REGISTRATION RIGHTS AGREEMENT
BY AND BETWEEN
INTERNATIONAL COMFORT PRODUCTS CORPORATION
AND
WATSCO COMPONENTS, INC.
and
P.E./DEL MAR, INC.
NASHVILLE, TENNESSEE
MAY 29, 1998
TABLE OF CONTENTS
1. Certain Definitions and Terms
2. Statement of Intent
3. Required and Incidental Registrations
4. Deviation from Agreement; Amendments; and Waivers
5. Construction
6. Titles of Articles, Sections and Subsections
7. Time of Essence
8. Successors and Assigns, Etc
9. Notices
10. Arbitration
11. Best Efforts
12. Resolution of Issues, Etc
13. Counterparts
SIGNATURES
ii
REGISTRATION RIGHTS AGREEMENT
BY AND BETWEEN
INTERNATIONAL COMFORT PRODUCTS CORPORATION
AND
WATSCO COMPONENTS, INC.
and
P.E./DEL MAR, INC.
THIS REGISTRATION RIGHTS AGREEMENT ("Agreement") entered into and made
by International Comfort Products Corporation (the "Company") and Watsco
Components, Inc. ("Components") and P.E./Del Mar, Inc. ("Del Mar")
(Components and Del Mar being referred to herein individually as a
"Shareholder" and collectively as the "Shareholders"), to be effective as of
May 29, 1998.
RECITALS:
A. Pursuant to that certain Asset Purchase Agreement dated as of May
29, 1998 (the "Purchase Agreement") among the Company, Comfort Components of
America, Inc., Shareholders and Watsco, Inc., Shareholders sold substantially
all of their assets and liabilities to the Company in exchange for 1,488,162
of the ordinary shares of the Company (the "ICP Shares"). Unless otherwise
defined herein, all capitalized terms used herein without definition shall
have the meanings ascribed to such terms in the Purchase Agreement.
B. The ICP Shares were issued to Shareholders without registration
under the Securities Act of 1933, as amended. It is a condition to closing
the transactions contemplated by the Purchase Agreement that ICP grant to
Shareholders certain "piggyback" and demand registration rights with respect
to the ICP Shares.
NOW THEREFORE, in consideration of the transactions embodied in the
Purchase Agreement, and for other good and valuable consideration, the
receipt and adequacy of which are hereby acknowledged, the parties have
agreed to the terms set forth in this Agreement.
TERMS:
1. Certain Definitions and Terms. The following terms and
definitions apply to this Agreement:
a. "AMEX" means the American Stock Exchange, Inc. and any
successor(s) in interest thereto.
b. "Common Stock" means the Company's ordinary shares, no par value,
outstanding on the date hereof, together with any reclassifications thereof
or other changes in respect thereof.
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c. "Company" means International Comfort Products Corporation, a
Canadian corporation with principal offices located currently at 000
Xxxxxxxxx Xxxxxx Xxxxx, Xxxxx 000, Xxxxxxxx, Xxxxxxxxx 00000, and any
successor(s) in interest thereto.
d. "Company Party" shall have the meaning ascribed to such term in
Subsection 3.e. hereof.
e. "Person" means any individual, corporation, limited liability
company, limited liability partnership, partnership, general partnership,
association, joint venture, joint stock company, syndicate, business trust or
other type of trust, unincorporated organization, government or any agency or
political subdivision thereof, or any other form of entity.
f. "Plan Registration" means a registration statement filed on Form
S-4 or Form S-8, or any shelf registration statement (unless and until the
securities registered under a shelf registration statement are actually
offered for sale) or other similar successor registration statement.
g. "Registrable Securities" shall have the meaning ascribed to such
term in Section 3 hereof.
h. "Securities Act" means the Securities Act of 1933, as amended.
i. "Securities Exchange Act" means the Securities Exchange Act of
1934, as amended.
j. "SEC" means the United States Securities and Exchange Commission.
k. "Shareholder" means each of Components and Del Mar. Shareholders
means both Components and Del Mar.
l. "Shareholder Party" shall have the meaning ascribed to such term
in Subsection 3.e. hereof.
m. "Shares" means shares of Common Stock beneficially owned by the
Shareholders as listed on Schedule A hereto, subject to any adjustment to
reflect any reclassifications thereof or other changes in respect thereof.
n. "State Administrator" means the Person charged with administering
or enforcing State Laws.
o. "State Laws" mean laws, rules and regulations applicable to the
registration or sale of securities in the various states and territories of
the United States of America, including the District of Columbia, and this
term includes those statutes commonly referred to as "Blue Sky Laws."
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p. The words "hereof", "herein", "hereunder", and words of similar
import shall, when used in this Agreement, refer to this Agreement as a whole
and not to any particular provision of this Agreement.
q. Words importing a particular gender mean and include every other
gender, and words importing the singular number mean and include the plural
number, and vice versa, as the context shall require.
2. Statement of Intent. This Agreement is intended to serve as the
mechanism for avoiding, to the extent practicable, a disruption of the market
in the Common Stock resulting from any sale of all or a material portion of
the Shares (the Shares having not been registered pursuant to the Securities
Act) in a public distribution pursuant to applicable exemptions under the
Securities Act. The parties' agreements herein are subject to the terms and
conditions set forth in this Agreement. This Agreement provides a non-
exclusive means for the Shareholders to dispose of the Shares.
