FORM 10-Q
UNITED STATES SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
(MARK ONE)
(X) QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF
THE SECURITIES EXCHANGE ACT OF 1934
FOR THE QUARTERLY PERIOD ENDED NOVEMBER 30, 1998
OR
( ) TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF
THE SECURITIES EXCHANGE ACT OF 1934
FOR THE TRANSITION PERIOD FROM ______________ TO ___________
COMMISSION FILE NUMBER 001-12837
PAMECO CORPORATION
------------------------------------------------------
(Exact name of registrant as specified in its charter)
GEORGIA 51-0287654
(State or other jurisdiction (I.R.S. employer identification
of incorporation or organization) number)
1000 CENTER PLACE
NORCROSS, GA 30093
----------------------------------------
(Address of principal executive offices)
(770)-798-0700
----------------------------------------------------
(Registrant's telephone number, including area code)
Indicate by check mark whether the registrant (1) has filed
all reports required to be filed by Section 13 or 15(d) of the
Securities Exchange Act of 1934 during the preceding 12 months (or for
such shorter periods that the registrant was required to file such
reports), and (2) has been subject to such filing requirements for the
past 90 days Yes /X/ No / /
Indicate the number of shares outstanding of each of the
issuer's classes of common stock, as of the latest practical date.
Class A Common Stock, $.01 par value, 4,902,253 shares and Class B
Common Stock, $.01 par value, 3,938,563 shares, both as of January 8,
1999.
<PAGE>
PAMECO CORPORATION
INDEX
PART I. FINANCIAL INFORMATION
Item 1. Financial Statements (Unaudited)
Condensed Consolidated Balance Sheets-November 30, 1998
and February 28, 1998 3
Condensed Consolidated Statements of Income-Three
Months ended November 30, 1998 and 1997 4
Condensed Consolidated Statements of Income-Nine
Months ended November 30, 1998 and 1997 4
Condensed Consolidated Statements of Cash Flows-Nine
Months ended November 30, 1998 and 1997 5
Notes to Condensed Consolidated Financial Statements 6
Item 2. Management's Discussion and Analysis of Financial
Condition and Results of Operations 8
Item 3. Quantitative and Qualitative Disclosures about Market Risk 11
PART II. OTHER INFORMATION
Item 1. Legal Proceedings 12
Item 5. Other Information 12
Item 6. Exhibits and Reports on Form 8-K 12
SIGNATURES
2<PAGE>
PART I. FINANCIAL INFORMATION
PAMECO CORPORATION
CONDENSED CONSOLIDATED BALANCE SHEETS
(In thousands)
<TABLE>
<CAPTION>
November 30, February 28,
1998 1998
----------- ------------
(UNAUDITED)
<S> <C> <C>
ASSETS
Current assets:
Cash and cash equivalents $ 162 $ 142
Accounts receivable, less allowance of $ 4,720 at November 30, 1998
and $3,992 at February 28, 1998 26,544 35,266
Inventories 142,375 123,041
Prepaid expenses and other current assets 1,604 1,554
---------- ----------
Total current assets 170,685 160,003
Property and equipment, net 16,695 11,603
Excess of cost over acquired net assets, net 44,475 25,613
Other assets 179 806
Deferred income tax assets 12,787 12,787
---------- ----------
Total assets $ 244,821 $ 210,812
========== ==========
LIABILITIES AND SHAREHOLDERS' EQUITY
Current liabilities:
Accounts payable $ 47,414 $ 60,323
Accrued compensation and withholdings 4,208 5,115
Other accrued liabilities and expenses 21,670 18,056
Notes payable --- 7,700
Current portion of capital lease obligations and other debt 33 56
---------- ----------
Total current liabilites 73,325 91,250
Long-term liablities:
Debt 82,191 42,072
Capital lease obligations 20 148
Warranty reserves and other 4,602 3,691
---------- ----------
Total long-term liabilities 86,813 45,911
Excess of acquired net assets over cost, net 5,181 4,999
Shareholders' equity:
Class A common stock, $.01 par value-authorized 40,000 shares;
4,882 and 4,665 shares issued and outstanding at
November 30, 1998 and February 28, 1998, respectively 49 47
Class B common stock, $.01 par value-authorized 20,000 shares;
3,940 and 4,046 shares issued and outstanding at
November 30, 1998 and February 28, 1998, respectively 39 41
Capital in excess of par value 37,650 37,092
Retained earnings 42,364 32,072
---------- ----------
80,102 69,252
Note receivable from shareholder (600) (600)
---------- ----------
Total shareholders' equity 79,502 68,652
---------- ----------
Total liabilities and shareholders' equity $ 244,821 $ 210,812
========== ==========
</TABLE>
See notes to condensed consolidated financial statements.
3<PAGE>
<TABLE>
<CAPTION>
PAMECO CORPORATION
CONDENSED CONSOLIDATED STATEMENTS OF INCOME
(In thousands)
(UNAUDITED)
Three Months Ended Nine Months Ended
November 30 November 30
---------------------------- ----------------------------
1998 1997 1998 1997
---------- ---------- ---------- ----------
<S> <C> <C> <C> <C>
Net sales $ 148,068 $ 117,197 $ 503,554 $ 377,392
Costs and expenses:
Cost of products sold 112,575 89,623 383,529 288,825
Warehousing, selling, and administrative 33,302 24,762 97,722 71,824
---------- ---------- ---------- ----------
145,877 114,385 481,251 360,649
---------- ---------- ---------- ----------
Operating earnings 2,191 2,812 22,303 16,743
Other expense:
Interest expense, net (1,154) (173) (3,462) (1,411)
Discount on sale of accounts receivable and
other expense (1,062) (896) (2,799) (2,504)
---------- ---------- ---------- ----------
Income (loss) before income taxes (25) 1,743 16,042 12,828
Provision (benefit) for income taxes (127) 544 5,744 4,640
---------- ---------- ---------- ----------
Net income $ 102 $ 1,199 $ 10,298 $ 8,188
========== ========== ========== ==========
Basic earnings per share $ 0.01 $ 0.14 $ 1.17 $ 1.10
========== ========== ========== ==========
Basic weighted average shares outstanding
8,818 8,697 8,780 7,475
========== ========== ========== ==========
Diluted earnings per share $ 0.01 $ 0.13 $ 1.13 $ 1.04
========== ========== ========== ==========
Diluted weighted average shares outstanding 9,106 9,099 9,132 7,881
========== ========== ========== ==========
</TABLE>
See notes to condensed consolidated financial
4<PAGE>
PAMECO CORPORATION
CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS
(In thousands)
(UNAUDITED)
<TABLE>
<CAPTION>
Nine Months Ended
November 30
-----------------------------
1998 1997
---------- ----------
<S> <C> <C>
CASH FLOWS FROM OPERATING ACTIVITIES
Net income $ 10,298 $ 8,188
Adjustments to reconcile net income to net cash provided by
operating activities:
Amortization of excess of cost over acquired net assets 751 279
Amortization of excess of acquired net assets over cost (918) (918)
Depreciation 1,622 1,236
(Gain) loss on sale of property and equipment (52) 52
Changes in operating assets and liabilities net of assets
acquired and liabilities assumed:
Accounts receivable 18,231 (2,915)
Inventories, prepaid expenses and other assets (1,291) 17,903
Accounts payable and accrued liabilities (22,244) (8,261)
---------- ---------
Net cash provided by operating activities 6,397 15,564
CASH FLOWS FROM INVESTING ACTIVITIES
Purchases of property, plant, and equipment (5,939) (2,253)
Proceeds from sale of property and equipment 202 84
Business acquisitions (41,069) (20,629)
---------- ---------
Net cash used in investing activities (46,806) (22,798)
CASH FLOWS FROM FINANCING ACTIVITIES
Borrowings on working capital facility 591,364 404,462
Repayments on working capital facility (601,398) (431,102)
Borrowings on term loan 51,075 ---
Repayments on term loan (1,075) (18,600)
Borrowings on note payable --- 7,700
Payments on capital lease obligations (35) (334)
Payments on other debt (58) (17)
Issuance of common stock, net of expenses --- 45,133
Repurchase of treasury stock --- (1,207)
Proceeds from exercise of stock options 556 1,169
---------- ---------
Net cash provided by financing activities 40,429 7,204
---------- ---------
Net increase (decrease) in cash and cash equivalents 20 (30)
Cash and cash equivalents at beginning of period 142 145
---------- ---------
Cash and cash equivalents at end of period $ 162 $ 115
========== =========
Issuance of common stock in exchange for note receivable $ --- $ 600
========== =========
</TABLE>
See notes to condensed consolidated financial statements.
5<PAGE>
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
(UNAUDITED)
November 30, 1998
1. BASIS OF PRESENTATION
The accompanying unaudited Condensed Consolidated Financial
Statements have been prepared in accordance with generally accepted
accounting principles for interim financial information and with the
instructions to Form 10-Q and Article 10 of Regulation S-X.
Accordingly, they do not include all of the information and footnotes
required by generally accepted accounting principles for complete
financial statements. In the opinion of management, all adjustments
(consisting of normal recurring accruals) considered necessary for a
fair presentation have been included. Operating results for the three
and nine month periods ended November 30, 1998 are not necessarily
indicative of the results that may be expected for the year ending
February 28, 1999. The sale of products by Pameco Corporation (the
"Company" or "Pameco") is seasonal with sales generally increasing
during the warmer months beginning in April and peaking in the months
of June, July, and August. For further information, refer to the
consolidated financial statements and footnotes thereto included in
the Company's Annual Report on Form 10-K for the year ended February 28,
1998.
The balance sheet at February 28, 1998 included herein has been
derived from the audited financial statements at that date but does
not include all the information and footnotes required by generally
accepted accounting principles for complete financial statements.
2. INVENTORIES
Inventories consist of goods held for resale and are stated at
the lower of cost or market. Cost is determined by the first-in,
first-out method.
3. EARNINGS PER SHARE
The following table sets forth the computation of basic and
diluted earnings per share (in thousands, except per share amounts).
<TABLE>
<CAPTION>
Three Months Ended Nine Months Ended
November 30, November 30,
1998 1997 1998 1997
------- ------- -------- --------
<S> <C> <C> <C> <C>
Numerator:
Net income applicable to common shareholders $ 102 $ 1,199 $ 10,298 $ 8,188
======= ======== ========= ========
Denominator:
Denominator for basic earnings per share-weighted 8,818 8,697 8,780 7,475
average shares
Effect of dilutive securities:
Employee Stock Options 288 402 352 406
------- -------- --------- --------
Denominator for diluted earnings per share-adjusted
weighted-average shares and assumed conversions 9,106 9,099 9,132 7,881
======= ======== ========= ========
Basic earnings per share $ 0.01 $ 0.14 $ 1.17 $ 1.10
======= ======== ========= ========
Diluted earnings per share $ 0.01 $ 0.13 $ 1.13 $ 1.04
======= ======== ========= ========
</TABLE>
The computation of diluted weighted average shares for the three
months and nine months ended November 30, 1998 excludes 541,250
6
<PAGE>
and 47,000 stock options, respectively, that are antidulitive
based on the average market price for that period. The
computation of diluted weighted average shares for the nine
months ended November 30, 1997 excludes 43,750 stock options
that are antidulitive based on the average market price for that
period.
4. ACQUISITIONS
In November 1998, the Company purchased the HVAC operations and
substantially all the related assets of Tesco Distributors, Inc., a
six branch distributor in the New York City and New Jersey markets.
One of the branches is in a top 100 SMSA not previously served by the
Company. For the year ended December 31, 1997, the acquired business
had net sales in excess of $14.0 million and derived substantially all
its net sales from HVAC and refrigeration products.
In November 1998, the Company purchased the HVAC operations and
substantially all the related assets of Climate Supply Company, Inc.,
a six branch distributor in the Dallas, Texas market. One of the
branches is in a top 100 SMSA not previously served by the Company.
For the year ended December 31, 1997, the acquired business had net
sales in excess of $7.0 million and derived substantially all its net
sales from HVAC and refrigeration products.
Pro forma Data:
The following table summarizes unaudited pro forma financial
information of the Company as if the June 1998 acquisition of Park
Heating and Air Conditioning Supply Co., Inc. had occurred as of March 1,
1997. Pro forma results have not been presented for those
acquisitions which were not significant during the periods presented.
These unaudited pro forma results of operations do not purport to
represent what the Company's actual results of operations would have
been if the acquisition had occurred on March 1, 1997, and should not
serve as a forecast of the Company's operating results for any future
periods.
The adjustments to the historical data reflect the following:
(i) interest expense assuming the Company financed the acquisition at
a rate of 7.3%; (ii) amortization of the excess of cost over acquired
net assets; (iii) income taxes on the earnings of the acquiree
adjusted to reflect the Company's effective tax rate; and (iv) the income
tax effect of such pro forma adjustments. The pro forma adjustments
are based on the available information and certain assumptions that
management believes are reasonable.
Nine Months Ended Year Ended
November 30, February 28,
1998 1998
---------------- -----------
Net sales $ 514,217 $ 518,105
========== ==========
Net income $ 10,554 $ 9,176
========== ==========
Basic earnings per share $ 1.20 $ 1.18
========== ==========
Diluted earnings per share $ 1.16 $ 1.12
========== ==========
7<PAGE>
5. CONTINGENCIES
From time to time, the Company is involved in claims and legal
proceedings which arise in the ordinary course of its business. The
Company intends to defend vigorously all such claims and does not
believe any such matters would have a material adverse effect on the
Company's results of operations or financial condition.
ITEM 2. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION
AND RESULTS OF OPERATIONS
The following table sets forth the percentage relationship of certain
statement of income data to net revenue for the periods indicated.
<TABLE>
<CAPTION>
Three Months Ended Nine Months Ended
November 30 November 30
---------------------- ------------------------
1998 1997 1998 1997
-------- -------- -------- ---------
<S> <C> <C> <C> <C>
Net sales 100.0 % 100.0 % 100.0 % 100.0 %
Cost of products sold 76.0 76.5 76.2 76.5
------ ------ ------ -------
Gross profit 24.0 23.5 23.8 23.5
Warehousing, selling, and
administrative expenses 22.5 21.1 19.4 19.1
------ ------ ------ -------
Operating earnings 1.5 2.4 4.4 4.4
Other expense:
Interest expense, net 0.8 0.1 0.7 0.4
Other expense 0.7 0.8 0.5 0.6
------ ------ ------ -------
Income (loss) before income taxes (0.0) 1.5 3.2 3.4
Provision (benefit) for income taxes (0.1) 0.5 1.0 1.2
------ ------ ------ -------
Net income 0.1 % 1.0 % 2.0 % 2.2 %
====== ====== ======= =======
</TABLE>
RESULTS OF OPERATIONS
Net sales of $148.1 million in the quarter ended November 30,
1998 increased 26.3% from $117.1 million for the comparable period in
1997. For the quarter, same store daily sales increased 8.1% as
compared to the prior year. Net sales of $503.6 million in the nine
months ended November 30, 1998 increased 33.4% from $377.4 million for
the comparable period in 1997. Same store daily sales for the nine
months ended November 30, 1998 increased 10.0% over the same period in
the prior year. Net sales from acquisitions contributed to the
remainder of the net sales growth in the quarter and nine months ended
November 30, 1998.
Net sales of HVAC products increased 9.9% on a daily same
store basis in the quarter ended November 30, 1998 as compared to the
prior year, while net sales for the nine month period increased 15.2%
over the prior year. Net sales of refrigeration equipment, parts, and
supplies increased 5.5% and 3.3%, respectively, as compared to the
prior year on a daily same store basis in the quarter and nine months
ended November 30, 1998. The Company has continued to gain market
share from its Thermalzone(TM) private label equipment line. Net sales
in the quarter ended November 30, 1998 for Thermalzone(TM) products
increased 37.9% over the prior year, while net sales in the nine
months ended November 30, 1998 increased 45.1% over the prior year.
The Company has also expanded the refrigeration product offering of 63
branches strategically located across the nation, which enables the
Company to provide same day delivery of refrigeration products to a
majority of its customers. Net sales for the quarter and nine months
ended November 30, 1998 from national accounts also increased 29.7%
and 32.3% over the prior year, respectively.
Gross profit for the quarter ended November 30, 1998 increased
28.7% to $35.5 million from $27.6 million in the prior year. For the
nine months ended November 30, 1998, gross profit increased 35.5% to
$120.0 million from $88.6 million in the prior year. Greater sales
volume is the main contributor to the increased gross profit. The
gross profit percentage increased to 24.0% during the quarter ended
November 30, 1998 as compared to 23.5% during the same quarter in the
prior year. Similarly, the gross profit percentage increased to
23.8% during the nine months ended November 30, 1998 as compared to
8<PAGE>
23.5% during the same period in the prior year. During the year, the
Company also received improved terms and prompt payment discounts from
suppliers. The Company also revised its purchasing practices to take
further advantage of manufacturer rebate programs and volume purchase
discounts.
Warehousing, selling, and administrative expenses during the
quarter increased 34.5% to $33.3 million from $24.8 million in the
prior year. For the nine months ended November 30, 1998, warehousing,
selling, and administrative expenses increased 36.1% to $97.7 million
from $71.8 million in the prior year. A significant amount of the
increase can be attributed to the normal operating expenses of the
acquired branches. As a percentage of net sales, warehousing, selling,
and administrative expenses increased to 22.5% in the quarter from
21.1% in the prior year. For the nine months ended November 30, 1998,
warehousing, selling, and administrative expenses increased to 19.4%
from 19.1% in the prior year. In the quarter ended November 30, 1998,
the Company completed the conversion of its operations to a new
enterprise-wide management information system. To facilitate a smooth
transition to the new system with minimal disruption to its customers,
the Company retained seasonal employees at its branches and warehouses
through the transition period. Likewise, additional administrative
costs were incurred at the corporate office during this transition
period for the same reason. In addition, for the quarter and nine
months ended November 30, 1998, warehousing, selling, and
administrative expenses for the acquired branches that have not yet
been converted to the Company's centralized management system were
higher than the expenses for average core branches.
Interest expense during the quarter ended November 30, 1998
increased to $1.2 million from $173,000 in the previous year. For the
nine months ended November 30, 1998, interest expense increased to
$3.5 million from $1.4 million in the previous year. The Company
utilized the Working Capital Facility (as defined below) to fund all
its acquisitions in the past year. To avoid disruptions during the
transition to the new system, the inventory was increased to a higher
than normal level and maintained at that level through the transition.
