<PAGE>
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, 1999
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
of incorporation or identification
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__
-
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, 5,947,329 shares and Class B Common Stock,
$.01 par value - 3,272,929 shares, both as of December 31, 1999.
<PAGE>
PAMECO CORPORATION
INDEX
<TABLE>
PART I. FINANCIAL INFORMATION
<S> <C>
Item 1. Financial Statements (Unaudited)
Condensed Consolidated Balance Sheet-November 30, 1999
and February 28, 1999 3
Condensed Consolidated Statement of Operations-Three
Months ended November 30, 1999 and 1998 4
Condensed Consolidated Statement of Operations-Nine
Months ended November 30, 1999 and 1998 4
Condensed Consolidated Statement of Cash Flow-Nine
Months ended November 30, 1999 and 1998 5
Notes to Condensed Consolidated Financial Statements 6
Item 2. Management's Discussion and Analysis of Financial
Condition and Results of Operations 8
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
</TABLE>
2
<PAGE>
PAMECO CORPORATION
CONDENSED CONSOLIDATED BALANCE SHEET
(IN THOUSANDS)
<TABLE>
<CAPTION>
November 30, February 28,
1999 1999
-------------- -------------
<S> <C> <C>
Assets
Current assets:
Cash and cash equivalents $ 128 $ 148
Accounts receivable, less allowance of $ 6,006 at November 30, 1999
and $6,210 at February 28, 1999 32,961 35,507
Inventories, net 117,205 157,621
Prepaid expenses and other current assets 1,904 4,149
-------------- -------------
Total current assets 152,198 197,425
Property and equipment, net 16,068 15,694
Excess of cost over acquired net assets, net 43,699 44,948
Other assets 831 682
Deferred income tax assets 15,139 15,139
-------------- -------------
Total assets $227,935 $273,888
============== =============
Liabilities and shareholders' equity
Current liabilities:
Accounts payable $ 61,085 $ 68,521
Accrued compensation and withholdings 4,772 4,661
Other accrued liabilities and expenses 18,085 23,148
Current portion of capital lease obligations and other debt 251 3,575
-------------- -------------
Total current liabilities 84,193 99,905
Long-term liabilities:
Debt 70,602 95,608
Warranty reserves and other 5,725 3,675
-------------- -------------
Total long-term liabilities 76,327 99,283
Excess of acquired net assets over cost, net 3,889 4,160
Shareholders' equity:
Class A Common stock, $.01 par value-authorized 40,000 shares; 5,947 and 5,226
shares issued and outstanding at November 30, 1999 and February 28, 1999, respectively 60 53
Class B Common stock, $.01 par value-authorized 20,000 shares; 3,273 and 3,831
shares issued and outstanding at November 30, 1999 and February 28, 1999, respectively 33 38
Capital in excess of par value 39,514 38,965
Retained earnings 24,722 31,884
-------------- -------------
64,329 70,940
Note receivable from shareholder (400) (400)
Deferred compensation cost (403) ---
Total shareholders' equity 63,526 70,540
-------------- -------------
Total liabilities and shareholders' equity $227,935 $273,888
============== =============
</TABLE>
See notes to condensed consolidated financial statements.
3
<PAGE>
PAMECO CORPORATION
CONDENSED CONSOLIDATED STATEMENT OF OPERATIONS
(In thousands, except per share amounts)
<TABLE>
<CAPTION>
Three Months Ended Nine Months Ended
November 30 November 30
-------------------------- -------------------------
1999 1998 1999 1998
----------- ----------- ---------- -----------
<S> <C> <C> <C> <C>
Net sales $135,991 $148,068 $502,832 $503,554
Costs and expenses:
Cost of products sold 103,163 112,575 388,818 383,529
Warehousing, selling, and administrative expenses 37,382 33,267 113,392 97,889
Severance 35 --- 633 ---
Restructuring 881 --- 3,585 ---
Amortization of excess of cost over acquired net assets 281 341 855 751
Amortization of excess of acquired net assets over cost (303) (306) (918) (918)
----------- ----------- ---------- -----------
141,439 145,877 506,365 481,251
----------- ----------- ---------- -----------
Operating (loss) earnings (5,448) 2,191 (3,533) 22,303
Other expenses:
Interest expense, net (1,861) (1,154) (5,431) (3,462)
Discount on sale of accounts receivable (559) (1,050) (2,418) (2,846)
Other income/(expense), net (403) (12) (522) 47
----------- ----------- ---------- -----------
(Loss ) income before income taxes (8,271) (25) (11,904) 16,042
(Benefit) provision for income taxes (3,129) (127) (4,742) 5,744
----------- ----------- ---------- -----------
Net (loss) income $ (5,142) $ 102 $ (7,162) $ 10,298
=========== =========== ========== ===========
Basic (loss) earnings per share $(0.56) $ 0.01 $ (0.78) $ 1.17
=========== =========== ========== ===========
Basic weighted average shares outstanding 9,216 8,818 9,170 8,780
=========== =========== ========== ===========
Diluted (loss) earnings per share $ (0.56) $ 0.01 $ (0.78) $ 1.13
=========== =========== ========== ===========
Diluted weighted average shares outstanding 9,216 9,106 9,170 9,132
=========== =========== ========== ===========
</TABLE>
See notes to condensed consolidated financial statements.
4
<PAGE>
PAMECO CORPORATION
CONSOLIDATED STATEMENT OF CASH FLOW
(In thousands)
<TABLE>
<CAPTION>
Nine Months Ended
November 30
-----------------------------------------------
1999 1998
----------------- ----------------
<S> <C> <C>
Cash flows from operating activities
Net (loss) income $ (7,162) $ 10,298
Adjustments to reconcile net (loss) income to net cash provided
by operating activities:
Amortization of excess of cost over acquired net assets 855 751
Amortization of excess of acquired net assets over cost (918) (918)
Depreciation 2,741 1,622
Loss (gain) on sale of property and equipment 52 (52)
Deferred compensation costs (403) ---
Changes in operating assets and liabilities net of
assets acquired and liabilities assumed:
Accounts receivable 2,546 18,231
Inventories, prepaid expenses and other assets 43,158 (1,291)
Accounts payable and accrued liabilities (11,774) (22,244)
----------------- ----------------
Net cash provided by operating activities 29,095 6,397
Cash flows from investing activities
Purchases of property and equipment (3,409) (5,939)
Proceeds from sales of property and equipment 23 202
Business acquisitions --- (41,069)
----------------- -----------------
Net cash used in investing activities (3,386) (46,806)
Cash flows from financing activities
Borrowings (repayments) on working capital facility 3,724 (10,034)
Borrowings on term debt --- 51,075
Repayments on term debt (29,756) (1,075)
Payments on capital lease obligations and other debt (248) (93)
Proceeds from exercise of stock options and warrants 551 556
----------------- -----------------
Net cash (used in) provided by financing activities (25,729) 40,429
----------------- ----------------
Net (decrease) increase in cash and cash equivalents (20) 20
Cash and cash equivalents at beginning of year 148 142
----------------- ----------------
Cash and cash equivalents at end of period $ 128 $ 162
================= ================
</TABLE>
See notes to consolidated financial statements.
5
<PAGE>
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
(UNAUDITED)
November 30, 1999
1. BASIS OF PRESENTATION
The accompanying unaudited Condensed Consolidated Financial Statements have
been prepared in accordance with Generally Accepted Accounting Principles for
interim financial information and with the instructions to Form 10-Q and Article
10 of Regulation S-X. Accordingly, they do not include all of the information
and footnotes required by Generally Accepted Accounting Principles for complete
financial statements. In the opinion of management, all adjustments (consisting
of normal recurring accruals) considered necessary for a fair presentation have
been included. Operating results for the three-month period ended November 30,
1999, are not necessarily indicative of the results that may be expected for the
year ending February 29, 2000. 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 28,1999.
The balance sheet at February 28, 1999, 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,
1999 1998 1999 1998
--------- --------- --------- ---------
<S> <C> <C> <C> <C>
Numerator:
Net (loss) income applicable to common shareholders (5,142) 102 (7,162) 10,298
======== ======= ======== ========
Denominator:
Denominator for basic (loss) earnings per share-weighted average 9,216 8,818 9,170 8,780
shares
Effect of dilutive securities:
Stock Options _ 288 _ 352
-------- ------- -------- --------
Denominator for diluted (loss) earnings per share-adjusted weighted-
average shares and assumed conversions 9,216 9,106 9,170 9,132
======== ======= ======== ========
Basic (loss) earnings per share $ (0.56) $ 0.01 $ (0.78) $ 1.17
======== ======= ======== ========
Diluted (loss) earnings per share $ (0.56) $ 0.01 $ (0.78) $ 1.13
======== ======= ======== ========
</TABLE>
6
<PAGE>
The computation of diluted weighted average shares for the three and nine
months ended November 30, 1999, excludes 834,919 shares underlying stock
options that are antidulitive based on the average market price for that
period and also as the Company is reporting a loss. The computation of
diluted weighted average shares for the three and nine months ended
November 30, 1998, excludes 541,250 and 47,000 shares underlying stock
options, respectively, that are antidilutive based on the average market
price for that period.
4. CONTINGENCIES
Richtree Realty sent a demand letter seeking reimbursement for expenses
associated with ongoing environmental investigation and remediation of a portion
of property located at 730 Grand Ave., Ridgefield, Bergen County, NJ. Melchior,
Armstrong Dessau Inc., a predecessor of Pameco manufactured air conditioning
units at this property prior to selling to Richtree. They asserted a claim for
$191,159.25 in reimbursement for the environmental investigation and soils
remediation, and offered to settle in December 1999 for $150,000 and direct
assumption by Pameco of all future pit expenses. The Company believes the claim
is without merit and intends to defend vigorously.
Two former employees allege the Company has breached the terms of an
employment agreement. Pameco has filed countersuit. This case has been removed
to the Federal District Court for the Southern District of FL. The court has set
pre-trial conference and trial dates. The Company believes the claim is without
merit and intends to defend vigorously.
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.
5. RESTRUCTURING
During the quarter ended August 31, 1999, the Company began an extensive
review of its unprofitable branches. As of November 30, 1999, the Company has
determined that 43 branches are either (1) located in a market that is already
sufficiently serviced by a Pameco branch or (2) located in small markets that
the Company could not service efficiently enough to be profitable, and should be
closed. As of November 30, 1999, the Company had closed 19 of these branches.
The remaining closings should be completed by February 29, 2000.
By closing or consolidating branches in these markets, the Company seeks
to reduce its inventory level and operating expenses, without significantly
reducing its net sales. The Company does not expect the demographics of these
markets to change significantly enough within the next several years for these
branches to become profitable.
In connection with the closure of these branches, the Company recorded a
$4.2 million restructuring and severance charge consisting of the following
components: (1) lease and other facility expenses of $1.7 million, (2)
7
<PAGE>
the write off of $549,000 of fixed assets no longer in use, (3) severance
payments of $633,000, and (4) an asset impairment charge of $1.4 million for the
write off of goodwill associated with certain branches to be closed.
ITEM 2. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS
OF OPERATIONS
The following table sets forth the percentage relationship of certain statement
of operations data to net sales for the periods indicated:
<TABLE>
<CAPTION>
Three Months Ended Nine Months Ended
-----------------------------------------------------------------
November 30 November 30
1999 1998 1999 1998
-------- ---------- -------- ----------
<S> <C> <C> <C> <C>
Net sales 100.0 % 100.0 % 100.0 % 100.0 %
Cost of products sold 75.9 76.0 77.3 76.2
--------- ---------- -------- ----------
Gross profit 24.1 24.0 22.7 23.8
Warehousing, selling, and administrative expenses 27.5 22.5 22.6 19.4
Severance 0.0 - 0.1 -
Restructuring 0.6 - 0.7 -
Amortization of excess of cost over acquired net 0.2 0.2 0.2 0.2
assets
Amortization of excess of acquired net assets over (0.2) (0.2) (0.2) (0.2)
cost
-------- ---------- -------- ----------
Operating (loss) earnings (4.0) 1.5 (0.7) 4.4
Other expense:
Interest expense, net 1.4 0.8 1.1 0.7
Discount on sale of accounts receivable 0.4 0.7 0.5 0.5
Other Income / (expense), net 0.3 0.0 0.1 0.0
-------- ---------- -------- ----------
(Loss) income before income taxes (6.1) (0.0) (2.4) 3.2
(Benefit) Provision for income taxes (2.3) (0.1) (1.0) 1.0
-------- ---------- -------- ----------
Net(loss) income (3.8) % 0.1 % (1.4) % 2.2 %
======== ========== ======== ==========
</TABLE>
RESULTS OF OPERATIONS
QUARTER ENDED NOVEMBER 30, 1999, AND QUARTER ENDED NOVEMBER 30, 1998
Net sales for the quarter ended November 30, 1999, decreased 8.2% to $136.0
million from $148.1 million for the same period in 1998. Third quarter same
store net sales decreased 9.2% as compared to the same period in 1998. The net
sales decline cannot be attributed to any single market factor. The decline was
similar across all regions of the country and included broad product categories,
which affected a broad range of product segments and vendor lines. The decline
in net sales was due primarily to supply chain issues that affected product
availability. The Company also continued to reduce its inventory levels in an
effort to manage working capital more effectively, which adversely impacted net
sales volume. For the quarter ended November 30, 1999, working capital was
reduced by $10.0 million and long term debt was reduced by $6.6 million.
Gross profit for the quarter ended November 30, 1999, decreased 7.6% to
$32.8 million from $35.5 million for the same period in 1998. The gross profit
percentage for the quarter ended November 30, 1999, increased to 24.1% from
24.0% for the same period in 1998. There has been a reduction in the inventory
reserves due to the Company continuously managing its inventory levels. These
adjustments positively impacted the gross margin percentage. Without the effect
of these adjustments, the gross profit percentage would have been 23.1% for the
three months ended November 30, 1999.
Warehousing, selling, and administrative expenses for the quarter ended
November 30, 1999, increased 12.3% to $37.4 million from $33.3 million for the
same period in 1998. The normal operating expenses of the 15 branches acquired
since November 30, 1998, contributed approximately 48.1% of the additional
expense. Of the
8
<PAGE>
remaining expenses, a significant portion is attributable to the consulting
costs associated with the Company's process of enhancing its key business
processes. Warehousing costs have also increased due to the cost of the
Company's strategic re-deployment of its inventory throughout the entire
distribution system.
Net interest expense for the quarter ended November 30, 1999, increased
$700,000 to $1.9 million from $1.2 million for the same period in 1998,
primarily due to higher interest rates. The Company's accounts receivable
securitization borrowing program (the "Securitization Program") is recorded as a
sale of assets; therefore, approximately $36.9 million of accounts receivable
and debt are not reflected on the Company's balance sheet at November 30, 1999.
The discount on the sale of accounts receivable of $559,000 and $1.1 million for
the quarter ended November 30, 1999 and November 30, 1998, respectively, was
recorded as the "Discount on sale of accounts receivable" on the statement of
operations.
For the quarter ended November 30, 1999, the Company recorded an income tax
benefit of $3.1 million. The Company's effective tax rate differed from the
statutory rate principally as a result of the amortization of the excess of
acquired net assets over cost (negative goodwill amortization) not being
included in taxable income.
NINE MONTHS ENDED NOVEMBER 30, 1999 AND NOVEMBER 30, 1998
Net sales for the nine months ended November 30, 1999, remained flat at
$502.8 million as compared to $503.6 million for the same period in 1998. For
the nine months ended November 30, 1999, same store net sales decreased 5.1% as
compared to the same period in 1998. The decline in same store net sales cannot
be attributed to any single market factor. The decline was similar across all
regions of the country and included broad product categories, which affected a
broad range of product segments and vendor lines. The decline in net sales was
due primarily to supply chain issues that affected product availability. The
Company also continued to reduce its inventory levels in an effort to manage
working capital more effectively, which adversely impacted net sales volume. For
the nine months ended November 30, 1999, working capital was reduced by $29.5
million and long term debt was reduced by $25.0 million.
Gross profit for the nine months ended November 30, 1999, decreased 5.0% to
$114.0 million from $120.0 million for the same period in 1998. The gross profit
percentage for the nine months ended November 30, 1999, decreased to 22.7% from
23.8% for the same period in 1998. The gross profit percentage was reduced as
the Company decreased its anticipated benefits from vendor rebate programs, to
reflect the lower than anticipated purchasing levels. Without the effect of
these adjustments, the gross profit percentage would have been 23.3% for the
nine months ended November 30, 1999.
Warehousing, selling, and administrative expenses for the nine months ended
November 30, 1999, increased 15.8% to $113.4 million from $97.9 million for the
same period in 1998. The normal operating expenses of the 32 branches acquired
since February 28, 1998, contributed approximately 53.5% of the additional
expense. Of the remaining expenses, a significant portion is attributable to the
consulting costs associated with the Company's process of enhancing its key
business processes. Warehousing costs have also increased due to the Company's
strategic re-deployment of its inventory throughout the entire distribution
system in the past nine months.
Net interest expense for the nine months ended November 30, 1999, increased
$1.9 million to $5.4 million from $3.5 million for the same period in 1998,
primarily due to higher interest rates. The Company's accounts receivable
securitization borrowing program (the "Securitization Program") is recorded as a
sale of assets; therefore, approximately $36.9 million of accounts receivable
and debt are not reflected on the Company's balance sheet at November 30, 1999.
The discount on the sale of accounts receivable of $2.4 million and $2.8 million
for the nine months ended November 30, 1999, and November 30, 1998,
respectively, was recorded as the "Discount on sale of accounts receivable" on
the statement of operations.
For the nine months ended November 30, 1999, the Company recorded an income
tax benefit of $4.7 million. The Company's effective tax rate differed from the
statutory rate principally as a result of the amortization of the excess of
acquired net assets over cost (negative goodwill amortization) not being
included in taxable income.
9
<PAGE>
RESTRUCTURING CHARGES
FOR THE YEAR ENDED FEBRUARY 28, 1999
The Company initiated an extensive review of its branches in the quarter
ended February 28, 1999. The Company had determined that 15 branches should be
closed based on either of the following criteria: (1) The branch location was
already in a market sufficiently serviced by a Pameco branch or (2) The branch
location was in an area with limited demand. As of November 30, 1999, the
Company has closed 11 of these branches. The remaining branch closings should be
completed by February 29, 2000.
By closing or consolidating branches in these markets, the Company seeks
to reduce its inventory level and operating expenses, without significantly
reducing its net sales. The Company does not expect the demographics of these
markets to change significantly enough within the next several years for these
branches to become profitable.
In connection with the closure and the consolidation of these 15 branches
and the downsizing of the distribution centers, the Company recorded a $5.6
million restructuring and severance charge. The charge consisted of the
following components: (1) lease and other facility expenses of $3.0 million (2)
the write off of $35,000 of fixed assets no longer in use (3) severance payments
of $1.6 million and (4) $843,000 for the termination of the dedicated fleet
contract. The following table provides more detail describing the above
restructuring and severance charges:
<TABLE>
<CAPTION>
CASH/ RESTRUCTURING RESERVE BALANCE
DESCRIPTION NON-CASH CHARGE ACTIVITY 11/30/99
- ----------------------------------------------------------------------------------------------------------------
(IN THOUSANDS)
<S> <C> <C> <C> <C>
Branches to be closed
Lease Cash (494) 186 (308)
Severance Cash (25) 8 (17)
Fixed asset write-off Non-Cash (35) 12 (23)
Utilities Cash (61) 2 (59)
Other Cash (70) 148 78
-----------------------------------------------------
Total-Branches (685) 356 (329)
Distribution Centers to be closed
Lease Cash (1,953) 34 (1,919)
Severance Cash (91) - (91)
Utilities Cash (229) - (229)
Other Cash (224) - (224)
-----------------------------------------------------
Total-Distribution Centers (2,497) 34 (2,463)
Severance-Executives Cash (1,532) 510 (1,022)
Termination of dedicated fleet contract Cash (843) - (843)
- ----------------------------------------------------------------------------------------------------------------
Grand Total (5,557) 900 (4,657)
=====================================================
</TABLE>
The majority of the cash expenditures related to branch closures, excluding
lease commitments, are anticipated to be completed by February 2000. The Company
will continue to pay on certain lease commitments through 2000. To date, the
Company has paid approximately $150,000 to terminate leases.
FOR THE NINE MONTHS ENDED NOVEMBER 30, 1999
During the quarters ended August 31, 1999, and November 30, 1999, the
Company identified 43 additional branches that met the closing criteria
mentioned above. As of November 30, 1999, the Company had closed 19 of these
branches. The remaining closings should be completed by August, 2000.
