PAMECO CORP, DEF 14A, 1999-06-16

PAMECO CORP
DEF 14A, 1999-06-16
ELECTRIC SERVICES

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<PAGE>

SCHEDULE 14A

SCHEDULE 14A INFORMATION
PROXY STATEMENT PURSUANT TO SECTION 14(A) OF THE
SECURITIES EXCHANGE ACT OF 1934

Filed by the Registrant [X]

Filed by a Party other than the Registrant [ ]

Check the appropriate box:

[ ] Preliminary Proxy Statement
[ ] Confidential, for Use of the Commission Only (as permitted by
Rule 14a-6(e)(2))
[X] Definitive Proxy Statement
[ ] Definitive Additional Materials
[ ] Soliciting Material Pursuant to Rule 14a-11(c) or Rule 14a-12

PAMECO CORPORATION
- --------------------------------------------------------------------------------
(Name of Registrant as Specified In Its Charter)

NOT APPLICABLE
- --------------------------------------------------------------------------------
(Name of Person(s) Filing Proxy Statement, if other than the Registrant)

Payment of Filing Fee (Check the appropriate box):

[X] No fee required.

[ ] Fee computed on table below per Exchange Act Rules 14a-6(i)(1) and 0-11.

(1) Title of each class of securities to which transaction applies:

(2) Aggregate number of securities to which transaction applies:

(3) Per unit price or other underlying value of transaction computed
pursuant to Exchange Act Rule 0-11 (set forth the amount on which the
filing fee is calculated and state how it was determined):

(4) Proposed maximum aggregate value of transaction:

(5) Total fee paid:

[ ] Fee paid previously with preliminary materials:

[ ] Check box if any part of the fee is offset as provided by Exchange Act
Rule 0-11(a)(2) and identify the filing for which the offsetting fee was
paid previously. Identify the previous filing by registration statement
number, or the Form or Schedule and the date of its filing.

(1) Amount Previously Paid:

(2) Form, Schedule or Registration Statement No.:

(3) Filing Party:

(4) Date Filed:

<PAGE>

PAMECO CORPORATION
1000 Center Place
Norcross, Georgia 30093

June 11, 1999

Dear Shareholder,

You are invited to attend the 1999 Annual Meeting of Shareholders of Pameco
Corporation to be held at 10:00 a.m. on Wednesday, June 30, 1999, at the Four
Seasons Hotel, 75 14th Street, Atlanta, Georgia 30309.

The Annual Meeting will include discussions and voting on the matters set
forth in the accompanying Notice of Annual Meeting of Shareholders and Proxy
Statement and discussion of other business matters properly brought before the
meeting.

Whether or not you plan to attend, you can be sure your shares are
represented at the meeting by promptly completing, signing, dating and
returning your proxy in the enclosed envelope.

Cordially,
/s/ James R. Balkcom, Jr.
James R. Balkcom, Jr.
Chairman, President and Chief
Executive Officer
<PAGE>

PAMECO CORPORATION
1000 Center Place
Norcross, Georgia 30093

----------------

Notice of Annual Meeting of Shareholders

To Be Held June 30, 1999

----------------

You are cordially invited to attend the Annual Meeting of Shareholders of
Pameco Corporation ("Pameco" or the "Company") which will be held on June 30,
1999, at 10:00 a.m., local time, at the Four Seasons Hotel, 75 14th Street,
Atlanta, Georgia 30309, for the following purposes:

(1) To elect the five members of the Board of Directors, consisting of
two directors to be elected by the holders of the Company's Class A Common
Stock and three directors to be elected by the holders of the Company's
Class B Common Stock;

(2) To ratify the Pameco Corporation 1999 Stock Award Plan;

(3) To approve the Chairman Compensation Plan; and

(4) To transact such other business as may properly come before the
Annual Meeting or any adjournment thereof.

Shareholders of record at the close of business on May 14, 1999 are entitled
to notice of and to vote at the Annual Meeting and any and all adjournments or
postponements thereof.

It is desirable that your shares be represented at the meeting regardless of
the number of shares you may hold. Whether or not you plan to attend the
meeting in person, please complete and return the enclosed proxy in the
envelope provided. If you attend the meeting, you may revoke your proxy and
vote in person.

By Order of the Board of Directors
/s/ Mary M. McCulley
Mary M. McCulley
Assistant Secretary

Norcross, Georgia
June 11, 1999
<PAGE>

PAMECO CORPORATION
1000 Center Place
Norcross, Georgia 30093

----------------

PROXY STATEMENT

----------------

GENERAL INFORMATION

Proxy Solicitation

This Proxy Statement and the accompanying proxy card are first being mailed
to shareholders on or about June 11, 1999, by the Board of Directors of Pameco
Corporation (the "Company") in connection with the solicitation of proxies for
Class A and Class B Common Stock for use at the Annual Meeting of Shareholders
(the "Annual Meeting") to be held at the Four Seasons Hotel, 75 14th Street,
Atlanta, Georgia 30309, on June 30, 1999, at 10:00 a.m., local time, and at
all adjournments or postponements thereof. The Company will pay all expenses
incurred in connection with this solicitation, including postage, printing,
handling and the actual expenses incurred by custodians, nominees and
fiduciaries in forwarding proxy material to beneficial owners. In addition to
solicitation by mail, certain officers and directors of the Company, who will
receive no additional compensation for their services, may solicit proxies by
telephone, personal communication or other means. The closing price of the
Company's Class A Common Stock as reported on the New York Stock Exchange on
May 14, 1999, was $6.9375 per share. There is no public market for the Class B
Common Stock, but shares of Class B Common Stock are convertible on a share-
for-share basis into shares of Class A Common Stock.

Purposes of Annual Meeting

The principal purposes of the Annual Meeting are to: (1) elect the five
members of the Board of Directors, two directors to be elected by the holders
of the Company's Class A Common Stock and three directors to be elected by the
holders of the Company's Class B Common Stock, (2) ratify the Pameco
Corporation 1999 Stock Award Plan, (3) approve the Chairman Compensation Plan,
and (4) transact such other business as may properly come before the Annual
Meeting or any adjournment thereof. The Board of Directors knows of no matters
(other than those stated above) to be brought before the Annual Meeting.

Voting Rights

If the accompanying proxy card is properly signed and returned to the
Company and not revoked, it will be voted in accordance with the instructions
contained in it. If the proxy card is signed and returned, but voting
directions are not made, the proxy will be voted in favor of the proposals set
forth in the accompanying "Notice of Annual Meeting of Shareholders" and in
such manner as the proxyholders named on the card determine in their
discretion with respect to any other business that may properly come before
the Annual Meeting or any adjournment or postponement thereof. Any proxy given
pursuant to this solicitation may be revoked by: (1) filing written notice of
revocation with the Secretary of the Company before the vote of shareholders,
(2) filing a duly executed proxy bearing a later date with the Secretary of
the Company before the vote of shareholders, or (3) attending the Annual
Meeting and voting in person.

The Board of Directors has fixed the close of business on May 14, 1999, as
the record date for the determination of shareholders entitled to receive
notice of and to vote at the Annual Meeting and all adjournments or
postponements thereof. As of the close of business on May 14, 1999, the
Company had outstanding 5,395,678 shares of Class A Common Stock, 3,792,926
shares of Class B Common Stock, and no shares of Preferred Stock. On all
matters to come before the Annual Meeting, each share of Class A Common Stock
is entitled to one vote and each share of Class B Common Stock is entitled to
ten votes, except with respect to: (1) the election of directors, (2) certain
"Going Private Transactions" (as defined in the Company's Articles
<PAGE>

of Incorporation), none of which is anticipated by the Board of Directors to
be brought before the Annual Meeting, and (3) any other matters required by
law. Holders of Class A and Class B Common Stock will vote together as a
single voting group on all matters anticipated to come before the Annual
Meeting, except the election of directors, where holders of Class A Common
Stock, voting as a separate class, are entitled to elect two of the Company's
directors, and holders of Class B Common Stock, voting as a separate class,
are entitled to elect the remaining directors. The presence in person or by
proxy of shares representing a majority of the votes entitled to be cast on a
matter by a voting group constitutes a quorum of such voting group with regard
to that matter. The Company's Articles of Incorporation do not authorize
cumulative voting.

Pursuant to the Company's Bylaws, the election of directors requires a
majority of the votes cast by the shares entitled to vote in the election at a
meeting at which a quorum is present. The Bylaws provide that all other
matters brought before the Annual Meeting shall be approved if the votes cast
within the applicable voting group favoring the action exceed the votes cast
opposing the action. Abstentions and broker non-votes will be counted in
determining whether a quorum of the relevant voting group is present, but will
not affect the outcome of a vote on any matter other than the election of
directors. With respect to the election of directors, abstentions and broker
non-votes are effectively counted as votes against the election of the
relevant director.

PROPOSAL 1

ELECTION OF DIRECTORS

Holders of the Class A and Class B Common Stock, voting as separate classes,
will elect two directors and three directors, respectively. The five persons
named below have been nominated to serve on the Board of Directors until the
2000 Annual Meeting of Shareholders (or until such time as their respective
successors are elected and qualified). Each nominee, except Mr. de Vogel, is
currently a director of the Company. The Board of Directors has no reason to
believe that the persons named below as nominees for directors will be unable
or will decline to serve if elected. In the event of death or disqualification
of any nominee or the refusal or inability of any nominee to serve as a
director, the proxy may be voted by the proxyholders with discretionary
authority for the substitute or substitutes designated by the Board of
Directors.

Nominees for Election by Holders of the Class A Common Stock as Directors

Richard A. Bearse Philip M. Pfeffer

The Board of Directors recommends that shareholders vote FOR the election of
the nominees.

Nominees for Election by Holders of the Class B Common Stock as Directors

James R. Balkcom, Jr.
Willem F. P. de Vogel
Earl Dolive

The Board of Directors recommends that shareholders vote FOR the election of
the nominees.

2
<PAGE>

Directors and Executive Officers

Certain information regarding the directors and key employees of the Company
is set forth in the table below.

<TABLE>
<CAPTION>
Name Age Position
---- --- --------
<S> <C> <C>
James R. Balkcom, Jr.... 55 Chairman of the Board, President and Chief Executive Officer
Jerry W. Bowman......... 48 Executive Vice President and Chief Operating Officer
Theodore R. Kallgren.... 37 Chief Financial Officer, Vice President and Secretary
Jeffrey S. Ruege........ 44 Vice President and General Manager-Strategic Business Units
Richard A. Bearse....... 60 Director
Willem F.P. de Vogel.... 48 Nominee for Director
Earl Dolive............. 81 Director
Philip M. Pfeffer....... 54 Director
</TABLE>

James R. Balkcom, Jr. has been a Director of the Company since February
1996, Chairman of the Board since May 1996, and President and Chief Executive
Officer since January 1999. Mr. Balkcom also is self-employed with J.R.
Balkcom Associates, Inc., a strategic planning consulting firm. Mr. Balkcom
served from 1977 until December 1997 in one or more of the following
capacities at Techsonic Industries, Inc., a manufacturer of consumer marine
electronics: Chairman, President and Chief Executive Officer. Mr. Balkcom was
the Chairman of Techsonic Industries, Inc. until December 1997. Mr. Balkcom is
also currently a director of Century South Banks Inc., a Georgia-based bank
holding company.

Jerry W. Bowman joined the Company as Executive Vice President and Chief
Operating Officer in April 1998. From May 1974 to March 1998, Mr. Bowman was
employed by Ryder Integrated Logistics, a division of Ryder System, Inc.,
where his most recent position was Senior Vice President--North America.

Theodore R. Kallgren joined the Company in May 1988, and has been Vice
President and Chief Financial Officer of Pameco since March 1994. Mr. Kallgren
also served as Vice President of Finance of MLX Corp., a former affiliate of
the Company ("MLX"), from March 1991 to March 1994, and as Secretary of MLX
from March 1994 to April 1997. Prior to joining Pameco, Mr. Kallgren was
employed by Ernst & Whinney from 1984 to 1988. Mr. Kallgren resigned his
position with the Company, effective May 31, 1999, to pursue other interests.

Jeffrey S. Ruege joined the Company in March 1988, was named Vice President
and General Manager--HVAC Operations in September 1996, and since July 1997
has served as Vice President and General Manager--Strategic Business Units.
Before September 1996, Mr. Ruege supervised the development of sales,
marketing and key accounts. Prior to joining Pameco, Mr. Ruege was employed by
Rockwell International from 1979 to 1988.

Richard A. Bearse has been Chairman and Chief Executive Officer of Beacon
Group, a diversified holding company, since January 1998. From June 1995 to
December 1997, Mr. Bearse was employed by United Dominion, a diversified
manufacturing company, where his last position was Senior Vice President--
Mergers & Acquisitions. Mr. Bearse joined United Dominion when it acquired
Flair Corp., a manufacturer of air filtration and dehydration systems, where
he had been employed since January 1991. Mr. Bearse was President and Chief
Executive Officer of Flair Corp. at the time of the United Dominion
acquisition. Mr. Bearse has also held sales and marketing positions at B.F.
Goodrich, Westinghouse Air Brake and Munsingwear. Mr. Bearse was elected to
the Board of Directors of Pameco Corporation in August 1997.

Willem F.P. de Vogel is President of Three Cities Research, Inc. ("TCR"), a
firm engaged in the investment and management of private capital. Mr. de Vogel
has been the President of TCR since 1982 and was previously a Director of the
Company from 1992 until 1996. Mr. de Vogel also serves as a director of
Computer Associates International, Inc. and Morton Industrial Group, Inc.

3
<PAGE>

Earl Dolive has been a Director of the Company since 1993. Mr. Dolive
retired as Vice-Chairman of Genuine Parts Company in 1989 after 52 years of
service. Mr. Dolive was President of the National Automotive Parts Association
("NAPA") in 1970 and 1971. Mr. Dolive also serves as a director of Aaron Rents
and Exide Corporation, and is a director emeritus of Genuine Parts Company.

Philip M. Pfeffer was Chief Executive Officer of Borders Group, Inc., a
retailer of books, music and videos, from November 1998 until April 1999. From
1996 to 1998, Mr. Pfeffer was President and Chief Operating Officer of Random
House, Inc., the world's largest English-language publisher. Between 1977 and
1996, Mr. Pfeffer held a variety of positions with Ingram Distribution Group,
Inc. and its affiliates. Most recently, Mr. Pfeffer was Chairman of the Board
and Chief Executive Officer. Mr. Pfeffer was previously a Director of the
Company from February 1996 until August 1996, and was again elected to the
Board of Directors in September 1998.

