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EXHIBIT 10.6
THE WARRANT REPRESENTED HEREBY AND THE SECURITIES ISSUABLE UPON
EXERCISE HEREOF HAVE BEEN ACQUIRED FOR INVESTMENT AND HAVE NOT BEEN REGISTERED
UNDER THE SECURITIES ACT OF 1933, AS AMENDED, OR THE SECURITIES LAWS OF ANY
STATE OR OTHER JURISDICTION. THIS WARRANT AND SUCH SECURITIES MAY NOT BE SOLD,
ASSIGNED OR OTHERWISE TRANSFERRED EXCEPT UPON SUCH REGISTRATION OR UPON
DELIVERY TO THE CORPORATION OF AN OPINION OF COUNSEL REASONABLY SATISFACTORY TO
THE CORPORATION STATING THAT SUCH SALE, ASSIGNMENT OR TRANSFER IS EXEMPT FROM
REGISTRATION UNDER SUCH ACT AND LAWS.
ACR GROUP, INC.
WARRANT FOR THE PURCHASE OF SHARES OF COMMON STOCK
No. 4 750,000 Shares
BY THIS WARRANT (this "Warrant"), ACR Group, Inc., a Texas corporation
(the "Company"), certifies that, for good and valuable consideration, the
receipt and sufficiency of which are hereby acknowledged, The Catalyst Fund,
Ltd., a Texas limited partnership (along with its registered assigns, the
"Holder"), is entitled to subscribe for and purchase from the Company, subject
to the terms and conditions set forth herein, at any time on or after the date
hereof but prior to 5:00 p.m. (Houston, Texas time) on August 26, 2001, unless
otherwise extended as provided herein, or, if such date is not a business day,
the next succeeding business day (the "Exercise Period"), 750,000 (subject to
adjustment as set forth herein) fully paid and nonassessable shares (the
"Shares") of the Company's Common Stock, $.01 par value per share (the "Common
Stock"), at a price equal to the exercise price per share, initially $.58594
(subject to adjustment as set forth herein) per share (the "Exercise Price").
1. EXERCISE OF WARRANT; COMPANY OFFICE. This Warrant may be
exercised at any time or from time to time during the Exercise Period as to the
entire number or any lesser number of whole Shares, by the surrender of this
Warrant to the Company at its office at 3200 Wilcrest, #440, Houston, Texas
77042 or such other place as is designated in writing by the Company pursuant
to this Section 1, together with (a) a duly executed election in substantially
the form of Exhibit A attached hereto and made a part hereof for all purposes
and (b) a wire transfer or a certified or bank cashier's check payable to the
order of the Company in an amount equal to the Exercise Price multiplied by the
number of Shares of Common Stock covered by such election. For so long as this
Warrant is outstanding, the Company shall continue to maintain an office in the
State of Texas where notices, presentations and demands in respect of this
Warrant may be made upon it and shall notify the Holder in writing at least 15
days before changing the location of any such office.
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2. STOCK OWNERSHIP; STOCK CERTIFICATES; PARTIAL EXERCISE. Upon
each exercise of this Warrant, the Holder shall be deemed to be the holder of
record of the Shares of Common Stock issuable upon such exercise,
notwithstanding that the stock transfer books of the Company shall then be
closed or certificates representing such Shares shall not then have been
actually delivered to the Holder. As soon as possible after each such exercise
of this Warrant, the Company shall issue and deliver to the Holder a
certificate or certificates for the Shares issuable upon such exercise issued
in such denominations as may be specified by the Holder and registered in the
name of the Holder or, subject to Section 9, such other name or names as shall
be designated in the Holder's election to exercise. If this Warrant should be
exercised in part only, the Company shall, upon surrender of this Warrant for
cancellation, execute and deliver a new Warrant evidencing the right of the
Holder to purchase the balance of the Shares subject to purchase hereunder on
the terms and conditions set forth herein (including all changes and
adjustments that have occurred hereunder). The Company will, at the time of
each exercise of this Warrant, upon the request of the Holder hereof,
acknowledge in writing its continuing obligation to afford to the Holder all
rights to which the Holder shall continue to be entitled after such
exercise in accordance with the terms of this Warrant; provided, however,
that if the Holder of this Warrant shall fail to make any such request,
such failure shall not affect the continuing obligation of the Company to
afford such rights to the Holder.
3. COMPANY RECORDS; TRANSFEROR ASSIGNMENT OF WARRANT. Exchange of
Warrant. Any warrants issued in connection herewith or in substitution herefor,
upon complete or partial transfer, assignment or exercise (the "Warrants")
shall be numbered and shall be registered in the warrant register of the
Company (the "Warrant Register") as they are issued. The Company shall treat
the registered holder of any Warrant on the Warrant Register as the owner in
fact thereof for all purposes, except that if the Warrant is properly
transferred or assigned and notice of such transfer or assignment is given to
the Company, the Company shall treat the transferee or assignee as the owner
thereof for all purposes (or, if such transfer or assignment is properly made
in blank, the Company shall treat the bearer of this Warrant as the owner
thereof for all purposes). Should the Holder enter into a written agreement to
sell this Warrant to any Person, the Company shall have a right of first
refusal to purchase this Warrant from the Holder upon the same terms and
conditions set forth in such agreement. Such right of first refusal must be
exercised (by written notice to the Holder), and the purchase of this Warrant
must be consummated, if at all, within 45 days of receiving notice of the
Holder entering into such agreement. If such 45 day period expires without the
exercise of such right and the purchase of this Warrant by the Company, the
Holder shall be free to sell this Warrant to such Person without any liability
whatsoever to the Company. Upon exercise of such right of first refusal or the
expiration of such 45 day period without the Company exercising, such right of
first refusal, the Warrant shall be transferred by the Company upon delivery
thereof duly endorsed by the Holder or by his duly authorized attorney or
representative, or accompanied by proper evidence of succession, assignment or
authority to transfer. In case of transfer by executors, administrators,
guardians or other legal representatives, duly authenticated evidence of their
authority shall be produced if requested by the Company in its reasonable
discretion. The Company shall immediately register all assignments and
transfers in the Warrant Register, and, upon any registration of assignment or
transfer, the Company shall deliver a new
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Warrant or Warrants to the person or entity entitled thereto on the terms and
conditions set forth herein (including all changes and adjustments that have
occurred hereunder). A Warrant, if properly transferred or assigned, may be
exercised by a subsequent Holder without having a new Warrant issued. The
Warrants may be exchanged at the option of the Holder thereof for another
Warrant, or other Warrants, of different denominations and representing in the
aggregate the right to purchase the same number of Shares of Common Stock on
the terms and conditions set forth herein (including all changes and
adjustments that have occurred hereunder) upon surrender to the Company or its
duly authorized agent. All provisions of this Section 3 shall be subject to
Section 13.
