<PAGE>
As filed with the Securities and Exchange Commission on October 15, 1996
Registration No. 333-09951
================================================================================
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
_________________________
(Amendment No. 1)
FORM S-1
REGISTRATION STATEMENT
UNDER
THE SECURITIES ACT OF 1933
_________________________
EAGLE SUPPLY GROUP, INC.
(Exact name of registrant as specified in its charter)
Delaware 5033 13-3889248
(State or other juris- (Primary Standard Industrial (I.R.S. Employer
diction of incorpora- Classification Code Number) Identification No.)
tion or organization)
122 East 42nd Street
Suite 1116
New York, New York 10168
(212) 986-6190
(Address, including zip code, and telephone number, including area code, of
registrant's principal executive offices)
_________________________
Douglas P. Fields
Chief Executive Officer
Eagle Supply Group, Inc.
122 East 42nd Street
Suite 1116
New York, New York 10168
(212) 986-6190
_________________________
(Name, address, including zip code, and telephone number, including area code,
of agent for service)
_________________________
Copies to:
Robert Perez, Esq. David A. Carter, P.A.
Gusrae, Kaplan & Bruno 355 West Palmetto Park Road
120 Wall Street Boca Raton, Florida 33432
New York, New York 10005 Tel No. (407) 750-6999
Tel No. (212) 269-1400 Fax No. (407) 367-0960
Fax No. (212) 809-5449
Approximate date of commencement of proposed sale to the public: As soon as
practicable after the effective date of this Registration Statement.
If any securities being registered on this Form are to be offered on a delayed
or continuous basis pursuant to Rule 415 under the Securities Act of 1933, check
the following box. [X]
If this Form is filed to register additional securities for an offering pursuant
to Rule 462(b) under the Securities Act, please check the following box and list
the Securities Act registration statement number of the earlier effective
registration statement for the same offering. [ ]
If this Form is a post-effective amendment filed pursuant to Rule 462(c) under
the Securities Act, check the following box and list the Securities Act
registration statement number of the earlier effective registration statement
for the same offering. [ ]
If delivery of the prospectus is expected to be made pursuant to Rule 434,
please check the following box. [ ]
_________________________
<PAGE>
CALCULATION OF REGISTRATION FEE
<TABLE>
<CAPTION>
============================================================================================
Proposed Proposed
Maximum Maximum
Title of Each Amount Offering Aggregate Amount Of
Class of Securities To Be Price Offering Registration
To Be Registered Registered Per Unit(1) Price(1) Fee
============================================================================================
<S> <C> <C> <C> <C>
Common Stock, $.0001 1,725,000(2) $5.00 $8,625,000 $2,974.14
par value
Redeemable Common Stock 1,725,000(3) $ .125 $ 215,625 $ 74.35
Purchase Warrants
Common Stock, $.0001 1,725,000 $5.00 $8,625,000 $2,974.14
par value(4)
Underwriter's Stock 150,000 $ .0001 $ 15 $ .004
Warrants(5)
Common Stock, $.0001 150,000 $8.00 $1,200,000 $ 413.79
par value(6)
Underwriter's Warrants(7) 150,000 $ .0001 $ 15 $ .004
Common Stock 150,000 $ .20 $ 30,000 $ 10.34
Purchase Warrants(8)
Common Stock, $.0001 150,000 $8.00 $1,200,000 $ 413.79
par value(9)
Redeemable Common Stock 300,000 $ .00(10) $ 0 $ .00
Purchase Warrants to be
sold by Selling
Securityholders
Common Stock, $.0001 300,000 $1.00(10) $ 300,000 $ 103.45
par value to be sold by
Selling Securityholders
Common Stock, $.0001
par value(11) 300,000 $5.00 $1,500,000 $ 517.24
---------
TOTAL $7,481.26*
=========
</TABLE>
* Filing fee paid in full with initial filing on August 12, 1996
- ----------
(1) Except as set forth in Note (10), estimated solely for purposes of
calculating the registration fee.
(2) Includes 225,000 shares of Common Stock subject to the underwriters'
overallotment option and assumes the overallotment option is exercised in
full.
(3) Includes 225,000 Redeemable Common Stock Purchase Warrants subject to the
underwriters' overallotment option and assumes the overallotment option is
exercised in full.
(4) Issuable upon exercise of the Redeemable Common Stock Purchase Warrants
referred to in the prior note.
(5) To be issued to the Underwriter, entitling the Underwriter to purchase up
to 150,000 shares of Common Stock.
(6) Issuable upon the exercise of the Underwriter's Stock Warrants.
(7) To be issued to the Underwriter, entitling the Underwriter to purchase up
to 150,000 Common Stock Purchase Warrants.
(8) Issuable upon the exercise of the Underwriter's Warrants.
(9) Issuable upon the exercise of the Common Stock Purchase Warrants identified
in the prior note.
(10) Price is based upon actual sale price paid by Selling Securityholders to
Registrant.
(11) Issuable upon the exercise of the Redeemable Common Stock Purchase Warrants
which are to be sold by the Selling Securityholders.
(ii)
<PAGE>
Pursuant to Rule 416, there are also being registered such additional but
indeterminate number of shares as may become issuable pursuant to anti-dilution
provisions of the Redeemable Common Stock Purchase Warrants and the
Underwriter's Stock Warrants
and Underwriter's Warrants.
The registrant hereby amends this Registration Statement on such date or
dates as may be necessary to delay its effective date until the registrant shall
file a further amendment which specifically states that this Registration
Statement shall thereafter become effective in accordance with Section 8(a) of
the Securities Act of 1933 or until this Registration Statement shall become
effective on such date as the Commission, acting pursuant to said Section 8(a),
may determine.
(iii)
<PAGE>
EAGLE SUPPLY GROUP, INC.
Cross Reference Sheet
Pursuant to Item 501(b) of Regulation S-K
Item of Form S-1 Location in Prospectus
1. Forepart of the Registration
Statement and Outside Front
Cover Page of Prospectus ............ Front Cover Page of Registration
Statement; Cross Reference Sheet;
Outside Front Cover Page of
Prospectus
2. Insider Front and Outside Back
Cover Pages of Prospectus ........... Inside Front Cover Page of
Prospectus; Additional Information;
Outside Back Cover Page of
Prospectus
3. Summary Information, Risk
Factors and Ratio of Earnings
to Fixed Charges .................... Prospectus Summary; Risk Factors
4. Use of Proceeds ..................... Prospectus Summary; Risk Factors;
Use of Proceeds
5. Determination of Offering Price ..... Outside Front Cover Page of
Prospectus; Underwriting
6. Dilution ............................ Dilution; Risk Factors
7. Selling Securityholders ............. Selling Securityholders
8. Plan of Distribution ................ Outside Front Cover Page of
Prospectus; Underwriting
9. Description of Securities to
be Registered ....................... Outside Front Cover Page of
Prospectus; Prospectus Summary;
Description of Capital Stock
10. Interests of Named Experts and
Counsel ............................. Legal Matters; Experts
11. Information with Respect to
the Registrant ...................... Outside Front Cover Page of
Prospectus; Prospectus Summary;
Risk Factors; Capitalization;
Unaudited Pro Forma Condensed
Consolidated Financial Statements;
Selected Financial Information;
Management's Discussion and
Analysis of Financial Condition and
Results of Operations; Business;
Management; Certain Transactions;
Principal Stockholders; Description
of Capital Stock; Dividend Policy;
Shares Eligible for Future Sale;
Financial Statements
12. Disclosure of Commission
Position on Indemnification
for Securities Act Liabilities ...... *
- ----------
* Item is inapplicable, or the answer thereto is in the negative, and is
omitted.
(iv)
<PAGE>
[FRONT COVER PAGE OF PROSPECTUS]
SUBJECT TO COMPLETION, DATED OCTOBER 15, 1996
PROSPECTUS
EAGLE SUPPLY GROUP, INC.
1,500,000 Shares of Common Stock and
1,500,000 Redeemable Common Stock Purchase Warrants
Eagle Supply Group, Inc. (the "Company") is offering hereby 1,500,000
shares of Common Stock (the "Common Stock") and 1,500,000 Redeemable Common
Stock Purchase Warrants (the "Warrants") of the Company (hereinafter the "Public
Offering"). The Common Stock and the Warrants (collectively, the "Securities")
are being separately offered and are separately transferable at any time from
the date of this Prospectus (the "Effective Date"). Each Warrant entitles the
registered holder thereof to purchase, at any time during the period commencing
on the Effective Date, one share of Common Stock at a price of $5.00 per share,
subject to adjustment under certain circumstances, for a period of three years
from the Effective Date. The Warrants offered hereby are not exercisable unless,
at the time of exercise, the Company has a current prospectus encompassing the
shares of Common Stock issuable upon exercise of the Warrants and such shares
have been registered, qualified or deemed to be exempt under the securities laws
of the states of residence of the exercising holders of the Warrants. Commencing
after the Effective Date, the Warrants are subject to redemption by the Company
at $.25 per Warrant on 30 days' prior written notice if the market price (as
defined herein) for the Company's Common Stock, as reported on a national or
regional securities exchange, as applicable, for 30 consecutive trading days
ending within 10 days of the notice of redemption of the Warrants averages at
least $10.00 per share. The Company is required to maintain an effective
registration statement with respect to the Common Stock underlying the Warrants
at the time of redemption of the Warrants. Prior to the first anniversary of the
Effective Date, the Warrants will not be redeemable by the Company without the
written consent of Barron Chase Securities, Inc. (the "Underwriter").
The offering price of the Common Stock and Warrants as well as the exercise
price and other terms of the Warrants have been determined by negotiation
between the Company and the Underwriter, and bear no relationship to the
Company's asset value, net worth or other established criteria of value. See
"RISK FACTORS" at page 12, and "UNDERWRITING." After completion of the Public
Offering, the Company's current officers and directors and their affiliates will
have voting control of approximately 54% of the outstanding shares of Common
Stock. See "Principal Stockholders."
1
<PAGE>
Also being offered for resale from time to time by this Prospectus are
300,000 shares of Common Stock, 300,000 Warrants and 300,000 shares of Common
Stock underlying said Warrants held by certain individuals (hereinafter the
"Selling Securityholders" and "Selling Securityholders' Offering"). The Selling
Securityholders may not sell their Warrants or the shares of Common Stock
underlying said Warrants for a period of twelve months from the Effective Date
without the Underwriter's consent. See "Selling Securityholders."
Prior to the Public Offering, there has been no public market for the
Common Stock or the Warrants. The Common Stock and the Warrants have been
approved for listing on __________ under the symbols "____" and "____W" ,
respectively. There is no assurance that a trading market in the Company's
Common Stock or Warrants will develop or if it does develop that it will be
sustained. The closing of the Public Offering is subject to the simultaneous
acquisition by the Company of Eagle Supply, Inc.
THESE SECURITIES INVOLVE A HIGH DEGREE OF RISK, IMMEDIATE AND SUBSTANTIAL
DILUTION AND SHOULD BE CONSIDERED ONLY BY PERSONS WHO CAN AFFORD THE LOSS OF
THEIR ENTIRE INVESTMENT. SEE "RISK FACTORS" AT PAGE 10 OF THIS PROSPECTUS.