Board of Directors Meetings and Committees

The Board of Directors held nine meetings during the fiscal year ending
February 28, 1999 ("Fiscal 1999"). All incumbent directors attended more than
75% of the aggregate number of meetings of the Board of Directors and those
board committees on which they served in Fiscal 1999, except Mr. Bulkin, who
attended 73.0% of such meetings, and Mr. Weld, who attended 60.0% of such
meetings. The Board of Directors has an Audit Committee, a Compensation
Committee and a Nominating Committee, and may form other committees from time
to time as circumstances warrant. Such committees will have authority and
responsibility as delegated by the Board of Directors. The Strategic Planning
Committee, which held only one meeting during Fiscal 1999, has been
discontinued.

The Audit Committee makes recommendations concerning the engagement of the
Company's independent public accountants, reviews the plans and results of the
audit engagement with the independent public accountants, approves
professional services provided by the independent public accountants, reviews
the independence of the independent public accountants, considers the range of
audit and non-audit fees and reviews the adequacy of the Company's internal
accounting controls. Directors Braswell, Dolive and Wagner are members of the
Audit Committee. During Fiscal 1999, the Audit Committee met two times.

The Compensation Committee administers the Company's stock option plans and
recommends compensation for the Company's executive officers. The Compensation
Committee is comprised of Directors Bulkin (Chairman), Dolive and Wagner.
During Fiscal 1999, the Compensation Committee met one time.

The Nominating Committee selects potential candidates for director and
recommends candidates to the Board. It also makes recommendations to the Board
concerning the structure and membership of the other Board Committees. Until
January 1999, the Nominating Committee consisted of Directors Wagner
(Chairman), Balkcom, Bearse and Gurbacki. Mr. Gurbacki resigned from the
Committee in January 1999 and has not been replaced. The Nominating Committee
met two times in Fiscal 1999. This committee will consider shareholder
nominations for members of the Board of Directors sent in the manner
prescribed by the Company's Bylaws to James R. Balkcom, Jr., Chairman, Pameco
Corporation, 1000 Center Place, Norcross, Georgia 30093.

The Strategic Planning Committee reviewed and made recommendations regarding
the Company's stated strategic objectives. The Strategic Planning Committee
consisted of Directors Balkcom, Braswell, Bulkin, Gurbacki and Weld. During
Fiscal 1999, the Strategic Planning Committee met one time.

4
<PAGE>

Share Ownership of Management and Certain Beneficial Owners

The following table sets forth certain information, as of May 14, 1999,
regarding shares of Common Stock of the Company owned of record or known to
the Company to be owned beneficially by each director and nominee for
director, each executive officer named in the Summary Compensation Table in
this Proxy Statement, all directors and executive officers as a group, and
each person known to beneficially own more than five percent of either class
of the Company's outstanding Common Stock. Except as set forth in the
footnotes to the table below, each of the shareholders identified in the table
below has sole voting and investment power over the shares beneficially owned
by such person.

As of the close of business on May 14, 1999, the Company had outstanding
5,395,678 shares of Class A Common Stock, 3,792,926 shares of Class B Common
Stock and no shares of Preferred Stock.

<TABLE>
<CAPTION>
Class A Common Stock Class B Common Stock
------------------------- --------------------- Percent of Percent of
Beneficial Percent of Beneficial Percent of Voting Shares
Beneficial Owner(1) Ownership Class A Ownership Class B Power Outstanding
------------------- ---------- ---------- ---------- ---------- ---------- -----------

<S> <C> <C> <C> <C> <C> <C>
James R. Balkcom, Jr.... 267,131(8) 5.0% -- -- * 2.9%

Richard A. Bearse....... 9,750(9) * -- -- * *

G. Thomas Braswell...... 16,000(10) * -- -- * *

Michael H. Bulkin....... 28,500(11) * -- -- * *

Willem F.P. de Vogel.... 128,679(12) 2.3% 122,379 3.2% 2.8% 1.4%

Earl Dolive............. 5,375(13) * -- -- * *

Gerald V. Gurbacki...... 286,251(14) 5.1% -- -- * 3.0%

Philip M. Pfeffer....... 20,000(15) * -- -- * *

H. Whitney Wagner....... 114,819(16) 2.1% 112,519 3.0% 2.6% 1.2%

Thomas G. Weld.......... 29,860(17) * 28,860 * * *

Jerry W. Bowman......... 169,999(18) 3.1% -- -- * 1.8%

Theodore R. Kallgren.... 34,170(19) * -- -- * *

Jeffrey S. Ruege........ 51,915(20) 1.0% -- -- * *

Mark L. Davison......... 3,892 * -- -- * *

Richard J. Marshuetz.... 10,959 * -- -- * *

Directors and Executive
Officers as a group (15
persons)............... 1,177,300 19.2% 263,758 7.0% 8.1% 12.3%

Bank One
Corporation(2)(22)..... 311,200 5.8% -- -- * 3.4%

Capital Guardian Trust
Company(3)(22)......... 322,500 6.0% -- -- * 3.5%

The Kaufmann Fund,
Inc.(4)(22)............ 474,200 8.8% -- -- 1.1% 5.2%

Goldman, Sachs & Co.
(5)(22)................ 543,700 10.1% -- -- 1.3% 5.9%

Quilvest American Equity
Ltd.(6)(22)............ 1,850,000(21) 29.6% 846,217 22.3% 21.8% 20.1%

Wellington Management
Company LLP(7)(22)..... 453,400 8.4% -- -- 1.0% 4.9%
</TABLE>
- --------
(*) Represents less than one percent of the outstanding Class A Common Stock,
Class B Common Stock, Voting Power or Total Shares Outstanding.
(1) Unless otherwise indicted, the address of the persons named above is care
of Pameco Corporation, 1000 Center Place, Norcross, Georgia 30093.
(2) The address of Bank One Corporation is One First National Plaza, Chicago,
Illinois 60670.

5
<PAGE>

(3) The address of Capital Guardian Trust Company is 11100 Santa Monica
Boulevard, Los Angeles, California 90025.
(4) The address of The Kaufmann Fund, Inc. is 140 East 45th Street, 43rd
Floor, New York, New York 10017.
(5) The address of Goldman, Sachs & Co. is 85 Broad Street, New York, NY
10004.
(6) The address of Quilvest American Equity Ltd. is P. O. Box 71, Road Town,
Tortola, British Virgin Islands.
(7) The address of Wellington Management Company LLP is 75 State Street,
Boston, Massachusetts 02109.
(8) Includes 35,113 shares held by Mr. Balkcom's wife. Mr. Balkcom disclaims
beneficial ownership of the shares owned by his wife. Also includes
110,000 shares of restricted Class A Common Stock that are subject to
forfeiture. See "Employment and Change of Control Agreements".
(9) Includes currently exercisable options to purchase 8,750 shares.
(10) Includes currently exercisable options to purchase 15,000 shares.
(11) Includes 12,500 shares held in joint tenancy with Mr. Bulkin's wife, and
currently exercisable options to purchase 15,000 shares.
(12) Includes 6,300 shares held by Mr. de Vogel's minor children and 122,379
shares of Class B Common Stock that are convertible on a one-to-one basis
to Class A Common Stock. Mr. de Vogel shares voting and dispositive
powers with respect to the shares held by his minor children with his
wife.
(13) Includes currently exercisable options to purchase 2,500 shares.
(14) Includes currently exercisable options to purchase 209,375 shares.
(15) Includes 6,000 shares held by Mr. Pfeffer's wife. Mr. Pfeffer disclaims
beneficial ownership of the shares owned by his wife. Includes currently
exercisable options to purchase 2,500 shares.
(16) Includes 112,519 shares of Class B Common Stock that are convertible on a
one-to-one basis to Class A Common Stock.
(17) Includes 28,860 shares of Class B Common Stock that are convertible on a
one-to-one basis to Class A Common Stock.
(18) Represents currently exercisable options to purchase the number of shares
of Class A Common Stock shown.
(19) Includes 1,600 shares held jointly with Mr. Kallgren's wife and currently
exercisable options to purchase 9,375 shares.
(20) Includes currently exercisable options to purchase 13,340 shares.
(21) Includes 846,217 shares of Class B Common Stock that are convertible on a
one-to-one basis to Class A Common Stock.
(22) Has indicated in filings with the Securities and Exchange Commission that
all shares are held for investment purposes only and not with the intent
of effecting a change of control.

6
<PAGE>

EXECUTIVE COMPENSATION

Summary Compensation Table

The following table sets forth a summary of annual and long-term
compensation paid or accrued by the Company for services rendered to the
Company in the previous three fiscal years by all persons who served as the
Company's Chief Executive Officer during Fiscal 1999 and the five other most
highly compensated executive officers (the "named executive officers") whose
total individual salary and bonus exceeded $100,000 during Fiscal 1999.

<TABLE>
<CAPTION>
Long-term
Compensation
Annual Compensation Awards
------------------- ------------
Securities
Name and Principal Fiscal Underlying All Other
Position Year Salary Bonus Options (#) Compensation
------------------ ------ -------- ---------- ------------ ------------
<S> <C> <C> <C> <C> <C>
James R. Balkcom, Jr.... 1999 $212,500 -- -- $200,000(2)
Chief Executive Officer
and Director(1) 1998 $161,634 -- -- $ 20,000(3)

Gerald V. Gurbacki...... 1999 $400,000 -- -- $274,642(5)
Chief Executive Officer
and Director(1) 1998 $399,892 $ 125,000 -- $147,526(6)
1997 $310,512 $1,250,000(4) 515,625 $ 369(7)

Jerry W. Bowman......... 1999 $287,500 $ 200,000 175,000 $ 4,324(7)
Chief Operating Officer

Theodore R. Kallgren.... 1999 $158,302 -- 25,000 $ 1,134(7)
Chief Financial
Officer, Vice
President and 1998 $138,678 $ 32,655 -- $ 469(7)
Secretary 1997 $121,385 $ 187,411(4) 9,375 --

Mark L. Davison......... 1999 $167,180 -- 25,000 $ 704(7)
Chief Information
Officer(8) 1998 $140,947 $ 45,528 10,000 $ 132(7)
1997 $ 83,077 $ 98,771(4) 9,375 --

Jeffrey S. Ruege........ 1999 $173,982 $ 17,800 25,000 $ 1,005(7)
Vice President and
General Manager-- 1998 $141,193 $ 40,606 10,000 $ 173(7)
Strategic Business
Units 1997 $122,714 $ 174,326(4) 9,375 $ 29(7)

Richard J. Marshuetz.... 1999 $137,539 -- 100,000 $ 17,380(7)
Executive Vice
President(9)
</TABLE>
- --------
(1) Mr. Gurbacki served as the Company's Chief Executive Officer until
January 1999, at which time Mr. Balkcom was named to such position.
(2) Represents portion of indebtedness to the Company that was forgiven as of
January 8, 1999. See "Certain Relationships and Related Transactions".
(3) Represents gain realized upon the exercise of non-qualified stock
options.
(4) Includes bonuses granted pursuant to the Company's bonus plan and a one-
time special cash bonus, which accrued in fiscal 1997, although a
percentage of the bonus may not be paid until subsequent fiscal years.
(5) Represents $2,642 in life insurance premiums paid by the Company and
$272,000 realized upon the exercise of non-qualified stock options.
(6) Represents $1,526 in life insurance premiums paid by the Company and
$146,000 realized upon the exercise of non-qualified stock options.
(7) Represents life insurance premiums paid by the Company.
(8) Mr. Davison was employed by the Company until February 1999.
(9) Mr. Marshuetz was employed by the Company until January 1999.
(10) Includes $14,331 in reimbursement of relocation expenses and $3,049 in
life insurance premiums paid by the Company.

7
<PAGE>

Options Granted in Last Fiscal Year

The following table summarizes certain information regarding stock options
to purchase Class A Common Stock granted to the named executive officers
during Fiscal 1999. No options were granted to purchase shares of Class B
Common Stock.
<TABLE>
<CAPTION>
Potential Realizable
Value at Assumed
Annual Rates of Stock
Price Appreciation
Individual Grants for Option Term
---------------------------------------------- ----------------------
Number of Percent of
Securities Total Options Exercise
Underlying Granted to or Base
Options Employees in Price Expiration
Names Granted Fiscal Year ($/Sh) Date 5% 10%
----- ---------- ------------- -------- ---------- ---------- -----------
<S> <C> <C> <C> <C> <C> <C>
Jerry W. Bowman......... 175,000(1) 36.1% $19.6250 04/05/03 -- --
Theodore R. Kallgren.... 25,000(2) 5.2% $19.4375 06/24/03 -- --
Jeffrey S. Ruege........ 25,000(2) 5.2% $19.4375 06/24/03 -- --
</TABLE>

- --------
(1) Granted pursuant to Employee Stock Option Plan (Plan I). Options have a
term of five years and vest incrementally over a three year period
beginning April 5, 1998.
(2) Granted pursuant to Employee Stock Option Plan (Plan I). Options have a
term of five years and vest June 25, 2001.

Aggregated Option Exercises and Fiscal Year-End Option Values

The following table provides certain information about stock options
exercised by the named executive officers in Fiscal 1999 and the year-end
values of stock options held by the named executive officers on February 28,
1999. All information relates to shares of Class A Common Stock.

<TABLE>
<CAPTION>
Number of Securities
Underlying Value of Unexercised
Unexercised Options at In-the-Money Options at
Shares Fiscal Year-End (#) Fiscal Year End ($)
Acquired on Value ------------------------- -------------------------
Names Exercise (#) Realized ($) Exercisable Unexercisable Exercisable Unexercisable
----- ------------ ----------- ----------- ------------- ----------- -------------
<S> <C> <C> <C> <C> <C> <C>
Gerald V. Gurbacki...... 229,375 $569,579 209,375 -- $60,195 --
Jerry W. Bowman......... -- -- 99,999 75,001 -- --
Theodore R. Kallgren.... 4,562 $ 41,042 9,375 25,000 -- --
Jeffrey S. Ruege........ 4,578 $ 28,877 13,340 28,334 -- --
</TABLE>

Director Compensation

The Company currently pays each non-employee director, other than directors
employed by TCR, fees of $2,500 per board meeting attended in person (or $250
per meeting in which they participate by telephone) and $1,000 per committee
meeting attended. Only one fee is paid if a committee meeting is held in
conjunction with a full board meeting. Directors are reimbursed for their out-
of-pocket expenses incurred in connection with their service on the Board of
Directors. In addition, in Fiscal 1998, the Company entered into an agreement
to pay Mr. Balkcom $175,000 in exchange for his agreement to devote
approximately 65.0% of his time to the Company's business.

