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EXHIBIT 10.7
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. 5 250,000 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, St. ▇▇▇▇▇ Capital
Partners, L.P., a Delaware 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 May
26, 1999, unless otherwise extended as provided herein, or, if such date is not
a business day, the next succeeding business day (the "Exercise Period"),
250,000 (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 ▇▇▇▇ ▇▇▇▇▇▇▇▇, #▇▇▇, ▇▇▇▇▇▇▇, ▇▇▇▇▇
▇▇▇▇▇ 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 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
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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; TRANSFER OR 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 therefor 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 to first refusal must be
exercised (by written notice to the Holder), and the purchase of this Warrant
must be consummated, if at all, within 45 days of receiving notice of the
Holder entering into such agreement. If such 45 day period expires without the
exercise of such right and the purchase of this Warrant by the Company, the
Holder shall be free to sell this Warrant to such Person without any liability
whatsoever to the Company. Upon exercise of such right of first refusal or the
expiration of such 45 day period without the Company exercising such right of
first refusal, the Warrant shall be transferred by the Company upon delivery
thereof duly endorsed by the Holder or by his duly authorized attorney or
representative, or accompanied by proper evidence of succession, assignment or
authority to transfer. In case of transfer by executors, administrators,
guardians or other legal representatives, duly authenticated evidence of their
authority shall be produced if requested by the Company in its reasonable
discretion. The Company shall immediately register all assignments and
transfers in the Warrant Register, and, upon any registration of assignment or
transfer, the Company shall deliver a new Warrant or Warrants to the person or
entity entitled thereto on the terms and conditions set forth herein (including
all changes and adjustments that have occurred hereunder). A Warrant, if
properly transferred or assigned, may be exercised by a subsequent Holder
without having a new Warrant issued. The Warrants may be exchanged at the
option of the Holder thereof for another
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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 of 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 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 purpose 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 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 in the fair
value therefor as determined in good faith by the Board of Directors
of the Company and irrespective of any accounting treatment; provided,
that such fair value as determined by the Board of Directors shall not
exceed the aggregate Current Market Price (as hereinafter defined) of
the shares of Common Stock being issued as of the date on which the
Board of Directors authorizes the issuance of such shares.
(C) Options and Convertible Securities. In the case of
the issuance of (i) options, warrants or other rights to purchase or
acquire Common Stock (whether or not at the time exercisable), (ii)
securities by their terms convertible into or exchangeable for Common
Stock (whether or not at the time so convertible or exchangeable), or
(iii) options, warrants or rights to purchase such convertible or
exchangeable securities (whether or not at the time exercisable) other
than Excluded Stock:
(1) the aggregate maximum number of shares of
Common Stock deliverable upon exercise of such options,
warrants or other rights to purchase or acquire Common Stock
shall be deemed to have been issued at the time such options,
warrants or rights were issued and for a consideration equal
to the consideration (determined in the manner provided in
subclauses (A) and (B) above), if any, received by the Company
upon the issuance of such options, warrants or rights plus the
minimum purchase price provided in such options, warrants or
rights for the Common Stock covered thereby;
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(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) up to
200,000 shares of Common Stock to be issued from time to time to
directors, officers, employees, consultants, advisors, independent
contractors and agents of the Company pursuant to stock options,
employee benefit plans or otherwise together with any such shares that
are repurchased by the Company and reissued to any such recipient, (2)
shares of Common Stock to be issued from time to time pursuant to
stock options granted by the Company prior to May 26, 1993, (3) up to
25,985 shares of Common Stock to be issued to A. ▇▇▇▇▇▇▇ ▇▇▇▇▇▇▇, and
(4) up to 550,000 shares of Common Stock which may be issued to ▇▇▇▇
▇▇▇▇▇▇▇, Jr. pursuant to that certain employment agreement entered
into between the Company and ▇▇▇▇ ▇▇▇▇▇▇▇, Jr. dated as of May 17,
1993, (5) up to 500,000 shares of Common Stock to be issued from time
to time pursuant to the 1996 Stock Option Plan of the Company, (6) up
to 1,000,000 shares of Common Stock to be issued pursuant to warrants
issued by the Company to St. ▇▇▇▇▇ Capital Partners, L.P., a Delaware
limited partnership ("St. ▇▇▇▇▇"), or its assigns, and (7) shares of
Common Stock to be issued to St. ▇▇▇▇▇, or its assigns, pursuant to
private placement purchases by St. ▇▇▇▇▇ of either Common Stock or
debt instruments of the Company which are convertible into Common
Stock, in an aggregate amount not to exceed $5,000,000. All shares of
Excluded Stock that the Company has reserved for issuance shall be
deemed to be outstanding for all purposes of computations under this
Section 5(b).