4. RESERVED STOCK. The Company shall reserve and keep available at
all times solely for the purpose of providing for the exercise of this Warrant
the maximum number of Shares of Common Stock as to which this Warrant may then
be exercised. All such Shares shall be duly authorized and free of preemptive
rights and, when issued upon such exercise, shall be validly issued and fully
paid and non-assessable with no liability on the part of the holders thereof.
5. CERTAIN ADJUSTMENTS.
(a) Number of Shares; Exercise Price. The number of
Shares of Common Stock which the Holder of this Warrant shall be
entitled to receive upon each exercise hereof shall be determined by
multiplying the number of Shares of Common Stock which would otherwise
(but for the provisions of this Section 5) be issuable upon such
exercise, as designated by the Holder hereof, by a fraction of which
(i) the numerator is $.58594 and (ii) the denominator is the Exercise
Price in effect on the date of such exercise. The Exercise Price shall
be adjusted and readjusted from time to time as provided in this
Section 5 and, as so adjusted or readjusted, shall remain in effect
until a further adjustment or readjustment thereof is required by this
Section 5.
(b) Issuance of Additional Shares of Common Stock or
Certain Convertible Securities. If the Company shall issue any Common
Stock other than Excluded Stock (as hereinafter defined) without
consideration or for a consideration per share less than the fair
market value price per share of Common Stock (as determined by the
Board of Directors of the Company) in effect immediately prior to such
issuance, the Exercise Price in effect immediately prior to each such
issuance shall immediately (except as otherwise expressly provided
below) be reduced to the price determined by multiplying the Exercise
Price in effect immediately prior to such issuance by the quotient
determined by dividing (1) the sum of (x) the product of the total
number of shares of Common Stock outstanding immediately prior to such
issuance multiplied by the fair market value per share of Common Stock
(as determined by the Board of Directors of the Company) in effect
immediately prior to such issuance, and (y) the product of the total
number of shares of Common Stock issued pursuant to such issuance
multiplied by the consideration per share of Common Stock received
under such issuance by (2) the number of shares of Common Stock
outstanding immediately after such issuance multiplied by the fair
market value price per share of Common Stock (as determined by the
Board of Directors of the Company) in effect immediately prior to such
issuance
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For the purposes of any adjustment of the Exercise Price pursuant to
this Section 5(b), the following provisions shall be applicable:
(A) Cash. In the case of the issuance of Common
Stock for cash, the amount of the consideration received by
the Company shall be deemed to be the amount of the cash
proceeds received by the Company for such Common Stock after
deducting therefrom any discounts, commissions, taxes or other
expenses allowed, paid or incurred by the Company for any
underwriting or otherwise in connection with the issuance and
sale thereof
(B) Consideration Other Than Cash. In the case of
the issuance of Common Stock (otherwise than upon the
conversion of shares of capital stock or other securities of
the Company) for a consideration in whole or in part other
than cash, including securities acquired in exchange therefor
(other than securities of the Company that by their terms are
exchangeable for such Common Stock), the consideration other
than cash shall be deemed to be the fair value thereof as
determined in good faith by the Board of Directors of the
Company and irrespective of any accounting treatment;
provided, that such fair value as determined by the Board of
Directors shall not exceed the aggregate Current Market Price
(as hereinafter defined) of the shares of Common Stock being
issued as of the date on which the Board of Directors
authorizes the issuance of such shares.
(C) Options and Convertible Securities. In the
case of the issuance of (i) options, warrants or other rights
to purchase or acquire Common Stock (whether or not at the
time exercisable), (ii) securities by their terms convertible
into or exchangeable for Common Stock (whether or not at the
time so convertible or exchangeable), or (iii) options,
warrants or rights to purchase such convertible or
exchangeable securities (whether or not at the time
exercisable) other than Excluded Stock:
(1) the aggregate maximum number of
shares of Common Stock deliverable upon exercise of
such options, warrants or other rights to purchase or
acquire Common Stock shall be deemed to have been
issued at the time such options, warrants or rights
were issued and for a consideration equal to the
consideration (determined in the manner provided in
subclauses (A) and (B) above), if any, received by
the Company upon the issuance of such options,
warrants or rights plus the minimum purchase price
provided in such options, warrants or rights for the
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Common Stock covered thereby;
(2) the aggregate maximum number of
shares of Common Stock deliverable upon conversion of
or in exchange for any such convertible or
exchangeable securities, or upon the exercise of
options, warrants or other rights to purchase or
acquire such convertible or exchangeable securities
and the subsequent conversion or exchange thereof,
shall be deemed to have been issued at the time such
securities were issued or such options, warrants, or
rights were issued and for a consideration equal to
the consideration, if any, received by the Company
for any such securities and related options, warrants
or rights (excluding any cash received on account of
accrued interest or accrued dividends), plus the
additional consideration (determined in the manner
provided in subclauses (A) and (B) above), if any, to
be received by the Company upon the conversion or
exchange of such securities, or upon the exercise of
any related options, warrants or rights to purchase
or acquire such convertible or exchangeable
securities and the subsequent conversion or exchange
thereof,
(3) on any change in the number of
shares of Common Stock deliverable upon exercise of
any such options, warrants or rights or conversion or
exchange of such convertible or exchangeable
securities or any change in the consideration to be
received by the Company upon such exercise,
conversion or exchange, including, but not limited
to, a change resulting from the anti-dilution
provisions thereof, the Exercise Price as then in
effect shall forthwith be readjusted to such Exercise
Price as would have been obtained had an adjustment
been made upon the issuance of such options, warrants
or rights not exercised prior to such change, or of
such convertible or exchangeable securities not
converted or exchanged prior to such change, upon the
basis of such change;
(4) on the expiration or cancellation of
any such options, warrants or rights or the
termination of the right to convert or exchange such
convertible or
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exchangeable securities, if the Exercise Price shall
have been adjusted upon the issuance thereof, the
Exercise Price shall forthwith be readjusted to such