It is the Company's policy to grant to eligible non-employee Directors non-
qualified options to purchase shares of Class A Common Stock under the
Company's Non-Employee Directors Stock Option Plan (the "Directors Plan")
administered by the Company's Compensation Committee. Options to purchase
2,500 shares of Class A Common Stock are awarded twice a year upon the release
of the fiscal year results and upon the release of the fiscal second quarter
results. On September 24, 1998, the Company granted each of Messrs. Bearse,
Braswell, Bulkin, Dolive and Pfeffer options to acquire 2,500 shares of Class
A Common Stock under the Directors Plan at an exercise price of $16.00 per
share. Additionally, 1,000 shares of unrestricted Class A Common Stock are
granted to each eligible non-employee Director annually on the date of the
annual shareholders' meeting. Messrs. Bearse, Braswell, Bulkin and Dolive each
received 1,000 shares of Class A Common Stock on June 25, 1998.

8
<PAGE>

Compensation Committee Report

The Compensation Committee of the Board of Directors, a committee composed
entirely of non-officer and non-employee directors, is responsible for
administering the Company's Employee Stock Option Plans and the Directors
Plan, and for recommending the compensation of the Company's executive
officers. All decisions by the Compensation Committee, except the
administration of and grants under the Company's Employee Stock Option Plans,
are subject to review and approval by the full Board of Directors.

The Company's executive compensation philosophy and specific compensation
plans tie a significant portion of each executive's compensation to the
Company's success in meeting specific profit, growth and performance goals.

The Company's compensation objectives include attracting and retaining the
best possible executive talent, motivating executive officers to achieve the
Company's performance objectives, rewarding individual performance and
contributions, and linking executives' and shareholders' interest through
equity based plans.

The Company's executive compensation consists of three key components: base
salary, annual incentive compensation and stock options, each of which is
intended to complement the others and, taken together, to satisfy the
Company's compensation objectives. The Compensation Committee's policies with
respect to each of the three components are discussed below.

Base Salary. In the early part of each fiscal year, the Compensation
Committee reviews the base salary of the Chief Executive Officer ("CEO") and
the recommendation of the CEO with regard to the base salary of all other
executive officers of the Company and approves, with any modifications it
deems appropriate, annual base salaries for each of the executive officers.
Recommended base salaries of the executive officers, other than the CEO, are
based on an evaluation of the individual performance of the executive officer,
including satisfaction of annual objectives. The recommended base salary of
the CEO is based on achievement of the Company's annual goals relating to
financial objectives, including earnings growth and return on capital
employed, and an evaluation of individual performance.

Recommended base salaries of the executive officers are also based in part
upon an evaluation of the salaries of those persons holding comparable
positions at comparable companies.

Annual Incentive Compensation. The Company's CEO is entitled to participate
in an incentive bonus plan which provides for the payment of annual bonuses in
cash based on the relative success of the Company in attaining certain
financial objectives established from time to time by the Compensation
Committee and/or the Board of Directors. The Compensation Committee will
consider incentive payments to the CEO of up to 100% of his annual base
salary. No incentive payment was made to the CEO for Fiscal 1999. As described
in Proposal 3, for the fiscal year ending February 29, 2000 ("Fiscal 2000"),
the Chairman is eligible for an annual bonus equal to eight percent of the
difference between pre-tax earnings for the fiscal year minus ten percent of
the shareholders' equity at the beginning of the year. The Chairman's maximum
bonus potential for Fiscal 2000 is $500,000.

The Company's remaining executive officers (other than the CEO) are entitled
to participate in a discretionary incentive bonus plan which provides for the
payment of annual bonuses in cash, stock or a combination thereof, based on
the guidelines described below. The Compensation Committee will consider
aggregate incentive cash and stock bonus payments to the executive officers,
as a group, of up to 50% of the aggregate annual executive base salaries, and
will consider bonus payments to be paid in stock in excess of 50% of the
aggregate annual executive base salaries. In aggregate, in the twelve months
ended February 28, 1999, the Compensation Committee awarded executive cash
bonuses under this plan equal to approximately 23.6% of the aggregate
executive base salaries.

The Compensation Committee has set the following guidelines: a bonus pool of
approximately 50% of the aggregate executive base salaries is created based on
growth in operating earnings. Distribution of approximately

9
<PAGE>

90% of the pool is based on the achievement by the Company of certain
financial objectives including (1) revenue increase, (2) inventory turns and
(3) operating profit. The balance of the pool (approximately 10%) is
distributed based on subjective factors which may include such items as
development of the management team and overall shareholder satisfaction with
management.

Stock Options. The primary objective of the stock option program is to link
the interests of the executive officers and other selected employees of the
Company with those of the shareholders through significant annual grants of
stock options. The aggregate number of options recommended by the Compensation
Committee is based on practices of the same comparable companies utilized for
determining base salary, while actual stock option grants reflect each
individual's expected long-term contribution to the success of the Company.
The Compensation Committee made the following grants of stock options to named
executive officers in Fiscal 1999:

<TABLE>
<CAPTION>
Date of
Name Grant Shares
---- -------- -------
<S> <C> <C>
Jerry W. Bowman 04/05/98 175,000
Theodore R. Kallgren 06/25/98 25,000
Jeffrey S. Ruege 06/25/98 25,000
</TABLE>

Stock Purchase Plan. The named executive officers and certain other
qualified employees of Pameco and its subsidiaries are also eligible to
purchase shares of Class A Common Stock on a quarterly basis through payroll
deductions under the Company's Stock Purchase Plan (the "Stock Purchase
Plan"). The Stock Purchase Plan is administered by the Employee Stock Purchase
Plan Administration Committee, which is designated by the Board of Directors
and is currently comprised of Paul K. Bois, Theodore R. Kallgren and Mary M.
McCulley. The price to be paid for a share of Class A Common Stock under the
plan is 85% of the Fair Market Value (as defined in the Stock Purchase Plan)
of a share of Class A Common Stock. The amount of any participant's payroll
deductions made pursuant to the Stock Purchase Plan may not exceed ten percent
of such participant's total annual compensation and may not exceed $25,000 per
year. A maximum of 500,000 shares of Class A Common Stock, including a maximum
of 100,000 shares in any calendar year, may be issued under the Stock Purchase
Plan. The Stock Purchase Plan may be terminated or amended by the Company's
Board of Directors; provided, however, that no such amendment shall (1)
disqualify the Stock Purchase Plan under Section 423 of the Internal Revenue
Code; (2) increase the aggregate number of shares of Class A Common Stock
which may be purchased pursuant to the Stock Purchase Plan or (3) change the
designation of corporations whose employees may participate in the Stock
Purchase Plan. Any amendment to the Stock Purchase Plan which would effect the
actions described in clauses (2) or (3) above must be approved by the
Company's shareholders. The Stock Purchase Plan is intended to qualify under
Section 421 and 423 of the Internal Revenue Code. In accordance therewith, no
income will be recognized by a participant when shares are acquired pursuant
to the Stock Purchase Plan. With certain exceptions, when a participant
disposes of such shares, he or she will recognize a capital gain equal to the
difference between the acquisition price and the amount realized on such
disposition. The Company will not be allowed a deduction with respect to any
shares transferred to a participant pursuant to the Stock Purchase Plan. The
following named executive officer acquired shares under the Stock Purchase
Plan during Fiscal 1999:

<TABLE>
<CAPTION>
Name Shares
---- ------
<S> <C>
Theodore R. Kallgren 1,321
</TABLE>

This report is submitted by the members of the Compensation Committee of the
Board of Directors:

Compensation Committee

Michael H. Bulkin, Chairman
Earl Dolive
H. Whitney Wagner

10
<PAGE>

Compensation Committee Interlocks and Insider Participation in Compensation
Decisions

No member of the Compensation Committee was, during Fiscal 1999, an officer
or employee of the Company or any of its subsidiaries, or was formerly an
officer of the Company or any of its subsidiaries.

H. Whitney Wagner, a member of the Compensation Committee, is a Managing
Director of TCR. The Company has entered into an Advisory Agreement with TCR
pursuant to which the Company has agreed to pay TCR a fee of $50,000 per annum
for advisory services and to reimburse TCR for out-of-pocket expenses approved
in advance, for a five year period ending on February 28, 2002. See "Certain
Relationships and Related Transactions".

During Fiscal 1999, no executive officer of the Company served as: (1) a
member of the compensation committee (or other board committee performing
equivalent functions, or in the absence of such a committee, the entire Board
of Directors) of another entity, one of whose executive officers served on the
Compensation Committee of the Board of Directors, (2) a director of another
entity, one of whose executive officers served on the Compensation Committee
of the Board of Directors, or (3) a member of the compensation committee (or
other board committee performing equivalent functions, or in the absence of
such a committee, the entire Board of Directors) of another entity, one of
whose executive officers served as a director of the Company.

Employment and Change of Control Agreements

On January 13, 1999, the Company and Mr. Gurbacki entered into a Retirement
Agreement and General Release. Mr. Gurbacki retired as of January 8, 1999 and
is eligible to receive supplemental retirement pay in an aggregate amount of
$800,000, paid in equal installments over the next two years. Mr. Gurbacki
elected to receive coverage (at his expense, except during the period he
receives retirement pay) for himself and his dependents under the Company's
group health plan until the earlier of (a) Mr. Gurbacki's sixty-fifth birthday
or (b) his becoming eligible to participate in a group health plan sponsored
by another employer. Additionally, Mr. Gurbacki was required to exercise one-
half of his remaining stock options (209,375 shares) by March 4, 1999 or
forfeit such options to the Company. He will have until January 7, 2001 to
exercise the remaining stock options for 209,375 shares or forfeit such
options to the Company. Mr. Gurbacki is prohibited from post-separation
competition with the Company for a period of two years from his retirement
date.

As of January 11, 1999, Mr. Balkcom agreed to expand his role by assuming
the title of President and Chief Executive Officer, while also maintaining his
position as Chairman of the Board of Directors. Mr. Balkcom's compensation has
been increased to $500,000 per year for a term of three years, with a bonus
potential of $500,000 per year, payable in cash. Additionally, under certain
conditions, the Company has agreed to forgive Mr. Balkcom's indebtedness to
the Company over a period of time. See "Certain Relationships and Related
Transactions" and Proposal 3--"Approval of the Pameco Corporation Chairman
Compensation Plan".

Mr. Balkcom received a restricted stock award comprised of 200,000 shares of
restricted Class A Common Stock on May 6, 1999. The stock vests incrementally
over a three year period and is subject to forfeiture if Mr. Balkcom is not
employed as Chief Executive Officer of the Company until January 1, 2002.

The Company has agreed with Mr. Bowman that in the event his employment is
terminated without cause, or is terminated due to a change in control of the
Company, Mr. Bowman will be entitled to severance in an amount equal to two
times his then-current salary, plus his targeted bonus for the year in which
his employment is terminated.

The Company has entered into severance agreements with each of the Company's
other named executive officers providing for six months severance benefits in
the event they are terminated without cause.

11
<PAGE>

Comparison of Cumulative Total Return

The following graph compares the cumulative total shareholder return on the
Company's Common Stock since June 4, 1997, the date that trading of the Class
A Common Stock began on the New York Stock Exchange, through February 28,
1999, with the cumulative total return for the same period of the Standard &
Poor's SmallCap 600 Stock Index (the "S&P 600"), and a Peer Index (the "Peer
Index"), consisting of the following publicly traded companies: ACR Group,
Inc., Hughes Supply, Inc., Noland Company and Watsco, Inc. (Common Stock). The
graph assumes that, at the beginning of the period indicated, $100 was
invested in the Company's Class A Common Stock and the stock of the companies
comprising each index, and that all dividends were reinvested.

[GRAPH APPEARS HERE]
INDEXED RETURNS
Years Ending
Base
Period
Company Name/Index 6/4/97 2/28/98 2/28/99
- -----------------------------------------------------------------------
Pameco Corporation Class A 100 117.86 47.77
S & P 600 100 124.35 103.07
Peer Group 100 114.52 72.41

12
<PAGE>

CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS

In March 1997, Mr. Balkcom, a director of the Company, purchased 62,500
shares of Class A Common Stock from the Company at a purchase price of $9.60
per share for an aggregate purchase price of $600,000, which was financed by
Mr. Balkcom's issuance of a $600,000 promissory note to the Company. The
promissory note bears interest at the applicable federal rate, is secured by
the Class A Common Stock purchased and is a full recourse note. The principal
of the note is payable in full on March 10, 2002. Interest is payable
quarterly, and all payments to date have been made timely. The applicable
federal rate is based upon the yield to maturity of outstanding marketable
obligations of the United States of similar maturities during the one-month
period ending on the fourteenth day of the month preceding the month for which
the rates are applicable. The Internal Revenue Service publishes the
applicable federal rates for each month in the Internal Revenue Bulletin. The
applicable federal rate for May 1999 was 5.12%. On January 8, 1999, the
Company agreed to forgive one-third of Mr. Balkcom's indebtedness to the
Company. If Mr. Balkcom remains in his present position until January 8, 2000,
another one-third of the indebtedness will be forgiven. The remaining portion
of the indebtedness will be forgiven if Mr. Balkcom remains in his present
position until January 8, 2001. The largest amount outstanding under the
promissory note during Fiscal 1999 was $600,000, and the amount currently
outstanding is $400,000.

Pursuant to the terms of an Advisory Agreement dated March 1, 1997, Pameco
engaged TCR as the Company's financial advisor. Pursuant to the agreement, TCR
provides advisory services to the Company and makes certain of its employees
available to advise the Company on financial matters. Under the agreement, the
Company pays TCR an annual fee of $50,000 and reimburses TCR for its out-of-
pocket expenses. The Company has also agreed to indemnify TCR against
liabilities arising out of TCR's engagement. Mr. de Vogel, a nominee for
Director, is President of TCR. Messrs. Wagner and Weld, both of whom were
directors of the Company during Fiscal 1999, are each Managing Directors of
TCR. The Advisory Agreement extends through February 28, 2002, unless
terminated by the Company under certain circumstances.