10
<PAGE>
The Company recorded a $4.2 million restructuring and severance charge that
can be attributed to the additional 43 branches to be closed. These charges
consisted of the following components: (1) lease and other facility expenses of
$1.7 million, (2) the write-off of $549,000 of fixed assets no longer in use,
(3) severance payments of $633,000, and (4) an asset impairment charge of $1.4
million for the write-off of goodwill associated with certain branches to be
closed. The table below provides supplementary data pertaining to the additional
$4.2 restructuring charges:
<TABLE>
<CAPTION>
CASH/ RESTRUCTURING RESERVE BALANCE
DESCRIPTION NON-CASH CHARGE ACTIVITY AT 11/30/99
- ------------------------------------------------------------------------------------------------------------
(IN THOUSANDS)
<S> <C> <C> <C> <C>
Branches to be closed
Lease Cash (1,277) 39 (1,238)
Severance Cash (162) 19 (143)
Fixed asset write-off Non-Cash (549) 250 (299)
Utilities Cash (167) 2 (165)
Other Cash (215) 37 (178)
Severance-Executives Cash (471) 468 (3)
Goodwill related to branches to be closed Non-Cash (1,377) 1,377 -
- ------------------------------------------------------------------------------------------------------------
Total (4,218) 2,192 (2,026)
=====================================
</TABLE>
The majority of the cash expenditures, excluding lease commitments, are
anticipated to be completed by August 2000. The Company will continue to pay
on certain lease commitments through 2005. To date, the Company has paid
approximately $250,000 to terminate leases.
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, 1999, cash
provided by operating activities was $29.1 million as compared to $6.4 million
provided by operating activities for the nine months ended November 30, 1998.
Net cash used in investing activities was $3.4 million for the nine months ended
November 30, 1999, as compared to $46.8 million for the nine months ended
November 30, 1998. In the nine months ended November 30, 1998, the Company
acquired 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. The Company's capital expenditures, excluding acquisitions,
for the nine months ended November 30, 1999, were $3.4 million as compared to
$5.9 million for the same period in 1998. Such capital expenditures were
primarily for branch and distribution center leasehold improvements, equipment,
computer hardware, and supply chain software. Net cash used in financing
activities was $25.7 million for the nine months ended November 30, 1999, while
such activities provided $40.4 million in the nine months ended November 30,
1998.
The Company's working capital decreased to $68.0 million at November 30,
1999, from $97.5 million at February 28, 1999.
At November 30, 1999, the Company had a $240.0 million credit agreement
(the "Credit Agreement") with one primary institution and various participating
lenders. The Credit Agreement provided for (a) a revolving line of credit ("the
Revolver") of $90.0 million, and (b) Term Loan of $25.2 million ("Tranche B").
The Company was also party to a Securitization Program of $100.0 million. These
credit commitments (collectively, the "Credit Facilities") were increased to the
present levels on October 16, 1998. The combined $240.0 million facility bears
interest based at the commercial paper or the Eurodollar rate plus a margin as
described below.
The Company, Pameco Securitization Corporation, Redwood Receivables
Corporation, and GECC are parties to (i) a Receivables Transfer Agreement, and
(ii) Receivables Purchasing and Servicing Agreement, and (iii) Liquidity Loan,
each dated as of April 29, 1996, (collectively the "Securitization Agreements"
or "Securitization Program") between such parties. The Securization Program is
an off-balance
11
<PAGE>
issues commercial paper on the Company's behalf. The capital commitment was
$100.0 million at the beginning of the fiscal year. At November 30, 1999, and
November 30, 1998, respectively, accounts receivable of $36.9 million and $63.4
million were sold under the Securitization Program. The sale of the
aforementioned accounts receivable have been reflected as a reduction of
accounts receivable in the Company's consolidated balance sheets. The Company
maintains an allowance for doubtful accounts, based upon the expected
collectibility of all trade accounts receivable, including accounts receivable
sold by PSC. The Company has agreed to continue to service accounts receivable
transferred under the Securitization Program. The Company had no accrual for a
liability at November 30, 1999, nor November 30, 1998, for such services, as the
Company believes such cost is not significant. The borrowing rate and the margin
on the commercial paper rate for the Securitization Program at November 30,
1999, was 5.42% and 1.75%, respectively, which resulted in a total interest rate
of 7.16%.
At November 30, 1999, the Company had borrowings of $45.9 million
outstanding under the Revolver. These borrowings are due August 6, 2003. The
borrowing rate and the margin on the Eurodollar rate for the Revolver at
November 30, 1999 was 5.41% and 2.5%, respectively, which resulted in a total
interest rate of 7.91%.
The $7.0 million outstanding on the Tranche A term loan was repaid in full
on November 12, 1999. The Company had borrowings of $25.2 million outstanding at
November 30, 1999, on the Tranche B term loan. The Tranche B loan matures on
June 30, 2001. The borrowing rate and margin on the Eurodollar rate for the
Tranche B at November 30, 1999, was 5.5% and 4.5%, respectively, which resulted
in a total interest rate of 10.0%.
The Company had entered into two-interest rate swap agreements to modify
the interest characteristics of a portion of its outstanding debt. The
agreements involved the exchange of amounts based on a variable interest rate
for amounts based on a fixed interest rate over the life of the agreements,
without an exchange of the notional amounts upon which the payments are based.
The Company specifically designated the interest rate swaps as hedges of debt
instruments and recognized the interest differentials as adjustments to interest
expense in the period they occurred. The differential that was paid, or
received, as a result in changing interest rates, was accrued and recognized as
an adjustment of interest expense related to the debt (the accrual accounting
method). The related amount payable to, or receivable from, counter-parties was
included in other liabilities or assets. The fair value of the swap agreements
was not recognized in the financial statements. The interest rate swap
agreements were terminated on November 8, 1999, and the resulting gain was
deferred and will be amortized to interest expense over the remaining life of
the hedged debt instrument.
The Company's Credit Agreement facilities include restrictive covenants in
compliance with specific levels of net worth, earnings before interest, taxes,
depreciation, and amortization ("EBITDA"), senior debt leverage ratio, total
debt leverage ratio, and fixed charge coverage ratio. The negative covenants
include various limitations on indebtedness, liens, fundamental changes,
dividends, and investments.
On October 20, 1999, the Company entered into a Seventh Amendment and
Waiver of the Credit Agreement and an Amendment No. 7 to Securitization
Agreements. These amendments require that the Company deliver daily borrowing
base reports to the lenders under the Credit Agreement and that the Company
deliver daily investment base reports to Redwood's operating agent under the
Securitization Program. The amendment of the Credit Agreement also restricts the
Company to prime rate-based interest rates for future borrowings and for
maturing eurodollar-based interest rate borrowings and requires that interest on
the prime rate-based borrowings be payable monthly in arrears. These amendments
also shorten or eliminate certain time periods previously available to the
Company to correct certain types of defaults (in the case of the Credit
Agreement) or termination events (in the case of the Securitization Program).
These amendments require that the Company comply on a daily basis with the
requirements of the Credit Agreement and the Securitization Program, and in
addition provide its lenders daily inventory reports, and provide Redwood's
operating agent daily accounts receivable reports. These amendments require that
the Company release the lenders under the Credit Agreement, Redwood and its
agents under the Securitization Program, from any and all liabilities, claims,
suits, debts, causes of action and the like, which the Company may have, or
claim to have, against any such person arising on, or prior to, the date of
these amendments. The amendment of the Securitization Program also eliminates
the requirement that Redwood's operating agent give the Company 30 days prior
notice of such operating agent's imposition of other criteria and requirements
for the
12
<PAGE>
eligibility of receivables to be included in the investment base for the
Securitization Program. The amendment of the Securitization Program also
requires that the Company cure, on a same-day basis, any borrowing base
deficiencies which may exist under the Securitization Program (previously the
Company was required to cure such conditions by the next business day). The
amendment of the Securitization Program also requires that at least one of PSC's
independent directors be a representative of a nationally-recognized
independent firm acceptable to Redwood's operating agent. In connection with the
amendment of the Securitization Program, the Company and PSC agreed that Redwood
has the option, upon five business days prior notice, to give PSC all
receivables transferred under the Securitization Program at a purchase price
equal to 100% of Redwood's capital investment in such receivables. Additionally
Redwood would receive the accrued yield on such investment and any breakage
costs payable under the Securitization Program. PSC's put obligation is
contingent upon PSC obtaining financing on terms no less favorable to PSC than
those under the Credit Agreement.
Subsequent Event
On December 30, 1999, the Company borrowed $7.5 million principal amount
from Quilvest American Equity Ltd. ("Quilvest"), evidenced by a promissory note
(the "Quilvest Promissory Note").
Interest on the Quilvest Promissory Note accrues at an annual rate equal to
the LIBOR Rate in effect for such period plus 700 basis points, of which (a) 500
basis points is payable in cash, and (b) 200 basis points are payable by
capitalizing such interest and adding such capitalized amount to the outstanding
principal amount. Additional interest and late charges are payable in the event
of late payment or default. The outstanding principle balance is due on August
31, 2003.
In connection with the Quilvest Promissory Note, the Company and Quilvest
entered into a Security Agreement, pursuant to which the Company granted to
Quilvest a security interest in certain property in which the Company has or
will acquire any right, title and interest. In addition, in connection with the
Quilvest Promissory Note, the Company, Quilvest and GECC (as collateral agent)
entered into a Pledge Agreement, pursuant to which the Company pledged certain
shares of capital stock of a Pameco subsidiary to secure obligations under the
Quilvest Promissory Note. Amounts owing under the Quilvest Promissory Note, and
Quilvest's security interests under the Security Agreement and the Pledge
Agreement, are subordinate of amounts owing to, and security interests held by,
General Electric Credit Corporation ("GECC") under various agreements between
GECC, the Company, and its affiliates.
On December 30, 1999, the Company entered into an amendment to the
Securitization Agreements ("Securitization Agreements Amendment No. 8") and an
amendment to the Credit Agreement ("Credit Agreement Amendment No. 8")
(collectively, "Eighth Amendments").
Pursuant to Amendment No. 8 to the Credit Agreement, certain past defaults
were waived and certain modifications of the Securitization Agreements were
adopted on a going-forward basis. Such amendments include the replacement of the
covenant providing that the Company's EBIDTA for the preceding twelve
consecutive fiscal months not fall below $7,800,000 with a requirement that for
the fiscal quarter ending November 30, 1999, EBIDTA shall not fall below
$(800,000); for the fiscal quarter ending February 29, 2000, EBIDTA shall not
fall below $17,246,000; and for each fiscal quarter thereafter, EBIDTA shall not
fall below $20,000,000.
The Company, GECC, and the lenders party to the Credit Agreement entered
into the Eighth Amendment, Consent, and Waiver, dated as of December 30, 1999,
to the Credit Agreement pursuant to which certain past defaults were waived and
certain modifications of the Credit Agreement were adopted on a going-forward
basis. Such amendments include (i) a decrease of the borrowing base under the
Credit Agreement from "the lesser of (a) $90.0 million and (b) 50% of eligible
inventory" (subject to the provisions and definitions therein) to "an amount
equal to the lesser of (a) $60.0 million and (b) 50% of eligible inventory less
certain Reserves in effect from time to time" (subject to the provisions and
definitions therein); (ii) an amendment to the revolving credit commitments
13
<PAGE>
which had originally provided that the loans made by a revolving credit lender
would not exceed the amount equal to such revolving credit lender's commitment
percentage of the lesser of (x) $90.0 million and (y) the borrowing base then in
effect, minus such certain other commitment percentages, by changing $90.0
million to $60.0 million; (iii) modification of the covenant providing that the
Company's EBIDTA for the preceding twelve consecutive fiscal months not fall
below certain levels with a requirement that for the fiscal quarter ending
November 30, 1999, EBIDTA shall not fall below $(800,000) (formerly
$18,724,000); for the fiscal month ending December 31, 1999, EBIDTA shall not
fall below ($9,000,000) (formerly $17,659,000); and for the for the fiscal month
ending January 31, 2000, EBIDTA shall not fall below ($14,500,000) (formerly
$17,936,000) and (iii) GECC and the lenders pursuant to the Credit Agreement
consented to the $7,500,000 loan made by Quilvest to the Company under the
Quilvest Promissory Note.
The Credit Agreement Amendment also contains terms relating to the new
Tranche C Term Loans and includes: (i) commitments from four lenders making
Tranche C Term Loans total $17.5 million, with such commitments expiring
February 29, 2000; (ii) terms for interest on such notes at the prime rate plus
5.00%; (iii) a covenant providing that until January 31, 2000, the outstanding
aggregate principal amount of Tranche C Term Loans shall not exceed $7,500,000;
(iv) provisions for the Company to borrow one time under the Tranche C Term
Loans during each of the following periods: (x) from and including January 1,
2000, to and including January 31, 2000; and (y) from and including February 1,
2000, to and including February 29, 2000, ("Final Tranche C Borrowing") (subject
to certain conditions); (v) certain conditions must be met before the Tranche C
Term Loan lenders are required to make any Tranche C Term Loans, including
receipt by GECC of certain fees and certain documents evidencing the terms of a
transaction with private equity investor involved in discussions with the
Company regarding a possible equity investment in form satisfactory to GECC;
(vi) certain conditions must be met before the Tranche C Term Loan lenders are
required to make their Final Tranche C Term Loans, which conditions include a
private equity investor involved in discussions with the Company regarding a
possible equity investment funding or agreeing to fund at least $20.0 million
into an escrow account for the purpose of purchasing shares of the Company's
preferred stock and the Company's representation that it has received
commitments to receive net cash proceeds of at least $25.0 million in
subordinated debt (other than the loan from Quilvest) by February 29, 2000;
(vii) a provision that the Tranche C Term Loan of each Tranche C Term Loan
lender shall mature and be payable, in one installment, on February 29, 2000;
(viii) new events of default include the sum of the principle balance of GECC's
capital investment under the Securitization Agreements and the Company's
obligations under the Credit Agreement exceed (x) $110.0 million for the period
beginning on the effective date of the Credit Agreement Amendment's effective
date until and including January 1, 1999, and (y) $112.5 million for the period
beginning on January 1, 2000, and thereafter, and (ix) a provision that if the
conditions precedent to Final Tranche C Borrowing have not been met or certain
term loans have not been paid in full, in either case, on or before February 29,
2000, the Company must pay GECC a deferral fee in the amount of $1.0 million,
subject to certain exceptions.
On January 19, 2000, the Company entered into a Ninth Amendment and Waiver
to the Credit Agreement and Amendment No. 9 to Securitization Agreements. These
amendments lowered certain of the financial covenants applicable to the Credit
Agreement and Securitization Program.
The Company is in final negotiations regarding new private equity
financing. Proceeds would be used to reduce outstanding senior debt, repay
outstanding payables and provide working capital. Simultaneously, the Company is
finalizing discussions with a bank group regarding the refinancing of its credit
facility.
Without the above mentioned equity infusion, management cannot assure 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 February 29, 2000.
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 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
14
<PAGE>
result, a computer program might recognize a date using "00" as the year 1900
rather than 2000 which could cause system failures or miscalculations. Year 2000
issues could adversely affect the Company's operations.
The Company implemented its Year 2000 project in four phases. During Phase
I, Millennium Impact Analysis, the Company reviewed all its business segments
for Year 2000 issues. The Company categorized all of its hardware, software, and
other equipment as compliant, non-compliant, or as requiring research. The
Company also surveyed its largest customers and most critical suppliers.
Moreover, the most critical suppliers were contacted individually to determine
their Year 2000 compliance status. As a part of Phase II, Project Tactical
Planning, a project budget and work plan for achieving Year 2000 compliance were
developed. The majority of the work plan was devoted to replacing the non-
compliant supply chain and financial management systems. Replacing non-compliant
point of sale ("POS") systems and telephone systems were also identified as
major tasks. Phase III, Conversion and System Training, was completed with the
implementation of the new enterprise software in 1998 and the completion of POS
system upgrades at the end of September 1999. In the final phase, Phase IV, Year
2000 Simulation and Deployment, the Company performed simulation testing to
confirm that all production systems will be compliant into the next millennium.
By replacing the supply chain and financial management systems and
software, the Company positions itself to respond more efficiently to the needs
of its customers. The Company believes that the new system is Year 2000
compliant. 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
will be Year 2000 compliant. The Company will continue to monitor the status of
key third parties.
Since the Company chose primarily to replace its main operating system to
improve customer service, the costs associated with this implementation are not
considered Year 2000 related costs. This project was completed at a cost of
$308,000. The Company replaced non-compliant telephone systems, security
systems, and office equipment at a cost of about $50,000. These replacements
were completed in November 1999. The costs for the replacement of these systems
were funded through the Revolver. The Company capitalized these costs as they
were incurred. The Company did not materially defer any other projects in order
to achieve Year 2000 compliance.
In the worst case scenario, several of the Company's branches could be
without basic utility services for an extended period of time. The Company could
also suffer unanticipated hardware or software failures. As a result, the
Company may not be able to timely provide reliable data to management. The
Company is also concerned that a number of its key suppliers might not be in
compliance with Year 2000 requirements as of January 1, 2000. If any one of the
financial institutions with whom the Company transacts business is non-
compliant, the Company's ability to borrow funds, process customer receipts and
vendor payments, and successfully complete other transactions may be adversely
affected. The Company developed contingency plans that would allow it to
continue its operations even if such a disruption to vital services were to
occur. In particular, the Company developed procedures to process transactions
manually in the event of the loss of power at any of its locations. 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, it could result in a material
financial risk.
As of this date, the Company has experienced no material Year 2000 related
failures. This includes both the Company's internal hardware and software
systems and the basic utility services of its providers. The Company is also not
aware of any Year 2000 related problems at any of its customers or critical
suppliers that could adversely affect its business operations. The Company will
continue to monitor its own systems and its business partners to identify and
address any potential risk situation related to the Year 2000.
PART II. OTHER INFORMATION
Item 1. Legal Proceedings
15
<PAGE>
See Note 4 to the Condensed Consolidated Financial Statements (Unaudited)
contained in Part I of this Report.
Item 6. Exhibits and Reports on Form 8-K
Certain portions of Exhibit 10.14J have been omitted from such exhibit
and omissions are indicated by a "*". The Company has requested from
the Securities and Exchange Commission confidential treatment for such
portions.
(a) Exhibits
(b) Reports on Form 8-K
None
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/ Mark S. Sellers
-------------------
Mark S. Sellers
Chief Financial Officer
January 19, 2000 (Sellers has been duly authorized
to sign on behalf of the registrant)
16
<PAGE>
Exhibit Index
Exhibit No. Exhibit
----------- -------
Certain portions of Exhibit 10.14J have been omitted from
such exhibit and omissions are indicated by a "*". The
Company has requested from the Securities and Exchange
Commission confidential treatment for such portions.
EX-10.14J Eighth Amendment Consent and Waiver to the Amended and
Restated Credit Agreement dated December 30, 1999
EX-10.19F Amendment No. 8 to Securitization Agreements, dated
December 30, 1999
EX-10.29 Tranche C Term Note between Pameco Corporation and General
Electric Capital Corporation
EX-10.30 Tranche C Term Note between Pameco Corporation and Wachovia
Bank, N.A.
EX-10.31 Tranche C Term Note between Pameco Corporation and Bank of
America, N.A.
EX-10.32 Tranche C Term Note between Pameco Corporation and Suntrust
Bank
EX-10.33 Security Agreement between Pameco Corporation and Quilvest
American Equity LTD, dated as of December 30, 1999
EX-10.34 Subordination and Intercreditor Agreement, entered into as
of December 30, 1999
EX-27 Financial Data Schedule (for SEC use only)
EX-99 Acknowledgment and Consent in favor of General Electric
Capital Corporation
17
<PAGE>
EXHIBIT 10.14J
Note: an "*" indicates information for which the Company has requested
from the Securities and Exchange Commission confidential treatment
EIGHTH AMENDMENT, CONSENT AND WAIVER
------------------------------------
EIGHTH AMENDMENT, CONSENT AND WAIVER (this "Amendment"), dated as of
---------
December 30, 1999, to the Amended and Restated Credit Agreement, dated as of
March 10, 1998 (as previously amended, and as the same is being and may be
further amended, restated, 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, give certain consents and grant certain waivers
with respect to, 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,
consents and waivers and 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:
1. Defined Terms. Terms defined in the Credit Agreement are used
-------------
herein with the meanings set forth in the Credit Agreement unless otherwise
defined herein.
2. Amendment of Credit Agreement.
-----------------------------
(a) Amendment of Section 1.1.
------------------------
(i) Section 1.1 is hereby amended by restating the following
definitions in their entirety:
"Borrowing Base" shall mean, at any date, the amount equal to the
--------------
lesser of (a) $60,000,000 and (b) 50% of Eligible Inventory, less
----
Reserves in effect from time to time; provided, however, that in no
-------- -------
event shall the sum of the Revolving Credit Loans, the Swingline Loans
and the Reimbursement Obligations (without duplication of the
Reimbursement Obligations deemed to have become Loans) exceed the
Borrowing Base. The Agent, at any and all times, shall be entitled to
change any and all of the percentages used in determining the
Borrowing Base at any time in its reasonable discretion with the
consent of the Majority Facility Lenders.
"Loan Documents" shall mean this Agreement, the Notes, the
--------------
Syndication Letter Agreement, the Intercreditor Agreement, the Global
Amendment, the Warrants, the Subordination Agreement and the
Collateral Documents.
<PAGE>
"Revolving Credit Commitment" shall mean, as to any Lender, the
---------------------------
obligation of such Lender, if any, to make Revolving Credit Loans to
the Company, to purchase participating interests in Swingline Loans
and to incur Letter of Credit Obligations hereunder, in an aggregate
amount not to exceed the amount set forth opposite such Lender's name
on Schedule 1 to this Eighth Amendment, as the same may be reduced
from time to time pursuant to the terms hereof; collectively, as to
all Revolving Credit Lenders, the "Revolving Credit Commitments".
