EXHIBIT 10.2
THE SECURITIES REPRESENTED BY THIS CERTIFICATE WERE ORIGINALLY ISSUED ON OCTOBER
11, 2002. THE SECURITIES REPRESENTED BY THIS CERTIFICATE HAVE NOT BEEN
REGISTERED UNDER EITHER THE SECURITIES ACT OF 1933, AS AMENDED (THE "1933 ACT"),
OR APPLICABLE STATE SECURITIES LAWS (THE "STATE ACTS"), AND SHALL NOT BE SOLD,
PLEDGED, HYPOTHECATED, DONATED OR OTHERWISE TRANSFERRED (WHETHER OR NOT FOR
CONSIDERATION) BY THE HOLDER EXCEPT BY REGISTRATION OR PURSUANT TO AN EXEMPTION
FROM REGISTRATION UPON THE ISSUANCE TO THE COMPANY OF A FAVORABLE OPINION OF
COUNSEL OR OTHER EVIDENCE REASONABLY SATISFACTORY TO THE COMPANY TO THE EFFECT
THAT ANY SUCH TRANSFER SHALL NOT BE A VIOLATION OF THE 1933 ACT AND THE STATE
ACTS.
COMFORT SYSTEMS USA, INC.
STOCK PURCHASE WARRANT AND REPURCHASE AGREEMENT
Date of Issuance: October 11, 2002 Certificate No. W1
FOR VALUE RECEIVED, COMFORT SYSTEMS USA, INC., a Delaware corporation
(the "Company"), hereby grants to GENERAL ELECTRIC CAPITAL CORPORATION, a
Delaware corporation (the "Purchaser"), or its permitted assigns (the holder of
this Stock Purchase Warrant and Repurchase Agreement (this "Warrant") is
referred to as the "Holder"), the right to purchase from the Company 409,051
shares of the Company's Warrant Stock, representing 1% of the fully diluted
equity interests of the Company (excluding stock options with an exercise price
equal to or greater than ten dollars ($10.00) per share) on the date of this
Warrant, at a purchase price per share of $0.01 (the "Exercise Price"). Certain
capitalized terms used herein are defined in Section 6 hereof and elsewhere
herein. This Warrant was issued pursuant to the terms of that certain Credit
Agreement, dated as of even date herewith, among the Company, the Purchaser, the
other Credit Parties party thereto, and the lenders signatory thereto from time
to time (as amended, restated, supplemented and modified from time to time, the
"Credit Agreement"). Capitalized terms used in this Warrant but not defined
herein shall have the meanings set forth in the Credit Agreement, including
Annex A thereof.
The amount and kind of securities issuable pursuant to the rights
granted hereunder and the purchase price for such securities are subject to
adjustment pursuant to the provisions contained in this Warrant.
This Warrant is subject to the following provisions:
Section 1. Exercise of Warrant.
1A. Exercise Period. The Holder may exercise, in whole or in
part, the purchase rights represented by this Warrant at any time and from time
to time after the Date of
Issuance to and including the later of (i) the fifth anniversary of the Date of
Issuance and (ii) 30 days after the date on which the Obligations shall have
been paid in full in cash (the "Exercise Period"). The Company shall give the
Holder written notice of the expiration of the Exercise Period at least 30 days
but not more than 90 days prior to the end of the Exercise Period.
1B. Exercise Procedure.
(i) This Warrant shall be deemed to have been exercised when
the Company has received all of the following items (the "Exercise Time"):
(a) a completed Exercise Agreement, as described in
Section 1C below and in the form substantially as set forth in Exhibit I hereto,
executed by the Person exercising all or part of the purchase rights represented
by this Warrant;
(b) this Warrant (except in the event the Holder does
not have possession due to a default by the Company of its obligations to issue
a new Warrant as required under subsection 1(B)(ii) hereof);
(c) if the Holder of this Warrant is not the
Purchaser, an Assignment or Assignments in the form set forth in Exhibit II
hereto evidencing the assignment of this Warrant to the Holder, in which case
the Holder shall have complied with the provisions set forth in Section 8
hereof; and
(d) any of the following (1) a cashier's or certified
check payable to the Company in an amount equal to the product of the Exercise
Price multiplied by the number of shares of Warrant Stock being purchased upon
such exercise (the "Aggregate Exercise Price"), (2) the surrender to the Company
of equity securities of the Company having a Market Price equal to the Aggregate
Exercise Price of the Warrant Stock being purchased upon such exercise, (3) a
written notice to the Company that the Holder is exercising this Warrant (or a
portion thereof) by authorizing the Company to reduce the outstanding principal
balance of any debt instrument of the Company held by the Holder (including,
without limitation, under the Credit Agreement) by an amount equal to the
Aggregate Exercise Price of the Warrant Stock being purchased upon such
exercise, (4) a written notice to the Company that the Holder is exercising this
Warrant (or a portion thereof) by authorizing the Company to withhold from
issuance a number of shares of Warrant Stock issuable upon such exercise of this
Warrant which when multiplied by the Market Price of the Warrant Stock is equal
to the Aggregate Exercise Price (and such withheld shares shall no longer be
issuable under this Warrant) or (5) any combination of the foregoing.
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(ii) Certificates for shares of Warrant Stock purchased upon
exercise of this Warrant shall be delivered by the Company to the Holder within
five (5) Business Days after the date of the Exercise Time. Unless this Warrant
has expired or all of the purchase rights represented hereby have been
exercised, the Company shall prepare a new Warrant, substantially identical
hereto, representing the rights formerly represented by this Warrant which have
not expired or been exercised and shall, within such five-day period, deliver
such new Warrant to the Person designated for delivery in the Exercise
Agreement. In addition, the Company shall prepare and deliver a new Warrant as
aforesaid in connection with the exercise by the Holder of its right to require
the Company to repurchase less than the entire Warrant in accordance with
Section 5 hereof.
(iii) The Warrant Stock issuable upon the exercise of this
Warrant shall be deemed to have been issued to the Holder at the Exercise Time,
and the Holder shall be deemed for all purposes to have become the record holder
of such Warrant Stock at the Exercise Time regardless of any failure of the
Company to deliver to Holder or such other Person certificates for Warrant Stock
issuable upon exercise of this Warrant.
