SCHEDULE 14A
(RULE 14a-101)
INFORMATION REQUIRED IN PROXY STATEMENT
SCHEDULE 14A INFORMATION
Proxy Statement Pursuant to Section 14(a)
of the Securities Exchange Act of 1934
(Amendment No. )
Filed by the Registrant [x]
Filed by a Party other than the Registrant [ ]
Check the appropriate box:
[ ] Preliminary Proxy Statement
[x] Definitive Proxy Statement
[ ] Definitive Additional Materials
[ ] Soliciting Material Pursuant to Rule 14a-11(c) or Rule 14a-12
[ ] Confidential, For Use of the Commission Only
(as permitted by Rule 14a-6(e) (2))
WATSCO, INC.
(Name of Registrant as Specified in Its Charter)
WATSCO, INC.
(Name of Person(s) Filing Proxy Statement, if Other Than the Registrant)
Payment of Filing Fee (Check the appropriate box):
[x] No fee required.
[ ] Fee computed on the table below per Exchange Act Rules 14a-6(i)(1) and
0-11.
(1) Title of each class of securities to which transaction applies:
(2) Aggregate number of securities to which transaction applies:
(3) Per unit price or other underlying value of transaction computed
pursuant to Exchange Act Rule 0-11 (set forth the amount on which the
filing fee is calculated and state how it was determined):
(4) Proposed maximum aggregate value of transaction:
(5) Total fee paid:
[ ] Check box if any part of the fee is offset as provided by Exchange Act Rule
0-11(a)(2) and identify the filing for which the offsetting fee was paid
previously. Identify the previous filing by registration statement number,
or the form or schedule and the date of its filing.
(1) Amount previously paid:
(2) Form, Schedule or Registration Statement No.:
(3) Filing Party:
(4) Date Filed:
<PAGE>
WATSCO, INC.
NOTICE OF ANNUAL MEETING OF SHAREHOLDERS
TO BE HELD ON JUNE 5, 2000
----------------
To the Shareholders of Watsco, Inc.:
NOTICE IS HEREBY GIVEN that the 2000 Annual Meeting of Shareholders (the
"Annual Meeting") of Watsco, Inc., a Florida corporation (the "Company"), will
be held on Monday, June 5, 2000, at 9:00 A.M., Eastern Daylight Time, at the
Hyatt Regency Hotel, 50 Alhambra Circle, Coral Gables, Florida, 33134, for the
following purposes:
(1) To elect three members to the Company's Board of Directors until the
2003 Annual Meeting of Shareholders or until their successors are duly elected
and qualified, one of whom will be elected by the holders of Common Stock and
two of whom will be elected by the holders of Class B Common Stock;
(2) To consider and act upon a proposal to ratify an amendment to the
Company's Amended and Restated 1996 Qualified Employee Stock Purchase Plan; and
(3) To transact such other business as may properly come before the Annual
Meeting and any adjournment or postponements thereof.
The Board of Directors has fixed the close of business on April 7, 2000 as
the record date for determining those shareholders entitled to notice of, and
to vote at, the Annual Meeting and any adjournments or postponements thereof.
Whether or not you expect to be present, please sign, date and return the
enclosed proxy card in the enclosed pre-addressed envelope as promptly as
possible. No postage is required if mailed in the United States.
By Order of the Board of Directors
BARRY S. LOGAN, Secretary
Coconut Grove, Florida
May 1, 2000
THIS IS AN IMPORTANT MEETING AND ALL SHAREHOLDERS ARE INVITED TO ATTEND THE
MEETING IN PERSON. THOSE SHAREHOLDERS WHO ARE UNABLE TO ATTEND ARE RESPECTFULLY
URGED TO EXECUTE AND RETURN THE ENCLOSED PROXY CARD AS PROMPTLY AS POSSIBLE.
SHAREHOLDERS WHO EXECUTE A PROXY CARD MAY NEVERTHELESS ATTEND THE MEETING,
REVOKE THEIR PROXY, AND VOTE THEIR SHARES IN PERSON.
<PAGE>
2000 ANNUAL MEETING OF SHAREHOLDERS
OF
WATSCO, INC.
----------------
PROXY STATEMENT
----------------
DATE, TIME AND PLACE OF ANNUAL MEETING
This Proxy Statement is furnished in connection with the solicitation by
the Board of Directors of Watsco, Inc., a Florida corporation (the "Company"),
of proxies from the holders of the Company's Common Stock, par value $.50 per
share (the "Common Stock"), and the Company's Class B Common Stock, par value
$.50 per share (the "Class B Common Stock"), for use at the 2000 Annual Meeting
of Shareholders (the "Annual Meeting") of the Company to be held on Monday,
June 5, 2000, at 9:00 A.M., Eastern Daylight Time, at the Hyatt Regency Hotel,
50 Alhambra Circle, Coral Gables, Florida, 33134, and at any adjournments or
postponements thereof, pursuant to the enclosed Notice of Annual Meeting. This
Proxy Statement and the enclosed form of proxy are first being sent to holders
of Common Stock and Class B Common Stock on or about May 1, 2000. Shareholders
should review the information provided herein in conjunction with the Company's
1999 Annual Report to Shareholders (the "1999 Annual Report") which accompanies
this Proxy Statement. The complete mailing address of the Company's principal
executive office is 2665 South Bayshore Drive, Suite 901, Coconut Grove,
Florida 33133.
INFORMATION CONCERNING PROXY
The enclosed proxy is solicited on behalf of the Company's Board of
Directors. The giving of a proxy does not preclude the right to vote in person
should any shareholder giving the proxy so desire. Shareholders have an
unconditional right to revoke their proxy at any time prior to the exercise
thereof, either in person at the Annual Meeting or by filing with the Company's
Secretary at the Company's headquarters a written revocation or duly executed
proxy bearing a later date; however, no such revocation will be effective until
written notice of the revocation is received by the Company at or prior to the
Annual Meeting.
The cost of preparing, assembling and mailing this Proxy Statement, the
Notice of Annual Meeting of Shareholders and the enclosed proxy card is to be
borne by the Company. In addition to the use of mail, employees of the Company
may solicit proxies personally and by telephone and telegraph. They will
receive no compensation, therefore, in addition to their regular salaries. The
Company may request banks, brokers and other custodians, nominees and
fiduciaries to forward copies of the proxy material to their principals and to
request authority for the execution of proxies. The Company may reimburse such
persons for their expenses in so doing.
<PAGE>
PURPOSES OF THE MEETING
At the Annual Meeting, the Company's shareholders will consider and vote
upon the following matters:
(1) To elect three members to the Company's Board of Directors until the
2003 Annual Meeting of Shareholders or until their successors are duly elected
and qualified, one of whom will be elected by the holders of Common Stock and
two of whom will be elected by the holders of Class B Common Stock;
(2) To consider and act upon a proposal to ratify an amendment to the
Company's Amended and Restated 1996 Qualified Employee Stock Purchase Plan; and
(3) To transact such other business as may properly come before the Annual
Meeting and any adjournments or postponements thereof.
Unless contrary instructions are indicated on the enclosed proxy, all
shares represented by valid proxies received pursuant to this solicitation (and
which have not been revoked in accordance with the procedures set forth above)
will be voted (a) for the election of the respective nominees for director
named below to be elected by the holders of Common Stock and by the holders of
Class B Common Stock (see "Outstanding Voting Securities and Voting Rights"),
and (b) in favor of all other proposals described in the Notice of Annual
Meeting or as may properly come before the Annual Meeting. In the event a
shareholder specifies a different choice by means of the enclosed proxy, such
shares will be voted in accordance with the specification so made.
