
to Redwood and GECC of the amendment of Seller's Certificate of Incorporation in
accordance with Section 2.1(b) of this Amendment No. 2.
Any default by New Pameco in the observance or performance of any of
the foregoing conditions subsequent shall be deemed a "Termination Event" and an
"Event of Servicer Termination" under the Purchase Agreement.
ARTICLE VIII
MISCELLANEOUS
SECTION 8.1 COUNTERPARTS. This Amendment No. 2 may be executed on
------------
any number of separate counterparts and all of said counterparts taken together
shall be deemed to constitute one and the same instrument.
7
<PAGE>
SECTION 8.2 GOVERNING LAW. THIS AMENDMENT NO. 2 SHALL BE GOVERNED
-------------
BY, AND CONSTRUED AND INTERPRETED IN ACCORDANCE WITH, THE LAW OF THE STATE OF
NEW YORK.
SECTION 8.3 EXPENSES. New Pameco agrees to pay and reimburse the
--------
Operating Agent for all of its out-of-pocket costs and expenses incurred in
connection with the negotiation, preparation, execution, and delivery of this
Amendment No. 2, including the reasonable fees and expenses of counsel to the
Operating Agent and the Collateral Agent.
8
<PAGE>
IN WITNESS WHEREOF, the parties hereto have caused this Amendment No.
2 to be duly executed and delivered by their proper and duly authorized officers
as of the day and year first above written.
PAMECO SECURITIZATION CORPORATION
By:____________________________________________
Title: Vice President
PAMECO CORPORATION
By:____________________________________________
Title: Treasurer
NEW PAMECO GEORGIA CORPORATION
By:____________________________________________
Title: Treasurer
REDWOOD RECEIVABLES CORPORATION
By:____________________________________________
Title:
GENERAL ELECTRIC CAPITAL CORPORATION
as Operating Agent and Collateral Agent
By:____________________________________________
Title:
GENERAL ELECTRIC CAPITAL CORPORATION
as Liquidity Agent
By:____________________________________________
Title:
GENERAL ELECTRIC CAPITAL CORPORATION
as Letter of Credit Agent and Letter of
Credit Provider
By:____________________________________________
Title:
9
<PAGE>
ANNEX A
PAMECO NOTE
$50,000,000.00 May 1, 1996
Amended and Restated
June 3, 1997
FOR VALUE RECEIVED, PAMECO CORPORATION ("Pameco"), a Georgia
------
corporation formerly known as New Pameco Georgia Corporation and the successor
by merger to Pameco Corporation ("Old Pameco") and Pameco Holdings, Inc., both
----------
Delaware corporations, hereby promises to pay to PAMECO SECURITIZATION
CORPORATION (the "Lender"), for its account, the principal sum of FIFTY MILLION
------
DOLLARS ($50,000,000) (or such lesser amount as shall equal the aggregate unpaid
principal amount of the PRC Loans made by the Lender to Pameco under the
Transfer Agreement referred to below), in lawful money of the United States of
America and in immediately available funds immediately on the demand of the
Lender.
The date, amount and interest rate, of each PRC Loan made by the
Lender to Pameco, and each payment made on account of the principal thereof,
shall be recorded by the Lender on its books and, prior to any transfer of this
Note, endorsed by the Lender on the schedule attached hereto or any continuation
thereof.
This Note is the Pameco Note referred to in the Receivables Transfer
Agreement (as modified and supplemented and in effect from time to time, the
"Transfer Agreement") dated as of May 1, 1996 by and among Old Pameco and the
- -------------------
Lender and evidences PRC Loans made by the Lender thereunder. Capitalized terms
used in this Note and not defined herein have the respective meanings assigned
to them in the Transfer Agreement.
The Transfer Agreement provides for prepayments of PRC Loans upon the
terms and conditions specified therein.
