SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, DC 20549
SCHEDULE 13D
Under the Securities Exchange Act of 1934
(Amendment No. 1)
ACR GROUP, INC.
(Name of Issuer)
COMMON STOCK, PAR VALUE $.01 PER SHARE
(Title of class of securities)
00087B101
(CUSIP number)
JOHN L. THOMPSON
ST. JAMES CAPITAL PARTNERS, L.P.
c/o ST. JAMES CAPITAL CORP.
1980 POST OAK BOULEVARD, SUITE 2030
HOUSTON, TEXAS 77056
(713) 871-0799
(Name, address and telephone number of person
authorized to receive notices and communications)
January 27, 1997
(Date of event which requires filing of this statement)
If the filing person has previously filed a statement on Schedule 13G to
report the acquisition which is the subject of this Schedule 13D, and is filing
this schedule because of Rule 13d-1(b)(3) or (4), check the following box. |_|
Check the following box if a fee is being paid with this statement. |_|
The information required in the remainder of this cover page shall not be
deemed to be filed for the purpose of Section 18 of the Securities Exchange Act
of 1934 ("Act") or otherwise subject to the liabilities of that section of the
Act but shall be subject to all other provisions of the Act.
<PAGE>
CUSIP No. 00087B101
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1 NAME OF REPORTING PERSONS St. James Capital Partners, L.P.
S.S. OR I.R.S. IDENTIFICATION NOS. OF ABOVE PERSONS 76-0478198
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2 CHECK THE APPROPRIATE BOX IF A MEMBER OF A GROUP (a) |_|
(b) |_|
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3 SEC USE ONLY
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4 SOURCE OF FUNDS WC
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5 CHECK BOX IF DISCLOSURE OF LEGAL PROCEEDINGS IS REQUIRED PURSUANT
TO ITEM 2(d) OR 2(e) |_|
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6 CITIZENSHIP OR PLACE OF ORGANIZATION Delaware
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NUMBER OF 7 SOLE VOTING POWER 1,418,229
SHARES --------------------------------------------------------
BENEFICIALLY 8 SHARED VOTING POWER 0
OWNED BY --------------------------------------------------------
EACH 9 SOLE DISPOSITIVE POWER 1,418,229
REPORTING --------------------------------------------------------
PERSON WITH 10 SHARED DISPOSITIVE POWER 0
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11 AGGREGATE AMOUNT BENEFICIALLY OWNED BY EACH
REPORTING PERSON 1,418,229
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12 CHECK BOX IF THE AGGREGATE AMOUNT IN ROW (11) EXCLUDES
CERTAIN SHARES |_|
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13 PERCENT OF CLASS REPRESENTED BY AMOUNT IN ROW (11) 12.3
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14 TYPE OF REPORTING PERSON PN
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<PAGE>
ITEM 1. Security and Issuer.
St. James Capital Partners, L.P., a Delaware investment limited partnership (the
"Partnership"), has acquired beneficial ownership of 1,418,229 shares (the
"Shares") of the common stock, par value $.01 per share (the "Common Stock"), of
ACR Group, Inc., a Texas corporation ("ACR"). The address of ACR's offices is
3200 Wilcrest Drive, Suite 440, Houston, Texas 77042.
ITEM 2. Identity and Background.
St. James Capital Corp., a Delaware corporation ("SJCC"), is the general partner
of the Partnership. The directors of SJCC are Charles E. Underbrink, John L.
Thompson, Alan D. Feinsilver, Titus H. Harris, Jr. and William H. Wagner. The
executive officers of SJCC are Messrs. Underbrink, Thompson, Feinsilver and Ron
Latta. The business address of SJCC and each of its executive officers is 1980
Post Oak Boulevard, Suite 2030, Houston, Texas 77056. The principal occupation
of each of the executive officers and directors of SJCC is investment management
and each is a citizen of the United States. Mr. Harris is the Chairman of the
Board of Harris, Webb & Garrison, a regional investment banking firm with its
principal business address at 5599 San Felipe, Suite 301, Houston, Texas 77057.
Mr. Wagner is the Managing Director of SV Capital Management, a private equity
firm with its principal business address at 200 Concord, Suite 620, San Antonio,
Texas 78216. None of SJCC or its executive officers and directors has been
convicted in a criminal proceeding (excluding traffic violations or similar
misdemeanors) during the last five years and has not been subject to a judgment,
decree or final order enjoining future violations of, or prohibiting or
mandating activities subject to, Federal or State securities laws or finding any
violation with respect to such laws.