OUTSTANDING VOTING SECURITIES AND VOTING RIGHTS
The Board of Directors has set the close of business on April 7, 2000, as
the record date (the "Record Date") for determining shareholders of the Company
entitled to notice of and to vote at the Annual Meeting. As of the Record Date,
there were 23,793,345 shares of Common Stock outstanding (representing
26,110,345 shares issued less 2,317,000 shares held in treasury) and 3,228,806
shares of Class B Common Stock issued and outstanding, all of which are
entitled to be voted at the Annual Meeting. Holders of Common Stock are
entitled to one vote per share on each matter that is submitted to shareholders
for approval and vote as a separate class to elect 25 percent of the directors
of the Company (rounded up to the next whole number), which presently equates
to three directors. Holders of Class B Common Stock are entitled to ten votes
per share on each matter that is submitted to shareholders for approval and
vote as a separate class to elect 75 percent of the directors (rounded down to
the next whole number), which presently equates to five directors. See
"Election of Directors."
The attendance, in person or by proxy, of the holders of Common Stock and
Class B Common Stock representing a majority of the combined voting power of
the outstanding shares of such stock entitled to vote at the Annual Meeting is
necessary to constitute a quorum. For purposes of electing directors at the
Annual Meeting, the nominees receiving the greatest number of votes of Common
Stock and Class B Common Stock, voting as separate classes shall be elected as
directors. The affirmative vote of a majority of votes of Common Stock and
Class B Common Stock present, in
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person or by proxy at the Annual Meeting and voting together as a single class,
is required for the approval of any other matter that may be submitted to a
vote of the Company's shareholders.
As of the Record Date, the directors and executive officers of the Company
and certain entities affiliated with such persons owned (i) Common Stock
representing 5.5% of the outstanding shares of Common Stock, (ii) Class B
Common Stock representing 79.1% of the outstanding shares of Class B Common
Stock and (iii) 47.9% of the aggregated combined votes of Common Stock and
Class B Common Stock entitled to be cast at the Annual Meeting. Such persons
and entities have informed the Company that they intend to vote all of their
shares of Common Stock and Class B Common Stock in favor of all proposals set
forth in the Proxy Statement.
Prior to the Annual Meeting, the Company will select one or more
inspectors of election for the meeting. Such inspector(s) shall determine the
number of shares of Common Stock and Class B Common Stock represented at the
meeting, the existence of a quorum and the validity and effect of proxies, and
shall receive, count and tabulate ballots and votes and determine the results
thereof. Abstentions will be considered as shares present and entitled to vote
at the Annual Meeting and will be counted as votes cast at the Annual Meeting,
but will not be counted as votes cast for or against any given matter. If less
than a majority of the combined voting power of the outstanding shares of
Common Stock and Class B Common Stock are represented at the Annual Meeting, a
majority of the shares so represented may adjourn the Annual Meeting from time
to time without further notice.
A broker or nominee holding shares registered in its name, or in the name
of its nominee, which are beneficially owned by another person and for which it
has not received instructions as to voting from the beneficial owner, may have
discretion to vote the beneficial owner's shares with respect to the election
of directors and other matters addressed at the Annual Meeting. Any such
shares, which are not represented at the Annual Meeting either in person or by
proxy, will not be considered to have cast votes on any matters addressed at
the Annual Meeting.
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<PAGE>
BENEFICIAL SECURITY OWNERSHIP
The following table sets forth as of the Record Date, information with
respect to the beneficial ownership of the Company's Common Stock and Class B
Common Stock by (i) each shareholder known by the Company to beneficially own
more than 5% of any class of the Company's voting securities, (ii) each
director of the Company who owns any such shares, (iii) each executive officer
named in the Summary Compensation Table in "Executive Compensation", and (iv)
all directors and executive officers as a group. The table also sets forth, in
its final column, the combined voting power of the voting securities on all
matters presented to the shareholders for their approval, except for the
election of directors and for such separate class votes as are required by
Florida law.
<TABLE>
<CAPTION>
CLASS B COMBINED
COMMON STOCK COMBINED STOCK PERCENT OF VOTING
BENEFICIALLY OWNED(2) BENEFICIALLY OWNED(2) SECURITIES(2)
----------------------- ------------------------- ------------------
NAME AND ADDRESS
OF BENEFICIAL OWNERS(1) SHARES PERCENT SHARES PERCENT
- ------------------------------------------------- ----------- --------- ------------ ----------
<S> <C> <C> <C> <C> <C>
Shareholders owning more than 5% of any
class of common stock:
Merrill Lynch Asset Management Group(3) ......... 3,622,430 15.2% -- -- 6.5%
T. Rowe Price Associates, Inc.(4) ............... 3,322,599 14.0 -- -- 5.9
Rheem Manufacturing Company(5) .................. 2,169,812 9.1 -- -- 3.9
Dimensional Fund Advisors Inc.(6) ............... 1,369,412 5.8 -- -- 2.4
Directors and executive officers:
Alna Capital Associates(7) ...................... 250,277 1.1% 1,534,301 47.5% 27.8%
Albert H. Nahmad(8) ............................. 718,872 3.0 4,078,319 81.8 56.0
Roberto Motta(9) ................................ 261,615 1.1 139,723 4.3 3.0
Alan H. Potamkin(10) ............................ 295,110 1.2 48,262 1.5 1.4
David B. Fleeman(11) ............................ 277,129 1.2 43,586 1.3 1.3
Barry S. Logan(12) .............................. 179,699 * 33,333 1.0 *
Bob L. Moss(13) ................................. 78,517 * -- -- *
J. Ira Harris(14) ............................... 52,562 * -- -- *
Paul F. Manley(15) .............................. 17,372 * 1,255 * *
Cesar L. Alvarez(16) ............................ 15,188 * -- -- *
Ana M. Menendez(17) ............................. 8,017 * -- -- *
All directors and executive officers
as a group (11 persons)(18) .................... 1,939,473 7.9% 4,344,477 86.6% 60.8%
</TABLE>
- ----------------
* Less than 1%.
(1) Unless otherwise indicated below, (a) the address of each of the
beneficial owners identified is 2665 South Bayshore Drive, Suite 901,
Coconut Grove, Florida 33133 and (b) each person or group has sole voting
and investment power with respect to all such shares.
(2) Although each named person and all directors and executive officers as a
group are deemed to be the beneficial owners of securities that may be
acquired within 60 days through the exercise of, exchange, or conversion
rights, and the Class B Common Stock is immediately convertible into
Common Stock on a one-for-one basis, the number of shares set forth
opposite each shareholder's name does not include shares of Common Stock
issuable upon conversion of the Company's Class B Common Stock.
(3) The address of Merrill Lynch Asset Management Group is 800 Scudders Mill
Road, Plainsboro, New Jersey 08536.
(4) These shares are owned by various individual and institutional investors
for which T. Rowe Price Associates, Inc. ("Price Associates") serves as
investment adviser with power to direct investments and/or sole power to
vote the securities. For
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<PAGE>
purpose of the reporting requirements of the Securities Exchange Act of
1934, Price Associates is deemed to be a beneficial owner of such
securities; however, Price Associates expressly disclaims that it is, in
fact, the beneficial owner of such securities. The address of Price
Associates, Inc. is 100 East Pratt Street, Baltimore, Maryland 21202.
(5) The address of Rheem Manufacturing Company is 405 Lexington Avenue, 22nd
Floor, New York, New York 10174.
(6) The address of Dimensional Funds Advisors Inc. is 1299 Ocean Avenue, 11th
Floor, Santa Monica, California 90401.
(7) Alna Capital Associates ("Alna Capital") is a New York limited partnership
of which Mr. Nahmad owns a 43% interest and is the sole general partner and
David B. Fleeman is a limited partner. The address of Alna Capital is 505
Park Avenue, 16th Floor, New York, New York 10022.