Notwithstanding any other provisions contained in this Note, if at any
time the rate of interest payable by Pameco under this Note, when combined with
any and all other charges provided for in this Note, in the Purchase Agreement
or in any other document (to the extent such other charges would constitute
interest for the purpose of any applicable law limiting interest that may be
charged on this Note), exceeds the highest rate of interest permissible under
applicable law (the "Maximum Lawful Rate"); then so long as the Maximum Lawful
-------------------
Rate would be exceeded the rate of interest under this Note shall be equal to
the Maximum Lawful Rate. If at any time thereafter the rate of interest payable
under this Note is less than the Maximum Lawful Rate, Pameco shall continue to
pay interest under this Note at the Maximum Lawful Rate until such time as the
total interest paid by Pameco is equal to the total interest that would have
been paid had such applicable law not limited the interest rate payable under
this Note. In no event shall the total interest received by the Lender under
this Note exceed the amount which the
<PAGE>
Lender could lawfully have received had the interest due under this Note been
calculated since the date of this Note at the Maximum Lawful Rate.
If any payment under this Note falls due on a day which is not a
Business Day, then such due date shall be extended to the next succeeding
Business Day and interest (calculated at the Pameco Interest Rate for each day
during the period then ending) shall be payable on the principal so extended.
This Note is being issued in replacement of and substitution for that
certain Pameco Note dated May 1, 1996, as amended and restated as of January 24,
1997, by Old Pameco to the order of the Lender in the principal amount of
$50,000,000. In addition to the indebtedness evidenced by this Note, this Note
shall also evidence any accrued and unpaid interest on such preceding note.
Pameco expressly waives presentment, demand, diligence, protest and
all notices of any kind whatsoever with respect to this Note.
This Note is made and delivered in New York, New York and shall be
governed by, and construed in accordance with, the internal laws (without
application of its conflict of laws provisions) of the State of New York.
IN WITNESS WHEREOF, Pameco has caused this Note to be signed and
delivered by its duly authorized officer as of the date set forth above.
PAMECO CORPORATION
By:__________________________________
Name: Mary M. McCulley
Title: Treasurer
<PAGE>
ANNEX B
ASSIGNMENT
ASSIGNMENT, dated as of June 3, 1997 between Pameco Corporation (the
"Originator"), a Georgia corporation formerly known as New Pameco Georgia
- -----------
Corporation (and the successor by merger to Pameco Corporation and Pameco
Holdings, Inc., both Delaware corporations), and Pameco Securitization
Corporation, a Delaware corporation ("PSC").
1. We refer to the Receivables Transfer Agreement dated as of April
29, 1996, as amended (the "Transfer Agreement") between the Originator and PSC.
------------------
All provisions of such Transfer Agreement are incorporated herein by reference.
All capitalized terms shall have the meanings set forth in the Transfer
Agreement.
2. The Originator does hereby sell or contribute, to PSC, without
recourse, except as provided in Section 4.04 of the Transfer Agreement, all
right, title and interest of the Originator in and to all Transferred
Receivables transferred from time to time from the Originator under the Transfer
Agreement.
3. THIS CERTIFICATE OF ASSIGNMENT SHALL BE GOVERNED BY AND CONSTRUED
IN ACCORDANCE WITH THE LAWS OF THE STATE OF NEW YORK.
IN WITNESS WHEREOF, the parties have caused this Agreement to be
executed by their respective officers thereunto duly authorized, as of the date
first above written.