----------------------------
(ii) Section 1.1 is hereby amended by inserting the following
new defined terms in alphabetical order:
"Eighth Amendment to Credit Agreement" shall mean that certain
------------------------------------
Eighth Amendment, Consent and Waiver dated as of December 30, 1999 to
this Agreement. The terms "First Borrowing Conditions", "Extension
Conditions", "Quilvest", "Preferred Stock Purchase", "Subordinated
Debt Issuance", and "Refinancing" as used herein shall have the
meanings set forth in the Eighth Amendment to Credit Agreement.
"Subordination Agreement" shall mean that certain Subordination
-----------------------
and Intercreditor Agreement dated as of December 30, 1999 by and among
Agent, the Company and Quilvest American Equity LTD ("Quilvest"), as
amended, restated or supplemented from time to time."
(iii) Section 1.1 is hereby amended by deleting the defined term
"Tranche A Term Loan Maturity Date" in its entirety and substituting therefor
- ----------------------------------
the following:
"Tranche C Term Loan Maturity Date" shall mean February 29, 2000.
---------------------------------
(b) Amendment of Section 2.1. Section 2.1 is hereby amended by
------------------------
deleting it in its entirety and substituting therefor the following:
2.1 Term Loan Commitments. Subject to the terms and conditions
---------------------
hereof, (a) each Tranche C Term Loan Lender severally agrees to make
term loans (each, a "Tranche C Term Loan") to the Company from January
-------------------
1, 2000 to February 29, 2000 on up to two Borrowing Dates in an
aggregate principal amount not to exceed the amount of the Tranche C
Term Loan Commitment of such Lender set forth on Schedule 1 to this
Eighth Amendment, with the aggregate principal amount of all such term
loans not to exceed $17,500,000, and (b) each Tranche B Term Loan
Lender severally has made term loans (each, a "Tranche B Term Loan")
-------------------
to the Company on the Effective Date in an aggregate principal amount
not to exceed the amount of the Tranche B Term Loan Commitment of such
Lender. The Tranche B 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. The Tranche
C Term Loans shall be Index Rate Loans. The Tranche C Term Loan
Commitments shall expire on February 29, 2000. Until January 31,
2000, the outstanding aggregate principal
-2-
<PAGE>
amount of Tranche C Term Loans shall not exceed $7,500,000. Principal
payments made on Tranche C Term Loans may not be reborrowed.
(c) Amendment of Section 2.3. Section 2.3 is hereby amended by
------------------------
renumbering existing Section 2.3 as "Section 2.3A" and creating a new Section
2.3B as follows (with the effect that Sections 2.3A and 2.3B shall collectively
be considered Section 2.3):
2.3B Procedure for Tranche C Term Loan Borrowing. The Company shall
-------------------------------------------
give the Agent irrevocable written notice (which notice must be
received by the Agent prior to 12:00 Noon, New York City time, one
Business Day prior to the proposed Borrowing Date in the form of
Exhibit A to this Amendment), specifying the amount of Tranche C Term
---------
Loans to be borrowed. Upon receipt of any such notice from the
Company, the Agent shall promptly notify each Tranche C Term Loan
Lender thereof. Each Tranche C Term Loan Lender will make the amount
of its pro rata share of each borrowing available to the Agent for the
account of the Company prior to 12:00 Noon, New York City time, on the
Borrowing Date at the Agent's depositary bank as designated by the
Agent from time to time for deposit in the Agent's depositary account,
in immediately available funds. The Company may borrow under the
Tranche C Term Loan one time during each of the following periods: (i)
from and including January 1, 2000 to and including January 31, 2000
(the "First Tranche C Borrowing"); and (ii) from and including
-------------------------
February 1, 2000 to and including February 28, 2000 (the "Final
-----
Tranche C Borrowing"). In addition to the other conditions set forth
-------------------
in this Agreement, each Tranche C Term Loan Lenders' obligation to
make the First Tranche C Borrowing and the Final Tranche C Borrowing
shall be conditioned upon the satisfaction of the First Borrowing
Conditions and the Extension Conditions, as applicable.
(d) Amendment of Section 2.4(a). Section 2.4(a) is hereby amended
---------------------------
by deleting it in its entirety and substituting therefor the following:
2.4 Repayment of Term Loans. (a) The Tranche C Term Loan of each
-----------------------
Tranche C Term Loan Lender shall mature, and the Company
unconditionally promises to pay such Tranche C Term Loan to the Agent
for the account of such Tranche C Term Loan Lender, in one installment
on February 29, 2000, which shall be in an amount equal to such
Lender's Tranche C Term Loan Percentage multiplied by the outstanding
principal amount of the Tranche C Term Loan.
(e) Amendment of Section 3.1. Section 3.1 is hereby amended by
------------------------
deleting the reference to "$90,000,000" contained therein and
substituting therefor "$60,000,000".
(f) Amendment of Section 6.1(e). Section 6.1(e) is hereby amended
--------------
by deleting it in its entirety and substituting therefor the following:
(e) If after the Eighth Amendment Effective Date any Indebtedness
(other than Indebtedness incurred pursuant to the terms of this
Agreement, the Quilvest Loan, or the Capital Investment) shall be
issued or incurred by the Company or any of its Subsidiaries or the
Company or any of
-3-
<PAGE>
its Subsidiaries shall issue equity, an amount equal to 100% of such
Net Cash Proceeds thereof shall be, within one Business Day after the
date of such issuance or incurrence, applied first, to interest and
-----
fees then due and payable and principal payments on the Tranche C Term
Loan, second, to interest and fees then due and payable and principal
------
payments on the Tranche B Term Loan, third, in accordance with Section
----- -------
6.16 and fourth, to reduce the Capital Investment until paid in full.
---- ------
The proceeds of the Quilvest Loan will be applied to reduce the amount
of then outstanding Revolving Credit Loans; provided, however, that
such reduction in the Revolving Credit Loans shall not reduce the
Revolving Credit Commitments other than as provided in the Eighth
Amendment to Credit Agreement.
(g) Amendment of Section 6.3(b). Section 6.3(b) is hereby amended
---------------------------
by deleting it in its entirety and substituting therefor the following:
(b) Each Term Loan that is an Index Rate Loan (other than a Tranche
C Term Loan) shall bear interest at a rate per annum equal to the
Index Rate plus the Applicable Margin; provided that outstanding
Tranche C Term Loans shall bear interest at a rate per annum equal to
the Index Rate plus 5.00%.
(h) Amendment of Section 7. Section 7 is hereby amended by adding
----------------------
new Sections 7.26 and 7.27 as follows:
7.26 Refinancing. (i) The senior debt provider has not indicated to
-----------
the Company or * that it will no longer pursue the Refinancing, (ii) *
and Quilvest have not indicated that they will no longer pursue the
Preferred Stock Sale (as defined below) and (iii) the vendors have not
indicated that they will no longer pursue the Subordinated Debt
Issuance.
7.27 Vendor Payments. From the date of the First Tranche C
---------------
Borrowing, in the aggregate, payments to vendors do not exceed the
amount of purchases of new Inventory on equal or better payment terms.
(i) Amendment of Section 10. Section 10 is hereby amended by adding
-----------------------
a new Section 10.18 as follows:
10.18 Receipt of Amounts. The Company shall not use any amounts
------------------
received under the Tranche C Term Loan other than to pay outstanding
Revolving Credit Loans in accordance with Section 6.16.
(j) Amendment of Section 11. New Sections 11(m) and (n) are hereby
-----------------------
added as follows with the remaining Sections relettered accordingly:
(m) The sum of the principal balance of (i) the Capital
Investment and (ii) the Obligations shall exceed at any time (x)
$110,000,000 for the period beginning on the Eighth Amendment
Effective Date to and including December 31, 1999 and (y) $112,500,000
for the period beginning on January 1, 2000 and thereafter; or
-4-
<PAGE>
(n) Any of the Extension Conditions shall not have occurred on or
before January 31, 2000.
(k) Except as specifically amended by this Amendment, all references
contained in the Credit Agreement and the other Loan Documents to the terms
"Tranche A Term Loan", "Tranche A Term Loan Commitment", "Tranche A Term Loan
Lender", "Tranche A Term Loan Maturity Date", "Tranche A Term Loan Percentage",
"Tranche A Term Note" are hereby replaced with the terms, respectively, "Tranche
C Term Loan", "Tranche C Term Loan Commitment", "Tranche C Term Loan Lender",
"Tranche C Term Loan Maturity Date", "Tranche C Term Loan Percentage", "Tranche
C Term Note" and the Credit Agreement and the other Loan Documents shall be
deemed amended in the Agent's determination with respect to grammatical,
punctuation and other non-substantive changes necessary to give effect to the
substitution of such terms without affecting the interpretation of the remaining
provisions thereof.
(l) Amendment of Schedule 10.8. Section (a) to Schedule 10.8 to the
--------------------------
Credit Agreement is hereby deleted in its entirety and replaced with the
following.
(a) Company EBITDA. As of the last day of each fiscal period of the
--------------
Company, the Consolidated EBITDA for the preceding twelve consecutive fiscal
months shall not be less than the amount set forth below opposite such period:
Fiscal Quarter Ending Amount
--------------------- ------
November 30, 1999 $(800,000)
February 29, 2000 $17,246,000
For each fiscal quarter thereafter $20,000,000
Fiscal Month Ending Amount
------------------- ------
December 31, 1999 $(9,000,000)
January 31, 2000 $(14,500,000)
In calculating Consolidated EBITDA for the periods set forth above, adjustments
to the Consolidated EBITDA may be made for non cash items; provided, however,
that such adjustments shall be reviewed by, and satisfactory to, the Agent, and
may only be made upon the written consent of the Agent to such non cash
adjustments. If any adjustments proposed by the Company are not satisfactory to
the Agent, the parties agree to negotiate in good faith to resolve any
differences.
3A. Conditions to Any Tranche C Borrowing. The Tranche C Term Loan
-------------------------------------
Lenders shall not be required to make any Tranche C Term Loan unless the
following conditions (the "First Borrowing Conditions") have been satisfied and
the Company has furnished to the Agent, all in form and substance satisfactory
to the Agent:
(a) Agent shall have received an appraisal of the Inventory of the
Company from MB Valuations, in form and substance acceptable to the Agent and
Lenders.
(b) Agent shall have received (i) a proposal letter, delivered
pursuant to a confidentiality agreement between *, and Agent, for a fully
underwritten
-5-
<PAGE>
senior debt commitment from a senior secured lender which contains terms and
conditions satisfactory to the Agent and (ii) a letter from *, to the effect
that it has received written proposals satisfactory to * from junior
subordinated investors on terms which, when aggregated with the net cash
proceeds from the Preferred Stock Sale (as defined below), would yield expected
proceeds sufficient to refinance the Obligations under the Credit Agreement, the
Capital Investment under the Receivables Purchase Agreement and any other
accrued and unpaid fees, interest and expenses in full (the "Refinancing").
(c) Quilvest shall have satisfied all conditions set forth in the
Subordination Agreement, including but not limited to the delivery to Agent of
UCC termination statements and other collateral releases.
(d) The Agent, for the benefit of the Tranche C Term Loan Lenders,
shall have received a fee of $150,000. This fee is in addition to the upfront
fee required by Section 3C(f) of this Eighth Amendment to Credit Agreement.
(e) The Agent shall have received an opinion of the Company's counsel
with respect to corporate existence, due authorization, execution and delivery,
enforceability and no conflict with law in form and substance satisfactory to
the Agent.
3B. Conditions to Final Tranche C Borrowing. The Tranche C Term Loan
---------------------------------------
Lenders shall not be required to make any Tranche C Term Loan on or after
February 1, 2000 unless, on or before such date, the following conditions (the
"Extension Conditions") have been satisfied and the Company has furnished to the
Agent, all in form and substance satisfactory to the Agent:
(a) An escrow account shall have been funded with not less than
$20,000,000 in cash for the purpose of the purchase of preferred stock of the
Company by * and Quilvest all on terms and conditions
satisfactory to the Agent and Lenders (the "Preferred Stock Sale");
(b) The Company shall have received net cash proceeds, or * and the
Company shall have represented in writing that the Company has received
commitments to receive net cash proceeds by February 29, 2000, of at least
$25,000,000 in subordinated debt (other than the Quilvest Loan) on terms and
conditions acceptable to * and the new senior debt provider; and
(c) The Company has delivered to the Agent written evidence of a
fully underwritten unconditional senior debt commitment evidencing expected
proceeds sufficient, when aggregated with the net cash proceeds from the
Preferred Stock Sale and the Subordinated Debt Issuance, to consummate the
Refinancing.
3C. Conditions to Effectiveness of Amendment. This Amendment shall
----------------------------------------
become effective (the actual date of such effectiveness, the "Eighth Amendment
Effective Date") as of the date first above written when:
(a) This Amendment shall have been duly executed and delivered by each
of the parties hereto.
-6-
<PAGE>
(b) The Acknowledgment and Consent dated as of the date hereof by the
Company and Pameco Investment Company, Inc. shall have been duly executed and
delivered by each of the parties thereto.
(c) The Agent shall have received a certificate of the Secretary or an
Assistant Secretary of each Loan Party, dated as of the Eighth Amendment
Effective Date, and certifying (i) as to the due authorization, execution,
delivery and performance of this Amendment, the Acknowledgment and Consent
attached hereto and related matters, and (ii) as to the incumbency and specimen
signature of such Loan Party's officers executing this Amendment and all other
documents required or necessary to be delivered hereunder or in connection
herewith. Such certificate shall state that the resolutions thereby certified
have not been amended, modified, revoked or rescinded as of the date of such
certificate.
(d) The Agent shall have received true and complete copies of the
certificate of incorporation and by-laws of each Loan Party, certified as of the
Eighth Amendment Effective Date as complete and correct copies thereof by the
Secretary or an Assistant Secretary of such Loan Party.
(e) The Agent shall have received an opinion of the Company's counsel
with respect to corporate existence, due authorization, execution and delivery,
enforceability and no conflict with law in form and substance satisfactory to
the Agent.
(f) The Agent, for the benefit of the Tranche C Term Loan Lenders,
shall have received an upfront fee of $100,000.
(g) The Agent shall have received copies, attached to a certificate
from the Secretary or Assistant Secretary of the Company, certifying as true and
correct (i) the loan agreement entered into between Quilvest and the Company
(the "Quilvest Loan Agreement") which shall contain provisions which grant to
Quilvest a security interest in the Collateral (other than the Seller Collateral
(as defined in the Receivables Purchase Agreement)) and otherwise be in form and
substance acceptable to the Agent and Lenders, (ii) any UCC financing statements
to be executed by the Company in favor of Quilvest, (iii) the Subordination
Agreement and (iv) any and all other documents or certificates executed in
connection with the Quilvest Loan Agreement, together with evidence that the
loan made by Quilvest pursuant to the Quilvest Loan Agreement in an amount not
less than $7,500,000 has funded (the "Quilvest Loan").
(i) The Agent shall have received, for the account of each Tranche C
Term Loan Lender, the Tranche C Term Loan Notes in the form of Exhibit B to this
---------
Amendment, executed and delivered by a duly authorized officer of the Company.
4. Company Representations and Warranties. The Company represents
--------------------------------------
and warrants that:
(a) Each of this Amendment and the Credit Agreement as amended by this
Amendment constitutes the legal, valid and binding obligation of the Company.
(b) Each of the representations and warranties set forth in Section 7
of the Credit Agreement are true and correct as of the Eighth Amendment
Effective Date; provided that
-7-
<PAGE>
references in the Credit Agreement to this "Agreement" shall be deemed
references to the Credit Agreement as amended to date and by this Amendment.
(c) After giving effect to this Amendment, there does not exist any
Default or Event of Default.
5. Acknowledgement. The Company further acknowledges and agrees
---------------
that: (i) the Company ratifies and reaffirms all of the terms and conditions of
the Loan Documents, including its liability for the Obligations as defined
therein; and (ii) the parties have not entered into a mutual disregard of the
terms and provisions of the Loan Documents (including through the execution of
this Amendment) or engaged in any course of dealing in variance with the terms
and provisions of the Loan Documents, within the meaning of any applicable law
of the State of New York or otherwise.
In order to induce the Agent and the Lenders to execute, deliver and
perform this Amendment, the Company represents and warrants that there are no
claims, causes of action, suits, debts, obligations, liabilities, demands of any
kind, character or nature whatsoever, fixed or contingent, which the Company may
have, or claim to have, against the Agent and the Lenders, and the Company
hereby releases, acquits and forever discharges the Agent and the Lenders and
their respective agents, employees, officers, directors, servants,
representatives, attorneys, affiliates, successors and assigns (collectively,
the "Released Parties") from any an all liabilities, claims, suits, debts,
causes of action and the like of any kind, character or nature whatsoever, known
or unknown, fixed or contingent that the Company may have, or claim to have,
against each of the Released Parties from the beginning of time until and
through the dates of execution and delivery of this Amendment.
6. Continuing Effect. Except as amended hereby, the Credit Agreement
-----------------
shall continue to be and shall remain in full force and effect in accordance
with its terms.
7. Deferral Fee. (a) If the Extension Conditions have not been met
------------
or (b) the Terms Loans have not been repaid in full, in either case on or before
February 29, 2000, the Company shall pay to the Agent, for the benefit of each
Tranche C Term Loan Lender, a deferral fee in the amount of $1,000,000 (the
"Deferral Fee") in immediately available funds on March 15, 2000.
Notwithstanding the foregoing, if the Refinancing has closed on or prior to
March 31, 2000 (the "Deferral Date"), and all Obligations under the Credit
Agreement, the Capital Investment under the Receivables Purchase Agreement and
any other accrued and unpaid fees, interest and expenses have been paid in full,
the Deferral Fee shall not be due and payable.
8. Warrant Agreement. Notwithstanding anything contained in the
-----------------
Warrants to the contrary, each Tranche B Term Loan Lender and the Company agree
that, so long as the Extension Conditions have been satisfied in full on or
prior to February 29, 2000, each Tranche B Term Loan Lender's rights to
subscribe for and purchase shares of the Company's common stock on February 29,
2000 shall be deferred until the Deferral Date.
9. Consent and Waiver. Notwithstanding the provisions of Sections
------------------
10.1 and 10.2 of the Credit Agreement, the Agent and Lenders hereby consent to
the execution and delivery by the Company of the Quilvest Loan Agreement. The
Agent and the Lenders hereby
-8-
<PAGE>
waive (i) the Event of Default arising under Section 11(c) of the Credit
Agreement caused solely by the Company's failure to comply with (x) subsection
(a) of Schedule 10.8 to the Credit Agreement for the fiscal month ended October
31, 1999 and (y) subsections (b), (c), (d) and (e) of Schedule 10.8 to the
Credit Agreement for the fiscal months ended October 31, 1999, November 30, 1999
and December 31, 1999 and (ii) for purposes of the reduction in the Revolving
Credit Commitments set forth in this Amendment only, the payment by the Company
of the Revolving Credit Commitment Reduction Fee set forth in Section 6.2 of the
Credit Agreement otherwise payable in accordance therewith, and (iii) provided
all Obligations under the Credit Agreement are paid in full on or prior to the
Deferral Date, the payment by the Company of the Revolving Credit Commitment
Reduction Fee set forth in Section 6.2 of the Credit Agreement otherwise payable
in connection therewith. The foregoing waivers are limited to the specific
purpose for which they are granted and shall not be construed as a consent,
waiver or other modification with respect to any other term, condition or other
provisions of any Loan Document or any other Default or Event of Default now or
hereafter existing.
10. Expenses. The Company agrees to pay and reimburse the Agent and
--------
each Lender for all of their respective 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 separate counsel
to the Agent and the Lenders.
11. 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. Delivery of an executed
counterpart of a signature page to this Amendment by telecopy shall be effective
as delivery of a manually executed counterpart of this Amendment.
12. GOVERNING LAW. THIS AMENDMENT SHALL BE GOVERNED BY, AND
-------------
CONSTRUED AND INTERPRETED IN ACCORDANCE WITH, THE INTERNAL LAWS OF THE STATE OF
NEW YORK.
[signature page follows]
-9-
<PAGE>
IN WITNESS WHEREOF, the parties hereto have caused this Eighth
Amendment and Waiver 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: _________________________
Title: ______________________
GENERAL ELECTRIC CAPITAL
CORPORATION, as Agent and as a Lender
By: _________________________
Title: Duly Authorized Signatory
WACHOVIA BANK, N.A.
By: _________________________
Title: ______________________
BANK OF AMERICA, N.A.
By: _________________________
Title: ______________________
SUNTRUST BANK
By: _________________________
Title:_______________________
By: _________________________
Title:_______________________
-10-
<PAGE>
EXHIBIT A TO EIGHTH AMENDMENT
FORM OF NOTICE OF
-----------------
TRANCHE C TERM LOAN BORROWING
-----------------------------
[Date]
General Electric Capital Corporation, as Agent
Commercial Finance Group
201 High Ridge Road
Stamford, CT 06927
Telecopy: (203) 316-7821
Attention: Vice-President-Portfolio
Commercial Finance
Ladies and Gentlemen:
Reference is made to the Amended and Restated Credit Agreement, dated
as of March 18, 1998, among Pameco Corporation, the Lenders party thereto, and
General Electric Capital Corporation, as Agent (as the same may be amended,
restated, supplemented or otherwise modified from time to time, the "Credit
------
Agreement"; the terms defined therein being used herein as therein defined)
- ---------
This is a Tranche C Term Loan borrowing request pursuant to Section
2.3B of the Credit Agreement:
(i) The requested Borrowing Date for the proposed borrowing (which
is a Business Day) is ______________, ____.