(8) Includes shares indicated as beneficially owned by Alna Capital. See
footnote (7) above. The number of shares of Common Stock indicated also
includes (i) 15,677 shares directly owned; (ii) 19,979 shares owned
pursuant to the Watsco, Inc. Amended and Restated Profit Sharing Retirement
Plan & Trust (the "Profit Sharing Plan"); (iii) 12,469 shares owned by Mr.
Nahmad's children; and (iv) 420,470 shares issuable upon exercise of
presently exercisable options granted pursuant to the Company's Third
Amended and Restated 1991 Stock Option Plan ("1991 Plan"). The number of
shares of Class B Common Stock indicated also includes (i) 483,423 shares
directly owned; (ii) 305,000 shares owned pursuant to Restricted Stock
Agreements; and (iii) 1,755,595 shares issuable upon exercise of presently
exercisable options granted pursuant to the 1991 Plan.
(9) The number of shares of Common Stock indicated includes (i) 254,865 shares
owned by Republic Trading, Inc. ("Republic Trading") of which Mr. Motta is
a principal and (ii) 6,750 shares issuable upon exercise of presently
exercisable options granted pursuant to the 1991 Plan and (iii). The number
of shares of Class B Common Stock indicates shares owned by Republic
Trading.
(10) The number of shares of Common Stock indicated includes (i) 117,975 shares
directly owned; (ii) 91,425 shares owned by two trusts of which Mr.
Potamkin is a trustee; (iii) 15,397 shares owned by Mr. Potamkin's spouse;
(iv) 45,000 shares owned by Potamkin Manhattan Corporation of which Mr.
Potamkin is a principal; and (v) 25,313 shares issuable upon exercise of
presently exercisable options granted pursuant to the 1991 Plan. The number
of shares of Class B Common Stock indicates shares directly owned.
(11) Excludes shares beneficially owned by Alna Capital. See footnote (7) above.
The number of shares of Common Stock indicated includes (i) 44,294 shares
directly owned; (ii) 203,552 shares owned by Fleeman Builders, a Florida
partnership of which Mr. Fleeman is a General Partner; (iii) 6,750 shares
issuable upon exercise of presently exercisable options granted pursuant to
the 1991 Plan; and (iv) 22,533 shares owned by 3JG Trust of which Mr.
Fleeman is a trustee. The number of shares of Class B Common Stock
indicates shares owned by Fleeman Builders.
(12) The number of shares of Common Stock indicated includes (i) 450 shares
directly owned; (ii) 88,750 shares owned pursuant to Restricted Stock
Agreements; (iii) 4,358 shares owned pursuant to the Company's Amended and
Restated 1996 Qualified Employee Stock Purchase Plan ("Stock Purchase
Plan"); (iv) 1,016 shares owned pursuant to the Profit Sharing Plan; and
(v) 33,750 and 51,375 shares issuable upon exercise of presently
exercisable options granted pursuant to the 1983 Executive Stock Option
Plan and 1991 Plan, respectively. The number of shares of Class B Common
Stock includes shares issuable upon exercise of presently exercisable
options granted pursuant to the 1991 Plan.
(13) The number of shares of Common Stock indicated includes (i) 37,514 shares
directly owned; (ii) 7,674 shares owned by Mr. Moss's spouse; and (iii)
33,329 shares issuable upon exercise of presently exercisable options
granted pursuant to the 1991 Plan.
(14) The number of shares of Common Stock indicated includes (i) 32,500 shares
owned by the J. Ira Harris Living Trust, of which Mr. Harris is a trustee;
and (ii) 20,062 shares issuable upon exercise of presently exercisable
options granted pursuant to the 1991 Plan.
(15) The number of shares of Common Stock indicated includes (i) 1,248 shares
directly owned and (ii) 16,124 shares issuable upon exercise of presently
exercisable options granted pursuant to the 1991 Plan. The number of shares
of Class B Common Stock indicates shares directly owned.
(16) The number of shares of Common Stock indicates shares issuable upon
exercise of presently exercisable options granted pursuant to the 1991
Plan.
(17) The number of shares of Common Stock indicated includes (i) 17 shares owned
pursuant to the Profit Sharing Plan; (ii) 5,000 shares owned pursuant to a
Restricted Stock Agreement; and (iii) 3,000 shares issuable upon exercise
of presently exercisable options granted pursuant to the 1991 Plan.
(18) Includes shares beneficially owned by directors and executive officers, as
described in footnotes (7) - (17).
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<PAGE>
I.
ELECTION OF DIRECTORS
NOMINEES
The Company's Amended and Restated Articles of Incorporation and Bylaws
provide that the Board of Directors shall consist of not less than three nor
more than nine members, and shall be divided, as nearly as possible, into three
equal divisions to serve in staggered terms of office of three years. Upon
election at the Annual Meeting, Messrs. Potamkin, Harris and Motta will serve
terms expiring at the 2003 Annual Meeting of Shareholders or until their
successors have been duly elected and qualified.
One director is to be elected at the Annual Meeting by the holders of
Common Stock voting separately as a class. Mr. Potamkin has been nominated as a
director to be elected by the holders of Common Stock and proxies will be voted
for Mr. Potamkin absent contrary instructions. Mr. Potamkin was appointed as a
director of the Company in 1994.
Two directors are to be elected at the Annual Meeting by the holders of
Class B Common Stock voting separately as a class. Messrs. Harris and Motta
have been nominated as directors to be elected by the holders of Class B Common
Stock and proxies will be voted for Messrs. Harris and Motta absent contrary
instructions. Mr. Harris has served as a director of the Company since 1998 and
Mr. Motta was appointed as a director in 1975.
The Board of Directors has no reason to believe that any nominee will
refuse to act or be unable to accept election; however, in the event that a
nominee for a directorship is unable to accept election or if any other
unforeseen contingencies should arise, it is intended that proxies will be
voted for the remaining nominees, if any, and for such other person as may be
designated by the Board of Directors, unless it is directed by a proxy to do
otherwise.
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<PAGE>
MANAGEMENT
DIRECTORS AND EXECUTIVE OFFICERS OF THE COMPANY
The directors and executive officers of the Company are as follows:
<TABLE>
<CAPTION>
NAME AGE POSITION WITH THE COMPANY
- ------------------- ----- ---------------------------------------
<S> <C> <C>
Albert H. Nahmad 59 Chairman of the Board and President
Barry S. Logan 37 Vice President - Finance and Secretary
Terrence E. Kelly 57 Vice President - Operations
Ana M. Menendez 35 Treasurer and Assistant Secretary
Cesar L. Alvarez 52 Director
David B. Fleeman 86 Director
J. Ira Harris 61 Director
Paul F. Manley 63 Director
Bob L. Moss 52 Director
Roberto Motta 86 Director
Alan H. Potamkin 51 Director
</TABLE>
ALBERT H. NAHMAD has served as Chairman of the Board and President of the
Company since December 1973. Mr. Nahmad is the general partner of Alna Capital
Associates, a New York limited partnership, which is the principal voting
shareholder of the Company.
BARRY S. LOGAN has served as Chief Financial Officer and Secretary of the
Company since 1997 and as Treasurer from 1996 to 1998. From 1992 to 1996, Mr.
Logan served as the Controller of the Company. Prior to joining the Company,
Mr. Logan was associated with the accounting firm of Arthur Andersen LLP from
1985 to 1992.
TERRENCE E. KELLY has served as Vice President - Operations since February
2000 having served as Company Group Vice President since 1999. From 1997 to
1999, Mr. Kelly served as President of Baker Distributing Company, one of the
Company's largest operating subsidiaries. Prior to joining the Company, Mr.