Exercise Price as would have been obtained had an
adjustment been made upon the issuance of such
options, warrants, rights or such convertible or
exchangeable securities on the basis of the issuance
of only the number of shares of Common Stock actually
issued upon the exercise of such options, warrants or
rights, or upon the conversion or exchange of such
convertible or exchangeable securities; and
(5) if the Exercise Price shall have
been adjusted upon the issuance of any such options,
warrants, rights or convertible or exchangeable
securities, no further adjustment of the Exercise
Price shall be made for the actual issuance of Common
Stock upon the exercise, conversion or exchange
thereof
(D) Excluded Stock. "Excluded Stock" shall mean
(1) up to 200,000 shares of Common Stock to be issued from
time to time to directors, officers, employees, consultants,
advisors, independent contractors and agents of the Company
pursuant to stock options, employee benefit plans or otherwise
together with any such shares that are repurchased by the
Company and reissued to any such recipient, (2) shares of
Common Stock to be issued from time to time pursuant to stock
options granted by the Company prior to April 14, 1997, (3)
up to 25,985 shares of Common Stock to be to A. Stephen
Trevino, (4) up to 550,000 shares of Common Stock which may be
issued to Alex Trevino, Jr. pursuant to that certain
employment agreement entered into between the Company and Alex
Trevino, Jr. dated as of May 17, 1993, (5) up to 500,000
shares of Common Stock to be issued from time to time pursuant
to the 1996 Stock Option Plan of the Company, (6) up to
1,000,000 shares of Common Stock to be issued pursuant to
warrants Issued by the Company to St. James Capital Partners,
L.P., a Delaware limited partnership ("St. James"), or its
assigns, and (7) shares of Common Stock to be issued to St.
James, or its assigns, pursuant to private placement purchases
by St. James of either Common Stock or debt instruments of the
Company which are convertible into Common Stock, in an
aggregate amount not to exceed $5,000,000. All shares of
Excluded Stock that the Company has reserved for issuance
shall be deemed to be outstanding for all purposes of
computations under this Section 5(b).
(c) Stock Dividends, Subdivisions, Reclassifications or
Combinations.
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If the Company shall (i) declare a dividend or make a distribution on
its Common Stock in shares of its Common Stock, (ii) subdivide or
reclassify the outstanding shares of Common Stock into a greater
number of shares, or (iii) combine or reclassify the outstanding
Common Stock into a smaller number of shares, the Exercise Price in
effect at the time of the record date for such dividend or
distribution or the effective date of such subdivision, combination or
reclassification shall be proportionately adjusted so that the Holder
of this Warrant who exercises this Warrant after such date shall be
entitled to receive the number of shares of Common Stock which he
would have owned or been entitled to receive had this Warrant been
exercised immediately prior to such date. Successive adjustments in
the Exercise Price shall be made whenever any event specified above
shall occur.
(d) Other Distributions. In case the Company shall fix a
record date for the making of a distribution to all holders of shares
of its Common Stock (i) of shares of any class other than its Common
Stock or (ii) of evidence of indebtedness of the Company or any
subsidiary or (iii) of assets (excluding cash dividends or
distributions, and dividends or distributions referred to in Section
5(c) above) or (iv) of rights or warrants (excluding those referred to
in Section 5(b)), in each case the Exercise Price in effect
immediately prior thereto shall be multiplied by the &action
determined by dividing (A) an amount equal to the difference
resulting Tom (x) fair market value price per share of Common Stock on
such record date, less (y) the fair market value (as determined by the
Board of Directors, whose determination shall be conclusive) of said
shares or evidences of indebtedness or assets or rights or warrants to
be so distributed divided by the number of shares of Common Stock
outstanding on such record date, by (B) the fair market value price
per share of Common Stock on such record date. Such adjustment shall
be made successively whenever such a record date is fixed. In the
event that such distribution is not so made, the Exercise Price then
in effect shall be readjusted, effective as of the date when the Board
of Directors determines not to distribute such shares, evidence of
indebtedness, assets, rights or warrants, as the case may be, to the
Exercise Price which would then be in effect if such record date had
not been fixed.
(e) Other Dilutive Events. In case any event shall occur
as to which the provisions of this Section 5 are not strictly
applicable but the failure to make any adjustment relating thereto
would not fairly protect the purchase rights represented by this
Warrant in accordance with the essential intent and principles of this
Section 5, then, in each such case, the Company shall immediately
make all adjustments necessary to preserve, without dilution, the
purchase rights represented by this Warrant on a basis consistent with
the intent and principles established in this Section 5 and shall also
immediately appoint a firm of independent certified public accountants
of recognized national standing (which may be the regular auditors of
the Company if they satisfy such standard), which shall give their
opinion that such adjustment, if any, preserves, without dilution, the
purchase rights represented by this Warrant on a basis consistent with
the intent and principles established in this Section 5. Upon receipt
of such opinion, the Company will immediately deliver a copy thereof
to the Holder of this Warrant. The Company shall not, by amendment of
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its certificate of incorporation or through any consolidation, merger,
reorganization, transfer of assets, dissolution, issue or sale of
securities or any other voluntary avoid or seek to avoid the
observance or performance of any of the terms of this Warrant, and
will at all times in good faith assist in carrying out all of such
terms and in the taking of all such actions as may be necessary or
appropriate in order to protect the rights of the Holder of this
Warrant against dilution or other impairment. Without limiting the
generality of the foregoing, the Company (i) will not permit the par
value of any shares of stock receivable upon the exercise of this
Warrant to exceed the amount payable therefor upon such exercise, (ii)
will take all such action as may be necessary or appropriate in order
that the Company may validly and legally issue fully paid and
nonassessable shares of stock on the exercise of the Warrants from
time to time outstanding, and (iii) will not take any action that
results in any adjustment of the Exercise Price if the total number of
Shares of Common Stock issuable after such action upon the exercise of
all of the Warrants would exceed the total number of Shares of Common
Stock then authorized by the Company's certificate of incorporation
and available for the purpose of issuance upon such exercise.