3. Required and Incidental Registrations.
a. Required Registration.
i. Between June 1, 1999 and May 31, 2000, upon the written request
of the Shareholders, the Company agrees to prepare and file a
registration statement under the Securities Act covering the
Shares which are the subject of such request (referred to herein
as the "Registrable Securities") and agrees to use its best
efforts to cause such registration statement to become effective
as expeditiously as possible.
ii. The Company shall be required to prepare, file and to use its
best efforts to cause to become effective only one registration
statement pursuant to this Subsection 3.a.
iii. The request for registration by the Shareholders shall specify
the number of Shares to be registered and shall describe the
proposed method of sale of such Shares. If, in the judgment of
the Shareholders, the proposed sale of Registrable Securities is
not on satisfactory terms, such request may be withdrawn by the
Shareholders at any time before the registration statement is
effective, with the effect that such request shall be deemed,
for the purposes of this Agreement, never to have been made so
long as the Shareholders promptly reimburse the Company for all
reasonable expenses incurred by the Company related to such now-
withdrawn request. Such expenses shall be itemized.
iv. If the Shareholders intend to distribute the Registrable
Securities by means of an underwriting, the Shareholders shall
provide the Company with the name of a nationally recognized
managing underwriter or underwriters (the "Managing
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Underwriter") that the Shareholders propose to employ as a part
of Shareholders' request made pursuant to this Subsection. The
Company shall have the right to approve such Managing
Underwriter, which approval shall not be unreasonably withheld,
delayed or conditioned. The Company may disapprove the
Shareholders' proposed underwriter if the Company is then in the
process of registering its securities using another nationally
recognized Managing Underwriter or has otherwise obligated
itself to use another nationally recognized Managing Underwriter
in public offerings of its securities. In the event that the
Shareholders propose to sell Shares through such underwriting,
the Company agrees to enter into (together with the Shareholders
and the other shareholders distributing their securities through
such underwriting) an underwriting agreement with the nationally
recognized Managing Underwriter and other underwriters selected
for such underwriting, provided that such underwriting agreement
is in customary form (including customary provisions restricting
any participant's ability to sell shares of the Company
securities for a reasonable period following the effective date
of the registration statement) and is reasonably acceptable to
the Company.
v. The Company and, subject to the requirements of Subsection f. of
this Section 3, other holders of the Company's securities may
include securities for its (or their) own account in such
registration (1) if the Managing Underwriter so agrees and (2)
if the number of Registrable Securities which would otherwise
have been included in such registration statement and
underwriting will not thereby be limited.
vi. The Company may postpone the filing of any registration
statement requested pursuant to this Subsection for a reasonable
period of time not to exceed one hundred twenty (120) days if it
deems such postponement prudent as a result of current Company
or market circumstances.
vii. Notwithstanding anything to the contrary contained herein, the
Company may choose to deny any request for registration pursuant
to Subsection 3.a. within one hundred twenty (120) days after
the effective date of a registration statement filed by the
Company covering an underwritten public offering which the
Shareholders shall have been entitled to join, pursuant to
Subsection 3.b., but failed or refused to join, unless (1) the
Managing Underwriter shall have limited the number of
Registrable Securities that the Shareholders proposed to offer
for sale pursuant to such registration statement, and/or (2) if
the registration statement shall have been withdrawn by the
Company or the underwriting was not completed substantially in
accordance with the terms offered to the Shareholders.
viii. The Company shall not be required to effect any requested
registration pursuant to this Subsection 3.a. if such
registration does not involve the disposition of Registrable
Securities constituting at least twenty-five percent (25%) of
the Shares
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registered in the name of the Shareholders and if the Company
shall deliver to the Shareholders an unqualified opinion of
counsel reasonably acceptable to such Shareholders to the effect
that no such registration is necessary under the Securities Act
and applicable State Laws in connection with the proposed
disposition of such Registrable Securities. Such opinion shall
be addressed to the Shareholders and shall specifically state
that such person or entity, and the proposed purchaser(s) of the
Shares to which the opinion relates, are entitled to rely
thereon in connection with the means of disposition covered by
such opinion.
ix. The Company shall not be required to effect any requested
registration pursuant to Subsection 3.a. if the Company is
engaged or plans to be engaged within ninety (90) days, at the
time of such written request, in a registered public offering in
which the Shareholders have the right to request inclusion of
the Registrable Securities pursuant to Subsection 3.b. hereof so
long as the Company uses its best efforts to assure that all of
the Registrable Securities are in fact included in such
registration. In the event that the Company advises the
Shareholders that the Company is denying the request for the
reason set out in this paragraph, it is agreed that such request
for registration shall not be deemed or understood to count as
a demand registration request under Subsection 3.a. for purposes
of this Agreement.
x. If the requested registration pursuant to Subsection 3.a. hereof
does not involve an underwritten public offering, the Company's
obligation to maintain the availability of such registration
statement for the public distribution of the Registrable
Securities included thereunder shall not exceed ninety (90) days
from the effective date of the registration statement.
xi. The Shareholders may withdraw the Registrable Securities from
any registration statement filed pursuant to Subsection 3.a. at
any time before the registration statement becomes effective by
giving telephonic notice to the Company and any Managing
Underwriter, which notice shall be reduced to writing and sent
immediately to the Company in accordance with the notice
provisions hereof, and in such event the Shareholders shall
promptly reimburse the Company for all reasonable expenses
related to the filing of the registration statement and the
Company's obligation to file a registration statement under
Subsection 3.a. shall continue as if the demand never had been
made. Such expenses shall be itemized.
xii. The Company's undertakings in this Section 3.a. include filings
under and in compliance with State Laws, subject to the
limitation set forth in Subsection 3.c.i.D.