Kelly was Senior Vice President of Dacor Appliances, Inc., a manufacturer of
appliances.
ANA M. MENENDEZ has served as Treasurer of the Company since 1998 and as
Assistant Secretary since 1999. From 1997 to 1998, Ms. Menendez served as Chief
Financial Officer and Secretary of Ezcony Interamerica, Inc., a publicly-held
company. From 1995 to 1997, Ms. Menendez served as Chief Financial Officer of
Diaco, Inc. From 1988 to 1995, Ms. Menendez was associated with the accounting
firm of Arthur Andersen LLP.
CESAR L. ALVAREZ has been a director of the Company since 1997. For more
than five years, Mr. Alvarez has been a lawyer with the law firm of Greenberg
Traurig, P.A., where he has served as chairman of its corporate, securities and
banking department and currently serves as the firm's Chief Executive Officer
and Managing Shareholder. Mr. Alvarez also serves as a director of Pediatrix
Medical Group, Inc., Atlantis Plastics, Inc. and Texpack, N.V.
DAVID B. FLEEMAN has been a director of the Company since 1977. Since
1956, Mr. Fleeman has served as the Managing Partner of Fleeman Builders, a
Florida general partnership engaged primarily in real estate development.
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J. IRA HARRIS has been a director of the Company since 1998. Mr. Harris is
Chairman of J. I. Harris & Associates, a financial advisory company and as Vice
Chairman of the Pritzker Organization, also a financial advisory company. From
1988 to 1997, Mr. Harris served as a Senior Partner of Lazard Freres & Co, LLC.
From 1969 to 1987, Mr. Harris served in various management capacities and as a
Senior Executive Director of Salomon Brothers. Mr. Harris also serves as a
director of Manpower, Inc., a publicly- held company.
PAUL F. MANLEY has been a director of the Company since 1984. Mr. Manley
served as Executive Director of the law firm of Holland & Knight from 1987 to
1991. From 1982 to 1987, Mr. Manley served as Vice President of Planning at
Sensormatic Electronics Corporation, a publicly-held manufacturer of electronic
article surveillance systems. Prior to 1982, Mr. Manley served as the Managing
Partner of the Miami office of Arthur Young & Company.
BOB L. MOSS has been a director of the Company since 1992. Since January
2000, Mr. Moss has served as Chairman of the Board and Chief Executive Officer
of Centex Construction Group, the largest domestic general building contractor
in the nation. From 1986 to December 1999, Mr. Moss served as Chairman of the
Board and Chief Executive Officer of Centex-Rooney Construction Company, Inc.,
Florida's largest contracting organization.
ROBERTO MOTTA has been a director of the Company since 1975. Mr. Motta has
been engaged as a private investor in various business activities for more than
five years.
ALAN H. POTAMKIN has been a director of the Company since 1994. Mr.
Potamkin serves as Chairman of the Board of Planet Automotive, an auto
retailer. Since 1970, Mr. Potamkin has served as President of Potamkin
Companies, one of the nation's largest automobile dealers. In addition, Mr.
Potamkin has owned various media properties and owns Potamkin International,
the Office Depot, Inc. franchisee for Eastern Europe.
The Company's Amended and Restated Articles of Incorporation provide for
the Board of Directors to have up to nine members, to be divided as nearly as
possible in three equal divisions to serve in staggered terms of three years.
Each division consists of one director to be elected by the holders of Common
Stock and two directors to be elected by the holders of Class B Common Stock.
The number of members comprising the Board of Directors presently is eight,
three of whom are Common Stock directors and five of whom are Class B Common
Stock directors. Messrs. Potamkin (Common Stock), Motta (Class B) and Harris
(Class B) serve until the 2000 Annual Meeting of Shareholders and Messrs.
Fleeman (Class B) and Moss (Class B) serve until the 2001 Annual Meeting of
Shareholders. Messrs. Manley (Common Stock), Alvarez (Common Stock) and Nahmad
(Class B) serve until the 2002 Annual Meeting of Shareholders. See "Election of
Directors".
There are no arrangements or understandings with respect to the selection
of officers or directors. The Company pays each director who is not an employee
a $1,000 fee for each meeting of the Board of Directors attended and reimburses
directors for their expenses in connection with their activities as directors
of the Company.
COMPLIANCE WITH SECTION 16(A) OF THE SECURITIES EXCHANGE ACT OF 1934
Section 16(a) of the Securities Exchange Act of 1934 requires the
Company's officers, directors, and persons who own more than ten percent of a
registered class of the Company's equity securities
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<PAGE>
to file reports of ownership and changes in ownership on Forms 3, 4 and 5 with
the Securities and Exchange Commission (SEC), the New York Stock Exchange and
the American Stock Exchange. Officers, directors and greater than ten percent
shareholders are required by the SEC regulations to furnish the Company with
copies of all Forms 3, 4 and 5 they file.
Based solely on the Company's review of the copies of such forms it has
received, the Company believes that all its officers, directors, and greater
than ten percent beneficial owners complied with all filing requirements
applicable to them with respect to transactions during 1999 except for the 1999
stock option grant made to each of the following directors and officers:
Messrs. Logan, Kelly, Fleeman, Manley, Moss and Motta and Ms. Menendez, which
were filed month ended April 30, 2000.
MEETINGS AND COMMITTEES OF THE BOARD OF DIRECTORS
During the fiscal year ended December 31, 1999, the Company's Board of
Directors took certain actions by unanimous written consent and held six
meetings. During 1999, other than Messrs. Manley, Motta, and Potamkin, no
incumbent director attended fewer than 75 percent of the aggregate of (i) the
number of meetings of the Board of Directors held during the period he served
on the Board and (ii) the number of meetings of committees of the Board of
Directors held during the period he served on such committees.
The Board of Directors has established four standing committees: (1) the
Audit Committee, (2) the Compensation Committee, (3) the Stock Option Committee
and (4) the Nominating Committee.
Messrs. Manley and Moss are members of the Audit Committee, which held two
meetings during 1999. The duties and responsibilities of the Audit Committee
include (a) recommending to the full Board of Directors the appointment of the
Company's independent auditors and any termination of engagement, (b) reviewing
the plan and scope of audits, (c) reviewing the Company's significant
accounting policies and internal controls and (d) having general responsibility
for all related auditing matters.
Messrs. Manley and Fleeman are members of the Compensation Committee,
which held three meetings during 1999. The Compensation Committee reviews and
determines the compensation of the Company's officers and administers the
Company's employee stock purchase plan.
Messrs. Moss and Alvarez are members of the Stock Option Committee. The
Stock Option Committee administers the Company's stock option plans and has the
power and authority to (a) determine the persons to be awarded options and the
terms thereof pursuant to the terms of the plans, and (b) construe and
interpret the Company's stock option plans.
Messrs. Nahmad and Potamkin are members of the Nominating Committee. The
Nominating Committee is responsible for (a) establishing procedures for the
selection and retention of members of the Board of Directors, (b) evaluating
Board nominees and members and (c) recommending nominees.
9
<PAGE>
EXECUTIVE COMPENSATION
The following table sets forth the aggregate compensation paid to the
Company's Chief Executive Officer and each of the Company's other executive
officers whose total annual salary and bonus for the 1999 fiscal year was
$100,000 or more.