(f) Size of Adjustment; Rounding. No adjustment in the
Exercise Price shall be required unless such adjustment would require
an increase or decrease of at least one cent ($.01) in such price;
provided, however, that any adjustment that is thereby not required to
be made shall be carried forward and taken into account in any
subsequent adjustment. All calculations under this Section 5 shall be
made to the nearest cent or to the nearest one-hundredth of a Share,
as the case may be.
(g) Notice. Whenever there shall be an adjustment as
provided in this Section 5, the Company shall within three (3) days
cause written notice thereof to be given to the Holder, which notice
shall be accompanied by an officer's certificate setting forth the
Exercise Price after such adjustment and setting forth a brief
statement of the facts requiring such adjustment and the computation
thereof. However, the failure by the Company to satisfy its
obligations under this Section 5(g) shall not in any manner affect or
alter the rights of the Holder under this Warrant.
(h) Fractional Shares. The Company shall not be required
to issue fractions of shares of Common Stock or other capital stock of
the Company upon the exercise of Warrants. If any fraction of a share
would be issuable upon the exercise of any Warrant (or specified
portions thereof), the Company shall purchase such fraction for an
amount in cash equal to the same fraction of the fair value of such
share of Common Stock (as determined in good faith by the Board of
Directors of the Company but not less than the fair market value) on
the date of exercise of the Warrant.
(i) Current Market Price. The Current Market Price at any
date shall mean, in the event the Common Stock is publicly traded, the
average of the daily closing prices per share of Common Stock for 30
consecutive trading days ending no more than 5 trading days before
such date (as adjusted for any stock dividend, split,
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combination or reclassification that took effect during such 30
trading day period), as determined by the Board of Directors of the
Company. The closing price for each day shall be the last reported
sale price regular way or, in case no such reported sale takes place
on such day, the average of the last closing bid and asked prices
regular way, in either case on the principal national securities
exchange on which the Common Stock is listed or admitted to trading,
or if not listed or admitted to trading on any national securities
exchange, the closing sale price for such day reported by NASDAQ, if
the Common Stock is traded over-the-counter and quoted in the National
Market System, or if the Common Stock is so traded, but not so quoted,
the average of the closing reported bid and asked prices of the Common
Stock as reported by NASDAQ or any comparable system or, if the Common
Stock is not listed on NASDAQ or any comparable system, the average of
the closing bid and asked prices as furnished by two members of the
National Association of Securities Dealers, Inc. selected from time to
time by the Company for that purpose. If the Common Stock is not
traded in such manner that the quotations referred to above are
available for the period required hereunder, the Current Market Price
per share of Common Stock shall be deemed to be the fair value as
determined by the Board of Directors of the Company in good faith and
irrespective of any accounting treatment.
(j) Treasury Stock. For the purposes of this Section 5,
the sale or other disposition of any Common Stock theretofore held in
the Company's treasury shall be deemed to be an issue thereof
(k) Valid Issuance. All shares of Common Stock which may be
issued upon the exercise of this Warrant will upon issuance by the
Company be duly and validly issued, fully paid and nonassessable and
free from all taxes, liens and charges with respect to the issuance
thereof, and the Company shall take no action which will cause a
contrary result (including, without limitation, any action which would
cause the Exercise Price to be less than the par value, if any, of the
Common Stock).
6. PREEMPTIVE RIGHTS. If the Company shall issue any Shares of
Common Stock, rights, options, or warrants to purchase Shares of Common Stock,
or securities of any type whatsoever that are, or may become, convertible into
Shares of Common Stock (collectively, "New Securities," which term shall
exclude any Excluded Stock), the Holder of this Warrant shall be entitled to
purchase its pro rata share of all or any part of such New Securities as
provided in this Section 6. For purposes of this Section 6, the term "pro rata
share" shall mean such share as would be necessary to permit the Holder to
maintain a percentage interest in the Company (determined on a fully diluted
basis assuming the exercise of any and all outstanding options or warrants and
the conversion of any securities convertible into Shares of Common Stock) equal
to the Holder's percentage interest in the Company immediately prior to such
issuance of New Securities (determined on a fully diluted basis). In the event
the Company proposes to undertake an issuance of New Securities, it shall give
the Holder written notice of its intention, describing the type of New
Securities and the price and terms upon which the Company proposes to issue the
same. The Holder shall have 30 days from the date of receipt of any such notice
to agree to purchase up to its pro rata share of such New Securities for the
price and upon the terms specified in the notice by giving written notice to
the Company and stating therein the quantity of New Securities to be purchased.
In the event
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the Holder fails to exercise such right of purchase within said 30-day period,
the Company shall have 90 days thereafter to complete the sale of the New
Securities at the price and upon terms no more favorable to the purchasers of
such New Securities than those specified in the Company's notice to the Holder.
In the event the Company has not sold the New Securities within such 90-day
period, the Company shall not thereafter issue or sell any of such New
Securities without first complying with the terms of this Section 6.
7. PUT OPTIONS.
(a) Option based on Purchase Offer for Assets. The
Company shall notify the Holder promptly, and in any event within five
days of receipt, of any bona fide written offer received by the
Company for the purchase of all or substantially all of the Company's
assets or its stock (each an "Offer"). Should the Company determine
that an Offer is unacceptable, the Holder shall have the option to
require the Company to purchase this Warrant and/or the Shares of
Common Stock issued pursuant hereto (or any portion thereof) at a
price determined by multiplying (i) the total consideration offered
for the Company's assets or stock, as applicable, under such Offer,
multiplied by, if such Offer is for less than all of the Company's
assets or stock, as applicable, a &action, the numerator of which is
the market value of all of the Company's assets or stock, as
applicable, as determined by the board of directors of the Company,
which number shall in no event be less than the total consideration
offered under the Offer, and the denominator of which is the total
consideration offered under the Offer, by (ii) the percentage
ownership of the Common Stock of the Company represented by this
Warrant and the Shares of Common Stock issued pursuant hereto that the
Holder wishes to require the Company to purchase under this Section
7(a) (expressed as a decimal and calculated on a fully diluted basis).
