SIGNATURES
Pursuant to the requirements of the Securities Act of 1933, the registrant
certifies that it has reasonable grounds to believe that it meets all of the
requirements for filing on Form S-3 and has duly caused this Amendment No. 1 to
the registration statement to be signed on its behalf by the undersigned,
thereunto duly authorized, in the City of Miami, State of Florida, on February
7, 1996.
WATSCO, INC.
By: /s/ RONALD P. NEWMAN
Ronald P. Newman, Chief Financial
Officer, Secretary and Treasurer
Pursuant to the requirements of the Securities Act of 1933, this Amendment
No. 1 to the registration statement has been signed by the following persons in
the capacities and on the date indicated.
SIGNATURE TITLE DATE
--------- ----- -----
/s/ ALBERT H. NAHMAD Chairman of the Board (principal executive February 7, 1996
Albert H. Nahmad officer)
/s/ RONALD P. NEWMAN Chief Financial Officer, Secretary and February 7, 1996
Ronald P. Newman Treasurer (principal financial and
accounting officer)
/s/ D. A. COAPE-ARNOLD Director February 7, 1996
D. A. Coape-Arnold
/s/ DAVID B. FLEEMAN Director February 7, 1996
David B. Fleeman
/s/ JAMES S. GRIEN Director February 7, 1996
James S. Grien
/s/ PAUL F. MANLEY Director February 7, 1996
Paul F. Manley
/s/ BOB L. MOSS Director February 7, 1996
Bob L. Moss
/s/ ROBERTO MOTTA Director February 7, 1996
Roberto Motta
/s/ ALAN H. POTAMKIN Director February 7, 1996
Alan H. Potamkin
II-4
EXHIBIT 10.29
STOCK EXCHANGE AGREEMENT
AND PLAN OF REORGANIZATION
THIS STOCK EXCHANGE AGREEMENT AND PLAN OF REORGANIZATION (the
"Agreement") is made and entered into as of the ___ day of February, 1996, by
and between WATSCO, INC., a Florida corporation ("Watsco"), and RHEEM
MANUFACTURING COMPANY, a Delaware corporation ("Rheem").
R E C I T A L S
A. Rheem currently owns (i) 200 shares of stock of Comfort Supply,
Inc., a Delaware corporation (the "Comfort Supply Stock"), (ii) 20 shares of
stock of Gemaire Distributors, Inc., a Florida corporation (the "Gemaire
Stock"), and (iii) 500 shares of stock of Heating & Cooling Supply, Inc., a
California corporation (the "Heating & Cooling Stock" and together with the
Comfort Supply Stock and the Gemaire Stock, collectively, the "Stock").
B. Rheem desires to transfer, convey, assign, deliver and set over unto
Watsco all of the Stock in exchange for that number of shares of common stock,
$.50 par value per share, of Watsco, whose value equals Twenty-Three Million and
No/100 Dollars ($23,000,000.00) (the "Watsco Stock"), as determined by the
average of the closing sales price on the New York Stock Exchange for a share of
common stock, $.50 par value per share, of Watsco for the ten (10) trading days
preceding the Closing Date (as hereinafter defined).
C. Watsco desires to issue, transfer, convey, assign, deliver and set
over unto Rheem the Watsco Stock in exchange for the Stock.
D. Upon the execution of this Agreement and the consummation of the
transactions contemplated hereby, Watsco will own all of the issued and
outstanding shares of common stock of Comfort Supply, Inc., Gemaire
Distributors, Inc. and Heating & Cooling Supply, Inc.
A G R E E M E N T
In consideration of the premises, the respective mutual agreements,
covenants, representations and warranties herein contained, and other good and
valuable consideration, the receipt and sufficiency of which are hereby
acknowledged, the parties hereto intending to be bound legally, hereby agree as
follows:
1. EXCHANGE OF STOCK.
1.1 TRANSFER OF THE STOCK. At the Closing (as hereinafter defined),
Rheem shall transfer, convey, assign and set over unto Watsco all of the Stock
and deliver to Watsco certificates representing the Stock, together with
appropriate stock powers, in form and substance satisfactory to Watsco and its
legal counsel.
1.2 ISSUANCE OF THE WATSCO STOCK. At the Closing, Watsco shall
instruct its transfer agent to issue, transfer, convey, assign and set over unto
Rheem all of the Watsco Stock and deliver to Rheem certificates representing
Watsco Stock, together with appropriate stock powers, if necessary, in form and
substance satisfactory to Rheem and its legal counsel.
1.3 NO FRACTIONAL SECURITIES. No certificates or scrip representing
fractional shares of Watsco Stock shall be issued upon the exchange of
certificates pursuant to this Section 1. In lieu of any such fractional
securities: (i) Rheem shall be issued one additional share of Watsco Stock in
the event that Rheem is entitled to receive, under the terms of this Agreement,
a fractional share of Watsco Stock which is equal to or greater than 50/100 of
one share and (ii) Rheem shall not be entitled to any further consideration,
whether in the form of stock or cash, in the event Rheem is entitled to receive,
under the terms of this Agreement, a fractional share of Watsco Stock which is
less than 50/100 of one share.
2. CLOSING.
2.1 The closing of the transactions contemplated by this Agreement
(the "Closing") shall take place on February 29, 1996 (or, if the conditions set
forth in Sections 7 and 8 hereof have not been satisfied or waived by such date,
no later than three (3) business days after all such conditions have been
satisfied or waived), at the offices of Greenberg, Traurig, Hoffman, Lipoff,
Rosen & Quentel, P.A., 1221 Brickell Avenue, Miami, Florida 33131, at 10:00
a.m., or at such other place and time as the parties hereto may agree. The date
upon which the Closing occurs is hereinafter referred to as the "Closing Date".
2.2 DELIVERIES BY RHEEM. At or prior to the Closing, Rheem shall
deliver (or cause to be delivered) to Watsco:
(i) certificates representing all of the Stock, together with
appropriate stock powers; and
(ii) all other documents, instruments, agreements and all
certificates and other evidence as Watsco or its counsel may reasonably request
as to the satisfaction of the conditions to Watsco's obligations set forth
herein.
