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EXHIBIT 10.11
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. 7 125,000 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, Southwest/Catalyst
Capital, 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"), 125,000
(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
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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,
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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 $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
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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 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
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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 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
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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 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 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
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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 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
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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 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
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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 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
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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 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
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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 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)
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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 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
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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
reclassification or change (including a
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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 $1,100,000 and payable to
Southwest/Catalyst Capital, Ltd., a Texas limited partnership, and $440,000 and
payable to the Catalyst Fund, 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 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
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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
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
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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
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
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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
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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).
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
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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"
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:
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Alex Trevino, Jr.
President
Attest:
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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]:
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(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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