(ii) The aggregate amount of the proposed borrowing is
$______________.
(iii) The Type of Tranche C Term Loan comprising the proposed
borrowing are Index Rate Loans.
The undersigned hereby represents and warrants that the conditions
contained in subsection 8.2 of the Credit Agreement have been satisfied and
hereby confirms the granting of liens to the Agent, on behalf of the Lenders,
pursuant to the Collateral Documents. The undersigned further represents and
warrants that (i) the senior debt provider has not indicated to the Company or *
that it will no longer pursue the Refinancing, (ii) * and Quilvest have not
indicated that they will no longer pursue the Preferred Stock Sale, and (iii)
the vendors have not indicated that they will no longer pursue the Subordinated
Debt Issuance.
Very truly yours,
PAMECO CORPORATION
By: _________________________________
Title: ______________________________
<PAGE>
cc: General Electric Capital Corporation
Attention: Collateral Analyst (Pameco)
-12-
<PAGE>
EXHIBIT B TO EIGHTH AMENDMENT
TRANCHE C TERM NOTE
$ _____________ New York, New York
December __, 1999
FOR VALUE RECEIVED, the undersigned, PAMECO CORPORATION, a Georgia
corporation (the "Company"), hereby unconditionally promises to pay to the order
-------
of ____________________, (the "Lender") at the office of General Electric
------
Capital Corporation, located at 201 High Ridge Road, Stamford, CT 06927-5100 in
lawful money of the United States of America and in immediately available funds,
the principal amount of _______________ DOLLARS ($_________), or, if less, the
unpaid principal amount of the Tranche C Term Loan made by the Lender pursuant
to subsection 2.1 of the Credit Agreement, as hereinafter defined. The
principal amount shall be paid in the amounts and on the dates specified in
subsection 2.4(a). The Company further agrees to pay interest in like money at
such office on the unpaid principal amount hereof from time to time outstanding
at the rates and on the dates specified in subsections 6.3 and 6.4 of such
Credit Agreement.
The holder of this Tranche C Term Note is authorized to endorse on the
Schedules annexed hereto and made a part hereof or on a continuation thereof
which shall be attached hereto and made a part hereof the information set forth
in subsection 2.2 of the Credit Agreement. Each such endorsement shall
constitute prima facie evidence of the accuracy of the information enclosed.
----- -----
The failure to make any such endorsement (or any error in such endorsement)
shall not affect the obligations of the Company in respect of such Term Loan or
under the Credit Agreement.
This Tranche C Term Note (a) is one of the Tranche C Term Notes referred to
in the Amended and Restated Credit Agreement, dated as of March 10, 1998 (as
amended, supplemented or otherwise modified from time to time, the "Credit
------
Agreement"), among the Company, the Lenders and General Electric Capital
- ---------
Corporation, as Agent, (b) is subject to the provisions of the Credit Agreement
and (c) is subject to optional and mandatory prepayment in whole or in part as
provided in the Credit Agreement. This Tranche C Term Note is secured and
guaranteed as provided in the Loan Documents. Reference is hereby made to the
Loan Documents for a description of the properties and assets in which a
security interest has been granted, the nature and extent of the security and
the guarantees, the terms and conditions upon which the security interests and
each guarantee were granted and the rights of the holder of this Tranche C Term
Note in respect thereof.
Upon the occurrence of any one or more of the Events of Default, all
amounts then remaining unpaid on this Tranche C Term Note shall become, or may
be declared to be, immediately due and payable, all as provided in the Credit
Agreement.
All parties now and hereafter liable with respect to this Tranche C Term
Note, whether maker, principal, surety, guarantor, endorser or otherwise, hereby
waive presentment, demand, protest and all other notices of any kind.
<PAGE>
Unless otherwise defined herein, terms defined in the Credit Agreement and
used herein shall have the meanings given to them in the Credit Agreement.
THIS TRANCHE C TERM NOTE SHALL BE GOVERNED BY, AND CONSTRUED AND
INTERPRETED IN ACCORDANCE WITH, THE LAW OF THE STATE OF NEW YORK.
PAMECO CORPORATION
By: ______________________________
Name:
Title:
-14-
<PAGE>
SCHEDULE 1
TO THE EIGHTH AMENDMENT
LENDING OFFICES AND COMMITMENTS
-------------------------------
<TABLE>
<CAPTION>
======================================================================================================================
Lender and Lending Office Tranche C Term Revolving Credit
Loan Commitment Commitment
======================================================================================================================
<S> <C> <C>
General Electric Capital Corporation $6,076,525 $20,833,800
201 High Ridge Road
Stamford, Connecticut 06927
Tel: (203) 316-7607
Fax: (203) 316-7821
Contact: Craig Winslow
----------------------------------------------------------------------------------------------------------------------
Wachovia Bank, N.A. $3,807,825 $13,055,400
191 Peachtree Street N.E.
Atlanta, Georgia 30303-1757
Tel: (404) 332-6520
Fax: (404) 332-6920
Contact: Lisa Shawl
----------------------------------------------------------------------------------------------------------------------
Bank of America, N.A. $3,807,825 $13,055,400
NC1-001-13-26
101 North Tyron Street
Charlotte, North Carolina 28255
Tel: (704) 386-3989
Fax: (704) 386-5856
Contact: Roger Gore
----------------------------------------------------------------------------------------------------------------------
SunTrust Bank $3,807,825 $13,055,400
201 Fourth Avenue North
12th Floor
Nashville, Tennessee 37219
Tel: (615) 748-4966
Fax: (615) 748-5700
Contact: Michael Logan
======================================================================================================================
TOTAL $17,500,000.00 $60,000,000.00
-----
======================================================================================================================
-15-
</TABLE>
<PAGE>
ACKNOWLEDGMENT AND CONSENT
ACKNOWLEDGMENT AND CONSENT (this "Acknowledgment and Consent"), dated
--------------------------
as of December ___, 1999, to the documents listed on Schedule 1 hereto (the
"Documents") made by each of the signatories hereto (each a "Grantor"), in favor
- ---------- -------
of GENERAL ELECTRIC CAPITAL CORPORATION, a New York corporation, as agent (in
such capacity, the "Agent") for the lenders (the "Lenders") from time to time
----- -------
parties to the Amended and Restated Credit Agreement referred to below.
W I T N E S S E T H
WHEREAS, Pameco Corporation (the "Company"), the Lenders and the Agent
-------
entered into the Amended and Restated Credit Agreement dated as of March 10,
1998 (as previously amended, and as the same may be further amended, restated,
supplemented or otherwise modified from time to time, the "Amended and Restated
--------------------
Credit Agreement"); and
- ----------------
WHEREAS, to secure and guarantee the obligations of the Company under
the Amended and Restated Credit Agreement, each Grantor entered into Documents
to which it is a party; and
WHEREAS, the Amended and Restated Credit Agreement was amended on the
date hereof pursuant to the Eighth Amendment and Waiver, dated as of this date,
among the Company, the Lenders and the Agent (the "Amendment"; the Amended and
---------
Restated Credit Agreement as amended by the Amendment, the "Amended Agreement");
-----------------
and
WHEREAS, it is a condition precedent to the effectiveness of the
Amendment that each Grantor execute and deliver this Acknowledgment and Consent
to confirm that the security interests granted under the Documents secure the
Obligations of the Company under the Amended Agreement;
NOW, THEREFORE, in consideration of the premises and mutual agreements
contained herein, and for other valuable consideration, the receipt of which is
hereby acknowledged, each Grantor and the Agent hereby agree as follows:
1. Defined Terms. Unless otherwise defined herein, terms which are
-------------
defined in the Amended and Restated Credit Agreement and used herein are so used
as so defined.
2. Representations and Warranties. Each Grantor represents and
------------------------------
warrants that upon the execution and delivery of this Acknowledgment and
Consent, the Documents, as acknowledged and consented to hereby, shall
constitute a valid and continuing lien on and, to the extent provided therein,
perfected security interest in, the collateral referred to in the Documents, as
acknowledged and consented to hereby, in favor of the Agent for the ratable
benefit of the Lenders.
3. Acknowledgment and Consent. Each Grantor hereby:
--------------------------
<PAGE>
(a) acknowledges and consents to the execution, delivery and
performance of (i) the Amendment and (ii) all of the documents and
transactions contemplated thereby;
(b) agrees that such execution, delivery and performance shall
not in any way affect such Grantor's obligations under any Loan Document
(as defined in the Amended Agreement) to which such Grantor is a party,
which obligations on the date hereof remain absolute and unconditional and
are not subject to any defense, set-off or counterclaim; and
(c) grants to the Agent, for the ratable benefit of the Lenders,
and pursuant to the terms and conditions of the Documents a continuing lien
on and security interest in all collateral described in the Documents as
security for the Obligations (as defined in the Amended Agreement).
4. Miscellaneous.
-------------
(a) This Acknowledgment and Consent may be executed in any
number of separate counterparts, and all of said counterparts taken
together shall constitute one and the same instrument. Delivery of an
executed counterpart of a signature page to this Acknowledgment and Consent
by telecopy shall be effective as delivery of a manually executed
counterpart of this Acknowledgment and Consent.
(b) This Acknowledgment and Consent shall become effective when
executed by each Grantor and the Agent.
(c) THIS ACKNOWLEDGMENT AND CONSENT SHALL BE GOVERNED BY, AND
CONSTRUED AND INTERPRETED IN ACCORDANCE WITH, THE INTERNAL LAWS OF THE
STATE OF NEW YORK.
[signature page follows]
<PAGE>
IN WITNESS WHEREOF, the parties hereto have caused this Acknowledgment
and Consent to be executed and delivered by their respective duly authorized
officers as of the date first written above.
PAMECO CORPORATION
By: ______________________________
Name: ____________________________
Title: ___________________________
PAMECO INVESTMENT COMPANY, INC.
By: ______________________________
Name: ____________________________
Title: ___________________________
<PAGE>
Schedule 1 to
-------------
Acknowledgment and Consent
--------------------------
DOCUMENTS
The Company Security Agreement dated as of March 19, 1992 by Pameco
Corporation in favor of General Electric Capital Corporation, as Agent
The Pledge Agreement dated as of April 29, 1996 by Pameco Corporation in
favor of General Electric Capital Corporation, as Agent
The Intercreditor Agreement dated as of April 29, 1996 among Pameco
Corporation, Pameco Securitization Corporation, Redwood Receivables Corporation
and General Electric Capital Corporation
The Pledge Agreement dated as of December 1, 1997 by Pameco Corporation in
favor of General Electric Capital Corporation, as Agent
The Subsidiary Guarantee dated as of December 1, 1997 by Pameco Investment
Company, Inc. in favor of General Electric Capital Corporation, as Agent
The Subsidiary Security Agreement dated as of December 1, 1997 by Pameco
Investment Company, Inc. in favor of General Electric Capital Corporation, as
Agent
The Trademark Security Agreement dated as of December 1, 1997 by Pameco
Investment Company, Inc. in favor of General Electric Capital Corporation, as
Agent
<PAGE>
EXHIBIT 10.19F
AMENDMENT NO. 8
TO SECURITIZATION AGREEMENTS
AMENDMENT NO. 8 TO SECURITIZATION AGREEMENTS, dated as of December 30,
1999, 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.
ARTICLE II
AMENDMENTS TO PURCHASE AGREEMENT AND ANNEX X
SECTION 2.1 Amendment to Annex X.
--------------------
(a) Annex X is hereby amended by deleting the definition of "Maximum
Purchase Limit" in its entirety and substituting therefor the following:
<PAGE>
"Maximum Purchase Limit" shall mean $60,000,000, as such amount
----------------------
may be subject to reduction in accordance with Section 2.02(a) of the
Purchase Agreement."
(b) Annex X is hereby amended by deleting from the definition of "Fee
Letter" the date "June 11, 1999" and substituting therefor the date "December
30, 1999."
SECTION 2.2 Amendment to Purchase Agreement.
-------------------------------
(a) Section 9.01 of the Purchase Agreement is hereby amended by adding
a new subsection (v) as follows:
"(v) the Servicer shall fail to use the excess of the Net Cash
Proceeds (as defined in the Credit Agreement) of any Indebtedness
incurred by, or from any equity issuance of, the Servicer or any of
its Subsidiaries which are applied in accordance with Section 6.1(e)
of the Credit Agreement to reduce the Capital Investment until paid in
full."
SECTION 2.3 Amendment to Exhibit H. Exhibit H to the Purchase
----------------------
Agreement is hereby amended by deleting subsection 1(a) in its entirety and
replacing it with the following:
"(a) Servicer EBITDA. As of the last day of each fiscal quarter of
---------------
the Servicer, the Consolidated EBITDA for the preceding twelve consecutive
fiscal months shall not be less than the amount set forth below opposite
such period:
Fiscal Quarter Ending Amount
--------------------- ------
November 30, 1999 $(800,000)
February 29, 2000 $17,246,000
For each fiscal quarter thereafter $20,000,000
In calculating Servicer EBITDA for the periods set forth above, adjustments to
the Servicer EBITDA may be made for non cash items; provided, however, that such
adjustments shall be reviewed by, and satisfactory to, the Operating Agent, and
may only be made upon the written consent of the Operating Agent to such non
cash adjustments. If any adjustments proposed by the Company are not
satisfactory to the Operating Agent, the parties agree to negotiate in good
faith to resolve any differences"
ARTICLE III
WAIVER
SECTION 3.1 Waiver. The Operating Agent, Redwood and the Collateral
------
Agent hereby waive (i) the Termination Event and Event of Servicer Termination
arising under Sections 9.01(l) and 9.02(f) of the Purchase Agreement caused
solely by the Company's failure to comply with the covenants set forth in
Exhibit H to the Purchase Agreement for the fiscal quarter ended November 30,
1999 and (ii) for purposes of the reduction in the Maximum
-2-
<PAGE>
Purchase Limit set forth in this Amendment only, the payment by the Seller of
the Maximum Purchase Limit Reduction Fee set forth in the Fee Letter otherwise
payable in accordance therewith. The foregoing waivers are limited to the
specific purpose for which they are granted and shall not be construed as a
consent, waiver or other modification with respect to any other term, condition
or other provisions of any Related Document or any other Termination Event and
Event of Servicer Termination now or hereafter existing.
SECTION 3.2 Certain Breakage Costs. In the event the Maximum
----------------------
Purchase Limit is permanently reduced to zero on or before March 31, 2000,
Redwood hereby waives any Breakage Costs otherwise payable to it under Section
2.12 of the Purchase Agreement resulting from such permanent reduction.
ARTICLE IV
REPRESENTATIONS AND WARRANTIES
SECTION 4.1 Representations and Warranties of PSC and Pameco. Each
------------------------------------------------
of PSC and Pameco represents and warrants that:
(a) this Amendment No. 8 has been duly authorized, executed and
delivered by each such party which is a signatory thereto;
(b) this Amendment No. 8 constitutes the legal, valid and binding
obligation of each such party which is a signatory thereto; and
(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 respe ct 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. 8 and to the Transfer Agreement as amended by this Amendment
No. 8, respectively.
SECTION 4.2 Representations and Warranties of Redwood. Redwood
-----------------------------------------
represents and warrants that:
(a) this Amendment No. 8 has been duly authorized, executed and
delivered by Redwood;
(b) this Amendment No. 8 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. 8 and to the Transfer Agreement as amended by this Amendment
No. 8, respectively.
-3-
<PAGE>
ARTICLE V
CONDITIONS PRECEDENT
SECTION 5.1 Conditions Precedent. This Amendment No. 8 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 in form and substance satisfactory to the
Operating Agent:
(a) Counterparts hereof shall have been duly executed and delivered by
the parties hereto;
(b) 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.
8, (ii) a copy of such party's certificate of incorporation and by-laws, and
(iii) a copy of the resolutions of the board of directors of such party
approving this Amendment No. 8 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;
(c) the Operating Agent shall have received an Officer's Certificate
from each of the Seller and the Servicer in the forms of Annexes A-1 and A-2
hereto, respectively;
(d) 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. 8, (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. 8 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; and
(e) PSC and Pameco shall have taken such other actions and provided
such documentation as the Operating Agent may request.
ARTICLE VI
WAIVER BY PSC AND SERVICER
Each of PSC and the Servicer hereby waives any claim, defense, demand,
action or suit of any kind or nature whatsoever against the Insurer, the
Purchaser, the Letter of Credit Providers, the Liquidity Lenders, the Liquidity
Agent, the Operating Agent and the Collateral
-4-
<PAGE>
Agent arising on or prior to the date hereof in connection with the Purchase
Agreement or the transactions contemplated thereunder.
ARTICLE VII
MISCELLANEOUS
SECTION 7.1 Counterparts. This Amendment No. 8 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 7.2 GOVERNING LAW. THIS AMENDMENT NO. 8 SHALL BE GOVERNED
-------------
BY, AND CONSTRUED AND INTERPRETED IN ACCORDANCE WITH, THE INTERNAL LAWS OF THE
STATE OF NEW YORK.
SECTION 7.3 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. 8, including the reasonable fees and expenses of counsel to the
Operating Agent and the Collateral Agent.
[signature page follows]
-5-
<PAGE>
IN WITNESS WHEREOF, the parties hereto have caused this Amendment No.
8 to be duly executed and delivered by their proper and duly authorized officers
as of the day and year first above written.
PAMECO SECURITIZATION CORPORATION
By ________________________
Title:
REDWOOD RECEIVABLES CORPORATION
By ________________________
Title:
PAMECO CORPORATION
By ________________________
Title:
GENERAL ELECTRIC CAPITAL
CORPORATION, as Operating Agent and
Collateral Agent
By ________________________
Title:
GENERAL ELECTRIC CAPITAL
CORPORATION, as Liquidity Agent
By ________________________
Title:
GENERAL ELECTRIC CAPITAL
CORPORATION, as Letter of Credit Agent and
Letter of Credit Provider
By ________________________
Title:
-6-
<PAGE>
ANNEX A-1
FORM OF OFFICER'S CERTIFICATE OF SELLER
---------------------------------------
Pameco Securitization Corporation
Officer's Certificate
I, [Name of Officer], the duly elected [Insert Title] of Pameco
Securitization Corporation (the "Seller"), hereby certify pursuant to Section
5.1(c) of Amendment No. 8 to Securitization Agreements, dated as of the date
hereof ("Amendment No. 8"; capitalized terms used but not defined in this
Officer's Certificate having the meaning set forth in Amendment No. 8), between
the Seller, Pameco Corporation, Redwood Receivables Corporation (the
"Purchaser") and General Electric Capital Corporation, and for the benefit of
the Purchaser, the Operating Agent and General Electric Capital Corporation, as
follows:
(1) after giving effect to the effectiveness of Amendment No. 8, no
Termination Event or Incipient Event will have occurred and be continuing; and
(2) the representations and warranties of the Seller contained in
Section 4.01 of the Purchase Agreement, in the Transfer Agreement and in any
other document, certificate or financial or other statement delivered by the
Seller in connection with the Purchase Agreement or the Transfer Agreement are
true and correct in all material respects and with the same force and effect as
though such representations and warranties had been made as of such date, except
to the extent any such representations and warranties relate solely to an
earlier date.
IN WITNESS WHEREOF, I have signed and delivered this Officer's
Certificate this ___ day of December, 1999.
PAMECO SECURITIZATION CORPORATION
By:_________________________
Name:
Title:
-7-
<PAGE>
ANNEX A-2
FORM OF OFFICER'S CERTIFICATE OF SERVICER
-----------------------------------------
Pameco Corporation
Officer's Certificate
I, [Name of Officer], the duly elected [Insert Title] of Pameco
Corporation (the "Servicer"), hereby certify pursuant to Section 5.1(c) of
Amendment No. 8 to Securitization Agreements, dated as of the date hereof
("Amendment No. 8"; capitalized terms used but not defined in this Officer's
Certificate having the meaning set forth in Amendment No. 8), between Pameco
Securitization Corporation, the Servicer, Redwood Receivables Corporation (the
"Purchaser") and General Electric Capital Corporation, and for the benefit of
the Purchaser, the Operating Agent and General Electric Capital Corporation, as
follows:
(1) after giving effect to the effectiveness of Amendment No. 8, no
Termination Event or Incipient Event will have occurred and be continuing; and
(2) the representations and warranties of the Seller contained in
Section 4.01 of the Purchase Agreement, in the Transfer Agreement and in any
other document, certificate or financial or other statement delivered by the
Seller in connection with the Purchase Agreement or the Transfer Agreement are
true and correct in all material respects and with the same force and effect as
though such representations and warranties had been made as of such date, except
to the extent any such representations and warranties relate solely to an
earlier date.
IN WITNESS WHEREOF, I have signed and delivered this Officer's
Certificate this ___ day of December, 1999.