Section 16(a) Beneficial Ownership Reporting Compliance

Pursuant to Section 16(a) of the Securities Exchange Act of 1934, each
executive officer, director and beneficial owner of 10% or more of either
class of the Company's Common Stock is required to file certain forms with the
Securities and Exchange Commission (the "Commission"). A report of beneficial
ownership of the Company's Common Stock on Form 3 is due at the time such
person becomes subject to the reporting requirement and a report on Form 4 or
5 must be filed to reflect changes in beneficial ownership occurring
thereafter. The Company believes that all filing requirements applicable to
its officers and directors were complied with during Fiscal 1999.

PROPOSAL 2

RATIFICATION OF THE PAMECO CORPORATION
1999 STOCK AWARD PLAN

General

The purpose of the Company's 1999 Stock Award Plan (the "Plan") is to secure
for the Company and its shareholders the benefits of the incentive inherent in
stock ownership in the Company by employees, consultants and other persons who
perform services for the Company, and who are largely responsible for its
future growth and continued success. The Plan promotes the success and
enhances the value of the Company by linking the personal interests of
Participants (as defined below) to those of the Company's shareholders, and by
providing Participants with an incentive for outstanding performance. The Plan
is further intended to provide flexibility to the Company in its ability to
motivate, attract and retain the services of Participants upon whose judgment,
interest and special effort the successful conduct of its operation largely
depends. The Plan will continue in effect, unless earlier terminated as
provided therein, for ten years. The Plan became effective on May 28, 1999 and
will continue in effect, unless earlier terminated, until May 27, 2009.
However, awards issued pursuant to the Plan

13
<PAGE>

("Awards") prior to the relevant termination date which have not expired or
otherwise terminated as of such date may be exercised after such time in
accordance with their terms.

A maximum of 1,000,000 shares of Common Stock are available for the grant of
Awards under the Plan. The shares will be issued out of authorized but
unissued shares or transferred from available treasury stock, including shares
purchased by the Company. If any Award is canceled, terminates, expires or
lapses prior to being fully exercised, new Awards may, subject to certain
limitations, be granted for the shares with respect to which the Awards were
not exercised.

The Plan is intended to replace the Company's Employee Stock Option Plan,
under which the Company is authorized to issue up to an additional 80,611
shares. Although the Company continues to grant options under the Employee
Stock Option Plan, such plan will terminate, and no additional options will be
issued under such plan, upon adoption of the Plan.

A summary of the Plan is set forth below. This summary does not purport to
be complete, and reference to the full text of the Plan, which is attached
hereto as Exhibit A, should be made for further information.

Administration

The Plan is administered by the Board of Directors of the Company, the
Compensation Committee of the Board of Directors, or by any other Committee
appointed by the Board of Directors that is granted authority to administer
the Plan (the "Committee"). The members of the Committee serve at the pleasure
of the Board of Directors.

Every key employee of the Company (including an employee who is a member of
the Board) or of a subsidiary in which the Company has a 50% or greater
interest, and any consultant or other person who performs services for the
Company or a subsidiary, whose judgment, initiative and efforts contribute or
may be expected to contribute materially to the successful performance of the
Company or any subsidiary, is eligible to participate in the Plan. Individuals
who are not employees of the Company or a subsidiary will not be eligible to
receive grants of incentive stock options. The Committee is empowered to
select the individuals who will participate in the Plan (the "Participants"),
the form and amount of the Awards, the dates of grant and the terms and
provisions of each Award, and to interpret the Plan and any agreement entered
into pursuant to the Plan. All decisions and determinations of the Committee
in the administration of the Plan and on all questions concerning the Plan are
final and conclusive. Participants in the Plan are selected in the discretion
of the Committee. The Company anticipates that up to 500 Company employees
will initially be eligible under the Plan.

Awards granted under the Plan will be evidenced by a written agreement (the
"Award Agreement") in such form and containing such terms and conditions
(which need not be identical for all Award Agreements) as the Committee
determines, so long as the Award Agreement is in compliance with the terms of
the Plan.

Terms of Grant and Exercise of Awards

Stock Options. Stock options granted under the Plan may be incentive stock
options ("ISOs") or nonqualified stock options ("NQSOs" and, collectively with
ISOs, "Options"). An Option entitles a Participant to purchase shares of
Common Stock from the Company at the option price. An Option may be granted
with or without a corresponding stock appreciation right. The option price
will be fixed by the Committee at the time the Option is granted, but the
price for each ISO cannot be less than the share's fair market value (as
defined in the Plan) on the date of grant. Up to 250,000 shares of Common
Stock subject to Options may be granted to an individual under the Plan during
any calendar year.

Full payment of the option price must be made when an Option is exercised.
The purchase price may be paid in cash or in such other form of consideration
as the Committee may approve, which may include shares of Common Stock valued
at their fair market value on the date of exercise, or by any other means
which the Committee determines to be consistent with the Plan's purpose and
applicable law.

14
<PAGE>

Options granted under the Plan will be exercisable, in whole or in part, by
the option holder upon such terms and conditions as may be determined by the
Committee. Options vest according to the schedule provided for by the
Committee in the corresponding Award Agreement and are not exercisable later
than ten years after the date of grant. Certain ISOs are not exercisable later
than five years after the date of grant. See "Additional Requirements for
Incentive Stock Options."

A Participant will have no rights as a shareholder with respect to the
shares subject to his or her Option until the Option is exercised.

Additional Requirements for Incentive Stock Options. The Plan establishes
additional terms for ISOs which, if the conditions are met, will qualify for
favorable tax treatment under Section 422 of the Internal Revenue Code of
1986, as amended (the "Code"). See "Federal Income Tax Effects." For example,
the value of stock with respect to which ISOs are exercisable for the first
time in any year under the terms of the Plan and any other incentive stock
option plans of the Company and its subsidiaries by a Participant may not
exceed $100,000. To the extent that Options granted pursuant to the Plan
exceed such amount, they will constitute NQSOs. For ISOs granted to
individuals possessing more than 10% of the combined voting power of all
classes of stock of the Company on the date the Option is granted, the option
price per share may not be less than 110% of the fair market value of a share
of Common Stock on the date the Option is granted, and the Option may not be
exercisable for more than five years.

Stock Appreciation Rights. The Plan also provides for the award of stock
appreciation rights ("SARs"). SARs entitle the Participant to receive a
payment, with respect to each share of Common Stock encompassed by the
exercise of each SAR, of an amount determined by the Committee and specified
in an Award Agreement. The Committee will designate Participants to whom SARs
are granted and will specify the number of shares of Common Stock subject to
each grant. A SAR may be granted with or without a related Option. A payment
to the Participant upon the exercise of a corresponding SAR may not be more
than the difference between the fair market value of the shares subject to the
ISO on the date of grant and the fair market value of the shares on the date
of exercise of the corresponding SAR. The amount payable as a result of the
exercise of a SAR may be settled in cash, in Common Stock or by a combination
of the two. Up to 250,000 shares of Common Stock underlying SAR Awards may be
awarded to an individual under the Plan during any calendar year.

The duration of a SAR will be set forth in an Award Agreement as determined
by the Committee. A SAR that is granted as a corresponding SAR will have the
same duration as the Option to which it relates. A SAR will terminate due to
the Participant's termination of employment at the same time as the date
specified in the Plan with respect to Options, regardless of whether the SAR
was granted in connection with the grant of an Option.

A SAR may be exercised in whole at any time or in part from time to time and
at such times and in compliance with such requirements as the Committee
determines as set forth in an Award Agreement; provided, however, that a
corresponding SAR that is related to an ISO may be exercised only to the
extent that the related Option is exercisable and only when the fair market
value of the shares exceeds the option price of the related ISO.

No Participant shall have any rights as a shareholder with respect to shares
subject to a SAR until the issuance of shares (if any) to the Participant
pursuant to the exercise of such SAR.

Restricted Stock; Stock Awards. Participants may also be awarded shares of
Common Stock pursuant to a stock award. The Committee, in its discretion, may
prescribe that a Participant's rights in a stock award shall be
nontransferable or forfeitable or both unless certain conditions are
satisfied. These conditions may include, for example, a requirement that the
Participant continue employment with the Company for a specified period or
that the Company or the Participant achieve stated objectives. In addition,
the restrictions may lapse incrementally. Up to 250,000 shares of restricted
stock may be granted to an individual under the Plan during any calendar year.

15
<PAGE>

At the time a grant of restricted stock is made, the Committee shall
establish a period or periods of time (the "Restricted Period") applicable to
such grant which, unless the Committee otherwise provides, shall not be less
than one year. All shares of restricted stock awarded to a Participant will be
forfeited unless such Participant remains an employee of (or active consultant
providing services to) the Company or any of its subsidiaries until the
expiration or termination of the Restricted Period and the satisfaction of all
other conditions prescribed by the Committee. Subject to certain provisions,
at the end of the Restricted Period, all restrictions shall lapse and the
restricted stock shall vest in the Participant. The Committee may, in its
discretion, shorten or terminate the Restricted Period, or waive any
conditions for the lapse or termination of restrictions with respect to all or
any portion of the restricted stock at any time after the date the grant is
made.

Upon a grant of restricted stock, a stock certificate representing the
number of shares of restricted stock granted to the Participant shall be
registered in the Participant's name and shall be held in custody by the
Company or a bank selected by the Committee for the Participant's account.
Following such registration, the Participant shall, subject to certain
restrictions, have the rights and privileges of a shareholder as to such
restricted stock, including the right to receive dividends and to vote such
restricted stock, except that the right to receive cash dividends shall be the
right to receive such dividends either in cash currently or by payment in
restricted stock, as the Committee shall determine.

Performance Share Awards. The Plan also provides for the award of
performance shares. A performance share award entitles the Participant to
receive Common Stock, a payment equal to the fair market value of a specified
number of shares of Common Stock, or a combination thereof, if certain
performance standards are met. The Committee will prescribe the requirements
that must be satisfied before a performance share award is earned. The
performance share requirements may include, for example, a requirement that
the Participant continue employment with the Company for a specified period or
that the Company or the Participant achieve stated objectives. To the extent
that performance shares are earned, the obligation may be settled in cash, in
Common Stock or by a combination of the two. Up to 250,000 performance share
awards may be earned by an individual under the Plan during any calendar year.

No Participant shall have, as a result of receiving a performance share
award, any rights as a shareholder until and to the extent that the
performance shares are earned and Common Stock is transferred to such
Participant. If the Award Agreement so provides, a Participant may receive a
cash payment equal to the dividends that would have been payable with respect
to the number of shares of Common Stock covered by an Award between (a) the
date that the performance shares are awarded and (b) the date that a transfer
of Common Stock to the Participant, cash settlement, or combination thereof is
made pursuant to the performance share award.

Right of Employment

The grant of any Award pursuant to the Plan will not confer upon any
recipient thereof any rights of employment with the Company or affect the
right of the Company to terminate the employment of the holder at any time.

Assignment of Interest

Generally, holders of Options may not sell, assign, transfer or hypothecate
their rights thereunder to any person, except in the event of the death of the
holder, in which case the rights granted may be transferred by will or by the
laws of descent and distribution. During the lifetime of a Participant,
Options may only be exercised by such Participant. Notwithstanding the
foregoing, if permitted by the Committee and stated in the Award Agreement, a
Participant may transfer an Option (other than an ISO) with respect to all or
part of the shares of Common Stock subject to such Option to the Participant's
spouse, children or grandchildren (or such other person or entity as may be
permitted by the Committee); to a trust for the benefit of such family members
or to a partnership in which such family members are the only partners if (a)
no consideration is received by the Participant in exchange for the Option;
(b) the transfer is permitted under applicable tax laws; (c) the transfer is

16
<PAGE>

permitted under Rule 16(b)(3) under the Securities Exchange Act of 1934, as
amended, and (d) the Option continues to be subject to the same terms and
conditions after the transfer.

Other than as permitted in the immediately preceding paragraph, each SAR
granted under the Plan may not be transferred except by will or by the laws of
descent and distribution. A corresponding SAR will be subject to the same
restrictions on transfer as the ISO to which it relates.

Unless the Committee provides otherwise in an Award Agreement, no grant of,
nor any right or interest of a Participant in or to, any restricted stock
under the Plan, may be assigned, encumbered or transferred except, in the
event of the death of a Participant, by will or the laws of descent and
distribution.

A Participant may not sell, transfer, pledge, exchange, hypothecate, or
otherwise dispose of a performance share award or the right to receive Common
Stock thereunder other than by will or the laws of descent and distribution.

Amendment and Termination of Plan; Adjustment of Shares

No Option or stock award may be granted and no performance shares may be
awarded under the Plan after May 27, 2009. The Board of Directors may at any
time terminate, suspend or amend the Plan. An amendment will not become
effective without shareholder approval if the amendment (a) materially
modifies the eligibility requirements; (b) increases the total number of
shares which may be granted under the Plan (except as discussed in the
immediately following paragraph); (c) extends the term of the Plan; or (d)
amends the Plan in any other manner which the Board of Directors determines
should become effective only if approved by the Company's shareholders.

The Committee may, in such manner as it determines in its sole discretion,
appropriately adjust the number of shares subject to Awards under the Plan and
the aggregate number of shares available for issuance under the Plan in the
event of any change in the Company's capitalization, including any stock
dividend issued by the Company, or any corporate transaction such as an
exchange of the outstanding shares of Common Stock for shares of another class
or company.

Expenses

The Company pays the administrative costs of the Plan, including the
expenses of the Committee, all costs of registering the shares of Common Stock
under the Plan with the Commission, and the costs of issuing and delivering
the shares subject to the Plan.

Compliance with Section 162(m) of the Internal Revenue Code

Section 162(m) of the Code denies a deduction by an employer for certain
compensation in excess of $1.0 million per year paid by a publicly traded
corporation to the chief executive officer or any of the four most highly
compensated executive officers other than the chief executive officer (the
"Designated Executive Officers"). Compensation with respect to stock options,
including upon exercise of a NQSO or upon a disqualifying disposition of an
ISO, as described below under "Certain Federal Income Tax Consequences," or
other compensation pursuant to the Plan, will be excluded from this deduction
limit if it satisfies certain requirements. The requirements include: (1) the
stock option must be granted at an exercise price not lower than fair market
value on the date of grant; (2) the stock option grant must be made by a
committee composed of two or more "outside directors" within the meaning of
Section 162(m); (3) the plan under which the stock option is granted must
state the maximum number of shares with respect to which options may be
granted during a specified period to any individual; and (4) the material
terms pursuant to which the compensation is to be paid must be disclosed to,
and approved by, the public stockholders of the corporation in a separate vote
prior to payment. The Plan meets the requirements of paragraphs (1) through
(3) above, and approval of the Plan by the Company's public stockholders is
being proposed in order to comply with requirement (4) so that compensation
with respect to stock options may be excluded from the deduction limit under
Section 162(m) of the Code.

