<PAGE>
PAMECO CORPORATION
1000 Center Place
Norcross, Georgia 30093
INFORMATION STATEMENT PURSUANT TO SECTION 14(f) OF THE SECURITIES
EXCHANGE ACT OF 1934 AND RULE 14(f)-1 THEREUNDER
REPORT OF CHANGE IN MAJORITY OF DIRECTORS
IN CONNECTION WITH PENDING TRANSACTIONS
This information statement (the "Statement") is being mailed on or about
February 18, 2000 to the holders of record of shares of the Class A and Class B
Common Stock, par value $0.01 per share, of Pameco Corporation, a Georgia
corporation (the "Company"). You are receiving this Statement in connection
with the anticipated appointment of persons designated by Littlejohn Fund II,
L.P. ("Littlejohn Fund") and Quilvest American Equity, Ltd. ("Quilvest" and,
collectively with Littlejohn Fund, the "Purchasers") to a majority of seats on
the board of directors of the Company (the "Board") in connection with the
Purchasers' investment of $35 million in the Company in exchange for preferred
stock and warrants in the Company.
On February 18, 2000 the Company and the Purchasers signed a series of
agreements (the "Transaction") pursuant to which the Purchasers have agreed to
pay $35 million (the "Purchase") in exchange for shares of the Company's Series
A Cumulative Pay-in-Kind Preferred Stock, par value $1.00 per share (the
"Preferred Stock") and warrants to purchase additional such shares (the
"Warrants"), subject to certain terms and conditions. With regard to the
Purchase, Littlejohn Fund will contribute $28 million of the purchase price and
Quilvest will contribute $7 million of the purchase price. The Purchasers have
informed the Company that the source of the funds from which Littlejohn Fund
will draw to purchase the Preferred Stock is capital to be contributed by its
limited partners. Quilvest S.A. is a financial holding company that controls
Quilvest Overseas Ltd. Quilvest is a subsidiary of Quilvest Overseas Ltd. and
Quilvest makes direct and indirect equity and debt investments in the United
States. Quilvest's portion of the purchase of the Preferred Stock will be
funded by liquidity made available to Quilvest from Quilvest S.A.
Conditions to the closing of the Purchase include (i) the Company's closing
and obtaining financing under a senior credit facility amounting to an
aggregate of $130 million arranged by Fleet Capital Corporation (the "Credit
Facility") and (ii) the Company's closing and obtaining financing under a
subordinated debt agreement pursuant to which the Company will have the ability
to borrow up to $20 million (the "Subdebt Facility"). The closing of each of
the Purchase, Credit Facility and Subdebt Facility is conditioned on the
closing of the other agreements in this sentence.
Pursuant to the Purchase and applicable law, Littlejohn Fund's director
nominees will be appointed to the Board at the closing, which will occur on the
day no earlier than the day which is ten days after the date of the mailing of
this Statement. In connection with the transaction, the Purchasers, the Company
and certain other holders of the Company's Class B Common Stock entered into a
Shareholders Agreement which will enable Littlejohn Fund to retain control of
the Board so long as it beneficially owns at least 25% of the Common Stock. The
Board currently has five members. Pursuant to the Shareholders Agreement, one
member of the current Board, Mr. Richard A. Bearse, will resign.
The Shareholders Agreement further requires that the Board have nine
directors at all times. So long as shares of Class B Common Stock are
outstanding, the Board will be composed of two persons elected by the holders
of the Class A Common Stock (the "Class A Directors") and seven persons elected
by the holders of the Class B Common Stock (the "Class B Directors"). Pursuant
to the Shareholders Agreement, Littlejohn Fund will nominate five persons to
stand for election to serve as Class B Directors, and Quilvest shall nominate
one person to stand for election to serve as a Class B Director. The then
existing members of the Board will nominate the remaining three directors, none
of whom shall be affiliates or associates (as defined in the Securities
Exchange Act of 1934, as amended, or the Georgia Business Corporation Code) of
Quilvest or Littlejohn. After such time as there are no Class B shares
outstanding, Littlejohn Fund will retain the right to nominate five persons to
stand for election to serve as directors, Quilvest shall nominate one person to
stand for election to serve as a director and the remaining three directors
shall be nominated in accordance with the
1
<PAGE>
requirements of applicable law, and none of whom shall be affiliates or
associates (as defined in the Securities Exchange Act of 1934, as amended, or
the Georgia Business Corporation Code) of Quilvest or Littlejohn.
The Transaction contemplates that the terms of the Preferred Stock
ultimately will entitle holders of Preferred Stock to convert their shares of
Preferred Stock into the Company's common stock, which the Company will be
required to register, pursuant to certain terms and conditions, and that
holders of the Preferred Stock will be entitled to vote as a class with holders
of the Company's common stock. However, the New York Stock Exchange requires
shareholder approval of such voting and conversion rights before they become
effective because the Transaction would result in the issuance of securities
convertible into more than 20% of the Company's outstanding common stock;
approval by the majority of a quorum of shareholders is required for issuances
of such magnitude. Accordingly, the Company will, and pursuant to the terms of
the Transaction is required to, conduct a special meeting of shareholders for
the purpose of voting to approve such voting and conversion rights. The
Purchase is not conditioned upon the receipt of such approval. The Company is
preparing proxy materials for filing and distribution and anticipates that the
special meeting will occur on or about May 15, 2000.
Pursuant to the Shareholder Agreement and other related agreements, Quilvest
and other holders of the Company's Class B Common Stock, who together control
more than 50% of the voting power of the Company have agreed to vote to approve
the aforementioned voting and conversion rights and, in connection therewith,
have granted Littlejohn Fund an irrevocable proxy. Accordingly, the approval
required by the New York Stock Exchange will be obtained.