The price to be paid to the Holder shall be reduced if the Holder has
elected to require the Company to purchase any unissued Shares of
Common Stock evidenced by this Warrant by an amount equal to (iii) the
Exercise Price then in effect, multiplied by (iv) the number of
unissued Shares of Common Stock evidenced by this Warrant that the
Holder has elected to require the Company to purchase. Unless
otherwise agreed to in writing by the Holder, the required purchase
price shall be payable in cash within 60 days of the Company's receipt
of notice of the Holder's election to require the Company to purchase
this Warrant and/or the Shares of Common Stock issued pursuant hereto
(or any portion thereof) under this Section 7(a). If at any time the
Company has not paid the required purchase price after the Holder has
exercised its option under this Section 7(a), the Holder, in addition
to having the right to enforce the payment of such required purchase
price, shall also have the right, if the Company shall after the
receipt of such first Offer receive a later Offer that the Holder
deems more favorable than such first Offer, to rescind its election
under the first Offer and require the Company to purchase this Warrant
and/or the Shares of Common Stock issued pursuant hereto (or any
portion thereof) under the terms of such later Offer in accordance
with the terms and procedures set forth above. This option shall be a
continuing option, exercisable as many times as the Holder shall
choose, and shall continue and remain until the Holder has sold all
unissued Shares of Common Stock evidenced by this Warrant and all
Shares of Common Stock issued
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hereunder to the Company.
(b) General Option. At any time after the period
beginning on May 26, 1996, upon 90 days prior written notice to the
Company (such notice being herein referred to as the "Put Notice"),
provided the Company's stock is no longer publicly traded, the Holder
shall have the option to require the Company to purchase this Warrant
and/or the Shares of Common Stock issued pursuant hereto (or any
portion thereof) for a price equal to the product of (i) the
percentage ownership of the Common Stock of the Company represented by
this Warrant and the Shares of Common Stock issued pursuant hereto
that the Holder wishes to require the Company to purchase under this
Section 7(b) (expressed as a decimal and calculated on a fully diluted
basis), and (ii) the greater of the following values, all calculated
as of the last day of the month immediately preceding the date the Put
Notice is delivered to the Company (A) 150% of the net book value of
the Company, (B) 400% of the earnings before interest, taxes,
depreciation and amortization (less any outstanding funded debt to The
Catalyst Fund, Ltd. and other lenders) ("EBITDA") of the Company for
the preceding 24 month period ended on the last day of the month
immediately preceding, the date the Put Notice is delivered to the
Company, or (C) at the option of the Holder, the appraised value of
the Company. The appraised value of the Company shall be determined as
of the last day of the month immediately preceding the date the Put
Notice is delivered to the Company in the following manner: First,
the Holder shall select and pay for an appraisal of the Company
performed by a certified appraiser (the "First Appraisal"). The
appraised value of the Company as determined by the First Appraisal
shall be binding upon the Company and the Holder as the appraised
value of the Company unless the Company shall notify the Holder in
writing of its objection to such appraised value within 30 days of the
Company's receipt of notice of such appraised value (the "First
Appraisal Notice"). If the Company so notifies the Holder, the
appraised value of the Company determined by the First Appraisal shall
nevertheless remain the appraised value of the Company unless the
Company shall pay for and obtain a second appraisal of the Company
from a certified appraiser (the "Second Appraisal") and deliver such
Second Appraisal to the Holder within 30 days of receipt of the First
Appraisal Notice. If the Company complies with the requirements of the
preceding sentence, the Second Appraisal shall be binding upon the
Company and the Holder as the appraised value of the Company unless
the Holder shall notify the Company of its objection to such Second
Appraisal within 30 days of the Holder's receipt of the Second
Appraisal. If the Holder so notifies the Company, the Company and the
Holder shall appoint a third certified appraiser to determine the value
of the company, and if the Company and the Holder cannot reach an
agreement as to such third certified appraiser, the Company and the
Holder shall appoint a third party to appoint a third certified
appraiser, which determination of appraiser shall be binding upon the
Company and the Holder. The appraisal determined by such third
appraiser (the "Third Appraisals) shall be binding upon the Company
and the Holder and shall be the appraised value of the Company. The
Company and the Holder shall bear equally all costs of such Third
Appraisal. The price to be paid to the Holder shall be reduced if the
Holder has elected to require the Company to purchase any unissued
Shares of Common Stock evidenced by this
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Warrant by an amount equal to (iii) the Exercise Price then in
effect, multiplied by (iv) the number of unissued Shares of Common
Stock evidenced by this Warrant that the Holder has elected to require
the Company to purchase. Unless otherwise agreed to in writing by the
Holder, the required purchase price shall be payable in cash within 75
days of the Company's receipt of notice of the Holder's election to
require the Company to purchase unissued Shares of Common Stock
evidenced by this Warrant and/or Shares of Common Stock issued
pursuant hereto (or any portion thereof) under this Section 7(b). This
option shall be a continuing option, exercisable as many times as the
Holder shall choose, and shall continue and remain until the Holder
has sold all unissued Shares of Common Stock evidenced by this Warrant
and all Shares of Common Stock issued hereunder to the Company.
(c) Purchase by Third Party. At the option of the board
of directors of the Company, the Company may allow all, or any portion
greater than 25 percent, of the Warrant or any Common Stock required
to be purchased by the Company pursuant to Section 7(a) or 7(b) above,
to be purchased directly by any of the Company's shareholders
provided, however, that should any of the Company's shareholders fail
to make payment of the required purchase price on the designated
purchase date, the Company shall be required to purchase such portion
of this Warrant or such Common Stock intended to be purchased by such
shareholders of the Company.
