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EXHIBIT 10.9
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. 6 750,000 SHARES
BY THIS WARRANT (this "Warrant"), ACR Group, Inc., a Texas
corporation (the "Company"), certifies that, for good and valuable
consideration, the receipt and sufficiency of which are hereby acknowledged, The
Catalyst Fund, Ltd., a Texas limited partnership (along with its registered
assigns, the "Holder"), is entitled to subscribe for and purchase from the
Company, subject to the terms and conditions set forth herein, at any time on or
after the date hereof but prior to 5:00 p.m. (Houston, Texas time) on 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"),
750,000 (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 $.58594 (subject to adjustment as set forth herein) per share
(the "Exercise Price").
1. EXERCISE OF WARRANT; COMPANY OFFICE. This Warrant may be exercised
at any time or from time to time during the Exercise Period as to the entire
number or any lesser number of whole Shares, by the surrender of this Warrant to
the Company at its office at 3200 Wilcrest, #440, Houston, Texas 77042 or such
other place as is designated in writing by the Company pursuant to this Section
1, together with (a) a duly executed election in substantially the form of
Exhibit A attached hereto and made a part hereof for all purposes and (b) a wire
transfer or a certified or bank cashier's check payable to the order of the
Company in an amount equal to the Exercise Price multiplied by the number of
Shares of Common Stock covered by such election. For so long as this Warrant is
outstanding, the Company shall continue to maintain an office in the State of
Texas where notices, presentations and demands in respect of this Warrant may be
made upon it and shall notify the Holder in writing at least 15 days before
changing the location of any such office.
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
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issuable upon such exercise, notwithstanding that the stock transfer books of
the Company shall then be closed or certificates representing such Shares shall
not then have been actually delivered to the Holder. As soon as possible after
each such exercise of this Warrant, the Company shall issue and deliver to the
Holder a certificate or certificates for the Shares issuable upon such exercise
issued in such denominations as may be specified by the Holder and registered in
the name of the Holder or, subject to Section 9, such other name or names as
shall be designated in the Holder's election to exercise. If this Warrant should
be exercised in part only, the Company shall, upon surrender of this Warrant for
cancellation, execute and deliver a new Warrant evidencing the right of the
Holder to purchase the balance of the Shares subject to purchase hereunder on
the terms and conditions set forth herein (including all changes and adjustments
that have occurred hereunder). The Company will, at the time of each exercise of
this Warrant, upon the request of the Holder hereof, acknowledge in writing its
continuing obligation to afford to the Holder all rights to which the Holder
shall continue to be entitled after such exercise in accordance with the terms
of this Warrant; provided, however, that if the Holder of this Warrant shall
fail to make any such request, such failure shall not affect the continuing
obligation of the Company to afford such rights to the Holder.
3. COMPANY RECORDS; TRANSFEROR ASSIGNMENT OF WARRANT; EXCHANGE
OF WARRANT. Any warrants issued in connection herewith or in substitution
herefor, upon complete or partial transfer, assignment or exercise (the
"Warrants") shall be numbered and shall be registered in the warrant register of
the Company (the "Warrant Register") as they are issued. The Company shall treat
the registered holder of any Warrant on the Warrant Register as the owner in
fact thereof for all purposes, except that if the Warrant is properly
transferred or assigned and notice of such transfer or assignment is given to
the Company, the Company shall treat the transferee or assignee as the owner
thereof for all purposes (or, if such transfer or assignment is properly made in
blank, the Company shall treat the bearer of this Warrant as the owner thereof
for all purposes). Should the Holder enter into a written agreement to sell this
Warrant to any Person, the Company shall have a right of first refusal to
purchase this Warrant from the Holder upon the same terms and conditions set
forth in such agreement. Such right of first refusal must be exercised (by
written notice to the Holder), and the purchase of this Warrant must be
consummated, if at all, within 45 days of receiving notice of the Holder
entering into such agreement. If such 45 day period expires without the exercise
of such right and the purchase of this Warrant by the Company, the Holder shall
be free to sell this Warrant to such Person without any liability whatsoever to
the Company. Upon exercise of such right of first refusal or the expiration of
such 45 day period without the Company exercising such right of first refusal,
the Warrant shall be transferred by the Company upon delivery thereof duly
endorsed by the Holder or by his duly authorized attorney or representative, or
accompanied by proper evidence of succession, assignment or authority to
transfer. In case of transfer by executors, administrators, guardians or other
legal representatives, duly authenticated evidence of their authority shall be
produced if requested by the Company in its reasonable discretion. The Company
shall immediately register all assignments and transfers in the Warrant
Register, and, upon any registration of assignment or transfer, the Company
shall deliver a new 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
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exchanged at the option of the Holder thereof for another Warrant, or other
Warrants, of different denominations and representing in the aggregate the right
to purchase the same number of Shares of Common Stock on the terms and
conditions set forth herein (including all changes and adjustments that have
occurred hereunder) upon surrender to the Company or its duly authorized agent.