After such shareholder approval, Littlejohn Fund will beneficially own
approximately 60% of the outstanding voting securities of the Company and
Quilvest will beneficially own approximately 20% of the outstanding voting
securities of the Company, assuming the exercise of the Warrants.
Description of Securities Currently
As of the close of business on February 11, 2000, the Company had
outstanding 5,959,534 shares of Class A Common Stock, 3,272,929 shares of Class
B Common Stock and no shares of Preferred Stock. On all matters, each share of
Class A Common Stock is entitled to one vote and each share of Class B Common
Stock is entitled to ten votes, except with respect to: (1) the election of
directors, (2) certain "Going Private Transactions" (as defined in the
Company's Articles of Incorporation) and (3) any other matters required by law.
Holders of Class A and Class B Common Stock vote together as a single voting
group on all matters, except: (1) the election of directors, where holders of
Class A Common Stock, voting as a separate class, are entitled to elect two of
the Company's directors, and holders of Class B Common Stock, voting as a
separate class, are entitled to elect the remaining directors; and (2) other
issues as heretofore indicated, where holders of all shares of Common Stock
shall vote as a single voting group with each share of Class A Common Stock and
Class B Common Stock entitled to one vote. The presence in person or by proxy
of shares representing a majority of the votes entitled to be cast on a matter
by a voting group constitutes a quorum of such voting group with regard to that
matter. The Company's Articles of Incorporation do not authorize cumulative
voting. Pursuant to the Company's Bylaws, the election of directors requires a
majority of the votes cast by the shares entitled to vote in the election at a
meeting at which a quorum is present. The Bylaws provide that all other matters
brought before the special meeting shall be approved if the votes cast within
the applicable voting group favoring the action exceed the votes cast opposing
the action. Abstentions and broker non-votes will be counted in determining
whether a quorum of the relevant voting group is present, but will not affect
the outcome of a vote on any matter other than the election of directors. With
respect to the election of directors, abstentions and broker non-votes are
effectively counted as votes against the election of the relevant director.
Designees to the Board
<TABLE>
<CAPTION>
Name of Designee Age
---------------- ---
<S> <C>
Angus C. Littlejohn, Jr.................................................. 49
Michael Ira Klein........................................................ 35
Edmund J. Feeley......................................................... 39
Harry F. Weyher III...................................................... 43
Dixon Ray Walker......................................................... 48
</TABLE>
2
<PAGE>
Angus C. Littlejohn has been the Chairman and Chief Executive Officer of
Littlejohn & Co., LLC ("Littlejohn") since August, 1996. Littlejohn manages
private equity funds focusing on control investments in under-performing
companies. Prior to such time and beginning in 1988, Mr. Littlejohn was a
Partner at Joseph Littlejohn & Levy, a private equity firm, in New York, New
York. Mr. Littlejohn currently serves as a Director of General Trailers, Ltd.,
in the United Kingdom; and Perfect Fit Industries, Inc., Durakon Industries,
Inc. and Jerr-Dan Corporation, each of which is a private corporation. Mr.
Littlejohn is a nominee of Littlejohn Fund and will be appointed to serve as
Director of the Company pursuant to the Shareholders Agreement.
Michael Ira Klein is President of Littlejohn, a position he has held since
August of 1996. Prior to such time and beginning in 1995, Mr. Klein was a
private investor and a Director of S&S Industries, Inc., a privately-held
company. He currently sits on the Boards of Directors of General Trailers,
Ltd., in the United Kingdom; and of Perfect Fit Industries, Inc., Durakon
Industries, Inc., Jerr-Dan Corporation, Keystone Automotive Operations, Inc.,
and KeyAutoParts.com Inc., each of which is a private corporation. Mr. Klein is
a nominee of Littlejohn Fund and will be appointed to serve as Director of the
Company pursuant to the Shareholders Agreement.
Edmund J. Feeley is currently a Managing Director of Littlejohn, which he
joined in November 1998. Prior to joining Littlejohn, Mr. Feeley worked with
Fleer Corporation ("Fleer"), a company that manufactures, markets and
distributes collectible sports and entertainment trading cards, starting in
March 1996. Thereafter, Mr. Feeley served from May 1996 through November 1998
as Fleer's President and Chief Operating Officer to lead a turnaround of the
operations. As part of the reorganization of Marvel Entertainment Group, Inc.
("Marvel"), Fleer filed a Chapter 11 reorganization petition in December 1996.
Marvel and Fleer emerged from reorganization proceedings in October of 1998 and
Fleer was sold in January of 1999. Prior to January 1996, Mr. Feeley was the
Senior Vice President and General Manager of The Timberland Company, which
manufactures footwear and apparel. He is currently Chairman of the Board and a
Director of Jerr-Dan Corporation, a privately-held company. Mr. Feeley is a
nominee of Littlejohn Fund and will be appointed to serve as Director of the
Company pursuant to the Shareholders Agreement.
Harry F. Weyher III has been the Executive Vice President of Littlejohn
since August 1996. Prior to that time, from 1990 to 1996, he was the Chief
Financial Officer of Gerald Metals, Inc., a privately-held metals trading and
processing firm. Mr. Weyher is a director of General Trailers, Ltd., in the
United Kingdom; and Perfect Fit Industries, Inc. and Durakon Industries, Inc.
Mr. Weyher is a nominee of Littlejohn Fund and will be appointed to serve as
Director of the Company pursuant to the Shareholders Agreement.
Dixon Ray Walker became the President and Chief Executive Officer of Jannock
Limited in 1999. He currently serves on Jannock Limited's Board of Directors.