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b. Incidental Registration.
i. Each time prior to June 1, 2000 that the Company shall determine
to file a registration statement under the Securities Act (other
than pursuant to Section 3.a. hereof and other than in respect
of a Plan Registration), either for its own account or on behalf
of any other security holder, the Company agrees to give prompt
written notice of its determination to the Shareholders. Upon
the written request of the Shareholders stating the number of
Shares the Shareholders desires to have registered and sold,
received within fifteen (15) days after the receipt of such
written notice from the Company, the Company agrees to use its
best efforts to cause all or a portion of such Registrable
Securities to be included in the Company's registration
statement and registered under the Securities Act, all to the
extent requisite to permit the sale or other disposition by the
Shareholders of as many of the shares of Registrable Securities
as practicable. Notwithstanding the foregoing provisions of
this Subsection 3.b.i., the Company may withdraw any
registration statement filed or planned to be filed pursuant to
Subsection 3.b. hereof without incurring any liability to the
Shareholders (other than reimbursement of fees, including
counsel, accounting and underwriting fees actually expended by
the Shareholders in connection with the proposed registration).
ii. If the registration of which the Company gives written notice
pursuant to Subsection 3.b.i. is for a public offering involving
an underwriting, the Company agrees to so advise the
Shareholders as a part of its written notice, including the
identity of a nationally recognized Managing Underwriter
selected by the Company. In such event the right of the
Shareholders to registration pursuant to this Subsection 3.b.i.
shall be conditioned upon the Shareholder's participation in
such underwriting and the inclusion of the Shareholder's
Registrable Securities in the underwriting to the extent
provided herein. In the event that the Shareholders propose to
sell Shares through such underwriting, the Shareholders agree to
enter into (together with the Company and the other shareholders
distributing their securities through such underwriting) an
underwriting agreement with the nationally recognized Managing
Underwriter and other underwriters selected for such
underwriting by the Company, provided that such underwriting
agreement is in customary form (including customary provisions
restricting the ability of the Shareholders to sell Shares for
a reasonable period following the effective date of the
registration statement) and is reasonably acceptable to the
Company. No underwriting agreement shall result in charges to
the Shareholders that are disproportionate to the number of
Registrable Securities included in the registration statement.
iii. Notwithstanding any other provision of this Section 3.b., if the
Managing Underwriter of an underwritten distribution advises the
Company and the Shareholders in writing that in its good faith
judgment the number of shares
6
of Registrable Securities and the other securities requested to
be registered exceeds the number of shares of Registrable
Securities and other securities which is advisable to include in
such offering (a "Recommendation"), then (A) the number of
shares of Registrable Securities and other securities so
requested to be included in the offering shall be reduced to
that number of shares which in the good faith judgment of the
Managing Underwriter it is advisable to include in such offering
except for shares to be issued by the Company in an offering
initiated by the Company, which shall have priority over the
shares of Registrable Securities, and (B) such reduced number of
shares shall be allocated among the Shareholders and holders of
other securities in proportion, as nearly as practicable, to the
respective number of shares of Registrable Securities requested
by the Shareholders or other securities requested by other
holders to be included in the registration statement. All
Registrable Securities and other securities which are excluded
from the underwriting by reason of the Managing Underwriter's
Recommendation and all Shares not originally requested to be so
included shall not be included in such registration statement
and shall be withheld from the market by the holders thereof for
a period which the Managing Underwriter reasonably determines is
necessary to effect the underwritten public offering.
iv. In the event that, as a result of the allocation as described in
Subsection 3.b.iii. above, the Shareholders are unable to
include all requested Registrable Securities in a registration
statement which is the subject of Subsection 3.b., then the
Company, upon request of the Shareholders, hereby agrees to
include such Registrable Securities, with a full priority over
other Company securities being offered by other Company security
holders, in the next subsequent registration by the Company in
accordance with Subsection 3.b. above, subject to a reduction
being effected by reason of the Managing Underwriter's
recommendation and compliance with other applicable terms of
Subsection 3.b.
v. The Shareholders may withdraw Registrable Securities from any
registration statement at any time before the registration
statement becomes effective by giving telephonic notice to the
Company and the Managing Underwriter, which notice shall be
reduced to writing and sent immediately to the Company and to
the Managing Underwriter in accordance with the notice
provisions hereof.
vi. The Company's undertakings in this Section 3.b. include filings
under and in compliance with State Laws, subject to the
limitation set forth in Subsection 3.c.i.D.
c. Registration Procedures.