In addition, the mailing of customer statements was delayed in
September and October as the new system become operational. Both of
these situations resulted in increased bank borrowings during the
quarter. The Company's average borrowings under the Working Capital
Facility increased by $67.3 million over the previous year. The
accounts receivable securitization borrowing (the "Securitization
Program") was recorded as a sale of assets; therefore, approximately
$63 million of accounts receivable and debt are not reflected on
the Company's balance sheet at November 30, 1998. The discount on
the sale of accounts receivable of $1.1 million and $834,000 for the
three months ended November 30, 1998 and November 30, 1997, respectively,
was recorded as other expense on the statements of income. For the
nine months ended November 30, 1998 and 1997, the discount on the
sale of accounts receivable was recorded as other expense on the
statements of income at $2.8 million and $2.4 million, respectively.
The average rate of interest on all debt, including the Securitization
Program, for the quarter ended November 30, 1998 was 6.95%, as compared
to 6.97% for the same period in the previous year.
The income tax benefit of $127,000 for the quarter ended November
30, 1998 is a result of nontaxable amortization income and the lower
level of income before income taxes. Income taxes increased $1.7
million to $5.7 million for the nine months ended November 30, 1998
due to greater income before taxes. The Company's effective income tax
rate was 35.8% for the nine months ended November 30, 1998 as compared
to 36.1% in the prior year. The Company's effective income tax rate is
lower than the statutory rate due primarily to nontaxable amortization
income.
LIQUIDITY AND CAPITAL RESOURCES
The Company's liquidity needs arise from seasonal working capital
requirements, capital expenditures, interest and principal payment
obligations, and acquisitions. The Company has historically met its
liquidity and capital investment needs with internally generated funds
and borrowings under its Credit Facilities (as defined below). For
the nine months ended November 30, 1998, cash provided by operating
activities was $6.4 million as compared $15.6 million for the nine
months ended November 30, 1997. Net cash used in investing activities
9
<PAGE>
was $46.8 million for the nine months ended November 30, 1998 as
compared to $22.8 million for the nine months ended November 30, 1997.
In the nine months ended November 30, 1998, the Company purchased the
HVAC operations and related assets of Keller Supply, Inc., George L.
Johnston Co., Inc., Park Heating and Air Conditioning, Inc., Tesco
Distributors, Inc., and Climate Supply Company, Inc. for an
aggregate cash price of $41.1 million as compared to $20.6 million for
the acquisition of Bellows-Evans, Inc., Trigg Supply, Inc., Heating
and Cooling Distributors, Inc., Saez Refrigeration, Inc. , Superior
Supply Company, and General Heating and Cooling, Inc. in the prior
year. Net cash provided by financing activities was $40.4 million for
the nine months ended November 30, 1998, while such activities
provided $7.2 million in the nine months ended November 30, 1997.
The Company's working capital increased to $97.4 million at
November 30, 1998 from $68.8 million at February 28, 1998.
At November 30, 1998, the Company had senior borrowings of
$145.5 million under its $240.0 million Credit Facilities, of which
$27.9 million was unused and available. The Company's senior
indebtedness consists of $82.1 million under the Working Capital
Facility and $63.4 million under the Securitization Program
(collectively, the "Credit Facilities"). The Securitization Program
is an off balance sheet arrangement that provides for the transfer and
sale of accounts receivable to a special purpose corporation. The
weighted average interest rate on the Credit Facilities at November
30, 1998 was 6.65%. This rate fluctuates with the commercial paper
and LIBOR rates.
On October 16, 1998, the Working Capital Facility Credit
Agreement (the "Credit Agreement") was amended to increase the two
$15.0 million term loans ("Tranche A" and "Tranche B") to $25.0 million
a piece. The Credit Agreement provides a total facility commitment of
$140.0 million, which also includes a $80.0 million Revolving Credit
Loan (the "Revolver") and a $10.0 million swing-line facility (the
"Swingline"). The Credit Agreement will expire on August 6, 2003. The
Tranche A term loan matures on September 30, 2003 and the Tranche B
term loan matures on September 30, 2005. On October 16, 1998, the
Securitization Program agreement was also amended to increase the
facility by $40.0 million to $100.0 million.
The Company's capital expenditures, excluding acquisitions, for
the nine months ended November 30, 1998, were $5.9 million as compared
to $2.3 million for the previous year. Such capital expenditures were
primarily for branch and distribution center leasehold improvements,
equipment, computer equipment and supply chain software.
Management believes that the Company has adequate resources and
liquidity to meet its borrowing obligations, fund all required capital
expenditures, and pursue its business strategy for existing operations
through the following year. However, the Company will require
additional funding in order to pursue significant acquisition
opportunities. Future acquisitions may be financed by bank
borrowings, public offerings, or private placements of equity or debt
securities or a combination of the foregoing. Such financings may
require the consent of the Company's existing lenders.
SEASONALITY
The sale of products by the Company is seasonal. Sales generally
increase during the warmer months beginning in April and peak in the
months of June, July, and August.
YEAR 2000
The Company utilizes computer systems and software that are
affected by the Year 2000 issue. Many computer programs were
originally designed to utilize two digits instead of four to define
the applicable year. As a result, a computer program might recognize
a date using "00" as the year 1900 rather than 2000 which could cause
system failures or miscalculations.
10<PAGE>
The Company has separated its Year 2000 project into four phases.
Within each phase, the Company reviews and addresses Year 2000 issues
with respect to both information and non-information technology
systems. During Phase I, Millennium Impact Analysis, which was
completed in July 1998, the Company reviewed all its business segments
for Year 2000 issues. As issues were identified, the Company
developed strategies to resolve them. As a part of Phase II, Project
Tactical Planning, which was also completed in July 1998, a project
budget and work plan was developed to resolve the Year 2000 issues
identified in the previous phase. Currently, the Company is in the
midst of Phase III, Conversion and System Training. By the end of
this phase, the Company expects to have replaced or modified all
affected mission critical systems. The Company intends to complete
this phase in September 1999. In the final phase, Phase IV, Year 2000
Simulation & Deployment, the Company will perform a simulation test to
confirm that all systems are compliant. The Company has scheduled
completion of this phase for September 1999.
In the absence of the steps outlined above, the Company's
operations could be adversely affected by Year 2000 issues. The
Company has replaced and upgraded its supply chain and financial
management systems with enterprise software that is Year 2000
compliant and which will also improve the Company's responsiveness to
its customers and suppliers. The Company has also targeted non-
compliant Point-Of-Sale ("POS") hardware and software for replacement.
For the Company's operations to continue uninterrupted, certain key
third parties, such as banks, customers, and vendors, must resolve all
the Year 2000 issues affecting them. Previously, the Company mailed
surveys to these key third parties. As of this date, all responses
have indicated that these parties intend to be Year 2000 compliant.
The Company will continue to pursue surveys from unresponsive parties,
as well as continue to monitor the status of key third parties.
Since the Company primarily chose to replace its main operating
system to improve customer service, the costs associated with this
implementation are not considered Year 2000 related costs. The Company
has budgeted $500,000 for the replacement and upgrading of POS
hardware and software. The Company has budgeted an additional
$1,000,000 to replace non-compliant phone systems, security systems,
and office equipment. The Company anticipates the replacements of
mission critical systems to be completed by September 1999.
Should the Company or a number of its key suppliers not be in
compliance with Year 2000 requirements as of January 1, 2000, the
Company may not be able to provide reliable data to management in a
timely manner. If any one of the financial institutions with whom the
Company transacts business were to be non-compliant, the Company's
ability to borrow funds, process customer receipts and vendor
payments, and successfully complete other transactions could be
adversely affected. The Company is in the process of developing its
contingency plan to resolve currently identified risk areas by January
1, 2000. As other potential risk areas become apparent, the Company
intends to develop alternative solutions. However, if the Company, its
vendors, or its customers, are unable to resolve their significant
Year 2000 issues in time, it could result in a material financial
risk.
The statements in this report that relate to future plans,
expectations, events, performances, and the like are forward-looking
statements within the meaning of the Private Securities Litigation
Reform Act of 1995 and the Securities and Exchange Act of 1934.
Actual results or events could differ materially from those described
in the forward-looking statements due to a variety of factors,
including inaccurate guarantees by computer hardware and software
vendors, third party non-compliance, difficulties obtaining
appropriate technical support due to the demand for individuals with
the the special skills necessary to resolve Year 2000 issues and for
the reasons outlined in the Company's other filings with the SEC.
ITEM 3. QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK
On October 15, 1998, the Company entered into two interest rate
swap agreements to hedge interest rate costs and risks associated with
variable interest rates. Such agreements effectively convert
variable-rate debt, to the extent of the notional amount, to fixed-
rate debt with effective per annum interest rates of 4.71% and 4.96%
with respect to the London Interbank Offered Rate portion of such
borrowings. The aggregate notional principal amount of such
agreements is $60.0 million, $40.0 million of which became effective
October 19, 1998 and matures October 19, 2001, and $20.0 million which
became effective October 19, 1998 and matures October 19, 2003.
11<PAGE>
The counterparty to such agreements is a major financial
institution, and therefore, credit losses from counterparty
nonperformance are not anticipated.
PART II. OTHER INFORMATION
Item 1. Legal Proceedings
See Note 5 to the Condensed Consolidated Financial Statements
(Unaudited) contained in Part I of this Report.
Item 5. Other Information
On January 8, 1999, Mr. Gerald V. Gurbacki informed the Company's
Board of Directors of his decision to retire from all positions held
with the Company and its subsidiaries and to pursue other personal
interests. The terms of his retirement were memorialized in an
agreement dated January 13, 1999, which Mr. Gurbacki may revoke at any
time within seven days of signing the agreement. Pursuant to the
terms of this agreement, Mr. Gurbacki will receive his base salary
immediately prior to retirement for a period of two years and Mr.
Gurbacki and his eligible dependents will be afforded health insurance
at the Company's expense for up to two years. In addition, Mr.
Gurbacki agreed to decrease the available time period for exercising
his remaining stock options. Finally, the Company and Mr. Gurbacki
have exchanged customary mutual releases.
Item 6. Exhibits and Reports on Form 8-K
(a) Exhibits
10.14E Third Amendment to Amended and Restated Credit Agreement
dated October 16, 1998
10.19B Fourth Amendment to Securitization Agreements dated
October 16, 1998
10.27 Interest Rate Swap Agreement between Suntrust Bank and
Pameco Corporation dated October 15, 1998
27. Financial Data Schedule (for SEC use only)
(b) Reports on Form 8-K
The Company filed an amendment to its Current Report on Form 8-K
with the Commission on September 8, 1998.
12
<PAGE>
SIGNATURES
Pursuant to the requirements of the Securities Exchange Act of 1934,
the Registrant has duly caused this report to be signed on its behalf
by the undersigned thereunto duly authorized.
PAMECO CORPORATION
-----------------------------------
(Registrant)
By: /s/ THEODORE R. KALLGREN
-----------------------------------
Theodore R. Kallgren
Chief Financial Officer
January 14, 1999 (Mr. Kallgren has been duly authorized
to sign on behalf of the registrant)
13
<PAGE>
Exhibit Index
Exhibit No. Exhibit
---------- -------
10.14E Third Amendment to Amended and Restated Credit
Agreement dated October 16, 1998
10.19B Fourth Amendment to Securitization Agreements
dated October 16, 1998
10.27 Interest Rate Swap Agreement between Suntrust Bank
and Pameco Corporation dated October 15, 1998
27. Financial Data Schedule (for SEC use only)
EXHIBIT 10.14E
EXECUTION COPY
THIRD AMENDMENT
THIRD AMENDMENT (this "Amendment"), dated as of October 16,
1998, to the Amended and Restated Credit Agreement, dated as of March
10, 1998, as amended by the First Amendment, dated as of April 21,
1998, and the Second Amendment, dated as of August 6, 1998 (as the
same is being and may be further amended, supplemented or otherwise
modified from time to time, the "Credit Agreement"), among PAMECO
CORPORATION, a Georgia corporation (the "Company"), the lenders
parties thereto (together with their respective successors and
permitted assigns, the "Lenders") and GENERAL ELECTRIC CAPITAL
CORPORATION, a New York corporation, as agent for the Lenders (in such
capacity, together with its successors and permitted assigns, the
"Agent").
W I T N E S S E T H :
WHEREAS, the Company has requested that the Agent and the
Lenders amend certain provisions of the Credit Agreement upon the
terms and subject to the conditions set forth herein; and
WHEREAS, the Agent and the Lenders have agreed to such
amendments only upon the terms and subject to the conditions set forth
herein;
NOW, THEREFORE, in consideration of the premises and the
mutual covenants contained herein, the parties hereto hereby agree as
follows:
10 DEFINED TERMS. Terms defined in the Credit Agreement
are used herein with the meanings set forth in the Credit Agreement
unless otherwise defined herein.
20 AMENDMENT OF SECTION 1.1. 2.1 Section 1.1 of the
Credit Agreement is hereby amended by deleting therefrom the
definitions of the following defined terms in their respective
entireties and inserting in lieu thereof the following new
definitions:
"Tranche A Term Loan Maturity Date" shall mean September 30,
2003.
"Tranche B Term Loan Maturity Date" shall mean September 30,
2005.
2.2 Section 1.1 of the Credit Agreement is hereby amended
by inserting the following new definitions in the appropriate
alphabetical order:
"Third Party Interactives" shall mean all Persons with whom
any Loan Party exchanges data electronically in the ordinary
course of business, including, without limitation, customers,
suppliers, third-party vendors, subcontractors, processors,
converters, shippers and warehousemen.
<PAGE>
2
"Year 2000 Assessment" shall mean a comprehensive written
assessment of the nature and extent of each Loan Party's Year
2000 Mission Critical Problems and Year 2000 Mission Critical
Date-Sensitive Systems/Components, including, without limitation,
Year 2000 Mission Critical Problems regarding data exchanges with
Third Party Interactives.
"Year 2000 Corrective Actions" shall mean, as to each Loan
Party, all actions necessary to eliminate such Person's Year 2000
Mission Critical Problems, including, without limitation,
computer code enhancements and revisions, upgrades and
replacements of Year 2000 Mission Critical Date-Sensitive
Systems/Components, and coordination of such enhancements,
revisions, upgrades and replacements with Third Party
Interactives.
"Year 2000 Corrective Plan"shall mean, with respect to each
Loan Party, a comprehensive plan to eliminate such Person's Year
2000 Mission Critical Problems on or before June 30, 1999,
including, without limitation, (i) computer code enhancements or
revisions, (ii) upgrades or replacements of Year 2000 Mission
Critical Date-Sensitive Systems/Components, (iii) test and
validation procedures, (iv) an implementation time line and
budget and (v) designation of specific employees who will be
responsible for planning, coordinating and implementing each
phase or subpart of the Year 2000 Corrective Plan.
"Year 2000 Implementation Testing" shall mean, as to each
Loan Party, (i) the performance of test and validation procedures
regarding Year 2000 Corrective Actions on a unit basis and on a
systemwide basis, (ii) the performance of test and validation
procedures regarding data exchanges among the Loan Parties' Year
2000 Mission Critical Date-Sensitive Systems/Components and data
exchanges with Third Party Interactives, and (iii) the design and
implementation of additional Corrective Actions, the need for
which has been demonstrated by test and validation procedures.
"Year 2000 Mission Critical Date-Sensitive System/Component"
shall mean, as to any Person, any mission critical system
software, network software, applications software, data base,
computer file, embedded microchip, firmware or hardware that
accepts, creates, manipulates, sorts, sequences, calculates,
compares or outputs calendar-related data accurately; such
systems and components shall include, without limitation,
mainframe computers, file server/client systems, computer
workstations, routers, hubs, other network-related hardware, and
other computer-related software, firmware or hardware and
information processing and delivery systems of any kind and
telecommunications systems and other communications processors,
security systems, alarms, elevators and HVAC systems.
"Year 2000 Mission Critical Problems" shall mean, with
respect to each Loan Party, limitations on the capacity or
readiness of each Loan Party's Year 2000 Mission Critical Date-
Sensitive Systems/Components to accurately accept, create,
manipulate, sort, sequence, calculate, compare or output calendar
date information with respect to calendar year 1999 or any
subsequent calendar year beginning on or after January 1, 2000
(including leap year computations), including, without
limitation, exchanges of information amount Year 2000 Mission
<PAGE>
3
Critical Date-Sensitive Systems/Components of the Loan Parties
and exchanges of information among the Loan Parties and Year 2000
Mission Critical Date-Sensitive Systems/Components of Third Party
Interactives and functionality of peripheral interfaces,
firmware, and embedded microchips.
30 AMENDMENT OF SECTION 2.1. Section 2.1 of the Credit
Agreement is hereby amended by adding thereto a new paragraph which
shall read as follows:
"Subject to the terms and conditions of the Third Amendment
dated as of October 16, 1998 (the "Third Amendment") to this
Credit Agreement among the parties hereto, (a) each Tranche A
Term Loan Lender severally agrees to make additional Tranche A
Term Loans to the Company on the Third Amendment Effective Date
(as defined in the Third Amendment) in an aggregate principal
amount not to exceed the amount set forth opposite the name of
such Lender on Annex A to the Third Amendment and (b) each
Tranche B Term Loan Lender severally agrees to make additional
Tranche B Term Loans to the Company on the Third Amendment
Effective Date in an aggregate principal amount not to exceed the
amount set forth opposite the name of such Lender on Annex A to
the Third Amendment. The additional Tranche A Term Loans and
additional Tranche B Term Loans, together with the Tranche A Term
Loans and Tranche B Term Loans, respectively, made on the
Effective Date shall constitute the "Tranche A Term Loans" and
"Tranche B Term Loans", respectively, and shall also constitute
"Term Loans" for all purposes hereof. The Term Loans may from
time to time be Eurodollar Loans or Index Rate Loans, as
determined by the Company and notified to the Agent in accordance
with subsections 2.3 and 6.4. For purposes of such subsection
2.3, the term "Effective Date" shall be deemed to mean the Third
Amendment Effective Date."
40 AMENDMENT OF SECTION 2.4. Section 2.4 of the Credit
Agreement is hereby amended by (a) deleting the chart at the end of
paragraph (a) thereof in its entirety and inserting in lieu thereof
the following:
"Installment Principal Amount
----------- ----------------
December 31, 1998 750,000
March 31, 1999 750,000
June 30, 1999 750,000
September 30, 1999 750,000
December 31, 1999 750,000
March 31, 2000 750,000
June 30, 2000 750,000
September 30, 2000 750,000
December 31, 2000 1,250,000
March 31, 2001 1,250,000
June 30, 2001 1,250,000
September 30, 2001 1,250,000
December 31, 2001 1,750,000
March 31, 2002 1,750,000
June 30, 2002 1,750,000
<PAGE>
4
September 30, 2002 1,750,000
December 31, 2002 1,750,000
March 31, 2003 1,750,000
June 30, 2003 1,750,000
Tranche A Term Loan
Maturity Date 1,750,000"; and
(b) deleting the chart at the end of paragraph (b) thereof in its
entirety and inserting in lieu thereof the following:
"Installment Principal Amount
----------- ----------------
December 31, 1998 62,500
March 31, 1999 62,500
June 30, 1999 62,500
September 30, 1999 62,500
December 31, 1999 62,500
March 31, 2000 62,500
June 30, 2000 62,500
September 30, 2000 62,500
December 31, 2000 62,500
March 31, 2001 62,500
June 30, 2001 62,500
September 30, 2001 62,500
December 31, 2001 62,500
March 31, 2002 62,500
June 30, 2002 62,500
September 30, 2002 62,500
December 31, 2002 62,500
March 31, 2003 62,500
June 30, 2003 62,500
September 30, 2003 62,500
December 31, 2003 2,968,750
March 31, 2004 2,968,750
June 30, 2004 2,968,750
September 30, 2004 2,968,750
December 31, 2004 2,968,750
March 31, 2005 2,968,750
June 30, 2005 2,968,750
Tranche B Term Loan
Maturity Date 2,968,750".