(iv) The issuance of certificates for shares of Warrant Stock
upon exercise of this Warrant shall be made without charge to the Holder for any
issuance tax in respect thereof or other cost incurred by the Company in
connection with such exercise and the related issuance of shares of Warrant
Stock. Each share of Warrant Stock issuable upon exercise of this Warrant shall,
upon payment of the Exercise Price therefor, be duly authorized, validly issued,
fully paid and nonassessable and free from all taxes and Liens, other than
Liens, if any, which the Holder has incurred through actions it has taken.
(v) The Company shall not close its books against the transfer
of this Warrant or of any share of Underlying Warrant Stock in any manner which
interferes with the timely exercise of this Warrant. The Company shall from time
to time take all such action as may be necessary to assure that the par value
per share of the unissued Warrant Stock issuable upon exercise of this Warrant
is at all times equal to or less than the sum of the Exercise Price then in
effect.
(vi) The Company shall assist and cooperate with the Holder in
making any required governmental filings or obtaining any governmental approvals
prior to or in connection with any exercise of this Warrant (including, without
limitation, making any filings required to be made by the Company).
(vii) Notwithstanding any other provision hereof, if an
exercise of any portion of this Warrant is to be made in connection with a
Public Offering or a Change of Control, the exercise of all or any portion of
this Warrant may, at the election of the Holder, be conditioned upon the
consummation of the Public Offering or a Change of Control, in which case such
exercise shall not be deemed to be effective until the consummation of such
transaction.
(viii) The Company shall at all times reserve and keep
available out of its authorized but unissued shares of Warrant Stock solely for
the purpose of issuance upon the exercise of this Warrant, such number of shares
of Warrant Stock as may from time to time be
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issuable upon the exercise of the entire outstanding portion of this Warrant.
The Company shall take all such actions as may be necessary to assure that all
such shares of Warrant Stock may be so issued without violation of any
applicable law or governmental regulation or any requirements of any domestic
securities exchange upon which shares of Warrant Stock may be listed (except for
official notice of issuance which shall be immediately delivered by the Company
upon each such issuance). The Company shall not take any action which would
cause the number of authorized but unissued shares of Warrant Stock to be less
than the number of such shares required to be reserved hereunder for issuance
upon exercise of this Warrant.
1C. Exercise Agreement. The Exercise Agreement shall be
substantially in the form set forth in Exhibit I hereto, except that if the
shares of Warrant Stock are not to be issued in the name of the Person in whose
name this Warrant is registered, the Exercise Agreement shall also state the
name of the Person to whom the certificates for the shares of Warrant Stock are
to be issued, and if the number of shares of Warrant Stock to be issued does not
include all the shares of Warrant Stock issuable hereunder, it shall also state
the name of the Person to whom a new Warrant for the unexercised portion of the
rights hereunder is to be delivered. Such Exercise Agreement shall be dated the
actual date of execution thereof.
1D. Effect of Exercise. Upon exercise of this Warrant, the
Company shall stamp "EXERCISED" on the face of this Warrant and return the
original Warrant (together with a new Warrant if and as required under
subsection 1(B)(ii)) to the Holder, it being understood that all of the Holder's
and the Company's rights and obligations under this Warrant shall survive the
exercise hereof.
Section 2. Adjustment of Number of Shares. In order to prevent dilution
of the rights granted under this Warrant the number of shares of Warrant Stock
issuable upon exercise of this Warrant shall be subject to adjustment from time
to time as provided in this Section 2.
2A. Share Revision Price and Adjustment of Number of Shares
upon Certain Issuances of Common Stock.
(i) If and whenever on or after the Date of Issuance the
Company issues or sells, or in accordance with Section 2B is deemed to have
issued or sold, any shares of Common Stock for a consideration per share less
than the Market Price of the Common Stock determined as of the date of such
issue or sale (or deemed issue or sale) (excluding shares issued in connection
with Options outstanding as of the Date of Issuance), then immediately upon such
issue or sale the number of shares of Warrant Stock issuable pursuant to this
Warrant shall be adjusted to the number of shares determined by multiplying the
Exercise Price by the number of shares of Warrant Stock issuable upon exercise
of this Warrant immediately prior to such adjustment and dividing the product
thereof by the Share Revision Price. For purposes hereof, the "Share Revision
Price" shall be determined by multiplying the Exercise Price by a fraction, the
numerator of which shall be the sum of (1) the number of shares of Common Stock
Deemed Outstanding immediately prior to such issue or sale (or deemed issue or
sale) multiplied by the Market Price of the Common Stock determined as of the
date of such issuance or sale (or deemed issuance or sale), plus (2) the
consideration, if any, received by the Company upon such issue or sale, and the
denominator of which shall be the product derived by multiplying the
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Market Price of the Common Stock by the number of shares of Common Stock Deemed
Outstanding immediately after such issue or sale.
(ii) Notwithstanding the foregoing, there shall be no
adjustment to the number of shares of Warrant Stock issuable upon exercise of
this Warrant with respect to the issuance of Common Stock upon exercise of this
Warrant or any other warrant issued to the Purchaser pursuant to the Credit
Agreement.
(iii) In the event that, at any time while this Warrant
remains outstanding, the Company shall issue or sell shares of Common Stock,
Options or Convertible Securities or take any action which, pursuant to the
provisions of Section 2B hereof results in the Company being deemed to have
issued or sold shares of Common Stock, Options or Convertible Securities (an
"Issuance"), the Company shall promptly after such Issuance, but in no event
later than five (5) Business Days after the date thereof, provide written notice
(a "Notice of Issuance") to the Holder. The Notice of Issuance shall set forth
the terms and conditions of, or facts and circumstances surrounding, such
Issuance (as applicable), including, without limitation to the extent
applicable, (i) the type of security issued or sold (or deemed to have been
issued or sold) by the Company in the Issuance, (ii) the action taken by the
Company which resulted in the issuance or sale (or deemed issuance or sale),
(iii) the price per share of Common Stock, Option or Convertible Security issued
or sold (or deemed to have been issued or sold) by the Company in the Issuance,
(iv) the number of shares of Common Stock, Options or Convertible Securities
issued or sold (or deemed to have been issued or sold) by the Company in the
Issuance, (v) the exercise, exchange or conversion price (and the form of
payment thereof) of any Options or Convertible Securities so issued or sold (or
deemed to have been issued or sold) by the Company in the Issuance and (vi) the
form of consideration received and/or to be received by the Company in exchange
for the issuance or sale (or deemed issuance or sale) of such Common Stock,
Options or Convertible Securities (and in the event such consideration is other
than cash, the value ascribed by the Company to such consideration) in
connection with the Issuance.