8. CERTAIN CORPORATE EVENTS OR ACTIONS.
(a) Consolidation, Merger, Etc. In case of any
consolidation with or merger of the Company with or into another
corporation or other entity (except for a merger or consolidation in
which the Company is the continuing corporation other than as a
subsidiary of another corporation or other entity), or in case of any
sale, lease or conveyance to another corporation or other entity of
the property of the Company as an entirety or substantially as an
entirety, such successor, purchasing, leasing or receiving corporation
or other entity, as the case may be, shall, prior to and as a
condition to the occurrence of such event, (i) execute with the Holder
an agreement providing that the Holder shall have the right thereafter
to receive upon exercise of this Warrant the kind and amount of shares
of stock and other securities, property, cash or any combination
thereof receivable upon such consolidation, merger, sale, lease or
conveyance by a holder of the number of Shares of Common Stock for
which this Warrant might have been exercised immediately prior to such
consolidation, merger, sale, lease or conveyance and (ii) make
effective provision in its certificate of incorporation or otherwise,
if needed, in order to effect such agreement. Such agreement shall
provide for adjustments which shall be equivalent to the adjustments
in Section 5.
(b) Reclassification, Etc. In case of any
reclassification or change of the Shares of Common Stock issuable upon
exercise of this Warrant or in case of any consolidation or merger of
another corporation or other entity with or into the Company in which
the Company is the continuing corporation (other than as a subsidiary
of another corporation or other entity) and in which there is a
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reclassification or change (including a change to the right to receive
cash or other property) of the Shares of Common Stock, the Holder
shall have the right thereafter to receive upon exercise of this
Warrant the kind and amount of shares of stock and other securities,
property, cash or any combination thereof receivable upon such
reclassification, change, consolidation or merger by a holder of the
number of Shares of Common Stock into which this Warrant would have
been exercisable immediately prior to such reclassification, change,
consolidation or merger. Thereafter, appropriate provision (as
determined by the Board of Directors of the Company in good faith)
shall be made for adjustments which shall be equivalent to the
adjustments in Section 5.
9. CERTAIN RESTRICTIONS. Notwithstanding the adjustment
provisions contained in this Warrant, the Company shall not take any of the
following actions without first receiving the express written consent of the
Holder:
(a) Except for the issuance of up to 550,000 shares of
Common Stock which may be issued to Alex Trevino, Jr. pursuant to that certain
employment agreement entered into between the Company and Alex Trevino, Jr.
dated as of May 17, 1993, issue Common Stock (otherwise than upon the
conversion of shares of capital stock or other securities of the Company) for a
consideration in whole or in part other than cash, including securities
acquired in exchange therefor (other than securities of the Company that by
their terms are exchangeable for such Common Stock).
(b) Make a distribution to all holders of shares of its
Common Stock of (i) shares of any class other than its Common Stock, (ii)
evidence of indebtedness of the Company or any subsidiary, or (iii) assets
(excluding cash dividends or distributions, and dividends or distributions
referred to in Section 5(c)), or (iv) of rights or warrants (excluding those
referred to in Section 5(b).
(c) Enter into any consolidation with or merger with or
into another corporation or other entity (except for a merger or consolidation
in which the Company is the continuing corporation other than as a subsidiary
of another corporation or other entity), or enter into any sale, lease or
conveyance to another corporation or other entity of the property of the
Company as an entirety or substantially as an entirety.
10. EXTENSION OF EXPIRATION DATE. If the last scheduled payment
date for the repayment of outstanding indebtedness under any of those certain
promissory notes (the "Notes"), dated April 14, 1997 executed by West Coast
HVAC Supply, Inc., a Texas corporation, in the aggregate original principal
amount of $450,000 and the others of which are each dated May 26, 1993 executed
by ACR Supply, Inc., a Texas corporation, Fabricated Systems, Inc., a Texas
corporation, and Heating and Cooling Supply, Inc., a Nevada corporation, and
payable to the order of The Catalyst Fund, Ltd., a Texas limited partnership,
in the aggregate original principal amount of $1,000,000 shall be extended
beyond August 26, 2001, then the expiration date of this Warrant shall also be
likewise extended to the date that is equal to the latest of the last scheduled
payment dates under any of the Notes. Notwithstanding the preceding sentence,
in the event the entire amount of principal and
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interest on the Notes is fully repaid prior to August 26, 2001, then the
expiration date of this Warrant shall expire thirty (30) days after the date of
such payment; provided, however, that under no circumstances shall the
expiration date be earlier than May 26, 1999; and further provided that if the
date of the complete payment of all of the Notes is during the time period of
April 27, 1999 through May 26, 1999, then the Warrant expiration date shall
occur thirty (30) days after such payment date. Additionally, if the Holder has
exercised any put option under Section 7 of this Agreement and (a) the Company
is financially unable, or in any event fails, to timely pay all of the required
purchase price under Section 7, or (b) or any creditor of the Company has
indicated to the Holder or the Company that the payment of such required
purchase price would be a default under the Company's indebtedness to such
creditor, then the expiration date of this Warrant shall be extended to the
date that is three and one-half years beyond the then expiration date of this
Warrant for any portion of this Warrant not purchased by the Company (including
any portion of this Warrant that the Holder has not required the Company to
purchase under Section 7), and the Holder shall be deemed to have retracted its
exercise of such put option; provided, however, that such retraction shall be
without prejudice to the Holder, and the Holder shall be entitled, at any time
thereafter prior to the expiration of this Warrant, to re-exercise such put
option upon the same term is of the prior exercise thereof upon the terms and
conditions set forth in Section 7.
11. CERTAIN NOTICES. In case at any time the Company shall propose
or have knowledge of any proposal,
(a) to pay any dividend or make any distribution on
Shares of Common Stock or to fix a record date for the making of any
such dividend or distribution to holders of Common Stock; or
(b) to take, or fix a record date for, any action that would
result in any adjustment to the Exercise Price pursuant to Section 5;
or
(c) to effect any reclassification or change of
outstanding Shares of Common Stock, or consolidation or merger, or
sale, lease or conveyance of property, of the type addressed in
Section 8; or
(d) to effect any voluntary or involuntary liquidation,
dissolution or winding up of the Company;
then, and in any one or more of such cases, the Company shall give written
notice thereof to the Holder at least 30 days prior to the date on which (i)
the books of the Company shall close or a record date shall be set, for any
such action described in Section 11 (a) or (b) or (ii) such reclassification,
change, consolidation, merger, sale, lease, conveyance, liquidation,
dissolution or winding-up shall be effective, as the case may be.