2.3 DELIVERIES BY WATSCO. At or prior to the Closing, Watsco shall
deliver (or cause to be delivered) to Rheem:
(i) certificates representing all of the Watsco Stock,
together with appropriate stock powers, if necessary; and
(ii) all other documents, instruments, agreements, certificates
and other evidence as Rheem or its counsel may reasonably request as to the
satisfaction of the conditions to Rheem's obligations set forth herein.
- 2 -
3. REPRESENTATIONS AND WARRANTIES OF RHEEM. In order to induce Watsco
to enter into this Agreement, and to consummate the transactions contemplated
hereby, Rheem hereby represents and warrants to Watsco as follows:
3.1 STATUS OF RHEEM. Rheem is a corporation duly organized, validly
existing and in good standing under the laws of the State of Delaware. Rheem has
all necessary corporate power and authority to own, manage, lease and hold its
properties and to execute, deliver and perform its obligations under this
Agreement and consummate the transactions contemplated hereby.
3.2 AUTHORITY; APPROVAL; ENFORCEABILITY. The execution, delivery and
performance by Rheem of this Agreement, and of each and every agreement,
document and instrument of conveyance contemplated hereby, and the consummation
of the transactions contemplated hereby and thereby have been duly and validly
authorized by all necessary corporate action. This Agreement is, and when
executed and delivered all such other agreements, documents and instruments
contemplated by this Agreement will be, valid, binding and enforceable against
Rheem in accordance with their respective terms, except to the extent that
enforcement thereof may be limited by applicable bankruptcy, reorganization,
insolvency or moratorium laws, or other laws or principles of equity affecting
the enforcement of creditors' rights. All persons who have executed this
Agreement on behalf of Rheem and who will execute any other agreement, document
or instrument contemplated by this Agreement on behalf of Rheem have been duly
authorized to do so by all necessary corporate action.
3.3 NO CONFLICT; NO CONSENTS REQUIRED. Neither the execution and
delivery by Rheem of this Agreement nor the consummation by Rheem of the
transactions contemplated hereby, nor compliance by Rheem with any of the
provisions hereof, will (i) conflict with or result in a breach of any provision
of the certificate of incorporation, bylaws or any other organizational document
of Rheem; (ii) result in the creation of a lien, charge or encumbrance upon any
of Rheem's assets; (iii) breach, conflict with, constitute a default (with or
without the giving of notice or the lapse of time or both) with respect to, or
result in the cancellation, termination or acceleration of the performance of
any obligations or indebtedness under the terms and conditions of, any contract,
agreement, commitment, indenture, mortgage, note, bond, license or other
instrument or obligation to which Rheem is now a party or by which Rheem or its
properties or assets may be bound or affected; (iv) violate any law or any rule
or regulation of any administrative agency or governmental body, or any
judgment, order, writ, injunction or decree of any court, administrative agency
or governmental body to which Rheem or its assets are or may be subject; or (v)
except for the Hart-Scott-Rodino filing and the consent of Rheem's lenders,
require Rheem to obtain or make any waiver, consent, approval or authorization
of, or registration, declaration, notice or filing with, any private
non-governmental third party or any federal, state, local or other governmental
authority. No approval, authorization, consent or other order or action of, or
filing by Rheem with any court, administrative agency, governmental authority or
any other person is required for the execution and delivery by Rheem of this
Agreement or the consummation by Rheem of the transactions contemplated hereby.
- 3 -
3.4 TITLE TO STOCK. Rheem owns all right, title and interest in and
to the Stock, free and clear of any security interests, charges, liens or other
encumbrances of any kind whatsoever, and the Stock represents all of Rheem's
right, title and interest in Comfort Supply, Inc., Gemaire Distributors, Inc.
and Heating & Cooling Supply, Inc. At the Closing, Rheem will transfer, convey,
assign and deliver, and Watsco will acquire, good, valid and marketable title to
the Stock, free and clear of all security interests, charges, liens or other
encumbrances of any kind whatsoever.
3.5 SECURITIES MATTERS.
3.5.1 Rheem is acquiring the Watsco Stock issuable in connection
with the transactions contemplated hereby for its own account and not with a
view to, or for sale in connection with, any "distribution," as such term is
used in Section 2(11) of the Securities Act of 1933, as amended (the "Securities
Act"), of any Watsco Stock in violation of the Securities Act.
3.5.2 Rheem is an "accredited investor," as that term is defined
in Rule 501(a) of Regulation D promulgated under the Securities Act.
3.5.3 Rheem understands that (i) the Watsco Stock issued in
connection with the transactions contemplated hereby will be restricted
securities within the meaning of Rule 144 of the Securities Act ("Rule 144");
(ii) such securities are not registered; (iii) such securities must be held
indefinitely and that no transfer of such securities may be made by Rheem unless
(A) the sale of such securities has been registered under the Securities Act and
any applicable state securities laws, or (B) an exemption from registration is
available under applicable state securities laws and the Securities Act,
including in accordance with the terms and conditions of Rule 144; and (iv) in
any event, the exemption from registration under Rule 144 will not be available
unless such securities have been beneficially owned for at least two years.
3.5.4 Rheem understands that the certificates representing the
Watsco Stock issued pursuant to this Agreement shall bear a legend substantially
as follows:
"The shares represented by this certificate have not been registered
under the Securities Act of 1933 or any applicable state law. They may
not be offered for sale, sold or transferred without (1) registration
under the Securities Act of 1933 and any applicable state law, or (2)
at holder's expense, an opinion (satisfactory to Rheem) of counsel
(satisfactory to Rheem) that registration is not required."