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(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 fraction
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 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
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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 ($.0l) in such price;
provided, however, that any adjustment that is thereby not required to
be made shall be carried forward and taken into account in any
subsequent adjustment. All calculations under this Section 5 shall be
made to the nearest cent or to the nearest one-hundredth of a Share,
as the case may be.
(g) Notice. Whenever there shall be an adjustment as
provided in this Section 5, the Company shall within three (3) days
cause written notice thereof to be given to the Holder, which notice
shall be accompanied by an officer's certificate setting forth the
Exercise Price after such adjustment and setting forth a brief
statement of the facts requiring such adjustment and the computation
thereof. However, the failure by the Company to satisfy its
obligations under this Section 5(g) shall not in any manner affect or
alter the rights of the Holder under this Warrant.
(h) Fractional Shares. The Company shall not be required
to issue fractions of shares of Common Stock or other capital stock of
the Company upon the exercise of Warrants. If any fraction of a share
would be issuable upon the exercise of any Warrant (or specified
portions thereof), the Company shall purchase such fraction for an
amount in cash equal to the same fraction of the fair value of such
share of Common Stock (as determined in good faith by the Board of
Directors of the Company but not less than the fair market value) on
the date of exercise of the Warrant.
(i) Current Market Price. The Current Market Price at any
date shall mean, in the event the Common Stock is publicly traded, the
average of the daily closing prices per share of Common Stock for 30
consecutive trading days ending no more than 5
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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 the NASDAQ or any comparable system, the average of the
closing bid and asked prices as furnished by two members of the
National Association of Securities Dealers, Inc. selected from time to
time by the Company for that purpose. If the Common Stock is not traded
in such manner that the quotations referred to above are available for
the period required hereunder, the Current Market Price per share of
Common Stock shall be deemed to be the fair value as determined by the
Board of Directors of the Company in good faith and irrespective of any
accounting treatment.
(j) Treasury Stock. For the purposes of this Section 5,
the sale or other disposition of any Common Stock theretofore held in
the Company's treasury shall be deemed to be an issue thereof.
(k) Valid Issuance. All shares of Common Stock which may
be issued upon the exercise of this Warrant will upon issuance by the
Company be duly and validly issued, fully paid and nonassessable and
free from all taxes, liens and charges with respect to the issuance
thereof, and the Company shall take no action which will cause a
contrary result (including, without limitation, any action which would
cause the Exercise Price to be less than the par value, if any, of the
Common Stock).
6. PREEMPTIVE RIGHTS. If the Company shall issue any Shares of
Common Stock, rights, options, or warrants to purchase Shares of Common Stock,
or securities of any type whatsoever that are, or may become, convertible into
Shares of Common Stock (collectively, "New Securities", which term shall
exclude any Excluded Stock), the Holder of this Warrant shall be entitled to
purchase its pro rata share of all or any part of such New Securities as
provided in this Section 6. For purposes of this Section 6, the term "pro rata
share" shall mean such share as would be necessary to permit the Holder to
maintain a percentage interest in the Company (determined on a fully diluted
basis assuming the exercise of any and all outstanding options or warrants and
the conversion of any securities convertible into Shares of Common Stock) equal
to the Holder's percentage interest in the Company immediately prior to such
issuance of New Securities (determined on a fully diluted basis). In the event
the Company proposes to undertake an issuance of New Securities, it shall give
the Holder written notice of its intention, describing the type of New
Securities and the price and terms upon which the Company proposes to issue the
same. The Holder shall have 30 days from the date of receipt
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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 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
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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 May 26, 1996, upon 90 days prior written notice to the
Company (such notice being herein referred to as the "Put Notice"),
provided the Company's stock is no longer publicly traded, the Holder
shall have the option to require the Company to purchase this Warrant
and/or the Shares of Common Stock issued pursuant hereto (or any
portion thereof) for a price equal to the product of (i) the
percentage ownership of the Common Stock of the Company represented
by this Warrant and the Shares of Common Stock issued pursuant hereto
that the Holder wishes to require the Company to purchase under this
Section 7(b) (expressed as a decimal and calculated on a fully diluted
basis), and (ii) the greater of the following values, all calculated
as of the last day of the month immediately preceding the date the Put
Notice is delivered to the Company (a) 150% of the net book value of
the Company, (b) 400% of the earnings before interest, taxes,
depreciation and amortization (less any outstanding funded debt to The
Catalyst Fund, Ltd. and other lenders) ("EBITDA") of the Company for
the preceding 24 month period ended on the last day of the month
immediately preceding the date the Put Notice is delivered to the
Company, or (C) at the, option of the Holder, the appraised value of
the Company. The appraised value of the Company shall be determined
as of the last day of the month immediately preceding the date the Put
Notice is delivered to the Company in the following manner: First, the
Holder shall select and pay for an appraisal of the Company performed
by a certified appraiser (the "First Appraisal"). The appraised value
of the Company as determined by the First Appraisal shall be binding
upon the Company and the Holder as the appraised value of the Company
unless the Company shall notify the Holder in writing of its objection
to such appraised value within 30 days of the Company's receipt of
notice of such appraised value (the "First Appraisal Notice"). If the
Company so notifies the Holder, the appraisal 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 value 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
Appraisal") shall be binding upon the Company and the Holder and shall
be the appraised
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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 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.