ITEM 3. Source and Amount of Funds or Other Consideration.
All of the funds used for the purchase of the Shares came from current working
capital of the Partnership, funded by its partners. None of the funds used to
purchase the Shares were borrowed.
ITEM 4. Purpose of Transaction.
The Partnership has acquired its beneficial ownership in the Shares for
investment purposes only. The Partnership intends to continuously review its
investment in ACR. Depending upon future evaluations of the business prospects
of ACR and upon other developments, including, but not limited to, general
economic and business conditions and stock market conditions, the Partnership
may determine from time to time to purchase additional shares of Common Stock,
exercise any of the warrants described in Item 5, convert the Convertible Note
(as defined hereinafter) and dispose of all or a portion of any shares of Common
Stock acquired, or a combination thereof.
ITEM 5. Interest in Securities of the Issuer.
The Partnership beneficially owns 1,418,229 shares of Common Stock, which
represent 12.34% of the outstanding shares of Common Stock. The Partnership has
the sole power to vote and dispose the Shares. On October 18, 1996, the
Partnership acquired 37,500 shares of Common Stock for $1.59375 per share in an
open market transaction. On October 14, 1996, the Partnership acquired warrants
to purchase an aggregate of 250,000 shares of Common Stock in exchange for
$227,500. On October 2 and 3, 1996, the Partnership acquired 50,000 and 207,674
shares of Common Stock, respectively, in privately negotiated transactions, at a
price of $1.25 per share of Common Stock.
Page 3
<PAGE>
On January 27, 1997, the Partnership acquired additional warrants to purchase an
aggregate of 280,000 shares of Common Stock and a Convertible Promissory Note in
the principal amount of $1,400,000 (the "Convertible Note") in exchange for
$1,400,280. The unpaid principal amount of the Convertible Note, together with
any unpaid interest accrued thereon, is convertible in whole or in part at any
time into shares of Common Stock based on a conversion price of $2.40 per share,
subject to adjustment for certain dilutive events. The Partnership has the right
to acquire up to 593,055 shares of Common Stock upon the conversion of the
Convertible Note within the next sixty (60) days.
SJCC and the limited partners of the Partnership are entitled to profits and
losses resulting from any disposition of the Shares in accordance with the
provisions of the Partnership's Agreement of Limited Partnership (the
"Partnership Agreement").
ITEM 6. Contracts, Arrangements, Understandings, or Relationships with Respect
to Securities of the Issuer.
250,000 of the Shares are issuable pursuant to Warrants for the Purchase of
Shares of Common Stock acquired by the Partnership on October 14, 1996. Such
warrants are presently exercisable at an exercise price of .58594 per share,
subject to adjustment for certain dilutive events, and are evidenced by a
Warrant Certificate dated October 9, 1996. These warrants expire on May 26,
1999.
Effective as of January 24, 1996, ACR and the Partnership entered into a
financing arrangement pursuant to which ACR agreed to issue additional warrants
and the Convertible Note in exchange for $1,400,280 (the "Financing"). The terms
and conditions of the Financing are governed by that certain Agreement of
Purchase and Sale dated January 24, 1997 by and between ACR and the Partnership.
The Financing closed on January 27, 1997.
280,000 of the Shares are issuable pursuant to Warrants for the Purchase of
Shares of Common Stock issued to the Partnership in connection with the
Financing. Such warrants are presently exercisable at a price of $2.40 per
share, subject to adjustment for certain dilutive events, and are evidenced by a
Warrant Certificate dated January 24, 1997. These warrants expire on January 24,
2002.
Up to 593,055 of the Shares shall be issuable upon conversion of the Convertible
Note within the next sixty (60) days. The Convertible Note bears interest at a
rate of ten percent (10%) per annum and may be converted by the Partnership at
any time. ACR has the right to require conversion of the Convertible Note if the
market price for a share of Common Stock as of the last trade of each of twenty
(20) consecutive trading days is $3.25 or more.