SUMMARY COMPENSATION TABLE
<TABLE>
<CAPTION>
ANNUAL COMPENSATION LONG TERM COMPENSATION
------------------------------------------------- ----------------------------------------
OTHER RESTRICTED NUMBER
NAME AND FISCAL ANNUAL STOCK OF STOCK ALL OTHER
PRINCIPAL POSITION YEAR SALARY BONUS COMPENSATION(1) AWARDS(2) OPTIONS COMPENSATION(3)
- -------------------------- ------- ----------- ------------------- ----------------- ------------ ---------- ----------------
<S> <C> <C> <C> <C> <C> <C> <C>
Albert H. Nahmad 1999 $711,603 $ 1,250,000(4) -- $ 258,750 200,000 $2,600
President and Chief 1998 719,092 478,500 -- 1,265,625 375,000 2,400
Executive Officer 1997 542,733 1,300,000 -- 2,550,000 300,000 2,250
Barry S. Logan 1999 $202,175 $ 125,000 -- $ 272,500 50,000 $2,400
Vice President-Finance 1998 124,099 80,000 -- 253,125 22,500 2,400
and Secretary 1997 96,021 65,000 -- 545,625 15,000 2,250
Ana M. Menendez 1999 $109,438 $ 22,000 -- $ 53,125 10,000 $ 200
Treasurer and Assistant 1998 16,500 -- -- -- 15,000 --
Secretary
</TABLE>
- ----------------
(1) The officers listed in this table receive certain personal benefits;
however, such additional benefits do not exceed the lesser of $50,000 or
10% of such officer's salary and bonus for any of the years reported.
(2) Mr. Nahmad was awarded 18,000 shares of Class B Common Stock and Mr. Logan
and Ms. Menendez were awarded 20,000 and 5,000 shares of Common Stock,
respectively. Significant restriction periods apply to these awards of
restricted stock. With regard to the grants made in 1999 to Messrs. Nahmad
and Logan and Ms. Menendez, such restrictions, absent the individuals'
death or disability or a change in control of the Company, lapse in 14
years, 24 years and 26 years, respectively. Individuals are entitled to
voting rights and to receive dividends on restricted stock awards. At
December 31, 1999, the aggregate value of all shares of restricted stock
held by Messrs. Nahmad and Logan and Ms. Menendez was $2,733,750, $794,922
and $57,813, respectively.
(3) These amounts represent the Company's contribution to the Profit Sharing
Plan. The Profit Sharing Plan is qualified under Section 401(k) of the
Internal Revenue Code of 1986, as amended.
(4) Incentive compensation in 1999 represents earned incentive for performance
in 1998 pursuant to an Incentive Plan approved by shareholders in 1996.
Incentive compensation is based on certain criteria related to the
Company's performance including increases in earnings per share and stock
price appreciation and is paid annually during the year following the
attainment and certification of the performance criteria.
10
<PAGE>
OPTION GRANTS IN FISCAL YEAR 1999
The following table sets forth certain information concerning grants of
stock options made during 1999 to the Named Executive Officers. All options
were granted at exercise prices equal to fair market value.
<TABLE>
<CAPTION>
POTENTIAL REALIZABLE
VALUE AT ASSUMED
% OF TOTAL ANNUAL RATES OF
OPTIONS STOCK PRICE APPRECIATION
NUMBER OF GRANTED TO EXERCISE FOR OPTION TERM(2)
OPTIONS EMPLOYEES IN PRICE PER EXPIRATION ---------------------------
NAME GRANTED(1) 1999 SHARE DATE 5% 10%
- -------------------------- ------------ -------------- ----------- ----------- ------------- -------------
<S> <C> <C> <C> <C> <C> <C>
Albert H. Nahmad ......... 200,000 28.5% $ 13.88 2/19/09 $1,663,738 $4,292,948
Barry S. Logan ........... 50,000 7.1% 13.88 2/19/09 415,934 1,073,237
Ana M. Menendez .......... 10,000 1.4% 10.00 12/8/09 63,908 160,995
</TABLE>
- ----------------
(1) Class B Common Stock as to Mssrs. Nahmad and Logan and Common Stock as to
Ms. Menendez.
(2) The dollar amounts set forth in these columns are the result of
calculations at the five percent and ten percent rates set forth by the
Commission and, therefore, are not intended to forecast possible future
appreciation, if any, of the market price of the common stock.
AGGREGATED OPTION EXERCISES IN LAST FISCAL YEAR
AND FISCAL YEAR END OPTION VALUES
The following table sets forth certain information concerning stock
options exercised in 1999 and unexercised stock options held by the Company's
executive officers as of December 31, 1999.
<TABLE>
<CAPTION>
NUMBER OF VALUE OF UNEXERCISED
NUMBER UNEXERCISED OPTIONS HELD AT IN-THE-MONEY OPTIONS AT
OF SHARES FISCAL YEAR END FISCAL YEAR END
ACQUIRED ON VALUE ----------------------------------- ----------------------------
NAME EXERCISE REALIZED EXERCISABLE(1) UNEXERCISABLE(2) EXERCISABLE UNEXERCISABLE
- -------------------------- ------------- --------- ---------------- ------------------ ------------- --------------
<S> <C> <C> <C> <C> <C> <C>
Albert H. Nahmad ......... -- -- 1,917,732 258,333 $9,045,527 $ --
Barry S. Logan ........... -- -- 92,792 75,333 392,977 --
Ana M. Menendez .......... -- -- 3,000 22,000 -- 15,625
</TABLE>
- ----------------
(1) Represents options as to 420,470 shares of Common Stock and 1,497,262
shares of Class B Common Stock for Mr. Nahmad, 76,125 shares of Common
Stock and 16,667 of Class B Common Stock for Mr. Logan and Common Stock
for Ms. Menendez.
(2) Represents options as to Class B Common Stock for Mr. Nahmad, 42,000 shares
of Common Stock and 33,333 shares of Class B Common Stock for Mr. Logan
and Common Stock for Ms. Menendez.
EMPLOYMENT AGREEMENT
The Company renewed an employment agreement with Mr. Nahmad which expires
January 31, 2002 and automatically renews for three-year terms unless the
Compensation Committee shall have notified Mr. Nahmad to the contrary in
writing prior to the expiration date. Under the terms of the employment
agreement, Mr. Nahmad shall be employed as President and Chairman of the Board
of the Company at an annual salary of not less than $630,000 and will be
entitled to additional compensation pursuant to an Incentive Plan.
11
<PAGE>
REVERSE SPLIT DOLLAR AGREEMENT
Messrs. Nahmad and Logan participate in reverse split dollar insurance
programs which provide the Company limited interests in the insurance policies,
including death benefits aggregating approximately $6.8 million plus any
prepaid and unearned premiums. Under the insurance program, Messrs. Nahmad and
Logan retain all incidents of ownership in excess of the Company's limited
interests.
KEY EXECUTIVE DEFERRED COMPENSATION AGREEMENT
The Company entered into a Key Executive Deferred Compensation Agreement
(the "Deferred Compensation Agreement") on January 31, 1983 with Mr. Nahmad
that provides benefits to Mr. Nahmad or his family upon disability, death or
retirement or upon change in control of the Company. The minimum monthly
benefit payable under the plan is based on Mr. Nahmad's length of service to
age 65 and is the lesser of one-twelfth (1/12) of 10% of (i) $727,000 plus
certain amounts accrued for each year of service, or (ii) his maximum annual
salary prior to the event triggering payment of benefits. The estimated minimum
annual benefits payable to Mr. Nahmad upon retirement at age 65 and the service
to the Company that will have been completed by him are $72,700 and 33 years,
respectively.
COMMITTEES' REPORT TO SHAREHOLDERS
The Company's executive compensation programs are based on three
components: base salary, annual incentives and long-term compensation; each
intended as an important piece of the overall compensation philosophy.
Base salary is used to attract and retain the Company's key executives and
is calculated using comparisons with the Company's industry competitors and/or
companies of similar market value. Salaries are reviewed by the Compensation
Committee on an annual basis.
