Description of Capital Stock
Exhibit 4.3
DESCRIPTION OF CAPITAL STOCK
As of the end of the fiscal year covered by the Annual Report on Form 10-K of Watsco, Inc., a Florida corporation (the “Company”), to which this Exhibit is attached, or incorporated by reference, as an exhibit, the following securities of the Company were registered under Section 12 of the Securities Exchange Act of 1934, as amended: Common stock, par value $0.50 per share (the “Common stock”), and Class B common stock, par value $0.50 per share (the “Class B common stock”). Unless the context otherwise requires, all references herein to “we”, “our”, “ours”, and “us” refer to the Company.
The following summarizes certain material terms and provisions of our Common stock, our Class B common stock and our preferred stock. This summary is qualified in its entirety by reference to the Florida Business Corporation Act (the “Florida Act”), and the complete text of our Amended and Restated Articles of Incorporation, as amended (the “Amended and Restated Articles of Incorporation”) and the complete text of our Second Amended and Restated Bylaws, as amended (the “Amended and Restated Bylaws”).
Overview – Authorized and Outstanding Shares
Under our Amended and Restated Articles of Incorporation, we have the authority to issue:
| • | 60,000,000 shares of Common stock; |
| • | 10,000,000 shares of Class B common stock; and |
| • | 10,000,000 shares of preferred stock, par value $0.50 per share, which are issuable in series on terms determined by our Board of Directors, of which none are currently designated. |
Rights of Our Common Stock
Preemptive Rights. The holders of our Common stock do not have preemptive rights to purchase or subscribe for any stock or other securities of ours.
Voting Rights. Each outstanding share of our Common stock is entitled to one (1) vote per share.
Dividends. Holders of our Common stock are entitled to receive dividends or other distributions when and if declared by our Board of Directors. The right of our Board of Directors to declare dividends, however, is subject to any rights of the holders of other classes of our capital stock and the availability of sufficient funds under Florida law to pay dividends. In addition, our ability to pay dividends depends on certain restrictions in our credit agreement.
Liquidation Rights. In the event of the liquidation of the Company, subject to the rights, if any, of the holders of other classes of our capital stock, the holders of our Common stock are entitled to receive any of our assets available for distribution to our shareholders ratably in proportion to the number of shares held by them.
Listing. We list our Common stock on the New York Stock Exchange under the symbol “WSO.”
Rights of Our Class B Common Stock
Our Class B common stock is substantially identical to our Common stock except: (i) each share of Common stock is entitled to one (1) vote on all matters submitted to a vote of our shareholders, and each share of Class B common stock is entitled to ten (10) votes; (ii) shareholders of Common stock are entitled to elect 25% of our Board of Directors (rounded up to the nearest whole number), and Class B shareholders are entitled to elect the balance of the Board of Directors; (iii) cash dividends may be paid on Common stock without paying a cash dividend on Class B common stock, and no cash dividend may be paid on Class B common stock unless at least an equal per share cash dividend is paid on Common stock; and (iv) Class B common stock is convertible at any time into Common stock on a one-for-one basis at the option of the shareholder.
We list our Class B common stock on the New York Stock Exchange under the symbol “WSOB.”
Rights of Our Preferred Stock
We are authorized to issue preferred stock with such designation, rights and preferences as may be determined from time to time by our Board of Directors. Accordingly, the Board of Directors is empowered, without approval by the holders of our Common stock and Class B common stock, to issue preferred stock with dividend, liquidation, conversion, voting or other rights which could adversely affect the voting power or other rights of the holders of our Common stock and Class B common stock. In the event of issuance, the preferred stock could be utilized, under certain circumstances, as a method of discouraging, delaying or preventing a change in control of the Company or making removal of management more difficult.
Material Provisions of our Amended and Restated Articles of Incorporation and Amended and Restated Bylaws
Our Amended and Restated Articles of Incorporation and Amended and Restated Bylaws contain provisions that could discourage, delay or prevent a tender offer or takeover attempt at a price which many shareholders may find attractive. The existence of these provisions could limit the price that investors might otherwise pay in the future for shares of our Common stock and Class B common stock.