Prior to joining Jannock Limited, Mr. Walker was a management consultant at
MacMillan Bloedel in 1998 and a Senior Vice President at Johns Manville
Corporation from 1993 to 1997. Mr. Walker is a nominee of Littlejohn Fund and
will be appointed to serve as Director of the Company pursuant to the
Shareholders Agreement.
See information for Willem F.P. de Vogel, who is a designee of Quilvest, set
forth in the section on Current Directors and Officers, below.
Current Directors and Officers
<TABLE>
<CAPTION>
Name of Director or
Officer Age Position
------------------- --- --------
<S> <C> <C>
James R. Balkcom, Jr.... 55 Chief Executive Officer and Chairman of Board
Richard A. Bearse....... 61 Director
Willem F.P. de Vogel.... 49 Director
Earl Dolive............. 83 Director
W. Michael Clevy........ 51 Director
Daniel P. Herrick....... 46 President and Chief Operating Officer
Mark S. Sellers......... 48 Vice Chairman and Chief Financial Officer
Douglas Koch............ 48 Executive Vice President
</TABLE>
3
<PAGE>
James R. Balkcom, Jr. has been a Director of the Company since February
1996, Chairman of the Board since May 1996, and Chief Executive Officer since
January 1999. Mr. Balkcom also is self-employed with J.R. Balkcom Associates,
Inc., a strategic planning consulting firm. Mr. Balkcom worked from 1977 to
1997 at Techsonic Industries, Inc., a manufacturer of consumer marine
electronics. At Techsonic, he served at various times as Chairman, President
and Chief Executive Officer. Mr. Balkcom is also currently a Director of
Century South Banks Inc., a Georgia-based bank holding company and of ARI,
Inc., an auto parts remanufacturer affiliated with Three Cities Research, Inc.
("TCR"), a firm engaged in the investment and management of private capital.
Mr. Balkcom also serves as chairman and director of Eufaula Bancorp, an
Alabama-based bank holding company.
Richard A. Bearse was elected to the Board of the Company in August 1997. He
has been Chairman and Chief Executive Officer of Beacon Group, a diversified
holding company, since January 1998. From June 1995 to December 1997, Mr.
Bearse was employed by United Dominion, a diversified manufacturing company,
where his last position was Senior Vice President--Mergers & Acquisitions. Mr.
Bearse joined United Dominion when it acquired Flair Corp., a manufacturer of
air filtration and dehydration systems, where he had been employed since
January 1991. Mr. Bearse was President and Chief Executive Officer of Flair
Corp. at the time of the United Dominion acquisition. Mr. Bearse also has held
sales and marketing positions at B.F. Goodrich, Westinghouse Air Brake and
Munsingwear.
W. Michael Clevy was appointed to the Company's Board in June 1999. He
currently serves as President and Chief Executive Officer of Desa
International, a position he has held since November 1999. Prior to such time,
Mr. Clevy served as President and Chief Executive Officer of International
Comfort Products, beginning in September 1994.
Willem F.P. de Vogel has been a Director of the Company since 1999. He has
been the President of TCR since 1982 and was previously a Director of the
Company from 1992 until 1996. Mr. de Vogel also serves as a Director of
Computer Associates International, Inc. and Morton Industrial Group, Inc. Mr.
de Vogel was appointed to the Board due to his relationship to TCR and
Quilvest.
Earl Dolive has been a Director of the Company since 1993. Mr. Dolive
retired as Vice-Chairman of Genuine Parts Company in 1989 after 52 years of
employment there. Mr. Dolive was President of the National Automotive Parts
Association ("NAPA") in 1970 and 1971. Mr. Dolive also serves as a Director of
Aaron Rents and Exide Corporation, and is a Director Emeritus of Genuine Parts
Company.
Daniel P. Herrick was named President and Chief Operating Officer in 1999.
From 1992 until 1999, Mr. Herrick served as President and Chief Executive
Officer of Interlakes Advantage International, a management consulting firm,
and previously as Senior Vice President--Operations at Revlon, and Corporate
Director of Materials Management for NMB Corporation.
Douglas Koch joined Pameco in November 1999. Most recently, Mr. Koch served
as Vice President, Human Resources with Uptons Department Stores, a division of
American Retail Group from 1995 until 1999. Prior to that Mr. Koch worked as
Director, Staffing and Development with the Sports Authority 1994 to 1995.
Mark S. Sellers was named Vice Chairman and Chief Financial Officer in 1999.
Mr. Sellers served as Chairman, President, Chief Executive Officer, and
Director of Southwest Supermarkets, L.L.C. from December 1997 to March 1999.
Previously, he had held similar positions with SGSM, L.L.C. from February 1997
to October 1998 and Bay Area Foods, Inc. & BAF Holding Co. from November 1995
to April 1999. Mr. Sellers also has served as Managing General Partner and
President of CWS Company since March 1992.
Certain Relationships and Related Transactions
As described under the heading "Description of Transaction," the Purchasers
will engage in the purchase of the Preferred Stock and Warrants as described in
this Information Statement.
4
<PAGE>
In March 1997, Mr. Balkcom, a director of the Company, purchased 62,500
shares of Class A Common Stock from the Company at a purchase price of $9.60
per share for an aggregate purchase price of $600,000, which was financed by
Mr. Balkcom's issuance of a $600,000 promissory note to the Company. The
promissory note bears interest at the applicable federal rate, is secured by
the Class A Common Stock purchased and is a full recourse note. The principal
of the note is payable in full on March 10, 2002. The applicable federal rate
is based upon the yield to maturity of outstanding marketable obligations of
the United States of similar maturities during the one-month period ending on
the fourteenth day of the month preceding the month for which the rates are
applicable. The Internal Revenue Service publishes the applicable federal rates
for each month in the Internal Revenue Bulletin. The applicable federal rate
for January 2000 was 5.76%. On January 8, 1999, the Company forgave one-third
of Mr. Balkcom's indebtedness to the Company, and on January 8, 2000, the
Company forgave another one-third of the indebtedness. The remaining portion of
the indebtedness will be forgiven if Mr. Balkcom remains in his present
position until January 8, 2001. The largest amount outstanding under the
promissory note during Fiscal 1999 was $600,000, and the amount currently
outstanding is $200,000.