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Federal Income Tax Effects

The federal, state and local income tax consequences associated with the
grant or purchase of Common Stock or Options under the Plan will depend upon
each individual Participant's circumstances. Each Participant should seek the
advice of a qualified tax adviser regarding the tax consequences of
participation in the Plan.

The statements pertaining to the federal income tax consequences regarding
participation in the Plan are based upon the Code, regulations promulgated by
the Internal Revenue Service (the "IRS") thereunder, published revenue rulings
issued by the IRS, and case law as of the date of this Proxy Statement. Such
laws and regulations are subject to change. Such statements reflect existing
law and reasonable interpretations thereof and do not, in any instance,
purport to indicate the trend of the law in the future. As a result, no
assurance can be given that there will be no statutory, judicial or
administrative changes that would modify these summaries and/or statements. No
ruling from the IRS or any state agency has been requested and no ruling has
been issued with respect to any transactions described herein.

Options. There are generally no federal tax consequences either to the
employee receiving Options (the "Optionee") or to the Company upon the grant
of an Option. Upon exercise of an ISO, the Optionee will not recognize any
income and the Company will not be entitled to a deduction for tax purposes,
although such exercise may give rise to a liability for the Optionee under the
alternative minimum tax provisions of the Code. Generally, if the Optionee
disposes of shares acquired upon exercise of an ISO within two (2) years of
the date of grant or one (1) year of the date of exercise, the Optionee will
recognize compensation income and the Company will be entitled to a deduction
for tax purposes in the taxable year in which such disposition occurred in the
amount of the excess of the fair market value of the shares of Common Stock on
the date of exercise over the option exercise price (or the gain on sale, if
less). Otherwise, the Company will not be entitled to any deduction for tax
purposes upon disposition of such shares, and the entire gain for the Optionee
will be treated as a capital gain. On exercise of a NQSO, the amount by which
the fair market value of the Common Stock on the date of exercise exceeds the
option exercise price will generally be taxable to the Optionee as
compensation income and will generally be deductible for tax purposes by the
Company. The disposition of shares of Common Stock acquired upon exercise of a
NQSO will generally result in a capital gain or loss for the Optionee, but
will have no tax consequences for the Company.

Stock Appreciation Rights. No income is recognized by a Participant upon the
grant of a SAR. The exercise of a SAR is generally a taxable event. A
Participant generally must recognize income equal to any cash that is paid to
the Participant and the fair market value of the shares of Common Stock that
is received by the Participant in settlement of a SAR. The Company is of the
opinion that it will be entitled to a deduction for tax purposes in the amount
and at the time that compensation income is realized by the Participant.

Stock Awards; Restricted Stock. With respect to outright grants of Common
Stock under the Plan, the Company is of the opinion that the Participant will
realize compensation income at the time of grant in an amount equal to the
fair market value of the Common Stock less any amount paid for such Common
Stock. The Company is also of the opinion that it will be entitled to a
deduction under the Code in the amount and at the time that compensation
income is realized by the Participant.

With respect to the grant of restricted stock under the Plan, the Company is
of the opinion that the Participant will realize compensation income in an
amount equal to the fair market value of the restricted stock (whether
received as a grant or as a dividend), less any amount paid for such
restricted stock, at the time when the Participant's rights with respect to
such restricted stock are no longer subject to a substantial risk of
forfeiture, unless the Participant elected, pursuant to a special election
provided in the Code, to be taxed on the restricted stock at the time it was
granted or received as a dividend, as the case may be. Dividends paid to the
Participant during the Restricted Period will be taxable as compensation
income, rather than as dividend income, unless the election referred to above
was made. The Company is also of the opinion that it will be entitled to a
deduction under the Code in the amount and at the time that compensation
income is realized by the Participant.

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<PAGE>

Performance Share Awards. Unless an election is made under Section 83(b) of
the Code, a Participant will recognize income on account of the settlement of
a performance share award. The amount of such income will be equal to any cash
that is paid and the fair market value of Common Stock (on the date that the
shares are first transferable or not subject to a substantial risk of
forfeiture) that is received in settlement of the award, and the Company is of
the opinion that it will generally be entitled to claim a deduction of such
amount for tax purposes.

Required Vote

The affirmative vote of holders of a majority of the shares of the Class A
Common Stock and the Class B Common Stock, voting together, represented and
voted at the Annual Meeting, assuming the presence of a quorum, is required to
ratify the Plan.

The Board of Directors recommends that the shareholders vote FOR
ratification of the Plan.

PROPOSAL 3

APPROVAL OF THE PAMECO CORPORATION
CHAIRMAN COMPENSATION PLAN

The Company's Chairman Compensation Plan (the "Bonus Program") is designed
to provide a monetary incentive to the Company's Chairman for attaining the
Company's financial goals.

In order to be qualified for a bonus under the Bonus Program, the Chairman
must be employed by the Company in that position for the entire given fiscal
year.

For the fiscal year ending February 29, 2000 ("Fiscal 2000"), the Chairman
is eligible for an annual bonus equal to eight percent of the difference
between pre-tax earnings for the fiscal year minus ten percent of the
shareholders' equity at the beginning of the year. The Chairman's maximum
bonus potential for Fiscal 2000 is $500,000. Prior to payment of any annual
bonus, the Compensation Committee shall certify in writing that the
performance goals were satisfied and shall calculate the amount of such bonus.
The foregoing calculation will be reevaluated and may be changed in subsequent
fiscal years.

Section 162(m) of the Code limits to $1.0 million the amount of compensation
that may be deducted in any tax year with respect to a Designated Executive
Officer, with an exception for certain performance-based compensation. The
Bonus Program is designed, and is to be administered, to qualify payments to
the Chairman for that performance-based exception, unless the Board of
Directors determines that compliance with Section 162(m) is not necessary or
desirable. Approval of the Bonus Program by the Company's public stockholders
is being proposed in order to comply with one of the requirements of 162(m) so
that compensation paid to the Chairman under the Bonus Program satisfies the
exception for performance-based compensation and may be excluded from the
deduction limit under 162(m) of the Code.

The Board of Directors recommends that the shareholders vote FOR approval of
the Chairman Compensation Plan.

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<PAGE>

MISCELLANEOUS

Information Concerning the Company's Accountants

Ernst & Young LLP was the principal independent public accountant for the
Company during Fiscal 1999. The Board of Directors has re-appointed Ernst &
Young LLP as independent auditor for the fiscal year ending February 29, 2000.
A representative of Ernst & Young LLP is expected to be present at the Annual
Meeting and will be afforded an opportunity to make a statement and to respond
to questions.

Annual Reports

Shareholders may obtain a copy of the Company's Fiscal 1999 Annual Report on
Form 10-K without charge by writing to Investor Relations, Office of the
Chairman of the Board, at the Company's principal executive offices: Pameco
Corporation, 1000 Center Place, Norcross, Georgia 30093.

SUBMISSION OF SHAREHOLDER PROPOSALS FOR 2000 ANNUAL MEETING

Any proposals which shareholders intend to present for a vote of
shareholders at the 2000 Annual Meeting of Shareholders and which such
shareholders desire to have included in the Company's Proxy Statement and form
of proxy relating to that meeting must be sent to the Company's principal
executive offices, marked to the attention of the Secretary of the Company,
and received by the Company at such offices on or before February 11, 2000.
The determination by the Company of whether it will oppose inclusion of any
proposal in its Proxy Statement and form of proxy will be made on a case by
case basis in accordance with its judgment, the provisions of the Company's
Bylaws, and the rules and regulations promulgated by the Securities and
Exchange Commission. Proposals received after February 11, 2000, will not be
considered for inclusion in the Company's proxy materials for its 2000 Annual
Meeting of Shareholders. The Company must be notified of any other shareholder
proposal intended to be presented for action at the meeting not later than
April 27, 2000, or else proxies may be voted on such proposal at the
discretion of the person or persons holding those proxies.

By Order of the Board of Directors

Mary M. McCulley
Assistant Secretary

June 11, 1999

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PAMECO CORPORATION

1999 STOCK AWARD PLAN
<PAGE>

TABLE OF CONTENTS

<TABLE>
<S> <C>
ARTICLE 1.ESTABLISHMENT, PURPOSE, AND DURATION............................. 1
1.1 Establishment of the Plan.............................................. 1
1.2 Purpose of the Plan.................................................... 1
1.3 Duration of the Plan................................................... 1

ARTICLE 2.DEFINITIONS...................................................... 1

ARTICLE 3.ADMINISTRATION................................................... 3
3.1 The Committee.......................................................... 3
3.2 Authority of the Committee............................................. 3
3.3 Decisions Binding...................................................... 4

ARTICLE 4.SHARES SUBJECT TO THE PLAN....................................... 4
4.1 Number of Shares....................................................... 4
4.2 Lapsed Awards.......................................................... 4
4.3 Adjustments In Authorized Shares....................................... 4

ARTICLE 5.ELIGIBILITY AND PARTICIPATION.................................... 5

ARTICLE 6.STOCK OPTIONS.................................................... 5
6.1 Grant of Options....................................................... 5
6.2 Agreement.............................................................. 5
6.3 Option Price........................................................... 5
6.4 Duration of Options.................................................... 5
6.5 Exercise of Options.................................................... 5
6.6 Payment................................................................ 6
6.7 Limited Transferability................................................ 6
6.8 Shareholder Rights..................................................... 6

ARTICLE 7.STOCK APPRECIATION RIGHTS........................................ 6
7.1 Grants of SARs......................................................... 6
7.2 Duration of SARs....................................................... 7
7.3 Exercise of SAR........................................................ 7
7.4 Determination of Payment of Cash and/or Common Stock Upon Exercise of
SAR....................................................................... 7
7.5 Nontransferability..................................................... 7
7.6 Shareholder Rights..................................................... 7

ARTICLE 8.RESTRICTED STOCK; STOCK AWARDS................................... 7
8.1 Grants................................................................. 7
8.2 Restricted Period; Lapse of Restrictions............................... 7
8.3 Rights of Holder; Limitations Thereon.................................. 8
8.4 Delivery of Unrestricted Shares........................................ 8
8.5 Nonassignability of Restricted Stock................................... 8

ARTICLE 9.PERFORMANCE SHARE AWARDS......................................... 9
9.1 Award.................................................................. 9
9.2 Earning the Award...................................................... 9
9.3 Payment................................................................ 9
9.4 Shareholder Rights..................................................... 9

ARTICLE 10.BENEFICIARY DESIGNATION......................................... 9

ARTICLE 11.DEFERRALS....................................................... 10

ARTICLE 12.RIGHTS OF EMPLOYEES............................................. 10
12.1 Employment............................................................ 10
12.2 Participation......................................................... 10
</TABLE>

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<TABLE>
<S> <C>
ARTICLE 13.CHANGE IN CONTROL................................................ 10
13.1 Definition............................................................. 10
13.2 Limitation on Awards................................................... 11

ARTICLE 14.AMENDMENT, MODIFICATION AND TERMINATION.......................... 11
14.1 Amendment, Modification and Termination................................ 11
14.2 Awards Previously Granted.............................................. 11
14.3 Compliance With Code Section 162(m).................................... 11

ARTICLE 15.WITHHOLDING...................................................... 11
15.1 Tax Withholding........................................................ 11
15.2 Share Withholding...................................................... 11

ARTICLE 16.INDEMNIFICATION.................................................. 11

ARTICLE 17.SUCCESSORS....................................................... 12

ARTICLE 18.LEGAL CONSTRUCTION............................................... 12
18.1 Gender and Number...................................................... 12
18.2 Severability........................................................... 12
18.3 Requirements of Law.................................................... 12
18.4 Regulatory Approvals and Listing....................................... 12
18.5 Securities Law Compliance.............................................. 12
18.6 Governing Law.......................................................... 12
</TABLE>

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<PAGE>

PAMECO CORPORATION

1999 STOCK AWARD PLAN

ARTICLE 1. ESTABLISHMENT, PURPOSE, AND DURATION

1.1 Establishment of the Plan. Pameco Corporation, a Georgia corporation
(hereinafter referred to as the "Company"), hereby establishes a stock option
and incentive award plan known as the "Pameco Corporation 1999 Stock Award
Plan" (the "Plan"), as set forth in this document. The Plan permits the grant
of Incentive Stock Options, Nonqualified Stock Options, Restricted Stock,
Stock Awards, Performance Share Awards and Stock Appreciation Rights. The Plan
shall become effective on the date it is approved by the Board of Directors
(the "Effective Date"), subject to approval of the Plan by the Company's
shareholders within the 12-month period immediately thereafter, and shall
remain in effect as provided in Section 1.3.

1.2 Purpose of the Plan. The purpose of the Plan is to secure for the
Company and its shareholders the benefits of the incentive inherent in stock
ownership in the Company by employees, consultants and other persons who
perform services for the Company, and who are responsible for its future
growth and continued success. The Plan promotes the success and enhances the
value of the Company by linking the personal interests of Participants (as
defined below) to those of the Company's shareholders, and by providing
Participants with an incentive for outstanding performance. The Plan is
further intended to provide flexibility to the Company in its ability to
motivate, attract and retain the services of Participants upon whose judgment,
interest and special effort the successful conduct of its operation largely
depends.

1.3 Duration of the Plan. The Plan shall commence on the Effective Date, and
shall remain in effect, subject to the right of the Board of Directors to
amend or terminate the Plan at any time pursuant to Article 14, until the day
prior to the tenth (10th) anniversary of the Effective Date.

ARTICLE 2. DEFINITIONS

Whenever used in the Plan, the following terms shall have the meanings set
forth below:

(a) "Agreement" means an agreement entered into by each Participant and the
Company, setting forth the terms and provisions applicable to Awards
granted to Participants under this Plan.

(b) "Award" means, individually or collectively, a grant under this Plan of
Incentive Stock Options, Nonqualified Stock Options, Restricted Stock,
Stock Awards, Performance Share Awards or Stock Appreciation Rights.

(c) "Beneficial Owner" or "Beneficial Ownership" shall have the meaning
ascribed to such term in Rule 13d-3 of the Exchange Act.