3.5.5 Rheem (i) has received and reviewed (x) Watsco's Annual
Report on Form 10-K for the year ended December 31, 1994, (y) Watsco's Quarterly
Report on Form 10-Q for the nine (9) months ended September 30, 1995 and (z) the
annual and other
- 4 -
periodic reports, special reports and registration statements filed by Watsco
with the Securities and Exchange Commission and/or any other securities exchange
during the past two (2) years, and (ii) has been afforded, prior to execution of
this Agreement, the opportunity to ask questions of, and receive answers from
Watsco, and to obtain any additional information relating to the transactions
contemplated hereby, to the extent Watsco possesses such information or could
have acquired it without unreasonable effort or expense, and in general has had
access to all information Rheem has deemed material to its decision to approve
the transaction contemplated hereby.
3.6 FAMILIARITY WITH WATSCO. Rheem is familiar with and
knowledgeable with regard to the operations of Watsco and its assets, properties
and businesses.
3.7 ACCURACY OF INFORMATION. None of the representations or
warranties by Rheem in this Agreement or in any statement or certificate
furnished or to be furnished to Watsco pursuant to the terms of this Agreement
contains or will contain any untrue statement of a material fact, or omits or
will omit to state a material fact, necessary to make the statement contained
therein not misleading or necessary in order to provide Watsco with complete and
accurate information in respect of all of the properties, assets and affairs of
Rheem.
4. REPRESENTATIONS AND WARRANTIES OF WATSCO. In order to induce Rheem
to enter into this Agreement, and to consummate the transactions contemplated
hereby, Watsco hereby represents and warrants to Rheem as follows:
4.1 STATUS OF WATSCO. Watsco is a corporation duly organized,
validly existing and in good standing under the laws of the State of Florida.
Watsco has all requisite corporate power and authority to own, manage, lease and
hold its properties and to execute, deliver and perform its obligations under
this Agreement and consummate the transactions contemplated hereby.
4.2 AUTHORITY. The execution, delivery and performance by Watsco of
this Agreement, and of each and every agreement, document and instrument
contemplated hereby, and the consummation of the transactions contemplated
hereby and thereby have been duly authorized by all necessary corporate action.
This Agreement is, and when executed and delivered all such agreements,
documents and instruments contemplated by this Agreement will be, valid, binding
and enforceable against Watsco in accordance with their respective terms, except
to the extent that enforcement thereof may be limited by applicable bankruptcy,
reorganization, insolvency or moratorium laws, or other laws or principles of
equity affecting the enforcement of creditors' rights. All persons who have
executed this Agreement on behalf of Watsco and who will execute any other
agreement, document or instrument contemplated by this Agreement on behalf of
Watsco have been duly authorized to do so by all necessary corporate action.
4.3 NO CONFLICT. Neither the execution and delivery by Watsco of
this Agreement nor the consummation by Watsco of the transactions contemplated
hereby, nor
- 5 -
compliance by Purchaser with any of the provisions hereof, will (i) conflict
with or result in a breach of any provision of the articles of incorporation,
bylaws or any other organizational document of Watsco, (ii) result in the
creation of a lien, charge or encumbrance upon any of Watsco's assets; (iii)
breach, conflict with, constitute a default (with or without the giving of
notice or the lapse of time or both) with respect to, or result in the
cancellation, termination or acceleration of the performance of any obligations
or indebtedness under the terms and conditions of, any contract, agreement,
commitment, indenture, mortgage, note, bond, license or other instrument or
obligation to which Watsco is now a party or by which Watsco or its properties
or assets may be bound or affected; (iv) violate any law or any rule or
regulation of any administrative agency or governmental body, or any judgment,
order, writ, injunction or decree of any court, administrative agency or
governmental body to which Watsco or its assets are or may be subject; or (v)
except for the Hart-Scott-Rodino filing and any necessary filing with the New
York Stock Exchange, require Watsco to obtain or make any waiver, consent,
approval or authorization of, or registration, declaration, notice or filing
with, any private non-governmental third party or any federal, state, local or
other governmental authority. No approval, authorization, consent or other order
or action of, or filing by Watsco with any court, administrative agency,
governmental authority or any other person is required for the execution and
delivery by Watsco of this Agreement or the consummation by Watsco of the
transactions contemplated hereby.
4.4 TITLE TO WATSCO STOCK. The Watsco Stock (i) has been duly
authorized and validly issued, (ii) is fully paid and non-assessable and (iii)
is free and clear of any security interests, charges, liens or encumbrances of
any kind whatsoever. At the Closing, Watsco will transfer and convey, and Rheem
will acquire, good, valid and marketable title to the Watsco Stock, free and
clear of all security interests, charges, liens and other encumbrances of any
kind whatsoever.
4.5 SECURITIES MATTERS.
4.5.1 Watsco is acquiring the Stock transferred in connection
with the transactions contemplated hereby for its own account and not with a
view to, or for sale in connection with, any "distribution," as such term is
used in Section 2(11) of the Securities Act of 1933, as amended (the "Securities
Act"), of any Stock in violation of the Securities Act.
4.5.2 Watsco is an "accredited investor," as that term is
defined in Rule 501(a) of Regulation D promulgated under the Securities Act.
4.5.3 Watsco understands that (i) the Stock issued in connection
with the transactions contemplated hereby are not registered, and (ii) such
securities must be held indefinitely and that no transfer of such securities may
be made by Watsco unless (A) the sale of such securities has been registered
under the Securities Act and any applicable state securities laws, or (B) an
exemption from registration is available under the Securities Act and applicable
state securities laws.
- 6 -
4.5.4 Watsco understands that the certificates representing the
Stock issued pursuant to this Agreement shall bear a legend substantially as
follows:
"The shares represented by this certificate have not been registered
under the Securities Act of 1933 or any applicable state law. They may
not be offered for sale, sold or transferred without (1) registration
under the Securities Act of 1933 and any applicable state law, or (2)
at holder's expense, an opinion (satisfactory to Watsco) of counsel
(satisfactory to Watsco) that registration is not required."
4.5.5 Watsco has been afforded, prior to execution of this
Agreement, the opportunity to ask questions of, and receive answers from Rheem
and to obtain any additional information relating to the transactions
contemplated hereby, to the extent Rheem possesses such information or could
have acquired it without unreasonable effort or expense, and in general has had
access to all information Watsco has deemed material to its decision to approve
the transactions contemplated hereby.