Pursuant to the terms of an Advisory Agreement dated March 1, 1997, the
Company engaged TCR as the Company's financial advisor. Pursuant to the
agreement, TCR provides advisory services to the Company and makes certain of
its employees available to advise the Company on financial matters. Under the
agreement, the Company pays TCR an annual fee of $50,000 and reimburses TCR for
its out-of-pocket expenses. The Company also has agreed to indemnify TCR
against liabilities arising out of TCR's engagement. Mr. de Vogel, a Director,
is President of TCR. Messrs. Wagner and Weld, both of whom were directors of
the Company during Fiscal 1999, are each Managing Directors of TCR. The
Advisory Agreement extends through February 28, 2002, unless terminated by the
Company under certain circumstances. Effective upon the closing of the
Purchase, the Advisory Agreement will terminate.
Material Pending Legal Proceedings
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. Currently, the Company has no pending legal proceedings in
which a director, officer or owner of 5% or more of the Company's securities is
an adverse party to the Company.
Committees and Meetings of the Board
The Board held nine meetings during the last complete fiscal year ending
February 28, 1999 ("Fiscal 1999"). All incumbent directors attended more than
75% of the aggregate number of meetings of the Board and of those board
committees on which they served in Fiscal 1999, with the exception of Mr.
Bulkin, who attended 73.0% of such meetings, and Mr. Weld, who attended 60.0%
of such meetings. The Board has an Audit Committee, a Compensation Committee
and a Nominating Committee, and may form other committees from time to time as
circumstances warrant. Such committees will have authority and responsibility
as delegated by the Board. The Strategic Planning Committee, which held only
one meeting during Fiscal 1999, has been discontinued.
The Audit Committee makes recommendations concerning the engagement of the
Company's independent public accountants, reviews the plans and results of the
audit engagement with the independent public accountants, approves professional
services provided by the independent public accountants, reviews the
independence of the independent public accountants, considers the range of
audit and non-audit fees and reviews the adequacy of the Company's internal
accounting controls. Directors Braswell, Dolive and Wagner were members of the
Audit Committee during Fiscal 1999. During that period, the Audit Committee met
two times.
The Compensation Committee administers the Company's stock option plans and
recommends compensation for the Company's executive officers. The Compensation
Committee was comprised of Directors Bulkin (Chairman), Dolive and Wagner
during Fiscal 1999, and met one time during such period.
5
<PAGE>
The Nominating Committee selects potential candidates for director and
recommends candidates to the Board. It also makes recommendations to the Board
concerning the structure and membership of the other Board Committees. Until
January 1999, the Nominating Committee consisted of Directors Wagner
(Chairman), Balkcom, Bearse and Gurbacki. Mr. Gurbacki resigned from the
Nominating Committee in January 1999 and was not replaced during Fiscal 1999.
The Nominating Committee met two times in Fiscal 1999. This committee will
consider shareholder nominations for members of the Board sent in the manner
prescribed by the Company's Bylaws to James R. Balkcom, Jr., Chairman, Pameco
Corporation, 1000 Center Place, Norcross, Georgia 30093.
The Strategic Planning Committee reviewed and made recommendations regarding
the Company's stated strategic objectives. The Strategic Planning Committee
consisted of Directors Balkcom, Braswell, Bulkin, Gurbacki and Weld. During
Fiscal 1999, the Strategic Planning Committee met one time.
Section 16(a) Beneficial Ownership Compliance:
All directors, officers and Beneficial Owners, as defined pursuant to
Section 13(d) of the Securities Exchange Act of 1934, holding greater than 10%
of a registered class of the Company's equity securities, have complied with
all Section 16(a) rules regarding the purchase and sales of stocks.
Executive Compensation
Summary Compensation Table
The following table sets forth a summary of annual and long-term
compensation paid or accrued by the Company for services rendered to the
Company in the previous three fiscal years by all persons who served as the
Company's Chief Executive Officer during Fiscal 1999 and the five other most
highly compensated executive officers (the "named executive officers") whose
aggregate individual salaries and bonuses exceeded $100,000 during Fiscal 1999.
<TABLE>
<CAPTION>
Long-term
Annual Compensation Compensation Awards
- -------------------------------------------------------- ----------------------------------
Fiscal Securities Underlying All Other
Name and Principal Position Year Salary Bonus Options (#) Compensation
- --------------------------- ------ -------- ---------- --------------------- ------------
<S> <C> <C> <C> <C> <C>
James R. Balkcom, Jr. (1) 1999 $212,500 -- -- $200,000(2)
Chief Executive Officer 1998 $161,634 -- -- $ 20,000(3)
and Director
Gerald V. Gurbacki (1) 1999 $400,000 -- -- $274,642(5)
Chief Executive Officer 1998 $399,892 $ 125,000 -- $147,526(6)
and Director 1997 $310,512 $1,250,000(4) 515,625 $ 369(7)
Jerry W. Bowman (8) 1999 $287,500 $ 200,000 175,000 $ 4,324(7)
Chief Operating Officer
Theodore R. Kallgren (9) 1999 $158,302 -- 25,000 $ 1,134(7)
Chief Financial Officer, 1998 $138,678 $ 32,655 -- $ 469(7)
Vice President and Secretary 1997 $121,385 $ 187,411(4) 9,375 --
Mark L. Davison (10) 1999 $167,180 -- 25,000 $ 704(7)
Chief Information Officer 1998 $140,947 $ 45,528 10,000 $ 132(7)
1997 $ 83,077 $ 98,771(4) 9,375 --
Jeffrey S. Ruege (11) 1999 $173,982 $ 17,800 25,000 $ 1,005(7)
Vice President and General 1998 $141,193 $ 40,606 10,000 $ 173(7)
Manager-Strategic 1997 $122,714 $ 174,326(4) 9,375 $ 29(7)
Business Units
Richard J. Marshuetz (12) 1999 $137,539 -- 100,000 $ 17,380(13)
Executive Vice President
</TABLE>
6
<PAGE>
- --------
(1) Mr. Gurbacki served as the Company's Chief Executive Officer until January
1999, at which time Mr. Balkcom was named to such position.