PAMECO CORPORATION
By:_________________________
Name:
Title:
-8-
<PAGE>
TRANCHE C TERM NOTE
$6,076,525.00 New York, New York
January __, 2000
FOR VALUE RECEIVED, the undersigned, PAMECO CORPORATION, a Georgia
corporation (the "Company"), hereby unconditionally promises to pay to the order
-------
of GENERAL ELECTRIC CAPITAL CORPORATION, (the "Lender") at the office of General
------
Electric Capital Corporation, located at 201 High Ridge Road, Stamford, CT
06927-5100 in lawful money of the United States of America and in immediately
available funds, the principal amount of SIX MILLION SEVENTY-SIX THOUSAND FIVE
HUNDRED TWENTY-FIVE DOLLARS ($6,076,525.00), or, if less, the unpaid principal
amount of the Tranche C Term Loan made by the Lender pursuant to subsection 2.1
of the Credit Agreement, as hereinafter defined. The principal amount shall be
paid in the amounts and on the dates specified in subsection 2.4(a). The
Company further agrees to pay interest in like money at such office on the
unpaid principal amount hereof from time to time outstanding at the rates and on
the dates specified in subsections 6.3 and 6.4 of such Credit Agreement.
The holder of this Tranche C Term Note is authorized to endorse on the
Schedules annexed hereto and made a part hereof or on a continuation thereof
which shall be attached hereto and made a part hereof the information set forth
in subsection 2.2 of the Credit Agreement. Each such endorsement shall
constitute prima facie evidence of the accuracy of the information enclosed.
----- -----
The failure to make any such endorsement (or any error in such endorsement)
shall not affect the obligations of the Company in respect of such Term Loan or
under the Credit Agreement.
This Tranche C Term Note (a) is one of the Tranche C Term Notes referred to
in the Amended and Restated Credit Agreement, dated as of March 10, 1998 (as
amended, supplemented or otherwise modified from time to time, the "Credit
------
Agreement"), among the Company, the Lenders and General Electric Capital
- ---------
Corporation, as Agent, (b) is subject to the provisions of the Credit Agreement
and (c) is subject to optional and mandatory prepayment in whole or in part as
provided in the Credit Agreement. This Tranche C Term Note is secured and
guaranteed as provided in the Loan Documents. Reference is hereby made to the
Loan Documents for a description of the properties and assets in which a
security interest has been granted, the nature and extent of the security and
the guarantees, the terms and conditions upon which the security interests and
each guarantee were granted and the rights of the holder of this Tranche C Term
Note in respect thereof.
Upon the occurrence of any one or more of the Events of Default, all
amounts then remaining unpaid on this Tranche C Term Note shall become, or may
be declared to be, immediately due and payable, all as provided in the Credit
Agreement.
All parties now and hereafter liable with respect to this Tranche C Term
Note, whether maker, principal, surety, guarantor, endorser or otherwise, hereby
waive presentment, demand, protest and all other notices of any kind.
<PAGE>
Unless otherwise defined herein, terms defined in the Credit Agreement and
used herein shall have the meanings given to them in the Credit Agreement.
THIS TRANCHE C TERM NOTE SHALL BE GOVERNED BY, AND CONSTRUED AND
INTERPRETED IN ACCORDANCE WITH, THE LAW OF THE STATE OF NEW YORK.
PAMECO CORPORATION
By:______________________________
Name:
Title:
<PAGE>
TRANCHE C TERM NOTE
$3,807,825.00 New York, New York
January __, 2000
FOR VALUE RECEIVED, the undersigned, PAMECO CORPORATION, a Georgia
corporation (the "Company"), hereby unconditionally promises to pay to the order
-------
of WACHOVIA BANK, N.A., (the "Lender") at the office of General Electric Capital
------
Corporation, located at 201 High Ridge Road, Stamford, CT 06927-5100 in lawful
money of the United States of America and in immediately available funds, the
principal amount of THREE MILLION EIGHT HUNDRED SEVEN THOUSAND EIGHT HUNDRED
TWENTY-FIVE DOLLARS ($3,807,825.00), or, if less, the unpaid principal amount of
the Tranche C Term Loan made by the Lender pursuant to subsection 2.1 of the
Credit Agreement, as hereinafter defined. The principal amount shall be paid in
the amounts and on the dates specified in subsection 2.4(a). The Company
further agrees to pay interest in like money at such office on the unpaid
principal amount hereof from time to time outstanding at the rates and on the
dates specified in subsections 6.3 and 6.4 of such Credit Agreement.
The holder of this Tranche C Term Note is authorized to endorse on the
Schedules annexed hereto and made a part hereof or on a continuation thereof
which shall be attached hereto and made a part hereof the information set forth
in subsection 2.2 of the Credit Agreement. Each such endorsement shall
constitute prima facie evidence of the accuracy of the information enclosed.
----- -----
The failure to make any such endorsement (or any error in such endorsement)
shall not affect the obligations of the Company in respect of such Term Loan or
under the Credit Agreement.
This Tranche C Term Note (a) is one of the Tranche C Term Notes referred to
in the Amended and Restated Credit Agreement, dated as of March 10, 1998 (as
amended, supplemented or otherwise modified from time to time, the "Credit
------
Agreement"), among the Company, the Lenders and General Electric Capital
- ---------
Corporation, as Agent, (b) is subject to the provisions of the Credit Agreement
and (c) is subject to optional and mandatory prepayment in whole or in part as
provided in the Credit Agreement. This Tranche C Term Note is secured and
guaranteed as provided in the Loan Documents. Reference is hereby made to the
Loan Documents for a description of the properties and assets in which a
security interest has been granted, the nature and extent of the security and
the guarantees, the terms and conditions upon which the security interests and
each guarantee were granted and the rights of the holder of this Tranche C Term
Note in respect thereof.
Upon the occurrence of any one or more of the Events of Default, all
amounts then remaining unpaid on this Tranche C Term Note shall become, or may
be declared to be, immediately due and payable, all as provided in the Credit
Agreement.
All parties now and hereafter liable with respect to this Tranche C Term
Note, whether maker, principal, surety, guarantor, endorser or otherwise, hereby
waive presentment, demand, protest and all other notices of any kind.
<PAGE>
Unless otherwise defined herein, terms defined in the Credit Agreement and
used herein shall have the meanings given to them in the Credit Agreement.
THIS TRANCHE C TERM NOTE SHALL BE GOVERNED BY, AND CONSTRUED AND
INTERPRETED IN ACCORDANCE WITH, THE LAW OF THE STATE OF NEW YORK.
PAMECO CORPORATION
By:______________________________
Name:
Title:
<PAGE>
TRANCHE C TERM NOTE
$3,807,825.00 New York, New York
January __, 2000
FOR VALUE RECEIVED, the undersigned, PAMECO CORPORATION, a Georgia
corporation (the "Company"), hereby unconditionally promises to pay to the order
-------
of BANK OF AMERICA, N.A., (the "Lender") at the office of General Electric
------
Capital Corporation, located at 201 High Ridge Road, Stamford, CT 06927-5100 in
lawful money of the United States of America and in immediately available funds,
the principal amount of THREE MILLION EIGHT HUNDRED SEVEN THOUSAND EIGHT HUNDRED
TWENTY-FIVE DOLLARS ($3,807,825.00), or, if less, the unpaid principal amount of
the Tranche C Term Loan made by the Lender pursuant to subsection 2.1 of the
Credit Agreement, as hereinafter defined. The principal amount shall be paid in
the amounts and on the dates specified in subsection 2.4(a). The Company
further agrees to pay interest in like money at such office on the unpaid
principal amount hereof from time to time outstanding at the rates and on the
dates specified in subsections 6.3 and 6.4 of such Credit Agreement.
The holder of this Tranche C Term Note is authorized to endorse on the
Schedules annexed hereto and made a part hereof or on a continuation thereof
which shall be attached hereto and made a part hereof the information set forth
in subsection 2.2 of the Credit Agreement. Each such endorsement shall
constitute prima facie evidence of the accuracy of the information enclosed.
----- -----
The failure to make any such endorsement (or any error in such endorsement)
shall not affect the obligations of the Company in respect of such Term Loan or
under the Credit Agreement.
This Tranche C Term Note (a) is one of the Tranche C Term Notes referred to
in the Amended and Restated Credit Agreement, dated as of March 10, 1998 (as
amended, supplemented or otherwise modified from time to time, the "Credit
------
Agreement"), among the Company, the Lenders and General Electric Capital
- ---------
Corporation, as Agent, (b) is subject to the provisions of the Credit Agreement
and (c) is subject to optional and mandatory prepayment in whole or in part as
provided in the Credit Agreement. This Tranche C Term Note is secured and
guaranteed as provided in the Loan Documents. Reference is hereby made to the
Loan Documents for a description of the properties and assets in which a
security interest has been granted, the nature and extent of the security and
the guarantees, the terms and conditions upon which the security interests and
each guarantee were granted and the rights of the holder of this Tranche C Term
Note in respect thereof.
Upon the occurrence of any one or more of the Events of Default, all
amounts then remaining unpaid on this Tranche C Term Note shall become, or may
be declared to be, immediately due and payable, all as provided in the Credit
Agreement.
All parties now and hereafter liable with respect to this Tranche C Term
Note, whether maker, principal, surety, guarantor, endorser or otherwise, hereby
waive presentment, demand, protest and all other notices of any kind.
<PAGE>
Unless otherwise defined herein, terms defined in the Credit Agreement and
used herein shall have the meanings given to them in the Credit Agreement.
THIS TRANCHE C TERM NOTE SHALL BE GOVERNED BY, AND CONSTRUED AND
INTERPRETED IN ACCORDANCE WITH, THE LAW OF THE STATE OF NEW YORK.
PAMECO CORPORATION
By:______________________________
Name:
Title:
<PAGE>
TRANCHE C TERM NOTE
$3,807,825.00 New York, New York
January __, 2000
FOR VALUE RECEIVED, the undersigned, PAMECO CORPORATION, a Georgia
corporation (the "Company"), hereby unconditionally promises to pay to the order
-------
of SUNTRUST BANK, (the "Lender") at the office of General Electric Capital
------
Corporation, located at 201 High Ridge Road, Stamford, CT 06927-5100 in lawful
money of the United States of America and in immediately available funds, the
principal amount of THREE MILLION EIGHT HUNDRED SEVEN THOUSAND EIGHT HUNDRED
TWENTY-FIVE DOLLARS ($3,807,825.00), or, if less, the unpaid principal amount of
the Tranche C Term Loan made by the Lender pursuant to subsection 2.1 of the
Credit Agreement, as hereinafter defined. The principal amount shall be paid in
the amounts and on the dates specified in subsection 2.4(a). The Company
further agrees to pay interest in like money at such office on the unpaid
principal amount hereof from time to time outstanding at the rates and on the
dates specified in subsections 6.3 and 6.4 of such Credit Agreement.
The holder of this Tranche C Term Note is authorized to endorse on the
Schedules annexed hereto and made a part hereof or on a continuation thereof
which shall be attached hereto and made a part hereof the information set forth
in subsection 2.2 of the Credit Agreement. Each such endorsement shall
constitute prima facie evidence of the accuracy of the information enclosed.
----- -----
The failure to make any such endorsement (or any error in such endorsement)
shall not affect the obligations of the Company in respect of such Term Loan or
under the Credit Agreement.
This Tranche C Term Note (a) is one of the Tranche C Term Notes referred to
in the Amended and Restated Credit Agreement, dated as of March 10, 1998 (as
amended, supplemented or otherwise modified from time to time, the "Credit
------
Agreement"), among the Company, the Lenders and General Electric Capital
- ---------
Corporation, as Agent, (b) is subject to the provisions of the Credit Agreement
and (c) is subject to optional and mandatory prepayment in whole or in part as
provided in the Credit Agreement. This Tranche C Term Note is secured and
guaranteed as provided in the Loan Documents. Reference is hereby made to the
Loan Documents for a description of the properties and assets in which a
security interest has been granted, the nature and extent of the security and
the guarantees, the terms and conditions upon which the security interests and
each guarantee were granted and the rights of the holder of this Tranche C Term
Note in respect thereof.
Upon the occurrence of any one or more of the Events of Default, all
amounts then remaining unpaid on this Tranche C Term Note shall become, or may
be declared to be, immediately due and payable, all as provided in the Credit
Agreement.
All parties now and hereafter liable with respect to this Tranche C Term
Note, whether maker, principal, surety, guarantor, endorser or otherwise, hereby
waive presentment, demand, protest and all other notices of any kind.
<PAGE>
Unless otherwise defined herein, terms defined in the Credit Agreement and
used herein shall have the meanings given to them in the Credit Agreement.
THIS TRANCHE C TERM NOTE SHALL BE GOVERNED BY, AND CONSTRUED AND
INTERPRETED IN ACCORDANCE WITH, THE LAW OF THE STATE OF NEW YORK.
PAMECO CORPORATION
By:______________________________
Name:
Title:
<PAGE>
_______________________________________________________________________________
SECURITY AGREEMENT
BETWEEN
PAMECO CORPORATION
and
QUILVEST AMERICAN EQUITY LTD.
____________________
Dated as of December 30, 1999
____________________
THIS INSTRUMENT AND THE RIGHTS AND OBLIGATIONS EVIDENCED HEREBY ARE SUBORDINATE
IN THE MANNER AND TO THE EXTENT SET FORTH IN THAT CERTAIN SUBORDINATION AND
INTERCREDITOR AGREEMENT (THE "SUBORDINATION AGREEMENT") DATED AS OF DECEMBER 30,
-----------------------
1999 AMONG PAMECO CORPORATION (THE "GRANTOR"), QUILVEST AMERICAN EQUITY LTD. AND
-------
GENERAL ELECTRIC CAPITAL CORPORATION ("AGENT"), TO THE INDEBTEDNESS (INCLUDING
-----
INTEREST) OWED BY COMPANY PURSUANT TO THAT CERTAIN AMENDED AND RESTATED CREDIT
AGREEMENT DATED AS OF MARCH 10, 1998 AMONG COMPANY, AGENT AND THE LENDERS FROM
TIME TO TIME PARTY THERETO, AS SUCH CREDIT AGREEMENT HAS BEEN AND HEREAFTER MAY
BE AMENDED, SUPPLEMENTED OR OTHERWISE MODIFIED FROM TIME TO TIME; AND EACH
HOLDER OF THIS INSTRUMENT, BY ITS ACCEPTANCE HEREOF, SHALL BE BOUND BY THE
PROVISIONS OF THE SUBORDINATION AGREEMENT. IN THE EVENT OF ANY CONFLICT BETWEEN
THE TERMS OF THIS INSTRUMENT AND THE SUBORDINATION AGREEMENT, THE TERMS OF THE
SUBORDINATION AGREEMENT SHALL CONTROL.
<PAGE>
SECURITY AGREEMENT
SECURITY AGREEMENT, dated as of December 30, 1999, between PAMECO
CORPORATION, a Georgia corporation (the "Grantor"), and QUILVEST AMERICAN EQUITY
-------
LTD. (the "Lender").
------
WHEREAS, pursuant to a Promissory Note dated as of December 30, 1999
(the "Promissory Note"), Lender has agreed to make a loan (the "Loan") to the
--------------- ----
Grantor upon the terms and subject to the conditions set forth therein;
WHEREAS, it is a condition precedent to the obligation of the Lender
to make the Loan to the Grantor pursuant to the Promissory Note that the Grantor
shall have executed and delivered this Security Agreement.
NOW, THEREFORE, in consideration of the premises and to induce the
Lender to make the Loan to the Grantor pursuant to the Promissory Note, the
Grantor hereby agrees with the Lender as follows:
1. Defined Terms. Unless otherwise defined herein, terms which are
-------------
defined in the Promissory Note and used herein are so used as so defined; the
following terms which are defined in the Code (as hereinafter defined) on the
date hereof are used herein as so defined: Chattel Paper, Documents, Equipment,
Farm Products, Fixtures, General Intangibles, Instruments, Inventory and
Proceeds; and the following terms shall have the following meanings:
"Code" shall mean the Uniform Commercial Code as from time to time in
----
effect in the State of New York.
"Collateral" shall have the meaning assigned to it in Section 2 of
----------
this Security Agreement.
"Lien" shall mean any interest in Property securing an obligation owed
----
to or a claim by, a Person other than the owner of the Property, whether such
interest is based on the common law, statute, or contract, and including,
without limitation, (a) a security interest, charge, claim, or lien arising from
a mortgage, deed of trust, encumbrance, pledge, hypothecation, assignment,
deposit arrangement, agreement, or conditional sale or a lease, consignment or
bailment for security purposes, or (b) any reservation, exception, encroachment,
easement, right-of-way, condition, restriction or other title exception or
encumbrance affecting Property.
"Material Adverse Effect" shall mean a material adverse effect on (a)
-----------------------
the business, assets, operations, prospects or condition (financial or
otherwise) of the Grantor taken as a whole, (b) the ability of the Grantor to
perform its obligations under the Promissory Note or the GECC Credit Agreement
in accordance with their terms, or
<PAGE>
(c) the Collateral or the Lender's Liens on the Collateral or the priority of
any such Lien on the Collateral, other than, in each case, immaterial
Collateral.
"Patent License" shall mean all agreements, whether written or oral,
--------------
providing for (a) the grant by the Grantor of any right to manufacture, use or
sell any invention covered by a Patent or (b) the grant to the Grantor of any
such right, including, without limitation, any thereof referred to in Schedule I
hereto.
"Patents" shall mean (a) all letters patent of the United States or
-------
any other country, and all applications for letters patent of the United States
or any other country, including, without limitation, any referred to in Schedule
I hereto, (b) all divisions, reissues, continuations, continuations-in-part, or
extensions thereof, including, without limitation, any referred to in Schedule I
hereto.
"Person" shall mean an individual, partnership, corporation, limited
------
liability company, association, trust, unincorporated organization, or a
government or agency or political subdivision thereof.
"Property" shall mean any right or interest in or to property of any
--------
kind whatsoever, whether real, personal or mixed and whether tangible or
intangible.
"Security Agreement" shall mean this Security Agreement, as amended,
------------------
supplemented or otherwise modified from time to time.
"Trademarks" shall mean (a) all trademarks, trade names, corporate
----------
names, company names, business names, fictitious business names, trade styles,
service marks, logos, other sources of business identifiers, prints and labels
on which any of the foregoing have appeared or appear, designs and general
intangibles of like nature, now existing or hereafter adopted or acquired
(including, without limitation, the goodwill associated with each of the
foregoing), all registrations and recordings thereof, and all applications in
connection therewith, including, without limitation, registrations, recordings
and applications in the United States Patent and Trademark Office or in any
similar office or agency of the United States, any State thereof or any other
country or any political subdivision thereof, including, without limitation, any
referred to in Schedule II hereto and (b) all reissues, extensions or renewals
thereof.
"Trademark License" shall mean any agreement, written or oral,
-----------------
providing for the grant (a) by the Grantor of any right to use any Trademark or
(b) to the Grantor of any such right, including, without limitation, any thereof
referred to in Schedule II hereto.
2. Grant of Security Interest. As collateral security for the
--------------------------
prompt and complete payment and performance when due (whether at the stated
maturity, by acceleration or otherwise) of the obligations under the Promissory
Note, the Grantor hereby grants to the Lender, a security interest in all of the
following property now owned or at any time hereafter acquired by the Grantor or
in which the Grantor now has or at any time in the future may acquire any right,
title or interest (collectively, the "Collateral"):
----------
<PAGE>
3
(i) all Chattel Paper;
(ii) all Documents;
(iii) all Equipment;
(iv) all General Intangibles;
(v) all Instruments;
(vi) all Inventory;
(vii) all Patents;
(viii) all Patent Licenses:
(ix) all Trademarks;
(x) all Trademark Licenses;
(xi) all deposit accounts maintained at any financial
institution and all funds, in whatever form, from time to time on deposit in
such accounts; and
(xii) to the extent not otherwise included, all proceeds,
products, substitutions and replacements of any and all of the foregoing;
provided, however, that, with respect to any contract, lease or agreement
- -------- -------
between the Grantor and any other Person which prohibits the assignment thereof,
"Collateral" shall include only the rights of the Grantor to receive monies
thereunder, provided, further, that the Lender shall have no security interest
-------- -------
in any Collateral that constitutes "Seller Collateral" under that certain
Receivables Purchase and Servicing Agreement dated as of April 29, 1996 among
Pameco Securitization Corporation, Redwood Receivables Corporation, Grantor, and
General Electric Capital Corporation, as amended, restated, replaced,
supplemented, or otherwise modified from time to time (the "RPA") including, any
---
proceeds thereof arising from the return of goods to the Grantor.
<PAGE>
4
3. Representations and Warranties. The Grantor hereby represents
------------------------------
and warrants that:
(a) Title; No Other Liens. Except for the Lien granted to the
---------------------
Lender pursuant to this Security Agreement, the Liens granted pursuant to the
RPA, the Liens in favor of General Electric Capital Corporation ("GECC")
----
pursuant to that certain Company Security Agreement dated as of March 19, 1992
between Grantor and GECC, as the same may have been and may be amended,
replaced, restated, supplemented or otherwise modified from time to time (the
"GECC Security Agreement") and Permitted Liens, the Grantor owns each item of
- -------------------------
the Collateral free and clear of any and all Liens or claims of others. No
security agreement, financing statement or other public notice with respect to
all or any part of the Collateral is on file or of record in any public office,
except such as may have been filed in favor of the Lender pursuant to this
Security Agreement and in favor of GECC under the GECC Security Agreement and
those relating to Permitted Liens.