During the 30 day period following receipt by the Holder of the Notice
of Issuance (the "Challenge Period"), the Holder may deliver to the Company a
notice (a "Challenge Notice") informing the Company that the Holder believes
that (each of the following, a "Challenge") that (A) the price per share of
Common Stock issued or sold (or deemed to have been issued or sold by the
Company pursuant to Section 2B of this Warrant) in connection with the Issuance
is less than the Market Price of the Common Stock, determined as of the date of
the Issuance; and/or (B) the value that the Company ascribed to any
consideration other than cash received or to be received by the Company in
connection with the Issuance is less than the fair value of such consideration.
If the Holder gives a timely Challenge Notice raising the Challenge contemplated
by the preceding clause (A), then the Market Price of a share of Common Stock
shall be determined in accordance with the definitions of "Market Price" and
"Fair Market Value" set forth herein. If a timely Challenge Notice raising the
Challenge contemplated by the preceding clause (B) is given, then the fair value
of any such non-cash/non-securities consideration shall be determined in
accordance with Section 2(B)(v) hereof.
2B. Effect on Share Revision Price of Certain Events. For
purposes of
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determining the Share Revision Price under Section 2A, the following shall be
applicable:
(i) Issuance of Rights or Options. If the Company in any
manner grants or sells any Options and the lowest price per share for which any
one share of Common Stock is issuable upon the exercise of any such Option, or
upon conversion or exchange of any Convertible Security issuable upon exercise
of such Option, is less than the Market Price determined as of such time, then
such share of Common Stock shall be deemed to have been issued and sold by the
Company at such time for such price per share. For purposes of this subsection
2B(i), the "lowest price per share for which any one share of Common Stock is
issuable" shall be equal to the sum of the lowest respective amounts of
consideration (if any) received and receivable by the Company with respect to
any one share of Common Stock upon each of (1) the granting or sale of the
Option, (2) the exercise of the Option and (3) the conversion or exchange of the
Convertible Security. No further adjustment of the Share Revision Price or
number of shares issuable hereunder shall be made upon the actual issuance of
such Common Stock or of such Convertible Securities upon the exercise of such
Options or upon the actual issuance of such Common Stock upon conversion or
exchange of such Convertible Securities.
(ii) Issuance of Convertible Securities. If the Company in any
manner issues or sells any Convertible Security and the lowest price per share
for which any one share of Common Stock is issuable upon conversion or exchange
thereof is less than the Market Price determined as of such time, then such
share or shares of Common Stock shall be deemed to have been issued and sold by
the Company at such time for such price per share. For the purposes of this
subsection 2B(ii), the "lowest price per share for which any one share of Common
Stock is issuable" shall be equal to the sum of the lowest respective amounts of
consideration (if any) received and receivable by the Company with respect to
any one share of Common Stock upon each of (1) the issuance of the Convertible
Security and (2) the conversion or exchange of such Convertible Security. No
further adjustment of the Share Revision Price shall be made upon the actual
issuance of such Common Stock upon conversion or exchange of such Convertible
Securities, and if any such issuance or sale of such Convertible Securities is
made upon exercise of any Options for which adjustments of the Shares Revision
Price or number of shares issuable hereunder had been or are to be made pursuant
to other provisions of this Section 2B, no further adjustment of the Share
Revision Price or number of shares issuable hereunder shall be made by reason of
such issuance or sale of such Convertible Securities.
(iii) Change in Option Price or Conversion Rate. If (a) the
purchase price provided for in any Options, (b) the additional consideration, if
any, payable upon the issuance, conversion or exchange of any Convertible
Securities, or (c) the rate at which any Convertible Securities are convertible
into or exchangeable for Common Stock change at any time, the Exercise Price in
effect at the time of such change shall be adjusted immediately to the Share
Revision Price which would have been in effect at such time had such Options or
Convertible Securities still outstanding provided for such changed purchase
price, additional consideration or changed conversion rate, as the case may be,
at the time initially granted, issued or sold and the number of shares of
Warrant Stock shall be correspondingly adjusted; provided that if such
adjustment would result in a decrease in the number of shares issuable
hereunder, such
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adjustment shall not be effective until 15 Business Days after written notice
thereof has been given by the Company to the Holder of this Warrant; and
provided, further, that no such adjustment shall have the effect of decreasing
the number of shares issuable hereunder to an amount less than the initial
number of shares issuable hereunder as of the date hereof.
(iv) Treatment of Expired Options and Unexercised Convertible
Securities. Upon the expiration of any Option or the termination of any right to
convert or exchange any Convertible Securities without the exercise of such
Option or right, the number of shares of Warrant Stock issuable hereunder shall
be adjusted immediately to the number of shares which would have been in effect
at the time of such expiration or termination had such Option or Convertible
Securities, to the extent outstanding immediately prior to such expiration or
termination, never been issued; provided that if such expiration or termination
would result in an decrease in the number of shares issuable hereunder, such
adjustment shall not be effective until 15 Business Days after written notice
thereof has been given to the Holder of this Warrant; and provided, further,
that no such adjustment shall have the effect of decreasing the number of shares
issuable hereunder as of the date hereof.