Additionally, on January 24, 1997, ACR and the Partnership executed a
Registration Rights Agreement pursuant to which ACR granted to the Partnership
certain demand and piggy-back registration rights with respect to the Shares
that are issuable upon conversion of the Convertible Note and upon exercise of
the warrants issued in connection with the Financing (the "Registration Rights
Agreement"). The Registration Rights Agreement contains standard standstill and
indemnification provisions and contains a provision providing for the amendment
of the Registration Rights Agreement to incorporate the terms of any more
favorable registration rights granted to a third party by ACR.
SJCC and the limited partners of the Partnership are entitled to profits and
losses resulting from any disposition of the Shares in accordance with the
provisions of the Partnership Agreement. Except as set forth above, no contract,
agreement, understanding or relationship relates to the transfer or voting of
any security, finder's fee, joint ventures, loan or option arrangements, puts or
calls, guarantees of profits, divisions of profits or loss, or the giving or
withholding of proxies.
Page 4
<PAGE>
ITEM 7. Exhibits.
Exhibit No. Description of Exhibit
- ----------- ----------------------
1 -- Registration Rights Agreement dated January 24, 1997 by and between ACR
and the Partnership.
Signature
After reasonable inquiry and to the best of my knowledge and belief, I certify
that the information set forth in this statement is true, complete and correct.
BY: ST. JAMES CAPITAL CORP.,
general partner
February 5, 1997
(Date)
/s/ JOHN L. THOMPSON
(Signature)
JOHN L. THOMPSON, PRESIDENT
(Name/Title)
Page 5
EXHIBIT 1
REGISTRATION RIGHTS AGREEMENT
THIS REGISTRATION RIGHTS AGREEMENT (this "Registration Rights Agreement")
is made as of January 24, 1997, by and between ACR Group, Inc., a Texas
corporation (the"Company"), and St. James Capital Partners, L.P., a Delaware
limited partnership ("Purchaser").
WHEREAS, on the date hereof, Purchaser acquired from the Company a 10%
Convertible Promissory Note (the "Note") in the original principal amount of
$1,400,000, which is convertible into a number of shares as set forth in the
Note (the "Note Shares") of the Company's common stock, $.01 par value (the
"Common Stock");
WHEREAS, on the date hereof, Purchaser received from the Company Warrants
to Purchase Common Stock (the "Warrants") which may be exercised to acquire a
certain number of shares of Common Stock, subject to adjustment (the "Warrant
Shares"; the Note Shares and the Warrant Shares are collectively referred to as
the "Shares");
WHEREAS, the Company wishes to grant Purchaser certain registration rights
in respect of the Shares, as set forth herein.
NOW, THEREFORE, in consideration of the mutual promises and covenants set
forth herein, the parties hereby agree as follows:
ARTICLE I
DEFINITIONS
As used in this Agreement, the following terms shall have the meanings set
forth below:
"COMMISSION" shall mean the Securities and Exchange Commission or any
other federal agency at the time administering the Securities Act.
"PURCHASER" shall mean St. James Capital Partners, L.P., a Delaware
limited partnership.
"REGISTRABLE SECURITIES" shall mean (i) the Shares; and (ii) any Common
Stock issued or issuable at any time or from time to time in respect of the
Shares upon a stock split, stock dividend, recapitalization or other similar
event involving the Company.
The terms "REGISTER", "REGISTERED," and "REGISTRATION" refer to a
registration effected by preparing and filing a registration statement in
compliance with the Securities Act, and the declaration or ordering by the
Commission of the effectiveness of such registration statement.
"REGISTRATION EXPENSES" shall mean all expenses, other than Selling
Expenses (as defined below), incurred by the Company in complying with this
Registration Rights Agreement, including, without limitation, all registration,
qualification and filing fees, exchange listing fees, printing expenses, escrow
fees, fees and disbursements of counsel for the Company, blue sky fees and
expenses, the expense of any special audits incident to or required by any such
registration (but excluding the compensation of regular employees of the Company
which shall be paid in any event by the Company).
"SECURITIES ACT" shall mean the Securities Act of 1933, as amended, or any
similar federal statute and the rules and regulations of the Commission
thereunder, all as the same shall be in effect at the time.
<PAGE>
"SELLING EXPENSES" shall mean all underwriting discounts, selling
commissions and stock transfer taxes applicable to the securities registered by
the holders of the Registrable Securities and, except as set forth above, all
fees and disbursements of counsel for such holders.