(2) Represents portion of indebtedness to the Company that was forgiven as of
January 8, 1999. See "Certain Relationships and Related Transactions".
(3) Represents gain realized upon the exercise of non-qualified stock options.
(4) Includes bonuses granted pursuant to the Company's bonus plan and a one-
time special cash bonus, which accrued in fiscal 1997, although a
percentage of the bonus may not be paid until subsequent fiscal years.
(5) Represents $2,642 in life insurance premiums paid by the Company and
$272,000 realized upon the exercise of non-qualified stock options.
(6) Represents $1,526 in life insurance premiums paid by the Company and
$146,000 realized upon the exercise of non-qualified stock options.
(7) Represents life insurance premiums paid by the Company.
(8) Mr. Bowman was employed by the Company until December 31, 1999.
(9) Mr. Kallgren was employed by the Company until May 28, 1999.
(10) Mr. Davison was employed by the Company until February 1999.
(11) Mr. Ruege was employed by the Company until August 31, 1999.
(12) Mr. Marshuetz was employed by the Company until January 1999.
(13) Includes $14,331 in reimbursement of relocation expenses and $3,049 in
life insurance premiums paid by the Company.
Severance Pay:
The following summarizes all severance payments made since the beginning of
the last fiscal year:
<TABLE>
<CAPTION>
Payment Payment
Name Principal Position Start Date End Date Total Payment
---- -------------------------------- ---------- -------- -------------
<S> <C> <C> <C> <C>
Gerald V. Gurbacki...... Chief Executive Officer 01-99 01-01 $ 430,758.36
Theodore R. Kallgren.... Chief Financial Officer 06-99 11-99 $ 73,200.00
Mark L. Davison......... Chief Information Officer 03-99 08-99 $ 81,600.00
Jeffrey S. Ruege........ Vice President & General Manager 10-99 03-00 $ 89,000.08
Richard J. Marshuetz.... Executive Vice President 03-99 04-01 $ 520,000.00
Jerry W. Bowman......... Chief Operating Officer 01-00 01-00 $ 223,750.00
-------------
$1,418,308.44
=============
</TABLE>
Options Granted in Last Fiscal Year
The following table summarizes certain information regarding stock options
to purchase Class A Common Stock granted to the named executive officers during
Fiscal 1999. No options were granted to purchase shares of Class B Common
Stock. Pursuant to the Company's Employee Stock Option Plan, options not
exercised prior to an executive officer's termination expire immediately.
<TABLE>
<CAPTION>
Individual Grants
- ---------------------------------------------------------------------------
Potential Realizable
Value at Assumed
Percent of Annual Rates of Stock
Number of Total Options Exercise Price Appreciation
Securities Granted to Base for Option Term
Underlying Employees Price Expiration ---------------------
Name Options Granted in Fiscal Year ($/Sh) Date 5% 10%
---- --------------- -------------- -------- ---------- ---------- -----------
<S> <C> <C> <C> <C> <C> <C>
Jerry W. Bowman......... 175,000(1) 36.1% $19.6250 04/05/03 -- --
Theodore R. Kallgren.... 25,000(1) 5.2% $19.4375 06/24/03 -- --
Jeffrey S. Ruege........ 25,000(1) 5.2% $19.4375 06/24/03 -- --
</TABLE>
- --------
(1) Granted pursuant to Employee Stock Option Plan (Plan I). These options
expired when Messrs. Bowman, Kallgren and Ruege terminated their
employment with the Company.
7
<PAGE>
Aggregated Option Exercises and Fiscal Year-End Option Values
The following table provides certain information about stock options
exercised by the named executive officers in Fiscal 1999 and the year-end
values of stock options held by the named executive officers on February 28,
1999. All information relates to shares of Class A Common Stock.
<TABLE>
<CAPTION>
Number of Securities Value of Unexercised
Shares Underlying Unexercised Options In the-Money Options
Acquired on at Fiscal Year-End (#) at Fiscal Year End ($)
Exercise Value --------------------------------------- -------------------------
Names (#) Realized ($) Exercisable Unexercisable Exercisable Unexercisable
----- ----------- ------------ ----------- ---------------- ----------- -------------
<S> <C> <C> <C> <C> <C> <C>
Gerald V. Gurbacki...... 229,375 $569,579 209,375 -- $60,195 --
Jerry W. Bowman......... -- -- (1) -- -- --
Theodore R. Kallgren.... 4,562 $ 41,042 (1) -- -- --
Jeffrey S. Ruege........ 4,578 $ 28,877 (1) -- -- --
</TABLE>
- --------
(1) These options expired when Messrs. Bowman, Kallgren and Ruege terminated
their employment with the Company.