<PAGE>
5
50 AMENDMENT OF SECTION 6.1. Section 6.1 of the Credit
Agreement is hereby amended by (i) deleting the ratio "3.25:1.00" from
paragraph (b) thereof and inserting in lieu thereof the ratio
"4.25:1.00" and (ii) deleting the ratio "5.50:1.00" from each place it
appears in paragraph (e) thereof and inserting in lieu thereof the
ratio "6.00:1.00."
60 AMENDMENT OF SECTION 7. Section 7 of the Credit
Agreement is hereby amended by inserting the following new subsection
7.26 at the end thereof:
"7.26 YEAR 2000 PROBLEMS. The Company has completed a
Year 2000 Assessment and has prepared a Year 2000 Corrective
Plan, and on or before June 30, 1999, the Company shall complete
Year 2000 Corrective Actions and Year 2000 Implementation Testing
and shall have eliminated all Year 2000 Mission Critical Problems
except where the failure to eliminate the same could not
reasonably be expected to have a Material Adverse Effect."
70 AMENDMENT OF SECTION 9. Section 9 of the Credit
Agreement is hereby amended by inserting the following new subsection
9.17 at the end thereof:
"9.17 YEAR 2000 COMPLIANCE. On or before June 30, 1999, the
Company shall complete Year 2000 Corrective Actions and Year 2000
Implementation Testing and shall eliminate all Year 2000 Mission
Critical Problems, except where the failure to eliminate the same
could not reasonably be expected to have a Material Adverse
Effect."
80 AMENDMENT OF SCHEDULE 1. Schedule 1 to the Credit
Agreement is hereby amended by deleting it in its entirety and
inserting in lieu thereof Annex B attached hereto.
90 AMENDMENT OF SCHEDULE 10.8. Schedule 10.8 to the
Credit Agreement is hereby amended by (i) deleting the ratio "4.5 to
1.0" where it appears in paragraph (e) thereof and inserting in lieu
thereof the ratio "5.0 to 1.0" and (ii) deleting the ratio "5.5 to
1.0" where it appears in paragraph (f) thereof and inserting in lieu
thereof the ratio "6.0 to 1.0."
100 NEW PROMISSORY NOTES. On the Third Amendment Effective
Date, the Company shall execute and deliver (i) to each Tranche A Term
Loan Lender, in substitution and exchange for, but not in payment of
the Tranche A Term Note held by such Lender, a promissory note (the
"New Tranche A Term Loan Note") substantially in the form of Exhibit
A-1 to the Credit Agreement, with appropriate insertions therein as to
payee, date and principal amount, payable to the order of such Lender
and in a principal amount equal to the Tranche A Term Loan of such
Lender and (ii) to each Tranche B Term Loan Lender, in substitution
and exchange for, but not in payment of the Tranche B Term Note held
by such Lender, a promissory note (the "New Tranche B Term Loan Note";
together with the New Tranche A Term Loan Note, the "New Notes")
substantially in the form of Exhibit A-2 to the Credit Agreement, with
appropriate insertions therein as to payee, date and principal amount,
payable to the order of such Lender and in a principal amount equal to
the Tranche B Term Loan of such Lender.
<PAGE>
6
110 CONDITIONS TO EFFECTIVENESS. This Third Amendment
shall become effective (the actual date of such effectiveness, the
"Third Amendment Effective Date") as of the date first above written
when:
11.1 counterparts hereof shall have been duly executed and
delivered by each of the parties hereto and acknowledged by
Pameco Investment Company, Inc.;
11.2 the Acknowledgement, Consent and Amendment dated as of
October 16, 1998 by the Company and Pameco Investment Company,
Inc. shall have been duly executed and delivered by each of the
parties thereto;
11.3 the Agent shall have received, with a copy for each Lender,
a certificate of the Secretary or an Assistant Secretary of each
Loan Party, dated as of the Third Amendment Effective Date, and
certifying (i) that attached thereto is a true and complete copy
of the resolutions (which resolutions are in form and substance
reasonably satisfactory to each Lender) of the board of directors
of such Loan Party authorizing, as applicable, the execution,
delivery and performance of this Third Amendment, the
Acknowledgment, Consent and Amendment attached hereto, the New
Notes, the New Fee Letter (as defined below) and related matters,
certified by the Secretary or an Assistant Secretary of such Loan
Party as of the Third Amendment Effective Date and (ii) as to the
incumbency and specimen signature of such Loan Party's officers
executing this Third Amendment and all other documents required
or necessary to be delivered hereunder or in connection herewith.
Such certificate shall state that the resolutions thereby
certified have not been amended, modified, revoked or rescinded
as of the date of such certificate;
11.4 the Agent shall have received, with a copy for each Lender,
true and complete copies of the certificate of incorporation and
by-laws of each Loan Party, certified as of the Third Amendment
Effective Date as complete and correct copies thereof by the
Secretary or an Assistant Secretary of such Loan Party;
11.5 the Agent shall have received with a counterpart for each
Lender the executed legal opinion of Kilpatrick Stockton LLP,
counsel to the Loan Parties, in form and substance satisfactory
to the Agent;
11.6 the Agent shall have received fees as required in the Fee
Letter dated October 16, 1998 from GE Capital to the Company (the
"New Fee Letter"); and
11.7 the Agent shall have received the New Notes in accordance
with paragraph 8 of this Amendment.
120 COMPANY REPRESENTATIONS AND WARRANTIES. The Company
represents and warrants that:
<PAGE>
7
12.1 each of this Amendment and the New Notes has been duly
authorized, executed and delivered by the Company;
12.2 each of this Amendment, the Credit Agreement as amended by
this Amendment and the New Notes constitutes the legal, valid and
binding obligation of the Company;
12.3 each of the representations and warranties set forth in
Section 7 of the Credit Agreement are true and correct as of the
Third Amendment Effective Date; provided that references in the
Credit Agreement to this "Agreement" shall be deemed references
to the Credit Agreement as amended to date and by this Amendment
and references to the "Notes" in the Credit Agreement shall be
deemed references to the New Notes; and
12.4 after giving effect to this Amendment, there does not exist
any Default or Event of Default.
130 CONTINUING EFFECTS. Except as expressly waived hereby,
the Credit Agreement shall continue to be and shall remain in full
force and effect in accordance with its terms.
140 EXPENSES. The Company agrees to pay and reimburse the
Agent for all of its out-of-pocket costs and expenses incurred in
connection with the negotiation, preparation, execution, and delivery
of this Amendment, including the fees and expenses of counsel to the
Agent.
150 COUNTERPARTS. This Amendment may be executed on any
number of separate counterparts and all of said counterparts taken
together shall be deemed to constitute one and the same instrument.
160 GOVERNING LAW. THIS AMENDMENT SHALL BE GOVERNED BY,
AND CONSTRUED AND INTERPRETED IN ACCORDANCE WITH, THE LAW OF THE STATE
OF NEW YORK.
<PAGE>
8
IN WITNESS WHEREOF, the parties hereto have caused this
Amendment to be duly executed and delivered in New York, New York by
their proper and duly authorized officers as of the day and year first
above written.
PAMECO CORPORATION
By /s/ Theodore R. Kallgren
Title: VP, CFO
GENERAL ELECTRIC CAPITAL
CORPORATION, as Agent
and as a Lender
By /s/ Brian P. Schrin (?)
Title: Vice President
WACHOVIA BANK, N.A.
By /s/ [unreadable]
Title: Vice President
NATIONSBANK, N.A.
By /s/ Scot Turner
Title: Asst. Vice President
SUNTRUST BANK, ATLANTA
By /s/ Jenna H. Kelly
Title: V.P.
By /s/ Melanie (?)
Title: Bank Officer
EXHIBIT 10.19B
EXECUTION COPY
AMENDMENT NO. 4
TO SECURITIZATION AGREEMENTS
AMENDMENT NO. 4, dated as of October 16, 1998, among PAMECO
SECURITIZATION CORPORATION, a Delaware company ("PSC"), PAMECO
CORPORATION, a Georgia company ("Pameco"), REDWOOD RECEIVABLES
CORPORATION ("Redwood") and GENERAL ELECTRIC CAPITAL CORPORATION, a
New York company ("GECC").
WHEREAS, Pameco, as originator (in such capacity, the
"Originator") and PSC are parties to a Receivables Transfer Agreement,
dated as of April 29, 1996 (as heretofore amended, supplemented or
otherwise modified, the "Transfer Agreement");
WHEREAS, PSC, as seller (in such capacity, the "Seller"),
Redwood, as purchaser (in such capacity, the "Purchaser"), GECC, as
operating agent (in such capacity, the "Operating Agent") and
collateral agent (in such capacity, the "Collateral Agent") and
Pameco, as servicer (in such capacity, the "Servicer") are parties to
a Receivables Purchase and Servicing Agreement, dated as of April 29,
1996 (as heretofore amended, supplemented or otherwise modified, the
"Purchase Agreement");
WHEREAS, Redwood and GECC are parties to a Liquidity Loan
Agreement, dated as of April 29, 1996 (as heretofore amended,
supplemented or otherwise modified, the "Liquidity Agreement";
together with the Transfer Agreement and the Purchase Agreement, the
"Securitization Agreements"); and
WHEREAS, the parties hereto desire to amend the
Securitization Agreements and certain ancillary documents and
agreements referred to therein in the manner set forth in this
Amendment.
NOW, THEREFORE, in consideration of the premises and the
mutual covenants contained herein, the parties hereto agree as
follows:
ARTICLE I
DEFINITIONS
SECTION 1.1 DEFINITIONS. All capitalized terms used
herein, unless otherwise defined, are used as defined in the Purchase
Agreement.
<PAGE>
2
ARTICLE II
AMENDMENTS TO TRANSFER AGREEMENT
SECTION 2.1 AMENDMENT TO SECTION 7.04. Section 7.04(a) of the
Transfer Agreement is hereby amended by deleting therefrom the amount
"$60,000,000" as it appears therein and substituting therefor the
amount "$100,000,000".
SECTION 2.2 NEW PROMISSORY NOTE. On the effective date
of this Amendment No. 4, Pameco shall execute and delivery to PSC a
Promissory Note (the "New Promissory Note") substantially in the form
of Annex A hereto, in substitution and exchange for, but not in
payment of, that certain promissory note of Pameco dated April 7, 1998
made in favor of PSC in the principal amount of $60,000,000.
ARTICLE III
AMENDMENTS TO PURCHASE AGREEMENT
SECTION 3.1 AMENDMENT TO SECTION 4.01. Section 4.01 of the
Purchase Agreement is hereby amended by inserting the following new
paragraph 4.01(dd) at the end thereof:
"(dd) The Seller has completed a Year 2000 Assessment and
has prepared a Year 2000 Corrective Plan, and on or before June
30, 1999, the Seller shall complete Year 2000 Corrective Actions
and Year 2000 Implementation Testing and shall have eliminated
all Year 2000 Mission Critical Problems except where the failure
to eliminate the same could not reasonably be expected to have a
Material Adverse Effect."
SECTION 3.2 AMENDMENT TO SECTION 4.02. Section 4.02 of the
Purchase Agreement is hereby amended by inserting the following new
paragraph 4.02(l) at the end thereof:
"(l) The Servicer has completed a Year 2000 Assessment and
has prepared a Year 2000 Corrective Plan, and on or before June
30, 1999, the Servicer shall complete Year 2000 Corrective
Actions and Year 2000 Implementation Testing and shall have
eliminated all Year 2000 Mission Critical Problems except where
the failure to eliminate the same could not reasonably be
expected to have a Material Adverse Effect."
SECTION 3.3 AMENDMENT TO SECTION 5.01. Section 5.01 of the
Purchase Agreement is hereby amended by inserting the following new
paragraph 5.01(j) at the end thereof:
"(j) on or before June 30, 1999, the Seller shall complete
Year 2000 Corrective Actions and Year 2000 Implementation Testing
and shall eliminate all Year 2000 Mission Critical Problems,
except where the failure to eliminate the same could not
reasonably be expected to have a Material Adverse Effect."
<PAGE>
3
SECTION 3.4 AMENDMENT TO SECTION 6.01(c). Section
6.01(c) of the Purchase Agreement is hereby amended by inserting just
after the final period the following: "The Seller and the Purchaser
agree that prior to the Facility Termination Date, the Operating
Agent, and from and after the Facility Termination Date, the
Collateral Agent, shall have exclusive dominion and control of the
Retention Account and all monies, instruments and other property from
time to time on deposit therein".
SECTION 3.5 AMENDMENT TO SECTION 6.02(a)(iii). Section
6.02(a)(iii) of the Purchase Agreement is hereby amended by inserting
the words "and Insurance Draws" after the words "Seller LOC Draws".
SECTION 3.6 AMENDMENT TO SECTION 6.02((a)(vi). Section
6.02(a)(vi) of the Purchase Agreement is hereby amended by inserting
the words "and Additional Amounts" after the words "Indemnified
Amounts".
SECTION 3.7 AMENDMENT TO SECTION 6.02(a)(viii). Section
6.02(a)(viii) of the Purchase Agreement is hereby amended by inserting
just before the final period the words "or that the Seller elects to
pay pursuant to Section 8.06(b) hereof".
SECTION 3.8 AMENDMENT TO SECTION 6.03(c)(ii). Section
6.03(c)(ii) of the Purchase Agreement is hereby amended by deleting
the parenthetical in the second line and inserting in its place the
following parenthetical: (or, in the case of Indemnified Amounts or
Additional Amounts for the account of the applicable Indemnified Party
or Affected Party, respectively).
SECTION 3.9 AMENDMENT TO SECTION 6.05. Section 6.05 of
the Purchase Agreement is hereby amended by deleting it in its
entirety and substituting therefor the following:
"Section 6.05 LIQUIDATION SETTLEMENT PROCEDURES. On each
Business Day on and after the Facility Termination Date, the
Collateral Agent shall:
(a) transfer all amounts then on deposit in the
Retention Account to the Collection Account;
(b) transfer all amounts in the Collection Account in
the following priority:
(i) to the Deferred Purchase Price Sub-Account, an
amount equal to all Deferred Purchase Price
Collections; and
<PAGE>
4
(ii) to the Capital Investment Sub-Account, the
balance;
(c) transfer all amounts in the Deferred Purchase Price
Sub-Account (after making the transfers required by Section
6.05(b)), in the following priority:
(i) if an Event of Termination has occurred and a
Successor Servicer has been appointed, to the Successor
Servicer in an amount equal to its accrued and unpaid
Successor Servicing Fees and Expenses;
(ii) to the Collateral Account for the account of
the Purchaser, in an amount equal to, on any such
Business Day on which the Capital Investment is being
maintained through the issuance of Commercial Paper (to
the extent such Capital Investment exceeds Transaction
Liquidity Loans then outstanding), accrued and unpaid
CP Interest through and including the date of maturity
of the Commercial Paper maintaining such Capital
Investment;
(iii) to the Insurer, any unpaid premiums then
owing the Insurer under the Insurance Agreement;
(iv) if the Insurance Draws are then outstanding,
to the Insurer, an amount equal to accrued and unpaid
interest on the Insurance Draws to the extent amounts
on deposit in the Deferred Purchase Price Sub-Account
are allocated to this subparagraph (iv) pursuant to the
terms of the Insurance Agreement;
(v) if there are Transaction Liquidity Loans then
outstanding, to the Transaction Liquidity Agent on
behalf of the Transaction Liquidity Providers, in an
amount equal to accrued and unpaid interest on the
Transaction Liquidity Loans;
(vi) to the Capital Investment Sub-Account:
(A) an amount equal to the Dilution Funded
Amount; and
(B) if there are Transaction Liquidity Loans
outstanding or Capital Investment exceeds the
Transaction Liquidity Loans then outstanding, all
amounts remaining in the Deferred Purchase Price
Sub-Account, if any;
(vii) to the Letter of Credit Agent, if there are
any outstanding LOC Draws in respect of the Seller, in
an amount equal to accrued and unpaid interest on such
outstanding LOC Draws;
<PAGE>
5
(viii) to the Collateral Account, an amount equal
to (A) accrued unpaid Daily Yield minus (B) the sum of
(i) amounts paid pursuant to Sections 6.05(c)(ii) and
6.05(c)(iv), (ii) amounts paid pursuant to Section
6.05(c)(v), and (iii) amounts paid under Section
6.05(c)(vii);
(ix) if an Event of Servicer Termination has not
occurred, to the Servicer in an amount equal to its
accrued and unpaid Servicing Fee;
(x) upon payment in full of all amounts set forth
in clauses (d)(i)-(d)(viii) below, to an account
previously designated by the Seller, in partial payment
of the Deferred Purchase Price, the balance, if any;
and
(d) transfer all amounts in the Capital Investment Sub-
Account, in the following priority:
(i) to the Collateral Account for the account of
the Purchaser, in an amount equal to,
(A) on any such Business Day on which Capital
Investment is being maintained through the
issuance of Commercial Paper (to the extent such
Capital Investment exceeds Transaction Liquidity
Loans then outstanding), accrued and unpaid CP
Interest through and including such date, to the
extent not paid pursuant to Sections 6.05(c)(ii)
and 6.05(c)(viii); and
(B) on any such Business Day on which Capital
Investment is being maintained through the
issuance of Commercial Paper (to the extent such
Capital Investment exceeds Transaction Liquidity
Loans then outstanding), the principal of all
Capital Investment in excess of such Transaction
Liquidity Loans;
(ii) to the Insurer, to the extent amounts on
deposit in the Capital Investment Sub-Account are
allocated to this subparagraph (d)(ii) pursuant to the
terms of the Insurance Agreement, unpaid premiums of
the Insurer under the Insurance Agreement to the extent
not paid under Section 6.05(c)(iii);
(iii) if Insurance Draws are then outstanding, to
the Insurer, to the extent amounts on deposit in the
Capital Investment Sub-Account are allocated to this
subparagraph (d)(iii) pursuant to the terms of the
Insurance Agreement, an amount equal to:
(A) accrued and unpaid interest on the
Insurance Draws to the extent not paid under
Section 6.05(c)(iv); and
<PAGE>
6
(B) the outstanding amount of Insurance
Draws; and
(C) any other amounts owing to the Insurer
pursuant to the Insurance Policy or the Insurance
Agreement, including, without limitation, any fees
and expenses of the Insurer other than Additional
Amounts and Indemnified Amounts;
(iv) if there are Transaction Liquidity Loans
outstanding, to the Transaction Liquidity Agent on
behalf of the Transaction Liquidity Providers, in an
amount equal to:
(A) accrued and unpaid interest on the
Transaction Liquidity Loans to the extent not paid
pursuant to Section 6.05(c)(v);
(B) the principal of outstanding Transaction
Liquidity Loans; and
(C) any other amounts, including any fees,
owing to the Transaction Liquidity Agent or
Transaction Liquidity Providers in connection with
the Transaction Liquidity Loans other than
Additional Amounts and Indemnified Amounts;
(v) to the Collateral Agent for the account of the
Purchaser, in an amount equal to:
(A) all Additional Amounts incurred and
payable to any Affected Party; and
(B) all Indemnified Amounts incurred and
payable to any Indemnified Party;
(vi) to the Letter of Credit Agent, if there are
any outstanding LOC Draws in respect of the Seller, in
an amount equal to:
(A) accrued and unpaid interest on such
outstanding LOC Draws to the extent not paid
pursuant to Section 6.05(c)(vii);
(B) the principal of such outstanding LOC
Draws; and
(C) any other amounts, including fees, owing
to the Letter of Credit Agent in connection with
such outstanding LOC Draws; and
<PAGE>
7
(vii) to the Collateral Account, an amount equal
to (A) accrued and unpaid Daily Yield minus (B) the sum
of (i) amounts paid pursuant to Sections 6.05(c)(ii),
6.05(c)(iv), 6.05(c)(v), 6.05(c)(vii), 6.05(c)(viii),
6.05(d)(i)(A), 6.05(d)(iii)(A), 6.05(d)(iv)(A) and
6.05(d)(vi)(A);
(viii) if an Event of Servicer Termination has not
occurred, to the Servicer in an amount equal to its
accrued and unpaid Servicer Fee; and
(ix) upon payment in full of all amounts set forth
in clauses (d)(i)-(d)(viii) above, to an account
previously designated by the Seller, the balance, if
any.