THESE SECURITIES HAVE NOT BEEN APPROVED OR DISAPPROVED BY THE SECURITIES AND
EXCHANGE COMMISSION OR ANY STATE SECURITIES COMMISSION NOR HAS THE SECURITIES
AND EXCHANGE COMMISSION OR ANY STATE SECURITIES COMMISSION PASSED UPON THE
ACCURACY OR ADEQUACY OF THIS PROSPECTUS. ANY REPRESENTATION TO THE CONTRARY IS A
CRIMINAL OFFENSE.
================================================================================
Price to Underwriting Proceeds to
Public Discount (1) Company (2)
- --------------------------------------------------------------------------------
Per Share ......... $5.00 $0.50 $4.50
- --------------------------------------------------------------------------------
Per Warrant ....... $0.125 $0.0125 $0.1125
- --------------------------------------------------------------------------------
Total(3) .......... $7,687,500.00 $768,750.00 $6,918,750.00
================================================================================
See footnotes on following page of this Prospectus
BARRON CHASE SECURITIES
The date of this Prospectus is _____________, 1996
2
<PAGE>
Information contained herein is subject to completion or amendment. A
registration statement relating to these securities has been filed with the
Securities and Exchange Commission. These securities may not be sold nor may
offers to buy be accepted prior to the time the registration statement becomes
effective. This Prospectus shall not constitute an offer to sell or the
solicitation of an offer to buy nor shall there be any sale of these securities
in any State in which such offer, solicitation or sale would be unlawful prior
to registration or qualification under the securities laws of any such State.
[INSIDE FRONT COVER PAGE OF PROSPECTUS]
(1) Does not include additional compensation to be received by the Underwriter
in the form of (i) a non-accountable expense allowance of $230,625
($265,219 if the Underwriter's overallotment option is exercised in full);
(ii) warrants to purchase up to 150,000 shares of Common Stock and 150,000
warrants at an exercise price equal to 165% of the initial public offering
prices of the Common Stock and Warrants, during the five and three year
periods, respectively, commencing on the Effective Date (the "Underwriter's
Warrant"); and (iii) a financial advisory agreement for the Underwriter to
act as an investment banker for the Company for a period of three years
from the Effective Date at a fee of $108,000 payable at the closing of the
Public Offering. In addition, the Company has agreed to indemnify the
Underwriter against certain civil liabilities, including liabilities under
the Securities Act of 1933. See "Underwriting."
(2) Before deducting expenses of this offering payable by the Company estimated
at $470,000 (approximately 6% of the gross proceeds of the Public
Offering), excluding the Underwriter's non-accountable expense allowance.
(3) The Company has granted to the Underwriter an option, exercisable within
thirty (30) days of the Effective Date, to purchase up to 225,000
additional shares of Common Stock and 225,000 additional Warrants on the
same terms and conditions as set forth above to cover overallotments, if
any (the "Overallotment Option"). If all such additional Securities are
purchased, the Price to Public, Underwriting Discount and Proceeds to
Company will be increased to $8,840,625, $884,063 and $7,956,522,
respectively. See "Underwriting."
The Securities are offered subject to prior sale, when, as and if delivered
to and accepted by the Underwriter and subject to the approval of certain legal
matters by counsel and certain other conditions. It is expected that delivery of
certificates representing the Securities sold in the Public Offering will be
made at the offices of Barron Chase Securities, Inc., 7700 W. Camino Real, Suite
200, Boca Raton, Florida 33433-5541, on or about _________________, 1996.
The Company is not presently required to file, and has not filed, periodic
reports with the Securities and Exchange Commission (the "Commission").
Following consummation of the Public Offering, the Company intends to furnish to
its stockholders annual reports containing financial statements audited and
reported on by independent auditors and quarterly reports containing unaudited
financial information for each of the first three quarters of each fiscal year.
Stockholders will be able to obtain the most recent
3
<PAGE>
such reports by making written request therefor to the Company's stockholder
relations officer at the Company's principal executive offices located at 122
East 42nd Street, Suite 1116, New York, New York 10168.
IN CONNECTION WITH THE PUBLIC OFFERING, THE UNDERWRITER MAY OVER-ALLOT OR
EFFECT TRANSACTIONS WHICH STABILIZE OR MAINTAIN THE MARKET PRICE OF THE COMMON
STOCK AND/OR WARRANTS OF THE COMPANY AT A LEVEL ABOVE THAT WHICH MIGHT OTHERWISE
PREVAIL IN THE OPEN MARKET. SUCH STABILIZING, IF COMMENCED, MAY BE EFFECTUATED
IN THE OVER-THE-COUNTER MARKET OR OTHERWISE AND MAY BE DISCONTINUED AT ANY TIME.
[END OF INSIDE FRONT COVER PAGE]
4
<PAGE>
PROSPECTUS SUMMARY
The following summary is qualified in its entirety by the detailed
information and financial statements and notes thereto appearing elsewhere in
this Prospectus. Each prospective investor is urged to read this Prospectus in
its entirety. Except as otherwise indicated herein, the information contained in
this Prospectus gives no effect to the exercise of (i) the Overallotment Option,
(ii) the Underwriter's Warrant, (iii) all other warrants issued and outstanding
on the date of this Prospectus or (iv) options granted or to be granted under
the Company's stock option plan.
Forward looking statements made throughout this Prospectus are based on
current expectations of the Company that involve a number of risks and
uncertainties and should not be considered as guarantees of future performance.
These statements are made under the Safe Harbor Provisions of the Private
Securities Litigation Reform Act of 1995. The factors that could cause actual
results to differ materially include the Company's inability to find suitable
acquisition candidates on terms commercially reasonable to the Company,
interruption or cancellation of existing sources of supply, the pricing of and
demand for distributed products and the presence of competitors with greater
financial resources.
THE COMPANY
The Company was recently organized to raise capital and acquire, own,
integrate and operate seasoned, privately-held companies engaged in the
wholesale distribution of roofing supplies and related products industry and
companies which manufacture products for or supply products to such industry.
Simultaneously with the closing of the Public Offering, the Company will
acquire all of the issued and outstanding securities of Eagle Supply, Inc.
("Eagle") (the "Acquisition") from TDA Industries, Inc. ("TDA"), the
Company's current majority stockholder. In connection with the Acquisition,
TDA will be issued 200,000 shares of the Company's Common Stock. Such shares
will be recorded at Eagle's historical net book value at the date of the
Acquisition. As part of the Acquisition, TDA guarantees that Eagle will have
a net tangible book value of $1,000,000, with TDA retaining Eagle's net
tangible book value in excess of that amount. That consideration was
determined, without independent appraisal, by dividing the required
$1,000,000 of Eagle's net tangible book value by the public offering price of
$5.00 per share for each of the 200,000 shares. If effected as of June 30,
1996, the amount of such dividend would have been approximately $2,711,000.
Any portion of TDA's indebtedness, which was approximately $2,495,000 at June
30, 1996, to Eagle not so cancelled will be paid to Eagle by TDA within 45
days of the closing of the Public Offering and consummation of the
Acquisition. Conversely, if on the closing of the Public Offering and
consummation of the Acquisition, Eagle has any indebtedness to TDA, such
indebtedness will be paid to TDA within that same 45 day period. In the
past, a subsidiary of TDA has leased to Eagle several of Eagle's distribution
centers on a month to month basis pursuant to
5
<PAGE>
oral agreements. Rent expense for these distribution centers was approximately
$709,000 for Eagle's fiscal year ended June 30, 1996. Upon completion of the
Public Offering and consummation of the Acquisition, Eagle will enter into ten
(10) year leases for said distribution centers. Although the written leases are
to be on substantially similar economic terms as the past oral agreements, Eagle
will then be committed to pay rent for these distribution centers for a minimum
of ten (10) years. At that same time, the Company will enter into (a) five-year
employment agreements with its Chairman of the Board and Chief Executive Officer
and its Executive Vice President, Treasurer and Secretary, pursuant to which
each of such persons, who are also executive officers and directors of TDA, will
receive a salary of $200,000 per year plus substantial additional benefits,
although neither of them have committed any specified amount of time to the
Company's affairs; and (b) a month to month administrative services agreement
with TDA requiring a $3,000 monthly payment to TDA. Furthermore, as part of the
Acquisition, TDA or its relevant subsidiaries will agree to indemnify Eagle for
any payment that Eagle will be required to make pursuant to mortgages underlying
Eagle's Birmingham, Alabama, and Pensacola, Florida, distribution centers and
the mortgage and lease underlying Eagle's former Fort Lauderdale, Florida,
distribution center. Eagle, which was founded in Florida in 1905, distributes
roofing supplies and related products to contractors and subcontractors engaged
in commercial and residential roofing repair and the construction of new
residential and commercial properties. Eagle sells to more than 2,000 customers
in Florida, Alabama and the southern portions of Georgia and Mississippi using
its own direct sales force. Products distributed by Eagle include equipment,
tools and accessory products for the removal of old roofing, re-roofing and roof
construction, and related materials such as insulation, shingles, tiles, liquid
roofing materials, fasteners, ventilation materials and sheet metal of the type
used in the roofing industry. Upon consummation of the Acquisition, Eagle will
become a wholly-owned subsidiary of the Company and will constitute the sole
business operations of the Company until and unless the Company consummates
additional acquisitions. See "Risk Factors" and "Business."
During Eagle's fiscal years ended June 30, 1995 ("Fiscal 1995") and June
30, 1996 ("Fiscal 1996"), Eagle had revenues of $50,483,469 and $59,262,226,
respectively, and net income of $352,589 and $1,315,035, respectively. There can
be no assurance that the historical level of Eagle's revenues and net income
will continue to be achieved in the future. See "Risk Factors", "Business" and
"Certain Transactions."
Based upon its management's experience in the industry, the Company
believes that the roofing supplies and related products distribution industry is
fragmented and has the potential for consolidation in response to the
competitive disadvantages faced by
6
<PAGE>
smaller distributors. The Company believes that the industry is characterized by
a large number of relatively small local distribution companies, a few very
large, multi-center and multi-regional distributors and a large national
multi-center distributor. Roofing supplies products distributors are
overwhelmingly privately owned, relationship-based companies that emphasize
service, delivery and reliability as well as competitive pricing and breadth of
product line to their customers. The Company believes that the competitive
environment faced by small distributors, coupled with the desire of many owners
of such distributors for liquidity, has prompted a trend toward industry
consolidation that offers significant opportunities for expansion oriented
distributors. The Company believes that there are opportunities for a company
which has the capability to source and distribute products effectively to serve
the roofing supplies and related products markets and to effect cost savings and
increased profit opportunities through efficiencies of scale which can be
applied to companies to be acquired in the roofing supply distribution and
related products industry. The Company intends to provide expansion capital, if
necessary, and administrative and management services to acquired companies. See
"Risk Factors" and "Business."
Although the Company does not currently have any agreements, arrangements
or commitments with respect to any proposed acquisition, other than the
Acquisition, based upon its management's experience in the industry, the Company
believes that there are a number of suitable acquisition candidates that may
meet its criteria. The Company intends to seek out prospective acquisition
candidates in businesses that complement or are otherwise related to the
business of Eagle. Although the primary focus of the Company's expansion and
acquisition program will be on seeking suitable acquisition candidates which are
engaged in the wholesale distribution of roofing supplies and related products,
the Company will consider the purchase of manufacturers or vendors of products
which may be distributed through its wholesale distribution business. The
Company anticipates that it will finance future acquisitions, if any, through a
combination of cash (including a substantial portion of the net proceeds of the
Public Offering), issuances of shares of capital stock of the Company, and
additional equity or debt financing. There can be no assurance that the Company
will be able to obtain additional equity or debt financing on terms acceptable
to the Company or at all.