(d) "Board" or "Board of Directors" means the Board of Directors of the
Company.

(e) "Cause" means: (i) willful misconduct on the part of a Participant that
is materially detrimental to the Company; or (ii) the conviction of a
Participant for the commission of a felony. The existence of "Cause"
under either (i) or (ii) shall be determined by the Committee.
Notwithstanding the foregoing, if the Participant has entered into an
employment agreement that is binding as of the date of employment
termination, and if such employment agreement defines "Cause," and/or
provides a means of determining whether "Cause" exists, such definition
of "Cause" and means of determining its existence shall supersede this
provision.

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(f) "Code" means the Internal Revenue Code of 1986, as amended from time to
time, or any successor act thereto.

(g) "Committee" means the committee appointed to administer the Plan with
respect to grants of Awards, as specified in Article 3, and to perform
the functions set forth therein.

(h) "Common Stock" means the common stock of the Company, par value $.01
per share.

(i) "Company" means Pameco Corporation, a Georgia corporation, or any
successor thereto as provided in Article 17.

(j) "Corresponding SAR" means an SAR that is granted in relation to a
particular Option and that can be exercised only upon the surrender to
the Company, unexercised, of that portion of the Option to which the
SAR relates.

(k) "Director" means any individual who is a member of the Board of
Directors of the Company.

(l) "Disability" shall have the meaning ascribed to such term in the
Company's long-term disability plan covering the Participant, or in the
absence of such plan, a meaning consistent with Section 22(e)(3) of the
Code.

(m) "Employee" means any employee of the Company or the Company's
Subsidiaries. Directors who are not otherwise employed by the Company
or the Company's Subsidiaries are not considered Employees under this
Plan.

(n) "Effective Date" shall have the meaning ascribed to such term in
Section 1.1.

(o) "Exchange Act" means the Securities Exchange Act of 1934, as amended
from time to time, or any successor act thereto.

(p) "Fair Market Value" shall be determined as follows:

(i) If, on the relevant date, the Shares are traded on a national or
regional securities exchange or on The Nasdaq Stock Market ("Nasdaq")
and closing sale prices for the Shares are customarily quoted, on the
basis of the closing sale price on the principal securities exchange
on which the Shares may then be traded or, if there is no such sale on
the relevant date, then on the immediately preceding day on which a
sale was reported;

(ii) If, on the relevant date, the Shares are not listed on any securities
exchange or traded on Nasdaq, but nevertheless are publicly traded and
reported on Nasdaq without closing sale prices for the Shares being
customarily quoted, on the basis of the mean between the closing bid
and asked quotations in such other over-the-counter market as reported
by Nasdaq; but, if there are no bid and asked quotations in the over-
the-counter market as reported by Nasdaq on that date, then the mean
between the closing bid and asked quotations in the over-the-counter
market as reported by Nasdaq on the immediately preceding day such bid
and asked prices were quoted; and

(iii) If, on the relevant date, the Shares are not publicly traded as
described in (i) or (ii), on the basis of the good faith
determination of the Committee.

(q) "Incentive Stock Option" or "ISO" means an option to purchase Shares
granted under Article 6 which is designated as an Incentive Stock
Option and is intended to meet the requirements of Section 422 of the
Code.

(r) "Initial Value" means, with respect to a Corresponding SAR, the Option
Price per share of the related Option, and with respect to a SAR
granted independently of an Option, the Fair Market Value of one share
of Common Stock on the date of grant.

(s) "Insider" shall mean an Employee who is, on the relevant date, an
officer or a director, or a ten percent (10%) beneficial owner of any
class of the Company's equity securities that is registered pursuant to
Section 12 of the Exchange Act or any successor provision, as "officer"
and "director" are defined under Section 16 of the Exchange Act.

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<PAGE>

(t) "Named Executive Officer" means a Participant who, as of the date of
vesting and/or payout of an Award is one of the group of "covered
employees," as defined in the regulations promulgated under Code
Section 162(m), or any successor statute.

(u) "Nonqualified Stock Option" or "NQSO" means an option to purchase
Shares granted under Article 6, and which is not intended to meet the
requirements of Code Section 422.

(v) "Option" means an Incentive Stock Option or a Nonqualified Stock
Option.

(w) "Option Price" means the price at which a Share may be purchased by a
Participant pursuant to an Option, as determined by the Committee.

(x) "Participant" means an Employee, a consultant or other person who
performs services for the Company or a Subsidiary, who has been
determined by the Committee to contribute significantly to the profits
or growth of the Company and who has been granted an Award under the
Plan which is outstanding.

(y) "Performance Share Award" means an Award, which, in accordance with and
subject to an Agreement, will entitle the Participant, or his estate or
beneficiary in the event of the Participant's death, to receive cash,
Common Stock or a combination thereof.

(z) "Person" shall have the meaning ascribed to such term in Section
3(a)(9) of the Exchange Act and used in Sections 13(d) and 14(d)
thereof, including a "group" as defined in Section 13(d) thereof.

(aa) "Retirement" shall mean retiring from employment with the Company or
any Subsidiary on or after attaining age 65.

(bb) "Restricted Stock" means an Award of Common Stock granted in accordance
with the terms of Article 8 and the other provisions of the Plan, and
which is nontransferable and subject to a substantial risk of
forfeiture. Shares of Common Stock shall cease to be Restricted Stock
when, in accordance with the terms hereof and the applicable Agreement,
they become transferable and free of substantial risk of forfeiture.

(cc) "SAR" means a stock appreciation right that entitles the holder to
receive, with respect to each share of Common Stock encompassed by the
exercise of such SAR, the amount determined by the Committee and
specified in an Agreement. In the absence of such specification, the
holder shall be entitled to receive in cash, with respect to each share
of Common Stock encompassed by the exercise of such SAR, the excess of
the Fair Market Value on the date of exercise over the Initial Value.
References to "SARs" include both Corresponding SARs and SARs granted
independently of Options, unless the context requires otherwise.

(dd) "Shares" means the shares of Common Stock of the Company (including any
new, additional or different stock or securities resulting from the
changes described in Section 4.3).

(ee) "Stock Award" means a grant of Shares under Article 8 that is not
generally subject to restrictions and pursuant to which a certificate
for the Shares is transferred to the Employee.

(ff) "Subsidiary" means any company during any period in which it is a
"subsidiary corporation" (as that term is defined in Code Section
424(f)) with respect to the Company.

ARTICLE 3. ADMINISTRATION

3.1 The Committee. The Plan shall be administered by the Board of Directors
or by the Compensation Committee of the Board, or by any other committee or
subcommittee appointed by the Board that is granted authority to administer
the Plan. The members of the Committee shall be appointed from time to time
by, and shall serve at the discretion of, the Board of Directors.

3.2 Authority of the Committee. Authority of the Committee. Subject to the
provisions of the Plan, the Committee shall have full power to select the
Employees, consultants and other persons who perform services

A-3
<PAGE>

for the Company or a Subsidiary, who shall participate in the Plan (who may
change from year to year); determine the size and types of Awards; determine
the terms and conditions of Awards in a manner consistent with the Plan
(including conditions on the exercisability of all or a part of an Option or
SAR, restrictions on transferability and vesting provisions on Restricted
Stock or Performance Share Awards and the duration of the Awards); construe
and interpret the Plan and any agreement or instrument entered into under the
Plan; establish, amend or waive rules and regulations for the Plan's
administration; and (subject to the provisions of Article 14) amend the terms
and conditions of any outstanding Award to the extent such terms and
conditions are within the discretion of the Committee as provided in the Plan,
including accelerating the time any Option or SAR may be exercised and
establishing different terms and conditions relating to the effect of the
termination of employment or other services to the Company. Further, the
Committee shall make all other determinations which may be necessary or
advisable in the Committee's opinion for the administration of the Plan. All
expenses of administering this Plan shall be borne by the Company.

3.3 Decisions Binding. All determinations and decisions made by the
Committee pursuant to the provisions of the Plan and all related orders and
resolutions of the Board shall be final, conclusive and binding on all
Persons, including the Company, the shareholders, Employees, Participants and
their estates and beneficiaries.

ARTICLE 4. SHARES SUBJECT TO THE PLAN

4.1 Number of Shares. Subject to adjustment as provided in Section 4.3, the
total number of Shares available for grant of Awards under the Plan shall be
one million (1,000,000) Shares. The Shares may, in the discretion of the
Company, be either authorized but unissued Shares or Shares held as treasury
shares, including Shares purchased by the Company, whether on the market or
otherwise. The following rules shall apply for purposes of the determination
of the number of Shares available for grant under the Plan:

(a) The grant of an Option, SAR, Stock Award, Restricted Stock Award or
Performance Share Award shall reduce the Shares available for grant
under the Plan by the number of Shares subject to such Award.
(b) While an Option, SAR, Stock Award, Restricted Stock Award or
Performance Share Award is outstanding, it shall be counted against
the authorized pool of Shares, regardless of its vested status.

4.2 Lapsed Awards. If any Award granted under this Plan is canceled,
terminates, expires or lapses for any reason, or if Shares are withheld in
payment of the Option Price or for withholding taxes, any Shares subject to
such Award or that are withheld shall again be available for the grant of an
Award under the Plan. However, in the event that prior to the Award's
cancellation, termination, expiration or lapse, the holder of the Award at any
time received one or more "benefits of ownership" pursuant to such Award (as
defined by the Securities and Exchange Commission, pursuant to any rule or
interpretation promulgated under Section 16 of the Exchange Act), the Shares
subject to such Award shall not again be made available for regrant under the
Plan.

4.3 Adjustments In Authorized Shares. In the event of any change in
corporate capitalization, such as a stock split, or a corporate transaction,
such as any merger, consolidation, separation, including a spin-off, or other
distribution of stock or property of the Company, any reorganization (whether
or not such reorganization comes within the definition of such term in Code
Section 368) or any partial or complete liquidation of the Company, such
adjustment shall be made in the number and class of Shares which may be
delivered under the Plan, and in the number and class of and/or price of
Shares subject to outstanding Awards granted under the Plan, as may be
determined to be appropriate and equitable by the Committee, in its sole
discretion, to prevent dilution or enlargement of rights; provided, however,
that the number of Shares subject to any Award shall always be a whole number
and the Committee shall make such adjustments as are necessary to insure
Awards of whole Shares.

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<PAGE>

ARTICLE 5. ELIGIBILITY AND PARTICIPATION

Any key Employee of the Company or any Subsidiary, including any such
Employee who is also a director of the Company or any Subsidiary, and any
consultant or other person who performs services for the Company or a
Subsidiary, whose judgment, initiative and efforts contribute or may be
expected to contribute materially to the successful performance of the Company
or any Subsidiary shall be eligible to receive an Award under the Plan. In
determining the individuals to whom such an Award shall be granted and the
number of Shares which may be granted pursuant to that Award, the Committee
shall take into account the duties of the respective individual, his or her
present and potential contributions to the success of the Company or any
Subsidiary, and such other factors as the Committee shall deem relevant in
connection with accomplishing the purpose of the Plan.

ARTICLE 6. STOCK OPTIONS

6.1 Grant of Options. Subject to the terms and provisions of the Plan,
Options may be granted to Participants at any time and from time to time as
shall be determined by the Committee. The Committee shall have discretion in
determining the number of Shares subject to Options granted to each
Participant. An Option may be granted with or without a Corresponding SAR. No
Participant may be granted ISOs (under the Plan and all other incentive stock
option plans of the Company and any Subsidiary) which are first exercisable in
any calendar year for Common Stock having an aggregate Fair Market Value
(determined as of the date an Option is granted) that exceeds $100,000. The
preceding annual limit shall not apply to NQSOs. The Committee may grant a
Participant ISOs, NQSOs or a combination thereof, and may vary such Awards
among Participants; provided that only an Employee may be granted ISOs. The
maximum number of Shares subject to Options which can be granted under the
Plan during any calendar year to any individual is 250,000 Shares.

6.2 Agreement. Each Option grant shall be evidenced by an Agreement that
shall specify the Option Price, the duration of the Option, the number of
Shares to which the Option pertains and such other provisions as the Committee
shall determine. The Option Agreement shall further specify whether the Award
is intended to be an ISO or an NQSO. Any portion of an Option that is not
designated as an ISO or otherwise fails or is not qualified as an ISO (even if
designated as an ISO) shall be a NQSO. If the Option is granted in connection
with a Corresponding SAR, the Agreement shall also specify the terms that
apply to the exercise of the Option and Corresponding SAR.

6.3 Option Price. The Option Price for each grant of an ISO shall not be
less than one hundred percent (100%) of the Fair Market Value of a Share on
the date the Option is granted. In no event, however, shall any Participant
who owns (within the meaning of Section 424(d) of the Code) stock of the
Company possessing more than ten percent (10%) of the total combined voting
power of all classes of stock of the Company be eligible to receive an ISO at
an Option Price less than one hundred ten percent (110%) of the Fair Market
Value of a share on the date the ISO is granted. The Option Price for each
grant of a NQSO shall be established by the Committee and, in its discretion,
may be less than the Fair Market Value of a Share on the date the Option is
granted.

6.4 Duration of Options. Each Option shall expire at such time as the
Committee shall determine at the time of grant; provided, however, that no
Option shall be exercisable later than the tenth (10th) anniversary date of
its grant; provided, further, however, that any ISO granted to any Participant
who at such time owns (within the meaning of Section 424(d) of the Code) stock
of the Company possessing more than ten percent (10%) of the total combined
voting power of all classes of stock of the Company, shall not be exercisable
later than the fifth (5th) anniversary date of its grant.

6.5 Exercise of Options. Options granted under the Plan shall be exercisable
at such times and be subject to such restrictions and conditions as the
Committee shall in each instance approve, including conditions related to the
employment of the Participant with the Company or any Subsidiary, which need
not be the same for each grant or for each Participant. Each Option shall be
exercisable for such number of Shares and at such time or times, including
periodic installments, as may be determined by the Committee at the time of
the grant. The

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Committee may provide in the Agreement for automatic accelerated vesting and
other rights upon the occurrence of a Change in Control of the Company. Except
as otherwise provided in the Agreement and Article 13, the right to purchase
Shares that are exercisable in periodic installments shall be cumulative so
that when the right to purchase any Shares has accrued, such Shares or any
part thereof may be purchased at any time thereafter until the expiration or
termination of the Option. The exercise or partial exercise of either an
Option or its Corresponding SAR shall result in the termination of the other
to the extent of the number of Shares with respect to which the Option or
Corresponding SAR is exercised.