i. If and whenever the Company is required by the provisions of
Subsections a. or b. of this Section 3 to use its best efforts
to effect the registration of Registrable
7
Securities under the Securities Act, the Company, as
expeditiously as possible, agrees to:
A. In accordance with the Securities Act and all applicable
rules and regulations, prepare and file with the SEC a
registration statement with respect to such securities and
use its best efforts to cause such registration statement to
become and remain effective for the period of distribution
contemplated thereby, not to exceed ninety (90) days, and
prepare and file with the SEC such amendments and
supplements to such registration statement and the
prospectus contained therein as may be necessary to keep
such registration statement effective for such period and to
maintain such registration statement and prospectus accurate
and complete in all material respects for such period;
provided, however, that the Company shall not be required to
maintain the effectiveness of any registration statement not
covering an underwritten public offering (1) beyond the
period of distribution contemplated thereby or (2) for more
than ninety (90) days after such registration statement
becomes effective (whichever period is shorter);
B. If the offering is to be underwritten in whole or in part,
enter into and perform under a written underwriting
agreement in customary form and substance which is
reasonably satisfactory to the Managing Underwriter of the
public offering, the Shareholders, and the Company;
C. Furnish to the Shareholders and to the underwriters of the
securities being registered such number of copies of the
registration statement and each amendment and supplement
thereto, preliminary prospectus, final prospectus and such
other documents as such underwriters and the Shareholders
may reasonably request in order to facilitate the public
offering of such securities;
D. Use its best efforts to list, register or qualify the
securities covered by such registration statement with the
AMEX and under such State Laws of such jurisdictions as the
Shareholders and underwriters may reasonably request, except
that the Company shall not for any purpose be required to
qualify to do business as a foreign corporation in any
jurisdiction where it is not so qualified;
E. Notify the Shareholders, promptly after it shall receive
notice thereof, of the date and time when such registration
statement and each post-effective amendment thereto has
become effective or a supplement to any prospectus forming
a part of such registration statement has been filed;
8
F. Notify the Shareholders promptly of any request by the SEC
for the amending or supplementing of such registration
statement or prospectus or for additional information;
G. Prepare and file with the SEC, promptly upon the request of
the Shareholders, any amendments or supplements to such
registration statement or prospectus which, in the
reasonable opinion of counsel for the Shareholders, is
required under the Securities Act or the rules and
regulations thereunder in connection with the distribution
of the Registrable Securities by the Shareholders;
H. Prepare and file promptly with the SEC, and promptly notify
the Shareholders of the filing of, such amendments or
supplements to such registration statement or prospectus as
may be necessary to correct any statements or omissions if,
at the time when a prospectus relating to such securities is
required to be delivered under the Securities Act, any event
has occurred as the result of which any such prospectus or
any other prospectus as then in effect would include an
untrue statement of a material fact or omit to state any
material fact required to be stated therein or necessary to
make the statements therein, in light of the circumstances
in which they were made, not misleading;
I. In case the Shareholders or any underwriter for the
Shareholders is required to deliver a prospectus at a time
when the prospectus then in circulation is not in compliance
in all material respects with the Securities Act or the
rules and regulations of the SEC, or applicable State Laws,
prepare promptly upon request such amendments or supplements
to such registration statement and such prospectus as may be
necessary in order for such prospectus to comply with the
requirements of the Securities Act and such rules and
regulations, and/or applicable State Laws;
J. Advise the Shareholders, promptly after it shall receive
notice or obtain knowledge thereof, of the issuance of any
stop order by the SEC (and/or any State Administrator)
suspending the effectiveness of such registration statement
or the initiation or threatening of any proceeding for that
purpose and promptly use its best efforts to prevent the
issuance of any stop order or to obtain its prompt
withdrawal if such stop order should be issued;
K. Not file any registration statement or prospectus or any
amendment or supplement to such registration statement or
prospectus to which the Shareholders has reasonably objected
on the grounds that such registration statement or
prospectus or amendment or supplement thereto does not
comply in all material respects with the requirements of the
Securities Act
9
or the rules and regulations thereunder, and/or under any
applicable State Laws, after having been furnished with a
copy thereof a reasonable time (under the circumstances)
prior to the filing thereof; provided, however, that the
failure of the Shareholders or its counsel to review or
object to any registration statement or prospectus or any
amendment or supplement to such registration statement or
prospectus (except to the extent of information furnished to
the Company by the Shareholders in writing) shall not affect
the rights of the Shareholders or their respective
representatives, executors, administrators, partners,
assigns, legal counsel, accountants or controlling persons
or any underwriter or any controlling person of such
underwriter under Section 3.e. hereof; and
L. At the request of the Shareholders, use its best efforts to
furnish to the Shareholders on the effective date of the
registration statement or, if such registration includes an
underwritten public offering, at the closing provided for in
the underwriting agreement, (A) a copy of the opinion of the
counsel representing the Company for the purposes of such
registration, covering such matters with respect to the
registration statement, the prospectus and each amendment or
supplement thereto, proceedings under state and federal
securities laws, other matters relating to the Company, the
securities being registered and the offer and sale of such
securities as are customarily the subject of opinions of
issuer's counsel provided to underwriters in underwritten
public offerings, and (B) copies of letters from the
independent certified public accountants of the Company,
stating that they are independent public accountants within
the meaning of the Securities Act and dealing with such
matters as the Managing Underwriter may reasonably request,
or if the offering is not underwritten that in the opinion
of such accountants the financial statements and other
financial data of the Company included in the registration
statement or the prospectus or any amendment or supplement
thereto comply as to form in all material respects with the
applicable accounting requirements of the Securities Act and
any applicable State Laws.
ii. If and when the Shareholders request registration of Registrable
Securities pursuant to Subsections a. or b. of this Section 3,
the Shareholders shall, at their expense and as expeditiously as
possible, do the following:
A. Supply the Company with all information reasonably required
by the Company concerning the Shareholders, and the
respective securities holdings and affiliates thereof, in
connection with the proposed distribution by the
Shareholders and their respective affiliates;
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B. Correct, supplement or amend information requested by or
furnished to the Company so as to ensure that information
supplied is not materially misleading or does not omit to
state facts or information necessary to cause information
provided, in light of the circumstances, not to be
materially misleading or incomplete;
C. Provide counsel to the Company, underwriters and accountants
access to all information and records of the Shareholders
and their affiliates, that these professionals reasonably
require to perform their "due diligence" functions in
connection with any registration hereunder;
D. Comply in all respects with the requirements of the
Securities Act, the Securities Exchange Act, the AMEX, and
applicable State Laws in connection with any registration or
sale of securities hereunder;
E. Comply in all material respects with reasonable requests by
the Company and the Managing Underwriter in connection with
the sale of the Registrable Securities (including without
limitation entering into customary underwriting agreements)
or with the activities by the Shareholders and the
affiliates thereof during or immediately following any
underwriting period hereunder (including without limitation
other sales or purchases of Company securities,
confidentiality requirements, public statements, and
responses to the SEC or other regulatory inquiries); and
F. Pay promptly when due all registration fees and other fees
and expenses of the SEC, the AMEX, and any State
Administrator or other governmental entity, and all fees and
expenses of their counsel, underwriters or placement agents,
with respect to the registration and/or sale of Registrable
Securities in accordance with the terms hereof.