(e) on the Facility Termination Date and after any date
thereafter, on each such date by no later than 11:00 a.m.
the Operating Agent shall transfer all amounts then on
deposit in the Retention Account to the Collateral Account."
SECTION 3.10 AMENDMENT TO SECTION 7.06. Section 7.06 of the
Purchase Agreement is hereby amended by inserting the following new
paragraph 7.06(j) at the end thereof:
"(j) on or before June 30, 1999, the Servicer shall complete
Year 2000 Corrective Actions and Year 2000 Implementation Testing
and shall eliminate all Year 2000 Mission Critical Problems,
except where the failure to eliminate the same could not
reasonably be expected to have a Material Adverse Effect."
SECTION 3.11 AMENDMENT TO SECTION 12.01(a). Section
12.01(a) of the Purchase Agreement is hereby amended by inserting the
words "the Insurer," after the words "Liquidity Provider," in the
third line.
SECTION 3.12 AMENDMENT TO SCHEDULE 3. Schedule 3 to the
Purchase Agreement is amended by deleting therefrom the definitions of
the terms "Daily Margin" and "Daily Default Margin" and by
substituting the following new definitions of such terms in lieu
thereof:
"Daily Margin" and "Daily Default Margin" mean the following
percentages divided by 360:
<PAGE>
8
<TABLE>
<CAPTION>
Daily Margin Daily Default Margin Interest Coverage Ratio
------------ -------------------- -----------------------
<C> <C> <S>
1.25% 3.25% Less than 1.75
1.00% 3.00% Greater than or equal to 1.75
and less than 3.50
0.75% 2.75% Greater than or equal to 3.50
and less than 5.50
0.625% 2.625% Greater than or equal to 5.50
</TABLE>
The term "Interest Coverage Ratio" shall have the meaning
ascribed to such term in the Credit Agreement.
ARTICLE IV
AMENDMENTS TO ANNEX X
Section 4.1 AMENDMENTS TO ANNEX X. Annex X is hereby
amended by:
(a) inserting in the definition of "Affected Parties"
the words ", the Insurer" after the words "any of the Liquidity
Lenders,".
(b) deleting from the definition of "Fee Letter" the
date "April 7, 1998" and substituting therefor the date "October
16, 1998";
(c) deleting from the definition of "Final Purchase
Date" the date "March 10, 2003" and substituting therefor the
date "August 6, 2003";
(d) inserting the following new definitions in the
appropriate alphabetical order:
"Insurance Agreement" means the Insurance Agreement, dated
as of October 16, 1998 among the Insurer, Redwood and GECC, as
Operating Agent and as Collateral Agent and Insured Party.
"Insurance Draws" means any payment made under the Insurance
Policy.
"Insurance Policy" means the Excess of Loss Insurance Policy
issued by the Insurer under the Insurance Agreement.
"Insurer" means Asset Guaranty Insurance Company and its
successors and permitted assigns, as issuer of the Insurance
Policy.
"Material Adverse Effect" means a material adverse effect on
(a) the business, assets, operations, prospects or condition
(financial or otherwise) of the Seller or the Servicer, (b) the
ability of the Seller or the Servicer to perform their respective
obligations under the Purchase Agreement in accordance with its
terms or (c) the Collateral or the Collateral Agent's liens on
the Collateral or the priority of any such lien on the
Collateral, other than, in each case, immaterial Collateral."
<PAGE>
9
"Third Party Interactives" shall mean all Persons with whom
the Seller or the Servicer exchanges data electronically in the
ordinary course of business, including, without limitation,
customers, suppliers, third-party vendors, subcontractors,
processors, converters, shippers and warehousemen.
"Year 2000 Assessment" shall mean a comprehensive written
assessment of the nature and extent of the Seller's and the
Servicer's Year 2000 Mission Critical Problems and Year 2000
Mission Critical Date-Sensitive Systems/Components, including,
without limitation, Year 2000 Mission Critical Problems regarding
data exchanges with Third Party Interactives.
"Year 2000 Corrective Actions" shall mean, as to the Seller
and the Servicer, all actions necessary to eliminate such
Person's Year 2000 Mission Critical Problems, including, without
limitation, computer code enhancements and revisions, upgrades
and replacements of Year 2000 Mission Critical Date-Sensitive
Systems/Components, and coordination of such enhancements,
revisions, upgrades and replacements with Third Party
Interactives.
"Year 2000 Corrective Plan"shall mean, with respect to the
Seller and the Servicer, a comprehensive plan to eliminate such
Person's Year 2000 Mission Critical Problems on or before June
30, 1999, including, without limitation, (i) computer code
enhancements or revisions, (ii) upgrades or replacements of Year
2000 Mission Critical Date-Sensitive Systems/Components, (iii)
test and validation procedures, (iv) an implementation time line
and budget and (v) designation of specific employees who will be
responsible for planning, coordinating and implementing each
phase or subpart of the Year 2000 Corrective Plan.
"Year 2000 Implementation Testing" shall mean, as to the
Seller and the Servicer, (i) the performance of test and
validation procedures regarding Year 2000 Corrective Actions on a
unit basis and on a systemwide basis, (ii) the performance of
test and validation procedures regarding data exchanges among the
Seller's and the Servicer's Year 2000 Mission Critical Date-
Sensitive Systems/Components and data exchanges with Third Party
Interactives, and (iii) the design and implementation of
additional Corrective Actions, the need for which has been
demonstrated by test and validation procedures.
"Year 2000 Mission Critical Date-Sensitive System/Component"
shall mean, as to any Person, any mission critical system
software, network software, applications software, data base,
computer file, embedded microchip, firmware or hardware that
accepts, creates, manipulates, sorts, sequences, calculates,
compares or outputs calendar-related data accurately; such
systems and components shall include, without limitation,
mainframe computers, file server/client systems, computer
workstations, routers, hubs, other network-related hardware, and
other computer-related software, firmware or hardware and
information processing and delivery systems of any kind and
telecommunications systems and other communications processors,
security systems, alarms, elevators and HVAC systems.
<PAGE>
9
"Year 2000 Mission Critical Problems" shall mean, with
respect to the Seller and the Servicer, limitations on the
capacity or readiness of the Seller's and the Servicer's Year
2000 Mission Critical Date-Sensitive Systems/Components to
accurately accept, create, manipulate, sort, sequence, calculate,
compare or output calendar date information with respect to
calendar year 1999 or any subsequent calendar year beginning on
or after January 1, 2000 (including leap year computations),
including, without limitation, exchanges of information amount
Year 2000 Mission Critical Date-Sensitive Systems/Components of
the Seller and the Servicer and exchanges of information among
the Seller and the Servicer and Year 2000 Mission Critical Date-
Sensitive Systems/Components of Third Party Interactives and
functionality of peripheral interfaces, firmware, and embedded
microchips.
(e) deleting the definition of "Investment Base" in its
entirety and substituting therefor the following definition:
"Investment Base" means, for any date, as disclosed in the
most recently submitted Investment Base Certificate, an amount
equal to the Outstanding Balance of Transferred Receivables that
are Eligible Receivables minus Reserves in respect of such
Eligible Receivables, plus for purposes of determining "Funding
Base" under the Collateral Agent Agreement, at any time after the
Facility Termination Date, so long as the Insurance Policy has
not been terminated, the aggregate amount that would be available
for drawing under the Insurance Policy if such date were the
"Draw Date" thereunder, in each case as disclosed in the most
recently submitted Investment Base Certificate or as otherwise
determined by the Purchaser, the Operating Agent or the
Collateral Agent based on Seller Collateral information available
to any of them, including any information obtained from any audit
or from any other reports with respect to the Seller Collateral,
which determination shall be final, binding and conclusive on all
parties to the Purchase Agreement."
(f) deleting from the definition of "Maximum Purchase
Limit" the amount "$60,000,000" and substituting therefor the
amount "$100,000,000"; and
(g) inserting in the definition of "Purchaser Secured
Parties" the words "the Collateral Agent and the Insurer" after
the words "Letter of Credit Providers".
(h) inserting in the definition of "Related Documents"
the words "the Insurance Policy and the Insurance Agreement"
after the words "the Assignment".
<PAGE>
11
(i) inserting at the end of the definition of "Three
Month Aged Receivable Ratio" the following: "For purposes of the
Transfer Agreement, Purchase Agreement and Liquidity Loan
Agreement, this ratio shall be based on a twelve month period
instead of a three month period."
ARTICLE V
AMENDMENTS TO LIQUIDITY AGREEMENT, ETC.
SECTION 5.1. Amendment to Section 1.01. The definition of
"Liquidity Commitment" appearing in Section 1.01 of the Liquidity
Agreement is amended by deleting the number "$61,800,000" appearing
therein and by inserting, in lieu thereof, the number "$103,000,000".
SECTION 5.2 AMENDMENT TO FORM OF LIQUIDITY NOTES.
Exhibit C to the Liquidity Agreement is hereby amended by deleting
such Exhibit in its entirety and by inserting, in lieu thereof, a new
Exhibit C in the form of Annex B hereto.
ARTICLE VI
REPRESENTATIONS AND WARRANTIES
SECTION 6.1 REPRESENTATIONS AND WARRANTIES OF PSC AND
PAMECO. Each of PSC and Pameco represents and warrants that:
(a each of this Amendment No. 4 and the New Promissory
Note has been duly authorized, executed and delivered by each such
party which is a signatory thereto;
(b each of this Amendment No. 4 and the New Promissory
Note constitutes the legal, valid and binding obligation of each such
party which is a signatory thereto;
(c each of the representations and warranties of such
party set forth in the Securitization Agreements is true and correct
as of the Amendment Effective Date (as defined below) and on such
Amendment Effective Date is also made with respect to the Insurer;
provided, that references in the Securitization Agreements to the
Purchase Agreement and to the Transfer Agreement, shall be deemed
references to the Purchase Agreement as amended by this Amendment No.
4 and to the Transfer Agreement as amended by this Amendment No. 4,
respectively, and references to the Pameco Note shall be deemed
references to the New Promissory Note.
SECTION 6.2 REPRESENTATIONS AND WARRANTIES OF REDWOOD.
Redwood represents and warrants that:
<PAGE>
12
(a) this Amendment No. 4 has been duly authorized, executed
and delivered by Redwood;
(b) this Amendment No. 4 constitutes the legal, valid and
binding obligation of Redwood; and
(c) each of the representations and warranties of Redwood
set forth in the Securitization Agreements is true and correct as of
the Amendment Effective Date (as defined below); PROVIDED, THAT
references in the Securitization Agreements to the Purchase Agreement
and to the Transfer Agreement, shall be deemed references to the
Purchase Agreement as amended by this Amendment No. 4 and to the
Transfer Agreement as amended by this Amendment No. 4, respectively,
and references to the Pameco Note shall be deemed references to the
New Promissory Note.
ARTICLE VII
CONDITIONS PRECEDENT
SECTION 7.1 CONDITIONS PRECEDENT. This Amendment No. 4
shall become effective (the actual date of such effectiveness, the
"Amendment Effective Date") as of the date first above written subject
to satisfaction of the following conditions precedent: that the
Purchaser, the Operating Agent and the Collateral Agent shall each
have received the following, in form and substance satisfactory to the
Operating Agent:
(a) Counterparts hereof shall have been duly executed and
delivered by the parties hereto;
(b) PSC shall have received the New Promissory Note,
executed and delivered by a duly authorized officer of Pameco;
(c) the Operating Agent, Redwood, the Seller and the
Servicer shall have executed and delivered the Fee Letter dated
October 16, 1998;
(d) the Purchaser, Operating Agent and Collateral Agent
shall have received the executed legal opinion (including confirmation
of true sale opinion) of Kilpatrick Stockton LLP, counsel to the
Seller and the Servicer, in form and substance satisfactory to the
Operating Agent;
(e) the Operating Agent shall have received a certificate
of the Secretary or an Assistant Secretary of each of the Seller and
the Servicer, dated as of the Amendment Effective Date, and certifying
(i) the names and true signatures of the officers authorized on its
behalf to sign this Amendment No. 4, (ii) a copy of the such party's
certificate of incorporation and by-laws, and (iii) a copy of the
resolutions of the board of directors of such party approving this
Amendment No. 4 and the related transactions to which it is a party,
all in form and substance satisfactory to the Operating Agent. Such
certificate shall state that the resolutions thereby certified have
not been amended, modified, revoked or rescinded as of the date of
such certificate;
<PAGE>
13
(f) the Operating Agent shall have received an Officer's
Certificate from each of the Seller and the Servicer in the forms of
Annexes C-1 and C-2 hereto, respectively;
(g) PSC shall have received a certificate of the Secretary
or an Assistant Secretary of the Originator, dated as of the Amendment
Effective Date, and certifying (i) the names and true signatures of
the officers authorized on its behalf to sign this Amendment No. 4 and
the New Promissory Note, (ii) a copy of the Originator's certificate
of incorporation and by-laws, and (iii) a copy of the resolutions of
the board of directors of the Originator approving this Amendment No.
4 and the related transactions to which it is a party. Such
certificate shall state that the resolutions thereby certified have
not been amended, modified, revoked or rescinded as of the date of
such certificate;
(h) the Operating Agent shall have received rating agency
letters from Moody's Investors Service and Standard & Poor's Rating
Services affirming the rating of the Redwood commercial paper as
"Prime-1" and "A-1+", respectively, after giving effect to this
Amendment No. 4 and consummation of the transactions contemplated
hereby; and
(i) PSC and Pameco shall have taken such other actions and
provided such documentation as the Operating Agent may request.
ARTICLE VIII
MISCELLANEOUS
Section 8.1 COUNTERPARTS. This Amendment No. 4 may be
executed on any number of separate counterparts and all of said
counterparts taken together shall be deemed to constitute one and the
same instrument.
SECTION 8.2 GOVERNING LAW. THIS AMENDMENT NO. 4 SHALL BE
GOVERNED BY, AND CONSTRUED AND INTERPRETED IN ACCORDANCE WITH, THE LAW
OF THE STATE OF NEW YORK.
SECTION 8.3 EXPENSES. Pameco agrees to pay and reimburse
the Operating Agent for all of its out-of-pocket costs and expenses
incurred in connection with the negotiation, preparation, execution,
and delivery of this Amendment No. 4, including the reasonable fees
and expenses of counsel to the Operating Agent and the Collateral
Agent.<PAGE>
14
IN WITNESS WHEREOF, the parties hereto have caused this
Amendment No. 4 to be duly executed and delivered by their proper and
duly authorized officers as of the day and year first above written.
PAMECO SECURITIZATION CORPORATION
By /s/ Mary M. McCulley
Title: VP
REDWOOD RECEIVABLES CORPORATION
By J [unreadable]
Title: Assistant Secretary
PAMECO CORPORATION
By /s/ Theodore R. Kallgran
Title: VP, CFO
GENERAL ELECTRIC CAPITAL
CORPORATION, as Operating Agent and
Collateral Agent
By /s/ Brice P. Schrin
Title: Vice President
GENERAL ELECTRIC CAPITAL
CORPORATION, as Liquidity Agent
By /s/ Brice P. Schrin
Title: Vice President
GENERAL ELECTRIC CAPITAL
CORPORATION, as Letter of Credit Agent and
Letter of Credit Provider
By_______________________________
Title: <PAGE>
ANNEX A
[Form of]
PAMECO NOTE
$100,000,000.00 May 1, 1996
Amended and Restated
October 16, 1998
FOR VALUE RECEIVED PAMECO CORPORATION, a Georgia corporation
("Pameco") hereby promises to pay to PAMECO SECURITIZATION CORPORATION
(the "Lender"), for its account, the principal sum of ONE HUNDRED
MILLION DOLLARS ($100,000,000) (or such lesser amount as shall equal
the aggregate unpaid principal amount of the PRC Loans made by the
Lender to Pameco under the Transfer Agreement referred to below), in
lawful money of the United States of America and in immediately
available funds immediately on the demand of the Lender.
The date, amount and interest rate, of each PRC Loan made by
the Lender to Pameco, and each payment made on account of the
principal thereof, shall be recorded by the Lender on its books and,
prior to any transfer of this Note, endorsed by the Lender on the
schedule attached hereto or any continuation thereof.
This Note is the Pameco Note referred to in the Receivables
Transfer Agreement (as modified and supplemented and in effect from
time to time, the "Transfer Agreement") dated as of the date hereof by
and among Pameco and the Lender and evidences PRC Loans made by the
Lender thereunder. Capitalized terms used in this Note and not
defined herein have the respective meanings assigned to them in the
Transfer Agreement.