(v) Calculation of Consideration Received. If any Common
Stock, Options or Convertible Securities are issued or sold or deemed to have
been issued or sold for cash, the consideration received therefor shall be
deemed to be the net amount of cash received by the Company therefor. If any
Common Stock, Options or Convertible Securities are issued or sold for a
consideration other than cash, the amount of the consideration other than cash
deemed to be received by the Company shall be the fair value of such
consideration, except where such consideration consists of securities, in which
case the amount of consideration deemed to be received by the Company shall be
the Market Price thereof as of the date of receipt. In case any Common Stock,
Options or Convertible Securities are issued to the owners of the nonsurviving
entity in connection with any merger in which the Company is the surviving
entity, the amount of consideration therefor shall be deemed to be the fair
value of such portion of the net assets and business of the nonsurviving entity
as is attributable to such Common Stock, Options or Convertible Securities, as
the case may be. If a timely Challenge Notice is given by the Holder as
contemplated by Section 2A(iv) hereof, the "fair value" of any consideration
other than cash or securities shall be determined jointly by the Company and the
Holder. If such parties are unable to reach agreement within a reasonable period
of time, such fair value shall be determined by an Appraiser jointly selected by
the Company and the Holder. The determination of such Appraiser shall be final
and binding on the Company and the Holder, and the fees and expenses of the
Appraiser shall be paid by the Company unless the fair value determined by the
Appraiser is higher than 90% of the fair value proposed by the Company, in which
case such fees and expenses shall be paid by the Holder.
(vi) Integrated Transactions. In case any Option is issued in
connection with the issuance or sale of other securities of the Company,
together comprising one integrated transaction in which no specific
consideration is allocated to such Options by the parties thereto, the Options
shall be deemed to have been issued for a consideration of $.01.
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(vii) Treasury Shares. The number of shares of Common Stock
outstanding at any given time does not include shares owned or held by or for
the account of the Company or any Subsidiary, and the disposition of any shares
so owned or held shall be considered an issuance or sale of Common Stock.
(viii) Record Date. If the Company takes a record of the
holders of Common Stock for the purpose of entitling them (a) to receive a
dividend or other distribution payable in Common Stock, Options or in
Convertible Securities or shares of common stock of another entity in connection
with any spin-off or similar transaction to be consummated by the Company or (b)
to subscribe for or purchase Common Stock, Options or Convertible Securities,
then such record date shall be deemed to be the date of the issuance or sale of
the shares of Common Stock deemed to have been issued or sold if and when such
dividend is declared or such other distribution is made or such right of
subscription or purchase is granted, as the case may be.
(ix) Fractional Shares. The Company shall not be required to
issue any fractional share of Common Stock upon exercise of this Warrant. As to
any fractional share which the Holder would otherwise be entitled to purchase
under such exercise, the Company shall pay a cash adjustment in respect of such
final fraction in an amount equal to the same fraction of the Market Price per
share of Common Stock on the date of exercise.
2C. Subdivision or Combination of Common Stock. If the Company
at any time subdivides (by any stock split, stock dividend, recapitalization or
otherwise) one or more classes of its outstanding shares of Common Stock into a
greater number of shares, the Exercise Price in effect immediately prior to such
subdivision shall be proportionately reduced and the number of shares of Warrant
Stock issuable upon the exercise of this Warrant shall be proportionately
increased. If the Company at any time combines (by reverse stock split or
otherwise) one or more classes of its outstanding shares of Common Stock into a
smaller number of shares, the Exercise Price in effect immediately prior to such
combination shall be proportionately increased and the number of shares of
Warrant Stock issuable upon exercise of this Warrant shall be proportionately
decreased.
2D. Reorganization, Reclassification, Consolidation, Merger or
Sale. Any recapitalization, reorganization, reclassification, consolidation,
merger, sale of all or substantially all of the Company's assets or other
transaction, which in each case is effected in such a way that the holders of
Common Stock are entitled to receive (either directly or upon subsequent
liquidation) stock, securities or assets with respect to or in exchange for
Common Stock is referred to herein as an "Organic Change." Prior to the
consummation of any Organic Change, the Company shall make appropriate provision
(in form and substance satisfactory to the Holder) to insure that the Holder of
this Warrant shall thereafter have the right, upon exercise of this Warrant, to
acquire and receive, in lieu of or in addition to (as the case may be) the
shares of Warrant Stock immediately theretofore issuable and receivable upon the
exercise of this Warrant, such shares of stock, securities or assets as may be
issued or payable in connection with such Organic Change with respect to or in
exchange for the number of shares of Warrant Stock immediately theretofore
issuable and receivable upon exercise of this Warrant had such Organic Change
not taken place. In any such case, the Company shall make appropriate provision
(in form and substance satisfactory to the Holder) with respect to the Holder's
rights and interests
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under this Warrant to insure that all of the provisions of this Warrant shall
thereafter continue to be applicable to the Holder (including, without
limitation, in the case of any such consolidation, merger or sale in which the
successor entity or purchasing entity is other than the Company and in which the
value for the Common Stock reflected by the terms of such consolidation, merger
or sale is less than the Market Price of the Common Stock determined as of such
date, the provisions of Section 2A providing for an immediate adjustment of the
Exercise Price and a corresponding immediate adjustment in the number of shares
of Warrant Stock issuable upon exercise of this Warrant). The Company shall not
effect any such consolidation, merger or sale in which the successor entity or
purchasing entity is an entity other than the Company, unless prior to the
consummation thereof, such successor entity or purchasing entity assumes by
written instrument (in form and substance satisfactory to the Holder), the
obligations to deliver to the Holder of this Warrant such shares of stock,
securities or assets as the Holder may be entitled to acquire in accordance with
the foregoing provisions.
2E. Certain Events. If any event occurs of the type
contemplated by the provisions of this Section 2 but not expressly provided for
by such provisions (including, without limitation, the granting of stock
appreciation rights, phantom stock rights or other rights with equity features),
then the Board of Directors of the Company shall, in a manner satisfactory to
the Holder, make an appropriate adjustment in the Exercise Price and the number
of shares of Warrant Stock issuable upon exercise of this Warrant so as to
protect the rights of the Holder of this Warrant; provided that no such
adjustment shall increase the Exercise Price or decrease the number of shares of
Warrant Stock issuable as otherwise determined pursuant to this Section 2.
2F. No Avoidance. In the event the Company shall enter into
any transaction for the purpose or with the intent of avoiding the provisions of
this Section 2, the benefits provided by such provisions shall nevertheless
apply and be preserved.
2G. Notices.
(i) Immediately upon any adjustment of the Exercise Price, the
Company shall give written notice thereof to the Holder, setting forth in
reasonable detail and certifying the calculation of such adjustment.