PAMECO CORPORATION, a PAMECO SECURITIZATION
Georgia corporation CORPORATION, a Delaware corporation
By:____________________________ By:__________________________________
Name: Mary M. McCulley Name: Mary M. McCulley
Title: Treasurer Title: Vice President
<PAGE>
ANNEX C-1
FORM OF OFFICER'S CERTIFICATE OF SELLER
---------------------------------------
PAMECO SECURITIZATION CORPORATION
OFFICER'S CERTIFICATE
I, Mary M. McCulley, the duly elected Vice President of Pameco
Securitization Corporation (the "Seller"), hereby certify pursuant to Section
------
7.1(f) of Amendment No. 2 to Securitization Agreements, dated as of June 3, 1997
("Amendment No. 2"; capitalized terms used but not defined in this Officer's
---------------
Certificate having the meaning set forth in Amendment No. 2), among the Seller,
Pameco Corporation, New Pameco Georgia Corporation, Redwood Receivables
Corporation, and General Electric Capital Corporation, and for the benefit of
the Purchaser, the Operating Agent and General Electric Capital Corporation, as
follows:
(1) After giving effect to the effectiveness of Amendment No. 2, no
Termination Event or Incipient Event will have occurred and be continuing; and
(2) The representations and warranties of the Seller contained in
Section 4.01 of the Purchase Agreement, in the Transfer Agreement, in Amendment
No. 2, and in any other document, certificate or financial or other statement
delivered by the Seller in connection with the Purchase Agreement or the
Transfer Agreement are true and correct in all material respects on and as of
the date of this Officer's Certificate and with the same force and effect as
though such representations and warranties had been made as of such date, except
to the extent any such representations and warranties relate solely to an
earlier date.
IN WITNESS WHEREOF, I have signed and delivered this Officer's
Certificate this 3rd day of June, 1997.
PAMECO SECURITIZATION CORPORATION
By:__________________________________
Name: Mary M. McCulley
Title: Vice President
<PAGE>
ANNEX C-2
FORM OF OFFICER'S CERTIFICATE OF SERVICER
-----------------------------------------
PAMECO CORPORATION
OFFICER'S CERTIFICATE
I, Mary M. McCulley, the duly elected Treasurer of Pameco Corporation
(the "Servicer"), a Georgia corporation formerly known as New Pameco Georgia
--------
Corporation, and the successor by merger to Pameco Corporation and Pameco
Holdings, Inc., both Delaware corporations, hereby certify pursuant to Section
7.1(f) of Amendment No. 2 to Securitization Agreements, dated as of June 3, 1997
("Amendment No. 2"; capitalized terms used but not defined in this Officer's
---------------
Certificate having the meaning set forth in Amendment No. 2), among Pameco
Securitization Corporation, Pameco Corporation, the Servicer, Redwood
Receivables Corporation, and General Electric Capital Corporation, and for the
benefit of the Purchaser, the Operating Agent and General Electric Capital
Corporation, as follows:
(1) After giving effect to the effectiveness of Amendment No. 2, no
Termination Event or Incipient Event will have occurred and be continuing; and
(2) The representations and warranties of the Servicer contained in
Section 4.01 of the Purchase Agreement, in the Transfer Agreement, in Amendment
No. 2, and in any other document, certificate or financial or other statement
delivered by the Servicer in connection with the Purchase Agreement or the
Transfer Agreement are true and correct in all material respects on and as of
the date of this Officer's Certificate and with the same force and effect as
though such representations and warranties had been made as of such date, except
to the extent any such representations and warranties relate solely to an
earlier date.
IN WITNESS WHEREOF, I have signed and delivered this Officer's
Certificate this 3rd day of June, 1997.
PAMECO CORPORATION
By:__________________________________
Name: Mary M. McCulley
Title: Treasurer
<PAGE>
ANNEX D
June 3, 1997
Pameco Corporation
1000 Center Place
Norcross, Georgia 30093
Pameco Securitization Corporation
1000 Center Place - Suite A
Norcross, Georgia 30093
Ladies and Gentlemen:
We refer to (i) the Receivables Purchase and Servicing Agreement dated
as of April 29, 1996, as amended (the "Purchase Agreement") among Pameco
Securitization Corporation, as seller (the "Seller"), Redwood Receivables
Corporation, as purchaser ("Redwood"), General Electric Capital Corporation, as
operating agent ("GECC"), and Pameco Corporation, as servicer, and (ii) the
Credit Agreement dated as of March 19, 1992, as amended (the "Credit
Agreement"), among Pameco Corporation, the lenders listed therein (the
"Lenders") and GECC, as agent for the Lenders (in such capacity, the "Agent").