"UNDERWRITTEN PUBLIC OFFERING" shall mean a public offering in which the
Common Stock is offered and sold on a firm commitment basis through one or more
underwriters, all pursuant to (i) an effective registration statement under the
Securities Act and (ii) an underwriting agreement between the Company and such
underwriters.
ARTICLE II
REGISTRATION RIGHTS
2. 1 DEMAND REGISTRATION.
2.1.1 At anytime and from time to time, a holder or holders of
Registrable Securities holding in the aggregate at least 50% of the then
existing Registrable Securities may make a one-time written demand upon the
Company, to file, within 60 days after such written demand is made, with the
Securities and Exchange Commission a shelf registration statement covering the
resale of the Registrable Securities on Form S-1, S-2 or S-3 (the "Registration
Statement"). The Company shall use its reasonable best efforts to cause such
Registration Statement to become effective as soon as practicable and to cause
the Registrable Securities to be qualified in such state jurisdictions as the
holders may request.
2.1.2 Except as set forth herein, the Company shall take all
reasonable steps necessary to keep the Registration Statement current and
effective until the lesser of: (i) three years and (ii) until the Registrable
Securities are transferable pursuant to Rule 144 under the Securities Act
without the volume limitations set forth in such rule.
2.1.3 The Company shall be entitled to require that a holder or
holders of Registrable Securities refrain from effecting any public sales or
distributions of the Registrable Securities pursuant to a Registration Statement
that has been declared effective by the Commission or otherwise, if the board of
directors of the Company reasonably determines that such public sales or
distributions would interfere in any material respect with any transaction
involving the Company that the board of directors reasonably determines to be
material to the Company. The board of directors shall, as promptly as
practicable, give the holders of the Registrable Securities written notice of
any such development. In the event of a request by the board of directors of the
Company that the holders of Registrable Securities refrain from effecting any
public sales or distributions of the Registrable Securities, the Company shall
be required to lift such restrictions regarding effecting public sales or
distributions of the Registrable Securities as soon as reasonably practicable
after the board of directors shall reasonably determine public sales or
distributions by the holders of the Registrable Securities shall not interfere
with such transaction, PROVIDED, that in no event shall any requirement that the
holders of Registrable Securities refrain from effecting public sales or
distributions in the Registrable Securities extend for more than 90 days.
2.2 PIGGYBACK REGISTRATION.
2.2.1 Subject to the terms hereof, if at any time or from time to
time the Company or any shareholder of the Company shall determine to register
any of its securities (except for registration statements relating to employee
benefit plans or exchange offers), either for its own account or the account of
a security holder, the Company will promptly give to the holders of Registrable
Securities written notice thereof no less the 30 days prior to the filing of any
registration statement; and include in such registration (and any related
qualification under blue sky laws or other compliance), and in the
<PAGE>
underwriting involved therein, if any, such Registrable Securities as such
holders may request in a writing delivered to the Company within 20 days after
the holders' receipt of Company's written notice.
2.2.2 The holders of Registrable Securities may participate in any
number of registrations until all of the Shares held by holders of Registrable
Securities have been distributed pursuant to a registration or until the Shares
are transferable pursuant to Rule 144 under the Securities Act.
2.2.3 If any registration statement is an Underwritten Public
Offering, the right of holders of Registrable Securities to registration
pursuant to this Section shall be conditioned upon each such holder's
participation in such reasonable underwriting arrangements as the Company shall
make regarding the offering, and the inclusion of Registrable Securities in the
underwriting shall be limited to the extent provided herein. Holders of
Registrable Securities and all other shareholders proposing to distribute their
securities through such underwriting shall (together with the Company and the
other holders distributing their securities through such underwriting) enter
into an underwriting agreement in customary form with the managing underwriter
selected for such underwriting by the Company. Notwithstanding any other
provision of this Section, if the managing underwriter concludes in its
reasonable judgment that the number of shares to be registered for selling
shareholders (including the holders of Registrable Securities) would materially
adversely effect such offering, the number of Shares to be registered, together
with the number of shares of Common Stock or other securities held by other
shareholders proposed to be registered in such offering, shall be reduced on a
pro rata basis based on the number of Shares proposed to be sold by the holders
of Registrable Securities as compared to the number of shares proposed to be
sold by all shareholders. If any holder of Registrable Securities disapproves of
the terms of any such underwriting, it may elect to withdraw therefrom by
written notice to the Company and the managing underwriter, delivered not less
than 10 days before the effective date. The Registrable Securities excluded by
the managing underwriter or withdrawn from such underwriting shall be withdrawn
from such registration, and shall not be transferred in a public distribution
prior to 120 days after the effective date of the registration statement
relating thereto, or such other shorter period of time as the underwriters may
require.