The Transfer Agreement provides for prepayments of PRC Loans
upon the terms and conditions specified therein.
Notwithstanding any other provisions contained in this Note,
if at any time the rate of interest payable by Pameco under this Note,
when combined with any and all other charges provided for in this
Note, in the Purchase Agreement or in any other document (to the
extent such other charges would constitute interest for the purpose of
any applicable law limiting interest that may be charged on this
Note), exceeds the highest rate of interest permissible under
applicable law (the "Maximum Lawful Rate"), then so long as the
Maximum Lawful Rate would be exceeded the rate of interest under this
Note shall be equal to the Maximum Lawful Rate. If at any time
thereafter the rate of interest payable under this Note is less than
the Maximum Lawful Rate, Pameco shall continue to pay interest under
this Note at the Maximum Lawful Rate until such time as the total
interest paid by Pameco is equal to the total interest that would have
been paid had such applicable law not limited the interest rate
payable under this Note. In no event shall the total interest
received by the Lender under this Note exceed the amount which the
Lender could lawfully have received had the interest due under this
Note been calculated since the date of this Note at the Maximum Lawful
Rate.
If any payment under this Note falls due on a day which is
not a Business Day, then such due date shall be extended to the next
succeeding Business Day and interest (calculated at the Pameco
Interest Rate for each day during the period then ending) shall be
<PAGE>
payable on the principal so extended.
Pameco expressly waives presentment, demand, diligence,
protest and all notices of any kind whatsoever with respect to this
Note.
This Note is made and delivered in New York, New York and
shall be governed by, and construed in accordance with, the internal
laws (without application of its conflict of laws provisions) of the
State of New York.
IN WITNESS WHEREOF, Pameco has caused this Note to be signed
and delivered by its duly authorized officer as of the date set forth
above.
Very truly yours,
PAMECO CORPORATION
By:_________________________
Name:
Title:
<PAGE>
ANNEX B
[NEW FORM OF LIQUIDITY NOTE]
PROMISSORY NOTE
Redwood Receivables Corporation
$103,000,000.00 May 1, 1996
Amended and Restated
October 16, 1998
FOR VALUE RECEIVED, REDWOOD RECEIVABLES CORPORATION, a
Delaware corporation (the "Company"), promises to pay to GENERAL
ELECTRIC CAPITAL CORPORATION (the "Liquidity Lender"), or registered
assigns, the principal sum of ONE HUNDRED THREE MILLION DOLLARS
($103,000,000) or, if less, the unpaid principal amount of the
aggregate loans ("Liquidity Loans") made by the Liquidity Lender to
the Company pursuant to the Liquidity Loan Agreement, dated as of
April 29, 1996 (as amended, the "Liquidity Loan Agreement"), between
the Company, the Liquidity Lender and General Electric Capital
Corporation as agent for the Liquidity Lender (as agent, the
"Liquidity Agent") on the dates specified in Sections 2.02(c), 4.02
and 4.03 of the Liquidity Loan Agreement, and to pay interest on the
unpaid principal amount of the Note outstanding from time to time at
the Liquidity Interest Rate provided in the Liquidity Loan Agreement
and on the dates specified in Section 4.01 of the Liquidity Loan
Agreement. Capitalized terms used in this Note and not defined herein
have the respective meanings assigned to them in the Liquidity Loan
Agreement.
Notwithstanding any other provisions contained in this Note,
if at any time the rate of interest payable by the Company under this
Note, when combined with any and all other charges provided for in
this Note, in the Liquidity Loan Agreement or in any other document
(to the extent such other charges would constitute interest for the
purpose of any applicable law limiting interest that may be charged on
this Note), exceeds the highest rate of interest permissible under
applicable law (the "Maximum Lawful Rate"), then so long as the
Maximum Lawful Rate would be exceeded the rate of interest under this
Note shall be equal to the Maximum Lawful Rate. If at any time
thereafter the rate of interest payable under this Note is less than
the Maximum Lawful Rate, the Company shall continue to pay interest
under this Note at the Maximum Lawful Rate until such time as the
total interest paid by the Company is equal to the total interest that
would have been paid had such applicable law not limited the interest
rate payable under this Note. In no event shall the total interest
received by the Liquidity Lender under this Note exceed the amount
which the Liquidity Lender could lawfully have received had the
interest due under this Note been calculated since the date of this
Note at the Maximum Lawful Rate.
Payments of the principal of, premium, if any, and interest
on this Note shall be made by the Company to the holder hereof by wire
transfer of immediately available funds by 3:00 p.m. New York City
time, in the manner and at the address specified for such purpose as
provided in Section 4.04 of the Liquidity Loan Agreement, or in such
manner or at such other address as the holder of this Note shall have
specified in writing to the Company for such purpose, without the
presentation or surrender of this Note or the making of any notation
on this Note.
<PAGE>
If any payment under this Note falls due on a day which is
not a Business Day, then such due date shall be extended to the next
succeeding Business Day in such locations and interest (calculated at
the Interest Rate in effect for the period then ending) shall be
payable on the principal so extended.
The Company expressly waives presentment, demand, diligence,
protest and all notices of any kind whatsoever with respect to this
Note.
The holder hereof may, subject to the provisions of Article
IX of the Liquidity Loan Agreement, sell, assign, transfer, negotiate,
grant participations in or otherwise dispose of all or any portion of
this Note and the indebtedness evidenced by this Note.
This Note is secured by (i) the security interests assigned
and granted to General Electric Capital Corporation, as collateral
agent on behalf of, among others, the Liquidity Lender and the
Liquidity Agent (in such capacity, the "Collateral Agent") from time
to time pursuant to Purchase Agreement, and (ii) the security
interests granted to the Collateral Agent pursuant to the Collateral
Agent Agreement. The holder of this Note is entitled to the benefits
of the Purchase Agreement and the Collateral Agent Agreement and may
enforce the agreements of the Company contained in such agreements and
exercise the remedies provided for by, or otherwise available in
respect of, such agreements, all in accordance with the terms of such
agreements. It an Event of Default shall occur and be continuing, the
unpaid balance of the principal of this Note, together with accrued
interest, may be declared and become due and payable in the manner
with the effect provided in the Liquidity Loan Agreement and the
Collateral Agent Agreement.
This Note is made and delivered in New York, New York and
shall be governed by, and construed in accordance with, the internal
laws (without application of its conflict of laws provisions) of the
State of New York.
<PAGE>
3
IN WITNESS WHEREOF, the Company has caused this Note to be
signed and delivered by its duly authorized officer as of the date set
forth above.
Very truly yours,
REDWOOD RECEIVABLES CORPORATION
By:____________________________
Name:
Title:
EXHIBIT 10.27
ISDA (R)
International Swap Dealers Association, Inc.
MASTER AGREEMENT
dated as of October 15, 1998
SUNTRUST BANK, ATLANTA and PAMECO CORPORATION
- ---------------------- ------------------
have entered and/or anticipate entering into one or more transactions
(each a "Transaction") that are or will be governed by this Master
Agreement, which includes the schedule (the "Schedule"), and the
documents and other confirming evidence (each a "Confirmation")
exchanged between the parties confirming those Transactions.
Accordingly, the parties agree as follows:--
1. Interpretation
(a) DEFINITIONS. The terms defined in Section 14 and in the Schedule
will have the meanings therein specified for the purpose of this
Master Agreement.
(b) INCONSISTENCY. In the event of any inconsistency between the
provisions of the Schedule and the other provisions of this Master
Agreement, the Schedule will prevail. In the event of any
inconsistency between the provisions of any Confirmation and this
Mater Agreement (including the Schedule), such Confirmation will
prevail for the purpose of the relevant Transaction.
(c) SINGLE AGREEMENT. All Transactions are entered into in reliance
on the fact that this Master Agreement and all Confirmations form a
single agreement between the parties (collectively referred to as this
"Agreement"), and the parties would not otherwise enter into any
Transactions.
2. Obligations.
(a) GENERAL CONDITIONS.
(i) Each party will make each payment or delivery specified in
each Confirmation to be made by it, subject to the other
provisions of this Agreement.
(ii) Payments under this Agreement will be made on the date due
for value on that date in the place of the account specified in
the relevant Confirmation or otherwise pursuant to this
Agreement in freely transferable funds and in the manner
customary for payments in the required currency. Where
settlement is by delivery (that is, other than by payment), such
delivery will be made for receipt on the due date in the manner
customary for the relevant obligation unless otherwise specified
in the relevant Confirmation or elsewhere in this Agreement.
(iii) Each obligation of each party under Section 2(a)(i) is
subject to (1) the condition precedent that no Event of Default
or Potential Event of Default with respect to the other party has
occurred and is continuing, (2) the condition precedent that no
Early Termination Date in respect of the relevant Transaction has
occurred or been effectively designated and (3) each other<PAGE>
applicable condition precedent specified in this Agreement.
(b) CHANGE OF ACCOUNT. Either party may change its account for
receiving a payment or delivery by giving notice to the other party at
least five Local Business Days prior to the scheduled date for the
payment or delivery to which such change applies unless such other
party gives timely notice of a reasonable objection to such change.
(c) NETTING. If on any date amounts would otherwise be payable:--
(i) in the same currency; and
(ii) in respect of the same Transaction.
by each party to the other, on such date, each party's obligation to
make payment of any such amount will be automatically satisfied and
discharged and, if the aggregate amount that would otherwise have been
payable by one party exceeds the aggregate amount that would otherwise
have been payable by the other party, replaced by an obligation upon
the party by whom the larger aggregate amount would have been payable
to pay to the other party the excess of the larger aggregate amount
over the smaller aggregate amount.
The parties may elect in respect of two or more Transactions that a
net amount will be determined in respect of all amounts payable on the
same date in the same currency in respect of such Transactions,
regardless of whether such amounts are payable in respect of the same
Transaction. The election may be made in the Schedule or a
Confirmation by specifying that subparagraph (ii) above will not
apply to the Transactions identified as being subject to the election,
together with the starting date (in which case subparagraph (ii) above
will not, or will cease to, apply to such Transactions from such
date). This election may be made separately for different groups of
Transactions and will apply separately to each pairing of Offices
through which the parties make and received payments or deliveries.
(d) DEDUCTION OR WITHHOLDING FOR TAX.
(i) GROSS-UP. All payments under this Agreement will be made
without any deduction or withholding for or on account of any Tax
unless such deduction or withholding is required by any
applicable law, as modified by the practice of any relevant
government revenue authority, then in effect. If a party is so
required to deduct or withhold, then that party ("X") will:--
(1) promptly notify the other party ("Y") of such
requirement;
(2) pay to the relevant authorities the full amount
required to be deducted or withheld (including the full
amount required to be deducted or withheld from any
additional amount paid by X to Y under this Section 2(d)
promptly upon the earlier of determining that such deduction
or withholding is required or receiving notice that such
amount has been assessed against Y:
(3) promptly forward to Y an official receipt (or a
certified copy), or other documentation reasonably
acceptable to Y, evidencing such payment to such
authorities; and
(4) if such Tax is an Indemnifiable Tax, pay to Y, in
addition to the payment to which Y is otherwise entitled
under this Agreement, such additional amount as is necessary
to ensure that the net amount actually received by Y (free
and clear of Indemnifiable Taxes, whether assessed against X<PAGE>
or Y) will equal the full amount Y would have received had
no such deduction or withholding been required. However, X
will not be required to pay any additional amount to Y to
the extent that it would not be required to be paid but
for:--
(A) the failure by Y to comply with or perform any
agreement contained in Section 4(a)(i), 4(a)(iii) or
4(d); or
(B) the failure of a representation made by Y pursuant
to Section 3(f) to be accurate and true unless such
failure would not have occurred but for (I) any action
taken by a taxing authority, or brought in a court of
competent jurisdiction, on or after the date on which a
Transaction is entered into (regardless of whether such
action is taken or brought with respect to a party to
this Agreement) or (II) a Change in Tax Law.
2<PAGE>
(ii) LIABILITY. If.--
(1) X is required by any applicable law, as modified by the
practice of any relevant governmental revenue authority, to
make any deduction or withholding in respect of which X
would not be required to pay an additional amount to Y under
Section 2(d)(i)(4);
(2) X does not so deduct or withhold; and
(3) a liability resulting from such Tax is assessed
directly against X.
then, except to the extent Y has satisfied or then satisfies the
liability resulting from such Tax, Y will promptly pay to X the amount
of such liability (including any related liability for interest, but
including any related liability for penalties only if Y has failed to
comply with or perform any agreement contained in Section 4(a)(iii)
or 4(d)).
(e) DEFAULT INTEREST; OTHER AMOUNTS. Prior to the occurrence or
effective designation of an Early Termination Date in respect of the
relevant Transaction, a party that defaults in the performance of
any payment obligation will, to the extent permitted by law and
subject to Section 6(c), be required to pay interest (before as well
as after judgment) on the overdue amount to the other party on demand
in the same currency as such overdue amount, for the period from (and
including) the original due date for payment to (but excluding) the
date of actual payment, at the Default Rate. Such interest will be
calculated on the basis of daily compounding and the actual number of
days elapsed. If, prior to the occurrence or effective designation of
an Early Termination Date in respect of the relevant Transaction, a
party defaults in the performance of any obligation required to be
settled by delivery, it will compensate the other party on demand if
and to the extent provided for in the relevant Confirmation or
elsewhere in this Agreement.
3. REPRESENTATIONS
Each party represents to the other party (which representations will
be deemed to be repeated by each party on each date on which a
Transaction is entered into and, in the case of the representations in
Section 3(f), at all times until the termination of this Agreement)
that:--
(a) BASIC REPRESENTATIONS.
(i) STATUS. It is duly organised and validly existing under the
laws of the jurisdiction of this organisation or incorporation
and, if relevant under such laws, in good standing;
(ii) POWERS. It has the power to execute this Agreement and any
other documentation relating to this Agreement and any other
documentation relating to this Agreement that it is required by
this Agreement to deliver and to perform its obligations under
this Agreement and any obligations it has under any Credit
Support Document to which it is a party and has taken all
necessary action to authorise such execution, delivery and
performance;
(iii) NO VIOLATION OR CONFLICT. Such execution, delivery and
performance do not violate or conflict with any law applicable to
it, any provision of its constitutional documents, any order or
judgment of any court or other agency of government applicable to
it or any of its assets or any contractual restriction binding on<PAGE>
or affecting it or any of its assets;
(iv) CONSENTS. All governmental and other consents that are
required to have been obtained by it with respect to this
Agreement or any Credit Support Document to which it is a party
have been obtained and are in full force and effect and all
conditions of any such consents have been complied with; and
(v) OBLIGATIONS BINDING. Its obligations under this Agreement
and any Credit Support Document to which it is a party constitute
its legal, valid and binding obligations, enforceable in
accordance with their respective terms (subject to applicable
bankruptcy, reorganisation, insolvency, moratorium or similar
laws affecting creditors' rights generally and subject, as to
enforceability, to equitable principles of general application
(regardless of whether enforceable is sought in a proceeding in
equity or at law)).
3<PAGE>
(b) ABSENCE OF CERTAIN EVENTS. No Event of Default or Potential
Event of Default or, to its knowledge, Termination Event with respect
to it has occurred and is continuing and no such event or circumstance
would occur as a result of its entering into or performing its
obligations under this Agreement or any Credit Support Document to
which it is a party.
(c) ABSENCE OF LITIGATION. There is not pending or, to its knowledge,
threatened against it or any of its Affiliates any action, suit or
proceeding at law or in equity or before any court, tribunal,
governmental body, agency or official or any arbitrator that is likely
to affect the legality, validity to perform its obligations under this
Agreement or such Credit Support Document.
(d) ACCURACY OF SPECIFIED INFORMATION. All applicable information
that is furnished in writing by or on behalf of it to the other party
and is identified for the purpose of this Section 3(d) in the Schedule
is, as of the date of the information, true, accurate and complete in
every material respect.
(e) PAYER TAX REPRESENTATION. Each representation specified in the
Schedule as being made by it for the purpose of this Section 3(f) is
accurate and true.
(f) PAYER TAX REPRESENTATIONS. Each representation specified in the
Schedule as being made by it for the purpose of this Section 3(f) is
accurate and true.
4. AGREEMENTS
Each party agrees with the other that, so long as either party has or
may have any obligation under this Agreement or under any Credit
document to which it is a party:--
(a) FURNISH SPECIFIED INFORMATION. It will deliver to the other
party or, in certain cases under subparagraph (iii) below, to such
government or taxing authority as the other party reasonably directs:--
(i) any forms, documents or certificates relating to taxation
specified in the Schedule or any Confirmation:
(ii) any other documents specified in the Schedule or any
Confirmation; and
(iii) upon reasonable demand by such other party, any form or
document that may be required or reasonably requested in writing
in order to allow such other party or its Credit Support Provider
to make a payment under this Agreement or any applicable Credit
Support Document without any deduction or withholding for or on
account of any Tax or with such deduction or withholding at a<PAGE>
reduced rate (so long as the completion, execution or submission
of such form or document would not materially prejudice the legal
or commercial position of the party in receipt of such demand),
with any such form or document to be accurate and completed in a
manner reasonably satisfactory to such other party and to be
executed and to be delivered with any reasonably required
certification,
in each case by the date specified in the Schedule or such
Confirmation or, if none is specified, as soon as reasonably
practicable.
(b) MAINTAIN AUTHORISATIONS. It will use all reasonable efforts to
maintain in full force and effect all consents of any governmental or
other authority that are required to be obtained by it with respect to
this Agreement or any Credit Support Document to which it is a party
and will use all reasonable efforts to obtain any that may become
necessary in the future.
(c) COMPLY WITH LAWS. It will comply in all material respects with
all applicable laws and orders to which it may be subject if failure
so to comply would materially impair its ability to perform its
obligations under this Agreement or any Credit Support Document to
which it is a party.
(d) TAX AGREEMENT. It will give notice of any failure of a
representation made by it under Section 3(f) to be accurate and true
promptly upon learning of such failure.
(e) PAYMENT OF STAMP TAX. Subject to Section 11, it will pay any
Stamp Tax levied or imposed upon it or in respect of its execution or
performance of this Agreement by a jurisdiction in which it is
incorporated, organised, managed and controlled, or considered to have
its seat, or in which a branch or office through which it is acting
for the purpose of this Agreement is located ("Stamp Tax
Jurisdiction") and will indemnify the other party against any Stamp
Tax levied or imposed upon the other party or in respect of the other
party's execution or performance of this Agreement by any such Stamp
Tax Jurisdiction which is not also a Stamp Tax Jurisdiction with
respect to the other party.