Terms not otherwise defined in this letter shall have the meanings assigned to
them under the Purchase Agreement. All references herein to "Pameco Corporation"
shall be deemed to be references to Pameco Corporation, a Georgia corporation
formerly known as New Pameco Georgia Corporation and the successor by merger to
Pameco Corporation and Pameco Holdings, Inc.
This letter is the Fee Letter referred to in the Purchase Agreement
and in the Credit Agreement and sets forth our understanding with respect to
certain fees that are payable by the Seller and Pameco Corporation pursuant to
the Purchase Agreement and the Credit Agreement. This letter supersedes and
replaces that certain Fee Letter among us dated January 24, 1997.
The parties to this letter agree as follows:
1. The Seller and Pameco Corporation shall pay an Unused Commitment
Fee equal to one quarter of one percent (0.25%) per annum calculated daily
and payable monthly on the amount by which $100,000,000 exceeds the sum of
(i) the outstanding Capital Investment on such date and (ii) the
outstanding "Loans" under the Credit Agreement on such date (such sum, the
"Total Outstandings"), with the Seller being responsible for the Unused
Commitment Fee based on that portion of Total Outstandings on each day
representing outstanding Capital Investments and Pameco Corporation being
responsible for the Unused Commitment Fee based on that portion of Total
Outstandings on each day representing outstanding "Loans" under the Credit
Agreement.
<PAGE>
2. The provisions of Sections 14.04(a) of the Purchase Agreement are
incorporated herein.
3. This letter shall be governed by, and construed in accordance
with, New York law.
Very truly yours,
GENERAL ELECTRIC CAPITAL
CORPORATION, as Lender, as Agent and as
Operating Agent
By:_____________________________________
Name:
Title:
REDWOOD RECEIVABLES
CORPORATION
By:_____________________________________
Name:
Title:
Agreed and accepted as of
the date first above written:
PAMECO SECURITIZATION CORPORATION
as Seller
By:______________________________
Name: Mary M. McCulley
Title: Vice President
PAMECO CORPORATION
as Servicer
By:______________________________
Name: Mary M. McCulley
Title: Treasurer
<PAGE>
EXHIBIT H
TO
PURCHASE AGREEMENT
FINANCIAL COVENANTS
-------------------
1. The Servicer shall not breach or fail to comply with any of the following
financial covenants, each of which shall be calculated in accordance with GAAP,
consistently applied:
(a) Servicer EBITDA. As of any date of determination, the Servicer
---------------
EBITDA for the preceding twelve consecutive fiscal months shall not be less than
$7,800,000.
(b) Interest Coverage Ratio. As of any date of determination, the
-----------------------
Interest Coverage Ratio for the preceding twelve consecutive fiscal months shall
not be less than 1.7 to 1.0.
(c) Fixed Charge Coverage Ratio. As of any date of determination, the
---------------------------
ratio of (i) Servicer EBITDA to (ii) Servicer Fixed Charges for the preceding
twelve consecutive fiscal months shall not be less than 1.05 to 1.0.
(d) Maintenance of Net Worth. The Servicer Net Worth on the last day of
------------------------
each fiscal quarter ending on the last day of any fiscal year set forth below
shall not be less than the amount set forth opposite such fiscal year:
FISCAL YEAR ENDING AMOUNT
------------------ ------
February 28, 1998 $52,500,000
February 28, 1999 $56,000,000
Each Fiscal Year
ending thereafter $59,500,000
2. Capitalized terms used in this Exhibit H and not defined in Annex X shall
have the meaning ascribed to such terms in the Credit Agreement; provided that
all references to (i) the "Company" or "Holdings" shall mean the Servicer and
(ii) "this Agreement" shall mean the Credit Agreement.