Blank Check Preferred Stock. As noted above, our preferred stock could be issued quickly and utilized, under certain circumstances, as a method of discouraging, delaying or preventing a change in control of the Company or make removal of management more difficult.
Election of Directors. Our Amended and Restated Articles of Incorporation provide for the filling of vacancies occurring on the Board of Directors by certain votes of the remaining directors. These provisions may discourage a third party from voting to remove incumbent directors and simultaneously gaining control of the Board of Directors by filling the vacancies created by that removal with its own nominees.
Classified Board. Our Amended and Restated Articles of Incorporation provide that our Board of Directors shall be divided into three classes serving staggered terms. Approximately one-third of the Board of Directors is elected each year. The provision for a classified board could prevent a party who acquires control of a majority of our outstanding capital stock entitled to vote from obtaining control of our Board of Directors until the second annual shareholders’ meeting following the date the acquiring party obtains such a controlling interest. The classified board provision could discourage a potential acquiror from making a tender offer or otherwise attempting to obtain control of the Company and could increase the likelihood that incumbent directors will retain their positions.
Transfer Agent and Registrar
The transfer agent and registrar for our Common stock and Class B common stock is American Stock Transfer & Trust Company, LLC.
Florida Anti-Takeover Statute
As a Florida corporation, we are subject to certain anti-takeover provisions that apply to public corporations under Florida law. Pursuant to Section ###-###-#### of the Florida Act, a publicly held Florida corporation may not engage in a broad range of business combinations or other extraordinary corporate transactions with an interested shareholder for a period of three (3) years following the time that such shareholder became an interested shareholder, unless:
| • | such business combination or other extraordinary corporate transaction (including a transaction which resulted in the shareholder becoming an interested shareholder) is approved by a majority of disinterested directors before the subject shareholder becomes an interested shareholder; |
| • | upon consummation of such a business combination or extraordinary corporate transaction that resulted in the subject shareholder becoming an interested shareholder, such shareholder owned at least 85% of the outstanding voting shares of the corporation at the time such transaction commenced, exclusive of shares owned by directors, officers and certain employee stock plans; or |
| • | at or subsequent to the time the subject shareholder became an interested shareholder, such business combination or other extraordinary corporate transaction is approved by the board of directors and authorized by an affirmative vote of the holders of two-thirds of the voting shares of the corporation (excluding shares held by the interested shareholder) at an annual or special meeting of shareholders, and not by written consent. |
The above requirements do not apply to such business combinations or other extraordinary corporate transactions with an interested shareholder if:
| • | the corporation has not had more than 300 shareholders of record at any time during the three years preceding the announcement date of any such business combination; |
| • | the interested shareholder has owned at least 80% of the corporation’s outstanding voting shares for at least three (3) years preceding the announcement date of any such business combination; |
| • | the interested shareholder is the beneficial owner of at least 90% of the outstanding voting shares of the corporation, exclusive of shares acquired directly from the corporation in a transaction not approved by a majority of the disinterested directors; or |
| • | the consideration paid to the holders of the corporation’s voting stock is at least equal to certain fair price criteria. |
An interested shareholder is defined as a person who, together with affiliates and associates, beneficially owns more than 15% of a corporation’s outstanding voting shares. We have not made an election in our Amended and Restated Articles of Incorporation to opt out of Section ###-###-####.
In addition, we are subject to Section ###-###-#### of the Florida Act, which prohibits the voting of shares in a publicly held Florida corporation that are acquired in a control share acquisition unless (i) our Board of Directors approved such acquisition prior to its consummation or (ii) after such acquisition, in lieu of prior approval by our Board of Directors, the holders of a majority of the corporation’s voting shares, exclusive of shares owned by officers of the corporation, employee directors or the acquiring party, approve the granting of voting rights as to the shares acquired in the control share acquisition. A control share acquisition is defined as an acquisition that immediately thereafter entitles the acquiring party to 20% or more of the total voting power in an election of directors. We have not made an election in our Amended and Restated Articles of Incorporation or Amended and Restated Bylaws to opt out of Section ###-###-####.