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(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 or
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 take any of the
following actions without first receiving the express written consent of the
Holder:
(a) Except for the issuance of up to 550,000 shares of
Common Stock which may be issued to ▇▇▇▇ ▇▇▇▇▇▇▇, Jr. pursuant to that
certain employment agreement entered into between the Company and ▇▇▇▇
▇▇▇▇▇▇▇, Jr. dated as of May 17, 1993, issue Common Stock (otherwise
than upon the conversion of shares of capital stock or other
securities of the Company) for a consideration in whole or in part
other than cash, including securities acquired in exchange therefor
(other than securities of the Company that by their terms are
exchangeable for such Common Stock).
(b) Make a distribution to all holders of shares of its
Common Stock of (i) shares of any class other than its Common Stock,
(ii) evidence of indebtedness of the Company or any subsidiary, or
(iii) assets (excluding cash dividends or distributions, and dividends
or distributions referred to in Section 5(c)), or (iv) of rights or
warrants (excluding those referred to in Section 5(b)).
(c) Enter into any consolidation with or merger with or
into another corporation or other entity (except for a merger or
consolidation in which the Company is the continuing corporation other
than as a subsidiary of another corporation or other entity), or enter
into any sale, lease or conveyance to another corporation or other
entity of the property of the Company as an entirety or substantially
as an entirety.
10. EXTENSION OF EXPIRATION DATE. If the last scheduled payment
date for the repayment of outstanding indebtedness under any of those certain
promissory notes (the "Notes"), 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,
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in the aggregate original principal amount of $1,000,000 shall be extended
beyond May 26, 1999, then the expiration date of this Warrant shall also be
likewise extended to the date that is equal to the latest of the last scheduled
payment dates under any of the Notes. Additionally, if the Holder has exercised
any put option under Section 7 of this Agreement and (a) the Company is
financially unable, or in any event fails, to timely pay all of the required
purchase price under Section 7, or (b) or any creditor of the Company has
indicated to the Holder or the Company that the payment of such required
purchase price would be a default under the Company's indebtedness to such
creditor, then the expiration date of this Warrant shall be extended to the
date that is three and one-half years beyond the then expiration date of this
Warrant for any portion of this Warrant not purchased by the Company (including
any portion of this Warrant that the Holder has not required the Company to
purchase under Section 7), and the Holder shall be deemed to have retracted its
exercise of such put option; provided, however, that such retraction shall be
without prejudice to the Holder, and the Holder shall be entitled, at any time
thereafter prior to the expiration of this Warrant, to re-exercise such put
option upon the same terms of the prior exercise thereof upon the terms and
conditions set forth in Section 7.
11. CERTAIN NOTICES. In case at any time the Company shall propose or
have knowledge of any proposal:
(a) to pay any dividend or make any distribution on
Shares of Common Stock or to fix a record date for the making of any
such dividend or distribution to holders of Common Stock; or
(b) to take, or fix a record date for, any action that would
result in any adjustment to the Exercise Price pursuant to Section 5;
or
(c) to effect any reclassification or change of
outstanding Shares of Common Stock, or consolidation or merger, or
sale, lease or conveyance of property, of the type addressed in
Section 8; or
(d) to effect any voluntary or involuntary liquidation,
dissolution or winding-up of the Company;
then, and in any one or more of such cases, the Company shall give written
notice thereof to the Holder at least 30 days prior to the date on which (i)
the books of the Company shall close, or a record date shall be set, for any
such action described in Section 11 (a) or (b) or (ii) such reclassification,
change, consolidation, merger, sale, lease, conveyance, liquidation,
dissolution or winding-up shall be effective, as the case may be.
12. EXPENSES. The Company shall pay all costs, fees, taxes (other
than stock transfer taxes) and expenses payable in connection with the
preparation, issuance and delivery from time to time of Warrants and of Shares
of Common Stock issued upon the exercise of Warrants.