iii. The Company reserves the right to amend or to stop any
registration or sale of Company securities if it concludes in
good faith that such registration or sale would violate any
applicable securities law or regulation. In such event, the
Company shall send prior written notice to the Shareholders
specifying the problems that the Company has identified in such
detail as shall permit the Shareholders to attempt to resolve
such ostensible violations to the Company's reasonable
satisfaction such that the registration is not stopped or
withdrawn. However, the Company shall not be required, in any
event, to take or to permit any registration or sale that it
deems, in good faith, to violate the Securities Act (inclusive
of its rules and regulations) or any State Laws. However, if
such registration is canceled or withdrawn by the Company for
any reason or reasons not related to deliberate or grossly
negligent misconduct by a Shareholder Party, including the
intentional provision of materially misleading information (or
the intentional omission of information required to make the
statements made not
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materially misleading in light of the circumstances then and
there pertaining), such registration shall not be deemed to be
a demand registration by the Shareholders.
d. Expenses.
i. Subject to any generally applicable State Law requirements with
respect to allocation of expenses, the Company shall bear one-
half of all expenses incurred in connection with a registration
statement filed pursuant to Subsection 3.a. hereof, including,
without limitation, all registration and filing fees, printing
expenses, fees and disbursements of counsel and independent
public accountants for the Company, fees and expenses incurred
in connection with complying with State Laws, fees of the AMEX,
and fees of transfer agents and registrars; provided, that the
Shareholders holding the Registrable Securities covered by or
included in such registration statement shall bear (1) the fees
and disbursements of any legal counsel, accountants or other
experts retained by the Shareholders to review matters relating
to such registration statement on behalf of the Shareholders (2)
any underwriting discounts or commissions applicable to the
Registrable Securities, and (3) any transfer taxes payable on
account of the transfer of such Registrable Securities.
ii. Subject to any generally applicable State Law requirements with
respect to allocation of expenses, the Company shall bear all
expenses incurred in connection with a registration statement
filed pursuant to Subsection 3.b. hereof, including, without
limitation, all registration and filing fees, printing expenses,
fees and disbursements of counsel and independent public
accountants for the Company, fees and expenses incurred in
connection with complying with State Laws, fees of the AMEX, and
fees of transfer agents and registrars; provided, that the
Shareholders holding the Registrable Securities covered by or
included in such registration statement shall bear (1) the fees
and disbursements of any legal counsel, accountants or other
experts retained by the Shareholders to review matters relating
to such registration statement on behalf of the Shareholders (2)
any underwriting discounts or commissions applicable to the
Registrable Securities, and (3) any transfer taxes payable on
account of the transfer of such Registrable Securities.
e. Indemnification and Contribution.
i. The Company hereby agrees to indemnify and hold harmless each
Shareholder Party (as defined below) from and against, and
agrees to reimburse each such Shareholder Party with respect to,
any and all claims, actions (actual or threatened), demands,
losses, damages, liabilities, costs and expenses (including
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reasonable attorneys and other professional fees and the
disbursements thereof) to which any Shareholder Party may become
subject, under the Securities Act or otherwise, insofar as such
claims, actions, demands, losses, damages, liabilities, costs or
expenses arise out of or are based upon any untrue statement or
alleged untrue statement of any material fact contained in such
registration statement, any prospectus contained therein, or any
amendment or supplement thereto, or arise out of or are based
upon the omission or alleged omission to state therein a
material fact required to be stated therein or necessary to make
the statements therein, in light of the circumstances in which
they were made, not misleading; provided, however, that the
Company will not be liable in any such case to the extent that
any such claim, action, demand, loss, damage, liability, cost or
expense is caused by an untrue statement or alleged untrue
statement or omission or alleged omission so made in strict
conformity with written information furnished by a Shareholder
to such underwriter or such controlling person specifically for
use in the preparation thereof.
As used herein, the term "Shareholder Party" means and
includes each of the following: the Shareholders and each of the
Shareholders' other representatives, executors, administrators,
assigns, representatives, and partners, and each person who
controls or is controlled by the Shareholders within the meaning
of the Securities Act.
ii. The Shareholders hereby agree that they will indemnify and hold
harmless each Company Party (as defined below) from and against,
and agrees to reimburse each such Company Party, with respect
to, any and all claims, actions (actual or threatened), demands,
losses, damages, liabilities, costs or expenses (including
attorneys and other professional fees and the disbursements
thereof) to which any Company Party may become subject, under
the Securities Act or otherwise, insofar as such claims,
actions, demands, losses, damages, liabilities, costs or
expenses are caused by any untrue or alleged untrue statement of
any material fact contained in such registration statement, any
prospectus contained therein or any amendment or supplement
thereto, or are caused by the omission or the alleged omission
to state therein a material fact required to be stated therein
or necessary to make the statements therein, in light of the
circumstances in which they were made, not misleading, in each
case to the extent, but if and only to the extent, that such
untrue statement or alleged untrue statement or omission or
alleged omission was actually so made in reliance upon and in
strict conformity with written information furnished by a
Shareholder specifically for use in the preparation thereof, or
withheld by a Shareholder after a request for such information
is received from the Company or its representatives for use in
the preparations thereof.