(ii) The Company shall give written notice to the Holder at
least 15 Business Days prior to the date on which the Company closes its books
or takes a record (a) with respect to any dividend or distribution upon the
Common Stock, (b) with respect to any pro rata subscription offer to holders of
Common Stock or (c) for determining rights to vote with respect to any Organic
Change, dissolution or liquidation.
(iii) The Company shall also give written notice to the Holder
at least 15 Business Days prior to the date on which any Change of Control,
dissolution or liquidation shall take place.
Section 3. Pre-emptive Rights on New Equity Issuances.
3A. Pre-emptive Rights.
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So long as the Holder holds any Underlying Warrant Stock or
any Warrant Stock (or the right to purchase any such Warrant Stock), the Company
shall, prior to any issuance or sale of any shares of Common Stock, any Options
(excluding, however, (i) any Options issued to employees of the Company after
the date hereof, net of any cancellations after the date hereof of any Options
issued to employees of the Company other than cancellations of Options with an
exercise price of equal to or greater than ten dollars ($10.00) per share unless
such options become Common Stock Deemed Outstanding, in the ordinary course of
business up to 600,000 shares in the aggregate between the Date of Issuance and
the fifth anniversary thereof and (ii) any shares of Common Stock granted to
employees of the Company as compensation after the date hereof in the ordinary
course of business up to 400,000 shares in the aggregate between the Date of
Issuance and the fifth anniversary thereof) any Convertible Securities or any
shares of its other equity securities, if any, offer (the "Offer") to the Holder
the right to purchase up to the Holder's proportionate share (based on the
Underlying Warrant Stock held or deemed to be held by the Holder relative to the
total Common Stock Deemed Outstanding), of such securities, as of the date of
the Offer. The purchase price per share or other unit for such securities to be
offered to the Holder (the "Offered Securities") which shall be payable by the
Holder shall be equal to the price or other consideration per share or other
unit for which such securities are proposed to be sold by the Company in the
proposed issuance or sale. The pre-emptive rights set forth in this Section 3A
shall terminate thirty (30) days (the "Refusal Period") following receipt of the
Offer by the Holder.
3B. The Offer.
(i) The Offer, which shall be in writing, shall (a) describe
the type and total number of the Offered Securities, (b) identify the price and
payment terms therefor, and (c) provide any other material facts relating to
such issuance or sale. The Holder may elect to purchase all or any portion of
its proportionate share (based on the Underlying Warrant Stock held or deemed to
be held by the Holder relative to the total Common Stock Deemed Outstanding) of
the Offered Securities by giving written notice of the exercise of such right to
the Company prior to the expiration of the Refusal Period.
(ii) If the Holder does not elect to purchase all of the
Offered Securities, the Offered Securities not purchased may be sold by the
Company at any time within thirty (30) days after the end of the Refusal Period.
Any such sale shall be at the price and upon other terms and conditions not more
favorable than those specified in the Offer. Any Offered Securities not sold
within such thirty (30) day period after the end of the Refusal Period shall
continue to be subject to the requirements of this Section 3.
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(iii) Any sales pursuant to this Section 3 shall be made at
such place as the Company and the Holder may mutually agree or, in the event
that they cannot so agree, the offices of the Company and, in any event, within
thirty (30) days after the expiration of the Refusal Period. Such sales shall be
effected by the Company's delivery to the Holder of certificates evidencing the
Offered Securities to be purchased by the Holder, against payment to the Company
of the purchase price therefor.
(iv) Notwithstanding the foregoing, with respect to (i) any
Options issued to employees of the Company after the date hereof, net of any
cancellations after the date hereof of any Options issued to employees of the
Company other than cancellations of Options with an exercise price of equal to
or greater than ten dollars ($10.00) per share unless such options become Common
Stock Deemed Outstanding, in the ordinary course of business, in excess of
600,000 shares in the aggregate between the Date of Issuance and the fifth
anniversary thereof and (ii) any shares of Common Stock granted to employees of
the Company as compensation after the date hereof in the ordinary course of
business in excess of 400,000 shares in the aggregate between the Date of
Issuance and the fifth anniversary thereof, the Offer to the Holder to purchase
shares as provided in Section 3A above shall be made on a quarterly basis in
connection with Option issuance and share grant activity, as described above,
for the preceding three months. Notwithstanding the foregoing, if a Trigger
Event as defined in Section 6 occurs, an Offer in connection with Option
issuance and share grants, as provided by this Section, shall be made
contemporaneously with the occurrence of the Trigger Event.
Section 4. Dividends. If the Company declares or pays a dividend upon
the Common Stock (i) payable otherwise than in cash out of earnings or earned
surplus (determined in accordance with GAAP consistently applied) except for a
stock dividend payable in shares of Common Stock (a "Liquidating Dividend") or
(ii) in cash out of earnings or earned surplus (determined in accordance with
GAAP consistently applied), then the Company shall pay to the Holder of this
Warrant at the time of payment thereof the Liquidating Dividend or other
dividend which would have been paid to the Holder on the Warrant Stock had this
Warrant been fully exercised immediately prior to the date on which a record is
taken for such Liquidating Dividend or other dividend, or, if no record is
taken, the date as of which the record holders of Common Stock entitled to such
dividends are to be determined.
Section 5. Registration Rights. This Warrant and each share of Warrant
Stock issued upon exercise of this Warrant will be entitled to the benefits of
the Registration Rights Agreement, which shall be in form and substance as set
forth in Exhibit III hereto.
Section 6. Put Arrangement.
(i) At any time during the period commencing on the earliest
to occur of (a) the fourth anniversary of the Date of Issuance, (b) the payment
in full of the Loans, (c) so long as the Holder or one of its Affiliates is a
Lender at the time, the acceleration of the Loans, (d) the consummation of a
Qualifying Public Offering or (e) a Change of Control (each, a "Trigger Event")
and ending on the fifth anniversary of the Date of Issuance, the Holder will
have the right to cause the Company to repurchase (the "Put") all or any portion
of the Holder's shares of Underlying Warrant Stock then in existence by
delivering written notice (the "Put Notice") to the
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Company. The date on which the Company receives a Put Notice hereinafter is
referred to as a "Delivery Date."