Management intends to pursue expansion of Eagle's operations by adding new
distribution centers by internal growth. During Fiscal 1996, Eagle opened four
new distribution centers, although one of those centers has subsequently been
closed, and is exploring the possibility of opening several more distribution
centers during its current fiscal year in its current market areas and in market
areas adjacent to its existing distribution centers. In July and August 1996,
Eagle opened new distribution centers in Clearwater, Florida and Tallahassee,
Florida, respectively.
7
<PAGE>
TDA is a holding company which operates four business enterprises,
including Eagle, and real estate investment companies. At the current time,
Eagle is wholly-owned by TDA, and during Fiscal 1996, Eagle's revenues
constituted a majority of TDA's consolidated revenues. After the successful
completion of the Public Offering and consummation of the Acquisition, TDA will
own approximately 54% of the Company's Common Stock. Certain of the Company's
officers and directors are also officers and directors of TDA (or affiliates of
TDA) and/or Eagle. See "Management", "Principal Stockholders" and "Certain
Transactions."
The Company was incorporated under the laws of the State of Delaware on May
1, 1996, and its activities to date have been limited. Certain administrative
services are provided to the Company by TDA. The Company has funded itself since
inception by initial minimal borrowing from TDA and selling 300,000 shares of
its Common Stock and 300,000 Warrants in a private offering of the Company's
securities (the "Private Placement"). The Company's executive office is located
at 122 East 42nd Street, Suite 1116, New York, New York 10168, and its telephone
number is (212) 986-6190. See "Business" and "Certain Transactions."
8
<PAGE>
THE PUBLIC OFFERING
Securities Offered ......... 1,500,000 shares of Common Stock and 1,500,000
Warrants. Each Warrant entitles the holder to
purchase one share of Common Stock at a price of
$5.00 during the three year period commencing on
the Effective Date. The exercise price and the
number of shares issuable upon exercise of the
Warrants are subject to adjustment in certain
circumstances. See "Description of Securities."
Common Stock Outstanding
Before Offering ........... 2,400,000 shares(1)
After Offering ............ 4,100,000 shares(2)
Use of Proceeds ............. To finance acquisitions of companies operating
primarily in the roofing supplies and related
products industry, expand Eagle's operations and
for working capital purposes, including general
corporate purposes of the Company and Eagle. See
"Use of Proceeds," "Capitalization" and "Certain
Transactions."
Risk Factors ................ Investment in the Securities offered hereby
involves a high degree of risk and immediate
substantial dilution. See "Risk Factors" and
"Dilution."
__________ Symbols:(3)
Common Stock .............. __________
Warrants .................. __________W
- ----------
(1) Excludes 200,000 shares of Common Stock to be issued to TDA in connection
with the Acquisition. See "Certain Transactions."
(2) Includes 200,000 shares of Common Stock to be issued to TDA in connection
with the Acquisition but does not include (i) 225,000 shares of Common
Stock, 225,000 Warrants and 225,000 shares of Common Stock underlying such
Warrants subject to the Underwriter's Overallotment Option; (ii) 1,500,000
shares of Common Stock issuable upon the exercise of the Warrants; (iii)
300,000 shares of Common Stock issuable upon the exercise of the Company's
outstanding Warrants; (iv) 300,000 shares of Common Stock issuable upon the
exercise of the Underwriter's Warrant; and (v) 1,000,000 shares of Common
Stock reserved for issuance pursuant to the Company's stock option plan of
which 450,000 shares of Common Stock are reserved for options to be granted
upon completion of the Public Offering. See "Management", "Certain
Transactions," "Underwriting," "Description of Securities" and "Selling
Securityholders."
(3) There is no assurance that a trading market will develop for the Company's
Common Stock and Warrants or that, if developed, it will be sustained.
9
<PAGE>
Summary Financial Data
(in thousands, except share and per share data)
<TABLE>
<CAPTION>
Pro Forma
Year Ended June 30, Year Ended
--------------------------------------------- June 30,
1996 1995 1994 1993 1992 1996(5)
---- ---- ---- ---- ---- ----------
<S> <C> <C> <C> <C> <C> <C>
Statement of Operations Data(1):
Revenues ........................ $59,262 $50,483 $53,925 $66,552 $46,484 $ 59,262
Gross Profit .................... 12,577 9,740 10,658 14,933 9,668 12,577
Income From Operations .......... 2,689 833 743 4,159 2,070 2,253
Net Income ...................... 1,315 353 464 2,622 1,334 1,044
Pro Forma Net Income Per
Share ........................... $ .40
==========
Pro Forma Weighted Average Number
of Shares Outstanding(2) ........ 2,600,000
==========
</TABLE>
<TABLE>
<CAPTION>
Eagle The Company
June 30, June 30, 1996
---------------------------------------------- -----------------------------------
As Pro
1996 1995 1994 1993 1992 Historical Adjusted(3) Forma(4)
---- ---- ---- ---- ---- ---------- -------- -----
<S> <C> <C> <C> <C> <C> <C> <C> <C>
Balance Sheet
Data(1):
Working
Capital ......... $ 5,037 $ 5,665 $ 4,785 $ 5,963 $ 5,109 $ 294 $6,512 $11,333
Total Assets .... 17,973 17,831 12,947 17,190 12,582 300 6,518 21,781
Long-Term
Debt ............ 5,164 6,290 -- -- -- -- -- 5,164
Total Liabilities 14,261 14,338 9,385 13,450 10,136 6 6 14,269
Stockholders'
Equity .......... 3,711 3,493 3,562 3,720 2,447 294 6,512 7,512
</TABLE>
- ----------
(1) Historical operating data was derived from the financial statements of
Eagle because the Company was organized in May 1996 and has not had any
operating activity to date.
10
<PAGE>
(2) The pro forma weighted average number of shares outstanding includes the
2,100,000 shares of Common Stock issued in connection with the Company's
initial capitalization, 300,000 shares issued in the Private Placement and
200,000 shares of Common Stock to be issued to TDA in connection with the
Acquisition. The 200,000 shares to be issued to TDA in connection with the
Acquisition are not included in the Securities offered hereby and have been
valued at the public offering price of $5.00 per share which will
approximate Eagle's historical aggregate net tangible book value at the
date of the Acquisition. See "Certain Transactions," "Risk Factors" and the
Financial Statements and the notes thereto.
(3) Reflects the Private Placement, the Public Offering of 1,500,000 shares of
Common Stock and a like number of Warrants at initial public offering
prices of $5.00 per share of Common Stock and $.125 per Warrant and the
application of the net proceeds therefrom but does not reflect the
consummation of the Acquisition. See the Unaudited Pro Forma Condensed
Consolidated Balance Sheet, "Management's Discussion and Analysis of
Financial Condition and Results of Operations," "Certain Transactions" and
the Financial Statements and the notes thereto.
(4) Reflects the Private Placement, the Public Offering of 1,500,000 shares of
Common Stock and a like number of Warrants at initial public offering
prices of $5.00 per share of Common Stock and $.125 per Warrant, the
application of the net proceeds therefrom and the consummation of the
Acquisition. See the Unaudited Pro Forma Condensed Consolidated Balance
Sheet, "Management's Discussion and Analysis of Financial Condition and
Results of Operations," "Certain Transactions" and the Financial Statements
and the notes thereto.
(5) See Unaudited Pro Forma Condensed Consolidated Statements of Operations.
11
<PAGE>
RISK FACTORS
An investment in the securities offered hereby is speculative in nature,
involves a high degree of risk and should not be made by any investor who cannot
afford the loss of his entire investment. Each prospective purchaser should
carefully consider the following risks and speculative factors associated with
this offering, as well as other factors described elsewhere in this Prospectus,
before making an investment.
No Assurance of Profitable Operations of Eagle. Eagle has experienced
substantial revenue fluctuations in the past. For Eagle's fiscal years ended
June 30, 1993, 1994, 1995 and 1996 its revenues were $66,552,083, $53,925,373,
$50,483,469 and $59,262,226, respectively, and its net income for those periods
were $2,621,939, $464,270, $352,589 and $1,315,035, respectively. Eagle's
results of operations for its fiscal year ended June 30, 1994 were negatively
impacted by a business slowdown following the prior year's increase in business
resulting from Hurricane Andrew. Hurricane Andrew also caused a substantial
increase in competition in the South Florida area resulting in the reduced
profitability of Eagle's operations in South Florida and their discontinuance
during Eagle's fiscal year ended June 30, 1994. Additionally, during Eagle's
fiscal year ended June 30, 1995, Eagle's Jacksonville, Florida, distribution
center was sold as a result of increased competition in that locale. Also, Eagle
recently closed its distribution center in Fort Pierce, Florida, which opened in
March of this year, as operating prospects for that center were not anticipated
to be satisfactory to management. Also during Eagle's fiscal year ended June 30,
1996, the damage caused by hurricanes increased business for Eagle's
distribution centers located in Pensacola and Panama City, Florida. The
foregoing increase may result in a business slowdown in the future. There can be
no assurance that unforeseen developments, increased competition, losses
incurred by new businesses that may be acquired, weather phenomena and other
circumstances may not have a material adverse affect on Eagle's operations in
its current market areas of operations or areas into which Eagle's or the
Company's operations may be expanded by acquisition or otherwise. See
"Management's Discussion and Analysis of Financial Condition and Results of
Operations," "Business" and Financial Statements and the notes thereto.
No Assurance of Continuing Credit Facility. Eagle has a bank revolving
credit facility in the amount of $7,500,000, guaranteed by TDA, which will
expire in December 1998. At June 30, 1996 Eagle had borrowed $5,163,529 under
this credit facility which is collateralized by certain tangible and intangible
assets of Eagle. Although the Company intends to seek an extension of Eagle's
credit facility, there can be no assurance that the bank will extend the credit
facility or that a replacement credit facility will be available to Eagle on
acceptable terms. In the event Eagle is
12
<PAGE>
unable to extend the credit facility or obtain a suitable replacement credit
facility, it will be materially adversely effected. See "Management Discussion
and Analysis of Financial Condition and Results of Operations."
Broad Discretion in Use of Proceeds; Unknown Acquisitions. The Company has
broad discretion with respect to the specific allocation of a substantial
portion of the net proceeds of the Public Offering. Such net proceeds are
intended to be applied toward consummating acquisitions in accordance with the
Company's business strategy, support Eagle's expansion efforts by the
establishment of additional distribution centers and for working capital
purposes. Although management of the Company will endeavor to evaluate the risks
inherent in any particular acquisition or the establishment of new distribution
centers for Eagle, there can be no assurance that the Company will properly or
accurately ascertain all such risks. Management of the Company will have
virtually unrestricted flexibility in identifying and selecting prospective
acquisition candidates and establishing new distribution centers. Locations
selected for expansion efforts will be made at the discretion of management and
will not be subject to stockholder approval. Additionally, the Company does not
intend to seek stockholder approval for any acquisitions unless required by
applicable law and regulations, and stockholders will most likely not have an
opportunity to review financial information on an acquisition candidate prior to
consummation of an acquisition. Thus, purchasers of the Securities offered
hereby will be entrusting their funds to the Company's management, upon whose
judgment the investor must depend, with only limited information concerning
management's specific intentions. Except for the Acquisition, the Company does
not currently have any agreements, commitments or arrangements with respect to
any proposed acquisitions, and there can be no assurance that any such
acquisitions will be consummated. See "Use of Proceeds."