Annual incentives are a significant component of executive compensation,
reflecting the Company's belief that management's contribution to long-term
shareholder returns (via increasing stock prices and dividends) comes from
maximizing earnings and the potential of the Company. The Company's Chief
Executive Officer has an annual incentive opportunity based upon the increase
in the earnings per share and stock price or, in earlier years, the pre-tax
earnings of the Company. By its extensive reliance on this incentive
compensation system, which has been employed by the Company for the Chief
Executive Officer for more than eight years, the Company links a substantial
portion of the Chief Executive Officer's annual pay directly to profits. As a
result of this approach, the Company's Chief Executive Officer's total
compensation is likely to vary from year to year more significantly than the
pay of executives of many of the Company's competitors. This philosophy is
essential to an entrepreneurial business such as the Company's business.
Certain other executive officers and employees have their pay levels set
primarily in relation to comparisons to similar executives of competitors, with
additional annual incentives based on the attainment of specific objectives
supporting the overall goals of the Company.
In 1999, the Company's pre-tax earnings from continuing operations
increased to $46.8 million, up 9% from $42.8 million in 1998. The execution of
the Company's strategy, sustained profit growth from
12
<PAGE>
a combination of strong internal growth and acquisitions, has resulted in an
earnings per share growth rate in excess of 40% for the period from 1990 to
1999 and has positioned the Company as the largest distributor of residential
central air conditioning, heating and refrigeration equipment and related parts
and supplies in the United States.
These successful efforts of the Company's management team were led by the
Company's President and Chief Executive Officer, Albert H. Nahmad. As discussed
in more detail below, Mr. Nahmad and other key executives of the Company
received a significant portion of their total compensation through incentive
and other forms of long-term compensation.
In order to promote an increase in net worth of the Company, maximize the
return to shareholders and effectively motivate senior management, the
executive compensation philosophy of the Company has been to link compensation
with Company performance. Therefore, Mr. Nahmad has received 61% of his
aggregate cash compensation during the last three years from incentives. The
Committee believes that this represents evidence of the strong and explicit
link between executive compensation and the creation of long-term shareholder
value.
In terms of long-term compensation, management incentives generally are
provided to the Company's executives through annual grants of stock options and
awards of restricted stock to retain and motivate executives to improve the
Company's stock value. Stock options have been granted at an exercise price
equal to the closing price of the Company's Common Stock or Class B Common
Stock as reported by the New York Stock Exchange and the American Stock
Exchange, respectively, on the day prior to the date of grant. Accordingly,
grants of stock options will produce value only if there are increases in the
underlying stock price. In 1999, Mr. Nahmad received options to acquire 200,000
shares of the Company's Class B Common Stock at an exercise price equal to the
then market value of $13.88 per share. The Company provides no defined benefit
pension plan or supplemental executive retirement plan but does provide a
401(k) plan for all of its employees employed for at least one year.
The Company provides certain executives awards of restricted stock that
are designed to focus such executives on the long-term performance of the
Company for the duration of their careers. Grants of restricted stock are
subject to forfeiture until certain specified dates, death, disability or a
change in control. These features result in the Company's ability to retain,
throughout their entire careers, those individuals who are key to the creation
of shareholder value. During 1999, there were 7 employees who were granted
restricted stock. During 1999, Mr. Nahmad was granted 18,000 shares of
restricted Class B Common Stock.
Decisions with regard to compensation of the Company's executives are made
by the two-member Compensation Committee, which has meetings at least once a
year and is called upon to meet more often when the need arises. Decisions with
regard to awards of restricted stock and stock options for all employees of the
Company are made by the two-member Stock Option Committee, which is called upon
to meet when the need arises. Each member of the Committees is a non-employee
director. The executive compensation practices of the Company are constantly
re-evaluated to ensure their relevance, their support of the strategic goals of
the Company and their contribution to the creation of long-term shareholder
value.
The above Committees' Report to Shareholders of the Compensation and Stock
Option Committees and the Company's Common Stock Price Performance Graph which
follows shall not be
13
<PAGE>
deemed to be incorporated by reference by any general statement incorporating
this Proxy Statement by reference into any filing under the Securities Act of
1933 or under the Securities Exchange Act of 1934, except to the extent that
the Company specifically incorporates this information by reference.
Section 162(m) of the Internal Revenue Code of 1986, as amended (the
"Code") generally disallows a public company's deduction for compensation to
any one employee in excess of $1 million per year unless the compensation is
pursuant to a plan approved by the public company's shareholders. In March
1996, the Compensation Committee renewed and amended the employment agreement
between the Company and Mr. Nahmad. The terms of the employment agreement
include a provision for an Incentive Plan for Mr. Nahmad, which was approved by
the shareholders of the Company at the 1996 Annual Meeting. Such Incentive Plan
is intended to comply with the provisions of Section 162(m).
COMPENSATION AND STOCK OPTION COMMITTEES
COMPENSATION COMMITTEE:
Paul F. Manley, Chairman
David B. Fleeman
STOCK OPTION COMMITTEE:
Bob L. Moss, Chairman
Cesar L. Alvarez
May 1, 2000
14
<PAGE>
WATSCO, INC. COMMON STOCK PRICE PERFORMANCE
The following graph compares the cumulative total shareholder return of
Watsco, Inc. Common Stock and Class B Common Stock, based on their market
prices and assuming reimbursement of dividends, with (i) the S & P Small-Cap
600 Index, (ii) the AMEX Market Index and (iii) a Peer Group Index.
The Peer Group Index is comprised of the following publicly traded
companies: Pameco Corporation, Hughes Supply, Inc., Noland Company and ACR
Group, Inc. The Company believes that this information demonstrates that the
compensation earned by its executive officers compares consistently with
increased shareholder value.
<TABLE>
<CAPTION>
1/1/95 12/31/95 12/31/96 12/31/97 12/31/98 12/31/99
-------- ---------- ---------- ---------- ---------- ---------
<S> <C> <C> <C> <C> <C> <C>
Watsco, Inc. Common Stock .................. 100 163 394 351 354 246
Watsco, Inc. Class B Common Stock .......... 100 160 384 338 341 240
Peer Group Index ........................... 100 130 198 236 199 144
S&P Small-Cap 600 Index .................... 100 130 158 198 203 229
AMEX Market Index .......................... 100 126 135 163 166 215
</TABLE>
The line graph assumes that $100 was invested on January 1, 1995 in the
Company's Common Stock and Class B Common Stock, Peer Group Index, the S&P
Small-Cap 600 Index and the AMEX Market Index.
The closing price of the Company's Common Stock and Class B Common Stock
was $11.5625 and $11.25, respectively, at December 31, 1999. As of the Record
Date, the closing price of the Company's Common Stock and Class B Common Stock
was $11.00 and $10.938 per share, respectively. The stock price performance of
Watsco, Inc. Common Stock and Class B Common Stock depicted in the graph above
represents past performance only and is not necessarily indicative of future
performance.
CERTAIN TRANSACTIONS
Mr. Potamkin and the Company each have a 50% equity interest in A2 Jet
Leasing LLC, ("A2 Jet Leasing") a company which performs aircraft leasing
services to Mr. Potamkin and his affiliates, the Company and to unaffiliated
third parties. During 1999, A2 Jet Leasing had total billings to Mr. Potamkin
and his affiliates and the Company of $486,830 and $452,565, respectively, for
services rendered.
Mr. Cesar L. Alvarez, a director, is the Chief Executive Officer and
Managing Shareholder of Greenberg Traurig, P.A., which serves as the Company's
principal outside counsel and receives customary fees for legal services. The
Company currently anticipates that such arrangement will continue.
15
<PAGE>
II.