(ii) Upon the delivery of a Put Notice, the Company and the
Holder shall promptly (and in any event within 10 days after delivery of the
final Election Notice) meet for the purpose of determining the Put Price, which
Put Price shall be determined in accordance with the provisions of this Warrant
as provided in the definition of the term "Put Price". In the event the Holder
does not agree with the Company's determination of Fair Market Value, (as used
for purposes of the definition of Put Price), the Holder may deliver written
notice to the Company (a "Notice of Objection") challenging the Fair Market
Value used by the Company in connection with determining the Put Price. If the
Holder gives a timely Notice of Objection, Fair Market Value for the purposes of
determining the Put Price shall be determined in the manner contemplated by the
definition of Fair Market Value. Promptly upon determination of the Put Price
with respect thereto and in no event less than 10 days prior to the date of any
Put Closing, the Company and the Holder shall determine the time and place of
the Put Closing; in the event that the Company and the Holder cannot so agree,
the Holder shall determine the time and place of the Put Closing. The Holder may
deliver to the Company all or any portion of this Warrant (rather than shares of
Warrant Stock) held in satisfaction of the sale of the Underlying Warrant Stock,
in which event the Put Price will be reduced by the Exercise Price of the
Warrant or portion thereof so delivered.
(iii) At any Put Closing, the Holder shall deliver to the
Company certificates representing the Put Shares or the portion of this Warrant,
as applicable, and the Company shall deliver to the Holder the product of (x)
the Put Price multiplied by (y) the number of Put Shares, by cashier's or
certified check or wire transfer of immediately available funds payable to the
Holder.
(iv) The Company shall not be required to pay cash or property
to repurchase Put Shares to the extent the sole reason for not doing so is that
it is prohibited from doing so under the Delaware General Corporation Law due to
a lack of surplus; provided that the Company will take all reasonable steps
necessary or desirable to make such payments under this Section 5, including,
without limitation, reducing its capital and/or increasing its net assets (by
reappraisal or otherwise).
(v) Notwithstanding the foregoing provisions of this Section
5, this subsection (v) shall apply in the event of a Change of Control. The
Company shall give the Holder of Underlying Warrant Stock at least 15 Business
Days prior written notice of any transaction that results in a Change of Control
(a "Change of Control Transaction"). If the Holder delivers a Put Notice at
least five days prior to such a Change of Control Transaction, the Put Closing
shall be held on the same date as the closing of the a Change of Control
Transaction. If the Change of Control Transaction involves the sale of all or
substantially all of the common equity (whether accomplished by merger,
consolidation, reorganization or other business combination) or assets of the
Company, the Fair Market Value of the Company to be used in connection with
determining the Put Price as provided in the definition of Put Price shall be
the product of (A) the highest price per share paid (whether directly or
indirectly by way of a purchase of assets of the Company) by an independent
third party in such Change of Control Transaction, multiplied by
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(B) the sum of the total number of shares of Common Stock Deemed Outstanding as
of the closing of the Change of Control Transaction, plus the number of shares
of Common Stock issuable upon exercise of this Warrant as of the closing of the
Change of Control Transaction, and, in the case of Options and Convertible
Securities, only to the extent such Options and Convertible Securities are
exercisable and "in the money" as of, and after giving effect to any
acceleration of vesting as a result of, the closing of the Change of Control
Transaction. For purposes of this paragraph, "price per share paid" means all
cash and other property, if any, payable to any holder of Common Stock or their
Affiliates in connection with such transaction, and includes all amounts payable
over time, all contingent payments, all fees and all other amounts. The Holder
may deliver to the Company all or any portion of this Warrant (rather than
shares of Warrant Stock) in satisfaction of the sale of the Holder's Underlying
Warrant Stock hereunder, in which event the Put Price payable to the Holder will
be reduced by the aggregate Exercise Price of the Warrant or portion thereof, as
applicable, so delivered.
Section 7. Definitions. The following terms have meanings set forth
below:
"Appraiser" means an investment banking or appraisal firm of
nationally recognized standing.
"Book Value" shall be determined in accordance with GAAP.
"Change of Control"-as defined in the Credit Agreement.
"Change of Control Transaction" - as defined in Section 6(v)
hereof.
"Common Stock" means the Company's common stock, par value
$0.01 per share.
"Common Stock Deemed Outstanding" means, at any given time and
from time to time, the number of shares of Common Stock actually outstanding at
such time, plus the maximum number of shares of Common Stock deemed from time to
time to be outstanding pursuant to Sections 2B(i) and 2B(ii) (without
duplication) or issuable upon exercise, conversion or exchange of any
outstanding Options or Convertible Securities, in each case regardless of
whether the Options or Convertible Securities are actually exercisable at such
time, but excluding any shares of Common Stock issuable upon exercise of this
Warrant. "Common Stock Deemed Outstanding" shall exclude shares of Common Stock
issuable upon the exercise of Options issued and outstanding on the date of this
Warrant with an exercise price of greater than or equal to ten dollars ($10.00)
per share; provided, however, such shares shall be included in determining
"Common Stock Deemed Outstanding" at any time after the Date of Issuance that
(a) the Market Price of the Common Stock exceeds the exercise price of such
Options and (b) the Options to which such shares are related remain outstanding.
"Convertible Securities" mean any evidences of indebtedness,
shares or other securities convertible into or exchangeable for Common Stock.
"Credit Agreement" has the meaning ascribed in the preamble
hereto.