4.6 FAMILIARITY WITH COMPANIES. Watsco is actively involved in the
operation of Comfort Supply, Inc., Gemaire Distributors, Inc. and Heating &
Cooling Supply, Inc. and is intimately familiar with and knowledgeable with
regard to the assets and businesses of Comfort Supply, Inc., Gemaire
Distributors, Inc. and Heating & Cooling Supply, Inc.
4.7 ACCURACY OF INFORMATION. None of the representations or
warranties by Watsco in this Agreement or in any statement or certificate
furnished or to be furnished to Rheem pursuant to the terms of this Agreement
contains or will contain any untrue statement of a material fact, or omits or
will omit to state a material fact, necessary to make the statement contained
therein not misleading or necessary in order to provide Rheem with complete and
accurate information in respect of all of the properties, assets and affairs of
Watsco.
4.8 TAX MATTERS.
4.8.1 Heating & Cooling Supply, Inc. has no plan or intention to
acquire or redeem the Series A Preferred Stock.
4.8.2 Neither Gemaire Distributors, Inc., Heating & Cooling
Supply, Inc., nor Comfort Supply, Inc., has any plans or intentions to issue
additional shares of its stock to the extent doing so would result in Watsco
losing control of Gemaire Distributors, Inc., Heating & Cooling Supply, Inc., or
Comfort Supply, Inc., within the meaning of Section 368(c) of the Internal
Revenue Code of 1986, as amended.
4.8.3 Watsco has no plan or intention to liquidate or merge
Gemaire Distributors, Inc., Heating & Cooling Supply, Inc., or Comfort Supply,
Inc. into another corporation; to cause Gemaire Distributors, Inc., Heating &
Cooling Supply, Inc., or Comfort
- 7 -
Supply, Inc., to sell or otherwise dispose of any of its assets, except for
dispositions in the ordinary course of business; or to sell or otherwise dispose
of any of the stock of Gemaire Distributors, Inc., Heating & Cooling Supply,
Inc., or Comfort Supply, Inc., except for transfers described in Section
368(a)(2)(C) of the Internal Revenue Code of 1986, as amended.
4.8.4 It is the present plan and intention of Watsco either to
(i) continue the respective historic businesses of Gemaire Distributors, Inc.,
Heating & Cooling Supply, Inc., and Comfort Supply, Inc., or (ii) use a
significant portion of their respective historic business assets in a business.
5. COVENANTS AND AGREEMENTS. Watsco and Rheem hereby covenant and agree
as follows:
5.1 TERMINATION OF EXISTING AGREEMENTS. Upon consummation of the
Closing, each of the Subscription and Shareholders' Agreements between Watsco
and Rheem in respect of Comfort Supply, Inc., Gemaire Distributors, Inc. and
Heating & Cooling Supply, Inc., each of which is attached hereto as Exhibit "A"
(collectively, the "Subscription and Shareholders' Agreements") , shall
terminate and be of no further force and effect except as otherwise provided in
Sections 5.2 and 5.3 of this Agreement.
5.2 PUT AND CALL.
5.2.1 Watsco and Rheem hereby agree that the "put" and "call"
provisions contained in Section 3 of each of the Subscription and Shareholders'
Agreements shall continue to be valid, binding and enforceable obligations of
each of Watsco and Rheem and, except as provided below, no such "put" or "call"
shall be exercisable prior to the tenth (10th) anniversary of the date of this
Agreement, if not terminated sooner:
(a) Notwithstanding anything to the contrary contained
in this Agreement, unless otherwise mutually agreed by
Watsco and Rheem, Rheem shall have the right to exercise a
"call" during the next succeeding Election Period (as
defined in the Subscription and Shareholders Agreements)
with respect to the corporation in question in the event
of:
(i) The appointment of a trustee, receiver or other
custodian for all or any substantial portion of
the property of Gemaire Distributors, Inc.,
Heating & Cooling Supply, Inc., Comfort Supply,
Inc., and/or Watsco; or
(ii) A judicial finding that Gemaire Distributors,
Inc., Heating & Cooling Supply, Inc.,
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Comfort Supply, Inc. and/or Watsco is insolvent
or bankrupt; or
(iii) An assignment by Gemaire Distributors, Inc.,
Heating & Cooling Supply, Inc., Comfort Supply,
Inc. and/or Watsco for the benefit of creditors;
or
(iv) An irreconcilable violation of any Distributor
Agreement (Distributor Agreement is defined
hereinafter in Section 5.10) with Rheem by
Comfort Supply, Inc., Gemaire Distributors, Inc.
and/or Heating & Cooling Supply, Inc.; or
(v) Watsco takes any of the following actions with
respect to Comfort Supply, Inc., Gemaire
Distributors, Inc., or Heating & Cooling Supply,
Inc., without the express prior written consent
of Rheem:
(I) Any change in the number of members of the
Board of Directors of Comfort Supply,
Inc., Gemaire Distributors, Inc., and/or
Heating & Cooling Supply, Inc., from that
existing on the date of this Agreement;
(II) Any violation of Section 1.4 of the
Subscription and Shareholders' Agreements,
which sections shall continue to be valid,
binding and enforceable obligations of
each of Watsco and Rheem (except that in
the case of Section 1.4 of the
Subscription and Shareholders' Agreement
for Heating & Cooling Supply, Inc., Watsco
shall have the right to appoint the
successor to O.M. Butler).