6.6 Payment. Options shall be exercised by the delivery of a written notice
of exercise to the Company, setting forth the number of Shares with respect to
which the Option is to be exercised, accompanied by full payment for the
Shares. The Option Price upon exercise of any Option shall be payable to the
Company in full, either: (a) in cash, (b) cash equivalent approved by the
Committee, (c) if approved by the Committee, by tendering previously acquired
Shares (or delivering a certification of ownership of such Shares) having an
aggregate Fair Market Value at the time of exercise equal to the total Option
Price (provided that the Shares which are tendered must have been held by the
Participant for six months, if required for accounting purposes, and for the
period required by law, if any, prior to their tender to satisfy the Option
Price), or (d) by a combination of (a), (b) and (c). The Committee also may
allow broker-assisted cashless exercises as permitted under Federal Reserve
Board's Regulation T, subject to applicable securities law restrictions, or by
any other means which the Committee determines to be consistent with the
Plan's purpose and applicable law. As soon as practicable after receipt of a
written notification of exercise and full payment, the Company shall deliver
to the Participant, in the Participant's name, Share certificates in an
appropriate amount based upon the number of Shares purchased under the
Option(s), and may place appropriate legends on the certificates representing
such Shares.

6.7 Limited Transferability. If permitted by the Committee in the Agreement,
a Participant may transfer an Option granted hereunder, including, but not
limited to, transfers to members of his or her Immediate Family (as defined
below), to one or more trusts for the benefit of such Immediate Family
members, to one or more partnerships where such Immediate Family members are
the only partners, or to such other individual or entity as may be permitted
by the Committee, if (i) the Participant does not receive any consideration in
any form whatsoever for such transfer, (ii) such transfer is permitted under
applicable tax laws, and (iii) the Participant is an Insider, such transfer is
permitted under Rule 16b-3 of the Exchange Act as in effect from time to time.
Any Option so transferred shall continue to be subject to the same terms and
conditions in the hands of the transferee as were applicable to said Option
immediately prior to the transfer thereof. Any reference in any such Agreement
to the employment by or performance of services for the Company by the
Participant shall continue to refer to the employment of, or performance by,
the transferring Participant. For purposes hereof, "Immediate Family" shall
mean the Participant and the Participant's spouse, children and grandchildren.
Any Option that is granted pursuant to any Agreement that did not initially
expressly allow the transfer of said Option and that has not been amended to
expressly permit such transfer, shall not be transferable by the Participant
other than by will or by the laws of descent and distribution and such Option
thus shall be exercisable in the Participant's lifetime only by the
Participant.

6.8 Shareholder Rights. No Participant shall have any rights as a
shareholder with respect to Shares subject to his Option until the issuance of
such Shares to the Participant pursuant to the exercise of such Option.

ARTICLE 7. STOCK APPRECIATION RIGHTS

7.1 Grants of SARs. The Committee shall designate Participants to whom SARs
are granted, and will specify the number of Shares of Common Stock subject to
each grant. An SAR may be granted with or without a related Option. All SARs
granted under this Plan shall be subject to an Agreement in accordance with
the terms of this Plan. A payment to the Participant upon the exercise of a
Corresponding SAR may not be more than the difference between the Fair Market
Value of the Shares subject to the ISO on the date of grant and the

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Fair Market Value of the Shares on the date of exercise of the Corresponding
SAR. The maximum number of Shares underlying SARs which can be awarded under
the Plan during any calendar year to any individual is 250,000.

7.2 Duration of SARs. The duration of an SAR shall be set forth in the
Agreement as determined by the Committee. An SAR that is granted as a
Corresponding SAR shall have the same duration as the Option to which it
relates. An SAR shall terminate due to the Participant's termination of
employment at the same time as the date specified in Article 6 with respect to
Options, regardless of whether the SAR was granted in connection with the
grant of an Option.

7.3 Exercise of SAR. An SAR may be exercised in whole at any time or in part
from time to time and at such times and in compliance with such requirements
as the Committee shall determine as set forth in the Agreement; provided,
however, that a Corresponding SAR that is related to an Incentive Stock Option
may be exercised only to the extent that the related Option is exercisable and
only when the Fair Market Value of the Shares exceeds the Option Price of the
related ISO. An SAR granted under this Plan may be exercised with respect to
any number of wholes shares less than the full number of shares for which the
SAR could be exercised. A partial exercise of an SAR shall not affect the
right to exercise the SAR from time to time in accordance with this Plan and
the applicable Agreement with respect to the remaining shares subject to the
SAR. The exercise of either an Option or Corresponding SAR shall result in the
termination of the other to the extent of the number of Shares with respect to
which the Option or its Corresponding SAR is exercised.

7.4 Determination of Payment of Cash and/or Common Stock Upon Exercise of
SAR. At the Committee's discretion, the amount payable as a result of the
exercise of an SAR may be settled in cash, Common Stock, or a combination of
cash and Common Stock. A fractional share shall not be deliverable upon the
exercise of an SAR, but a cash payment shall be made in lieu thereof.

7.5 Nontransferability. Each SAR granted under the Plan shall be
nontransferable except by will or by the laws of descent and distribution.
During the lifetime of the Participant to whom the SAR is granted, the SAR may
be exercised only by the Participant. No right or interest of a Participant in
any SAR shall be liable for, or subject to any lien, obligation or liability
of such Participant. A Corresponding SAR shall be subject to the same
restrictions on transfer as the ISO to which it relates. Notwithstanding the
foregoing, if the Agreement so provides, a Participant may transfer an SAR
(other than a Corresponding SAR that relates to an Incentive Stock Option)
under the same rules and conditions as are set forth in Section 6.7.

7.6 Shareholder Rights. No Participant shall have any rights as a
shareholder with respect to Shares subject to an SAR until the issuance of
Shares (if any) to the Participant pursuant to the exercise of such SAR.

ARTICLE 8. RESTRICTED STOCK; STOCK AWARDS

8.1 Grants. The Committee may from time to time in its discretion grant
Restricted Stock and Stock Awards to Participants and may determine the number
of Shares of Restricted Stock or Stock Awards to be granted. The Committee
shall determine the terms and conditions of, and the amount of payment, if
any, to be made by the Employee for such Shares or Restricted Stock. A grant
of Restricted Stock may, in addition to other conditions, require the
Participant to pay for such Shares of Restricted Stock, but the Committee may
establish a price below Fair Market Value at which the Participant can
purchase the Shares of Restricted Stock. Each grant of Restricted Stock shall
be evidenced by an Agreement containing terms and conditions not inconsistent
with the Plan as the Committee shall determine to be appropriate in its sole
discretion. The maximum number of Shares of Common Stock or Restricted Stock
which can be awarded under the Plan during any calendar year to any individual
is 250,000 Shares.

8.2 Restricted Period; Lapse of Restrictions. At the time a grant of
Restricted Stock is made, the Committee shall establish a period or periods of
time (the "Restricted Period") applicable to such grant which, unless the
Committee otherwise provides, shall not be less than one year. Subject to the
other provisions of this Article 8, at the end of the Restricted Period all
restrictions shall lapse and the Restricted Stock shall vest in the
Participant. At the time a grant is made, the Committee may, in its
discretion, prescribe conditions for the incremental lapse of restrictions
during the Restricted Period and for the lapse or termination of restrictions
upon

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the occurrence of other conditions in addition to or other than the expiration
of the Restricted Period with respect to all or any portion of the Restricted
Stock. Such conditions may, but need not, include the following:

(a) The death, Disability or Retirement of the Employee to whom Restricted
Stock is granted, or

(b) The occurrence of a Change in Control (as defined in Section 13.1).

The Committee may also, in its discretion, shorten or terminate the
Restricted Period, or waive any conditions for the lapse or termination of
restrictions with respect to all or any portion of the Restricted Stock at any
time after the date the grant is made.

8.3 Rights of Holder; Limitations Thereon. Upon a grant of Restricted Stock,
a stock certificate (or certificates) representing the number of Shares of
Restricted Stock granted to the Participant shall be registered in the
Participant's name and shall be held in custody by the Company or a bank
selected by the Committee for the Participant's account. Following such
registration, the Participant shall have the rights and privileges of a
shareholder as to such Restricted Stock, including the right to receive
dividends, if and when declared by the Board of Directors, and to vote such
Restricted Stock, except that the right to receive cash dividends shall be the
right to receive such dividends either in cash currently or by payment in
Restricted Stock, as the Committee shall determine, and except further that,
the following restrictions shall apply:

(a) The Participant shall not be entitled to delivery of a certificate
until the expiration or termination of the Restricted Period for the
Shares represented by such certificate and the satisfaction of any and
all other conditions prescribed by the Committee;

(b) None of the Shares of Restricted Stock may be sold, transferred,
assigned, pledged, or otherwise encumbered or disposed of during the
Restricted Period and until the satisfaction of any and all other
conditions prescribed by the Committee; and

(c) All of the Shares of Restricted Stock that have not vested shall be
forfeited and all rights of the Participant to such Shares of
Restricted Stock shall terminate without further obligation on the part
of the Company, unless the Participant has remained an employee of (or
active consultant providing services to) the Company or any of its
Subsidiaries, until the expiration or termination of the Restricted
Period and the satisfaction of any and all other conditions prescribed
by the Committee applicable to such Shares of Restricted Stock. Upon
the forfeiture of any Shares of Restricted Stock, such forfeited Shares
shall be transferred to the Company without further action by the
Participant and shall, in accordance with Section 4.2, again be
available for grant under the Plan. If the Participant paid any amount
for the Shares of Restricted Stock that are forfeited, the Company
shall pay the Participant the lesser of the Fair Market Value of the
Shares on the date they are forfeited or the amount paid by the
Participant.

With respect to any Shares received as a result of adjustments under Section
4.3 hereof and any Shares received with respect to cash dividends declared on
Restricted Stock, the Participant shall have the same rights and privileges,
and be subject to the same restrictions, as are set forth in this Article 8.

8.4 Delivery of Unrestricted Shares. Upon the expiration or termination of
the Restricted Period for any Shares of Restricted Stock and the satisfaction
of any and all other conditions prescribed by the Committee, the restrictions
applicable to such Shares of Restricted Stock shall lapse and a stock
certificate for the number of Shares of Restricted Stock with respect to which
the restrictions have lapsed shall be delivered, free of all such restrictions
except any that may be imposed by law, to the holder of the Restricted Stock.
The Company shall not be required to deliver any fractional Share but will
pay, in lieu thereof, the Fair Market Value (determined as of the date the
restrictions lapse) of such fractional Share to the holder thereof.
Concurrently with the delivery of a certificate for Restricted Stock, the
holder shall be required to pay an amount necessary to satisfy any applicable
federal, state and local tax requirements as set out in Article 15 below.

8.5 Nonassignability of Restricted Stock. Unless the Committee provides
otherwise in the Agreement, no grant of, nor any right or interest of a
Participant in or to, any Restricted Stock, or in any instrument evidencing
any grant of Restricted Stock under the Plan, may be assigned, encumbered or
transferred except, in the event of the death of a Participant, by will or the
laws of descent and distribution.

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ARTICLE 9. PERFORMANCE SHARE AWARDS

9.1 Award. The Committee may designate Participants to whom Performance
Share Awards will be granted from time to time for no consideration and
specify the number of shares of Common Stock covered by the Award. No more
than 250,000 Performance Shares may be earned by any individual with respect
to any calendar year.

9.2 Earning the Award. A Performance Share Award, or portion thereof, will
be earned, and the Participant will be entitled to receive Common Stock, a
cash payment or a combination thereof, only upon the achievement by the
Participant, the Company, or a Subsidiary of such performance objectives as
the Committee, in its discretion, shall prescribe on the date of grant. To the
extent required, the performance objectives applicable to Awards to Named
Executive Officers intended to qualify under Code Section 162(m) shall be
selected from among the following measures: return on equity or assets,
earnings per share, total earnings, earnings growth, return on capital, profit
before taxes, profit after taxes, economic value added and increase in Fair
Market Value of the Shares. The determination as to whether such objectives
have been achieved shall be made by the Committee, and such determination
shall be conclusive; provided, however, that the period in which such
performance is measured shall be at least one year.

The Committee may in determining whether performance targets have been met
adjust the Company's financial results to exclude the effect of unusual
charges or income items or other events, including acquisitions or
dispositions of businesses or assets, restructurings, reductions in force,
currency fluctuations or changes in accounting, which are distortive of
financial results (either on a segment or consolidated basis); provided, that
for purposes of determining the Performance Share Awards of Named Executive
Officers, the Committee shall exclude unusual items whose exclusion has the
effect of increasing income or earnings if such items constitute
"extraordinary items" under generally accepted accounting principles or are
significant unusual items. In addition, the Committee will adjust its
calculations to exclude the effect on financial results of changes in the Code
or other tax laws, or the regulations relating thereto.

9.3 Payment. In the discretion of the Committee, the amount payable when a
Performance Share Award is earned may be settled in cash, by the grant of
Common Stock or a combination of cash and Common Stock. The aggregate Fair
Market Value of the Common Stock received by the Participant pursuant to a
Performance Share Award, together with any cash paid to the Participant, shall
be equal to the aggregate Fair Market Value, on the date the Performance
Shares are earned, of the number of Shares of Common Stock equal to each
Performance Share earned. A fractional Share will not be deliverable when a
Performance Share Award is earned, but a cash payment will be made in lieu
thereof.

9.4 Shareholder Rights. No Participant shall have, as a result of receiving
a Performance Share Award, any rights as a shareholder until and to the extent
that the Performance Shares are earned and Common Stock is transferred to such
Participant. If the Agreement so provides, a Participant may receive a cash
payment equal to the dividends that would have been payable with respect to
the number of Shares of Common Stock covered by the Award between (a) the date
that the Performance Shares are awarded and (b) the date that a transfer of
Common Stock to the Participant, cash settlement, or combination thereof is
made pursuant to the Performance Share Award. A Participant may not sell,
transfer, pledge, exchange, hypothecate, or otherwise dispose of a Performance
Share Award or the right to receive Common Stock thereunder other than by will
or the laws of descent and distribution. After a Performance Share Award is
earned and paid in Common Stock, a Participant will have all the rights of a
shareholder with respect to the Common Stock so awarded.