The Wholesale Distribution of Roofing Supplies Business Subject to Economic
and Other Changes. The wholesale distribution of roofing supplies industry is
cyclical and is affected by weather and changes in general economic conditions.
An economic downturn in one or more of the markets currently served by Eagle or
to be served by the Company and/or Eagle as a result of acquisitions or
expansion efforts could have a material adverse effect on the operations of the
Company and/or Eagle.
Vendors. Eagle distributes products manufactured by a number of major
vendors. GAF Corporation, a supplier of residential and commercial roofing
materials, is Eagle's largest supplier, accounting for approximately 19% and 21%
of Eagle's purchases during Eagle's fiscal years ended June 30, 1995 and 1996,
respectively. During Eagle's fiscal years ended June 30, 1995 and 1996, three
other vendors' products accounted for an aggregate of approximately 19% and 17%,
respectively, of Eagle's purchases.
13
<PAGE>
Eagle has no written agreements with any of its vendors. Management believes
that in the event of any interruption of product deliveries from any of its
vendors, Eagle will be able to secure suitable replacement supplies on
acceptable terms. However, there can be no assurance of the continued
availability of supplies of residential and commercial roofing materials at
acceptable prices or at all. See "Business."
Competition. Eagle currently faces its principal competition in the
wholesale distribution of roofing supplies from relatively smaller distributors
but also faces competition from distribution centers of a number of
multiregional and a national wholesale distributor of building products
including roofing supplies which are larger than Eagle and have greater
financial resources than Eagle. Eagle currently competes in the wholesale
distribution of roofing supplies on the basis of competitive pricing, service,
breadth of product line, prompt delivery, providing discounts for prompt payment
and on the abilities of its personnel. There can be no assurance that Eagle will
be able to continue to compete effectively with such competitors. During Eagle's
last three fiscal years it has closed certain distribution centers as a result
of such competition. See "-- No Assurance of Profitable Operations of Eagle" and
"Management's Discussion and Analysis of Financial Condition and Results of
Operations."
The Company anticipates that it may experience competition from entities
and individuals (including venture capital partnerships and corporations, blind
pool companies, large industrial and financial institutions, small business
investment companies and wealthy individuals) which are well-established and
have greater financial resources and more extensive experience than the Company
and Eagle in connection with identifying and effecting acquisitions of the type
sought by the Company. Many of such competitors possess greater financial,
technical, personnel and other resources than the Company and Eagle, and there
can be no assurance that the Company will be able to compete successfully in
connection with identifying and effecting acquisitions of the type sought by the
Company. The Company's and Eagle's combined financial resources will be limited
in comparison to those of many of such competitors. Such competition could
result in the loss of an acquisition candidate or an increase in the price the
Company would be required to pay for such acquisitions. See "Business."
Need for Additional Future Financing; Possible Additional Dilution and/or
Financial Restrictions. The Company may require additional equity or debt
financing in order to consummate an acquisition or for additional working
capital if Eagle suffers losses or if the Company completes the acquisition of a
business that subsequently suffers losses. Any additional equity financing that
may be obtained may dilute the voting power and equity interests of the
Company's stockholders. Any additional debt financing that may be obtained may
impair or restrict the Company's
14
<PAGE>
ability to declare dividends or may impose financial restrictions on the
Company's ability to make acquisitions or implement Eagle's expansion efforts.
There can be no assurance that the Company will be able to obtain additional
financing on terms acceptable to the Company or at all. In the event additional
financing is unavailable to the Company, the Company may be materially adversely
affected. See "Use of Proceeds."
Unproven Business Strategy of the Company. Although the Company's
Acquisition of Eagle will occur simultaneously with the closing of the Public
Offering, the Company, which was only recently incorporated, has not yet
commenced operations. A significant element of the Company's business strategy
is to acquire additional companies engaged in the wholesale distribution of
roofing supplies and related products industry and companies which manufacture
products for or supply products to such industry. The Company's strategy is
unproven and based on unpredictable and changing events. Although the Company
believes that suitable candidates for potential acquisition exist, there can be
no assurance that any acquisitions, if successfully consummated, will be
successfully integrated into the Company's or Eagle's operations, will perform
as expected, will not result in significant unexpected liabilities or will ever
contribute significant revenues or profits to the Company and/or Eagle. In
addition, if the Company is unable to manage growth effectively, the Company's
operating results could be materially adversely effected. See "Business."
Control by Management and TDA. Upon closing of the Public Offering and
consummation of the Acquisition, TDA will own approximately 54% of the issued
and outstanding Common Stock of the Company. Douglas P. Fields, the Company's
Chief Executive Officer and Chairman of the Company's Board of Directors, is
also Chairman of the Board of Directors, President and the Chief Executive
Officer of TDA as well as a principal stockholder of TDA. Frederick M. Friedman,
the Executive Vice President, Treasurer, Secretary and a Director of the Company
is also the Executive Vice President, Chief Financial Officer, Treasurer and a
Director of TDA as well as a principal stockholder of TDA. John E. Smircina is a
Director Nominee of the Company and a director of TDA. Accordingly, Messrs.
Fields, Friedman and Smircina will control approximately 54% of the issued and
outstanding shares of Common Stock of the Company after the closing of the
Public Offering and consummation of the Acquisition. As a result, the foregoing
officers and directors, if they were to act in concert, would be in a position
to control the composition of the Board of Directors of the Company, and,
therefore the business, policies and affairs of the Company and the outcome of
issues which may be subject to a vote of the Company's stockholders. See
"Principal Stockholders," "Management" and "Certain Transactions."
15
<PAGE>
Potential Conflicts of Interest. Certain executive officers and directors
of the Company are also officers, directors and/or principal stockholders of TDA
and its affiliates and, consequently, may be able, through TDA and its
affiliates, to direct the election of the Company's directors, effect
significant corporate events and generally direct the affairs of the Company.
Eagle has been dependent on TDA for certain administrative services. Following
completion of the Public Offering and the consummation of the Acquisition, TDA
will provide the Company with certain administrative services. The Company does
not intend to enter into any material transactions with TDA or its affiliates in
the future unless such transaction is fair and reasonable to the Company.
Notwithstanding the foregoing, there can be no assurance that future
transactions, if any, will not result in conflicts of interest which will be
resolved in a manner favorable to the Company. See "-- Control by Management and
TDA," "Management," "Principal Stockholders" and "Certain Transactions."
Dependence Upon Key Personnel; Conflicts of Interest. The Company's and
Eagle's success may depend upon the continued contributions of Eagle and its
officers. The Company and Eagle have five executive officers, only two of whom,
Messrs. Fields and Friedman, will be subject to employment agreements effective
upon completion of the Public Offering. Mr. Fields is the Company's and Eagle's
Chief Executive Officer and the Chairman of their Board of Directors. Mr.
Friedman is the Company's and Eagle's Executive Vice President, Treasurer and
Secretary. Thomas W. Havnes, Lewis G. Marshall and Donald G. Morris, the
Company's President, Controller and Vice President-Operations, respectively, and
similar officers of Eagle are not subject to employment agreements. The business
of the Company could be adversely affected by the loss of services of Messrs.
Fields and Friedman. Additionally, the employment agreements to be entered into
with Messrs. Fields and Friedman will not require either of the them to devote a
specified amount of time to the Company's affairs. Each of Messrs. Fields and
Friedman have significant business interests outside of the Company, including
but not limited to TDA and its subsidiaries. Accordingly, Messrs. Fields and
Friedman may have conflicts of interest in allocating time among various
business activities. There can be no assurance that any such conflicts will be
resolved in a manner favorable to the Company. See "Management."
Transactions With And For the Benefit of Affiliates. Messrs. Fields and
Friedman, the Company's Chief Executive Officer and Chairman of its Board of
Directors; and Executive Vice President, Treasurer, Chief Financial Officer and
a Director of the Company, respectively, are also executive officers, directors
and principal stockholders of TDA and will benefit or may be deemed to benefit,
directly or indirectly, from Eagle's transactions with TDA. See "Management" and
"Principal Stockholders."
16
<PAGE>
Eagle has a bank revolving credit facility in the amount of $7,500,000,
guaranteed by TDA. During Eagle's June 30, 1995 fiscal year, Eagle used its
borrowings under this revolving credit facility to repay $2,325,533 of its
indebtedness to TDA and to advance $3,308,681 to TDA. Upon completion of the
Public Offering, a significant portion, if not all, of TDA's indebtedness to
Eagle will be dividended from Eagle to TDA in the form of cancellation of such
indebtedness, with Eagle retaining $1,000,000 in net tangible book value. To the
extent TDA's indebtedness to Eagle is so cancelled, TDA will directly, and
Messrs. Fields and Friedman will indirectly, derive a benefit. During Fiscal
1995 and 1996, Eagle made dividend payments to TDA of $421,535 and $1,097,000,
respectively. After June 30, 1996, Eagle has continued to make dividend payments
of approximately $150,000 per month to TDA. See "Management's Discussion and
Analysis of Financial Condition and Results of Operations," "Management" and
"Certain Transactions."
TDA, through a wholly-owned subsidiary, has rented to Eagle the premises
for several of Eagle's distribution facilities and Eagle's executive offices.
Upon completion of the Public Offering and the consummation of the Acquisition,
Eagle and TDA intend to enter into lease agreements which will provide rental
arrangements for such facilities which the Company believes to be fair and
reasonable to Eagle. See "Business," "Certain Transactions" and Financial
Statements and the notes thereto.
Eagle is responsible to make payments due on mortgages underlying its
Birmingham, Alabama and Pensacola, Florida distribution centers. Such properties
are owned by a wholly-owned subsidiary of TDA. Such mortgages require "balloon"
payments for the Birmingham, Alabama and the Pensacola, Florida realty in April
1999 and March 1997, respectively. TDA's wholly-owned subsidiary which owns
these properties intends to obtain replacement financing when the "balloon"
payments are due. There can be no assurance that such financing will be
available on acceptable terms. Eagle also remains responsible for lease payments
to a TDA subsidiary under a lease for Eagle's former distribution center in Fort
Lauderdale, Florida, including a "balloon" payment due on May 1, 1999, the lease
expiration date, relating to industrial revenue bonds used to acquire and
develop the Fort Lauderdale, Florida realty. Eagle presently subleases this
property to an unrelated third party. In the event the unrelated third party
subleasee fails to perform its obligations under the sublease and/or a new
sublease cannot be secured on equivalent terms upon the expiration of the
sublease, Eagle is required to make rental payments to the TDA subsidiary, and,
in any event, will be required to make the "balloon" payment. However, through
June 30, 1995, Eagle had been making pro-rata payments upon the "balloon"
payment to the TDA subsidiary owning the Fort Lauderdale, Florida realty, and
these payments, together with anticipated sublessee rental payments, are
currently projected to fully fund the "balloon" payment. The foregoing
anticipated sublessee rental payments assume the
17
<PAGE>
execution and performance by the sublessee of a negotiated, but unsigned,
extension of the sublease. Upon completion of the Public Offering and as part of
the Acquisition, TDA or its relevant subsidiaries will agree to indemnify Eagle
for any payments that Eagle is required to make which are in excess of its
obligations under its leases for the foregoing properties. In the event of the
failure of Eagle, TDA and/or TDA's subsidiary to perform Eagle's obligations
under said mortgages and lease, Eagle could be subject to substantial judgments
that would have a material adverse effect on Eagle and its financial condition.