2.2.4 The Company shall have the right to terminate or withdraw any
registration initiated by it under this Section prior to the effectiveness of
such registration whether or not the holders of Registrable Securities have
elected to include securities in such registration.
2.3 EXPENSES OF REGISTRATION. All Registration Expenses shall be borne by
the Company. Unless otherwise stated herein, all Selling Expenses relating to
securities registered on behalf of the holders of Registrable Securities shall
be borne by the holders of Registrable Securities.
2.4 BEST REGISTRATION RIGHTS. If, on or after the date of this
Registration Rights Agreement, the Company grants to any person with respect to
any security issued by the Company or any of its Subsidiaries registration
rights that provide for terms that are in any manner more favorable to the
holder of such registration rights than the terms granted to the Purchaser (or
if the Company amends or waives any provision of any Agreement providing
registration rights of others or takes any other action whatsoever to provide
for terms that are more favorable to other holders than the terms provided to
the Purchaser) then this Registration Rights Agreement shall immediately be
deemed amended to provide the holders of Registrable Securities with any (or
all) of such more favorable terms as the holders of Registrable Securities shall
elect to include herein.
2.5 REGISTRATION PROCEDURES. In the case of each registration,
qualification or compliance effected by the Company pursuant to this
Registration Rights Agreement, the Company will keep the holders of Registrable
Securities advised in writing as to the initiation of each registration,
qualification and compliance and as to the completion thereof. At its expense,
the Company will:
<PAGE>
2.5.1 Prepare and file with the Commission a registration statement
with respect to such securities and use its commercially reasonable efforts to
cause such registration statement to become and remain effective until the
distribution described in such registration statement has been completed;
2.5.2 Furnish to each underwriter such number of copies of a
prospectus, including a preliminary prospectus, in conformity with the
requirements of the Securities Act, and such other documents as such underwriter
may reasonably request in order to facilitate the public sale of the shares by
such underwriter, and promptly furnish to each underwriter and the holders of
Registrable Securities notice of any stop-order or similar notice issued by the
Commission or any state agency charged with the regulation of securities, and
notice of any Nasdaq or securities exchange listing; and
2.5.3 Cause the Shares to be listed on the Nasdaq small-cap market
or a securities exchange on which the Common Stock is approved for listing.
2.6 INDEMNIFICATION.
2.6.1 To the extent permitted by law, the Company will indemnify
each holder of Registrable Securities, each of its officers and directors and
partners, and each person controlling such holder within the meaning of Section
15 of the Securities Act, with respect to which registration, qualification or
compliance has been effected pursuant to this Agreement, and each underwriter,
if any, and each person who controls any underwriter within the meaning of
Section 15 of the Securities Act, against all expenses, claims, losses, damages
or liabilities (or actions in respect thereof), including any of the foregoing
incurred in settlement of any litigation, commenced or threatened, to the extent
such expenses, claims, losses, damages or liabilities arise out of or are based
on any untrue statement (or alleged untrue statement) of a material fact
contained in any registration statement, prospectus, offering circular or other
similar document, or any amendment or supplement thereto, incident to any such
registration, qualification or compliance, or based on any omission (or alleged
omission) to state therein a material fact required to be stated therein or
necessary to make the statements therein, in light of the circumstances in which
they were made, not misleading, or any violation by the Company of the
Securities Act or any rule or regulation promulgated under the Securities Act
applicable to the Company in connection with any such registration,
qualification or compliance, and the Company will reimburse each holder of
Registrable Securities, each of its officers and directors and partners, and
each person controlling each holder of Registrable Securities, each such
underwriter and each person who controls any such underwriter, for any legal and
any other expenses reasonably incurred in connection with investigating,
preparing or defending any such claim, loss, damage, liability or action;
provided, however, that the indemnity contained herein shall not apply to
amounts paid in settlement of any claim, loss, damage, liability or expense if
settlement is effected without the consent of the Company (which consent shall
not unreasonably be withheld); provided, further, that the Company will not be
liable in any such case to the extent that any such claim, loss, damage,
liability or expense arises out of or is based on any untrue statement or
omission or alleged untrue statement or omission, made in reliance upon and in
conformity with written information furnished to the Company by a holder of
Registrable Securities, such controlling person or such underwriter specifically
for use therein. Notwithstanding the foregoing, insofar as the foregoing
indemnity relates to any such untrue statement (or alleged untrue statement) or
omission (or alleged omission) made in the preliminary prospectus but eliminated
or remedied in the amended prospectus on file with the Commission at the time
the registration statement becomes effective or in the final prospectus filed
with the Commission pursuant to the applicable rules of the Commission or in any
supplement or addendum thereto, the indemnity agreement herein shall not inure
to the benefit of any underwriter if a copy of the final prospectus filed
pursuant to such rules, together with all supplements and addenda thereto, was
not furnished to the person or entity asserting the loss, liability, claim or
damage at or prior to the time such furnishing is required by the Securities
Act.