4<PAGE>
5. EVENTS OF DEFAULT AND TERMINATION EVENTS
(a) EVENTS OF DEFAULT. The occurrence at any time with respect to a
party or, if applicable, any Credit Support Provider of such arty or
any Specified Entity of such party of any of the following events
constitutes an event of default (an "Event of Default") with respect
to such party:--
(i) FAILURE TO PAY OR DELIVER. Failure by the party to make,
when due, any payment under this Agreement or delivery under
Section 2(a)(i) or 2(e) to be made by it if such failure is not
remedied on or before the third Local Business Day after notice
of such failure is given to the party;
(ii) BREACH OF AGREEMENT. Failure by the party to comply with or
perform any agreement or obligation (other than an obligation to
make any payment under Section 2(a)(i) or 2(e) or to give notice
of a Termination Event or any agreement or obligation under
Section 4(a)(i), 4(a)(iii) or 4(d)) to be complied with or
performed by the party in accordance with this Agreement if such
failure is not remedied on or before the thirtieth day after
notice of such failure is given to the party;
(iii) CREDIT SUPPORT DEFAULT.
(1) Failure by the party or any Credit Support Provider of
such party to comply with or perform any agreement or
obligation to be complied with or performed by it in
accordance with any Credit Support Document if such failure
is continuing after any applicable grace period has elapsed;
(2) the expiration or termination of such Credit Support
Document or the failing or ceasing of such Credit Support
Document to be in full force and effect for the purpose of
this Agreement (in either case other than in accordance with
its terms) prior to the satisfaction of all obligations of
such party under each Transaction to which such Credit
Support Document relates without the written consent of the
other party; or
(3) the party or such Credit Support Provider disaffirms,
disclaims, repudiates or rejects, in whole or in part, or
challenges the validity of, such Credit Support Document;
(iv) MISREPRESENTATION. A representation (other than a
representation under Section 3(e) or (f)) made or repeated or
deemed to have been made or repeated by the party or any Credit
Support Provider of such party in this Agreement or any Credit
Support Document proves to have been incorrect or misleading in
any material respect when made or repeated or deemed to have been
made or repeated;
(v) DEFAULT UNDER SPECIFIED TRANSACTION. The party, any Credit
Support Provider of such party or any applicable Specified Entity
of such party (1) defaults under a Specified Transaction and,
after giving effect to any applicable notice requirement or grace
period, there occurs a liquidation of, an acceleration of
obligations under, or an early termination of, that Specified
Transaction, (2) defaults, after giving effect to any applicable
notice requirement or grace period, in making any payment or
delivery due on the last payment, delivery or exchange date of,
or any payment on early termination of, a Specified Transaction
<PAGE>
(or such default continues for at least three Local Business Days
if there is no applicable notice requirement or grace period) or
(3) disaffirms, disclaims, repudiates or rejects, in whole or in
part, a Specified Transaction (or such action is taken by any
person or entity appointed or empowered to operate it or act on
its behalf);
(vi) CROSS DEFAULT. If "Cross Default" is specified in the
Schedule as applying to the party, the occurrence or existence of
(1) a default, event of default or other similar condition or
event (however described) in respect of such party, any Credit
Support Provider of such party or any applicable Specified Entity
of such party under one or more agreements or instruments
relating to Specified Indebtedness of any of them (individually
or collectively) in an aggregate amount of not less than the
applicable Threshold Amount (as specified in the Schedule) which
has resulted in such Specified Indebtedness becoming, or becoming
capable at such time of being declared, due and payable under
5<PAGE>
such agreements or instruments, before it would otherwise have
been due and payable or (2) a default by such party, such Credit
Support Provider or such Specified Entity (individually or
collectively) in making one or more payments on the due date
thereof in an aggregate amount of not less than the applicable
Threshold Amount under such agreements or instruments (after
giving effect to any applicable notice requirement or grace
period);
(vii) BANKRUPTCY. The party, any Credit Support Provide of
such party or any applicable Specified Entity of such party:--
(1) is dissolved (other than pursuant to a consolidation,
amalgamation or merger); (2) becomes insolvent or is unable
to pay its debts or fails or admits in writing its inability
generally to pay its debts as they become due; (3) makes a
general assignment, arrangement or composition with or for
the benefit of its creditors; (4) institutes or has
instituted against it a proceeding seeking a judgment of
insolvency or bankruptcy or any other relief under any
bankruptcy or insolvency law or other similar law affecting
creditors' rights, or a petition is presented for its
winding-up or liquidation, and, in the case of any such
proceeding or petition instituted or presented against it,
such proceeding or petition (A) results in a judgment of
insolvency or bankruptcy or the entry of an order for relief
or the making of an order for its winding-up or liquidation
or (B) is not dismissed, discharged, stayed or restrained in
each case within 30 days of the institution or presentation
thereof; (5) has a resolution passed for its winding-up,
official management or liquidation (other than pursuant to a
consolidation, amalgamation or merger); (6) seeks or becomes
subject to the appointment of an administrator, provisional
liquidator, conservator, receiver, trustee, custodian or
other similar official for it or for all or substantially
all its assets; (7) has a secured party take possession of
all or substantially all its assets or has a distress,
execution, attachment, sequestration or other legal process
levied, enforced or sued on or against all or substantially
all its assets and such secured party maintains possession,
or any such process is not dismissed, discharged, stayed or
restrained, in each case within 30 days thereafter; (8)
causes or is subject to any event with respect to it which,
under the applicable laws of any jurisdiction, has an
analogous effect to any of the events specified in clauses
(1) to (7) (inclusive); or (9) takes any action in
furtherance of, or indicating its consent to, approval or,
or acquiescence in, any of the foregoing acts; or
(viii) MERGER WITHOUT ASSUMPTION. The party or any Credit
Support Provider of such party consolidates or amalgamates with,
or merges with or into, or transfers all or substantially all its
assets to, another entity and, at the time of such consolidation,
amalgamation, merger or transfer: --
(1) the resulting, surviving or transferee entity fails to
assume all the obligations of such party or such Credit
Support Provider under this Agreement or any Credit Support
Document to which it or its predecessor was a party by
operation of law or pursuant to an agreement reasonably
satisfactory to the other party to this Agreement; or
(2) the benefits of any Credit Support Document fail to
extend (without the consent of the other party) to the
performance by such resulting, surviving or transferee
entity of its obligations under this Agreement.
(b) TERMINATION EVENTS. The occurrence at any time with respect to a
party or, if applicable, any Credit Support Provider of such party or
any Specified Entity of such party of any event specified below
constitutes an Illegality if the event is specified in (i) below, a ax
Event if the event is specified in (ii) below or a Tax Event Upon
Merger if the event is specified in (iii) below, and, if specified to
6
<PAGE>
be applicable, a Credit Event Upon Merger if the event is specified
pursuant to (iv) below or an Additional Termination Event if the event
is specified pursuant to (v) below: --
(i) ILLEGALITY. Due to the adoption of, or any change in, any
applicable law after the date on which a Transaction is entered
into, or due to the promulgation of, or any change in, the
interpretation by any court, tribunal or regulatory authority
with competent jurisdiction of any applicable law after such
date, it becomes unlawful (other than as a result of a breach by
the party of Section 4(b)) for such party (which will be the
Affected Party): --
(1) to perform any absolute or contingent obligation to
make a payment or delivery or to receive a payment or
delivery in respect of such Transaction or to comply with
any other material provision of this Agreement relating to
such Transaction; or
(2) to perform, or for any Credit Support Provider of such
party to perform, any contingent or other obligation which
the party (or such Credit Support Provider) has under any
Credit Support Document relating to such Transaction;
(ii) TAX EVENT. Due to (x) any action taken by a taxing
authority, or brought in a court of competent jurisdiction, on or
after the date on which a Transaction is entered into (regardless
of whether such action is taken or brought with respect to a
party to this Agreement) or (y) a Change in Tax Law, the party
(which will be the Affected Party) will, or there is a
substantial likelihood that it will, on the next succeeding
Scheduled Payment Date (1) be required to pay to the other party
an additional amount in respect of an Indemnifiable Tax under
Section 2(d)(i)(4) (except in respect of interest under Section
2(e), 6(d)(ii) or 6(e)) or (2) receive a payment from which an
amount is required to be deducted or withheld for or on account
of a Tax (except in respect of interest under Section 2(e),
6(d)(ii) or 6(e)) and no additional amount is required to be paid
in respect of such Tax under Section 2(d)(i)(4) (other than be
reason of Section 2(d)(i)(4)(A) or (B));
(iii) TAX EVENT UPON MERGER. The party (the "Burdened
Party") on the next succeeding Scheduled Payment Date will either
(1) be required to pay an additional amount in respect of an
Indemnifiable Tax under Section 2(d)(i)(4) (except in respect of
interest under Section 2(e), 6(d)(ii) or 6(e)) or (2) receive a
payment from which an amount has been deducted or withheld for or
on account of any Indemnifiable Tax in respect of which the other
party is not required to pay an additional amount (other than by
reason of Section 2(d)(i)(4)(A) or (B)), in either case as a
result of a party consolidating or amalgamating with, or merging
with or into, or transferring all or substantially all its assets
to, another entity (which will be the Affected Party) where such
action does not constitute an event described in Section
5(a)(viii);
(iv) CREDIT EVENT UPON MERGER. If "Credit Event Upon Merger" is
specified in the Schedule as applying to the party, such party
("X"), any Credit Support Provider of X or any applicable
Specified Entity of X consolidates or amalgamates with, or merges
with or into, or transfers all or substantially all its assets
to, another entity and such action does not constitute an event
described in Section 5(a)(viii) but the creditworthiness of the
resulting, surviving or transferee entity is materially weaker
<PAGE>
than that of X, such Credit Support Provider or such Specified
Entity, as the case may be, immediately prior to such action
(and, in such event, X or its successor or transferee, as
appropriate, will be the Affected Party); or
(v) ADDITIONAL TERMINATION EVENT. If any "Additional
Termination Event" is specified in the Schedule or any
Confirmation as applying, the occurrence of such event (and, in
such event, the Affected Party or Affected Parties shall be as
specified for such Additional Termination Event in the Schedule
or such Confirmation).
(c) EVENT OF DEFAULT AND ILLEGALITY. If an event or circumstance
which would otherwise constitute or give rise to an Event of Default
also constitutes an Illegality, it will be treated as an Illegality
and will not constitute an Event of Default.
7
<PAGE>
6. EARLY TERMINATION
(a) RIGHT TO TERMINATE FOLLOWING EVENT OF DEFAULT. If at any time an
Event of Default with respect to a party (the "Defaulting Party") has
occurred and is then continuing, the other party (the "Non-defaulting
Party") may, by not more than 20 days notice to the Defaulting Party
specifying the relevant Event of Default, designate a day not earlier
than the day such notice is effective as an Early Termination Date in
respect of all outstanding Transactions. If, however, "Automatic
Early Termination" is specified in the Schedule as applying to a
party, then an Early Termination Date in respect of all outstanding
Transactions will occur immediately upon the occurrence with respect
to such party of an Event of Default specified in Section
5(a)(vii)(1), (3), (5), (6) or, to the extent analogous thereto, (8),
and as of the time immediately preceding the institution of the
relevant proceeding or the presentation of the relevant petition upon
the occurrence with respect to such party of an Event of Default
specified in Section 5(a)(vii)(4) or, to the extent analogous thereto,
(8).
(b) RIGHT TO TERMINATE FOLLOWING TERMINATION EVENT.
(i) NOTICE. If a Termination Event occurs, an Affected Party
will, promptly upon becoming aware of it, notify the other party,
specifying the nature of that Termination Event and each Affected
Transaction and will also give such other information about that
Termination Event as the other party may reasonably require.
(ii) TRANSFER TO AVOID TERMINATION EVENT. If either an
Illegality under Section 5(b)(i)(1) or a Tax Event occurs and
there is only one Affected Party, or if a Tax Event Upon Merger
occurs and the Burdened Party is the Affected Party, the Affected
Party will, as a condition to its right to designate an Early
Termination Date under Section 6(b)(iv), use all reasonable
efforts (which will not require such party to incur a loss,
excluding immaterial, incidental expenses) to transfer within 20
days after it gives notice under Section 6(b)(i) all its rights
and obligations under this Agreement in respect of the Affected
Transactions to another of its Offices or Affiliates so that such
Termination Event ceases to exist.
If the Affected Party is not able to make such a transfer it will
give notice to the other party to that effect within such 20 day
period, whereupon the other party may effect such a transfer
within 30 days after the notice is given under Section 6(b)(i).
Any such transfer by a party under this Section 6(b)(ii) will be
subject to and conditional upon the prior written consent of the
other party, which consent will not be withheld if such other
party's policies in effect at such time would permit it to enter
into transactions with the transferee on the terms proposed.
(iii) TWO AFFECTED PARTIES. If an Illegality under Section
5(b)(1) or a Tax Event occurs and there are two Affected Parties,
each party will use all reasonable efforts to reach agreement
within 30 days after notice thereof is given under Section
6(b)(i) on action to avoid that Termination Event.
(iv) RIGHT TO TERMINATE. If:
(1) a transfer under Section 6(b)(ii) or an agreement under
Section 6(b)(iii), as the case may be, has not been effected
with respect to all Affected Transactions within 30 days
after an Affected party gives notice under Section 6(b)(i);
or<PAGE>
(2) an Illegality under Section 5(b)(i)(2), a Credit Event
Merger or an Additional Termination Event occurs, or a Tax
Event Upon Merger occurs and the Burdened Party is not the
Affected Party,
either party in the case of an Illegality, the Burdened Party in
the case of a Tax Event Upon Merger, any Affected Party in the
case of a Tax Event or an Additional Termination Event if there
is more than one Affected Party, or the party which is not the
Affected Party in the case of a Credit Event Upon Merger or an
Additional Termination Event if there is only one Affected Party
may, by not more than 20 days notice to the other party and
provided that the relevant Termination Event is then continuing,
designate a day not earlier than the day such notice is effective
as an Early Termination Date in respect of all Affected
Transactions.
8<PAGE>
(c) EFFECT OF DESIGNATION.
(i) If notice designating an Early Termination Date is given
under Section 6(a) or (b), the Early Termination Date will occur
on the date so designated, whether or not the relevant Event of
Default or Termination Event is then continuing.
(ii) Upon the occurrence or effective designation of an Early
Termination Date, no further payments or deliveries under Section
2(a)(i) or 2(e) in respect of the Terminated Transactions will be
required to be made, but without prejudice to the other
provisions of this Agreement. The amount, if any, payable in
respect of an Early Termination Date shall be determined pursuant
to Section 6(e).
(d) CALCULATIONS.
(i) STATEMENT. On or as soon as reasonably practicable
following the occurrence of an Early Termination Date, each party
will make the calculations on its part, if any, contemplated by
Section 6(e) and will provide to the other party a statement (1)
showing, in reasonable detail, such calculations (including all
relevant quotations and specifying any amount payable under
Section 6(e)) and (2) giving details of the relevant account to
which any amount payable to it is to be paid. In the absence of
written confirmation from the source of a quotation obtained in
determining a Market Quotation, the records of the party
obtaining such quotation will be conclusive evidence of the
existence and accuracy of such quotation.
(ii) PAYMENT DATE. An amount calculated as being due in respect
of any Early Termination Date under Section 6(e) will be payable
on the day that notice of the amount payable is effective (in the
case of an Early Termination Date which is designated or occurs
as a result of an Event of Default) and on the day which is two
Local Business Days after the day on which notice of the amount
payable is effective (in the case of an Early Termination Date
which is designated as a result of a Termination Event). Such
amount will be paid together with (to the extent permitted under
applicable law) interest thereon (before as well as after
judgment) in the Termination Currency, from (and including) the
relevant Early Termination Date to (but excluding) the date such
amount is paid, at the Applicable Rate. Such interest will be
calculated on the basis of daily compounding and the actual
number of days elapsed.
(e) PAYMENTS ON EARLY TERMINATION. If an Early Termination Date
occurs, the following provisions shall apply based on the parties'
election in the Schedule of a payment measure, either "Market
Quotation" or "Loss", and a payment method, either the "First Method"
or the "Second Method". If the parties fail to designate a payment
measure or payment method in the Schedule, it will be deemed that
"Market Quotation" or the "Second Method", as the case may be, shall
apply. The amount, if any, payable in respect of an Early Termination
Date and determined pursuant to this Section will be subject to any
Set-off.
(i) EVENTS OF DEFAULT. If the Early Termination Date results
from an Event of Default:
(1) FIRST METHOD AND MARKET QUOTATION. If the First Method
and Market Quotation apply, the Defaulting Party will pay to
the Non-defaulting Party the excess, if a positive number,
of (A) the sum of the Settlement Amount (determined by the
Non-defaulting Party) in respect of the Terminated
Transactions and the Termination Currency Equivalent of the
Unpaid Amounts owing to the Non-defaulting Party over (B)
the Termination Currency Equivalent of the Unpaid Amounts
owing to the Defaulting Party.
(2) FIRST METHOD AND LOSS. If the First Method and Loss
apply, the Defaulting Party will pay to the Non-defaulting
Party, if a positive number, the Non-defaulting Party's Loss
in respect of this Agreement.
(3) SECOND METHOD AND MARKET QUOTATION. If the Second
Method and Market Quotation apply, an amount will be payable
equal to (A) the sum of the Settlement Amount (determined by
the Non-defaulting Party) in respect of the Terminated
Transactions and the Termination Currency Equivalent of the
Unpaid Amounts owing to the Non-defaulting Party less (B)
the Termination Currency Equivalent of the Unpaid Amounts
9<PAGE>
owing to the Defaulting Party. If that amount is a positive
number, the Defaulting Party will pay it to the Non-
defaulting Party; if it is a negative number, the Non-
defaulting Party will pay the absolute value of that amount
to the Defaulting Party.
(4) SECOND METHOD AND LOSS. If the Second Method and Loss
apply, an amount will be payable equal to the Non-defaulting
Party's Loss in respect of this Agreement. If that amount
is a positive number, the Defaulting Party will pay it to
the Non-defaulting Party; if it is a negative number, the
Non-defaulting Party will pay the absolute value of that
amount to the Defaulting Party.
(ii) TERMINATION EVENTS. If the Early Termination Date results
from a Termination Event:
(1) ONE AFFECTED PARTY. If there is one Affected Party,
the amount payable will be determined in accordance with
Section 6(e)(i)(3), if Market Quotation applies, or Section
6(e)(i)(4), if Loss applies, except that, in either case,
references to the Defaulting Party and to the Non-defaulting
Party will be deemed to be references to the Affected Party
and the party which is not the Affected Party, respectively,
and, if Loss applies and fewer than all the Transactions are
being terminated, Loss shall be calculated in respect of all
Terminated Transactions.