(III) The adoption, amendment or repeal of the
Bylaws of Comfort Supply,
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Inc., Gemaire Distributors, Inc., and/or
Heating & Cooling Supply, Inc., in
existence on the date of this Agreement;
(IV) The dissolution, liquidation or winding up
of Comfort Supply, Inc., Gemaire
Distributors, Inc., Heating & Cooling
Supply, Inc. and/or Watsco;
(V) Any amendment to the Articles of
Incorporation of Comfort Supply, Inc.,
Gemaire Distributors, Inc., and/or Heating
& Cooling Supply, Inc.;
(VI) Any change in the business materially away
from distributing heating, ventilating,
air conditioning and cooling and
refrigeration equipment, parts and
supplies by Gemaire Distributors, Inc.,
Heating & Cooling Supply, Inc. and/or
Comfort Supply, Inc.; or
(VII) Voluntary submission to receivership,
bankruptcy or any similar status,
insolvency, or partial or complete
dissolution or liquidation or assignment
for the benefit of creditors by Gemaire
Distributors, Inc., Heating & Cooling
Supply, Inc., and/or Comfort Supply, Inc.
(b) Notwithstanding anything to the contrary contained in
this Agreement, unless otherwise mutually agreed by Watsco
and Rheem, Rheem shall have the right to exercise the
"call" with respect to Heating & Cooling Supply, Inc.
during the next succeeding Election Period (as defined in
the Subscription and Shareholders' Agreements) in the
event that Watsco takes any of the following actions with
respect to Heating & Cooling Supply, Inc. without the
express prior written consent of Rheem:
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(i) Any assignment, transfer, sale, lease or
disposition of the business or assets of Heating
& Cooling Supply, Inc., whether now owned or
hereafter acquired, other than in the ordinary
course of business; or
(ii) Any sale, amalgamation, merger, reorganization,
spin off, split up or consolidation, affiliation
with, participation in ownership of or joint
venture which is precluded under Section
5.2.1(a)(v)(VI); or
(iii) Any investment by Heating & Cooling Supply, Inc.
outside the ordinary course of business;
(iv) Voluntary submission to receivership, bankruptcy
or any similar status, insolvency, or partial or
complete dissolution or liquidation or
assignment for the benefit of creditors by
Heating & Cooling Supply, Inc.;
(v) Any liens, charges or encumbrances upon any of
its assets or property whether now owned or
hereafter acquired, other than as required under
credit or loan agreements or with vendors other
than in the ordinary course of business by
Heating & Cooling Supply, Inc.; or
(vi) Any third party debt unrelated to working
capital needs of Heating & Cooling Supply, Inc.
and such debt shall reduce the purchase price
under Section 3.3.1 (of the appropriate
Subscription and Shareholders' Agreement) and
which adjustment for the purchase price will be
agreed upon prior to the incurrence of the debt.
Watsco and Rheem hereby agree that paragraphs (i), (iii),
(iv) and (v) only apply to Heating & Cooling Supply, Inc.
until the satisfaction of and payment of, when
appropriate:
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(x) the preferred shares issued by Heating & Cooling
Supply Inc., plus accrued dividends thereon; and
(y) the Note owed by Heating & Cooling Supply, Inc.
to Rheem plus any accrued interest thereon.
(c) Notwithstanding anything to the contrary contained in
this Agreement, unless otherwise mutually agreed by Watsco
and Rheem, Watsco shall have the right to exercise a "put"
during the next succeeding Election Period (as defined in
the Subscription and Shareholders' Agreements) in the
event of:
(i) The appointment of a trustee, receiver or other
custodian for all or any substantial portion of
the property of Rheem; or
(ii) A judicial finding that Rheem is insolvent or
bankrupt; or
(iii) An assignment by Rheem for the benefit of
creditors; or
(iv) The dissolution or liquidation of Rheem; or
(v) Rheem impedes the long-term competitiveness of
Comfort Supply, Inc., Gemaire Distributors,
Inc., or Heating & Cooling Supply, Inc., in
terms of quality, price, or delivery; or
(vi) The voluntary submission to receivership,
bankruptcy or any similar status, insolvency or
partial or complete dissolution or liquidation
or assignment for the benefit of creditors by
Rheem.
(d) In the event of an irreconcilable dispute over whether
Rheem impedes the long-term competitiveness of Comfort
Supply, Inc., Gemaire Distributors, Inc., or Heating &
Cooling Supply, Inc., in terms of quality, price or
delivery or where there is an irreconcilable violation of
the Distribution Agreements, the parties agree to be bound
to the dispute resolution procedures provided in Section
5.11.3 herein.
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5.2.2 The "put" and "call" provided for in Section 3 of each of
the Subscription and Shareholders' Agreements and this Section 5.2 shall
terminate on the tenth (10th) anniversary of the date of this Agreement, if not
terminated sooner.
5.2.3 REFINANCING. Watsco and Rheem hereby agree that the "put"
and "call" formulae shall be modified at such time as Watsco replaces any
existing bank debt at the operating or subsidiary level with intercompany debt.
5.3 INVENTORY PURCHASE. Watsco and Rheem hereby agree that Section
3.7 of the Subscription and Shareholders' Agreements for Heating & Cooling
Supply, Inc. and Comfort Supply, Inc. shall continue to be valid, binding and
enforceable obligations of each of Watsco and Rheem.
5.4 FINANCIAL INFORMATION AND ASSURANCE.
5.4.1 During the term of this Agreement, Watsco shall provide
Rheem with a copy of (i) its annual financial statements, together with the
auditor's report, upon completion thereof, but in no event later than March 30
and (ii) the annual and other periodic reports, special reports and registration
statements to be filed by Watsco with the Securities and Exchange Commission
and/or any other securities exchange at the same time that it files such reports
and registration statements with the governmental authorities and/or securities
exchanges, unless prohibited by law.
5.4.2 Rheem shall notify Watsco at any time during the term of
this Agreement that Rheem determines in good faith, or otherwise becomes aware
that (a) it is financially incapable, of fulfilling its "put" and "call"
obligations under Section 3 of each of the Subscription and Shareholders'
Agreements and Section 5.2 of this Agreement or (b) an Event of Default as
defined in the Credit Agreement to which it is a party has occurred and is
continuing. Upon receipt of any such notice or if Rheem fails to provide Watsco
with the information specified in the first sentence of this Section 5.4.2,
Watsco shall have the right to terminate the "put" and "call" provisions
contained in Section 3 of each of the Subscription and Shareholders' Agreements
and Section 5.2 of this Agreement.