<PAGE>
2.6.2 To the extent permitted by law, each holder of Registrable
Securities will, if securities held by such holder are included in the
securities as to which such registration, qualification or compliance is being
effected pursuant to terms hereof, indemnify the Company, each of its directors
and officers, each underwriter, if any, of the Company's securities covered by
such a registration statement, each person who controls the Company or such
underwriter within the meaning of Section 15 of the Securities Act, and each
other person selling the Company's securities covered by such registration
statement, each of such person's officers and directors and each person
controlling such persons within the meaning of Section 15 of the Securities Act,
against all claims, losses, damages and liabilities (or actions in respect
thereof) arising out of or based on any untrue statement (or alleged untrue
statement) of a material fact contained in any such registration statement,
prospectus, offering circular or other document, or any omission (or alleged
omission) to state therein a material fact required to be stated therein or
necessary to make the statements therein not misleading, or any violation by a
holder of Registrable Securities of any rule or regulation promulgated under the
Securities Act applicable to holders of Registrable Securities and relating to
action or inaction required of holders of Registrable Securities in connection
with any such registration, qualification or compliance, and will reimburse the
Company, such other persons, such directors, officers, persons, underwriters or
control persons for any legal or other expenses reasonably incurred in
connection with investigating or defending any such claim, loss, damage,
liability or action, in each case to the extent, but only to the extent, that
such untrue statement (or alleged untrue statement) or omission (or alleged
omission) is made in such registration statement, prospectus, offering circular
or other document in reliance upon and in conformity with written information
furnished to the Company by such holder of Registrable Securities specifically
for use therein; provided, however, that the indemnity contained herein shall
not apply to amounts paid in settlement of any claim, loss, damage, liability or
expense if settlement is effected without the consent of such holder of
Registrable Securities (which consent shall not be unreasonably withheld).
Notwithstanding the foregoing, the liability of such holder of Registrable
Securities under this subsection (b) shall be limited in an amount equal to the
net proceeds from the sale of the shares sold by such holder of Registrable
Securities, unless such liability arises out of or is based on willful conduct
by such holder of Registrable Securities. In addition, insofar as the foregoing
indemnity relates to any such untrue statement (or alleged untrue statement) or
omission (or alleged omission) made in the preliminary prospectus but eliminated
or remedied in the amended prospectus on file with the Commission at the time
the registration statement becomes effective or in the final prospectus filed
pursuant to applicable rules of the Commission or in any supplement or addendum
thereto, the indemnity agreement herein shall not inure to the benefit of the
Company or any underwriter, if a copy of the final prospectus filed pursuant to
such rules, together with all supplements and addenda thereto, was not furnished
to the person or entity asserting the loss, liability, claim or damage at or
prior to the time such furnishing is required by the Securities Act.