The mortgage underlying Eagle's Birmingham, Alabama, distribution center
requires monthly payments of approximately $4,700 through March 1999 and a
"balloon" payment of approximately $440,000 on that date. The mortgage
underlying Eagle's Pensacola, Florida, distribution center requires monthly
payments of approximately $4,800 through March 1997 and a "balloon" payment of
approximately $361,000 on that date. The lease for Eagle's former Fort
Lauderdale, Florida, distribution center requires variable monthly payments and
a "balloon" payment of approximately $580,000 on May 1, 1999.
Upon completion of the Public Offering and consummation of the Acquisition,
TDA will provide office space and administrative services to the Company at
TDA's offices in New York City pursuant to an administrative services agreement
to be entered into by the Company and TDA, and Messrs. Fields' and Friedman's
employment agreements with the Company and Eagle will become effective. See
"Business," "Management," "Certain Transactions" and Financial Statements and
the notes thereto.
Dilution. As a result of the sale of the Securities offered in the Public
Offering and the consummation of the Acquisition, there will be immediate and
substantial dilution to public investors in that the pro forma net tangible book
value per share of the Company's Common Stock after the Public Offering and
consummation of the Acquisition will be approximately $1.83 per share, or
approximately $3.17 (63%) less than the $5.00 Public Offering price per share.
All of the Company's present stockholders purchased their shares at a price
substantially less than the Public Offering price per share. See "Dilution."
Prior Absence of Written Leases with Affiliates; Written Leases to be
Entered Into. Several of Eagle's distribution centers are leased from a
subsidiary of TDA on a month to month basis without formal written lease
agreements. Upon completion of the Public Offering and consummation of the
Acquisition, the subsidiary of TDA and Eagle intend to enter into written leases
for such distribution centers. Although the written leases are expected to be on
substantially equivalent economic terms as Eagle's prior oral agreements, the
written leases will be for ten (10) year terms. As a result, Eagle will then be
committed to pay rent for such
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<PAGE>
distribution centers for said ten (10) year terms while in the past it had no
such obligation. See "Business."
No Assurance of Public Market; Determination of Offering Price. Prior to
the offering, there has been no market for any of the Company's securities. The
initial public offering price of the Securities and the exercise price and other
terms of the Warrants have been arbitrarily determined by negotiations between
the Company and the Underwriter and such prices and terms are not necessarily
related to the Company's asset value, net worth or other established criteria of
value. In addition, there can be no assurance that a trading market will develop
after the Public Offering for any of the Company's Securities or that, if
developed, it will be sustained. See "Underwriting."
Shares Eligible for Future Sale. In general, under Rule 144, a person which
has satisfied a two-year holding period may, under certain circumstances, sell
within any three-month period a number of shares of common stock that does not
exceed the greater of 1% of the then outstanding shares of common stock or the
average weekly trading volume in such shares during the four calendar weeks
prior to such sale. Rule 144 also permits, under certain circumstances, the sale
of shares without any quantity or other limitation by a person which is not an
affiliate of an issuer and which has satisfied a three-year holding period. The
holders of approximately 2,300,000 and 300,000 shares of the Company's Common
Stock, after giving effect to the Acquisition, have agreed not to sell shares of
the Company's Common Stock owned by them on the date hereof for a period of two
years and fifteen months, respectively from the date of this Prospectus, and as
to said approximate 2,300,000 shares, without the prior written consent of the
Underwriter.
After giving effect to the Acquisition, the Company will have 2,600,000
shares of Common Stock outstanding that are "restricted securities," as that
term is defined under Rule 144 promulgated under the Securities Act of 1933, as
amended (the "Securities Act"). The Company also has outstanding Warrants to
purchase 300,000 shares of Common Stock which Warrants and shares of Common
Stock underlying the Warrants are being registered under the Registration
Statement of which this Prospectus forms a part for sale by the Selling
Securityholders. Investors should be aware that sales of the Company's
securities may have a depressive effect on the price of the Company's securities
in any market which may develop for such securities. See "-- Effect of Options,
Warrants and Registration Rights," "Shares Eligible for Future Sale" and
"Selling Securityholders."
Effect of Options, Warrants and Registration Rights. For the respective
terms of the Underwriter's Warrant and Warrants sold as part of the Public
Offering and issued by the Company in the Private Placement and any options
granted and that may be granted
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<PAGE>
by the Company under the Company's stock option plan, the holders thereof are
given an opportunity to profit from a rise in the market price of the Common
Stock, with a resulting dilution in the interests of the other stockholders.
Further, the terms on which the Company may obtain additional financing during
the exercise periods of said warrants and options may be adversely effected by
the existence of such warrants, options and plan. The holders of options or
warrants to purchase Common Stock may exercise such options or warrants at a
time when the Company might be able to obtain additional capital through
offerings of securities on terms more favorable than those provided by such
options or warrants. In addition, the holders of the Underwriter's Warrant have
demand and "piggyback" registration rights with respect to their securities. In
connection with the Acquisition, TDA will be granted "piggyback" registration
rights with respect to the 200,000 shares of the Company's Common Stock to be
acquired thereby. Exercise of such registration rights may involve substantial
expense to the Company. See "Management," "Certain Transactions," "Description
of Securities," "Underwriting" and "Selling Securityholders."
No Cash Dividends. The Company has not paid any dividends to date. The
Company's Board of Directors does not presently intend to declare any dividends
in the foreseeable future, but instead intends to retain all earnings, if any,
for use in the Company's and Eagle's business operations. See "Description of
Securities."
Issuance of Preferred Stock; Anti-Takeover Provisions. The Company's
Certificate of Incorporation permits its directors to designate the terms of and
issue shares of preferred stock. The issuance of shares of preferred stock by
the Board of Directors could adversely effect the rights of holders of Common
Stock by, among other matters, establishing preferential dividends, liquidation
rights and voting power. Although the Company has no present intention to issue
shares of preferred stock, the issuance thereof might render it more difficult,
and therefore discourage, an unsolicited takeover proposal such as a tender
offer, proxy contest or the removal of incumbent management, even if such
actions would be in the best interest of the Company's stockholders. See
"Description of Securities."
Directors' Liability Limited. The Company's Certificate of Incorporation
provides that its directors will not be held liable to the Company or its
stockholders for monetary damages upon breach of a director's fiduciary duty
with certain exceptions. The exceptions include a breach of the director's duty
of loyalty, acts or omissions not in good faith or which involve intentional
misconduct or knowing violation of law, improper declarations of dividends, and
transactions from which the directors derived an improper personal benefit. See
"Management."
Potential Adverse Effect of Redemption of Warrants. The Warrants may be
redeemed by the Company at a redemption price of
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<PAGE>
$.25 per Warrant upon 30 days prior written notice if the market price (as
herein defined) of the Common Stock averages at least $10.00 per share for 30
consecutive trading days ending within 10 days of the notice. Redemption of the
Warrants could force the holders to exercise the Warrants and pay the exercise
price at a time when it may be disadvantageous for the holders to do so, to sell
the Warrants at the current market price for the Warrants when they might
otherwise wish to hold the Warrants, or to accept the redemption price, which
may be substantially less than the market value of the Warrants at the time of
redemption. See "Description of Securities."
Current Prospectus and Blue Sky Registration Required to Exercise Warrants.
Holders of the Warrants will have the right to exercise the Warrants for the
purchase of shares of Common Stock only if a current prospectus relating to such
shares is then in effect and only if the shares are qualified for sale under the
securities laws of the states in which the warrantholders reside. Although the
Company intends to maintain such a current prospectus and to seek to qualify the
shares of Common Stock underlying the Warrants for sale in those states where
the Common Stock and Warrants are to be offered, there is no assurance that it
will be able to do so. The Warrants may be deprived of any value if the current
prospectus encompassing the shares underlying the Warrants is not kept effective
or if such underlying shares are not or cannot be registered in the states in
which warrantholders reside. See "Description of Securities."
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<PAGE>
DILUTION
The initial offering price per share of Common Stock is substantially
higher than the average price per share paid by the Company's existing
stockholders. Based on an initial public offering price of $5.00 per share,
purchasers of the Common Stock in the Public Offering will experience an
immediate and substantial dilution in net tangible book value of approximately
63% or $3.17 per share. For the purposes of this discussion, it is assumed that
no Warrants will be exercised, and, accordingly, no value is attributed to the
Warrants.
The following table presents certain information concerning the net
tangible book value per share of the Company's Common Stock as of June 30, 1996,
as adjusted to give effect to the sale of 1,500,000 shares of Common Stock by
the Company in the Public Offering (at an initial public offering price of $5.00
per share and after deducting the estimated underwriting discounts and estimated
offering expenses payable by the Company) and the consummation of the
Acquisition:
Initial public offering price........................ $5.00 $5.00
-----
Net tangible book value per share
before the Public Offering and the
Acquisition(1).................................. $.12
Increase per share attributable
to new investors ............................... 1.55
----
Pro forma net tangible book value per
share after the Public Offering and
before the Acquisition........................... 1.67 1.67
-----
Dilution per share to new investors
before the Acquisition.......................... $3.33
=====
Increase per share attributable to the
Acquisition..................................... .16
-----
Pro forma net tangible book value per
share after the Public Offering
and the Acquisition.............................. 1.83
-----
Total dilution per share to new
investors(2)..................................... $3.17
=====
- ----------
(1) Net tangible book value per share is determined by dividing the Company's
net tangible book value (total assets less intangible assets and total
liabilities) at June 30, 1996 by the number of shares of Common Stock then
outstanding.
(2) Dilution per share is determined by subtracting pro forma net tangible book
value per share after the Public Offering and the Acquisition from the
initial public offering price per share. The foregoing table also assumes
no exercise of the Underwriter's Warrant or options to purchase 450,000
shares of Common Stock to be granted upon the closing of the Public
Offering pursuant to the Company's 1996 Stock Option Plan.
In the event the Underwriter exercises its Overallotment Option in full,
the pro forma net tangible book value per share would be $1.97 which would
result in dilution to new investors of $3.03 per share.
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<PAGE>
The following table sets forth, on a pro forma basis as of the date of this
Prospectus, the respective positions of the Company's existing stockholders and
new investors with respect to the number of shares of Common Stock purchased
from the Company, the total cash consideration paid and the average price per
share paid by the existing stockholders and by the new investors with respect to
the 1,500,000 shares of Common Stock to be issued by the Company at an initial
public offering price of $5.00 per share.
Shares Purchased Total Consideration
---------------- ------------------- Average
Approximate Approximate Price
Number Percent Amount Percent Per Share
------ ------- ------ ------- ---------
Existing
stockholders(1) 2,600,000 63% $1,300,210 15% $ .50
New investors 1,500,000 37% 7,500,000 85% $5.00
--------- ---- ---------- ----
Total........ 4,100,000 100% $8,800,210 100%
- ----------
(1) Includes 200,000 shares of Common Stock to be issued to TDA in connection
with the Acquisition. The value of the shares issued in connection with the
Acquisition will approximate Eagle's historical aggregate net tangible book
value at the date of the Acquisition.
The foregoing table assumes no exercise of any Warrants or options to
purchase 450,000 shares of Common Stock to be granted upon the closing of the
Public Offering pursuant to the Company's 1996 Stock Option Plan.