12. EXPENSES. The Company shall pay all costs, fees, taxes (other
than stock transfer taxes) and expenses payable in connection with the
preparation, issuance and delivery from time to time of Warrants and of Shares
of Common Stock issued upon the exercise of Warrants.
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13. RESTRICTIONS ON TRANSFER. This Warrant and the Shares of
Common Stock or other securities issued upon exercise of this Warrant shall be
subject to a stop-transfer order (except with respect to a transfer by the
original Holder of this Warrant to its partners) and the certificate or
certificates evidencing any such Shares or securities shall bear the following
legend, unless in the opinion Of counsel to the Holder exercising any Warrant
such legend is not required in order to comply with the Securities Act of 1933,
as amended (the "Securities Act"), which opinion shall be reasonably
satisfactory to the Company, or unless the offering and sale of the Shares or
other securities issued upon exercise of the Warrants have been registered
under the Securities Act, and in each such case such restriction on transfer
and legend shall be removed:
"THE SHARES (OR OTHER SECURITIES) REPRESENTED BY THIS CERTIFICATE HAVE
BEEN ACQUIRED FOR INVESTMENT AND HAVE NOT BEEN REGISTERED UNDER THE SECURITIES
ACT OF 1933, AS AMENDED, OR THE SECURITIES LAWS OF ANY STATE OR OTHER
JURISDICTION. SUCH SECURITIES MAY NOT BE SOLD, ASSIGNED OR OTHERWISE
TRANSFERRED EXCEPT UPON SUCH REGISTRATION OR UPON DELIVERY TO THE CORPORATION
OF AN OPINION OF counsel REASONABLY SATISFACTORY TO THE CORPORATION STATING
THAT SUCH SALE, ASSIGNMENT OR TRANSFER IS EXEMPT FROM REGISTRATION UNDER SUCH
ACT AND LAWS."
14. REGISTRATION OF COMMON STOCK, LISTING. If any Shares of Common
Stock required to be reserved for purposes of exercise of this Warrant required
registration with or approval of any governmental authority under any federal
or state law before such Shares may be issued upon exercise, the Company will,
at its expense and as expeditiously as possible, cause such Shares to be duly
registered or approved, as the case may be. At any such time as Common Stock is
listed for trading, the Company will, at its expense, obtain promptly and
maintain the approval of all securities exchanges (including, for this purpose,
NASDAQ and the NASDAQ National Market System) on which the Common Stock is
listed for trading for an additional listing, upon official notice of issuance,
of the Shares of Common Stock issuable upon exercise of the then outstanding
Warrants and maintain the listing of such shares after their issuance.
15. AVAILABILITY OF INFORMATION. (a) If the Company shall have
filed a registration statement pursuant to Section 12 of the Securities
Exchange Act of 1934, as amended (the "Exchange Act"), or a registration
statement pursuant to the Securities Act, the Company will comply with the
reporting requirements of Sections 13 and 15(d) of the Exchange Act (or, if the
Company is not required to so comply and it shall have so filed such a
registration statement, it will make publicly available the information
specified by Rule 144(c)(2) under the Securities Act) and will comply with all
other public information reporting requirements of the Securities and Exchange
Commission (the "Commission") (including Rule 144 promulgated by the Commission
under the Securities Act) from time to time in effect and relating to the
availability of an exemption from the Securities Act for the sale of any
restricted securities (as defined in the Securities Act) or the sale of
securities by affiliates (as defined in the Securities Act). The Company will
also cooperate with each holder of any restricted securities in supplying such
information as may be necessary for such holder to
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complete and file any information reporting forms presently or hereafter
required by the Commission as a condition to the availability of an exemption
from the Securities Act for the sale of any restricted securities or the sale
of securities by affiliates. The Company will furnish to each Holder of a
Warrant, promptly upon their becoming available, copies of all financial
statements, reports, notices and proxy statements sent or made available
generally by the Company to its stockholders, and copies of all regular and
periodic reports and all registration statements and prospectuses filed by the
Company with any securities exchange or with the Commission. The Company will
also furnish each Holder with copies of all minutes of all meetings of the
Company's board of directors or any committee thereof, forthwith after such
minutes have been prepared.
(b) The Holder agrees to accept and maintain on a confidential
basis as provided in this Section 15(b), all information obtained by it
pursuant to Section 15(a) or otherwise under this Agreement (such information
is referred to for purposes of this Section 15(b) as "Information"). The Holder
agrees that unless it receives the express written permission of the Company or
is otherwise required to make disclosure by law, a regulation of a national
stock exchange or any other industry self-regulating body (referred to
collectively for purposes in this Section 15(b) as "Law"), the Holder will not
disclose, publish or reveal any of the Information except to those of its
employees, agents or representatives as have a need to know and who have
agreed to maintain the confidentiality of the Information. Except as may be
required by Law, the Holder will not disclose any of the Information to third
parties. The Holder agrees, and it will advise all employees, agents and
representatives who have access to the Information, that the United States
securities laws may prohibit any Person who has received material, non-public
information with respect to an issuer from purchasing or selling securities of
such issuer or from communicating such information to any other Person. The
responsibility of the Holder with respect to Information received from Company
and/or its subsidiaries shall terminate as to such of the Information as
becomes public knowledge by publication or general knowledge in the trade
through no fault of the Holder, its employees, agents or representatives.
Notwithstanding anything to the contrary in this Section 15(b), the Holder may,
(i) with respect to any prospective purchaser of the Warrant (or any portion
thereof) that is not a direct competitor of the Company or any of its
subsidiaries (each such prospective purchaser being hereinafter referred to as
a "Company Competitors), after written notice to the Company on or before the
10th day prior to disclosure, disclose Information to any such prospective
purchaser; provided, however, that the Holder may immediately disclose
Information to any such Person upon the occurrence and continuance of any Event
of Default (as such term is defined in that certain Note Agreement of even date
herewith to which the Company and the Holder are parties (among other parties)
(the "Note Agreement"); (ii) with respect to any prospective purchaser of the
Warrant (or any portion thereon that is a Company Competitor, upon the
occurrence and continuance of any Event of Default (as such term is defined in
the Note Agreement), disclose Information to any such prospective purchaser;
(iii) disclose Information to the Holder's legal counsel or auditors, so long
as such disclosures are held in confidence by the recipients thereof, and (iv)
so long as The Catalyst Fund, Ltd. is a Person constituting the Holder,
disclose information to any Person who is an equity investor in The Catalyst
Fund, Ltd.