2.6.3 Notwithstanding the foregoing paragraphs (a) and (b) of this
Section, each party entitled to indemnification under this Section (the
"Indemnified Party") shall give notice to the party required to provide
indemnification (the "Indemnifying Party") promptly after such Indemnified Party
has actual knowledge of any claim as to which indemnity may be sought, and shall
permit the Indemnifying Party to assume the defense of any such claim or any
litigation resulting therefrom, provided that counsel for the Indemnifying
Party, who shall conduct the defense of such claim or litigation, shall be
approved by the Indemnified Party (whose approval shall not unreasonably be
withheld), and the Indemnified Party may participate in such defense at such
party's expense, and provided further that the failure of any Indemnified Party
to give notice as provided herein shall not relieve the Indemnifying Party of
its obligations under this Agreement unless the failure to give such notice is
materially prejudicial to an Indemnifying Party's ability to defend such action
and provided further, that the Indemnifying Party shall not assume the defense
for matters as to which there is a conflict of interest or as to which the
Indemnifying Party is asserting separate or different defenses, which defenses
are inconsistent with the defenses of the Indemnified Party. No Indemnifying
Party, in the defense of any such claim or litigation, shall, except with the
consent of each Indemnified Party, consent to entry of any judgment or enter
into
<PAGE>
any settlement which does not include as an unconditional term thereof the
giving by the claimant or plaintiff to such Indemnified Party of a release from
all liability in respect to such claim or litigation. No Indemnified Party shall
consent to entry of any judgment or enter into any settlement without the
consent of each Indemnifying Party.
2.6.4 If the indemnification provided for in this Section is
unavailable to an Indemnified Party in respect of any losses, claims, damages or
liabilities referred to therein, then each Indemnifying Party, in lieu of
indemnifying such Indemnified Party, shall contribute to the amount paid or
payable by such Indemnified Party as a result of such losses, claims, damages or
liabilities (i) in such proportion as is appropriate to reflect the relative
benefits received by the Company on the one hand and all shareholders offering
securities in the offering (the "Selling Security Holders") on the other from
the offering of the Company's securities, or (ii) if the allocation provided by
clause (i) above is not permitted by applicable law, in such proportion as is
appropriate to reflect not only the relative benefits referred to in clause (i)
above but also the relative fault of the Company on the one hand and the Selling
Security Holders on the other in connection with the statements or omissions
which resulted in such losses, claims, damages or liabilities, as well as any
other relevant equitable considerations. The relative benefits received by the
Company on the one hand and the Selling Security Holders on the other shall be
the net proceeds from the offering (before deducting expenses) received by the
Company on the one hand and the Selling Security Holders on the other. The
relative fault of the Company on the one hand and the Selling Security Holders
on the other shall be determined by reference to, among other things, whether
the untrue or alleged untrue statement of material fact or the omission or
alleged omission to state a material fact relates to information supplied by the
Company or by the Selling Security Holders and the parties' relevant intent,
knowledge, access to information and opportunity to correct or prevent such
statement or omission. The Company and the Selling Security Holders agree that
it would not be just and equitable if contribution pursuant to this Section were
based solely upon the number of entities from whom contribution was requested or
by any other method of allocation which does not take account of the equitable
considerations referred to above in this Section. The amount paid or payable by
an Indemnified Party as a result of the losses, claims, damages and liabilities
referred to above in this Section shall be deemed to include any legal or other
expenses reasonably incurred by such Indemnified Party in connection with
investigating or defending any such action or claim, subject to the provisions
hereof. Notwithstanding the provisions of this Section, no Selling Shareholder
shall be required to contribute any amount or make any other payments under this
Agreement which in the aggregate exceed the proceeds received by such Selling
Shareholder. No person guilty of fraudulent misrepresentation (within the
meaning of the Securities Act) shall be entitled to contribution from any person
who was not guilty of such fraudulent misrepresentation.
2.7 CERTAIN INFORMATION.
2.7.1 The holders of Registrable Securities agree, with respect to
any Registrable Securities included in any registration, to furnish to the
Company such information regarding such holder, the Registrable Securities and
the distribution proposed by the such holder as the Company may reasonably
request in writing and as shall be required in connection with any registration,
qualification or compliance referred to herein.
2.7.2 The failure of the holder of Registrable Securities to furnish
the information requested pursuant to Section 2.7.1 shall not affect the
obligation of the Company to the other Selling Security Holders who furnish such
information unless, in the reasonable opinion of counsel to the Company or the
underwriters, such failure impairs or may impair the legality of the
Registration Statement or the underlying offering.