As used herein, the term "Company Party" means and includes
each of the following: the Company, its officers, and directors,
legal counsel and accountants
13
and each person who controls the Company within the meaning of
the Securities Act.
iii. Promptly after receipt by a party indemnified pursuant to the
provisions of Subsection e.i. or e.ii. of this Section 3 of
notice of the commencement (or threatened commencement) of any
action involving the subject matter of the foregoing indemnity
provisions, such indemnified party will, if a claim therefor is
to be made against the indemnifying party pursuant to the
provisions of Subsection e.i. or e.ii. of this Section 3, notify
the indemnifying party of the commencement (or threatened
commencement) thereof; but the omission to notify the
indemnifying party will not relieve it from any liability which
it may have to an indemnified party otherwise than under this
Section 3.e. and shall not relieve the indemnifying party from
liability under this Section 3.e. unless such indemnifying party
is prejudiced by such omission. In case any such action is
brought against any indemnified party, and it notifies the
indemnifying party of the commencement thereof, the indemnifying
party will be entitled to participate therein and, to the extent
that it may wish, jointly with any other indemnifying parties
similarly notified, to assume the defense thereof, with counsel
reasonably satisfactory to such indemnified party; provided,
however, that if the defendants in any such action include both
the indemnified party and the indemnifying party and the
indemnified party shall have reasonably concluded that there may
be legal defenses available to it and/or other indemnified
parties which are different from or additional to those
available to the indemnifying party, the indemnified party or
parties shall have the right to select separate counsel (in
which case the indemnifying party shall not have the right to
direct the defense of such action on behalf of the indemnified
party or parties). Upon the permitted assumption by the
indemnifying party of the defense of such action, and approval
by the indemnified party of counsel, the indemnifying party
shall not be liable to such indemnified party under Subsection
e.i. or e.ii. of this Section 3 for any legal or other expenses
subsequently incurred by such indemnified party in connection
with the defense thereof (other than reasonable costs of
investigation) unless (A) the indemnified party shall have
employed separate counsel in connection with the assertion of
legal defenses in accordance with the proviso to the immediately
preceding sentence, (B) the indemnifying party shall not have
employed counsel reasonably satisfactory to the indemnified
party to represent the indemnified party within a reasonable
time, (C) the indemnifying party and its counsel do not actively
and vigorously pursue the defense of such action, or (D) the
indemnifying party has authorized the employment of counsel for
the indemnified party at the expense of the indemnifying party.
No indemnifying party shall be liable to an indemnified party
for any settlement of any action or claim without the consent of
the indemnifying party and no indemnifying party may
unreasonably withhold its consent to any such settlement. No
party seeking indemnity will consent to entry of any judgment or
enter into any settlement which does not include as an
unconditional term thereof the giving by the
14
claimant or plaintiff to such indemnified party of a release
from all liability with respect to such claim or litigation.
The indemnified and the indemnifying party agree to cooperate
fully and, to the maximum extent practicable, to wage a joint
defense as to all claims for which the indemnified party demands
indemnification pursuant to this Agreement.
iv. If the indemnification provided for in Subsection e.i. or e.ii.
of this Section 3 is held by a court of competent jurisdiction
to be unavailable to a party to be indemnified with respect to
any claims, actions, demands, losses, damages, liabilities,
costs or expenses referred to therein, then each indemnifying
party under any such Subsection, in lieu of indemnifying such
indemnified party thereunder, hereby agrees to contribute to the
amount paid or payable by such indemnified party as a result of
such claims, actions, demands, losses, damages, liabilities,
costs or expenses in such proportion as is appropriate to
reflect the relative fault of the indemnifying party on the one
hand and of the indemnified party on the other in connection
with the statements or omissions which resulted in such claims,
actions, demands, losses, damages, liabilities, costs or
expenses, as well as any other relevant equitable
considerations. The relative fault of the indemnifying party
and of the indemnified party shall be determined by reference
to, among other things, whether the untrue or alleged untrue
statement of a material fact or the omission or alleged omission
to state a material fact relates to information supplied by the
indemnifying party or by the indemnified party and the parties'
relative intent, knowledge, access to information and
opportunity to correct or prevent such statement or omission.
Notwithstanding the foregoing, the amount any indemnifying party
shall be obligated to contribute pursuant to this Subsection
3.e.iv. shall be limited to an amount equal to the per share
public offering price (less any underwriting discount and
commissions) multiplied by the number of shares of Common Stock
sold by the indemnifying party pursuant to the registration
statement which gives rise to such obligation to contribute
(less the aggregate amount of any damages which the indemnifying
party has otherwise been required to pay in respect of such
claim, action, demand, loss, damage, liability, cost or expense
or any substantially similar claim, action, demand, loss,
damage, liability, cost or expense arising from the sale of such
Common Stock).
v. No Person guilty of fraudulent misrepresentation (within the
meaning of Section 11(f) of the Securities Act) shall be
entitled to contribution hereunder from any Person who was not
guilty of such fraudulent misrepresentation.