(b) Perfected Priority Liens. Subject to all filings necessary
------------------------
to perfect the security interests granted hereunder, the Liens granted pursuant
to this Security Agreement constitute perfected Liens on the Collateral (other
than any Patents and Trademarks registered in any jurisdiction outside of the
United States or any political subdivision thereof and Collateral to the extent
it is deemed to be a Fixture) in favor of the Lender and are enforceable as such
against all creditors of and purchasers from the Grantor and against any owner
or purchaser of the real property where any of the Equipment is located and any
present or future creditor obtaining a Lien on such real property, subject only
to the prior perfected Liens on the Collateral (i) granted under the RPA, (ii)
in favor of GECC under the GECC Security Agreement, and (iii) Permitted Liens.
(c) Inventory and Equipment. The Inventory and the Equipment are
-----------------------
kept at the locations listed on Schedules III and IV hereto.
(d) Chief Executive Office. The Grantor's chief executive office
----------------------
and chief place of business is located at 1000 Center Place, Norcross, Georgia
30093.
(e) Farm Products. None of the Collateral constitutes, or is the
-------------
Proceeds of, Farm Products.
(f) Patents and Trademarks. Schedule I hereto includes all
----------------------
Patents and Patent Licenses owned by the Grantor in its own name as of the date
hereof. Schedule II hereto includes all Trademarks and Trademark Licenses owned
by the Grantor in its own name as of the date hereof. To the best knowledge of
the Grantor, each Patent and Trademark is valid, subsisting, unexpired,
enforceable and
<PAGE>
5
has not been abandoned. Except as set forth in either such Schedule, none of
such Patents and Trademarks is the subject of any licensing or franchise
agreement.
(g) Governmental Obligors. The aggregate value of all Contracts
---------------------
to which Governmental Authorities are an obligor or a party, as the case may be,
is not in excess of $500,000.
4. Covenants. The Grantor covenants and agrees with the Lender that,
---------
until the Loan is paid in full:
(a) Further Documentation; Pledge of Instruments. At any time
--------------------------------------------
and from time to time, upon the written request of the Lender, and at the sole
expense of the Grantor, the Grantor will promptly and duly execute and deliver
such further instruments and documents and take such further action as the
Lender may reasonably request for the purpose of obtaining or preserving the
full benefits of this Security Agreement and of the rights and powers herein
granted, including, without limitation, the filing of any financing or
continuation statements under the Uniform Commercial Code in effect in any
jurisdiction with respect to the Liens created hereby. The Grantor also hereby
authorizes the Lender to file any such financing or continuation statement
without the signature of the Grantor to the extent permitted by applicable law.
The Grantor promptly shall notify the Lender if any amount payable under or in
connection with any of the Collateral shall be or become evidenced by any
promissory note, other Instrument or Chattel Paper having a value in excess of
$7,500.
(b) Indemnification. The Grantor will pay, and save the Lender
---------------
harmless from, any and all liabilities, costs and expenses (including, without
limitation, legal fees and expenses) (i) with respect to, or resulting from, any
delay in paying, any and all excise, sales or other taxes which may be payable
or determined to be payable with respect to any of the Collateral, (ii) with
respect to, or resulting from, any delay in complying with any Requirement of
Law applicable to any of the Collateral or (iii) in connection with any of the
transactions contemplated by this Security Agreement. In any suit, proceeding
or action brought by the Lender under any Contract for any sum owing thereunder,
or to enforce any provisions of any Contract, the Grantor will save, indemnify
and keep the Lender, harmless from and against all expense, loss or damage
suffered by reason of any defense, setoff, counterclaim, recoupment or reduction
or liability whatsoever of the obligor thereunder, arising out of a breach by
the Grantor of any obligation thereunder or arising out of any other agreement,
indebtedness or liability at any time owing to or in favor of such obligor or
its successors from the Grantor.
(c) Maintenance of Records. The Grantor will keep and maintain
----------------------
at its own cost and expense satisfactory and complete records of the Collateral.
The Grantor will mark its books and records pertaining to the Collateral to
evidence this Security Agreement and the security interests granted hereby. For
the
<PAGE>
6
Lender's further security, the Lender is hereby granted a security interest in
all of the Grantor's books and records concerning the Collateral, and the
Grantor shall turn over any such books and records to the Lender or to its
representatives during normal business hours at the request of the Lender.
(d) Right of Inspection. The Lender shall at all times have full and
-------------------
free access during normal business hours to all the books, correspondence and
records of the Grantor, and the Lender or its representatives may examine the
same, take extracts therefrom and make photocopies thereof, and the Grantor
agrees to render to the Lender (and its representatives), at the Grantor's cost
and expense, such clerical and other assistance as may be reasonably requested
with regard thereto. The Lender and its representatives shall at all times also
have the right to enter into and upon any premises where any of the Inventory or
Equipment is located for the purpose of inspecting the same, observing its use
or otherwise protecting its interests therein. The Lender hereby agrees that,
unless an Event of Default has occurred and is continuing, they will give the
Grantor reasonable notice under the circumstances prior to exercising its rights
under this clause (d).
(e) Compliance with Laws, etc. The Grantor will comply in all
--------------------------
respects with all material Requirements of Law applicable to the Collateral or
any part thereof or to the operation of the Grantor's business, except (i) to
the extent that the failure to so comply could not (individually or in the
aggregate) reasonably be expected to have a Material Adverse Effect or (ii) that
the Grantor may contest any Requirement of Law in any reasonable manner which
shall not, in the sole opinion of the Lender, adversely affect the Lender's
rights or the priority of their Liens on the Collateral.
(f) Payment of Obligations. The Grantor will pay promptly when due
----------------------
all taxes, assessments and governmental charges or levies imposed upon the
Collateral or in respect of its income or profits therefrom, as well as all
claims of any kind (including, without limitation, claims for labor, materials
and supplies) against or with respect to the Collateral, except that no such
charge need be paid if (i) the validity thereof is being contested in good faith
by appropriate proceedings, (ii) such proceedings do not, individually or in the
aggregate, involve any material danger of the sale, forfeiture or loss of any
material portion of the Collateral or any interest therein and (iii) such charge
is adequately reserved against on the Grantor's books in accordance with GAAP.
(g) Limitation on Liens on Collateral. The Grantor will not create,
---------------------------------
incur or permit to exist, will defend the Collateral against, and will take such
other action as is necessary to remove, any Lien or claim on or to the
Collateral, other than the Liens created hereby, the Liens pursuant to the RPA
and the Liens in favor of
<PAGE>
7
GECC pursuant to the GECC Security Agreement, and will defend the right, title
and interest of the Lender in and to any of the Collateral against the claims
and demands of all Persons whomsoever.
(h) Limitations on Dispositions of Collateral. The Grantor will not
-----------------------------------------
sell, transfer, lease or otherwise dispose of any of the collateral, or attempt,
offer or contract to do so except as permitted pursuant to the RPA or the GECC
Security Agreement.
(i) Maintenance of Equipment. The Grantor will maintain each item of
------------------------
Equipment in good operating condition, ordinary wear and tear and immaterial
impairments of value and damage by the elements excepted, and will provide all
maintenance, service and repairs necessary for such purpose.
(j) Maintenance of Insurance. The Grantor will maintain, with
------------------------
financially sound and reputable companies, such insurance policies as are
required pursuant to the GECC Security Agreement and related documents.
(k) Further Identification of Collateral. The Grantor will furnish to
------------------------------------
the Lender from time to time statements and schedules further identifying and
describing the Collateral and such other reports in connection with the
Collateral as the Lender may reasonably request, all in reasonable detail.
(l) Notices. The Grantor will advise the Lender promptly, in
-------
reasonable detail, at its address set forth herein, (i) of any Lien (other than
Liens created or permitted hereby) on, or claim asserted against, any of the
Collateral and (ii) of the occurrence of any other event which could reasonably
be expected to have a Material Adverse Effect on the aggregate value of the
Collateral or on the Liens created hereunder.
(m) Changes in Locations, Name, etc. The Grantor will not (i) change
--------------------------------
the location of its chief executive office/chief place of business from that
specified in Section 4(e) or remove its books and records from such location,
(ii) permit any of the Inventory or Equipment to be kept at a location other
than those listed on Schedules III and IV hereto or (iii) change its name,
identity or corporate structure to such an extent that any financing statement
filed by the Lender in connection with this Security Agreement would become
seriously misleading, unless it shall have given the Lender at least 45 days
prior written notice thereof and, prior to effecting any such change, it shall
have taken all steps as the Lender may deem necessary or advisable to continue
the perfection and priority of the security interests granted pursuant hereto.
(n) Patents and Trademarks.
----------------------
<PAGE>
8
(i) The Grantor (either itself or through licensees) will,
except with respect to any Trademark that the Grantor shall reasonably
determine is of immaterial economic value to it, (i) continue to use each
Trademark on each and every trademark class of goods applicable to its
current line as reflected in its current catalogs, brochures and price
lists in order to maintain such Trademark in full force free from any claim
of abandonment for non-use, (ii) maintain as in the past the quality of
products and services offered under such Trademark, (iii) employ such
Trademark with the appropriate notice of registration, (iv) not adopt or
use any mark which is confusingly similar or a colorable imitation of such
Trademark unless the Lender shall obtain a perfected security interest in
such mark pursuant to this Security Agreement, and (v) not (and not permit
any licensee or sublicensee thereof to) do any act or knowingly omit to do
any act whereby any Trademark may become invalidated.
(ii) The Grantor will not, except with respect to any Patent
that the Grantor shall reasonably determine is of immaterial economic value
to it, do any act, or omit to do any act, whereby any Patent may become
abandoned or dedicated.
(iii) The Grantor will notify the Lender immediately if it knows,
or has reason to know, that any application or registration relating to any
Patent or Trademark may become abandoned or dedicated, or of any adverse
determination or development (including, without limitation, the
institution of, or any such determination or development in, any proceeding
in the United States Patent and Trademark Office or any court or tribunal
in any country) regarding the Grantor's ownership of any Patent or
Trademark or its right to register the same or to keep and maintain the
same.
(iv) Whenever the Grantor, either by itself or through any
agent, employee, licensee or designee, shall file an application for the
registration of any Patent or Trademark with the United States Patent and
Trademark Office or any similar office or agency in any other country or
any political subdivision thereof, the Grantor shall report such filing to
the Lender within five Business Days after the last day of the fiscal
quarter in which such filing occurs and the Grantor shall execute and
deliver any and all agreements, instruments, documents, and papers as the
Lender may request to evidence the Lender's security interest in any Patent
or Trademark and the goodwill and general intangibles of the Grantor
relating thereto or represented thereby, and the Grantor hereby constitutes
the Lender its attorney-in-fact to execute and file all such writings for
the foregoing purposes, all acts of such attorney being hereby ratified and
confirmed; such power being coupled with an interest is irrevocable until
the Loan is paid in full.
<PAGE>
9
(v) The Grantor will take all reasonable and necessary
steps, including, without limitation, in any proceeding before the United
States Patent and Trademark Office, or any similar office or agency in any
other country or any political subdivision thereof, to maintain and pursue
each application (and to obtain the relevant registration) and to maintain
each registration of the Patents and Trademarks, including, without
limitation, (A) as to Trademarks, the filing of applications for renewal,
affidavits of use and affidavits of incontestability and (B) as to Patents,
the payment of maintenance fees.
(vi) In the event that any Patent or Trademark included in
the Collateral is infringed, misappropriated or diluted by a third party,
the Grantor shall promptly notify the Lender after it learns thereof and
shall, unless the Grantor shall reasonably determine that such Patent or
Trademark is not of material economic value to the Grantor, promptly sue
for infringement, misappropriation or dilution, to seek injunctive relief
where appropriate and to recover any and all damages for such infringement,
misappropriation or dilution, or take such other actions as the Grantor
shall reasonably deem appropriate under the circumstances to protect such
Patent or Trademark.
5. Lender's Appointment as Attorney-in-Fact.
----------------------------------------
(a) Powers. The Grantor hereby irrevocably constitutes and
------
appoints the Lender and any officer or agent thereof, with full power of
substitution, as its true and lawful attorney-in-fact with full irrevocable
power and authority in the place and stead of the Grantor and in the name of the
Grantor or in its own name, from time to time in the Lender's discretion, for
the purpose of carrying out the terms of this Security Agreement, to take any
and all appropriate action and to execute any and all documents and instruments
which may be necessary or desirable to accomplish the purposes of this Security
Agreement, and, without limiting the generality of the foregoing, the Grantor
hereby gives the Lender the power and right, on behalf of the Grantor, without
notice to or assent by the Grantor, to do the following:
(i) upon the occurrence and during the continuance of any
Event of Default, in the name, of the Grantor or its own name, or
otherwise, to take possession of and endorse and collect any checks,
drafts, notes, acceptances or other instruments for the payment of moneys
due under any Instrument or General Intangible and to file any claim or to
take any other action or proceeding in any court of law or equity or
otherwise deemed appropriate by the Lender for the purpose of collecting
any and all such moneys due under any Instrument or General Intangible
whenever payable, or to pay or discharge taxes and Liens levied or placed
on or threatened against the Collateral, to effect any repairs or any
incurrence called for by the terms of this
<PAGE>
10
Security Agreement and to pay all or any part of the premiums therefor and
the costs thereof; and
(ii) upon the occurrence and during the continuance of any Event
of Default, (A) to direct any Person liable for any payment under any of
the Collateral to make payment of any and all moneys due or to become due
thereunder directly to the Lender or as the Lender shall direct; (B) to ask
or demand for, collect, receive payment of and receipt for, any and all
moneys, claims and other amounts due or to become due at any time in
respect of or arising out of any Collateral; (C) to sign and endorse any
invoices, freight or express bills, bills of lading, storage or warehouse
receipts, drafts against debtors, assignments, verifications, notices and
other documents in connection with any of the Collateral; (D) to commence
and prosecute any suits, actions or proceedings at law or in equity in any
court of competent jurisdiction to collect the Collateral or any thereof
and to enforce any other right in respect of any Collateral; (E) to defend
any suit, action or proceeding brought against the Grantor with respect to
any Collateral; (F) to settle, compromise or adjust any suit, action or
proceeding described in clause (E) above and, in connection therewith, to
give such discharges or releases as the Lender may deem appropriate; (G) to
assign any Patent or Trademark (along with the goodwill of the business to
which any such Trademark pertains), throughout the world for such term or
terms, an such conditions and in such manner, as the Lender shall in its
sole discretion determine; and (H) generally, to sell, transfer, pledge and
make any agreement with respect to or otherwise deal with any of the
Collateral as fully and completely as though the Lender were the absolute
owner thereof for all purposes, and to do, at the Lender's option and the
Grantor's expense, at any time, or from time to time, all acts, and things
which the Lender deems necessary to protect, preserve or realize upon the
Collateral and the Lender's Liens thereon and to effect the intent of this
Security Agreement, all as fully and effectively as the Grantor might do.
The Grantor hereby ratifies all that said attorneys shall lawfully do
or cause to be done by virtue hereof. This power of attorney is a power coupled
with an interest and shall be irrevocable.
(b) No Duty on Lender's Part. The powers conferred on the Lender
------------------------
hereunder are solely to protect the Lender's interests in the Collateral and
shall not impose any duty upon the Lender to exercise any such powers. The
Lender shall be accountable only for amounts that they actually receive as a
result of the exercise of such powers, and neither it nor any of its officers,
directors, employees or agents shall be responsible to the Grantor for any act
or failure to act hereunder, except for their own gross negligence or willful
misconduct.
<PAGE>
11
6. Performance by Lender of Grantor's Obligations. If the Grantor
----------------------------------------------
fails to perform or comply with any of its agreements contained herein and the
Lender, as provided for by the terms of this Security Agreement, shall itself
perform or comply, or otherwise cause performance or compliance, with such
agreement, the expenses of the Lender incurred in connection with such
performance or compliance, together with interest thereon at a rate per annum
specified in the Promissory Note for amounts owing when an Event of Default has
occurred and is continuing, shall be payable by the Grantor to the Lender on
demand and shall be secured hereby.
7. Remedies. If an Event of Default shall occur and be continuing,
--------
the Lender may exercise in addition to all other rights and remedies granted to
it in this Security Agreement and in any other instrument or agreement securing,
evidencing or relating to the obligations, all rights and remedies of a secured
party under the Code. Without limiting the generality of the foregoing, the
Lender, without demand of performance or other demand, presentment, protest,
advertisement or notice of any kind (except the notice specified below of time
and place of public or private sale) to or upon the Grantor or any other Person
(all and each of which demands, defenses, advertisements and notices are hereby
waived), may in such circumstances forthwith collect, receive, appropriate and
realize upon the Collateral, or any part thereof, and/or may forthwith sell,
lease, assign, give option or options to purchase, or otherwise dispose of and
deliver said Collateral or any part thereof (or contract to do any of the
foregoing), in one or more parcels at public or private sale or sales, at any
exchange, broker's board or office of the Lender or elsewhere upon such terms
and conditions as it may deem advisable and at such prices as it may deem best,
for cash or on credit or for future delivery without assumption of any credit
risk. The Lender shall have the right upon any such public sale or sales, and,
to the extent permitted by law, upon any such private sale or sales, to purchase
the whole or any part of said Collateral so sold, free of any right or equity of
redemption in the Grantor, which right or equity is hereby waived or released.
The Grantor further agrees, at the Lender's request, to assemble the Collateral
and make it available to the Lender at places which the Lender shall reasonably
select, whether at the Grantor's premises or elsewhere. The Lender shall apply
the net proceeds of any such collection, recovery, receipt, appropriation,
realization or sale, after deducting all reasonable costs and expenses of every
kind incurred therein or incidental to the care or safekeeping of any of the
collateral or in any way relating to the Collateral or the rights of the Lender
hereunder (including, without limitation, reasonable fees and disbursements of
legal counsel, accountants, auctioneers, appraisers, investment bankers and
other financial advisors), to the payment in whole or in part of the Loan, in
such order as the Lender may elect, and only after such application and after
the payment by the Lender of any other amount required by any provision of law,
including, without limitation, Section 9-504(1)(c) of the Code, need the Lender
account for the surplus, if any, to the Grantor. To the extent permitted by
applicable law, the Grantor waives all claims, damages, and demands against the
Lender arising out of the exercise by them of any rights hereunder.
<PAGE>
12
If any notice of a proposed sale or other disposition of Collateral shall be
required by law, such notice shall be deemed reasonably and properly given if
given (effective upon dispatch) by first-class mail, postage prepaid, addressed
to the Grantor at its address set forth herein at least 10 days before such sale
or other disposition. The Grantor shall remain liable for any deficiency if the
proceeds of any sale or other disposition of the Collateral are insufficient to
pay the Loan and the fees and disbursements of any attorneys employed by the
Lender to collect such deficiency.
8. Limitation on the Lender's Duties in Respect of Collateral. The
----------------------------------------------------------
Lender's sole duty with respect to the custody, safekeeping and physical
preservation of the Collateral in its possession, under Section 9-207 of the
Uniform Commercial Code or otherwise, shall be to deal with it in the same
manner as the Lender deals with similar property for its own account. Subject
to the provisions of the immediately preceding sentence, neither the Lender, nor
any of its directors, officers, employees or agents shall be liable for failure
to demand, collect or realize upon all or any part of the Collateral or for any
delay in doing so or shall be under any obligation to sell or otherwise dispose
of any Collateral upon the request of the Grantor or otherwise.
9. Powers Coupled with an Interest. All authorizations and agencies
-------------------------------
herein contained with respect to the Collateral are irrevocable and powers
coupled with an interest.
10. Severability. Any provision of this Security Agreement which is
------------
prohibited or unenforceable in any jurisdiction shall, as to such jurisdiction,
be ineffective to the extent of such prohibition or unenforceability without
invalidating' the remaining provisions hereof, and any such prohibition or
unenforceability in any jurisdiction shall not invalidate or render
unenforceable such provision in any other jurisdiction.
11. Paragraph Headings. The paragraph headings used in this Security
------------------
Agreement are for convenience of reference only and are not to affect the
construction hereof or be taken into consideration in the interpretation hereof.
12. Termination; Etc. The security interest in Collateral created
-----------------
hereby shall terminate when all amounts owed under the Promissory Note have been
paid and finally discharged in full. Subject to the provisions of Section 13
hereof, Lender shall execute and deliver to the Grantor such UCC-3 termination
statements as may be necessary to terminate any currently effective UCC-1
financing statements upon the termination of the security interest as provided
herein.
13. Reinstatement. Notwithstanding the provisions of Section 12
-------------
hereof, this Agreement, and the security interest granted hereunder, shall
continue to be effective or be reinstated, as the case may be, if at any time
any amount received by
<PAGE>
13
Lender in respect of the Collateral is rescinded or must otherwise be restored
or returned by Lender in respect of the Collateral upon the insolvency,
bankruptcy, dissolution, liquidation or reorganization of the Grantor or upon
the appointment of any intervenor, receiver, or conservator of, or trustee or
similar official for, the Grantor or any substantial part of its properties, or
otherwise, all as though such payments had not been made.
14. No Waiver; Cumulative Remedies. The Lender shall not by any act
------------------------------
(except pursuant to the execution of a written instrument pursuant to Section 15
hereof), delay, indulgence, omission or otherwise be deemed to have waived any
right or remedy hereunder or to have acquiesced in any Event of Default or in
any breach of any of the terms and conditions hereof. No failure to exercise,
nor any delay in exercising, on the part of the Lender, any right, power or
privilege hereunder shall operate as a waiver thereof. No single or partial
exercise of any right, power or privilege hereunder shall preclude any other or
further exercise thereof or the exercise of any other right, power or privilege.