2.8 RULE 144 REPORTING. With a view to making available the benefits of
certain rules and regulations of the Commission which may at any time permit the
sale of Restricted Securities (used herein
<PAGE>
as defined in Rule 144 under the Securities Act) to the public without
registration, the Company agrees to use its best lawful efforts to:
2.8.1 Make and keep public information available, as those terms are
understood and defined in Rule 144 under the Securities Act, at all times during
which the Company is subject to the reporting requirements of the Securities
Exchange Act of 1934, as amended (the "Exchange Act");
2.8.2 File with the Commission in a timely manner all reports and
other documents required of the Company under the Securities Act and the
Exchange Act (at all times during which the Company is subject to such reporting
requirements); and
2.8.3 So long as any holder of Registrable Securities owns any
Restricted Securities (as defined in Rule 144 promulgated under the Securities
Act), to furnish to such holder forthwith upon request a written statement by
the Company as to its compliance with the reporting requirements of said Rule
144 and with regard to the Securities Act and the Exchange Act (at all times
during which the Company is subject to such reporting requirements), a copy of
the most recent annual or quarterly report of the Company, and such other
reports and documents of the Company and other information in the possession of
or reasonably obtainable by the Company as such holder of Registrable Securities
may reasonably request in availing itself of any rule or regulation of the
Commission allowing such holder to sell any such securities without
registration.
2.9 TRANSFERABILITY. The rights conferred by this Agreement shall be
freely transferable to a recipient of Registrable Securities.
2.10 GOVERNING LAW. This Agreement shall be governed in all respects by
the laws of the State of Delaware.
2.11 ENTIRE AGREEMENT; AMENDMENT. This Agreement constitutes the full and
entire understanding and agreement between the parties with regard to the
subject hereof. This Agreement, or any provision hereof, may be amended, waived,
discharged or terminated upon the written consent of the Company and the
Purchaser.
2.12 NOTICES, ETC. All notices and other communications required or
permitted hereunder shall be in writing and shall be mailed by registered or
certified mail, postage prepaid, or otherwise delivered by hand or by messenger
including Federal Express or similar courier service, addressed (a) if to the
Purchaser: St. James Capital Partners, L.P., c/o St. James Capital Corp., 1980
Post Oak Boulevard, Suite 2030, Houston, Texas 77056, or at such other address
as the Purchaser shall have furnished to the Company in writing, or (b) if to
the Company: to ACR Group, Inc., 3200 Wilcrest Drive, Suite 440, Houston, Texas
77042, or at such other address as the Company shall have furnished to the
Purchaser. Each such notice or other communication shall for all purposes of
this Agreement be treated as effective upon receipt.
2.13 DELAYS OR OMISSIONS. Except as expressly provided herein, no delay or
omission to exercise any right, power or remedy accruing to any party to this
Agreement shall impair any such right, power or remedy of such party nor shall
it be construed to be a waiver of any such breach or default, or an acquiescence
therein, or of or in any similar breach or default thereafter occurring; nor
shall any waiver of any single breach or default be deemed a waiver of any other
breach or default theretofore or thereafter occurring. Any waiver, permit,
consent or approval of any kind or character on the part of any party of any
breach or default under this Agreement, or any waiver on the part of any party
of any provisions or conditions of this agreement, must be in writing and shall
be effective only to the extent specifically set forth in such writing. All
remedies, either under this Agreement or by law or otherwise afforded to any
party to this Agreement, shall be cumulative and not alternative.
<PAGE>
2.14 COUNTERPARTS. This Agreement may be executed in any number of
counterparts, each of which shall be enforceable against the parties actually
executing such counterparts, and all of which together shall constitute one
instrument.
2.15 SEVERABILITY. In the event that any provision of this Agreement
becomes or is declared by a court of competent jurisdiction to be illegal,
unenforceable or void, this Agreement shall continue in full force and effect
without said provision.
2.16 TITLES AND SUBTITLES. The titles and subtitles used in this Agreement
are used for convenience only and are not considered in construing or
interpreting this Agreement.
<PAGE>
THE COMPANY'S SIGNATURE PAGE
IN WITNESS WHEREOF, the Company has executed this agreement effective upon
the date first set forth above.
ACR GROUP, INC.
By: /s/ ALEX TREVINO, JR.
Alex Trevino, Jr., President
<PAGE>
THE PURCHASER'S SIGNATURE PAGE
IN WITNESS WHEREOF, the Purchaser has signed this Agreement as of the date
first written above.
ST. JAMES CAP TAL PARTNERS, L.P.
By: St. James Capital Corp.,
its General Partner
/s/ JOHN L. THOMPSON
John L. Thompson, President
