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EXHIBIT 10.10
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. 8 50,000 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 February 28, 2003, unless
otherwise extended as provided herein, or, if such date is not a business day,
the next succeeding business day (the "Exercise Period"), 50,000 (subject to
adjustment as set forth herein) fully paid and non-assessable 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 $2.0562
(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
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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.
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
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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 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.
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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 $2.0562 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 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
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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
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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 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
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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 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)
all shares of Common Stock issued by the Company on or prior
to January 28,1998, (2) shares of Common Stock to be issued
from time to time pursuant to stock options granted by the
Company on or prior to January 28, 1998, (3) shares of Common
Stock to be issued from time to time pursuant to warrants
issued by
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the Company on or prior to January 28, 1998, (4) shares of
Common Stock which may be issued to directors, officers or
employees of the Company or its subsidiaries pursuant to
employment agreements, incentive compensation plans or
agreements, or similar agreements or arrangements, now or
hereafter in effect, approved by the Board of Directors of the
Company, (5) shares of Common Stock to be issued from time to
time pursuant to the 1996 Stock Option Plan of the Company, as
may be amended from time to time, (6) shares of Common Stock
to be issued from time to time pursuant to any other stock
option or similar plan approved by the stockholders of the
Company, (7) up to 200,000 shares of Common Stock to be issued
from time to time pursuant to warrants issued by the Company
to equity investors, consultants, advisors, independent
contractors and agents of the Company approved by the Board of
Directors of the Company.
(c) Stock Dividends, Subdivisions, Reclassifications or
Combinations. 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 from (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
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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 its
certificate of incorporation or through any consolidation, merger,
reorganization, transfer of assets, dissolution, issue or sale of
securities or any other voluntary action, 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
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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, 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
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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. Except with respect to a registered public
offering, 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
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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). Except with
respect to a registered public offering, 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 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
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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 hereunder to the
Company.
(b) General Option. At any time after the period beginning on
January 28, 1998, 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
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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 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
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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
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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
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, without first receiving the
express written consent of the Holder, except for the issuance of Excluded
Stock, 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).
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 as of even date herewith executed by the
Company in the aggregate original principal amount of $440,000 and payable to
The Catalyst Fund, Ltd., a Texas limited partnership, and $1,100,000 and payable
to Southwest/Catalyst Capital, Ltd, a Texas limited partnership, and 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
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original principal amount of $1,000,000 shall be extended beyond January 31,
2003, then the expiration date of this Warrant shall also be likewise extended
to the date that is the same as 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 interest on the Notes is fully repaid prior to
January 31, 2003, 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 January 31, 2003.
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 terms 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
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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.
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 require
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
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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 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
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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.
16. LOSS, THEFT, 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).
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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
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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" meaning this Warrant and all references in such
representations and warranties to the "Subject Documents" meaning this Warrant
and the 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.
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IN WITNESS WHEREOF, the Company has caused this Warrant to be duly
executed and attested by its Secretary.
Dated: January 28, 1998 ACR GROUP, INC.
By:
--------------------------------
Alex Trevino, Jr.
President
Attest:
- ------------------------------------
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):
--------------------------
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