A waiver by the Lender of any right or remedy hereunder on any one occasion
shall not be construed as a bar to any right or remedy which the Lender would
otherwise have on any future occasion. The rights and remedies herein provided
are cumulative, may be exercised singly or concurrently and are not exclusive of
any rights or remedies provided by law.
15. Waivers and Amendments; Successors and Assigns; Governing Law.
-------------------------------------------------------------
None of the terms or provisions of this Security Agreement way be waived,
amended, supplemented or otherwise modified except by a written instrument
executed by the Grantor and the Lender. This Security Agreement shall be
binding upon the successors and assigns of the Grantor and shall inure to the
benefit of the Lender and its successors and assigns. This Security Agreement
shall be governed by, and construed and interpreted in accordance with, the laws
of the State of New York.
16. Integration. This Security Agreement represents the agreement of
-----------
the Grantor and the Lender with respect to the subject matter hereof and there
are no promises or representations by the Lender relative to the subject matter
hereof not reflected herein or in the Promissory Note.
IN WITNESS WHEREOF, the Grantor has caused this Security Agreement to
be duly executed and delivered as of the date first above written.
PAMECO CORPORATION
By: ____________________________
Name:
Title:
<PAGE>
14
QUILVEST AMERICAN EQUITY LTD.
By: ____________________________
Name:
Title:
<PAGE>
SCHEDULE I to
Security Agreement
------------------
Patents
- -------
1. On June 3, 1988, Westbrook Distributing, Inc., a Texas
corporation ("Westbrook") entered into an agreement with Charles T. Sweeney and
Tetravalent, Inc. whereby Westbrook became a licensee and sublicensee for
certain United States and foreign patents and for the following trademarks
registered with the United States Patent and Trademark Office: "KING CHLOR"
(became registered on January 7, 1984 - Reg. No. 1,194,648) and "Tetravalent"
(became registered on November 12, 1985 - Reg. No. 1,369,899). Westbrook has
been merged into the Grantor.
<PAGE>
SCHEDULE II to
Security Agreement
------------------
Trademarks
- ----------
1. The name "Melco" and design became registered with the
United States Patent and Trademark Office on April 4, 1950, under registration
523,300. This trademark was assigned to Metchior, Armstrong, Dessau, Inc., a
Delaware corporation and a wholly-owned subsidiary of Seller, which assignment
was recorded on December 6, 1961. This Trademark was assigned to the Grantor and
was recorded on _____________.
2. The name "Thermal Supply" and design became registered
with the United States Patent and Trademark Office on May 19, 1976, under
registration number 1,039,937. This trademark was assigned to the Grantor and
was recorded on July 23, 1990.
3. The design for Thermal Company became registered with the
United States Patent and Trademark Office on July 13, 1982. This trademark has
been cancelled due to failure to file the required affidavit during the one-year
period after registration.
4. On May 8, 1989, the Grantor applied to register the name
"Thermal Zone" and design with the United States Patent and Trademark Office
under serial numbers 73/798,309 (class 11) and 73/799,130 (class 3).
5. See item 1 in Schedule I hereto.
Trade Names
- -----------
The RAC Group entities use, or have used, the following names
in the operation of their business, in addition to those names (or portions
thereof) appearing above. Such names may or may not be registered as trade names
in one or more jurisdictions:
1. National Temperature Control Centers
2. Melchior, Armstrong, Dessau
3. Westbrook Distributing
4. Graves Refrigeration
5. R&R Supply Company
6. Gulf Coast Air Conditioning Suppliers
7. Graves Brothers Refrigeration Supplies
8. Knoxville Refrigeration Supply Company
9. J&P Supply Company
<PAGE>
REDWOOD FEE LETTER
December 30, 1999
Pameco Corporation
World Headquarters
1000 Center Place
Norcross, Georgia 30093
Pameco Securitization Corporation
1000 Center Place - Suite A
Norcross, Georgia 30093
Ladies and Gentlemen:
We refer to (i) the Receivables Purchase and Servicing Agreement dated
as of April 29, 1996, as amended (the "Purchase Agreement") among Pameco
Securitization Corporation, as seller (the "Seller"), Redwood Receivables
Corporation, as purchaser ("Redwood"), General Electric Capital Corporation, as
operating agent ("GECC"), and Pameco Corporation ("Pameco"), as servicer and
(ii) Amendment No. 8 to Securitization Agreements (the "Amendment"), dated as of
the date hereof, among Seller, Pameco, Redwood and GECC. Terms not otherwise
defined in this letter shall have the meanings assigned to them under the
Purchase Agreement.
This letter is the Fee Letter referred to in the Purchase Agreement
and sets forth our understanding with respect to certain fees that are payable
by the Seller and Pameco pursuant to the Purchase Agreement. This letter
supersedes and replaces that certain Fee Letter among us dated June 11, 1999.
The parties to this letter agree as follows:
1. The Seller shall pay an Unused Commitment Fee equal to one-
quarter of one percent (0.25%) per annum calculated daily and payable
monthly on the amount by which the Maximum Purchase Limit exceeds the
outstanding Capital Investment on such date
2. Upon any reduction of the Maximum Purchase Limit, in whole or in
part, on or before October 16, 2001, the Seller shall pay a Maximum
Purchase Limit Reduction Fee in an amount equal to one-quarter of one
percent (0.25%) on such reduction of the Maximum Purchase Limit.
3. The provisions of Sections 14.04(a) of the Purchase Agreement are
incorporated herein.
4. This letter shall be governed by, and construed in accordance
with the internal laws of the State of New York.
<PAGE>
Very truly yours,
GENERAL ELECTRIC CAPITAL
CORPORATION, as Lender, as Agent and as
Operating Agent
By:______________________________
Name:
Title:
REDWOOD RECEIVABLES CORPORATION
By:______________________________
Name:
Title:
-2-
<PAGE>
Agreed and accepted as of
the date first above written:
PAMECO SECURITIZATION CORPORATION
as Seller
By:_____________________
Name:
Title:
PAMECO CORPORATION
as Servicer
By:_____________________
Name:
Title:
-3-
<PAGE>
SUBORDINATION AND INTERCREDITOR AGREEMENT
-----------------------------------------
This SUBORDINATION AND INTERCREDITOR AGREEMENT (this "Agreement") is
entered into as of December 30, 1999 by and among QUILVEST AMERICAN EQUITY LTD
("Junior Creditor"), PAMECO CORPORATION, a Georgia corporation ("Company"), and
GENERAL ELECTRIC CAPITAL CORPORATION, a New York corporation, as agent (together
with its successors and assigns, "Agent") for all Lenders (which term shall
include the successors and assigns thereof) party to the Credit Agreement
described below.
W I T N E S S E T H:
- - - - - - - - - -
WHEREAS, Company, Agent and Lenders have entered into an Amended and
Restated Credit Agreement dated as of March 10, 1998 (as the same may be
amended, refinanced, replaced, restated, supplemented or otherwise modified from
time to time, the "Credit Agreement") pursuant to which, among other things,
Lenders have agreed, subject to the terms and conditions set forth in the Credit
Agreement, to make certain loans and financial accommodations to Company;
WHEREAS, Company and Junior Creditor have entered into a Security
Agreement and a Pledge Agreement of even date herewith pursuant to which the
Company has granted Junior Creditor a security interest in certain collateral to
secure a loan by Junior Creditor in the principal amount of $7,500,000, which
loan is evidenced by a promissory note (as the same may be amended, supplemented
or otherwise modified from time to time as permitted hereunder, collectively,
the "Junior Agreement").
WHEREAS, as a condition precedent to the agreement of Agent and the
Lenders to the Company's granting of security to the Junior Creditor, Lenders
have required the execution and delivery of this Agreement by Junior Creditor
and Company;
NOW, THEREFORE, in order to induce Lenders to consummate the
transactions contemplated by the Credit Agreement, and for other good and
valuable consideration, the receipt and sufficiency of which hereby are
acknowledged, the parties hereto hereby agree as follows:
1. Definitions. All capitalized terms used in this Agreement without
-----------
definition shall have the meanings ascribed to such terms in the Credit
Agreement. The following terms shall have the following meanings in this
Agreement:
"Collection Action" shall mean (a) to demand, sue for, take or receive
-----------------
from or on behalf of Company, by set-off, demand for cash collateral or in any
other manner, the whole or any part of any moneys which may now or hereafter be
owing by the Company with respect to the Junior Debt, (b) to initiate or
participate with others in any suit, action or proceeding against Company to (i)
enforce payment of or to collect the whole or any part of the Junior Debt or
(ii) commence judicial enforcement of any of the rights and remedies under the
Junior Debt Documents or applicable law with respect to the Junior Debt or the
Junior Debt Documents, (c) to accelerate any Junior Debt unless the Senior Debt
has been accelerated, (d) to exercise any put option or to cause Company to
honor any redemption or mandatory prepayment or cash
<PAGE>
collateralization obligation under any Junior Debt Document, (e) to take any
action with respect to the Collateral under the Pledge Agreement or exercise any
rights or remedies thereunder, or (f) to take any action to realize upon any
Collateral or to exercise any right or remedy with respect to the Collateral.
"Indefeasible Payment" or "Indefeasibly Paid" shall mean, with respect
-------------------- -----------------
to the making of any payment on or in respect of any Senior Debt, a payment in
cash of such Senior Debt in full, which payment is not subject to avoidance or
rescission in any Proceeding that has been commenced at or within ninety days of
the time of such payment.
"Junior Debt" shall mean all of the obligations of Company to Junior
-----------
Creditor evidenced by or arising under or by virtue of the Junior Agreement and
all other amounts now or hereafter owed by Company to Junior Creditor under any
of the Junior Debt Documents.
"Junior Debt Documents" shall mean the Junior Agreement and all other
---------------------
documents and instruments to which Company is a party and which evidence or
pertain to all or any portion of the Junior Debt.
"Junior Default" shall mean (i) a default in the payment of the Junior
--------------
Debt or performance of any term, covenant or condition contained in the Junior
Debt Documents or (ii) any other occurrence permitting Junior Creditor to
accelerate or demand payment of, put or cause the redemption of, or requirement
of cash collateral for, all or any portion of the Junior Debt or any Junior Debt
Document.
"Junior Default Notice" shall mean a written notice from Junior
---------------------
Creditor or Company to Agent pursuant to which Agent is notified of the
occurrence of a Junior Default, which notice incorporates a reasonably detailed
description of such Junior Default.
"Proceeding" shall mean any voluntary or involuntary insolvency,
----------
bankruptcy, receivership, custodianship, liquidation, dissolution or
reorganization involving the Company as debtor, assignment for the benefit of
creditors of the Company, appointment of a custodian, receiver, trustee or other
officer with similar powers with respect to the Company or a substantial portion
of its assets or any other proceeding for the liquidation, dissolution or other
winding up of the Company.
"Senior Debt" shall mean the "Obligations," as such term is defined in
-----------
the Credit Agreement, together with (a) all complete or partial refinancings of
the Obligations, (b) any amendments, modifications, renewals or extensions of
any of the foregoing and (c) any interest accruing on the foregoing on or after
the commencement of a Proceeding, without regard to whether or not such interest
is an allowed claim. Senior Debt shall be considered to be outstanding whenever
any loan commitment under the Credit Agreement is outstanding.
"Senior Debt Documents" shall mean the Credit Agreement and all other
---------------------
documents and instruments evidencing or pertaining to all or any portion of the
Senior Debt.
"Senior Debt Payoff" shall mean, with respect to the Senior Debt, that
------------------
the Senior Debt has been Indefeasibly Paid, and all commitments to lend under
the Credit Agreement have been terminated.
-2-
<PAGE>
"Senior Default" shall mean any "Default" or "Event of Default"
--------------
described in the Credit Agreement, or any condition or event that, after notice
or lapse of time or both, would constitute such an Event of Default if that
condition or event were not cured or removed within any applicable grace or cure
period set forth therein.
2. Subordination.
-------------
(a) Subordination of Junior Debt to Senior Debt. Company
-------------------------------------------
covenants and agrees, and the Junior Creditor by its acceptance of the
Junior Agreement (whether upon original issue or upon transfer or
assignment) likewise covenants and agrees, that (i) the payment by Company
of any and all of the Junior Debt shall be subordinate and subject in right
of payment, to the extent and in the manner hereinafter set forth, to the
prior Indefeasible Payment of the Senior Debt and (ii) the existing and
hereafter acquired liens and security interests of Agent or any Lender
securing all or any portion of the Senior Debt (whether or not arising pre-
petition or post-petition, and whether or not granted pursuant to the
Senior Debt Documents, a debtor-in-possession financing provided to Company
by Agent, any Lender and/or any other Person, or the post-petition use of
cash collateral by Company) shall be senior, regardless of the time or
method of perfection, to all existing and hereafter acquired liens and
security interests of Junior Creditor (or any agent therefore) securing all
or any portion of the Junior Debt. Junior Creditor hereby consents and
agrees that Agent may, and authorizes Agent to, purchase, sell, assign,
release, abandon, or dispose of the Collateral by private or public sale
with or without notice, pursuant to court order, under Section 363 of the
Bankruptcy Code or otherwise and by any means, all free and clear of any
interest or claim of or by Junior Creditor with respect thereto, and all
without any liability of Agent or any Lender whatsoever to account for,
allocate or deliver to Junior Creditor any proceeds or distributions
received by Agent or any Lender as a result thereof (provided that if and
to the extent the Senior Debt is Indefeasibly Paid and the commitments to
extend Senior Debt are terminated, Agent will deliver to Junior Lender, in
the form thereof, but without recourse, the residual interest of Agent and
Lenders in such proceeds or distributions). So long as any Senior Debt or
commitment to extend any Senior Debt is outstanding, Junior Creditor
waives, with respect to Company's assets or the enforcement of any right or
remedy of Agent or any Lender arising under any Senior Debt Document, this
Agreement or at law or in equity, any requirement regarding, and agrees not
to demand, request, plead or otherwise claim the benefit of, any
marshalling, foreclosure, appraisement, valuation, adequate protection or
any other right (including without limitation, under Section 361, 363 or
1111(b) or any other section of the Bankruptcy Code) contemplated at law or
in equity (whether or not relating to notice, diligence, presentment,
demand, protest, setoff, reliance, defense, counterclaim or election) that
may otherwise be available to Junior Creditor; provided, however, that
Junior Creditor may request adequate protection under Sections 361 and 363
of the Bankruptcy Code if adequate protection is being provided for the
Senior Debt and the Senior Debt is not prejudiced by the request of Senior
Creditor. Each holder of Senior Debt, whether now outstanding or hereafter
created, incurred, assumed or guaranteed, shall be deemed to have acquired
Senior Debt in reliance upon the provisions contained in this Agreement.
Nothing contained in the foregoing provisions is intended to or shall
impair, as between
-3-
<PAGE>
the Junior Creditor and the Company, the obligations of the Company to such
Junior Creditor.
(b) Proceedings. In the event of any Proceeding, (i) all Senior
-----------
Debt first shall be Indefeasibly Paid before any payment of or with respect
to the Junior Debt shall be made; (ii) any payment or distribution, whether
in cash, property or securities which, but for the terms hereof, otherwise
would be payable or deliverable in respect of the Junior Debt, shall be
paid or delivered directly to Agent (to be held and/or applied by Agent in
accordance with the terms of the Credit Agreement) until all Senior Debt is
Indefeasibly Paid, and Junior Creditor irrevocably authorizes, empowers and
directs all receivers, trustees, liquidators, custodians, conservators and
others having authority in the premises to effect all such payments and
distributions, and Junior Creditor also irrevocably authorizes, empowers
and directs Agent to demand, sue for, collect and receive every such
payment or distribution provided, however, that no such delivery of stock
-------- -------
or debt instruments that are issued to the Junior Creditor (the "New
Subordinated Obligations") pursuant to such Proceeding shall be made to the
Agent if such stock or debt instruments are (x) authorized by any order or
decree entered by a court of competent jurisdiction in a Proceeding under
any applicable bankruptcy or reorganization law, which gives full effect to
the subordination of the Junior Debt to the Senior Debt as provided herein,
and (y) which New Subordinated Obligations are expressly subordinate and
junior at least to the extent provided in this Agreement to the payment of
all Senior Debt then outstanding and to the payment of any stock or debt
instruments which are issued in exchange or substitution for any Senior
Debt then outstanding; (iii) Junior Creditor agrees to execute and deliver
to Agent or its representative all such further instruments confirming the
authorization referred to in the foregoing clause (ii); (iv) Junior
Creditor agrees not to initiate or prosecute or encourage any other person
to initiate or prosecute (and, in any event, Junior Creditor agrees not to
participate on any creditor's committee with respect to Company or the
Collateral) any claim, action or other proceeding challenging the
enforceability of the Senior Debt, any liens and security interests
securing the Senior Debt, or any adequate protection rights granted by any
bankruptcy court in favor of Agent or any Lender; (v) Junior Creditor
agrees not to object to, or seek adequate protection in respect of, any use
of cash collateral by Company under Section 363 of the Bankruptcy Code
permitted by Agent or any Lender or any borrowing by Company from Agent,
any Lender and/or any other Person permitted by Agent or any Lender, or to
any grant of a lien or security interest by any Person in favor of Agent,
any Lender and/or any other Person permitted by Agent or any Lender, under
Section 364 of the Bankruptcy Code; provided, however, that Junior Creditor
-------- -------
may request adequate protections under Section 361 and 363 of the
Bankruptcy Code if adequate protection is being provided for the Senior
Debt and the Senior Debt is not prejudiced by the request of Junior
Creditor; and (vi) Junior Creditor agrees to execute, verify, deliver and
file any proofs of claim in respect of the Junior Debt in connection with
any such Proceeding and hereby irrevocably authorizes, empowers and
appoints Agent its agent and attorney-in-fact to (A) execute, verify,
deliver and file such proofs of claim upon the failure of Junior Creditor
promptly to do so (and, in any event, prior to 30 days before the
expiration of the time to file any such proof) and (B) vote such claim in
any such Proceeding upon the failure of Junior Creditor to do so prior to
15 days before the expiration of the time to vote any such claim; provided
Agent shall have no obligation to execute, verify, deliver,
-4-
<PAGE>
file and/or vote any such proof of claim. In the event that Agent votes any
claim in accordance with the authority granted hereby, Junior Creditor
shall not be entitled to change or withdraw such vote. The Senior Debt
shall continue to be treated as Senior Debt and the provisions of this
Agreement shall continue to govern the relative rights and priorities of
Lenders and Junior Creditor even if all or part of the Senior Debt or the
security interests securing the Senior Debt are subordinated, set aside,
avoided or disallowed in connection with any such Proceeding and this
Agreement shall be reinstated if at any time any payment of any of the
Senior Debt is rescinded or must otherwise be returned by any holder of
Senior Debt or any representative of such holder.
(c) Payment Upon Senior Default. Company may not make and Junior
---------------------------
Creditor may not receive any payment of principal, interest or any other
amount due with respect to the Junior Debt if (i) at the time of such
payment a Senior Default exists which shall not have been cured or waived
in accordance with the terms of the Senior Debt Documents or (ii) the
making of such payment would result in a Senior Default.
(d) Permitted Payments. To the extent not prohibited under this
------------------
Agreement, including without limitation, under Section 2(b) or Section
2(c), Company shall not be prohibited from making, and the Junior Creditor
shall not be prohibited from receiving, regularly scheduled interest
payments made pursuant to the terms of the Junior Agreement. Company shall
be prohibited from making, and the Junior Creditor shall be prohibited from
receiving, payments of principal to the Junior Creditor prior to the
Indefeasible Payment of the Senior Debt.
(e) Restriction on Action by Junior Creditor. Until the Senior
----------------------------------------
Debt is Indefeasibly Paid, notwithstanding anything contained in the Junior
Debt Documents or the Senior Debt Documents to the contrary, Junior
Creditor shall not, without the prior written consent of Required Lenders,
take any Collection Action with respect to the Junior Debt or agree to any
amendment, modification or supplement to the Junior Debt Documents, unless
such action is required to prevent the expiration of any applicable statute
of limitation or similar provision and provided that in any such Collection
Action, Junior Creditor shall not, without the consent of the Agent,
realize upon any Collateral. Such consent shall not be unreasonably
withheld in the case of any amendment, modification or supplement to the
Junior Debt Documents that does not have an adverse effect upon the rights
or interests of the Agent of the Lenders.
(f) Incorrect Payments. If any payment or distribution on
------------------
account of the Junior Debt not permitted to be made by Company or received
by Junior Creditor under this Agreement is received by Junior Creditor
before a Senior Debt Payoff, such payment or distribution shall not be
commingled with any asset of Junior Creditor, shall be held in trust by
Junior Creditor for the benefit of Lenders and shall be promptly paid over
to Agent, or its designated representative, for application (in accordance
with the Credit Agreement) to the payment of the Senior Debt then remaining
unpaid, until all of the Senior Debt is Indefeasibly Paid.