H-1
<PAGE>
SCHEDULE 1 TO
TRANSFER AGREEMENT
LIST OF CHIEF EXECUTIVE
OFFICES OF THE ORIGINATOR
-------------------------
1000 Center Place
Norcross, Georgia 30093
LIST OF OTHER OFFICES OF THE
ORIGINATOR WHERE RECORDS ARE KEPT
---------------------------------
1000 Center Place
Norcross, Georgia 30093
TRADE NAMES, FICTITIOUS NAMES, ASSUMED NAMES
AND "DOING BUSINESS AS" NAMES OF THE ORIGINATOR
-----------------------------------------------
Pameco Corp. Knoxville Refrigeration
National Temperature Control Centers R&R Supply
NTCC Thermal Company
Melchoir, Armstrong, Dessau Thermal Supply
Melco Westbrook Distribution
Graves Refrigeration Pameco-Aire
Graves Brothers Gulf Coast Air Conditioning
J & P Supply Rick's Supply
Chase Supply
Trigg Supply
Bellow-Evans
<PAGE>
SCHEDULE 2 TO
TRANSFER AGREEMENT
PRIOR NAMES OF ORIGINATOR
-------------------------
JUNE 3, 1997 - Pameco Corporation and Pameco Holdings, Inc., both Delaware
corporations, were merged with and into New Pameco Georgia
Corporation, a Georgia corporation, which was the surviving
corporation from such merger and changed its name to "Pameco
Corporation" upon the closing of such merger
MARCH 19, 1992 - Name changed from MLX Refrigeration & Air Conditioning
Group, Inc. to Pameco Corporation
MARCH 1, 1989 - Name changed from National Temperature Control Centers, Inc.
to MLX Refrigeration & Air Conditioning Group, Inc.
JANUARY 16, 1986 - Name changed from NTCC Acquisition Company to National
Temperature Control Centers, Inc.
OCTOBER 1, 1985 - Incorporated as NTCC Acquisition Company
<PAGE>
ANNEX E
CERTIFICATE OF AMENDMENT
TO THE
CERTIFICATE OF INCORPORATION
OF
PAMECO SECURITIZATION CORPORATION
Pursuant to the provisions of Section 242 of the Delaware General
Corporation Law, the undersigned, Pameco Securitization Corporation, a Delaware
corporation (the "Corporation") adopts the following Certificate of Amendment to
its Certificate of Incorporation:
I.
The name of the Corporation is Pameco Securitization Corporation.
II.
The Board of Directors and sole Shareholder of the Corporation have duly
adopted and approved the amendment to the Certificate of Incorporation as set
forth in this Certificate of Amendment in accordance with the provisions of
Section 242(b)(1).
III.
The Certificate of Incorporation of the Corporation is hereby amended by
deleting the reference to "Pameco Corporation, a Delaware corporation" where it
appears in Paragraph (i) of the Sixth Section and replacing it with "Pameco
Corporation, a Georgia corporation (and the successor by merger to Pameco
Corporation, a Delaware corporation)."
IV.
This Amendment to the Certificate of Incorporation shall become effective
upon filing with the Secretary of State of the State of Delaware.
<PAGE>
IN WITNESS WHEREOF, the undersigned has executed this Certificate of
Amendment to the Certificate of Incorporation of Pameco Securitization
Corporation this 3rd day of June, 1997.
PAMECO SECURITIZATION CORPORATION
By:_______________________________
Theodore R. Kallgren, President
<PAGE>
EXHIBIT 11.1
PAMECO CORPORATION
COMPUTATION OF NET INCOME PER SHARE
<TABLE>
<CAPTION>
Three Months Ended
May 31
----------------------------
1997 1996
------------ ------------
<S> <C> <C>
Primary and fully diluted:
Weighted average common stock and common
stock equivalents outstanding during the
period.................................. 5,164 6,250
Effect of common stock equivalents issued
subsequent to March 26, 1996, computed
in accordance with the treasury stock
method as required by the SEC(1)........ 330 348
------------ ------------
Total 5,494 6,598
============ ============
Net income applicable to common stockholders $ 1,015 $ 924
============ ============
Net income per share of common stock $ 0.18 $ 0.14
============ ============
</TABLE>
(1) Pursuant to Securities and Exchange Commission Staff Accounting Bulletin No.