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<PAGE>
USE OF PROCEEDS
The net proceeds to the Company from the sale of 1,500,000 shares of Common
Stock and 1,500,000 Warrants offered hereby are estimated to be approximately
$6,218,125 ($7,221,343 if the Underwriter's Overallotment Option is exercised in
full) after deducting underwriting commissions and discounts and other expenses
of the Public Offering. The Company expects to use the net proceeds over the
next twelve to twenty-four months approximately as follows:
Approximate Approximate
Dollar Amount Percentage of
Application of Net Proceeds of Net Proceeds Net Proceeds
- --------------------------- --------------- -------------
Finance the cash portion of
potential acquisitions(1)................... $2,487,250 40%
Expand Eagle's distribution centers(2)...... $2,176,344 35%
Equipment purchases(3)...................... $ 310,906 5%
Working capital ............................ $1,243,625 20%
---------- ---
Total ................................ $6,218,125 100%
- ----------
(1) Represents the approximate amount that may be used to fund the potential
acquisition of businesses in accordance with the Company's current strategy
which is subject to change from time to time.
(2) Represents the approximate amount that may be used to expand Eagle's
operations which is subject to change from time to time. The Company estimates
that the foregoing allocation will be sufficient to enable Eagle to establish
approximately six new distribution centers and will be used to carry accounts
receivable, purchase inventory, fixed assets, leasehold improvements and office
equipment.
(3) To be used to purchase trucks, forklifts and similar equipment to support
additional distribution centers for Eagle.
The Company currently estimates that the net proceeds of the Public Offering
will be sufficient to fund its planned operations, including the cash portion
of potential acquisitions, if any, and expansion efforts for approximately
twelve to twenty-four months from the date of this Prospectus. The net
proceeds may be sufficient for a greater or lesser period of time depending
on the extent of the Company's expansion efforts and on the number of
acquisitions, if any, that the Company consummates during the next twelve to
twenty-four months and the portion of the purchase price of such acquisitions
paid in cash. In addition, the Company may require additional financing prior
to or following such period if Eagle suffers losses or if the Company effects
the acquisition of a business that subsequently suffers losses. The Company
has no commitments or arrangements for any such additional financing and
there can be no assurance that the Company will be able to obtain additional
24
<PAGE>
financing on terms acceptable to the Company or at all. If required, the Company
may seek to finance the purchase price of acquisitions by purchase money
indebtedness, asset-based financing and/or issuances of its own securities; and
to open additional Eagle distribution centers by obtaining short-term vendor
inventory financing (inventory purchased on extended payment terms), asset-based
financing and/or equipment leasing/financing. In the event additional financing
is unavailable to the Company, the Company may be materially adversely affected.
The foregoing represents the Company's best estimate of its allocation of
the net proceeds of the Public Offering. Future events, as well as changes in
economic, regulatory or competitive conditions or the Company's business or
Eagle's business and the results of the Company's or Eagle's activities may make
shifts in the allocation of funds within the described categories or to other
purposes necessary or desirable. In the event the Company is unable to fund the
cash portion of potential acquisitions with the net proceeds allocated above,
Eagle suffers losses or the Company completes an acquisition that subsequently
suffers losses, the Company may draw upon the net proceeds of the Public
Offering allocated to expand the number of Eagle's distribution centers,
purchase equipment to support that expansion and/or working capital. The Company
estimates that the net proceeds of the Public Offering allocated to expand the
number of Eagle's distribution centers and purchase equipment to support that
expansion will be sufficient to establish approximately six new distribution
centers at an average cost of approximately $415,000 for each new distribution
center. In the event the per distribution center costs are greater than
estimated, Eagle may establish less than six new distribution centers, the
Company may seek vendor financing of inventory, asset-based financing and/or
equipment leasing/financing, or draw upon the net proceeds of the Public
Offering allocated to working capital. In the event the per distribution center
costs are less than estimated, a portion of the net proceeds of the Public
Offering allocated for such purposes will be reallocated to finance
acquisitions. In order to conduct its proposed expansion, the Company intends to
use a significant portion of the net proceeds of the Public Offering for the
acquisition of businesses or assets that are consistent with the Company's
current strategy, which is subject to change from time to time. With the
exception of the Acquisition, the Company does not currently have any
agreements, commitments or arrangements with respect to any proposed
acquisitions nor has it identified or negotiated with any potential acquisition
candidates, and there can be no assurance that any acquisitions will be
consummated.
Prior to expenditure, proceeds will be invested principally in high grade,
short-term, interest-bearing investments. Any proceeds received upon exercise of
the Overallotment Option or any of the Warrants will be used to finance
potential acquisitions or for working capital. There can be no assurance that
the Overallotment Option or any of the Warrants will be exercised.
25
<PAGE>
CAPITALIZATION
The following table sets forth the capitalization of the Company as of June
30, 1996 (i) on an actual basis, (ii) as adjusted to give effect to the Private
Placement and the Public Offering of 1,500,000 shares of Common Stock and a like
number of Warrants at initial public offering prices of $5.00 per share and
$.125 per Warrant and the application of the net proceeds therefrom and (iii) on
a pro forma basis, assuming the consummation of the Acquisition as of such date.
The Acquisition will be treated as a combination of entities under common
control similar to the pooling-of-interests method of accounting. This table
should be read in conjunction with "Management's Discussion and Analysis of
Financial Condition and Results of Operations," and the "Unaudited Pro Forma
Condensed Consolidated Balance Sheet," "Certain Transactions" and the Financial
Statements and the notes thereto included elsewhere in this Prospectus.
June 30, 1996
--------------------------------
Actual As Adjusted Pro Forma
------ ----------- ---------
Long-Term Debt ..................... $ -- $ -- $ 5,164
======= ======= =======
Stockholders' Equity:
Preferred Stock, $.0001 par value;
2,000,000 shares authorized; no
shares issued and outstanding .... $ -- $ -- $ --
Common Stock, $.0001 par value;
15,000,000 shares authorized;
2,400,000 shares issued and
outstanding (actual);
3,900,000 shares issued and
outstanding (as adjusted)(1);
4,100,000 shares issued and
outstanding (pro forma)(2)(3) .... --(4) 2 2
Additional Paid-in Capital ......... 294 6,510 7,510
Retained Earnings .................. -- -- --
Total Stockholders' Equity .... 294 6,512 7,512
------- ------- -------
Total Capitalization .......... $ 294 $ 6,512 $12,676
======= ======= =======
- ----------
(1) Includes 300,000 shares issued in connection with the Private Placement
and 1,500,000 shares of Common Stock to be issued in the Public Offering.
(2) Includes, in the pro forma column, 200,000 shares of Common Stock to be
issued to TDA simultaneously with the closing of the Public Offering in
connection with the Acquisition. See "Certain Transactions."
(3) Does not include (i) 225,000 shares of Common Stock and 225,000 Warrants
and 225,000 shares of Common Stock underlying such Warrants subject to the
Underwriter's Overallotment Option; (ii) 1,500,000 shares of Common Stock
issuable upon the exercise of the Warrants; (iii) 300,000 shares of Common
Stock issuable upon the exercise of the Company's outstanding Warrants;
(iv) 300,000 shares of Common Stock issuable upon the exercise of the
Underwriter's Warrant; and (v) 1,000,000 shares of Common Stock reserved
for issuance pursuant to the Company's stock option plan of which 450,000
shares of Common Stock are reserved for options to be granted upon
completion of the Public Offering. See "Management," "Underwriting,"
"Description of Securities" and "Selling Securityholders."
(4) Amounts are less than $1,000.
26
<PAGE>
UNAUDITED PRO FORMA CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
The accompanying unaudited pro forma condensed consolidated financial
statements are presented to illustrate the effects of certain adjustments to the
historical financial statements of the Company and Eagle that would result from
the completion of the Private Placement, the Public Offering and the Acquisition
and are presented as if these transactions had occurred on the first day of the
earliest period presented in the Unaudited Pro Forma Condensed Consolidated
Statements of Operations and the last day of the third quarter of the current
fiscal year for the Unaudited Pro Forma Condensed Consolidated Balance Sheet.
The unaudited pro forma consolidated financial statements should be read in
conjunction with the notes thereto and also in conjunction with the respective
audited and unaudited historical financial statements and notes thereto of the
Company and Eagle appearing elsewhere herein.
The unaudited pro forma condensed consolidated financial statements are
presented for illustrative purposes only and do not purport to represent the
actual results and financial position of the consolidated entities had the
Private Placement, the Public Offering and the Acquisition occurred on the dates
described above, nor are they necessarily indicative of the future operating
results or financial position of the consolidated entities after the Private
Placement, the Public Offering and the Acquisition.
The Acquisition will be accounted for as the combining of two entities
under common control similar to the pooling-of-interests method of accounting
with the net assets of Eagle recorded at historical carryover values. The
200,000 shares of Common Stock to be issued to TDA will be recorded at Eagle's
historical book value at the date of the Acquisition. Accordingly, this
transaction will not result in any re-evaluation of Eagle's assets or the
creation of goodwill.
27
<PAGE>
UNAUDITED PRO FORMA CONDENSED CONSOLIDATED BALANCE SHEET
(in thousands)
<TABLE>
<CAPTION>
June 30, 1996
---------------------------------------------------------
Eagle Supply Eagle Pro Forma
Group, Inc. Supply, Inc. Adjustments Pro Forma
----------- ------------ ----------- ---------
Historical
-----------------------
<S> <C> <C> <C> <C>
ASSETS
CURRENT ASSETS: $ 6,218 (1)
Cash $ 244 $ 198 (216)(2) $ 6,444
Accounts and notes receivable-net -- 8,292 -- 8,292
Inventories -- 4,826 -- 4,826
Deferred tax asset -- 194 -- 194
Stock Subscription Receivable 56 -- -- 56
Other current assets -- 536 -- 536
-------- -------- -------- --------
Total current assets 300 14,046 6,002 20,348
DUE FROM TDA INDUSTRIES, INC -- 2,495 (2,495)(2) --
AND AFFILIATED COMPANIES
IMPROVEMENTS AND EQUIPMENT - Net -- 1,433 -- 1,433
-------- -------- -------- --------
$ 300 $ 17,974 $ 3,507 $ 21,781
======== ======== ======== ========
LIABILITIES AND STOCKHOLDERS'
EQUITY
CURRENT LIABILITIES:
Accounts Payable $ -- $ 8,194 $ -- $ 8,194
Loans payable stockholder 6 -- -- 6
Accrued expenses and other
current liabilities -- 815 -- 815
-------- -------- -------- --------
Total current
liabilities 6 9,009 -- 9,015
LONG TERM DEBT -- 5,164 -- 5,164
DEFERRED TAX LIABILITY -- 90 -- 90
-------- -------- -------- --------
Total liabilities 6 14,263 -- 14,269
-------- -------- -------- --------
STOCKHOLDERS' EQUITY:
Preferred shares -- -- -- --
Common shares -- (3) 59 -- (1)(3) --
(59)(2)
Additional paid-in capital 294 1,000 6,216 7,510
Retained earnings -- 2,652 (2,652)(2) --
Total stockholders' equity 294 3,711 3,507 7,512
-------- -------- -------- --------
$ 300 $ 17,974 $ 3,507 $ 21,781
======== ======== ======== ========
</TABLE>
See notes to unaudited pro forma condensed consolidated balance sheet.
