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EXHIBIT 10.5
REGISTRATION RIGHTS AGREEMENT
THIS REGISTRATION RIGHTS AGREEMENT (this "Agreement") is made effective
as of March 1, 1998, by and between ACR Group, Inc., a Texas corporation, and
Xxxx Xxxxxxx, Jr.
("Xxxxxxx") and Xxxxxxx X. Xxxxxxx ("Xxxxxxx").
WHEREAS, contemporaneously herewith the Company has granted to Xxxxxxx
and Xxxxxxx options (the "Options") to purchase 300,000 shares and 100,000
shares, respectively, of the common stock of the Company, par value $0.01 per
share (the "Common Stock");
WHEREAS, the Company wishes to grant the Purchaser certain registration
rights in respect of the shares of Common Stock issuable to the Purchaser upon
the exercise, in whole or in part, of the Options (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 United States Securities and Exchange
Commission or any other federal agency at the time administering the Securities
Act.
"Company" shall mean ACR Group, Inc., a Texas corporation, and any
successor entity thereof.
"Holder" shall mean, collectively, the Purchaser and any successor
person or entity having a right to exercise the Options and acquire Shares.
"Purchaser" shall mean, collectively, Xxxxxxx and Xxxxxxx.
"Registrable Securities" shall mean (i) the Shares; and (ii) any form
of security (as that term is defined in the Securities Act) issued to Holder in
exchange for the Shares.
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
Agreement, including, without limitation, all registration, qualification and
filing fees, exchange listing fees, printing expenses,
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escrow fees, fees and disbursements of counsel for the Company, blue sky fees
and expenses, the expenses 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 successor federal statute and the rules and regulations of the Commission
thereunder, all as the same shall be in effect at the time.
"Selling Expenses" shall mean all underwriting discounts, selling
commissions and stock transfer taxes applicable to the Registrable Securities
and, except as set forth above, all fees and disbursements of counsel for such
Holder.
"Underwritten Public Offering" shall mean a public offering in which
securities of the Company or any successor thereto are 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 PIGGYBACK REGISTRATION.
2.1.1 Subject to the terms of this Agreement, if at any time
or from time to time 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 shall promptly give to Holder 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 underwriting involved therein, if any,
such Registrable Securities as Holder may request in a writing delivered to the
Company within 20 days after Holders' receipt of the Company's written notice.
2.1.2 Holder may participate in any number of registrations
until all of the Registrable Securities held by Holder have been distributed
pursuant to a registration or until the Registrable Securities are transferable
pursuant to Rule 144 under the Securities Act.
2.1.3 If any registration is an Underwritten Public Offering,
the right of Holder to registration pursuant to this Article II shall be
conditioned upon 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. Holder and all other holders of securities of the Company
having similar registration
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rights to those of Holder (the "Other Holders") 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 Article II, if the managing underwriter concludes in its
reasonable judgment that the number of securities to be registered for selling
security holders (including Holder) would materially adversely affect such
offering, the number of Registrable Securities to be registered, together with
the number of securities of the Company or other securities held by Other
Holders proposed to be registered in such offering, shall be reduced on a pro
rata basis based on the number of Registrable Securities proposed to be sold by
Holder as compared to the number of securities proposed to be sold by the Other
Holders. If Holder 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.
2.1.4 The Company shall have the right to terminate or
withdraw any registration initiated by it under this Article II prior to the
effectiveness of such registration whether or not Holder has elected to include
Registrable Securities in such registration.
2.2 EXPENSES OF REGISTRATION. All Registration Expenses shall be
borne by the Company. Unless otherwise stated herein, all Selling Expenses
relating to Registrable Securities shall be borne by Holder.
2.3 REGISTRATION PROCEDURES. In the case of each registration,
qualification or compliance effected by the Company pursuant to this Agreement,
the Company will keep Holder 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:
2.3.1 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;
2.3.2 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 securities
of the Company by such underwriter, and promptly furnish to each underwriter and
Holder 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
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2.3.3 Cause the securities of the Company to be listed on the
Nasdaq small-cap market or a securities exchange on which the securities are
approved for listing.
2.4 INDEMNIFICATION.
2.4.1 To the extent permitted by law, the Company will
indemnify Holder, each of its officers and directors, and each person
controlling 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) by the Company 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) by
the Company 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 Holder, each of its
officers and directors, and each person controlling Holder, 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 or delayed); provided, however, 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 Holder, 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.
2.4.2 To the extent permitted by law, if Registrable
Securities are included in the securities as to which such registration,
qualification or compliance is being effected pursuant to
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the terms hereof, Holder shall indemnify the Company, each of its directors,
officers and shareholders, 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) by Holder to state therein a material fact required to be stated
therein or necessary to make the statements therein not misleading, or any
violation by Holder of any rule or regulation promulgated under the Securities
Act applicable to Holder and relating to action or inaction required of Holder
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 Holder 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 Holder (which consent shall not be unreasonably
withheld). Notwithstanding the foregoing, the liability of Holder under this
subsection 2.4.2 shall be limited in an amount equal to the net proceeds from
the sale of the securities sold by Holder, unless such liability arises out of
or is based on willful conduct by Holder. 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.
2.4.3 Notwithstanding the foregoing paragraphs of Section 2.4,
each party entitled to indemnification under this Section 2.4 (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 or
delayed), and the Indemnified Party may participate in such defense
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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 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.
2.4.4 If the indemnification provided for in this Section 2.4
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 holders of securities
of the Company 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 2.4 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 2.4. 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 2.4 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
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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.
2.5 CERTAIN INFORMATION.
2.5.1 Holder agrees, with respect to any Registrable
Securities included in any registration, to furnish to the Company such
information regarding Holder and the distribution proposed by 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.
2.5.2 The failure of Holder to furnish the information
requested pursuant to Section 2.5.1 shall not affect the obligations 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.
2.6 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 as defined in Rule
144 under the Securities Act) to the public without registration, the Company
agrees to use its best lawful efforts to:
2.6.1 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");
2.6.2 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
2.6.3 So long as Holder 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 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 Holder may reasonably request in availing itself of any rule or
regulation of the Commission allowing Holder to sell any such securities without
registration.
2.7 GOVERNING LAW. This Agreement shall be governed in all
respects by the laws of the State of Texas.
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2.8 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 Holder.
2.9 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. Each such notice or other
communication shall for all purposes of this Agreement be treated as effective
upon receipt.
2.10 DELAYS OR OMISSIONS. Except as expressly provided herein, no delay
or omission to exercise any right, power or remedy accruing to any party of 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.
2.11 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.
2.12 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.
2.13 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.
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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/ Xxxx Xxxxxxx, Jr.
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Name: Xxxx Xxxxxxx, Jr.
Title: President
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THE PURCHASER'S SIGNATURE PAGE
IN WITNESS WHEREOF, Xxxxxxx and Xxxxxxx have executed this Agreement
effective upon the date first set forth above.
/s/ Xxxx Xxxxxxx, Jr.
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Xxxx Xxxxxxx, Jr.
/s/ Xxxxxxx X. Xxxxxxx
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Xxxxxxx X. Xxxxxxx
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