Director Compensation
In Fiscal 1999, the Company paid each non-employee Director, other than
Directors employed by TCR, fees of $2,500 per board meeting attended in person
(or $250 per meeting in which they participate by telephone) and $1,000 per
committee meeting attended. Only one fee is paid if a committee meeting is held
in conjunction with a full board meeting. Directors are reimbursed for their
out-of-pocket expenses incurred in connection with their service on the Board.
In addition, in Fiscal 1998, the Company entered into an agreement to pay Mr.
Balkcom $175,000 in exchange for his agreement to devote approximately 65.0% of
his time to the Company's business.
It is the Company's policy to grant to eligible non-employee Directors non-
qualified options to purchase shares of Class A Common Stock under the
Company's Non-Employee Directors Stock Option Plan (the "Directors Plan")
administered by the Company's Compensation Committee. Options to purchase 2,500
shares of Class A Common Stock are awarded twice a year upon the release of the
fiscal year results and upon the release of the fiscal second quarter results.
On September 24, 1998, the Company granted each of Messrs. Bearse, Braswell,
Bulkin, Dolive and Pfeffer options to acquire 2,500 shares of Class A Common
Stock under the Directors Plan at an exercise price of $16.00 per share.
Additionally, 1,000 shares of unrestricted Class A Common Stock are granted to
each eligible non-employee Director annually on the date of the annual
shareholders' meeting. Messrs. Bearse, Braswell, Bulkin and Dolive each
received 1,000 shares of Class A Common Stock on June 25, 1998.
Compensation Committee Report
The Compensation Committee of the Board, a committee composed entirely of
non-officer and non-employee directors, is responsible for administering the
Company's Employee Stock Option Plans and the Directors Plan, and for
recommending the compensation of the Company's executive officers. All
decisions by the Compensation Committee, except the administration of and
grants under the Company's Employee Stock Option Plans, are subject to review
and approval by the full Board.
The Company's executive compensation philosophy and specific compensation
plans tie a significant portion of each executive's compensation to the
Company's success in meeting specific profit, growth and performance goals. The
Company's compensation objectives include attracting and retaining the best
possible executive talent, motivating executive officers to achieve the
Company's performance objectives, rewarding individual performance and
contributions, and linking executives' and shareholders' interest through
equity-based plans.
8
<PAGE>
The Company's executive compensation consists of three key components: base
salary, annual incentive compensation and stock options, each of which is
intended to complement the others and, taken together, to satisfy the Company's
compensation objectives. The Compensation Committee's policies with respect to
each of the three components are discussed below.
Base Salary. In the early part of each fiscal year, the Compensation
Committee reviews the base salary of the Chief Executive Officer ("CEO") and
the recommendation of the CEO with regard to the base salary of all other
executive officers of the Company and approves, with any modifications it deems
appropriate, annual base salaries for each of the executive officers.
Recommended base salaries of the executive officers, other than the CEO, are
based on an evaluation of the individual performance of the executive officer,
including satisfaction of annual objectives. The recommended base salary of the
CEO is based on achievement of the Company's annual goals relating to financial
objectives, including earnings growth and return on capital employed, and an
evaluation of individual performance.
Recommended base salaries of the executive officers are also based in part
upon an evaluation of the salaries of those persons holding comparable
positions at comparable companies.
Annual Incentive Compensation. The Company's CEO is entitled to participate
in an incentive bonus plan which provides for the payment of annual bonuses in
cash based on the relative success of the Company in attaining certain
financial objectives established from time to time by the Compensation
Committee and/or the Board. The Compensation Committee will consider incentive
payments to the CEO of up to 100% of his annual base salary. No incentive
payment was made to the CEO for Fiscal 1999. For the fiscal year ending
February 29, 2000 ("Fiscal 2000"), the Chairman is eligible for an annual bonus
equal to eight percent of the difference between pre-tax earnings for the
fiscal year minus ten percent of the shareholders' equity at the beginning of
the year. The Chairman's maximum bonus potential for Fiscal 2000 is $500,000.
The Company's remaining executive officers (other than the CEO) are entitled
to participate in a discretionary incentive bonus plan which provides for the
payment of annual bonuses in cash, stock or a combination thereof, based on the
guidelines described below. The Compensation Committee will consider aggregate
incentive cash and stock bonus payments to the executive officers, as a group,
of up to 50% of the aggregate annual executive base salaries, and will consider
bonus payments to be paid in stock in excess of 50% of the aggregate annual
executive base salaries. In aggregate, in the twelve months ended February 28,
1999, the Compensation Committee awarded executive cash bonuses under this plan
equal to approximately 23.6% of the aggregate executive base salaries.
The Compensation Committee has set the following guidelines: a bonus pool of
approximately 50% of the aggregate executive base salaries is created based on
growth in operating earnings. Distribution of approximately 90% of the pool is
based on the achievement by the Company of certain financial objectives
including (1) revenue increase, (2) inventory turns and (3) operating profit.
The balance of the pool (approximately 10%) is distributed based on subjective
factors which may include such items as development of the management team and
overall shareholder satisfaction with management.
Stock Options. The primary objective of the stock option program is to link
the interests of the executive officers and other selected employees of the
Company with those of the shareholders through significant annual grants of
stock options. The aggregate number of options recommended by the Compensation
Committee is based on practices of the same comparable companies utilized for
determining base salary, while actual stock option grants reflect each
individual's expected long-term contribution to the success of the Company. The
Compensation Committee made the following grants of stock options to named
executive officers in Fiscal 1999:
<TABLE>
<CAPTION>
Date of
Name Grant Shares
---- -------- -------
<S> <C> <C>
Jerry W. Bowman........................ 04/05/98 175,000
Theodore R. Kallgren................... 06/25/98 25,000
Jeffrey S. Ruege....................... 06/25/98 25,000
</TABLE>
9
<PAGE>
Since each of Mr. Bowman, Mr. Kallgren and Mr. Ruege terminated his
employment with the Company, these options have expired.