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13. RESTRICTIONS ON TRANSFER. This Warrant and the Shares of
Common Stock or other securities issued upon exercise of this Warrant shall be
subject to a stop-transfer order (except with respect to a transfer by the
original Holder of this Warrant to its partners) and the certificate or
certificates evidencing any such Shares or securities shall bear the following
legend, unless in the opinion of counsel to the Holder exercising any Warrant
such legend is not required in order to comply with the Securities Act of 1933,
as amended (the "Securities Act"), which opinion shall be reasonably
satisfactory to the Company, or unless the offering and sale of the Shares or
other securities issued upon exercise of the Warrants have been registered
under the Securities Act, and in each such case such restriction on transfer
and legend shall be removed:
"THE SHARES (OR OTHER SECURITIES) REPRESENTED BY THIS CERTIFICATE HAVE BEEN
ACQUIRED FOR INVESTMENT AND HAVE NOT BEEN REGISTERED UNDER THE SECURITIES ACT
OF 1933, AS AMENDED, OR THE SECURITIES LAWS OF ANY STATE OR OTHER JURISDICTION.
SUCH SECURITIES MAY NOT BE SOLD, ASSIGNED OR OTHERWISE TRANSFERRED EXCEPT UPON
SUCH REGISTRATION OR UPON DELIVERY TO THE CORPORATION OF AN OPINION OF COUNSEL
REASONABLY SATISFACTORY TO THE CORPORATION STATING THAT SUCH SALE, ASSIGNMENT
OR TRANSFER IS EXEMPT FROM REGISTRATION UNDER SUCH ACT AND LAWS."
14. REGISTRATION OF COMMON STOCK; LISTING. If any Shares of Common
Stock required to be reserved for purposes of exercise of this Warrant 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 Section 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
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information as may be necessary for such holder to complete and file any
information reporting forms presently or hereafter required by the Commission
as a condition to the availability of an exemption from the Securities Act for
the sale of any restricted securities or the sale of securities by affiliates.
The Company will furnish to each Holder of a Warrant, promptly upon their
becoming available, copies of all financial statements, reports, notices and
proxy statements sent or made available generally by the Company to its
stockholders, and copies of all regular and periodic reports and all
registration statements and prospectuses filed by the Company with any
securities exchange or with the Commission. The Company will also furnish each
Holder with copies of all minutes of all meetings of the Company's Board of
Directors or any committee thereof, forthwith after such minutes have been
prepared.
(b) The Holder agrees to accept and maintain on a confidential
basis as Provided in this Section 15(b), all information obtained by it
pursuant to Section 15(a) or otherwise under this Agreement (such information
is referred to for purposes of this Section 15(b) as "Information"). The Holder
agrees that unless it receives the express written permission of the Company or
is otherwise required to make disclosure by law, a regulation of a national
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 Competitor"),
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 thereof) that is a Company Competitor, upon the occurrence and
continuance of any Event of Default (as such term is defined in the Note
Agreement), disclose Information to any such prospective purchaser; (iii)
disclose Information to the Holder's legal counsel or auditors, so long as such
disclosures are held in confidence by the recipients thereof; and (iv) so long
as The Catalyst Fund, Ltd. is a Person constituting the Holder, disclose
information to any Person who is an equity investor in The Catalyst Fund, Ltd.
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16. LOSS, 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 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 I 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
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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.
THIS WARRANT IS ISSUED IN SUBSTITUTION FOR AND REPLACEMENT OF THAT
CERTAIN WARRANT NO. 3 ISSUED BY THE COMPANY TO THE HOLDER DATED OCTOBER 6,
1996, SUCH WARRANT NO. 3 BEING HEREBY DEEMED CANCELLED.
IN WITNESS WHEREOF, the Company has caused this Warrant to be duly executed
and attested by its Secretary.
Dated: April 14, 1997 ACR GROUP, INC.
By: /s/ ▇▇▇▇ ▇▇▇▇▇▇▇, JR.
----------------------------
▇▇▇▇ ▇▇▇▇▇▇▇, Jr., President
Attest:
/s/▇▇▇▇▇▇▇ ▇. ▇▇▇▇▇▇▇
-------------------------------
▇▇▇▇▇▇▇ ▇. ▇▇▇▇▇▇▇, Secretary
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EXHIBIT A TO WARRANT
To: ACR Group, Inc.
▇▇▇▇ ▇▇▇▇▇▇▇▇, #▇▇▇
▇▇▇▇▇▇▇, ▇▇▇▇▇ ▇▇▇▇▇
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:
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(Print)
---------------------------------
(Signature)
Address:
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