(2) TWO AFFECTED PARTIES. If there are two Affected
Parties:
(A) if Market Quotation applies, each party will
determine a Settlement Amount in respect of the
Terminated Transactions, and an amount will be payable
equal to (I) the sum of (a) one-half of the difference
between the Settlement Amount of the party with the
higher Settlement Amount ("X") and the Settlement
Amount of the party with the lower Settlement Amount
("Y") and (b) the Termination Currency Equivalent of
the Unpaid Amounts owing to X less (II) the Termination
Currency Equivalent of the Unpaid Amounts owing to Y;
and
(B) if Loss applies, each party will determine its
Loss in respect of this Agreement (or, if fewer than
all the Transactions are being terminated, in respect
of all Terminated Transactions) and an amount will be
payable equal to one-half of the difference between the
Loss of the party with the higher Loss ("X") and the
Loss of the party with the lower Loss ("Y").
If the amount payable is a positive number, Y will pay it to
X; if it is a negative number, X will pay the absolute value
of that amount to Y.
(iii) ADJUSTMENT FOR BANKRUPTCY. In circumstances where an
Early Termination Date occurs because "Automatic Early
Termination" applies in respect of a party, the amount determined
under this Section 6(e) will be subject to such adjustments as
are appropriate and permitted by law to reflect any payments or
deliveries made by one party to the other under this Agreement
(and retained by such other party) during the period from the
relevant Early Termination Date to the date for payment
determined under Section 6(d)((ii).
<PAGE>
(iv) PRE-ESTIMATE. The parties agree that if Market Quotation
applies an amount recoverable under this Section 6(e) is a reasonable
pre-estimate of loss and not a penalty. Such amount is payable for
the loss of bargain and the loss of protection against future
risks and except as otherwise provided in this Agreement neither
party will be entitled to recover any additional damages as a
consequence of such losses.
10
<PAGE>
7. TRANSFER
Subject to Section 6(b)(ii), neither this Agreement nor any interest
or obligation in or under this Agreement may be transferred (whether
by way of security or otherwise) by either party without the prior
written consent of the other party, except that:
(a) a party may make such a transfer of this Agreement pursuant to a
consolidation or amalgamation with, or merger with or into, or
transfer of all or substantially all its assets to, another entity
(but without prejudice to any other right or remedy under this
Agreement); and
(b) a party may make such a transfer of all or any part of its
interest in any amount payable to it from a Defaulting Party under
Section 6(e).
Any purported transfer that is not in compliance with this Section
will be void.
8. CONTRACTUAL CURRENCY
(a) PAYMENT IN THE CONTRACTUAL CURRENCY. Each payment under this
Agreement will be made in the relevant currency specified in this
Agreement for that payment (the "Contractual Currency"). To the
extent permitted by applicable law, any obligation to make payments
under this Agreement in the Contractual Currency will not be
discharged or satisfied by any tender in any currency other than the
Contractual Currency, except to the extent such tender results in the
actual receipt by the party to which payment is owed, acting in a
reasonable manner and in good faith in converting the currency so
tendered into the Contractual Currency, of the full amount in the
Contractual Currency of all amounts payable in respect of this
Agreement. If for any reason the amount in the Contractual Currency
so received falls short of the amount in the Contractual Currency
payable in respect of this Agreement, the party required to make the
payment will, to the extent permitted by applicable law, immediately
pay such additional amount in the Contractual Currency as may be
necessary to compensate for the shortfall. If for any reason the
amount in the Contractual Currency so received exceeds the amount in
the Contractual Currency payable in respect of this Agreement the
party receiving the payment will refund promptly the amount of such
excess.
(b) JUDGMENTS. To the extent permitted by applicable law, if any
judgment or order expressed in a currency other than the Contractual
Currency is rendered (i) for the payment of any amount owing in
respect of this Agreement, (ii) for the payment of any amount relating
to any early termination in respect of this Agreement or (iii) in
respect of a judgment or order of another court for the payment of any
amount described in (i) or (iii) above, the party seeking recovery,
after recovery in full of the aggregate amount to which such party is
entitled pursuant to the judgment or order, will be entitled to
receive immediately from the other party the amount of any shortfall
of the Contractual Currency received by such party as a consequence of
sums paid in such other currency and will refund promptly to the other
party any excess of the Contractual Currency received by such party as
a consequence of sums paid in such other currency if such shortfall or
such excess arises or results from any variation between the rate of
exchange at which the Contractual Currency is converted into the
currency of the judgment or order for the purposes of such judgment or
order and the rate of exchange at which such party is able, acting in
a reasonable manner and in good faith in converting the currency
received into the Contractual Currency, to purchase the Contractual
Currency with the amount of the currency of the judgment or order
actually received by such party. The term "rate of exchange"
includes, without limitation, any premiums and costs of exchange
payable in connection with the purchase of or conversion into the
Contractual Currency.
(c) SEPARATE INDEMNITIES. To the extent permitted by applicable law,
these indemnities constitute separate and independent obligations from
the other obligations in this Agreement, will be enforceable as
separate and independent causes of action, will apply notwithstanding
any indulgence granted by the party to which any payment is owed and
will not be affected by judgment being obtained or claim or proof
being made for any other sums payable in respect of this Agreement.
(d) EVIDENCE OF LOSS. For the purpose of this Section 8, it will
sufficient for a party to demonstrate that it would have suffered a
loss had an actual exchange or purchase been made.
11<PAGE>
9. MISCELLANEOUS
(a) ENTIRE AGREEMENT. This Agreement constitutes the entire
agreement and understanding of the parties with respect to its subject
matter and supersedes all oral communication and prior writings with
respect thereto.
(b) AMENDMENTS. No amendment, modification or waiver in respect of
this Agreement will be effective unless in writing (including a
writing evidenced by a facsimile transmission) and executed by each of
the parties or confirmed by an exchange or telexes or electronic
messages on an electronic messaging system.
(c) SURVIVAL OF OBLIGATIONS. Without prejudice to Section 2(a)(iii)
and 6(c)(ii), the obligations of the parties under this Agreement will
survive the termination of any Transaction.
(d) REMEDIES CUMULATIVE. Except as provided in this Agreement, the
rights, powers, remedies and privileges provided in this Agreement are
cumulative and not exclusive of any rights, powers, remedies and
privileges provided by law.
(e) COUNTERPARTS AND CONFIRMATIONS.
(i) This Agreement (and each amendment, modification and waiver
in respect of it may be executed and delivered in counterparts
(including by facsimile transmission), each of which will be
deemed an original.
(ii) The parties intend that they are legally bound by the terms
of each Transaction for the moment they agree to those terms
(whether orally or otherwise). A Confirmation shall be entered
into as soon as practicable and may be executed and delivered in
counterparts (including by facsimile transmission) or be created
by an exchange of telexes or by an exchange of electronic
messages on an electronic messaging system, which in each case
will be sufficient for all purposes to evidence a binding
supplement to this Agreement. The parties will specify therein
or through another effective means that any such counterpart,
telex or electronic message constitutes a Confirmation.
(f) NO WAIVER OF RIGHTS. A failure or delay in exercising any right,
power or privilege in respect of this Agreement will not be presumed
to operate as a waiver, and a single or partial exercise of any right,
power or privilege will not be presumed to preclude any subsequent or
further exercise, of that right, power or privilege or the exercise of
any other right, power or privilege.
(g) HEADINGS. The headings used in this Agreement are for
convenience of reference only and are not to affect the construction
of or to be taken into consideration in interpreting this Agreement.
10. OFFICE: MULTIBRANCH PARTIES
(a) If Section 10(a) is specified in the Schedule as applying, each
party that enters into a Transaction through an Office other than its
head or home office represents to the other party that,
notwithstanding the place of booking office or jurisdiction of
incorporation or organization of such party, the obligations of such
party, the obligations of such party are the same as if it had entered
into the Transaction through its head or home office. This
representation will be deemed to be repeated by such party on each
date on which a Transaction is entered into.
<PAGE>
(b) Neither party may change the Office through which it makes and
receives payments or deliveries for the purpose of a Transaction
without the prior written consent of the other party.
(c) If a party is specified as a Multibranch Party in the Schedule,
such Multibranch Party may make and receive payments or deliveries
under any Transaction through any Office listed in the Schedule, and
the Office through which it makes and receives payment or deliveries
with respect to a Transaction will be specified in the relevant
Confirmation.
11. EXPENSES.
A Defaulting Party will, on demand, indemnify and hold harmless the
other party for and against all reasonable out-of-pocket expenses,
including legal fees and Stamp Tax, incurred by such other party by
reason of the enforcement and protection of its rights under this
Agreement or any Credit Support Document to which the Defaulting Party
is a party or by reason of the early termination of any Transaction,
including, but not limited to costs of collection.
12<PAGE>
12. NOTICES
(a) EFFECTIVENESS. Any notice or other communication n respect of
this Agreement may be given in any manner set forth below (except that
a notice or other communication under Section 5 or 6 may not be given
by facsimile transmission or electronic messaging system) to the
address or number or in accordance with the electronic messaging
system details provided (see the Schedule) and will be deemed
effective as indicated:
(i) if in writing and delivered in person or by courier, on the
date it is delivered;
(ii) if sent by telex, on the date the recipient's answerback is
received;
(iii) if sent by facsimile transmission, on the date that
transmission is received by a responsible employee of the
recipient in legible form ( it being agreed that the burden of
proving receipt will be on the sender and will not be met by a
transmission report generated by the sender's facsimile machine);
(iv) if sent by certified or registered mail (airmail, if
overseas) or the equivalent (return receipt requested), on the
date that mail is delivered or its delivery is attempted; or
(v) if sent by electronic messaging system, on the date that
electronic message is received.
unless the date of that delivery (or attempted delivery) or that
receipt, as applicable, is not a Local Business Day or that
communication is delivered (or attempted) or received, as applicable,
after the close of business on a Local Business Day, in which case
that communication shall be deemed given and effective on the first
following day that is a Local Business Day.
(b) CHANGE OF ADDRESSES. Either party may by notice to the other
change the address, telex or facsimile number or electronic messaging
system details at which notices or other communications are to be
given to it.
13. GOVERNING LAW AND JURISDICTION
(a) GOVERNING LAW. This Agreement will be governed by and construed
in accordance with the law specified in the Schedule.
(b) JURISDICTION. With respect to any suit, action or proceedings
relating to this Agreement ("Proceedings"), each party irrevocably:-
(i) submits to the jurisdiction of the English courts, if this
Agreement is expressed to be governed by English law, or to the
non-exclusive jurisdiction of the courts of the State of New York
and the United States District Court located in the Borough of
Manhattan in New York City, if this Agreement is expressed to be
governed by the laws of the State of New York; and
(ii) waives any objection which it may have at any time to the
laying of venue of any Proceedings brought in any such court,
waives any claim that such Proceedings have been brought in an
inconvenient forum and further waives the right to object, with
respect to such Proceedings, that such court does not have any
jurisdiction over such party.
Nothing in this Agreement precludes either party from bringing
Proceedings in any other jurisdiction (outside, if this Agreement is
expressed to be governed by English law, the Contracting States, as
defined in Section 1(3) of the Civil Jurisdiction and Judgments Act
1982 or any modification, extension or re-enactment thereof for the
time being in force) nor will the bringing of Proceedings in any one
or more jurisdictions preclude the bringing of Proceedings in any
other jurisdiction.
(c) SERVICE OF PROCESS. Each party irrevocably appoints the Process
Agent (if any) specified opposite its name in the Schedule to receive,
for it and on its behalf, service of process in any Proceedings. If
13<PAGE>
for any reason any party's Process Agent is unable to act as such, such
party will promptly notify the other party and within 30 days appoint
a substitute process agent acceptable to the other party. The parties
irrevocably consent to service of process given in the manner provided
for notices in Section 12. Nothing in this Agreement will affect the
right of either party to serve process in any other manner permitted
by law.
(d) WAIVER OF IMMUNITIES. Each party irrevocably waives, to the
fullest extent permitted by applicable law, with respect to itself and
its revenues and assets (irrespective of their use or intended use),
all immunity on the grounds of sovereignty or other similar grounds
from (i) suit, (ii) jurisdiction of any court, (iii) relief by way of
injunction, order for specific performance or for recovery of
property, (iv) attachment of its assets (whether before or after
judgment) and (v) execution or enforcement of any judgment to which it
or its revenues or assets might otherwise be entitled in any
Proceedings in the courts of any jurisdiction and irrevocably agrees,
to the extent permitted by applicable law, that it will not claim any
such immunity in any Proceedings.
14. DEFINITIONS
As used in this Agreement: --
"ADDITIONAL TERMINATION EVENT" has the meaning specified in Section
5(b).
"AFFECTED PARTY" has the meaning specified in Section 5(b).
"AFFECTED TRANSACTIONS" means (a) with respect to any Termination
Event consisting of an Illegality, Tax Event or Tax Event Upon merger,
all Transactions affected by the occurrence of such Termination Event
and (b) with respect to any other Termination Event, all Transactions.
"AFFILIATE" means, subject to the Schedule, in relation to any person,
any entity controlled, directly or indirectly, by the person, any
entity that controls, directly or indirectly, the person or any entity
directly or indirectly under common control with the person. For this
purpose, "control" of any entity or person means ownership of a
majority of the voting power of the entity or person.
"APPLICABLE RATE" means: --
(a) in respect of obligations payable or deliverable (for which would
have been but for Section 2(a)(iii)) by a Defaulting Party, the
Default Rate;
(b) in respect of any obligation to pay any amount under Section 6(e)
of either party from and after the date (determined in accordance with
Section 6(d)(ii)) on which that amount is payable, the Default Rate;
(c) in respect of all other obligations payable or deliverable (or
which would have been but for Section 2(a)(iii)) by a Non-defaulting
Party, the Non-default Rate; and
(d) in all other cases, the Terminate Rate.
"BURDENED PARTY" has the meaning specified in Section 5(b).
"CHANGE IN TAX LAW" means the enactment, promulgation, execution or
ratification of, or any change in or amendment to, any law (or in the
application or official interpretation of any law) that occurs on or
after the date on which the relevant Transaction is entered into.
<PAGE>
"CONSENT" includes a consent, approval, action, authorisation,
exemption, notice, filing, registration or exchange control consent.
"CREDIT EVENT UPON MERGER" has the meaning specified in Section 5(b).
"CREDIT SUPPORT DOCUMENT" means any agreement or instrument that is
specified as such in this Agreement.
"CREDIT SUPPORT PROVIDER" has the meaning specified in the Schedule.
"DEFAULT RATE" means a rate per annum equal to the cost (without proof
or evidence of any actual cost) to the relevant payee (as certified by
it) if it were to fund or of funding the relevant amount plus 1% per
annum.
14<PAGE>
"DEFAULTING PARTY" has the meaning specified in Section 6(a).
"EARLY TERMINATION DATE" means the date determined in accordance with
Section 6(a) or 6(b)(iv).
"EVENT OF DEFAULT" has the meaning specified in Section 5(a) and, if
applicable, in the Schedule.
"ILLEGALITY" has the meaning specified in Section 5(b).
"INDEMNIFIABLE TAX" means any Tax other than a Tax that would not be
imposed in respect of a payment under this Agreement but for a present
or former connection between the jurisdiction of the government or
taxation authority imposing such Tax and the recipient of such payment
or a person related to such recipient (including, without limitation,
a connection arising from such recipient or related person being or
having been a citizen or resident of such jurisdiction, or being or
having been organised, present or engaged in a trade or business in
such jurisdiction, or having or having had a permanent establishment
or fixed place of business in such jurisdiction, but excluding a
connection arising solely from such recipient or related person having
executed, delivered, performed its obligations or received a payment
under, or enforced, this Agreement or a Credit Support Document).
"LAW" includes any treaty, law, rule or regulation (as modified, in
the case of tax matters, by the practice of any relevant governmental
revenue authority) and "LAWFUL" and "UNLAWFUL" will be construed
accordingly.
"LOCAL BUSINESS DAY" means, subject to the Schedule, a day on which
commercial banks are open for business (including dealings in foreign
exchange and foreign currency deposits) (a) in relation to any
obligation under Section 2(a)(i), in the place(s) specified in the
relevant Confirmation or, if not so specified, as otherwise agreed by
the parties in writing or determined pursuant to provisions contained,
or incorporated by reference, in this Agreement, (b) in relation to
any other payment, in the place where the relevant account is located
and, if different, in the principal financial centre, if any, of the
currency of such payment, (c) in relation to any notice or other
communication, including notice contemplated under Section 5(a)(i), in
the city specified in the address for notice provided by the recipient
and, in the case of a notice contemplated by Section 2(b), in the
place where the relevant new account is to be located and (d) in
relation to Section 5(a)(v)(2), in the relevant locations for
performance with respect to such Specified Transaction.
"LOSS" means, with respect to this Agreement or one or more Terminated
Transactions, as the case may be, and a party, the Termination
Currency Equivalent of an amount that party reasonably determines in
good faith to be its total losses and costs (or gain, in which case
expressed as a negative number) in connection with this Agreement or
that Terminated Transaction or group of Terminated Transactions, as
the case may be, including any loss of bargain, cost of funding or, at
the election of such party but without duplication, loss or cost
incurred as a result of its terminating, liquidating, obtaining or
reestablishing any hedge or related trading position (or any gain
resulting from any of them). Loss includes losses and costs (or
gains) in respect of any payment or delivery required to have been
made (assuming satisfaction of each applicable condition precedent) on
or before the relevant Early Termination Date and not made, except, so
as to avoid duplication, if Section 6(e)(i)(1) or (3) or
6(e)(ii)(2)(A) applies. Loss does not include a party's legal fees
and out-of-pocket expenses referred to under Section 11. A party will<PAGE>
determine its Loss as of the relevant Early Termination Date, or, if
that is not reasonably practicable, as of the earliest date thereafter
as is reasonably practicable. A party may (but need not) determine
its Loss by reference to quotations of relevant rates or prices from
one or more leading dealers in the relevant markets.
"MARKET QUOTATION" means, with respect to one or more Terminated
Transactions and a party making the determination, an amount
determined on the basis of quotations from Reference Market-makers.