28
<PAGE>
NOTES TO UNAUDITED PRO FORMA CONDENSED CONSOLIDATED BALANCE SHEET
(1) Reflects the Public Offering of 1,500,000 shares of Common Stock at an
offering price of $5.00 per share and 1,500,000 Warrants at an offering
price of $.125 per Warrant including the application of cash toward the
aggregate offering expenses of approximately $1,469,375 and the application
of the net proceeds therefrom. See "Underwriting" and "Use of Proceeds."
(2) Reflects the consummation of the Acquisition. Upon the closing of the
Public Offering, TDA's indebtedness to Eagle will be dividended by Eagle to
TDA through the cancellation of such indebtedness, with Eagle retaining
$1,000,000 in net tangible book value. See "Risk Factors" and "Certain
Transactions."
(3) Amounts are less than $1,000.
29
<PAGE>
UNAUDITED PRO FORMA CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS
(in thousands, except share and per share amounts)
<TABLE>
<CAPTION>
Year Ended June 30, 1996
--------------------------------------------------------------
Eagle Supply Eagle Pro Forma
Group, Inc.(5) Supply, Inc. Adjustments Pro Forma
-------------- ------------ ----------- ---------
Historical
----------------------------
<S> <C> <C> <C> <C>
Revenues $ -- $ 59,262 $ -- $ 59,262
Cost of Goods Sold -- 46,685 -- 46,685
---------- ---------- ---------- ----------
Gross Profit -- 12,577 -- 12,577
---------- ---------- ---------- ----------
Operating Expenses -- 9,129 400(1) 9,529
Intercompany Charges -- 759 36(2) 795
---------- ---------- ---------- ----------
-- 9,888 436 10,324
---------- ---------- ---------- ----------
Income from Operations -- 2,689 (436) 2,253
Interest Expense - Net -- (581) -- (581)
---------- ---------- ---------- ----------
Income before Provision -- 2,108 (436) 1,672
for Income Taxes
Provision (Credit) for -- 793 (165)(3) 682
Income Taxes
---------- ---------- ---------- ----------
Net Income (Loss) $ -- $ 1,315 $ (271) $ 1,044
========== ========== ========== ==========
Pro Forma Income per Common
Share(4) $ .40
==========
Pro Forma Weighted Average
Number of Common Shares
Outstanding(4) 2,600,000
==========
</TABLE>
See notes to unaudited pro forma condensed
consolidated statements of operations.
30
<PAGE>
NOTES TO UNAUDITED PRO FORMA
CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS
(1) To reflect employment agreements for Messrs. Fields and Friedman which
become effective upon closing of the Public Offering and consummation of
the Acquisition. See "Management" and "Certain Transactions."
(2) To reflect the administrative services agreement with TDA for office space
and administrative services to be entered into upon completion of the
Public Offering and consummation of the Acquisition.
(3) To reflect income taxes relating to the foregoing adjustments.
(4) Income per Common Share is based on the weighted average number of shares
outstanding and includes 2,100,000 shares issued in connection with the
Company's initial capitalization, 300,000 shares issued as part of the
Company's Private Placement and 200,000 shares to be issued to TDA in
connection with the Acquisition. The computation excludes 1,500,000 shares
to be issued in connection with the Public Offering. The Underwriter's
Warrant and options to be granted upon the closing of the Public Offering
pursuant to the Company's 1996 Stock Option Plan are not dilutive and have
not been included. See "Risk Factors" and "Certain Transactions".
(5) The Company was formed on May 1, 1996 and has not had any operations
through June 30, 1996.
31
<PAGE>
SELECTED FINANCIAL INFORMATION
(in thousands, except share and per share data)
The selected financial information presented below should be read in
conjunction with the Company's and Eagle's financial statements and the notes
thereto and the unaudited pro forma condensed consolidated financial statements
included elsewhere herein. The statement of operations data with respect to the
years ended June 30, 1996, 1995 and 1994 and the balance sheet data at June 30,
1995 and 1994 are derived from, and are qualified by reference to, Eagle's
financial statements, which have been audited by Deloitte & Touche LLP,
independent auditors, included elsewhere in this Prospectus. The statement of
operations data with respect to the years ended June 30, 1993 and 1992 and the
balance sheet data at June 30, 1994, 1993 and 1992 are derived from Eagle's
audited financial statements not included in this Prospectus. The selected
financial information (Pro Forma) is derived from the unaudited selected pro
forma condensed consolidated financial statements appearing elsewhere herein.
The following financial information should be read in conjunction with
"Management's Discussion and Analysis of Financial Condition and Results of
Operations" and "The Unaudited Pro Forma Condensed Consolidated Financial
Statements."
<TABLE>
<CAPTION>
Pro Forma
Year Ended June 30, Year Ended
----------------------------------------------------- June 30,
1996 1995 1994 1993 1992 1996(5)
---- ---- ---- ---- ---- ----------
<S> <C> <C> <C> <C> <C> <C>
Statement of Operations Data(1):
Revenues ........................... $59,262 $50,483 $53,925 $66,552 $46,484 $ 59,262
Gross Profit ....................... 12,577 9,740 10,658 14,933 9,668 12,577
Income From Operations ............. 2,689 833 743 4,159 2,070 2,253
Net Income ......................... 1,315 353 464 2,622 1,334 1,044
Pro Forma Net Income Per
Share .............................. $ .40
==========
Pro Forma Weighted Average Number of
Shares Outstanding(2) .............. 2,600,000
==========
</TABLE>
32
<PAGE>
<TABLE>
<CAPTION>
Eagle The Company
June 30, June 30, 1996
-------------------------------------------------- -------------------------------------
As Pro
1996 1995 1994 1993 1992 Historical Adjusted(3) Forma(4)
---- ---- ---- ---- ---- ---------- -------- ----------
<S> <C> <C> <C> <C> <C> <C> <C> <C>
Balance Sheet
Data(1):
Working
Capital.............. $5,037 $5,665 $4,785 $5,963 $5,109 $294 $6,512 $11,333
Total Assets........ 17,973 17,831 12,947 17,190 12,582 300 6,518 21,781
Long-Term
Debt................. 5,164 6,290 -- -- -- -- -- 5,164
Total Liabilities... 14,261 14,338 9,385 13,450 10,136 6 6 14,269
Stockholders'
Equity............... 3,711 3,493 3,562 3,720 2,447 294 6,512 7,512
</TABLE>
- ----------
(1) Historical operating data was derived from the financial statements of
Eagle because the Company was organized in May 1996 and has not had any
operating activity to date.
(2) The pro forma weighted average number of shares outstanding includes the
2,100,000 shares of Common Stock issued in connection with the Company's
initial capitalization, 300,000 shares issued in the Private Placement and
200,000 shares of Common Stock to be issued to TDA in connection with the
Acquisition. The 200,000 shares to be issued to TDA in connection with the
Acquisition are not included in the Securities offered hereby and have been
valued at the public offering price of $5.00 per share which will
approximate Eagle's historical net aggregate net tangible book value at the
date of the Acquisition. See "Certain Transactions," "Risk Factors" and the
Financial Statements and the notes thereto.
(3) Reflects the Private Placement, the Public Offering of 1,500,000 shares of
Common Stock and a like number of Warrants at initial public offering
prices of $5.00 per share of Common Stock and $.125 per Warrant and the
application of the net proceeds therefrom. See the Unaudited Pro Forma
Condensed Consolidated Balance Sheet, "Management's Discussion and Analysis
of Financial Condition and Results of Operations," "Certain Transactions"
and the Financial Statements and the notes thereto.
(4) Reflects the Private Placement, the Public Offering of 1,500,000 shares of
Common Stock and a like number of Warrants at initial public offering
prices of $5.00 per share of Common Stock and $.125 per Warrant, the
application of the net proceeds therefrom and the consummation of the
Acquisition. See the Unaudited Pro Forma Condensed Consolidated Balance
Sheet, "Management's Discussion and Analysis of Financial Condition and
Results of Operations," "Certain Transactions" and the Financial Statements
and the notes thereto.
(5) See Unaudited Pro Forma Condensed Consolidated Statements of Operations.
33
<PAGE>
MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL
CONDITION AND RESULTS OF OPERATIONS
The following discussion and analysis should be read in conjunction with
the Financial Statements and notes thereto appearing elsewhere in this
Prospectus.
Introduction
The Company was recently organized (May 1, 1996) to raise capital and
acquire, own, integrate and operate seasoned, privately-held companies
engaged in the wholesale distribution of roofing supplies and related
products industry and companies which manufacture products for or supply
products to such industry. Simultaneously with the closing of the Public
Offering, the Company will consummate the Acquisition. Although the primary
focus of the Company's expansion and acquisition program will be on seeking
suitable acquisition candidates which are engaged in the wholesale
distribution of roofing supplies and related products, the Company will
consider the purchase of manufacturers or vendors of products which may be
distributed through its wholesale distribution business. Eagle, which was
founded in Florida in 1905, distributes roofing supplies and related products
to contractors and subcontractors engaged in commercial and residential
roofing repair and the construction of new residential and commercial
properties using its own direct sales force. Historically, Eagle has not
entered into any arrangements with its customers on an exclusive or "firm"
basis. In connection with the Acquisition, TDA will be issued 200,000 shares
of the Company's Common Stock. The foregoing number of shares of the
Company's Common Stock was determined by reference to the per share Public
Offering price of $5.00 per share. Such shares will be recorded at Eagle's
historical net book value at the date of the Acquisition. Additionally, as
part of the Acquisition, TDA guarantees that Eagle will have a net tangible
book value of $1,000,000, with TDA retaining Eagle's net tangible book value
in excess of that amount. If effected as of June 30, 1996, the amount of such
dividend would have been approximately $2,711,000. Any portion of TDA's
indebtedness to Eagle, which was approximately $2,495,000 at June 30, 1996,
not so cancelled will be paid to Eagle by TDA within 45 days of the closing
of the Public Offering and consummation of the Acquisition. Conversely, if
on the closing of the Public Offering and consummation of the Acquisition,
Eagle has any indebtedness to TDA, such indebtedness will be paid to TDA
within that same 45 day period. In the past, a subsidiary of TDA has leased
to Eagle several of Eagle's distribution centers on a month to month basis
pursuant to oral agreements. Rent expense for these distribution centers was
approximately $709,000 for Eagle's fiscal year ended June 30, 1996. Upon
completion of the Public Offering and consummation of the Acquisition, Eagle
will enter into ten (10) year leases for said distribution centers. Although
the written leases are to be on substantially similar economic terms as the
past oral agreements, Eagle will then be committed to pay rent for these
distribution centers for a minimum of ten (10) years. At that same time, the
Company will enter into (a) five-year employment agreements with its Chairman
of the Board and Chief Executive
34
<PAGE>
Officer and its Executive Vice President, Treasurer and Secretary, pursuant to
which each of such persons, who are also executive officers and directors of
TDA, will receive a salary of $200,000 per year plus substantial additional
benefits, although neither of them have committed any specified amount of time
to the Company's affairs; and (b) a month to month administrative services
agreement with TDA requiring a $3,000 monthly payment to TDA. Furthermore, as
part of the Acquisition, TDA or its relevant subsidiaries will agree to
indemnity Eagle for any payment that Eagle will be required to make pursuant to
mortgages underlying Eagle's Birmingham, Alabama, and Pensacola, Florida,
distribution centers and the mortgage and lease underlying Eagle's former Fort
Lauderdale, Florida, distribution center. See "Certain Transactions." Upon
consummation of the Acquisition, Eagle will become a wholly-owned subsidiary of
the Company and will constitute the sole business operations of the Company
until and unless the Company consummates additional acquisitions.