-5-
<PAGE>
(g) Sale, Transfer, etc. Junior Creditor shall not sell, assign,
-------------------
pledge, dispose of or otherwise transfer all or any portion of the Junior
Debt or any Junior Debt Document (i) without giving prior written notice of
such action to Agent, and (ii) unless prior to the consummation of any such
action, the transferee thereof shall execute and deliver to Agent an
agreement substantially identical to this Agreement, providing for the
continued subordination and forbearance of the Junior Debt to the Senior
Debt as provided herein and for the continued effectiveness of all of the
rights of Agent and Lenders arising under this Agreement. Notwithstanding
the failure to execute or deliver any such agreement, the subordination
effected hereby shall survive any sale, assignment, pledge, disposition or
other transfer of all or any portion of the Junior Debt, and the terms of
this Agreement shall be binding upon the successors and assigns of Junior
Creditor, as provided in Section 12 below.
(h) Legends. Until a Senior Debt Payoff, the Junior Agreement at
-------
all times shall contain in a conspicuous manner the following legend:
"This instrument and the rights and obligations evidenced hereby are
subordinate in the manner and to the extent set forth in that certain
Subordination and Intercreditor Agreement (the "Subordination
Agreement") dated as of December 30, 1999 among Pameco Corporation
(the "Company"), Quilvest American Equity LTD, and General Electric
Capital Corporation ("Agent"), to the indebtedness (including
interest) owed by Company pursuant to that certain Amended and
Restated Credit Agreement dated as of March 10, 1998 among Company,
Agent and the lenders from time to time party thereto, as such Credit
Agreement has been and hereafter may be amended, supplemented or
otherwise modified from time to time; and each holder of this
instrument, by its acceptance hereof, shall be bound by the provisions
of the Subordination Agreement. In the event of any conflict between
the terms of this instrument and the Subordination Agreement, the
terms of the Subordination Agreement shall control."
(i) Release of Liens and Related Matters. Except following a
------------------------------------
Senior Debt Payoff, in the event that Agent is required pursuant to the
terms of the Credit Agreement or any other Senior Debt Document to release
its liens and security interests in any of the Collateral securing the
Senior Debt, or in the event that Agent voluntarily elects to release its
liens and security interests in any of the Collateral securing the Senior
Debt, Junior Creditor shall (or shall cause its agent to) release, on a
prompt basis, and shall thereupon be deemed to have released without any
further action, any liens and security interests which it may have in such
Collateral. Concurrently with the execution of this Agreement, the Junior
Creditor has delivered to Agent duly executed and undated UCC termination
statements and other applicable collateral releases with respect to the
Junior Creditor's liens in the Collateral. Junior Creditor acknowledges
and agrees that Agent may file such statements and other releases of record
in connection with a release of Junior Creditor's liens in the Collateral
pursuant to this Agreement, other than in connection with a Senior Debt
Payoff. Junior Creditor shall from time to time promptly deliver to Agent
such additional documents of termination or release with respect to the
-6-
<PAGE>
liens of Junior Creditor as Agent may request to effect any release of
liens of Junior Creditor pursuant to this Agreement. Upon termination of
this Agreement, Agent shall return such termination statements and other
releases (if not filed) to Junior Creditor or as otherwise required by
applicable law. Junior Creditor agrees that neither Agent nor Lenders (i)
shall be deemed or otherwise considered to be acting as an agent or in any
other fiduciary capacity on behalf of Junior Creditor or the Junior Debt by
virtue of this Agreement or otherwise and (ii) shall have any duty to
Junior Creditor other than to return unfiled termination statements and
other releases to Junior Creditor pursuant to this Agreement. Junior
Creditor agrees that neither Agent nor any Lender shall have any liability
to Junior Creditor for, and Junior Creditor hereby waives, any claim which
Junior Creditor may have at any time against Agent or any Lender arising
out of any and all actions which Agent or any Lender may take or omit to
take not in violation of this Agreement, including, without limitation,
with respect to (A) any Senior Debt Document, (B) collection of Senior Debt
and (C) foreclosure upon and sale, liquidation or other disposition, or
valuation, use, protection or release, of any of Company's assets.
3. Modifications to Senior Debt. Lenders may at any time and from
----------------------------
time to time without the consent of or notice to Junior Creditor, without
incurring liability to the Junior Creditor and without impairing or releasing
the obligations of the Junior Creditor under this Agreement, change the manner
or place of payment or extend the time of payment of or renew, increase or alter
any Senior Debt, or amend in any manner any agreement, note, guaranty or other
instrument evidencing or securing or otherwise relating to the Senior Debt.
4. Continued Effectiveness of this Agreement. The terms of this
-----------------------------------------
Agreement, the subordination effected hereby, and the rights and the obligations
of Junior Creditor, Company, Agent or Lenders arising hereunder, shall not be
affected, modified or impaired in any manner or to any extent by: (a) any
amendment or modification of or supplement to the Credit Agreement, any of the
other Senior Debt Documents or any of the Junior Debt Documents; (b) the
validity or enforceability of any of such documents; or (c) any exercise or non-
exercise of any right, power or remedy under or in respect of the Senior Debt or
the Junior Debt or any of the instruments or documents referred to in clause (a)
above. The Junior Creditor and each holder of Junior Debt hereby acknowledge
that the provisions of this Agreement are intended to be enforceable at all
times, whether before the commencement of, after the commencement of, in
connection with or premised on the occurrence of a Proceeding.
5. No Contest by Junior Creditor. Junior Creditor agrees that it
-----------------------------
will not at any time contest the validity, perfection, priority or
enforceability of the Senior Debt, the Senior Debt Documents, or the security
interests of Agent and Lenders.
6. Representations and Warranties. Junior Creditor hereby represents
------------------------------
and warrants to Agent and Lenders that (a) Junior Creditor is the current owner
and holder of the Junior Agreement and Junior Debt, (b) no Junior Default exists
under or with respect to the Junior Agreement or any of the other Junior Debt
Documents (c) Junior Creditor has the authority to execute, deliver and perform
under the Junior Debt Documents.
-7-
<PAGE>
7. Junior Default Notice. Junior Creditor and Company each shall
---------------------
provide Agent with a Junior Default Notice upon the occurrence of each Junior
Default, and Junior Creditor shall notify Agent in the event such Junior Default
is cured or waived.
8. Cumulative Rights, No Waivers. Each and every right, remedy and
-----------------------------
power granted to Agent or Lenders hereunder shall be cumulative and in addition
to any other right, remedy or power specifically granted herein, in the Credit
Agreement or the other Senior Debt Documents or now or hereafter existing in
equity, at law, by virtue of statute or otherwise, and may be exercised by Agent
or Lenders, from time to time, concurrently or independently and as often and in
such order as Agent or Lenders may deem expedient. Any failure or delay on the
part of Agent or Lenders in exercising any such right, remedy or power, or
abandonment or discontinuance of steps to enforce the same, shall not operate as
a waiver thereof or affect the rights of Agent or Lenders thereafter to exercise
the same, and any single or partial exercise of any such right, remedy or power
shall not preclude any other or further exercise thereof or the exercise of any
other right, remedy or power, and no such failure, delay, abandonment or single
or partial exercise of the rights of Agent or Lenders hereunder shall be deemed
to establish a custom or course of dealing or performance among the parties
hereto.
9. Modification. Any modification or waiver of any provision of this
------------
Agreement, or any consent to any departure by Junior Creditor therefrom, shall
not be effective in any event unless the same is in writing and signed by Agent,
and then such modification, waiver or consent shall be effective only in the
specific instance and for the specific purpose given. Any notice to or demand on
Junior Creditor in any event not specifically required of Agent hereunder shall
not entitle Junior Creditor to any other or further notice or demand in the
same, similar or other circumstances unless specifically required hereunder.
10. Additional Documents and Actions. Junior Creditor at any time,
--------------------------------
and from time to time, after the execution and delivery of this Agreement,
promptly will execute and deliver such further documents and do such further
acts and things as Agent reasonably may request that may be necessary in order
to effect fully the purposes of this Agreement.
11. Subrogation. If any payment or distribution to which the holders
-----------
of the Junior Debt would otherwise have been entitled (but for the provisions of
this Agreement) shall have been turned over to the holders of the Senior Debt or
otherwise applied to the payment of the Senior Debt pursuant to the provisions
of this Agreement, then the holders of the Junior Debt shall be entitled to
receive from the holders of the Senior Debt any payments or distributions
received by them in excess of the amount sufficient to pay all Senior Debt in
full in indefeasible funds, and upon receipt by the holders of the Senior Debt
of amounts sufficient to pay the Senior Debt in full in cash, the holders of the
Junior Debt shall be subrogated to all rights of the holders of the Senior Debt
to receive all further payments or distributions applicable to the Senior Debt
until the Junior Debt shall have been paid in full in cash. If the holders of
the Junior Debt have been subrogated to the rights of the holders of the Senior
Debt pursuant to the operation of this Section 11, the holders of the Senior
Debt (at the expense of the holders of the Junior Debt) and the Company shall
take all reasonable actions requested by the holders of the Junior Debt in order
to enable the holders of the Junior Debt to obtain payments from such Debtor
with respect to such subrogation rights as soon as possible. For purposes of
the subrogation rights of the holders of the Junior Debt hereunder, payments to
the holders of the Senior Debt with respect to
-8-
<PAGE>
the Senior Debt which the holders of the Junior Debt would have been entitled to
receive with respect to the Junior Debt but for the provisions of this Agreement
shall not, as between the Company, its creditors (other than the holders of the
Senior Debt) and the holders of the Junior Debt, be deemed payments with respect
to the Senior Debt, but rather shall be deemed payments with respect to the
Junior Debt; it being understood that the provisions of this Agreement are and
are intended solely for the purpose of defining the relative rights of the
Junior Creditor on the one hand and the Agent and Lenders, on the other hand.
12. Notices. Except as otherwise provided herein, whenever it is
-------
provided herein that any notice, demand, request, consent, approval, declaration
or other communication shall or may be given to or served upon any of the
parties by any other parties, or whenever any of the parties desires to give or
serve upon any other parties any communication with respect to this Agreement,
each such notice, demand, request, consent, approval, declaration or other
communication shall be in writing and shall be deemed to have been validly
served, given or delivered (a) upon the earlier of actual receipt and three (3)
Business Days after deposit in the United States Mail, registered or certified
mail, return receipt requested, with proper postage prepaid, (b) upon
transmission, when sent by telecopy or other similar facsimile transmission
(with such telecopy or facsimile promptly confirmed by delivery of a copy by
personal delivery or United States Mail as otherwise provided in this Section
11), (c) one (1) Business Day after deposit with a reputable overnight courier
with all charges prepaid or (d) when delivered, if hand-delivered by messenger,
all of which shall be addressed to the party to be notified and sent to the
address or facsimile number indicated below for such party. The giving of any
notice required hereunder may be waived in writing by the party entitled to
receive such notice. Failure or delay in delivering copies of any notice,
demand, request, consent, approval, declaration or other communication to any
Person (other than the parties hereto) designated below for any party to receive
copies shall in no way adversely affect the effectiveness of such notice,
demand, request, consent, approval, declaration or other communication.
Notices shall be addressed as follows (or to such other address
(or facsimile number) as may be substituted by notice given as herein provided):
(a) If to Junior Creditor:
Quilvest American Equity LTD
c/o Three Cities Research, Inc.
650 Madison Avenue
New York, New York 10022
Attention: Willem de Vogel
Telecopier No.: 212-980-1142
-9-
<PAGE>
With a copy to:
Paul, Weiss, Rifkind, Wharton & Garrison
1285 Avenue of the Americas
Attention: Jeffrey Saferstein
Telecopier No.: 212-757-3990
(b) If to Company:
Pameco Corporation
1000 Center Place
Norcross, Georgia 30093
Telecopy: (770) 798-0621
Attn: Chief Financial Officer
With a copy to:
Cadwalader, Wickersham & Taft
100 Maiden Lane
New York, New York 10038
Attention: David Robertson
Telecopier No.: (212) 504-6666
(c) If to Agent:
General Electric Capital Corporation
201 High Ridge Road
Stamford, Connecticut 06927-5100
Attention: Vice President - Portfolio Commercial Finance
Telecopier No.: (203) 316-7821
with copies to:
Winston & Strawn
35 West Wacker Drive
Chicago, Illinois 60601
Attention: Ronald H. Jacobson
Telecopier No.: (312) 558-5700
and:
General Electric Capital Corporation
201 High Ridge Road
Stamford, Connecticut 06927-5100
Attention: Corporate Counsel - Commercial Finance/Pameco
Telecopier No.: (203) 316-7822
-10-
<PAGE>
13. Severability. In the event that any provision of this Agreement
------------
is deemed to be invalid, illegal or unenforceable by reason of the operation of
any law or by reason of the interpretation placed thereon by any court or
governmental authority, the validity, legality and enforceability of the
remaining provisions of this Agreement shall not in any way be affected or
impaired thereby, and the affected provision shall be modified to the minimum
extent permitted by law so as most fully to achieve the intention of this
Agreement.
14. Successors and Assigns. This Agreement shall inure to the
----------------------
benefit of the successors and assigns of Agent and shall be binding upon the
successors and assigns of Junior Creditor and Company.
15. Counterparts. This Agreement may be executed in one or more
------------
counterparts, each of which shall be deemed to be an original, but all of which
taken together shall be one and the same instrument.
16. Defines Rights of Creditors. The provisions of this Agreement
---------------------------
are solely for the purpose of defining the relative rights of Junior Creditor,
Agent and Lenders and shall not be deemed to create any rights or priorities in
favor of any other Person, including, without limitation, Company.
17. Conflict. In the event of any conflict between any term,
--------
covenant or condition of this Agreement and any term, covenant or condition of
any of the Junior Debt Documents, the provisions of this Agreement shall control
and govern. For purposes of this Section 16, to the extent that any provisions
of any of the Junior Debt Documents provide rights, remedies and benefits to
Agent or Lenders that exceed the rights, remedies and benefits provided to Agent
or Lenders under this Agreement, such provisions of the applicable Junior Debt
Documents shall be deemed to supplement (and not to conflict with) the
provisions hereof.
18. Headings. The paragraph headings used in this Agreement are for
--------
convenience only and shall not affect the interpretation of any of the
provisions hereof.
19. Termination. This Agreement shall terminate upon the
-----------
indefeasible payment in full in cash of the Senior Debt.
20. Applicable Law. IN ALL RESPECTS, INCLUDING ALL MATTERS OF
--------------
CONSTRUCTION, VALIDITY AND PERFORMANCE, THIS AGREEMENT SHALL BE GOVERNED BY, AND
CONSTRUED AND ENFORCED IN ACCORDANCE WITH, THE LAWS OF THE STATE OF NEW YORK
APPLICABLE TO CONTRACTS MADE AND PERFORMED IN THAT STATE AND ANY APPLICABLE LAWS
OF THE UNITED STATES OF AMERICA.
21. Consent to Jurisdiction. EACH OF JUNIOR CREDITOR AND COMPANY
-----------------------
HEREBY CONSENTS AND AGREES THAT THE STATE OR FEDERAL COURTS LOCATED IN THE
BOROUGH OF MANHATTAN, THE CITY OF NEW YORK, NEW YORK SHALL HAVE EXCLUSIVE
JURISDICTION TO HEAR AND DETERMINE ANY CLAIMS OR DISPUTES BETWEEN THE PARTIES
HERETO PERTAINING TO THIS AGREEMENT OR TO ANY MATTER ARISING OUT OF OR RELATING
TO THIS
-11-
<PAGE>
AGREEMENT, PROVIDED, THAT THE PARTIES HERETO ACKNOWLEDGE THAT ANY APPEALS FROM
--------
THOSE COURTS MAY HAVE TO BE HEARD BY A COURT LOCATED OUTSIDE OF THE BOROUGH OF
MANHATTAN, THE CITY OF NEW YORK, NEW YORK; PROVIDED, FURTHER NOTHING IN THIS
-------- -------
AGREEMENT SHALL BE DEEMED OR OPERATE TO PRECLUDE AGENT FROM BRINGING SUIT OR
TAKING OTHER LEGAL ACTION IN ANY OTHER JURISDICTION TO REALIZE ON THE COLLATERAL
OR ANY OTHER SECURITY FOR THE OBLIGATIONS, OR TO ENFORCE A JUDGMENT OR OTHER
COURT ORDER IN FAVOR OF AGENT. EACH OF JUNIOR CREDITOR AND COMPANY EXPRESSLY
SUBMITS AND CONSENTS IN ADVANCE TO SUCH JURISDICTION IN ANY ACTION OR SUIT
COMMENCED IN ANY SUCH COURT, AND EACH OF JUNIOR CREDITOR AND COMPANY HEREBY
WAIVES ANY OBJECTION WHICH SUCH PARTY MAY HAVE BASED UPON LACK OF PERSONAL
JURISDICTION, IMPROPER VENUE OR FORUM NON CONVENIENS AND HEREBY CONSENTS TO THE
----- --- ----------
GRANTING OF SUCH LEGAL OR EQUITABLE RELIEF AS IS DEEMED APPROPRIATE BY SUCH
COURT. EACH OF JUNIOR CREDITOR AND COMPANY HEREBY WAIVES PERSONAL SERVICE OF THE
SUMMONS, COMPLAINT AND OTHER PROCESS ISSUED IN ANY SUCH ACTION OR SUIT AND
AGREES THAT SERVICE OF SUCH SUMMONS, COMPLAINTS AND OTHER PROCESS MAY BE MADE BY
REGISTERED OR CERTIFIED MAIL ADDRESSED TO SUCH PARTY AT THE ADDRESS SET FORTH IN
SECTION 11 OF THIS AGREEMENT AND THAT SERVICE SO MADE SHALL BE DEEMED COMPLETED
UPON THE EARLIER OF SUCH PARTY'S ACTUAL RECEIPT THEREOF OR THREE (3) DAYS AFTER
DEPOSIT IN THE U.S. MAILS, PROPER POSTAGE PREPAID.
22. Waiver of Jury Trial. BECAUSE DISPUTES ARISING IN CONNECTION
--------------------
WITH COMPLEX FINANCIAL TRANSACTIONS ARE MOST QUICKLY AND ECONOMICALLY RESOLVED
BY AN EXPERIENCED AND EXPERT PERSON AND THE PARTIES HERETO WISH APPLICABLE STATE
AND FEDERAL LAWS TO APPLY (RATHER THAN ARBITRATION RULES), THE PARTIES HERETO
DESIRE THAT THEIR DISPUTES BE RESOLVED BY A JUDGE APPLYING SUCH APPLICABLE LAWS.
THEREFORE, TO ACHIEVE THE BEST COMBINATION OF THE BENEFITS OF THE JUDICIAL
SYSTEM AND OF ARBITRATION, THE PARTIES HERETO WAIVE ALL RIGHT TO TRIAL BY JURY
IN ANY ACTION, SUIT, OR PROCEEDING BROUGHT TO RESOLVE ANY DISPUTE, WHETHER
SOUNDING IN CONTRACT, TORT OR OTHERWISE, AMONG THE PARTIES HERETO ARISING OUT
OF, CONNECTED WITH, RELATED TO, OR INCIDENTAL TO THE RELATIONSHIP ESTABLISHED
AMONG THEM IN CONNECTION WITH, THIS AGREEMENT, THE SENIOR DEBT DOCUMENTS, THE
JUNIOR DEBT DOCUMENT OR THE TRANSACTIONS RELATED THERETO.
[signature page follows]
-12-
<PAGE>
IN WITNESS WHEREOF, the parties hereto have caused this Agreement to
be duly executed as of the date first written above.
JUNIOR CREDITOR:
QUILVEST AMERICAN EQUITY LTD
By: __________________________
Its: _________________________
COMPANY:
PAMECO CORPORATION
By: __________________________
Its: _________________________
AGENT:
GENERAL ELECTRIC CAPITAL
CORPORATION
By: __________________________
Its: Duly Authorized Signatory
-13-
<TABLE> <S> <C>
<PAGE>
<ARTICLE> 5
<LEGEND>
THIS SCHEDULE CONTAINS SUMMARY FINANCIAL INFORMATION EXTRACTED FROM THE
FINANCIAL STATEMENTS OF PAMECO CORPORATION FOR THE QUARTER ENDED NOVEMBER 30,
1999 AND IS QUALIFIED IN ITS ENTIRETY BY REFERENCE TO SUCH FINANCIAL STATEMENTS
</LEGEND>
<S> <C>
<PERIOD-TYPE> 3-MOS
<FISCAL-YEAR-END> FEB-28-2000
<PERIOD-START> SEP-01-1999
<PERIOD-END> NOV-30-1999
<CASH> 128
<SECURITIES> 0
<RECEIVABLES> 38,967
<ALLOWANCES> 6,006
<INVENTORY> 117,205
<CURRENT-ASSETS> 152,198
<PP&E> 29,528
<DEPRECIATION> 13,460
<TOTAL-ASSETS> 227,935
<CURRENT-LIABILITIES> 84,193
<BONDS> 0
0
0
<COMMON> 0
<OTHER-SE> 0
<TOTAL-LIABILITY-AND-EQUITY> 227,935
<SALES> 135,991
<TOTAL-REVENUES> 135,991
<CGS> 103,163
<TOTAL-COSTS> 141,439
<OTHER-EXPENSES> 962
<LOSS-PROVISION> 0
<INTEREST-EXPENSE> 1,861
<INCOME-PRETAX> (8,271)
<INCOME-TAX> (3,129)
<INCOME-CONTINUING> (5,142)
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> 0
<EPS-BASIC> (0.56)
<EPS-DILUTED> (0.56)
</TABLE>