f. Future Registration Rights. Except as expressly permitted by
this Agreement or by the Shareholders, and except for an underwriting
agreement between the Company and one or more professional underwriters of
securities, from and after the date hereof the Company agrees not to enter
into any agreement to file a registration statement on demand for any equity
securities under the Securities Act held by any other holder(s) of such
securities ("Other Shareholder(s)") except pursuant to an agreement between
the Company and such Other
15
Shareholder(s) that specifically provides as follows: (i) the Other
Shareholder(s) of such equity securities may not participate in any
registration requested pursuant to Subsection a. of this Section 3 hereof
without the written consent of the Shareholders unless (A) the sale of the
Registrable Securities is to be underwritten on a firm commitment basis and
the Managing Underwriter in its good faith judgment concludes that the public
offering or sale of such equity securities would not cause the number of
shares of Registrable Securities and such equity securities to exceed the
number which it is advisable to include in such offering to achieve not less
than the minimum desired sale price, and (B) the Shareholders shall have the
right to participate, to the extent that either of them may request, in any
registration statement initiated under a demand registration right exercised
by the Other Shareholder(s), except that if the Managing Underwriter of a
public offering made pursuant to such a demand registration limits the number
of shares of Common Stock to be sold, the participation of the Shareholders
and the holders of all other Common Stock desiring to participate (other than
the Other Shareholder(s)) shall be reduced pro rata based upon the number of
shares of Registrable Securities and Common Stock held at the time of filing
the Registration Statement; (ii) the Other Shareholder(s) may not participate
in any registration requested pursuant to Section 3.b. hereof if the sale of
Registrable Securities is to be underwritten unless, if the Managing
Underwriter limits the total number of securities to be sold, the Other
Shareholder(s) and the Shareholders are entitled to participate in such
underwritten distribution pro rata based upon the number of shares of Common
Stock and Registrable Securities held at the time of filing the registration
statement; and (iii) all equity securities excluded from any registration as
a result of the foregoing limitations shall not be included in such
registration and may not be publicly offered or sold for such period as the
Managing Underwriter of such registered distribution may reasonably request.
g. Reporting Requirements. The Company agrees (1) to use its best
efforts to file timely such information, documents and reports as the SEC may
require or prescribe under Sections 13, 14 or 15(d) (whichever is applicable)
of the Securities Exchange Act of 1934 and (2) upon request, to furnish to
the Shareholders such reports and documents filed by the Company with the SEC
as the Shareholders may reasonably request in availing itself of an exemption
for the sale of Registrable Securities without registration under the
Securities Act. The Company acknowledges and agrees that the purposes of the
requirements contained in this Section 3 are (i) to enable the Shareholders
to comply with the current public information requirement contained in
paragraph (c) of Rule 144 under the Securities Act should the Shareholders
ever wish to dispose of any of the securities of the Company acquired by the
Shareholders or his affiliates without registration under the Securities Act
in reliance upon Rule 144 (or any other similar exemptive provision) and (3)
to qualify the Company for the use of registration statements on Form S-3.
In addition, the Company agrees to use its best efforts to take such other
measures and file such other information, documents and reports, as shall be
required of it hereafter by the SEC as a condition to the availability of
Rule 144 under the Securities Act (or any similar exemptive provision
hereafter in effect) and the use of Form S-3. The Company also covenants to
use its best efforts, to the extent that it is reasonably within its power to
do so, to qualify, and maintain such qualification, for the use of Form S-3.
16
h. Shareholder Information. The Shareholders shall furnish the
Company with such information with respect to the Shareholders and their
affiliates in connection with the distribution of such Registrable Securities
as the Company may from time to time reasonably request in writing and as
shall be required by law or by the SEC in connection therewith. Such
information shall be used by the Company solely in connection with the
requested registration and not for any other purpose(s) and shall be treated
as strictly confidential by the Company except as otherwise required by the
Securities Act or other laws, rules and regulations.
i. Forms. All references in this Agreement to particular forms of
registration statements are intended to include, and shall be deemed to
include, references to all successor forms which are intended to replace, or
to apply to similar transactions as, the forms herein referenced.
4. Deviation from Agreement; Amendments; and Waivers. In order to
amend or deviate from the terms of the Agreement, a party must first obtain
the prior written consent of the other party, which consent may be withheld
or granted in such party's sole discretion. No amendment(s),
modification(s), deviations from agreements or covenants, or waiver(s) of any
provision of this Agreement, shall in any event be effective unless the same
shall be in writing and signed by appropriate officers of the Company and by
the Shareholders. No action or course of dealing on the part of any Person
or entity, its officers, employees, consultants, heirs, administrators,
executors or agents, nor any failure or delay by a party with respect to
exercising any right, power or privilege of such party under this Agreement
shall operate as a waiver thereof, except as expressly provided in writing in
accordance with this Section.
5. Construction. This Agreement constitutes a contract made under
and shall be construed in accordance with and governed by the laws of the
State of Tennessee.
6. Titles of Articles, Sections and Subsections. All titles or
headings to articles, sections, Subsections or other divisions of this
Agreement are only for the convenience of the parties and shall not be
construed to have any effect or meaning with respect to the other content of
such articles, sections, Subsections or other divisions, such other content
being controlling as to the agreement between the parties hereto.
7. Time of Essence. Time is of the essence with regard to each and
every provision of this Agreement.
8. Successors and Assigns, Etc. All covenants and agreements
contained by or on behalf of the parties in this Agreement shall bind such
Person's successors and assigns. However, the rights and duties of the
parties under this Agreement may not be assigned or delegated by either party
without the written consent of the other, which may be withheld in that
party's sole discretion.
9. Notices. All communications under or in connection with this
Agreement shall be in writing and shall be delivered by an overnight courier
service of national standing (such
17
as Federal Express) and sent, charges prepaid, for next business day
delivery. In addition, any communication deemed by the sending party to be
urgent shall also be in writing and sent by telecopy or other similar form of
rapid transmission followed by contemporaneously sending for overnight
delivery by overnight courier as provided above (or, in the discretion of the
sender, in lieu of telecopy, such communication can be delivered personally
to the receiving party or to a representative thereof at such person's
principal office as indicated herein (subject to change as provided below)).