All provisions of this Section 3 shall be subject to Section 13.
4. RESERVED STOCK. The Company shall reserve and keep available at all
times solely for the purpose of providing for the exercise of this Warrant the
maximum number of Shares of Common Stock as to which this Warrant may then be
exercised. All such Shares shall be duly authorized and free of preemptive
rights and, when issued upon such exercise, shall be validly issued and fully
paid and non-assessable with no liability on the part of the holders thereof.
5. CERTAIN ADJUSTMENTS.
(a) Number of Shares; Exercise Price. The number of
Shares of Common Stock which the Holder of this Warrant shall be
entitled to receive upon each exercise hereof shall be determined by
multiplying the number of Shares of Common Stock which would otherwise
(but for the provisions of this Section 5) be issuable upon such
exercise, as designated by the Holder hereof, by a fraction of which
(i) the numerator is $.58594 and (ii) the denominator is the Exercise
Price in effect on the date of such exercise. The Exercise Price shall
be adjusted and readjusted from time to time as provided in this
Section 5 and, as so adjusted or readjusted, shall remain in effect
until a further adjustment or readjustment thereof is required by this
Section 5.
(b) Issuance of Additional Shares of Common Stock or
Certain Convertible Securities. If the Company shall issue any Common
Stock other than Excluded Stock (as hereinafter defined) without
consideration or for a consideration per share less than the fair
market value price per share of Common Stock (as determined by the
Board of Directors of the Company) in effect immediately prior to such
issuance, the Exercise Price in effect immediately prior to each such
issuance shall immediately (except as otherwise expressly provided
below) be reduced to the price determined by multiplying the Exercise
Price in effect immediately prior to such issuance by the quotient
determined by dividing (1) the sum of (x) the product of the total
number of shares of Common Stock outstanding immediately prior to such
issuance multiplied by the fair market value per share of Common Stock
(as determined by the Board of Directors of the Company) in effect
immediately prior to such issuance, and (y) the product of the total
number of shares of Common Stock issued pursuant to such issuance
multiplied by the consideration per share of Common Stock received
under such issuance by (2) the number of shares of Common Stock
outstanding immediately after such issuance multiplied by the fair
market value price per share of Common Stock (as determined by the
Board of Directors of the Company) in effect immediately prior to such
issuance.
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For the purposes of any adjustment of the Exercise Price pursuant to
this Section 5(b), the following provisions shall be applicable:
(A) Cash. In the case of the issuance of Common Stock for
cash, the amount of the consideration received by the Company shall
be deemed to be the amount of the cash proceeds received by the
Company for such Common Stock after deducting therefrom any
discounts, commissions, taxes or other expenses allowed, paid or
incurred by the Company for any underwriting or otherwise in
connection with the issuance and sale thereof.
(B) Consideration Other Than Cash. In the case of the issuance
of Common Stock (otherwise than upon the conversion of shares of
capital stock or other securities of the Company) for a consideration
in whole or in part other than cash, including securities acquired in
exchange therefor (other than securities of the Company that by their
terms are exchangeable for such Common Stock), the consideration
other than cash shall be deemed to be the fair value thereof as
determined in good faith by the Board of Directors of the Company and
irrespective of any accounting treatment; provided, that such fair
value as determined by the Board of Directors shall not exceed the
aggregate Current Market Price (as hereinafter defined) of the shares
of Common Stock being issued as of the date on which the Board of
Directors authorizes the issuance of such shares.
(C) Options and Convertible Securities. In the case of the
issuance of (i) options, warrants or other rights to purchase or
acquire Common Stock (whether or not at the time exercisable), (ii)
securities by their terms convertible into or exchangeable for Common
Stock (whether or not at the time so convertible or exchangeable), or
(iii) options, warrants or rights to purchase such convertible or
exchangeable securities (whether or not at the time exercisable)
other than Excluded Stock:
(1) the aggregate maximum number of shares of Common
Stock deliverable upon exercise of such options, warrants or
other rights to purchase or acquire Common Stock shall be
deemed to have been issued at the time such options, warrants
or rights were issued and for a consideration equal to the
consideration (determined in the manner provided in subclauses
(A) and (B) above), if any, received by the Company upon the
issuance of such options, warrants or rights plus
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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
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;
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(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 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
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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 Tom (x) fair market value price
per share of Common Stock on such record date, less (y) the fair
market value (as determined by the Board of Directors, whose
determination shall be conclusive) of said shares or evidences of
indebtedness or assets or rights or warrants to be so distributed
divided by the number of shares of Common Stock outstanding on
such record date, by (B) the fair market value price per share of
Common Stock on such record date. Such adjustment shall be made
successively whenever such a record date is fixed. In the event
that such distribution is not so made, the Exercise Price then in
effect shall be readjusted, effective as of the date when the
Board of Directors determines not to distribute such shares,
evidence of indebtedness, assets, rights or warrants, as the case
may be, to the Exercise Price which would then be in effect if
such record date had not been fixed.