13
"Fair Market Value" means the fair market value of the
Company's entire common equity, on a fully diluted basis, determined on a going
concern basis as between a willing buyer and a willing seller and taking into
account all relevant factors determinative of value without giving effect to any
discount for any lack of liquidity attributable to a lack of a public market for
such security, any block discount or discount attributable to the size of any
Person's holdings of such security, any minority interest or any voting rights
thereof or lack thereof and without giving effect to any control premium, plus
(to the extent not otherwise taken into consideration in the determination of
fair market value of the Company's entire common equity) the aggregate amount of
cash or property payable or to be surrendered to the Company upon exercise or
conversion of Options and Convertible Securities and the principal amount of any
debt constituting Convertible Securities. If (i) a timely Challenge Notice with
respect to any Issuance is given as contemplated by Section 2A(iv) or 2B(v)
hereof or (ii) a timely Notice of Objection is given pursuant to Section 5(ii)
hereof, then the Company and the Holder will use reasonable efforts to determine
Fair Market Value, but if the Company and the Holder are unable to agree on Fair
Market Value within 10 days after meeting (the date on which such persons so
meet is referred to as the "Meeting Date") for the purpose of determining the
Fair Market Value, the Company and the Holder shall, within 20 days after the
Meeting Date, mutually select an Appraiser to make a determination of the Fair
Market Value (who shall make such determination within 30 days after selection);
provided that if such persons are unable to agree upon the selection of an
Appraiser within such 20-day period, the Fair Market Value shall be determined
as follows: the Company and the Holder shall, within 5 days after their failure
to agree upon the selection of an Appraiser, each select their own Appraiser to
determine the "Fair Market Value." Each such Appraiser shall make a
determination of the "Fair Market Value" within 30 days after the date of
selection. If the "Fair Market Value" as determined by one Appraiser is within
10% of the "Fair Market Value" determined by the other Appraiser, then the Fair
Market Value shall be the average of the "Fair Market Values" determined by the
two Appraisers. If the "Fair Market Value" determined by one Appraiser is not
within 10% of the "Fair Market Value" of the other Appraiser, then such two
Appraisers shall promptly select a third Appraiser, which Appraiser shall make a
determination of the "Fair Market Value" as promptly as possible but, in any
event, within 60 days after the Meeting Date, and the Fair Market Value shall be
the median of the "Fair Market Values" determined by the three Appraisers. The
determination of the Fair Market Value pursuant to the preceding sentences shall
be final and binding upon the Company and the Holder. All fees and expenses of
the Appraisers determining the Fair Market Value of the Company shall be borne
by the Company unless the Fair Market Value as so determined is no higher than
110% of the Fair Market Value as proposed by the Company, in which event such
fees and expenses shall be paid by the Holder.
"Market Price" means as to any security (other than this
Warrant) the average of the closing prices of such security's sales on all
domestic securities exchanges on which such security may at the time be listed
or quoted, including for this purpose, The Nasdaq Stock Market, or, if there
have been no sales on any such exchange on any day, the average of the highest
bid and lowest asked prices on all such exchanges at the end of such day, or, if
on any day such security is not so listed or quoted, the average of the highest
bid and lowest asked prices on such day in the domestic over-the-counter market
as reported by the National Quotation Bureau, Incorporated, or any similar
successor organization, in each such case
14
averaged over a period of 21 days consisting of the day as of which "Market
Price" is being determined and the 20 consecutive business days prior to such
day; provided that if such security is listed on any domestic securities
exchange, the term "business days" as used in this sentence means business days
on which such exchange is open for trading. If at any time such security is not
listed on any domestic securities exchange or quoted on The Nasdaq Stock Market
or the domestic over-the-counter market, the "Market Price" shall be the fair
value thereof (taking into account, in the case of a determination of the Market
Price of shares of Common Stock, any outstanding Options and Convertible
Securities) determined based on the Fair Market Value of the Company (determined
in accordance with the definition of "Fair Market Value"). Any determination of
Market Price of a security will be made without giving effect to any discount
for any lack of liquidity attributable to a lack of a public market for such
security, any block discount or discount attributable to the size of any
Person's holdings of such security, any minority interest or any voting rights
thereof or lack thereof and without giving effect to any control premium. The
"Market Price" of all or a portion of this Warrant means the excess of (i) the
Market Price of the shares of Warrant Stock issuable upon exercise thereof over
(ii) the Aggregate Exercise Price of the Warrant Stock payable in connection
with such exercise. For purposes of Section 1B(i)(d)(2) above, the "Market
Price" of any debt security or any preferred stock of the Company or any of its
wholly-owned Subsidiaries shall be deemed to be equal to the aggregate
outstanding principal amount or liquidation value thereof (as applicable) plus
all accrued and unpaid interest or dividends thereon (as applicable) plus all
premium and other amounts owing with respect thereto.
"Obligations" - as defined in the Credit Agreement.
"Options" mean rights, options or warrants to subscribe for,
purchase or otherwise acquire Common Stock or Convertible Securities.
"Public Offering" means the consummation of an underwritten
public offering pursuant to an effective registration statement filed by the
Company (or any successor entity to the Company) with the Securities and
Exchange Commission under the Securities Act with respect to common equity of
the Company (or any successor entity to the Company).
"Put Price" shall equal, with respect to each share of
Underlying Warrant Stock, the higher of (x) the quotient obtained by dividing
(i) the higher of (a) the Fair Market Value of the Company as of the Delivery
Date and (b) the Book Value of the Company as of the Delivery Date by (ii) the
sum of the total number of shares of Common Stock outstanding as of the Delivery
Date plus the number of shares of Common Stock issuable upon exercise or
conversion of any Options or Convertible Securities as of the Delivery Date
(including the Warrant), in each case only to the extent such Options and
Convertible Securities are exercisable and "in-the-money" on the Delivery Date
and in each case calculated as of the Delivery Date and (y) the Market Price of
a share of Common Stock, calculated as of the Delivery Date. The expenses of
determining the Put Price shall be borne by the Company.
"Qualifying Public Offering" means the consummation of a
Public Offering with gross proceeds to the Company (or any successor entity to
the Company) of at least $10,000,000.
15
"Underlying Warrant Stock" means (i) the Common Stock issued
or issuable upon exercise of this Warrant and (ii) any Common Stock issued or
issuable with respect to the securities referred to in clause (i) above by way
of stock dividend or stock split or in connection with a combination of shares,
recapitalization, merger, consolidation or other reorganization. For purposes
hereof, any Person who holds all or a portion of this Warrant shall be deemed to
be the holder of the Underlying Warrant Stock obtainable upon exercise of this
Warrant in connection with the transfer thereof or otherwise regardless of any
restriction or limitation on the exercise of this Warrant, such Underlying
Warrant Stock shall be deemed to be in existence, and such Person shall be
entitled to exercise the rights of a holder of Underlying Warrant Stock
hereunder. As to any particular shares of Underlying Warrant Stock, such shares
shall cease to be Underlying Warrant Stock when they have been (a) effectively
registered under the Securities Act and disposed of in accordance with the
registration statement covering them, (b) distributed to the public through a
broker, dealer or market maker pursuant to Rule 144 under the Securities Act (or
any similar provision then in force) or (c) repurchased by the Company or any of
its Subsidiaries.