5.5 WATSCO AND RHEEM OPTIONS.
5.5.1 WATSCO OPTION. In the event that Watsco has the right to
accelerate a "put" pursuant to Section 5.2 of this Agreement, Watsco may elect
either to (i) exercise its right to accelerate such "put" or (ii) terminate the
"put" and "call" provisions contained in Section 3 of each of the Subscription
and Shareholders' Agreements and Section 5.1 of this Agreement.
5.5.2 RHEEM OPTION. In the event that Rheem has the right to
accelerate a "call" pursuant to Section 5.2 of this Agreement, Rheem may elect
either to (i) exercise its right to accelerate such "call" or (ii) terminate the
put and "call" provisions
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contained in Section 3 of each of the Subscription and Shareholders' Agreements
and Section 5.1 of this Agreement.
5.6 WATSCO BOARD OF DIRECTORS. Watsco agrees that, after the Closing
Date and until such time as Rheem owns less than ten percent (10%) of the issued
and outstanding shares of common stock of Watsco, the chief executive officer of
Rheem shall be listed in Watsco's proxy as a nominee to Watsco's Board of
Directors.
5.7 ENSURE CONDITIONS MET; HART-SCOTT-RODINO FILINGS. Each of Watsco
and Rheem shall use all reasonable efforts to cause the conditions to Watsco's
and Rheem's obligations at Closing to be satisfied on or before the Closing
Date, and specifically to use all reasonable efforts to (i) take, or cause to be
taken, all actions necessary to comply promptly with all legal requirements
which may be imposed on such party with respect to the transactions contemplated
by this Agreement and to consummate the transactions contemplated by this
Agreement, and (ii) to obtain (and to cooperate with the other party to obtain)
any consent, authorization, order or approval of, or any exemption by, any
governmental entity and/or any private third party which is required to be
obtained or made by such party in connection with the transactions contemplated
by this Agreement (including, without limitation, the consent of Rheem's
lenders). The parties hereto specifically agree to promptly prepare and file
their respective Notification and Report Forms under the Hart-Scott-Rodino
Antitrust Improvements Act of 1976, as amended ("HSR Act"), in accordance with
applicable law, if such filings are required under applicable law with respect
to this Agreement and the transactions contemplated hereby. Each party hereto
shall furnish to the other party such information and assistance as such other
party may reasonably request in connection with the preparation of any such HSR
filings or submissions and provide the others with copies of all correspondence,
filings or communications (or memoranda setting forth the substance thereof)
between such party or any of its representatives, on the one hand, and any
governmental agency or authority or members of their respective staffs, on the
other hand, with respect to this Agreement and the transactions contemplated
hereby.
5.8 WATSCO FILINGS. Watsco has heretofore delivered to Rheem copies
of (i) Watsco's Annual Reports on Form 10-K for the fiscal years ended December
31, 1994 and December 31, 1993, (ii) Watsco's Quarterly Report on Form 10-Q for
the nine (9) months ended September 30, 1995 and (iii) the annual and other
periodic reports, special reports and registration statements filed by Watsco
with the Securities and Exchange Commission and/or any other securities exchange
during the past two (2) years. As of their respective dates, such reports
complied in all material respects with all applicable requirements of the
Securities Act or the Securities Exchange Act of 1934, as applicable, and did
not contain any untrue statement of a material fact or omit to state a material
fact required to be stated therein or necessary to make the statements therein,
in light of the circumstances under which they were made, not misleading. The
audited consolidated financial statements and unaudited consolidated interim
financial statements of Watsco included in such reports have been prepared in
accordance with generally accepted accounting principles applied on a consistent
basis during the periods involved (except as may be indicated in the notes
thereto and, as to unaudited statements, except for the
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absence of notes thereto), and present fairly in all material respects the
financial position of Watsco as of the dates thereof and the results of Watsco's
operations for the periods then ended (subject, in the case of unaudited interim
financial statements, to year-end adjustments, all of which adjustments will
consist of normal recurring accruals consistent with past practice).
5.9 SUPPLEMENTARY ACTION. If at any time after the Closing Date, any
further assignments or assurances in law or any other things are necessary or
desirable to carry out the provisions of this Agreement, the officers and
directors of Watsco and Rheem are hereby authorized and empowered, in the name
of and on behalf of Watsco or Rheem, as the case may be, to execute and deliver
any and all things necessary or proper to vest or to perfect or confirm title to
the Stock and/or the Watsco Stock in Watsco and Rheem, respectively, and
otherwise to carry out the purposes and provisions of this Agreement.
5.10 EXTENSION OF DISTRIBUTOR AGREEMENTS. Subject to Section 5.11.1
of this Agreement, each of the existing Rheem Manufacturing Distributor
Agreements with Comfort Supply, Inc., Gemaire Distributors, Inc. and Heating &
Cooling Supply, Inc., copies of which are attached hereto as Exhibit "B" (each a
"Distributor Agreement" and collectively, the "Distributor Agreements") shall be
extended for an initial term of ten (10) years which shall expire on the tenth
(10th) anniversary of the date of this Agreement. Thereafter, subject to Section
5.11.1 hereof, the Distributor Agreements shall be "evergreened" since they will
be renewed automatically after the initial term for additional successive terms
of one (1) year each.
5.11 MODIFICATION OF DISTRIBUTOR AGREEMENTS. Upon the termination of
the "put" and "call" obligations contained in Section 3 of each of the
Subscription and Shareholders' Agreements and Section 5.2 of this Agreement,
Watsco and Rheem hereby agree to modify, in writing, the Distributor Agreements,
as follows:
5.11.1 Watsco and Rheem hereby agree that the Distributor
Agreements shall terminate in the event that Rheem impedes the long-term
competitiveness of Comfort Supply, Inc., Gemaire Distributors, Inc. or Heating &
Cooling Supply, Inc., in terms of quality, price or delivery.