Each quotation will be for an amount, if any, that would be paid to
such party (expressed as a negative number) or by such party
(expressed as a positive number) in consideration of any agreement
between such party (taking into account any existing Credit Support
Document with respect to the obligations of such party) and the
quoting Reference Market-maker to enter into a transaction (the
"Replacement Transaction") that would have the effect of preserving
for such party the economic equivalent of any payment or delivery
(whether the underlying obligation was absolute or contingent and
assuming the satisfaction of each applicable condition precedent) by
the parties under Section 2(a)(i) in respect of such Terminated
Transaction or group of Terminated Transactions that would, but for
the occurrence of the relevant Early Termination Date, have
been required after that date. For this purpose, Unpaid Amounts in
respect of the Terminated Transaction or group of Terminated
Transactions are to be excluded but, without limitation, any payment
or delivery that would, but for the relevant Early Termination Date,
have been required (assuming satisfaction of each applicable condition
15<PAGE>
precedent) after that Early Termination Date is to be included. The
Replacement Transaction would be subject to such documentation as such
party and the Reference Market-maker may, in good faith, agree. The
party making the determination (or its agent) will request each
Reference Market-maker to provide its quotation to the extent
reasonably practicable as of the same day and time (without regard to
different time zones) on or as soon as reasonably practicable after
the relevant Early Termination Date. The day and time as of which
those quotations are to be obtained will be selected in good faith by
the party obliged to make a determination under Section 6(e), and, if
each party is so obliged, after consultation with the other. If more
than three quotations are provided, the Market Quotation will be the
arithmetic mean of the quotations, without regard to the quotations
having the highest and lowest values. If exactly three such
quotations are provided, the Market Quotation will be the quotation
remaining after disregarding the highest and lowest quotations. For
this purpose, if more than one quotation has the same highest value or
lowest value, then one of such quotations shall be disregarded. If
fewer than three quotations are provided, it will be deemed that the
Market Quotation in respect of such Terminated Transaction or group of
Terminated Transactions cannot be determined.
"NON-DEFAULT RATE" means a rate per annum equal to the cost (without
proof or evidence of any actual cost) to the Non-defaulting Party (as
certified by it) if it were to fund the relevant amount.
"NON-DEFAULTING PARTY" has the meaning specified in Section 6(a).
"OFFICE" means a branch or office of a party, which may be such
party's head or home office.
"POTENTIAL EVENT OF DEFAULT" means any event which, with the giving of
notice or the lapse of time or both, would constitute an Event of
Default.
"REFERENCE MARKET-MAKERS" means four leading dealers in the relevant
market selected by the party determining a Market Quotation in good
faith (a) from among dealers of the highest credit standing which
satisfy all the criteria that such party applies generally at the time
in deciding whether to offer or to make an extension of credit and (b)
to the extent practicable, from among such dealers having an office in
the same city.
"RELEVANT JURISDICTION" means, with respect to a party, the
jurisdictions (a) in which the party is incorporated, organized,
managed and controlled or considered to have its seat, (b) where an
Office through which the party is acting for purposes of this
Agreement is located, (c) in which the party executes this Agreement
and (d) in relation to any payment, from or through which such payment
is made.
"SCHEDULED PAYMENT DATE" means a date on which a payment or delivery
is to be made under Section 2(a)(i) with respect to a Transaction.
"SET-OFF" means set-off, offset, combination of accounts, right of
retention or withholding or similar right or requirement to which the
payer or an amount under Section 6 is entitled or subject (whether
arising under this Agreement, another contract, applicable law or
otherwise) that is exercised by, or imposed on, such payer.
"SETTLEMENT AMOUNT" means, with respect to a party and any Early
Termination Date, the sum of:
(a) the Termination Currency Equivalent of the Market Quotations
(whether positive or negative) for each Terminated Transaction or
group of Terminated Transactions for which a Market Quotation is
determined; and
(b) such party's Loss (whether positive or negative and without
reference to any Unpaid Amounts) for each Terminated Transaction or
group of Terminated Transactions for which a Market Quotation cannot
be determined or would not (in the reasonable belief of the party
making the determination) produce a commercially reasonable result.
"SPECIFIED ENTITY" has the meaning specified in the Schedule.
16<PAGE>
"SPECIFIED INDEBTEDNESS" means, subject to the Schedule, any
obligation (whether present or future, contingent or otherwise, as
principal or surety or otherwise) in respect of borrowed money.
"SPECIFIED TRANSACTION" means, subject to the Schedule, (a) any
transaction (including an agreement with respect thereto) now existing
or hereafter entered into between one party to this Agreement (or any
Credit Support Provider of such party or any applicable Specified
Entity of such party) and the other party to this Agreement (or any
Credit Support Provider of such other party or any applicable
Specified Entity of such other party) which is a rate swap
transaction, basic swap, forward rate transaction, commodity swap,
commodity option, equity or equity index swap, equity or equity index
option, bond option, interest rate option, foreign exchange
transaction, cap transaction, floor transaction, collar transaction,
currency swap transaction, cross-currency rate swap transaction,
currency option or any other similar transaction (including any option
with respect to any of these transactions), (b) any combination of
these transactions and (c) any other transaction identified as a
Specified Transaction in this Agreement or the relevant confirmation.
"STAMP TAX" means any stamp, registration, documentation or similar
tax.
"TAX" means any present or future tax, levy, impost, duty, charge,
assessment or fee of any nature (including interest, penalties and
additions thereto) that is imposed by any government or other taxing
authority in respect of any payment under this Agreement other than a
stamp, registration, documentation or similar tax.
"TAX EVENT" has the meaning specified in Section 5(b).
"TAX EVENT UPON MERGER" has the meaning specified in Section 5(b).
"TERMINATED TRANSACTIONS" means with respect to any Early Termination
Date (a) if resulting from a Termination Event, all Affected
Transactions and (b) if resulting from an Event of Default, all
Transactions (in either case) in effect immediately before the
effectiveness of the notice designating that Early Termination Date
(or, if "Automatic Early Termination" applies, immediately before that
Early Termination Date).
"TERMINATION CURRENCY" has the meaning specified in the Schedule.
"TERMINATION CURRENCY EQUIVALENT" means, in respect of any amount
denominated in the Termination Currency, such Termination Currency
amount and, in respect of any amount denominated in a currency other
than the Termination Currency (the "Other Currency"), the amount in
the Termination Currency determined by the party making the relevant
determination as being required to purchase such amount of such Other
Currency as at the relevant Early Termination Date, or, if the
relevant Market Quotation or Loss (as the case may be), is determined
as of a later date, that later date, with the Termination Currency at
the rate equal to the spot exchange rate of the foreign exchange agent
(selected as provided below) for the purchase of such Other Currency
with the Termination Currency at or about 11:00 a.m. (in the city in
which such foreign exchange agent is located) on such date as would be
customary for the determination of such a rate for the purchase of
such Other Currency for value on the relevant Early Termination Date
or that later date. The foreign exchange agent will, if only one
party is obliged to make a determination under Section 6(e), be
selected in good faith by that party and otherwise will be agreed by
the parties.
"TERMINATION EVENT" means an Illegality, a Tax Event or a Tax Event
Upon Merger or, if specified to be applicable, a Credit Event Upon
Merger or an Additional Termination Event.
"TERMINATION RATE" means a rate per annum equal to the arithmetic mean
of the cost (without proof or evidence of any actual cost) to each
party (as certified by such party) if it were to fund or of funding
such amounts.
"UNPAID AMOUNTS" owing to any party means, with respect to an Early
Termination Date, the aggregate of (a) in respect of all Terminated
Transactions, the amounts that became payable (or that would have
become payable but for Section 2(a)(iii) to such party under Section
2(a)(i) on or prior to such Early Termination Date and which remain
unpaid as at such Early Termination Date and (b) in respect of each
Terminated Transaction, for each obligation under Section 2(a)(i)
which was (or would have been but for Section 2(a)(iii) required to be
settled by delivery to such party on or prior to such Early
Termination Date and which has not been so settled as at such Early
17<PAGE>
Termination Date, an amount equal to the fair market value of that
which was (or would have been) required to be delivered as of the
originally scheduled date for delivery, in each case together with (to
the extent permitted under applicable law) interest, in the currency
of such amounts, from (and including) the date such amounts or
obligations were or would have been required to have been paid or
performed to (but excluding) such Early Termination Date, at the
Applicable Rate. Such amounts of interest will be calculated on the
basis of daily compounding and the actual number of days elapsed. The
fair market value of any obligation referred to in clause (b) above
shall be reasonably determined by the party obliged to make the
determination under Section 6(e) or, if each party is so obliged, it
shall be the average of the Termination Currency Equivalents of the
fair market values reasonably determined by both parties.
IN WITNESS WHEREOF the parties have executed this document on the
respective dates specified below with effect from the date specified
on the first page of this document.
SUNTRUST BANK, ATLANTA PAMECO CORPORATION
- --------------------------- ---------------------
(Name of Party) (Name of Party)
By: /s/ Fred D. Woolf By: /s/ Mary M. McCulley
Name: Fred D. Woolf Name: Mary M. McCulley
Title: Vice President Title: Treasurer
Date: 12/8/98 Date: October 15, 1998
By: /s/ Melanie Walter
Name: Melanie Walter
Title: A.V.P.
Date:
<PAGE>
SCHEDULE TO THE
ISDA MASTER AGREEMENT
DATED AS OF OCTOBER 15, 1998, BETWEEN
SUNTRUST BANK, ATLANTA
("PARTY A")
AND
PAMECO CORPORATION
("PARTY B")
Part 1
DEFINITIONS
1. "Affiliate" shall have the meaning assigned to such term in
Section 14 of this Agreement.
2. "Calculation Agent" shall mean Party A.
3. "Specified Entity" shall mean for the purposes of Sections
5(a)(v), (vi), and (vii), and Section 5(b)(iv) of this Agreement,
in the case of Party A, not applicable, and in the case of Party
B, any subsidiary of Party B.
4. "Specified Indebtedness" shall mean, for purposes of Section
5(a)(vi) of this Agreement, any obligation (whether present,
future, contingent, or otherwise, as principal, surety, or
otherwise) in respect of borrowed money or relating to the
payment or delivery of funds or other property (including,
without limitation, securities or any form of collateral), but
shall not include indebtedness in respect of deposits received.
5. "Specified Transaction" shall have the meaning assigned to such
term in Section 14 of this Agreement.
6. "Tangible Net Worth" shall mean, at any time with respect to any
entity, the excess of its total assets over its total
liabilities, total assets and total liabilities each to be
determined in accordance with generally accepted accounting
principles in the country in which it is organized, EXCLUDING,
HOWEVER, from the determination of total assets: (i) goodwill,
organizational expenses, research and development expenses,
trademarks, trade names, copyrights, patents, patent
applications, licenses and right in any thereof, and other
similar intangibles, (ii) all prepaid expenses, deferred charges,
or unamortized debt discount and expense, (iii) all reserves
carried and not deducted from assets, (iv) treasury stock and
capital contributions to, or investments in, any subsidiary,
(v) securities which are not readily marketable, (vi) cash held
in a sinking or other analogous fund established for the purpose
of redemption, retirement, or prepayment of capital stock or
indebtedness for borrowed money, and (vii) any items not included
in clauses (i) through (vi) above which are treated as
intangibles in conformity with such generally accepted accounting
principles.
<PAGE>
7. "Termination Currency" shall mean United States Dollars.
8. "Threshold Amount" shall mean, for purposes of Section 5(a)(vi)
of this Agreement, (A) with respect to Party A, an amount equal
to five percent (5%) of Party A's Tangible Net Worth, and
(B) with respect to Party B, an amount equal to $1,000,000 (or
the equivalent thereof in any other currencies).
19<PAGE>
Part 2
REPRESENTATIONS
1. The "Accuracy of Specified Information" representations set forth
in Section 3(d) shall apply to the information required to be
delivered under Park 3 of this Schedule in respect of the party
delivering said information.
2. The following paragraph is added as Section 3(g) of the
Agreement:
"(g) ELIGIBLE SWAP PARTICIPANT. It is an "eligible swap
participant" with the meaning of 17 C.F.R. sec. 35.1(b)(2)."
Part 3
AGREEMENTS
1. DOCUMENTS TO BE DELIVERED. For purposes of Section 4(a) of this
Agreement, each party agrees to deliver the following documents
as applicable:
(a) Certified copies of all documents evidencing necessary
corporate and other authorizations and approvals with respect
to the execution, delivery and performance by the party of this
Agreement and any Credit Support Document.
Party required to deliver: Party B
Date by which to be delivered: Upon execution of this
Agreement
Covered by Section 3(d) Representation: Yes
(b) An incumbency certificate of an authorized officer of the party
certifying the names, true signatures and authority of the officers
of the party signing this Agreement and any Credit Support Document.
Party required to deliver: Party B
Date by which to be delivered: Upon execution of this
Agreement
Covered by Section 3(d) Representation: Yes
(c) Such other document as the other party may reasonable request in
connection with each Transaction.
Party required to deliver: Party B
Date by which to be delivered: Promptly upon request
Covered by Section 3(d) Representation: Yes
(d) Such other written information representing the condition or
operations, financial or otherwise, of Party B as Party A may
reasonably request from time to time.
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Party required to deliver: Party B
Date by which to be delivered: Promptly upon request
Covered by Section 3(d) Representation: Yes
Part 4
TERMINATION PROVISIONS
1. CROSS DEFAULT. The "Cross Default" provisions of Section 5(a)(vi)
to Party A and Party B; PROVIDED, HOWEVER, that clause (2) of such
Section 5(a)(vi) shall be amended to read as follows:
"(2) a default by such party, such Credit Support Provider or
such Specified Entity (individually or collectively) in making
one or more payments on the due date thereof, or in performing
any other delivery obligation on the date required, in an aggregate
amount of not less than an applicable Threshold Amount (or its
U.S. dollar equivalent in the case or payment or other obligations
not denominated in U.S. dollars or other delivery obligations)
under such agreements or instruments (after giving effect to any
applicable notice requirement);"
2. CREDIT EVENT UPON MERGER. The "Credit Event Upon Merger" provisions of
Section 5(b)(iv) shall apply to each of Party A and Party B.
3. AUTOMATIC EARLY TERMINATION. The "Automatic Early Termination" provision
of Section 6(a) shall not apply to Party A and Party B.
4. PAYMENTS ON EARLY TERMINATION. For purposes of Section 6(e) of this
Agreement, Second Method and Market Quotation shall apply.
5. ADDITIONAL TERMINATION EVENT shall mean, without limiting the generality
of the foregoing with respect to Party B, if the indebtedness under the
Loan Agreement, as defined in the Confirmation, is (for whatever reason,
in whatever manner) partially or fully paid or discharged, then it shall
be an Event of Default, if Party A so notifies Party B in writing of
such a default, if the Financial Covenants or minimum ratios as defined
in the indebtedness of the Loan Agreement are not continually
maintained by Party B until the Termination Date of the Transaction.
6. Notwithstanding the foregoing, there shall be no Event of Default nor
Additional Termination Event by Party B if Party A, or any lending
officer of Party A, grants Party B a written waiver as to any term
or terms of the Loan Agreement.
Part 5
MISCELLANEOUS
1. NOTICES. For purposes of Section 12 of the Agreement:
(a) The address for notice or communication to Party A is:
21
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SunTrust Equitable Securities Corporation
Financial Risk Management, Operations
303 Peachtree Street, 23rd Floor
Center Code 3913
Atlanta, GA 30308
404-575-2696 (phone)
404-658-4835 (fax)
(b) The address for notice or communication to Party B is:
Ms. Mary McCulley
Treasurer
Pameco Corporation
1000 Center Place
Norcross, GA 30093
770-798-0700 (phone)
770-798-0618 (fax)
2. GOVERNING LAW. Section 13(a) of the Agreement is hereby restated
as follows:
"(a) Governing Law. This Agreement will be governed by and
construed in accordance with the laws of the State of New York
without reference to choice of law doctrine."
3. JURISDICTION. Section 13(b)(i) of the Agreement is hereby restated as
follows:
"(i) submits to the nonexclusive jurisdiction of the courts of
the State of Georgia and the United States District Court located
in Atlanta, Georgia; and"
4. PROCESS AGENT. Process Agent shall not apply to the Agreement.
5. OFFICES. The provisions of Section 10(a) shall not apply to the
Agreement.
6. MULTIBRANCH PARTY. For purposes of Section 10, neither Party A nor
Party B is a Multibranch Party.
7. CREDIT SUPPORT PROVIDER shall mean with respect to Party B, none.
8. CREDIT SUPPORT DOCUMENT shall mean with respect to Party B, none.
Part 6
ADDITIONAL AGREEMENTS
1. JURY TRIAL. Each party hereby waives its respective right to jury
trial with respect to any litigation arising under, or in connection
with, this Agreement or any Confirmation.
2. SET OFF. Notwithstanding anything contained in the Agreement to the
contrary, in addition to and not in limitation of any rights of offset
that a party may have under applicable law, in the event of a designation
of an Early Termination Date as a result of an Event of Default, if the
Defaulting Party would be owned amounts hereunder in respect of the
Terminated Transaction as a result of such designation, the Non-
Defaulting Party shall have the right to setoff and apply such amount
22
<PAGE>
against any indebtedness or other financial obligation, whether
matured or unmatured, of the Defaulting Party to the Non-Defaulting
Party.
3. By signing this Schedule, Party B acknowledges that it has received
and understands the SunTrust Bank, Atlanta, "Terms of Dealing for
OTC Risk Management Transactions' and the "Risk Disclosure
Statement for OTC Risk Management Transactions."
Please confirm your agreement to the terms of the foregoing Schedule by
signing below.
SUNTRUST BANK, ATLANTA PAMECO CORPORATION
By: /s/ Fred D. Woolf By: /s/ Mary M. McCulley
Name: Fred D. Woolf Name: Mary M. McCulley
Title: Vice President Title: Treasurer
By: /s/ Melanie Walter
Name: Melanie Walter
Title: A.V.P.
23
<PAGE>
<TABLE> <S> <C>
<ARTICLE> 5
<LEGEND>
THIS SCHEDULE CONTAINS SUMMARY FINANCIAL INFORMATION EXTRACTED FROM THE
FINANCIAL STATEMENTS OF PAMECO CORPORATION FOR THE NINE MONTHS ENDED
NOVEMBER 30, 1998, AND IS QUALIFIED IN ITS ENTIRETY BY REFERENCE TO SUCH
FINANCIAL STATEMENTS
</LEGEND>
<CIK> 0001036283
<NAME> PAMECO CORPORATION
<MULTIPLIER> 1,000
<S> <C>
<PERIOD-TYPE> 9-MOS
<FISCAL-YEAR-END> FEB-28-1999
<PERIOD-START> MAR-01-1998
<PERIOD-END> NOV-30-1998
<CASH> 162
<SECURITIES> 0
<RECEIVABLES> 30,536
<ALLOWANCES> 3,992
<INVENTORY> 142,375
<CURRENT-ASSETS> 170,685
<PP&E> 22,345
<DEPRECIATION> 5,650
<TOTAL-ASSETS> 244,821
<CURRENT-LIABILITIES> 102,435
<BONDS> 0
0
0
<COMMON> 88
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<TOTAL-LIABILITY-AND-EQUITY> 244,821
<SALES> 503,554
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<CGS> 383,529
<TOTAL-COSTS> 481,251
<OTHER-EXPENSES> 2,799
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<EXTRAORDINARY> 0
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<NET-INCOME> 10,298
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