PROPOSAL TO RATIFY AN AMENDMENT TO THE COMPANY'S AMENDED
AND RESTATED 1996 QUALIFIED EMPLOYEE STOCK PURCHASE PLAN
In July 1996, the Board of Directors adopted, and in June 1997 the
Company's Shareholders ratified, the 1996 Qualified Employee Stock Purchase
Plan (the "Stock Purchase Plan"). The Compensation Committee of the Board of
Directors has adopted, and is submitting to the Shareholders for approval, an
amendment to the Amended and Restated 1996 Qualified Employee Stock Purchase
Plan. The Stock Purchase Plan has been restated and amended to increase the
amount of shares of Common Stock of the Company reserved for issuance from
600,000 to 800,000 shares.
A general description of the basic features of the Stock Purchase Plan is
presented below, but such description is qualified in its entirety by the full
text of the Stock Purchase Plan, which is available from the Company upon
request.
GENERAL TERMS AND CONDITIONS
The purpose of the Stock Purchase Plan is to encourage stock ownership in
the Company by employees of the Company and those subsidiaries of the Company
designated by the Compensation Committee as eligible to participate, thereby
enhancing employee interest in the continued success and progress of the
Company.
The Stock Purchase Plan permits employees to purchase stock of the Company
at a favorable price and possibly with favorable tax consequences to the
participants. All employees (including officers, other than Mr. Nahmad) of the
Company or of those subsidiaries designated by the Compensation Committee who
are regularly scheduled to work at least 20 hours per week and more than five
months per year are eligible to participate in any of the purchase periods of
the Stock Purchase Plan after completing 90 days of continuous employment.
However, any participant who would own (as determined under the Code),
immediately after the grant of an option, stock possessing 5% or more of the
total combined voting power or value of all classes of the stock of the Company
will not be granted an option under the Stock Purchase Plan. As of the Record
Date, the Company had approximately 3,200 eligible participants.
The Stock Purchase Plan is administered by the Compensation Committee
which is appointed by the Board of Directors and consists of persons who are
Non-Employee Directors under Rule 16b-3 under the Exchange Act. The Stock
Purchase Plan gives broad powers to the Compensation Committee to administer
and interpret the Stock Purchase Plan.
Purchase periods begin on January 1, April 1, July 1 and October 1 of each
year. No later than 15 days before the commencement date of each purchase
period, each participant must elect to have compensation withheld during the
purchase period of a specific dollar amount of not less than $10 per payroll
period for employees that are paid weekly, $20 for employees that are paid
either bi-weekly or semi-monthly or a minimum $100 lump sum purchase. The
percentage or amount designated may not be increased or decreased during a
purchase period, but a participant can discontinue payroll deductions for the
remainder of a purchase period and withdraw his or her funds entirely. As of
the first day of the purchase period, a participant is granted an option to
purchase that number of shares
16
<PAGE>
determined by dividing the total amount to be withheld by the purchase price
described below. Based on the amount of salary withheld and lump sum payments
made at the end of the purchase period, shares will be purchased for the
account of each participant within five business days of the termination date
of such purchase period (the "Purchase Date"). In no event, however, may a
participant receive an option for shares, which would cause the participant to
own 5% or more of the total combined voting power of all classes of common
stock of the Company. The purchase price to be paid by the participants will be
the lower of the amount determined under Paragraphs A and B below:
A. 85% of the closing sales price of the Company's Common Stock as reported
on the New York Stock Exchange as of the Commencement date of the
purchase period; or
B. 85% of the closing sales price of the Company's Common Stock as reported
on the New York Stock Exchange as of the Purchase Date.
As required by tax law, no participant may receive an option under the
Stock Purchase Plan for shares that have a fair market value in excess of
$25,000 in one calendar year. No interest is paid by the Company on funds
withheld and such funds are used by the Company for general operating purposes.
In general, the shares of Common Stock purchased by a participant may not be
sold, transferred or disposed of by the participant other than by will or laws
of descent and distribution or to immediate family members or trusts
established for their benefit, for a period of 12 months after the purchase
date for such shares.
The Compensation Committee may, from time to time, revise or amend the
Stock Purchase Plan as the Compensation Committee may deem proper and in the
best interest of the Company or as may be necessary to comply with Section 423
of the Code; provided, that no such revision or amendment may, without prior
approval of the Company's shareholders, (i) increase the total number of shares
for which options may be granted under the Stock Purchase Plan except as
provided in the case of stock splits, consolidations, stock dividends or
similar events, or (ii) to the extent otherwise required to comply with Rule
16b-3 of the Exchange Act or under Section 423 of the Code or other applicable
law.
The Board of Directors shall equitably adjust the number of shares
remaining reserved for issuance, the number of shares of stock subject to
outstanding options and the price per share of stock subject to an option in
the event of certain increases or decreases in the number of outstanding shares
of Common Stock of the Company effected as a result of stock splits or
consolidations, stock dividends or other transactions in which the Company
receives no consideration.
FEDERAL INCOME TAX EFFECTS
Shares purchased under the Stock Purchase Plan are intended to qualify for
favorable tax treatment to the employees under Sections 421 and 423 of the
Code. Employee contributions are made on an after-tax basis. A capital gain or
capital loss on Common Stock purchased under the Stock Purchase Plan would not
be realized until the participant would sell the shares of Common Stock. If a
participant disposes of shares two years or more after the date of the
beginning of the purchase period when the shares were acquired, and more than
one year after the shares are purchased, the participant would recognize as
ordinary income the lesser of: (i) the excess of the fair
17
<PAGE>
market value of the shares on the date of sale over the price paid or (ii) 15%
of the fair market value of the shares at the beginning of the purchase
period(s). Additionally, the participant would recognize a long-term capital
gain or loss (within the meaning of the Code) equal to the difference between
the amount realized from the sale of the shares and the basis (the basis would
be the purchase price plus any amount taxed as ordinary compensation income).
If a participant disposes of shares within two years of the date of the
beginning of the purchase period when the shares were acquired, or within one
year after the shares are purchased, the participant would recognize ordinary
compensation income equal to the excess of the fair market value of the shares
on the purchase date(s) over the price paid for the shares. Additionally, the
participant would recognize a capital gain or loss (within the meaning of the
Code) equal to the difference between the amount realized from the sale of the
shares and the basis (the basis would be the purchase price plus the amount
taxed as ordinary compensation income). If the participant held the shares for
more than one year, the capital gain or loss would be a long-term gain or loss.
The Company would not receive an income tax deduction upon either the grant or
exercise of the option by the participant, but generally would receive a
deduction equal to the ordinary compensation income required to be recognized
by the participant as a result of the disposition if the shares are disposed of
by the participant within two years of the beginning of the purchase period
when the shares were acquired or within one year after the shares are
purchased.
IMPORTANCE OF CONSULTING A TAX ADVISER. The information set forth above is
a summary only and does not purport to be complete. In addition, the
information is based upon current federal income tax rules and therefore is
subject to change when those rules change. Moreover, because the tax
consequences to any participant may depend on his or her particular situation,
each participant should consult his or her tax adviser as to the Federal,
state, local and other tax consequences of the acquisition or disposition of
Common Stock under the Stock Purchase Plan.
SHARES PURCHASED UNDER THE STOCK PURCHASE PLAN
The following table sets forth certain information, as of Record Date
regarding shares purchased under the Stock Purchase Plan by the persons and
groups indicated:
<TABLE>
<CAPTION>
AGGREGATE AGGREGATE
NUMBER OF PURCHASE PRICE
NAME OF INDIVIDUAL OR GROUP POSITIONI SHARES PURCHASED PAID TO COMPANY
- ----------------------------------- ----------------------------------- ------------------ ----------------
<S> <C> <C> <C>
Albert H. Nahmad(1) ............... Chairman of the Board and
President -- --
Barry S. Logan .................... Vice President--Finance and
Secretary 4,187 $ 56,054
Ana M. Menendez ................... Treasurer and Assistant Secretary -- --
All current Executive Officers
(4 persons) ...................... 4,187 56,054
All current directors who are not
Executive Officers(1) ............ -- --
All employees, other than Executive
Officers (812 persons) ........... 459,443 5,931,411
</TABLE>
- ----------------
(1) Not eligible to participate.