(e) Other Dilutive Events. In case any event shall occur
as to which the provisions of this Section 5 are not strictly
applicable but the failure to make any adjustment relating thereto
would not fairly protect the purchase rights represented by this
Warrant in accordance with the essential intent and principles of
this Section 5, then, in each such case, the Company shall
immediately make all adjustments necessary
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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 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
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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 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
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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 the Company's assets or stock, as applicable, a
fraction, 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
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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 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
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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 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
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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 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 January 28, 1998 executed by
the Company in the aggregate original principal amount of $1,100,000 and
payable to The Catalyst Fund, Ltd., a Texas limited partnership, and dated
January 28, 1998 executed by the Company in the aggregate original
principal amount of $440,000 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
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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 February 28, 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, as so amended, 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 July 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 May 26, 1999; and further provided that if the date of the
complete payment of all of the Notes is during the time period of April 27,
1999 through May 26, 1999, then the Warrant expiration date shall occur
thirty (30) days after such payment date. Additionally, if the Holder has
exercised any put option under Section 7 of this Agreement and (a) the
Company is financially unable, or in any event fails, to timely pay all of
the required purchase price under Section 7, or (b) or any creditor of the
Company has indicated to the Holder or the Company that the payment of such
required purchase price would be a default under the Company's indebtedness
to such creditor, then the expiration date of this Warrant shall be
extended to the date that is three and one-half years beyond the then
expiration date of this Warrant for any portion of this Warrant not
purchased by the Company (including any portion of this Warrant that the
Holder has not required the Company to purchase under Section 7), and the
Holder shall be deemed to have retracted its exercise of such put option;
provided. however. that such retraction shall be without prejudice to the
Holder, and the Holder shall be entitled, at any time thereafter prior to
the expiration of this Warrant, to re-exercise such put option upon the
same 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;
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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. 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 13(b), all information obtained by it
pursuant to Section 13(a) or otherwise under this Agreement (such
information is referred to for purposes of this Section 13(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 13(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
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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 13(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).
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
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that, to the extent permitted by applicable law, such terms may be
specifically enforced by a decree for the specific performance of any
agreement contained herein or by an injunction against a violation of any
of the terms hereof or otherwise; provided, however, that (i) the Company
shall not seek specific enforcement of its rights under this Warrant unless
the Holder is acting in contravention of its obligations or outside of its
rights under this Warrant and (ii) the Company hereby agrees to indemnify
and hold harmless the Holder from any costs, liabilities, losses or
expenses incurred by the Holder caused by or otherwise associated with a
claim by the Company for specific enforcement of its rights under this
Warrant if such claim is not a claim permitted to be made pursuant to
clause (i) immediately preceding.
20. NOTICES. All notices and other communications provided for
herein shall be delivered or mailed by registered or certified mail, return
receipt requested, postage prepaid, addressed (a) if to any Holder of any
Warrant, to the address of such Holder as set forth in the Warrant Register
or to such other address as such Holder has notified the Company of in
writing, or (b) if to the Company, to the address set forth in Section 1 or
to such other address as the Company has notified such Holder of pursuant
to Section 1 and this Section 20; provided, however, that the exercise of
any Warrant shall be effective in the manner provided in Section 1. All
notices given pursuant to this Warrant shall be deemed to be effective upon
receipt thereof by the party to whom such notice is addressed.
21. REPRESENTATIONS AND WARRANTIES. In order to induce the
acquisition of this Warrant by the Holder, the Company hereby represents
and warrants to the Holder that the representations and warranties of the
Company contained in the Note Agreement are true and correct in all
respects as of the date hereof (with all references in such representations
and warranties to the "Note" or "Notes" 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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THIS WARRANT IS ISSUED IN SUBSTITUTION FOR AND REPLACEMENT
OF THAT CERTAIN WARRANT NO. 4 ISSUED BY THE COMPANY TO THE HOLDER
DATED APRIL 14, 1997, SUCH WARRANT NO. 4 BEING HEREBY DEEMED
CANCELLED.
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)
Address :
-----------------------------
-----------------------------
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