Stock Purchase Plan. The named executive officers and certain other
qualified employees of the Company and its subsidiaries are also eligible to
purchase shares of Class A Common Stock on a quarterly basis through payroll
deductions under the Company's Stock Purchase Plan (the "Stock Purchase Plan").
The Stock Purchase Plan is administered by the Employee Stock Purchase Plan
Administration Committee, which is designated by the Board and is currently
comprised of Paul K. Bois, Theodore R. Kallgren and Mary M. McCulley. The price
to be paid for a share of Class A Common Stock under the plan is 85% of the
Fair Market Value (as defined in the Stock Purchase Plan) of a share of Class A
Common Stock. The amount of any participant's payroll deductions made pursuant
to the Stock Purchase Plan may not exceed ten percent of such participant's
total annual compensation and may not exceed $25,000 per year. A maximum of
500,000 shares of Class A Common Stock, including a maximum of 100,000 shares
in any calendar year, may be issued under the Stock Purchase Plan. The Stock
Purchase Plan may be terminated or amended by the Company's Board; provided,
however, that no such amendment shall (1) disqualify the Stock Purchase Plan
under Section 423 of the Internal Revenue Code; (2) increase the aggregate
number of shares of Class A Common Stock which may be purchased pursuant to the
Stock Purchase Plan; or (3) change the designation of corporations whose
employees may participate in the Stock Purchase Plan. Any amendment to the
Stock Purchase Plan which would effect the actions described in clauses (2) or
(3) above must be approved by the Company's shareholders. The Stock Purchase
Plan is intended to qualify under Sections 421 and 423 of the Internal Revenue
Code. In accordance therewith, no income will be recognized by a participant
when shares are acquired pursuant to the Stock Purchase Plan. With certain
exceptions, when a participant disposes of such shares, he or she will
recognize a capital gain equal to the difference between the acquisition price
and the amount realized on such disposition. The Company will not be allowed to
take a deduction with respect to any shares transferred to a participant
pursuant to the Stock Purchase Plan. The following named executive officer
acquired shares under the Stock Purchase Plan during Fiscal 1999:
<TABLE>
<CAPTION>
Name Shares
---- ------
<S> <C>
Theodore R. Kallgren.............. 1,321
</TABLE>
Employment and Change of Control Agreements. On January 13, 1999, the
Company and Mr. Gurbacki entered into a Retirement Agreement and General
Release. Mr. Gurbacki retired as of January 8, 1999, and is eligible to receive
supplemental retirement pay in an aggregate amount of $800,000, paid in equal
installments over the next two years. Mr. Gurbacki elected to receive coverage
(at his expense, except during the period he receives retirement pay) for
himself and his dependents under the Company's group health plan until the
earlier of (a) Mr. Gurbacki's sixty-fifth birthday or (b) his becoming eligible
to participate in a group health plan sponsored by another employer.
Additionally, Mr. Gurbacki was required to exercise one half of his remaining
stock options (209,375 shares) by March 4, 1999, or forfeit such options to the
Company. He will have until January 7, 2001, to exercise the remaining stock
options for 209,375 shares or forfeit such options to the Company. Mr. Gurbacki
is prohibited from post-separation competition with the Company for a period of
two years from his retirement date.
As of January 11, 1999, Mr. Balkcom agreed to expand his role by assuming
the title of President and Chief Executive Officer, while also maintaining his
position as Chairman of the Board. Mr. Balkcom's compensation has been
increased to $500,000 per year for a term of three years, with a bonus
potential of $500,000 per year, payable in cash. Additionally, under certain
conditions, the Company has agreed to forgive Mr. Balkcom's indebtedness to the
Company over a period of time. See "Certain Relationships and Related
Transactions."
Mr. Balkcom received a restricted stock award composed of 200,000 shares of
restricted Class A Common Stock on May 6, 1999. The stock vests incrementally
over a three-year period and is subject to forfeiture if Mr.Balkcom is not
employed as Chief Executive Officer of the Company until January 1, 2002.
10
<PAGE>
Mr. Bowman entered into a severance agreement with the Company on December
31, 1999. Pursuant to that agreement, the Company agreed to pay Mr. Bowman a
sum of $223,750 over a one-month period. The last payment was made pursuant to
the severance agreement, on January 29, 2000.
The Company has entered into severance agreements with each of the Company's
other named executive officers providing for six months severance benefits in
the event they are terminated without cause.
This report is submitted by the members of the Compensation Committee of the
Board:
Compensation Committee
Michael H. Bulkin, Chairman
Earl Dolive
H. Whitney Wagner
Compensation Committee Interlocks and Insider Participation in Compensation
Decisions
No member of the Compensation Committee was, during Fiscal 1999, an officer
or employee of the Company or any of its subsidiaries, or was formerly an
officer of the Company or any of its subsidiaries.
H. Whitney Wagner, a member of the Compensation Committee during Fiscal
1999, is a Managing Director of TCR. The Company has entered into an Advisory
Agreement with TCR pursuant to which the Company has agreed to pay TCR a fee of
$50,000 per annum for advisory services and to reimburse TCR for out-of-pocket
expenses approved in advance, for a five-year period ending on February 28,
2002. See "Certain Relationships and Related Transactions."
During Fiscal 1999, no executive officer of the Company served as: (1) a
member of the Compensation Committee (or other board committee performing
equivalent functions, or in the absence of such a committee, the entire Board)
of another entity, one of whose executive officers served on the Compensation
Committee of the Board, (2) a director of another entity, one of whose
executive officers served on the Compensation Committee of the Board, or (3) a
member of the Compensation Committee (or other board committee performing
equivalent functions, or in the absence of such a committee, the entire Board)
of another entity, one of whose executive officers served as a director of the
Company.