18
<PAGE>
The Compensation Committee believes that shares granted under the Stock
Purchase Plan have been and will be awarded to all employees presently meeting
the existing eligibility requirements, except no one plan participant may be
granted an aggregate number of shares with a fair market value exceeding
$25,000 in one calendar year, as determined at the beginning of each purchase
period as defined under the Stock Purchase Plan.
THE BOARD OF DIRECTORS RECOMMENDS A VOTE "FOR" APPROVAL OF THE PROPOSAL TO
RATIFY AN AMENDMENT TO THE COMPANY'S AMENDED AND RESTATED 1996 QUALIFIED
EMPLOYEE STOCK PURCHASE PLAN.
III.
OTHER BUSINESS
The Board of Directors knows of no other business to be brought before the
Annual Meeting. If, however, any other business should properly come before the
Annual Meeting, the persons named in the accompanying proxy will vote proxies
as in their discretion they may deem appropriate, unless they are directed by a
proxy to do otherwise.
INFORMATION CONCERNING SHAREHOLDER PROPOSALS
Shareholders interested in presenting a proposal for consideration at the
Company's 2001 annual meeting of shareholders may do so by following the
procedures prescribed in Rule 14a-8 promulgated by the Securities and Exchange
Act of 1934. To be eligible for inclusion in the proxy statement and form of
proxy relating to the meeting, shareholder proposals must be received by the
Corporate Secretary no later than January 1, 2001. Any shareholder proposal
submitted other than for inclusion in the proxy materials for that meeting must
be delivered to the Company no later than March 17, 2001, or such proposal will
be considered untimely. If a shareholder proposal is received after March 17,
2001, we may vote in our discretion as to the proposal all of the shares for
which the Company has received proxies for the 2001 annual meeting of the
shareholders.
By Order of the Board of Directors
BARRY S. LOGAN, Secretary
Coconut Grove, Florida
May 1, 2000
19
<PAGE>
WATSCO, INC.
2000 ANNUAL MEETING OF SHAREHOLDERS
HYATT REGENCY HOTEL
50 ALHAMBRA CIRCLE
CORAL GABLES, FLORIDA 33134
JUNE 5, 2000
9:00 A.M.
- FOLD AND DETACH HERE -
PROXY FOR COMMON STOCK
SOLICITED ON BEHALF OF THE BOARD OF DIRECTORS OF WATSCO, INC.
The undersigned hereby appoints ALBERT H. NAHMAD, BARRY S. LOGAN and each
of them, the true and lawful attorneys, agents for and in the name of the
undersigned, with full power of substitution for and in the name of the
undersigned, to vote all shares the undersigned is entitled to vote at the 2000
Annual Meeting of Shareholders of WATSCO, INC. to be held on Monday, June 5,
2000, at 9:00 A.M., Eastern Daylight Time, in the Hyatt Regency Hotel, 50
Alhambra Circle, Coral Gables, Florida, 33134, and at any and all adjournments
thereof, on the following matters:
(1) FOR [ ] WITHHOLD VOTE [ ] the election of Alan H. Potamkin as a Common
Stock Director to serve until the Annual
Meeting of Shareholders in 2003 or until his
successor is duly elected and qualified;
(2) FOR [ ] AGAINST [ ] WITHHOLD VOTE [ ] the proposal to ratify an amendment
to the Company's Amended and Restated
1996 Qualified Employee Stock Purchase
Plan; and
(3) In their discretion, on any other matters which may properly come before
the Annual Meeting or any adjournment or postponements thereof.
(SEE REVERSE SIDE)
<PAGE>
- FOLD AND DETACH HERE -
(CONTINUED FROM OTHER SIDE)
THIS PROXY, WHEN PROPERLY EXECUTED, WILL BE VOTED IN THE MANNER DIRECTED
HEREIN BY THE UNDERSIGNED SHAREHOLDER. IF NO DIRECTION IS MADE, THIS PROXY WILL
BE VOTED "FOR" ITEMS 1 AND 2.
The undersigned hereby acknowledges receipt of (i) the Company's 1999
Annual Report to Shareholders, (ii) the Proxy Statement and (iii) the Notice of
Annual Meeting dated May 1, 2000.
Date:________________________, 2000
___________________________________
___________________________________
Please sign exactly as your name
appears hereon. If stock is
registered in more than one name,
each holder should sign. When
signing as an attorney,
administrator, executor, guardian
or trustee, please add your title
as such. If executed by a
corporation or partnership, the
proxy should be signed in full
corporate or partnership name by a
duly authorized officer or partner
as applicable.
<PAGE>
WATSCO, INC.
2000 ANNUAL MEETING OF SHAREHOLDERS
HYATT REGENCY HOTEL
50 ALHAMBRA CIRCLE
CORAL GABLES, FLORIDA 33134
JUNE 5, 2000
9:00 A.M.
- FOLD AND DETACH HERE -
PROXY FOR CLASS B COMMON STOCK
SOLICITED ON BEHALF OF THE BOARD OF DIRECTORS OF WATSCO, INC.
The undersigned hereby appoints ALBERT H. NAHMAD, BARRY S. LOGAN and each
of them, the true and lawful attorneys, agents for and in the name of the
undersigned, with full power of substitution for and in the name of the
undersigned, to vote all shares the undersigned is entitled to vote at the 2000
Annual Meeting of Shareholders of WATSCO, INC. to be held on Monday, June 5,
2000, at 9:00 A.M., Eastern Daylight Time, in the Hyatt Regency Hotel, 50
Alhambra Circle, Coral Gables, Florida, 33134, and at any and all adjournments
thereof, on the following matters:
(1) FOR [ ] WITHHOLD VOTE [ ] the election of J. Ira Harris and Roberto Motta
as Class B Directors to serve until the Annual
Meeting of Shareholders in 2003 or until their
successors are duly elected and qualified,
except vote withheld from the following nominee
(if any);
(2) FOR [ ] AGAINST [ ] WITHHOLD VOTE [ ] the proposal to ratify an amendment
to the Company's Amended and Restated
1996 Qualified Employee Stock Purchase
Plan; and
(3) In their discretion, on any other matters which may properly come before
the Annual Meeting or any adjournment or postponements thereof.
(SEE REVERSE SIDE)
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- FOLD AND DETACH HERE -
(CONTINUED FROM OTHER SIDE)
THIS PROXY, WHEN PROPERLY EXECUTED, WILL BE VOTED IN THE MANNER DIRECTED
HEREIN BY THE UNDERSIGNED SHAREHOLDER. IF NO DIRECTION IS MADE, THIS PROXY WILL
BE VOTED "FOR" ITEMS 1 AND 2.
The undersigned hereby acknowledges receipt of (i) the Company's 1999
Annual Report to Shareholders, (ii) the Proxy Statement and (iii) the Notice of
Annual Meeting dated May 1, 2000.
Date:________________________, 2000
___________________________________
___________________________________
Please sign exactly as your name
appears hereon. If stock is
registered in more than one name,
each holder should sign. When
signing as an attorney,
administrator, executor, guardian
or trustee, please add your title
as such. If executed by a
corporation or partnership, the
proxy should be signed in full
corporate or partnership name by a
duly authorized officer or partner
as applicable.
