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EXHIBIT 2
ATTORNEY WORK PRODUCT
PRIVILEGED AND CONFIDENTIAL
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PROJECT HOT `N COLD IV
TERM SHEET
A. The Parties
Littlejohn: Littlejohn Fund II, L.P.
Quilvest: Quilvest American Equity Ltd.
B. Overview of Transaction
Littlejohn and Quilvest (collectively, the "Buyers") intend to make an
offer to acquire all of the outstanding shares of common stock in Pameco
Corporation (the "Company") for a cash purchase price of $0.40 per share (or
whatever higher per share price is deemed acceptable by both the Buyers and
Company) (the "Consideration") and following acquisition of such shares
terminate the Company's status as a reporting company under the Securities
Exchange Act of 1934. To accomplish the transaction, Buyers shall form a
wholly-owned subsidiary ("Newco") which shall be merged with and into the
Company (the "Merger").
C. Terms of Transaction
Formation of Newco: Newco shall be formed by Buyers as a Delaware
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corporation. The initial funding of Newco shall consist of a nominal
contribution by the Buyers, which amount shall be mutually determined, but of
which total amount Littlejohn shall contribute eighty percent (80%) and Quilvest
shall contribute twenty percent (20%).
Additional Capitalization of Newco: Prior to the consummation of the
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Merger, and in order to pay the Consideration and other expenditures
necessitated by the Merger, Buyers shall purchase additional equity in Newco on
the basis of an eighty percent (80%) contribution by Littlejohn and a twenty
percent (20%) contribution by Quilvest.
Merger: Upon consummation of the Merger, all outstanding shares of
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common stock in the Company (including shares held by Quilvest and its
affiliates) shall be converted into the right to receive the Consideration. The
Merger will be structured in a tax-efficient manner for both Littlejohn and
Quilvest. Buyers shall own one hundred percent (100%) of the outstanding shares
of the Company, and shall be in a position to cause the common stock of the
Company to cease to be authorized to be quoted on the OTC Bulletin Board or on
any other interdealer quotation system of a registered national securities
association. Buyers shall also cause the Company to file a Form 15 with the SEC
terminating registration of the common stock of the Company under the Exchange
Act of 1934, as amended.
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ATTORNEY WORK PRODUCT
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Post-Merger Ownership: Following consummation of the Merger, each of
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Littlejohn and Quilvest will own that percentage of the equity of the surviving
company (computed on a fully-diluted, common stock equivalent basis) equal to
the percentage of the aggregate amount invested by Littlejohn and Quilvest in
the Company to acquire the Series A, Series B and Series C Preferred Stock plus
accrued and unpaid dividends on such preferred stock through the day immediately
prior to the day on which the Merger is consummated plus the amounts invested in
Newco made by each entity (currently the respective percentages would be
Littlejohn - 80.833% and Quilvest - 19.167%).
Shareholders Agreement: The Buyers acknowledge that the Shareholders
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Agreement, dated as of February 18, 2000, by and among the Buyers, the Company
and Willem F.P. de Vogel (the "Shareholders Agreement") shall be amended and
restated to maintain its effectiveness in conjunction with and following the
Merger. Both Littlejohn and Quilvest agree that the terms of any amended and
restated shareholders agreement, as well as the terms of all related agreements
(including without limitation any Irrevocable Proxies), shall be substantially
the same as currently exist under the Shareholders Agreement, subject to agreed
upon changes; provided, that, because Willem F.P. de Vogel shall no longer be a
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shareholder of the Company following the Merger, he, individually, shall not be
a signatory to the amended and restated shareholders agreement.
D. Conditions of the Transaction
Consummation of the transaction shall be conditioned on, among other
things, the acceptance by Company of Buyers' offer to acquire all of Company's
outstanding shares of common stock and the negotiation and execution of a
definitive merger agreement acceptable to each of the Buyers and the Company
(the "Merger Agreement") to effect the Merger. Buyers' proposed letter
communicating the offer, which includes additional conditions to the
transaction, is attached hereto as Exhibit A.
E. Schedule 13D
Promptly after delivering to Company the proposed offer letter, Buyers
shall amend the Schedule 13D/A they have on file with the Securities and
Exchange Commission to disclose the offer. Such amendment shall include as
exhibits both the offer letter and this Term Sheet.
F. Closing Date
Buyers shall use their commercially reasonable best efforts to
consummate the transactions contemplated hereunder in an expeditious fashion
and, toward that end, shall maintain timely communications with each other and
with their respective financial and legal counsel.
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ATTORNEY WORK PRODUCT
PRIVILEGED AND CONFIDENTIAL
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G. Expenses
Pending consummation of the Merger, each of Littlejohn and Quilvest
shall be responsible for its respective expenses incurred in connection with the
transaction. Upon consummation of the Merger, it is anticipated that each of
Littlejohn and Quilvest shall be reimbursed for their respective reasonable
expenses by the Company.
H. Termination
If the Merger Agreement has not been entered into by January 31, 2001,
or, if entered into, the Merger Agreement is subsequently terminated, this Term
Sheet shall become null and void, unless extended by mutual agreement of the
parties, except that each party shall continue to be bound by the provisions
relating to Expenses.
LITTLEJOHN FUND II, L.P. QUILVEST AMERICAN EQUITY LTD.
By: Littlejohn Associates II, LLC,
General Partner
By:_______________________________ By:__________________________
Name: Angus C. Littlejohn, Jr. Name: Willem F.P. deVogel
Title: Manager Title: Attorney-in-Fact