"Warrant Stock" means the Common Stock, provided that if there
is a change such that the securities issuable upon exercise of this Warrant are
issued by an entity other than the Company or there is a change in the type or
class of securities so issuable, then the term "Warrant Stock" shall mean one
share of the security issuable upon exercise of this Warrant if such security is
issuable in shares, or shall mean the smallest unit in which such security is
issuable if such security is not issuable in shares.
Section 7. No Voting Rights; Limitations of Liability. This Warrant
shall not entitle the Holder to any voting rights as a stockholder of the
Company. No provision hereof, in the absence of affirmative action by the Holder
to purchase Warrant Stock, and no enumeration herein of the rights or privileges
of the Holder shall give rise to any liability of the Holder for the Exercise
Price of Warrant Stock issuable by exercise hereof or as a stockholder of the
Company.
Section 8. Warrant Transferable. Subject to the transfer conditions
referred to in the legend endorsed hereon, this Warrant and all rights hereunder
are transferable, in whole or in part, without charge to the Holder, upon
surrender of this Warrant with a properly executed Assignment (in the form of
Exhibit II hereto) at the principal office of the Company.
Section 9. Warrant Exchangeable for Different Denominations. This
Warrant is exchangeable, upon the surrender hereof by the Holder at the
principal office of the Company, for new warrants of like tenor representing in
the aggregate the purchase rights hereunder, and each of such new warrants shall
represent such portion of such rights as is designated by the Holder at the time
of such surrender. The date the Company initially issues this Warrant shall be
deemed to be the "Date of Issuance" hereof regardless of the number of times new
certificates representing the unexpired and unexercised rights formerly
represented by this Warrant shall be issued.
Section 11. Replacement. Upon receipt of evidence reasonably
satisfactory to the Company (an affidavit of the Holder shall be satisfactory)
of the ownership and the loss, theft, destruction or mutilation of any
certificate evidencing this Warrant, and in the case of any such
16
loss, theft or destruction, upon receipt of indemnity reasonably satisfactory to
the Company (provided that if the Holder is a financial institution, mezzanine
fund or other institutional investor its own agreement shall be satisfactory),
or, in the case of any such mutilation upon surrender of such certificate, the
Company shall (at its expense) execute and deliver, in lieu thereof, a new
certificate of like kind representing the same rights represented by such lost,
stolen, destroyed or mutilated certificate and dated the date of such lost,
stolen, destroyed or mutilated certificate.
Section 12. Notices. Except as otherwise expressly provided herein, any
notice or other communication required shall be in writing addressed (i) to the
Company, at its principal executive offices and (ii) to the Holder of this
Warrant, at the Holder's address as it appears in the records of the Company
(unless otherwise indicated by the Holder), may be personally served,
telecopied, sent by overnight courier service or U.S. mail and shall be deemed
to have been given: (a) if delivered in person, when delivered; (b) if delivered
by telecopy, on the date of transmission if transmitted on a Business Day before
3:00 p.m. New York time; (c) if delivered by overnight courier, one (1) Business
Day after delivery to the courier properly addressed; or (d) if delivered by
U.S. mail, four (4) Business Days after deposit with postage prepaid and
properly addressed.
Section 13. Amendment and Waiver. Except as otherwise provided herein,
no amendment, modification, termination or waiver of any provision of this
Warrant, or consent to any departure by any party therefrom, shall in any event
be effective unless the same shall be in writing and signed by the Holder and
the Company. Each amendment, modification, termination or waiver shall be
effective only in the specific instance and for the specific purpose for which
it was given. No notice to or demand on the Company or the Holder of this
Warrant in any case shall entitle the Company or the Holder to any other or
further notice or demand in similar or other circumstances. Any amendment,
modification, termination, waiver or consent effected in accordance with this
Section 13 shall be binding upon the Holder of this Warrant and the Company.
Section 14. Applicable Law. THIS AGREEMENT SHALL BE GOVERNED BY AND
SHALL BE CONSTRUED AND ENFORCED IN ACCORDANCE WITH THE INTERNAL LAWS OF THE
STATE OF NEW YORK, WITHOUT REGARD TO CONFLICTS OF LAW PRINCIPLES.
Section 15. Headings. Section and subsection headings are included
herein for convenience of reference only and shall not constitute a part of this
Agreement for any other purposes or be given substantive effect.
Section 16. Severability. The invalidity, illegality, or
unenforceability in any jurisdiction of any provision under this Warrant shall
not affect or impair the remaining provisions in this Warrant.
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IN WITNESS WHEREOF, the Company has caused this Warrant to be signed
and attested by its duly authorized officers and to be dated the Date of
Issuance hereof.
COMFORT SYSTEMS USA, INC.
By /s/ J. Gordon Beittenmiller
--------------------------------------
Name J. Gordon Beittenmiller
------------------------------------
Title Executive Vice President
-----------------------------------
EXHIBIT I
EXERCISE AGREEMENT
To: Dated:
The undersigned, pursuant to the provisions set forth in the attached
Warrant (Certificate No. W____), hereby agrees to subscribe for the purchase of
______ shares of the Warrant Stock covered by such Warrant and makes payment
herewith in full therefor in accordance with the terms of such Warrant at the
price per share provided by such Warrant.
Signature
------------------------------
Address
--------------------------------
EXHIBIT II
ASSIGNMENT
FOR VALUE RECEIVED, _________________________________ hereby sells,
assigns and transfers all of the rights of the undersigned under the attached
Warrant (Certificate No. W_____) with respect to the number of shares of the
Warrant Stock covered thereby set forth below, unto:
<Table>
<Caption>
Name of Assignee Address No. of Shares
- ---------------- ------- -------------
</Table>
Dated: Signature
-------------------------------
-------------------------------
Witness
-------------------------------
EXHIBIT III
REGISTRATION RIGHTS AGREEMENT