Security Ownership Of Certain Beneficial Owners And Management
The following table sets forth certain information, accurate as of January
12, 2000, regarding shares of Common Stock of the Company owned of record or
beneficially by each director and nominee for director, each executive officer
named in the Summary Compensation Table in this Information Statement, all
directors and executive officers as a group, and each person known to the
Company to beneficially own more than five percent of either class of the
Company's outstanding Common Stock. Except as set forth in the footnotes to the
table below, each of the shareholders identified in the table below has sole
voting and investment power over the shares beneficially owned by such person.
11
<PAGE>
PAMECO CORPORATION
COMMON STOCK OWNERSHIP AS OF FEBRUARY 11, 2000
<TABLE>
<CAPTION>
Class A Common Stock Class B Common Stock
--------------------- --------------------- Percent of Percent of
Beneficial Percent of Beneficial Percent of Voting Shares
Name and Address (1) Ownership Class A Ownership Class B Power Outstanding
-------------------- ---------- ---------- ---------- ---------- ---------- -----------
<S> <C> <C> <C> <C> <C> <C>
James R. Balkcom, Jr. (2)............... 267,131 4.5% -- -- * 2.9%
Richard A. Bearse (3)................... 12,250 * -- -- * *
Jerry W. Bowman......................... -- * -- -- * *
W. Michael Clevy (4).................... 3,025 * -- -- * *
Mark L. Davison......................... 3,892 * -- -- * *
Willem F. P. de Vogel (5)............... 128,679 2.1% 122,379 3.7% 3.2% 1.4%
Earl Dolive (6)......................... 7,875 * -- -- * *
Gerald V. Gurbacki (7).................. 286,251 4.6% -- -- * *
Daniel P. Herrick (8)................... 33,334 * -- -- * *
Theodore R. Kallgren (14)............... 24,795 * -- -- * *
Douglas Koch (8)........................ 10,000 * -- -- * *
Jeffrey S. Ruege........................ 38,575 * -- -- * *
Mark S. Sellers (8)..................... 20,000 * -- -- * *
Directors and Executive Officers
as a group (13 persons)............. 835,807 12.8% 122,379 3.7% 4.9% 8.6%
Dimensional Fund Advisors, Inc. (9)..... 320,700 5.4% -- -- -- 3.5%
Capital Guardian Trust Company (10)..... 322,500 5.4% -- -- -- 3.5%
Royce and Associates, Inc. (11)......... 461,600 7.7%
The Kaufman Fund, Inc. (12)............. 474,200 8.0% -- -- 1.2% 5.1%
Quilvest American Equity, Ltd. (13)..... 1,850,000 27.2% 846,217 25.9% 24.5% 20.1%
</TABLE>
- --------
Notes:
(*) Represents less than one percent of the outstanding Class A Common Stock,
Class B Common Stock, Voting Power or Total Shares Outstanding.
(1) Unless otherwise indicated, the address of the persons named above is: care
of Pameco Corporation, 1000 Center Place, Norcross, Georgia 30093.
(2) Includes 35,113 shares held by Mr. Balkcom's wife. Mr. Balkcom disclaims
beneficial ownership of the shares owned by his wife. Also includes 110,000
shares of restricted Class A Common Stock that are subject to forfeiture.
See "Employment and Change of Control Agreements."
(3) Includes currently exercisable options to purchase 10,450 shares.
(4) Includes currently exercisable options to purchase 1,700 shares.
(5) Includes 6,300 shares held by Mr. de Vogel's minor children and 122,379
shares of Class B Common Stock that are convertible on a one-to-one basis
to Class A Common Stock. Mr. de Vogel shares voting and dispositive powers
with respect to the shares held by his minor children with his wife.
(6) Includes currently exercisable options to purchase 4,260 shares.
(7) Includes currently exercisable options to purchase 209,375 shares.
(8) Represents currently exercisable options to purchase shares pursuant to
employment agreements negotiated prior to the record date, but only
effective thereafter.
(9) Has indicated in filings with the Securities and Exchange Commission that
all shares are held for investment purposes only and not with the intent of
effecting a change of control. The address of Dimensional Fund Advisors,
Inc. is 1299 Ocean Ave., 11th Floor, Santa Monica, California 90401.
(10) Has indicated in filings with the Securities and Exchange Commission that
all shares are held for investment purposes only and not with the intent of
effecting a change of control. The address of Capital Guardian Trust
Company is 11100 Santa Monica Boulevard, Los Angeles, California 90025.
12
<PAGE>
(11) Has indicated in filings with the Securities and Exchange Commission that
all shares are held for investment purposes only and not with the intent
of effecting a change of control. The address of Royce & Associates, Inc.
is 1414 Avenue of the Americas, New York, New York 10019.
(12) Has indicated in filings with the Securities and Exchange Commission that
all shares are held for investment purposes only and not with the intent
of effecting a change of control. The address of The Kaufmann Fund, Inc.
is 140 East 45th Street, 43rd Floor, New York, New York 10017.
(13) Has indicated in filings with the Securities and Exchange Commission that
all shares are held for investment purposes only and not with the intent
of effecting a change of control. Includes 846,217 shares of Class B
Common Stock that are convertible on a one-to-one basis to Class A Common
Stock. The address of Quilvest American Equity Ltd. is P.O. Box 71, Road
Town, Tortola, British Virgin Islands.
(14) Includes 1,600 shares held jointly with Mr. Kallgren's wife.
13