5.11.2 Watsco and Rheem hereby agree that the Distributor
Agreements shall provide that "specific performance" shall be an available and
permitted remedy in the event of any irreconcilable violation of the Distributor
Agreements.
5.11.3 Watsco and Rheem hereby agree that the Distributor
Agreements shall provide that the following dispute resolution procedures shall
govern, in the order of priority set forth below, in the event there is an
irreconcilable dispute between Watsco and Rheem with respect to any of the
Distributor Agreements:
(a) The chief executive officers of Watsco and Rheem shall
attempt, in good faith, to resolve the dispute during the ten (10) day period
following the date on which such dispute becomes irreconcilable.
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(b) In the event that the chief executive officers of Watsco
and Rheem are unable to resolve the dispute within such ten (10) day period, the
dispute shall be submitted to an independent third party mediator to be agreed
upon by the chief executive officers of Watsco and Rheem (or the managing
partner of the Washington, D.C. offices of Price Waterhouse or another "big six"
accounting firm that is not used by or associated with either Rheem or Watsco in
the event that the chief executive officers of Watsco and Rheem are unable to
agree upon an independent third party mediator).
(c) In the event that Watsco or Rheem fails to implement the
decision made by the mediator in respect of the dispute within ten (10) days of
such decision, the other party shall have the right to a confession of judgment
to implement the decision of the mediator. Each of Watsco and Rheem hereby agree
to take any and all actions, and to cooperate with the other in any reasonably
requested manner, necessary to obtain any such confession of judgment.
5.12 TAX TREATMENT. Each of Watsco and Rheem intends for the
transaction contemplated by this Agreement to qualify as a tax-free
reorganization for federal income tax purposes and agrees to retain their own
independent legal counsel to advise them on the tax consequences of the
transaction contemplated by this Agreement. Each of Watsco and Rheem further
agrees to cooperate with the other to ensure, to the maximum extent possible,
that the transaction contemplated by this Agreement will qualify as a tax-free
reorganization for federal income tax purposes.
5.13 REGISTRATION RIGHTS. Rheem shall be entitled to registration
rights with respect to the Watsco Stock on the first to occur of (i) the second
(2nd) anniversary of the Closing Date or (ii) an event described in Section 5.5
has occurred.
6. INDEMNIFICATION BY WATSCO.
6.1 INDEMNIFICATION BY WATSCO. Watsco agrees to indemnify and hold
Rheem harmless from, against and in respect of the full amount of any and all
liabilities, damages, claims, deficiencies, assessments, losses, taxes,
penalties, interest, costs and expenses, including without limitation,
reasonable fees and disbursements of trial and appellate counsel arising from,
in connection with, or incident to any breach or violation of any of the
representations, warranties, covenants or agreements of Watsco contained in this
Agreement.
6.2 INDEMNIFICATION BY RHEEM. Rheem agrees to indemnify and hold
Watsco harmless from, against and in respect of the full amount of any and all
liabilities, damages, claims, deficiencies, assessments, losses, taxes,
penalties, interest, costs and expenses, including without limitation,
reasonable fees and disbursements of trial and appellate counsel arising from,
in connection with, or incident to any breach or violation of any of the
representations, warranties, covenants or agreements of Rheem contained in this
Agreement.
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6.3 CLAIMS FOR INDEMNIFICATION. A claim for indemnification pursuant
to Section 6.1 or Section 6.2 of this Agreement may be made by any indemnified
party at any time by the giving of written notice thereof to the indemnifying
party. The notice shall set forth in reasonable detail the basis upon which the
claim for indemnification is made.
6.4 DEFENSE OF CLAIMS. If any person or entity not a party to this
Agreement shall make any demand or claim, or file or threaten to file any
lawsuit, which demand, claim or lawsuit may result in any liability, damage or
loss to any indemnified party or that may cause liability to any indemnified
party as the result of, arising from, in connection with or incident to any
breach or violation of any representations, warranties, covenants, or agreements
contained in this Agreement, then in that event, after notice by the indemnified
party to the indemnifying party of the demand, claim or lawsuit, the
indemnifying party shall have the option, at its cost and expense, to retain
counsel to defend any demand, claim or lawsuit. Thereafter, the indemnified
party shall be permitted to participate in any defense at its own expense. If
the indemnifying party shall fail to respond within ten (10) days after receipt
of the written notice of any demand, claim or lawsuit, the indemnified party
shall retain counsel and conduct the defenses of the demand, claim or lawsuit as
it may in its discretion deem proper, at the cost and expense of the
indemnifying party. The indemnities from the indemnifying party to the
indemnified party shall include any liability, damage or losses the indemnified
party may suffer as the result of the demand, claim or lawsuit.
7. CONDITIONS TO RHEEM'S OBLIGATION TO CLOSE. Rheem's obligation to
consummate the transactions contemplated by this Agreement shall be subject to
each of the following:
7.1 The expiration or termination, at or prior to the Closing, of
the applicable Hart-Scott-Rodino waiting period.
7.2 The receipt of the consents of the Lenders.
7.3 The recapitalization of Heating & Cooling Supply, Inc., pursuant
to Section 368(a)(1)(E) of the Internal Revenue Code of 1986, as amended, such
that after the recapitalization, the authorized capital stock of Heating &
Cooling Supply, Inc. shall be (i) 10,000 shares of Common Stock which shall be
entitled to vote on a one vote per share basis, 5,000 shares of which shall be
issued to Watsco and 5,000 shares of which shall be issued to Rheem and (ii)
2,000 shares of Series A Preferred Stock which shall be entitled to vote on a
one vote per share basis, all of which shall be issued to Rheem.
7.4 Heating & Cooling Supply, Inc., shall have permanently amended
its charter and the Certificate of Determination of Preferences, Series A to
reflect that each share of Series A Preferred Stock shall be entitled to vote on
a one vote per share basis.
8. CONDITIONS TO WATSCO'S OBLIGATION TO CLOSE. Watsco's obligation to
consummate the transactions contemplated by this Agreement shall be subject to
the expiration or termination, at or prior to Closing, of the applicable
Hart-Scott-Rodino waiting period.