All such communications shall be sent or delivered to the parties at their
respective addresses set forth below:
a. If to the Company, to:
International Comfort Products Corporation
000 Xxxxxxxxx Xxxxxx Xxxxx, Xxxxx 000
Xxxxxxxx, Xxxxxxxxx 00000
Facsimile No. (000) 000-0000
Attention: Xxxxx X. Xxxx
With a copy in each instance to:
Xxxx X. Xxxxx
Tuke Xxxx & Xxxxxxx, PLC
Xxxxx 0000, XxxxxxxXxxx Xxxxx
Xxxxxxxxx, Xxxxxxxxx 00000
Facsimile No. (000) 000-0000
b. If to the Shareholders, to:
Watsco Components, Inc.
P.E./Del Mar, Inc.
0000 Xxxxx Xxxxxxxx Xxxxx, Xxxxx 000
Xxxxxxx Xxxxx, Xxxxxxx 00000
Attention: Xxxxx X. Xxxxx
Facsimile No.: (000) 000-0000
With a copy in each instance to:
Xxxxx X. Xxxxxx, Xx.
Xxxxx & Xxx Xxxxx, PLCC
NationsBank Corporate Center
000 Xxxxx Xxxxx Xxxxxx, Xxxxx 00
Xxxxxxxxx, Xxxxx Xxxxxxxx 00000
Facsimile No.: (000) 000-0000
Any party may send notice in accordance with this Section of a new
address to be used to contact such party. Any communication so addressed and
transmitted shall be deemed to be given on the date received.
10. Arbitration. Any controversy or claim arising out of or
relating to this Agreement, or the actual or asserted violation or other
breach of this Agreement, shall be settled by arbitration administered by the
American Arbitration Association ("AAA") in accordance with its Commercial
Arbitration Rules ("Rules"), and judgment upon the award rendered by the
18
arbitrator(s) (and successor arbitrator(s)) may be entered in any court
having jurisdiction thereof. There shall be (a) one neutral arbitrator for
any dispute involving any claim in connection with this Agreement involving
a monetary demand for Fifty Thousand Dollars ($50,000.00) or less and (b) as
to any other dispute, three (3) neutral arbitrators selected by the AAA
pursuant to the Rules. The arbitrators shall be duly licensed attorneys and
(in the judgment of the AAA) substantially experienced in practicing
securities law. The arbitrator(s) shall apply the procedural and substantive
law of the State of Tennessee, as well as the Rules to the extent not
inconsistent with such laws, except that the law applicable to the
arbitration shall be Federal Arbitration Act, 9 U.S.C. Secs. 1 et seq. Any
award by an arbitrator or panel of arbitrators shall be issued within 270
days from the first demand for arbitration in such matter. Any dispute as to
whether a matter is arbitrable shall itself be arbitrated by the parties
pursuant to this provision. No award shall include punitive damages.
Rather, each award shall be for actual damages and out-of-pocket expenses.
In the discretion of the arbitrator, or a majority of the arbitrators as the
case may be, the award may include, as compensable damages and out-of-pocket
expenses, all or part of a party's attorneys fees and other out-of-pocket
expenses. The award for attorneys fees and costs to the prevailing party may
be prorated as the arbitrator or a majority of the arbitrators shall deem
just and proper. The Arbitrator(s) shall permit limited, non-abusive
discovery in the form of depositions and the production of documents and
records and shall, on application by a party, enter appropriate orders
granting extraordinary relief to preserve the rights of the parties pending
the issuance of the award.
11. Best Efforts. The requirement that a party use its best efforts
shall not require such party to assume unduly expensive, unduly burdensome,
or otherwise commercially unreasonable obligations. However, it does require
that such a party shall seek to perform the required duty with the same
determination and diligence that it would use to obtain its own important
business objectives.
12. Resolution of Issues, Etc. In the event that a Person,
including a Managing Underwriter, shall recommend to the Company that a
lesser number of Registrable Securities be registered (or shall make other
recommendations relative to a registration of Registrable Securities) than
has been requested by the Shareholders, the Company shall promptly send a
copy of the Recommendation to the Shareholders and shall afford the
Shareholders a reasonable opportunity to resolve any problems raised by such
Person (including a Managing Underwriter), in whole or in part, with a view
to resolving the problems raised by such Person and/or maximizing the number
of Registrable Securities (and the price thereof) that can be sold pursuant
to such registration.
13. Counterparts. This Agreement may be executed in two or more
counterparts, and it shall not be necessary that the signatures of all
parties hereto be contained on any one counterpart hereof; each counterpart
shall be deemed an original, but all of which together shall constitute one
and the same instrument.
19
EACH OF THE PARTIES HERETO SPECIFICALLY ACKNOWLEDGES, THAT AFTER CONSULTATION
WITH COUNSEL, SUCH PARTY HAS WAIVED SUCH PARTY'S RIGHT TO A TRIAL BY JURY AND
CONSENTS TO THE ARBITRATION PROVISIONS OF THIS AGREEMENT AS TO ALL ISSUES.
THIS IS A SPECIFIC INDUCEMENT TO EACH PARTY TO ENTER INTO THIS AGREEMENT AND
A MATERIAL PART OF THE CONSIDERATION THEREFOR.
In witness whereof the parties hereto have executed this Agreement to be
effective as of the date first above written.
THE COMPANY:
INTERNATIONAL COMFORT PRODUCTS
CORPORATION
By: /s/ Xxxxx X. Xxxx
Title:
THE SHAREHOLDERS:
WATSCO COMPONENTS, INC.
By: /s/ Xxxxx X. Xxxxx
Title: VP-Finance
P.E./DEL MAR, INC.
By: /s/ Xxxxx X. Xxxxx
Title: VP-Finance
20
SCHEDULE A
Share Holdings
Watsco Components ............................................ 1,398,872
P.E./Del Mar, Inc............................................. 89,290
---------
1,488,162
21