ARTICLE 10. BENEFICIARY DESIGNATION

To the extent applicable, each Participant under the Plan may, from time to
time, name any beneficiary or beneficiaries (who may be named contingently or
successively) to whom any benefit under the Plan is to be paid in case of his
or her death before he or she receives any or all of such benefit. Each such
designation shall revoke all prior designations by the same Participant, shall
be in a form prescribed by the Company and shall be effective only when filed
by the Participant, in writing, with the Company during the Participant's
lifetime. In the absence

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of any such designation, benefits remaining unpaid at the Participant's death
shall be paid to the Participant's estate. If required, the spouse of a
married Participant domiciled in a community property jurisdiction shall join
in any designation of a beneficiary or beneficiaries other than the spouse.

ARTICLE 11. DEFERRALS

The Committee may permit a Participant to defer to another plan or program
such Participant's receipt of Shares or cash that would otherwise be due to
such Participant by virtue of the exercise of an Option, the vesting of
Restricted Stock, or the earning of a Performance Share Award. If any such
deferral election is required or permitted, the Committee shall, in its sole
discretion, establish rules and procedures for such payment deferrals.

ARTICLE 12. RIGHTS OF EMPLOYEES

12.1 Employment. Nothing in the Plan shall interfere with or limit in any
way the right of the Company or a Subsidiary to terminate any Participant's
employment by, or performance of services for, the Company at any time, nor
confer upon any Participant any right to continue in the employ or service of
the Company or a Subsidiary. For purposes of the Plan, transfer of employment
of a Participant between the Company and any one of its Subsidiaries (or
between Subsidiaries) shall not be deemed a termination of employment.

12.2 Participation. No Employee shall have the right to be selected to
receive an Award under this Plan, or, having been so selected, to be selected
to receive a future Award.

ARTICLE 13. CHANGE IN CONTROL

13.1 Definition. For purposes of the Plan, a "Change in Control" means any
of the following events:

(a) The acquisition (other than from the Company) by any Person of
Beneficial Ownership of thirty-five percent (35%) or more of the
combined voting power of the Company's then outstanding voting
securities; provided, however, that for purposes of this Section 13.1,
Person shall not include any person who on the date hereof owns 10% or
more of the Company's outstanding securities, and a Change in Control
shall not be deemed to occur solely because thirty-five percent (35%)
or more of the combined voting power of the Company's then outstanding
securities is acquired by (i) a trustee or other fiduciary holding
securities under one or more employee benefit plans maintained by the
Company or any of its subsidiaries, or (ii) any corporation, which,
immediately prior to such acquisition, is owned directly or indirectly
by the shareholders of the Company in the same proportion as their
ownership of stock in the Company immediately prior to such
acquisition.

(b) Approval by shareholders of the Company of (1) a merger or
consolidation involving the Company if the shareholders of the Company,
immediately before such merger or consolidation do not, as a result of
such merger or consolidation, own, directly or indirectly, more than
fifty percent (50%) of the combined voting power of the then
outstanding voting securities of the corporation resulting from such
merger or consolidation in substantially the same proportion as their
ownership of the combined voting power of the voting securities of the
Company outstanding immediately before such merger or consolidation, or
(2) a complete liquidation or dissolution of the Company or an
agreement for the sale or other disposition of all or substantially all
of the assets of the Company.

(c) A change in the composition of the Board such that the individuals who,
as of the Effective Date, constitute the Board (such Board shall be
hereinafter referred to as the "Incumbent Board") cease for any reason
to constitute at least a majority of the Board; provided, however, for
purposes of this Section 13.1 that any individual who becomes a member
of the Board subsequent to the Effective Date whose election, or
nomination for election by the Company's shareholders, was approved by
a vote of at least a majority of those individuals who are members of
the Board and who were also members of the Incumbent Board (or deemed
to be such pursuant to this proviso) shall be considered as though such
individual were a member of the Incumbent Board; but, provided,
further, that any such individual whose initial assumption of office
occurs as a result of either an actual or threatened election contest
(as such terms are used in Rule 14a-11 of Regulation 14A promulgated
under the Exchange Act,

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including any successor to such Rule), or other actual or threatened
solicitation of proxies or consents by or on behalf of a Person other
than the Board, shall not be so considered as a member of the Incumbent
Board.

13.2 Limitation on Awards. Notwithstanding any other provisions of the Plan
and unless provided otherwise in the Agreement, if the right to receive or
benefit from any Award under this Plan, either alone or together with payments
that a Participant has the right to receive from the Company or a Subsidiary,
would constitute a "parachute payment" (as defined in Section 280G of the
Code), all such payments shall be reduced to the largest amount that will
result in no portion being subject to the excise tax imposed by Section 4999 of
the Code.

ARTICLE 14. AMENDMENT, MODIFICATION AND TERMINATION

14.1 Amendment, Modification and Termination. The Board may, at any time and
from time to time, alter, amend, suspend or terminate the Plan in whole or in
part; provided, that, unless approved by the holders of a majority of the total
voting power of Shares of the Company represented and voted at a meeting at
which a quorum is present, no amendment shall be made to the Plan if such
amendment would (a) materially modify the eligibility requirements provided in
Article 5; (b) increase the total number of Shares (except as provided in
Section 4.3) which may be granted under the Plan; (c) extend the term of the
Plan; or (d) amend the Plan in any other manner which the Board, in its
discretion, determines should become effective only if approved by the
shareholders even if such shareholder approval is not expressly required by the
Plan or by law.

14.2 Awards Previously Granted. No termination, amendment or modification of
the Plan shall adversely affect in any material way any Award previously
granted under the Plan, without the written consent of the Participant holding
such Award. The Committee shall, with the written consent of the Participant
holding such Award, have the authority to cancel Awards outstanding and grant
replacement Awards therefor.

14.3 Compliance With Code Section 162(m). At all times when the Committee
determines that compliance with Code Section 162(m) is required or desired, all
Awards granted under this Plan to Named Executive Officers shall comply with
the requirements of Code Section 162(m). In addition, in the event that changes
are made to Code Section 162(m) to permit greater flexibility with respect to
any Award or Awards under the Plan, the Committee may, subject to this Article
14, make any adjustments it deem appropriate.

ARTICLE 15. WITHHOLDING

15.1 Tax Withholding. The Company shall have the power and the right to
deduct or withhold, or require a Participant to remit to the Company, an amount
sufficient to satisfy federal, state and local taxes (including the
Participant's FICA obligation) required by law to be withheld with respect to
any taxable event arising in connection with an Award under this Plan.

15.2 Share Withholding. With respect to withholding required upon the
exercise of Options, or upon any other taxable event arising as a result of
Awards granted hereunder which are to be paid in the form of Shares,
Participants may elect, subject to the approval of the Committee, to satisfy
the withholding requirement, in whole or in part, by having the Company
withhold Shares having a Fair Market Value on the date the tax is to be
determined equal to the minimum statutory total tax which could be imposed on
the transaction. All elections shall be irrevocable, made in writing, signed by
the Participant, and elections by Insiders shall additionally comply with all
legal requirements applicable to Share transactions by such Participants.

ARTICLE 16. INDEMNIFICATION

Each person who is or shall have been a member of the Committee, or the
Board, shall be indemnified and held harmless by the Company against and from
any loss, cost, liability or expense that may be imposed upon or reasonably
incurred by him or her in connection with or resulting from any claim, action,
suit or proceeding to which he or she may be a party or in which he or she may
be involved by reason of any action taken or failure to act under the Plan and
against and from any and all amounts paid by him or her in settlement thereof,
with the

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Company's approval, or paid by him in satisfaction of any judgment in any such
action, suit or proceeding against him, provided he shall give the Company an
opportunity, at its own expense, to handle and defend the same before he
undertakes to handle and defend it on his own behalf. The foregoing right of
indemnification shall be in addition to any other rights of indemnification to
which such persons may be entitled under the Company's Articles of
Incorporation or Bylaws, as a matter of law, or otherwise, or any power that
the Company may have to indemnify them or hold them harmless.

ARTICLE 17. SUCCESSORS

All obligations of the Company under the Plan, with respect to Awards
granted hereunder, shall be binding on any successor to the Company, whether
the existence of such successor is the result of a direct or indirect
purchase, merger, consolidation or otherwise, of all or substantially all of
the business and/or assets of the Company.

ARTICLE 18. LEGAL CONSTRUCTION

18.1 Gender and Number. Except where otherwise indicated by the context, any
masculine term used herein shall also include the feminine; the plural shall
include the singular and the singular shall include the plural.

18.2 Severability. If any provision of the Plan shall be held illegal or
invalid for any reason, the illegality or invalidity shall not affect the
remaining parts of the Plan, and the Plan shall be construed and enforced as
if the illegal or invalid provision had not been included.

18.3 Requirements of Law. The granting of Awards and the issuance of Shares
under the Plan shall be subject to all applicable laws, rules and regulations,
and to such approvals by any governmental agencies or national securities
exchanges as may be required.

18.4 Regulatory Approvals and Listing. The Company shall not be required to
issue any certificate or certificates for Shares under the Plan prior to (i)
obtaining any approval from any governmental agency which the Company shall,
in its discretion, determine to be necessary or advisable, (ii) the admission
of such shares to listing on any national securities exchange or Nasdaq on
which the Company's Shares may be listed, and (iii) the completion of any
registration or other qualification of such Shares under any state or federal
law or ruling or regulation of any governmental body which the Company shall,
in its sole discretion, determine to be necessary or advisable.
Notwithstanding any other provision set forth in the Plan, if required by the
then-current Section 16 of the Exchange Act, any "derivative security" or
"equity security" offered pursuant to the Plan to any Insider may not be sold
or transferred for at least six (6) months after the date of grant of such
Award. The terms "equity security" and "derivative security" shall have the
meanings ascribed to them in the then-current Rule 16(a) under the Exchange
Act.

18.5 Securities Law Compliance. With respect to Insiders, transactions under
this Plan are intended to comply with all applicable conditions of Rule 16b-3
or its successors under the Exchange Act. To the extent any provisions of the
Plan or action by the Committee fails to so comply, it shall be deemed null
and void, to the extent permitted by law and deemed advisable by the
Committee.

18.6 Governing Law. To the extent not preempted by Federal law, the Plan,
and all agreements hereunder, shall be construed in accordance with and
governed by the laws of the State of Georgia.

AS APPROVED BY THE BOARD OF DIRECTORS OF PAMECO CORPORATION ON MAY 28, 1999.

PAMECO CORPORATION

By:

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PROXY PAMECO CORPORATION PROXY

Class A Common Stock Proxy for
Annual Meeting of Shareholders Solicited by the Board of Directors

The undersigned hereby appoints Jerry W. Bowman and Mary M. McCulley and each
of them as attorney and proxy of the undersigned, each with the full power of
substitution, to represent the undersigned and to vote all of the shares of
Class A Common Stock of Pameco Corporation which the undersigned is entitled to
vote at the Annual Meeting of Shareholders to be held on June 30, 1999, at
10:00 a.m., local time, at the Four Seasons Hotel, 75 14th Street, Atlanta,
Georgia 30309, and any adjournments thereof: (1) as hereinafter specified upon
the proposals listed below and as more particularly described in the Company's
Proxy Statement, receipt of which is hereby acknowledged, and (2) in their
discretion upon such other matters as may properly come before the meeting and
any adjournments thereof.

The Board of Directors Recommends a Vote FOR the Proposals Listed Below.

1.To elect Directors by Holders of Class A Common Stock
[_] FOR all nominees listed below [_] WITHHOLD AUTHORITY to vote for
(except as marked to the contrary). all nominees listed below.

Richard A. Bearse Philip M. Pfeffer

INSTRUCTION: To withhold authority to vote for any individual nominee,
write that nominee's name in the space provided below:

---------------------------------------------------------------------------

2.To ratify the Company's 1999 Stock Award Plan:
[_] FOR [_] AGAINST[_] ABSTAIN

3.To approve the Chairman Compensation Plan:
[_] FOR [_] AGAINST[_] ABSTAIN
(continued on reverse side)

Please sign exactly as your name appears below. When shares are held by joint
tenants, both should sign.

Date _________________________, 1999
(Be sure to date Proxy)
------------------------------------
Signature and title, if applicable
------------------------------------
Signature if held jointly

When signing as attorney, executor,
administrator, trustee or guardian,
please give full title as such. If
a corporation, please sign the full
corporate name by the president or
other authorized officer. If a
partnership, please sign in the
partnership name by an authorized
person.

PLEASE MARK, SIGN, DATE AND RETURN
THIS PROXY CARD PROMPTLY USING THE
ENCLOSED PRE-PAID ENVELOPE.

<PAGE>

PROXY PAMECO CORPORATION PROXY

Class B Common Stock Proxy for
Annual Meeting of Shareholders Solicited by the Board of Directors

The undersigned hereby appoints Jerry W. Bowman and Mary M. McCulley and each
of them as attorney and proxy of the undersigned, each with the full power of
substitution, to represent the undersigned and to vote all of the shares of
Class B Common Stock of Pameco Corporation which the undersigned is entitled to
vote at the Annual Meeting of Shareholders to be held on June 30, 1999, at
10:00 a.m., local time, at the Four Seasons Hotel, 75 14th Street, Atlanta,
Georgia 30309, and any adjournments thereof (1) as hereinafter specified upon
the proposals listed below and as more particularly described in the Company's
Proxy Statement, receipt of which is hereby acknowledged; and (2) in their
discretion upon such other matters as may properly come before the meeting and
any adjournments thereof.

The Board of Directors Recommends a Vote FOR the Proposals Listed Below.

1.To elect Directors by Holders of Class B Common Stock
[_] FOR all nominees listed below [_] WITHHOLD AUTHORITY to vote for
(except as marked to the contrary). all nominees listed below.

James R. Balkcom, Jr. Willem F. P. deVogel Earl Dolive

INSTRUCTION: To withhold authority to vote for any individual nominee,
write that nominee's name on the space provided below:

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2.To ratify the Company's 1999 Stock Award Plan:
[_] FOR [_] AGAINST[_] ABSTAIN

3.To approve the Chairman Compensation Plan:
[_] FOR [_] AGAINST[_] ABSTAIN
(continued on reverse side)

Please sign exactly as your name appears below. When shares are held by joint
tenants, both should sign.

Date _________________________, 1999
(Be sure to date Proxy)
------------------------------------
Signature and title, if applicable
------------------------------------
Signature if held jointly

PLEASE MARK, SIGN, DATE AND RETURN
THIS PROXY CARD PROMPTLY USING THE
ENCLOSED PRE-PAID ENVELOPE.