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9. MISCELLANEOUS.
9.1 GOVERNING LAW; JURISDICTION; VENUE. This Agreement shall be
governed by and construed in accordance with the laws of the State of Florida.
The parties hereto agree that any action brought by Rheem in connection with the
transactions contemplated herein shall be brought in the Federal and Florida
state courts located in Dade County, Florida. The parties hereto agree that any
action brought by Watsco in connection with the transactions contemplated herein
shall be brought in the Federal and New York state courts located in New York
County, New York. Each of the parties hereto expressly consents to the
jurisdiction of the foregoing courts and waives any objection that such courts
constitute an inconvenient forum.
9.2 NO ASSIGNMENT. Except as set forth herein, no party hereto shall
assign its rights, or delegate its obligations, under this Agreement unless and
until any such assignment or delegation shall first be consented to in a written
instrument executed by the other parties hereto.
9.3 NOTICES. Any notices, requests, demands and other communications
required or permitted to be given hereunder shall be given in writing and shall
be deemed to have been duly given when delivered by hand or when deposited in
the United States mail, by registered or certified mail, postage prepaid, return
receipt requested, or by delivery to Federal Express priority service or another
reputable overnight courier service, addressed as follows:
If to Watsco: Watsco, Inc.
2665 South Bayshore Drive, Suite 901
Coconut Grove, Florida 33133
Attention: Ronald Newman
with a copy to: Greenberg, Traurig, Hoffman, Lipoff &
Quentel, P.A.
1221 Brickell Avenue
Miami, Florida 33131
Attention: Martin Kalb, Esq.
If to Rheem: Rheem Manufacturing Company
405 Lexington Avenue, 22nd Floor
New York, New York 10174-0307
Attention: Gary L. Tapella
with a copy to: Rheem Manufacturing Company
405 Lexington Avenue, 22nd Floor
New York, New York 10174-0307
Attention: Vincent J. Debo, Esq.
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or to such other addresses as the parties hereto from time to time may give
written notice of, in accordance with this section, to the other parties.
9.4 ENTIRE AGREEMENT. This Agreement constitutes the entire
agreement between the parties hereto and supersedes all prior agreements,
understandings, negotiations and discussions, both written and oral, between the
parties hereto with respect to the subject matter hereof.
9.5 AMENDMENT. This Agreement may not be amended or modified in any
way except by a written instrument executed by the parties hereto.
9.6 BENEFITS; BINDING EFFECT. This Agreement shall be for the
benefit of and binding upon the parties hereto, their respective heirs, personal
representatives, successors and assigns.
9.7 NO WAIVER. No waiver of any of the provisions of this Agreement
shall be deemed or shall constitute a waiver of any other provisions hereof
(whether or not similar), nor shall any such waiver constitute a continuing
waiver unless otherwise expressly so provided.
9.8 NO THIRD PARTY BENEFICIARY. Nothing expressed or implied in this
Agreement is intended, or shall be construed, to confer upon or give any person,
firm, corporation, partnership, association or other entity, other than the
parties hereto and their respective heirs, personal representatives, legal
representatives and assigns, any rights or remedies under or by reason of this
Agreement.
9.9 SEVERABILITY. The invalidity of any one or more of the words,
phrases, sentences, clauses, sections or subsections contained in this Agreement
shall not affect the enforceability of the remaining portions of this Agreement
or any part hereof, all of which are inserted conditionally on their being valid
in law, and, in the event that any one or more of the words, phrases, sentences,
clauses, sections or subsections contained in this Agreement shall be declared
invalid, this Agreement shall be construed as if such invalid section or
sections, or subsection or subsections had not been inserted.
9.10 PRONOUNS AND PLURALS. Whenever the context may require, any
pronoun used in this Agreement shall include the corresponding masculine,
feminine or neuter forms, and the singular forms of nouns, pronouns and words
shall include the plural and vice versa.
9.11 SECTION HEADINGS. The section and other headings contained in
this Agreement are for reference purposes only and shall not affect the meaning
or interpretation of any provisions of this Agreement.
9.12 ATTORNEYS' FEES. If either party shall retain or engage an
attorney or attorneys to collect or enforce or protect its interest with respect
to this Agreement, the prevailing party shall be entitled to receive from the
other party payment of all costs and
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expenses of collection, enforcement, or protection, including reasonable
attorneys' fees, whether or not suit is brought and through all appeals.
9.13 COUNTERPARTS. This Agreement may be executed in multiple
counterparts and all such counter parts shall collectively constitute an
original Agreement, which may be evidenced by any one counterpart.
IN WITNESS WHEREOF, the parties hereto have each executed and delivered
this Agreement as of the day and year first above written.
WATSCO, INC., a Florida corporation
By: ________________________________________
Name: ______________________________________
Title: _____________________________________
RHEEM MANUFACTURING
COMPANY, a Delaware corporation
By: ________________________________________
Name: ______________________________________
Title: _____________________________________
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EXHIBIT "A"
SUBSCRIPTION AND SHAREHOLDERS' AGREEMENTS
A-1
EXHIBIT "B"
RHEEM MANUFACTURING COMPANY DISTRIBUTOR AGREEMENTS
B-1
EXHIBIT 23.2
CONSENT OF INDEPENDENT CERTIFIED PUBLIC ACCOUNTANTS
As independent certified public accountants, we hereby consent to the use of our
reports (and to all references to our Firm) included in or made a part of this
registration statement.
ARTHUR ANDERSEN LLP
Fort Lauderdale, Florida,
February 6, 1996.
EXHIBIT 23.3
CONSENT OF INDEPENDENT ACCOUNTANTS
We consent to the inclusion in this registration statement on Form S-3 of
Watsco, Inc. of our report on our audit of the financial statements of Three
States Supply Company, Inc. We also consent to the reference to our firm under
the caption "Experts."
RHEA & IVY, P.L.C.
Memphis, Tennessee,
February 6, 1996.