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16. LOSS, THEM, ETC. Upon receipt of evidence satisfactory to the
Company of the loss, theft, destruction or mutilation of any Warrant and upon
surrender and cancellation of any Warrant if mutilated, the Company shall
execute and deliver to the Holder thereof a new Warrant in the form and
substance of the lost, stolen, destroyed or mutilated Warrant (including all
changes and adjustments that have occurred hereunder).
17. NO RIGHTS OR LIABILITIES AS A STOCKHOLDER. Nothing contained
in this Warrant shall be construed as conferring upon the Holder hereof any
rights as a stockholder of the Company or as imposing any obligation upon such
Holder to purchase any securities or as imposing any liability upon such Holder
as a stockholder of the Company, whether such obligation or liability is
asserted by the Company or by creditors of the Company at law or in equity.
18. GOVERNING LAW. This Warrant shall be governed by and construed
in accordance with the internal laws of the State of Texas.
19. REMEDIES. The Company stipulates that the remedies at law of
the Holder of this Warrant in the event of any default or threatened default by
the Company in the performance of or compliance with any of the terms of this
Warrant are not and will not be adequate, and that, to the extent permitted by
applicable law, such terms may be specifically enforced by a decree for the
specific performance of any agreement contained herein or by an injunction
against a violation of any of the terms hereof or otherwise; provided, however,
that (i) the Company shall not seek specific enforcement of its rights under
this Warrant unless the Holder is acting in contravention of its obligations or
outside of its rights under this Warrant and (ii) the Company hereby agrees to
indemnify and hold harmless the Holder from any costs, liabilities, losses or
expenses incurred by the Holder caused by or otherwise associated with a claim
by the Company for specific enforcement of its rights under this Warrant if
such claim is not a claim permitted to be made pursuant to clause (i)
immediately preceding.
20. NOTICES. All notices and other communications provided for
herein shall be delivered or mailed by registered or certified mail, return
receipt requested, postage prepaid, addressed (a) if to any Holder of any
Warrant, to the address of such Holder as set forth in the Warrant Register or
to such other address as such Holder has notified the Company of in writing, or
(b) if to the Company, to the address set forth in Section 1 or to such other
address as the Company has notified such Holder of pursuant to Section 1 and
this Section 20; provided, however, that the exercise of any Warrant shall be
effective in the manner provided in Section 1. All notices given pursuant to
this Warrant shall be deemed to be effective upon receipt thereof by the party
to whom such notice is addressed.
21. REPRESENTATIONS AND WARRANTIES. In order to induce the
acquisition of this Warrant by the Holder, the Company hereby represents and
warrants to the Holder that the representations and warranties of the Company
contained in the Note Agreement are true and correct in all respects as of the
date hereof (with all references in such representations and warranties to the
"Note" or "Notes" mean in this Warrant and all references in such
representations and warranties to the "Subject Documents" meaning this Warrant
and the
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Registration Rights Agreement of even date herewith between the Company and the
Holder. The Holder hereby represents and warrants to the Company that it has
not purchased or sold any securities of the Company within the 60-day period
preceding the date hereof.
22. MISCELLANEOUS. This Warrant and any term hereof may be
changed, waived, discharged or terminated only by an instrument in writing
signed by the party against which enforcement of such change, waiver, discharge
or termination is sought. Any provision of this Warrant that shall be
prohibited or unenforceable in any jurisdiction shall, as to such jurisdiction,
be ineffective to the extent of such prohibition or unenforceability without
invalidating the remaining provisions hereof, and any such prohibition or
unenforceability in any jurisdiction shall not invalidate or render
unenforceable such provision in any other jurisdiction. To the extent permitted
by applicable law, the Company waives any provision of law that shall render
any provision hereof prohibited or unenforceable in any respect. The section
and paragraph headings used in this Warrant are inserted for convenience only
and shall not be used for any interpretive purpose.
THIS WARRANT IS ISSUED IN SUBSTITUTION FOR AND REPLACEMENT OF THAT
CERTAIN WARRANT NO. 2 ISSUED BY THE COMPANY TO THE HOLDER DATED OCTOBER 6,
1996, SUCH WARRANT NO. 2 BEING HEREBY DEEMED CANCELLED.
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IN WITNESS WHEREOF, the Company has caused this Warrant to be duly executed
and attested by its Secretary.
Dated: April 14, 1997 ACR GROUP, INC.
By: /s/ ALEX TREVINO, JR
-------------------------
Alex Trevino, Jr.
President
Attest:
/s/ ANTHONY R. MARESCA
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Anthony R. Maresca, Secretary
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EXHIBIT A TO WARRANT
To: ACR Group, Inc.
3200 Wilcrest, #440
Houston, Texas 77042
ELECTION TO EXERCISE
The undersigned hereby exercises his or its rights to subscribe for
_____________ Shares of Common Stock covered by the within Warrant and tenders
payment herewith in the amount of $_______________ in accordance with the terms
thereof, and requests that certificates for such shares in the following
denominations be issued in the name of, and delivered to, the person[s] at
the following address[es]:
----------------------------------------------------------------
----------------------------------------------------------------
----------------------------------------------------------------
(Print Address[es] and Social Security Number[s] or Employer
Identification Number[s] as applicable)
and, if said number of shares shall not be all the shares covered by
the within Warrant, that a new Warrant for the balance remaining of the shares
covered by the within Warrant be registered in the name of, and delivered to,
the undersigned at the address stated below:
Date: Name:
-------------------- -----------------------------
(Print)
----------------------------------
(Signature)
Address:
--------------------------
--------------------------
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