83, Common stock equivalents issued at prices below the Initial Public
Offering price per share of $14 ("cheap stock") during the twelve month
period immediately preceding the initial filing date of the Company's
Registration Statement for its Initial Public Offering have been included as
outstanding for all periods presented prior to the Initial Public Offering.
<PAGE>
EXHIBIT 11.2
PAMECO CORPORATION
COMPUTATION OF HISTORICAL SUPPLEMENTAL NET INCOME PER SHARE
<TABLE>
<CAPTION>
Three Months Ended
May 31
1997
-----------------
<S> <C>
Primary and fully diluted:
Weighted average common stock and common
stock equivalents outstanding during the
period.................................. 8,585
Effect of common stock equivalents issued
subsequent to March 26, 1996, computed
in accordance with the treasury stock method
as required by the SEC (1).............. 330
-----------------
Total 8,915
=================
Net Income $ 1,015
Plus: Reduction in interest expense from repayment
of long-term notes payable,net of income taxes(2) 621
-----------------
Net Income $ 1,636
=================
Net income per share of common stock $ 0.18
=================
</TABLE>
(1) Pursuant to Securities and Exchange Commission Staff Accounting Bulletin
No. 83, Common stock equivalents issued at prices below the Initial Public
Offering price per share of $14 ("cheap stock") during the twelve month
period immediately preceding the initial filing date of the Company's
Registration Statement for its Initial Public Offering have been included
as outstanding for all periods presented prior to the Initial Public
Offering.
(2) Historical supplemental net income per share reflects the number of shares
of common stock issued upon consummation of the Initial Public Offering
used to repay $44.2 million in current and long term debt as if the
issuance had occurred at the beginning of the period (or date of issuance
of notes payable, if later) and the related reduction in interest expense.
<TABLE> <S> <C>
<PAGE>
<ARTICLE> 5
<LEGEND>
THIS SCHEDULE CONTAINS SUMMARY FINANCIAL INFORMATION EXTRACTED FROM THE
FINANCIAL STATEMENTS OF PAMECO CORPORATION FOR THE THREE MONTHS ENDED MAY 31,
1997, AND IS QUALIFIED IN ITS ENTIRETY BY REFERENCE TO SUCH FINANCIAL
STATEMENTS.
</LEGEND>
<S> <C>
<PERIOD-TYPE> 3-MOS
<FISCAL-YEAR-END> FEB-28-1998
<PERIOD-START> MAR-01-1997
<PERIOD-END> MAY-31-1997
<CASH> 146
<SECURITIES> 0
<RECEIVABLES> 21,828
<ALLOWANCES> 2,700
<INVENTORY> 113,122
<CURRENT-ASSETS> 133,538
<PP&E> 9,211
<DEPRECIATION> 3,141
<TOTAL-ASSETS> 157,122
<CURRENT-LIABILITIES> 99,196
<BONDS> 0
0
0
<COMMON> 64
<OTHER-SE> 0
<TOTAL-LIABILITY-AND-EQUITY> 157,122
<SALES> 113,735
<TOTAL-REVENUES> 113,735
<CGS> 87,124
<TOTAL-COSTS> 110,333
<OTHER-EXPENSES> 696
<LOSS-PROVISION> 0
<INTEREST-EXPENSE> 1,219
<INCOME-PRETAX> 1,487
<INCOME-TAX> 472
<INCOME-CONTINUING> 1,015
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> 1,015
<EPS-PRIMARY> 0.18
<EPS-DILUTED> 0.18
</TABLE>