The Company has funded itself since inception by initial minimal borrowings
from TDA and selling 300,000 shares of its Common Stock and 300,000 Warrants in
the Private Placement pursuant to which the Company derived aggregate gross
proceeds of $300,000.
Results of Operations of Eagle
Fiscal Year Ended June 30, 1996 Compared to Fiscal Year
Ended June 30, 1995
Revenues of Eagle during the fiscal year ended June 30, 1996 increased by
approximately $8,779,000 (17.4%) compared to the 1995 fiscal year. This increase
was primarily due to revenues in the aggregate amount of approximately
$4,057,000 generated from new branches opened during fiscal 1996, improvement in
business in market areas served by seasoned branches, and additional business
resulting from Hurricane Opal. The 1995 fiscal year includes revenues of
approximately $4,625,000 from a branch that was sold as of June 30, 1995.
At June 30, 1996, Eagle had ten distribution centers in operation for at
least one year ("Operating Centers"). Eagle's Operating Center revenue during
the fiscal year ended June 30, 1996 increased by approximately $9,327,000
(20.3%) from the fiscal year ended June 30, 1995. This increase in Operating
Center revenue may be attributed to an improvement in business in general and
the additional business resulting from the hurricane damage occurring in Florida
in the late summer and fall of 1995.
Cost of goods sold increased between the fiscal years 1996 and 1995 at a
lesser rate than the increase in revenues between these fiscal years.
Accordingly, cost of goods sold as a percentage of revenues decreased to 78.8%
in the fiscal year 1996 from 80.7% in the fiscal year 1995, and, accordingly,
gross profit as a percent-
35
<PAGE>
age of revenues increased to 21.2% in the fiscal year 1996 from 19.3% in the
fiscal year 1995. This increase in gross profit margin may be attributed
primarily to the increase in fiscal 1996 in sales to customers out of warehouse
inventory which carry a higher gross profit margin than direct sales shipments
to customers from vendors. The Company's management is unable to determine if
Eagle's increase in revenues during Eagle's fiscal year ended June 30, 1996, as
compared to its fiscal year ended June 30, 1995, was the result of unit price
increases to any significant extent as opposed to increased sales volume.
The Company's management is unable to predict if sales to Eagle's customers
out of warehouse inventory is a trend that will continue in the future.
Operating expenses increased by approximately $981,000 (11%) between the
fiscal years 1996 and 1995 at a lesser rate than the increase in revenues
between these fiscal years. Operating expenses in fiscal 1995 includes
approximately $1,064,000 of operating expenses attributable to the branch that
was sold as of June 30, 1995; and fiscal 1996 includes approximately $1,007,000
of start-up costs and expenses attributable to new branch operations, and
increased operating expenses in the aggregate amount of approximately $1,039,000
comprised primarily of payroll and related costs and transportation expenses
directly related to the increase in business in fiscal 1996. Operating expenses
as a percentage of revenues were 16.7% in the fiscal year 1996 compared to 17.6%
in the fiscal year 1995.
Interest expense increased by approximately $316,000 between fiscal 1996
and 1995. Interest expense in fiscal 1995 is for less than a full year since
borrowings under Eagle's revolving credit facility commenced in December 1994.
See "-- Liquidity and Capital Resources."
Fiscal Year Ended June 30, 1995 Compared to Fiscal Year
Ended June 30, 1994
Revenues of Eagle during the fiscal year ended June 30, 1995 decreased by
approximately $3,442,000 (6.4%) compared to the 1994 fiscal year. This decrease
was primarily due to the disposition in fiscal 1994 of two distribution centers
located in south Florida which were not profitable but generated revenues in the
aggregate amount of approximately $6,704,000 in that fiscal year. This decrease
in revenues was partially offset from revenues in the aggregate amount of
approximately $2,810,000 generated in fiscal 1995 from two distribution centers
opened in July 1994.
At June 30, 1995, Eagle had eight Operating Centers. Eagle's Operating
Center revenue during the fiscal year ended June 30, 1995 increased only
nominally from the fiscal year ended June 30, 1994.
36
<PAGE>
Cost of goods sold decreased between the fiscal years 1995 and 1994 at a
lesser rate than the decrease in revenues between these fiscal years.
Accordingly, cost of goods sold as a percentage of revenues increased to 80.7%
in the fiscal year 1995 from 80.2% in the fiscal year 1994, and, accordingly,
gross profit as a percentage of revenues decreased to 19.3% in the fiscal year
1995 from 19.8% in the fiscal year 1994. This decrease in gross profit margin
may be attributed primarily to the decrease in fiscal 1995 in sales to customers
out of warehouse inventory which carry a higher gross profit margin than direct
sales shipments to customers from vendors.
Operating expenses decreased by approximately $1,008,000 (10.2%) between
the fiscal years 1995 and 1994 at a greater rate than the decrease in revenues
between these fiscal years. Operating expenses in fiscal 1994 includes
approximately $2,416,000 of operating expenses attributable to the two disposed
south Florida distribution centers; and operating expenses in fiscal 1995
includes approximately $985,000 of start-up costs and expenses attributable to
new distribution center operations and costs and expenses incurred in connection
with winding down the operations in south Florida. Operating expenses as a
percentage of revenues were 17.6% in the fiscal year 1995 compared to 18.4% in
the fiscal year 1994.
Interest expense increased by approximately $254,000 between the fiscal
years 1995 and 1994. During the fiscal year ended June 30, 1995, Eagle paid
interest on the amount of its borrowings under its revolving credit facility
which commenced in December 1994. See " -- Liquidity and Capital Resources."
Fiscal Year Ended June 30, 1994 Compared to Fiscal Year
Ended June 30, 1993
Revenues of Eagle during the fiscal year ended June 30, 1994 decreased by
approximately $12,627,000 (19%) compared to the 1993 fiscal year. This decrease
was primarily due to the disposition in fiscal 1994 of two distribution centers
located in south Florida which were not profitable but generated revenues in the
aggregate amount of approximately $6,705,000 in fiscal 1994 compared to
approximately $19,364,000 in fiscal 1993.
Cost of goods sold decreased between the fiscal years 1994 and 1993 at a
lesser rate than the decrease in revenues between these fiscal years.
Accordingly, cost of goods sold as a percentage of revenues increased to 80.2%
in the fiscal year 1994 from 77.6% in the fiscal year 1993, and, accordingly,
gross profit as a percentage of revenues decreased to 19.8% in the fiscal year
1994 from 22.4% in the fiscal year 1993. This decrease in gross profit margin
may be attributed primarily to the decrease in fiscal 1994 in sales to customers
of the two disposed south Florida distribution centers, which sales carried
higher gross profit margins.
37
<PAGE>
Operating expenses decreased by approximately $859,000 (8%) between the
fiscal years 1994 and 1993 at a lesser rate than the decrease in revenues
between these fiscal years. This decrease is primarily as a result of the
disposition in fiscal 1994 of the two distribution centers in south Florida.
Operating expenses as a percentage of revenues were 18.4% in the fiscal year
1994 compared to 16.2% in the fiscal year 1993.
Liquidity and Capital Resources
Eagle
Eagle has historically financed its operations through operating cash flow
and support from TDA or affiliates of TDA.
In December 1994, Eagle entered into a Loan Agreement which provides for
secured borrowing consisting of a four-year revolving credit facility in the
amount of $7.5 million. The initial borrowing, in the amount of approximately
$4.6 million, was advanced to TDA partially in payment of intercompany debt.
(See Note 3 to the Financial Statements for the years ended June 30, 1996 and
1995.) TDA has guaranteed the obligations of Eagle under the Loan Agreement. At
June 30, 1996 and June 30, 1995, Eagle's borrowings under the revolving credit
facility were $5,163,529 and $6,290,453, respectively.
Eagle's working capital was approximately $5,037,000 at June 30, 1996
compared to $5,665,000 at June 30, 1995. At June 30, 1996, Eagle's current ratio
was 1.56 to 1 compared to 1.71 to 1 at June 30, 1995.
During the year ended June 30, 1996, cash flows provided by operations
approximated $2,588,000. Such amount consisted primarily of net income
($1,315,000), depreciation and amortization ($539,000), decreased levels of
accounts and notes receivables ($756,000), increased levels of trade accounts
payable ($740,000), a net decrease in amounts due from parent and affiliated
companies ($627,000), offset by an increase in inventories ($1,306,000). During
the fiscal year ended June 30, 1995, cash flows used in operations approximated
$5,388,000. Such amount consisted primarily of increased levels of accounts and
notes receivables ($1,673,000), inventories ($364,000), a net increase in
amounts due from parent and affiliated companies ($5,613,000), offset by net
income ($353,000), increased levels of trade accounts payable ($1,011,000),
depreciation and amortization ($533,000), other current assets ($209,000) and
other current liabilities ($133,000).
Capital expenditures approximated $900,000 and $340,000 during the
fiscal years ended June 30, 1996 and 1995, respectively. The management of
Eagle does not anticipate a significant increase in such expenditures in the
next twelve months.
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During Eagle's fiscal years ended June 30, 1995 and June 30, 1996, Eagle
made dividend payments of $421,535 and $1,097,000, respectively, to TDA. After
June 30, 1996, Eagle has made and will continue to make dividend payments to TDA
of approximately $150,000 per month until the Public Offering is completed and
the Acquisition is consummated. Additionally, during each of said fiscal years,
TDA charged Eagle the sum of $50,000 for accounting and auditing fees. Upon the
closing of the Public Offering and consummation of the Acquisition all such
accounting and auditing fees will be incurred directly by Eagle. See "Certain
Transactions."
The Company and Eagle have entered into employment agreements with Douglas
P. Fields and Frederick M. Friedman to become effective upon the closing of the
Public Offering and consummation of the Acquisition pursuant to which they will
act as Chairman of the Board and Chief Executive Officer, and Executive Vice
President, Chief Financial Officer, Treasurer, Secretary and a Director of the
Company and Eagle, respectively, for a five-year period, at annual salaries of
$200,000 each, subject to annual increases and bonuses as may be determined by
the Board of Directors. See "Management."
Upon closing of the Public Offering and consummation of the Acquisition,
a significant portion, if not all, of TDA's indebtedness to Eagle will be
dividended by Eagle to TDA in the form of cancellation of such indebtedness,
with Eagle retaining $1,000,000 in net tangible book value. If effected on
June 30, 1996, the amount of such dividend would have been approximately
$2,711,000. Any portion of TDA's indebtedness to Eagle not so cancelled will
be paid to Eagle by TDA within 45 days of the closing of the Public Offering.
Conversely, if on the closing of the Public Offering and consummation of the
Acquisition, Eagle has any indebtedness to TDA, such indebtedness will be
paid to TDA within that same 45 day period. See "Certain Transactions."
As Eagle has historically made dividend payments to TDA, the current
monthly dividend payments to TDA are not anticipated to vary Eagle's cash
sufficiency from it's historical levels and, as the dividend payments to TDA
will cease upon the closing of the Public Offering and consummation of the
Acquisition, it is anticipated that Eagle's available funds from operations will
be increased. It can be anticipated that this increase in available funds will
be partially offset by the salaries to be paid to Messrs. Fields and Friedman in
the future. Management believes that TDA's indebtedness to Eagle, and Eagle's
dividend to TDA in the form of cancellation of such indebtedness, has not and is
not anticipated to have any future impact upon Eagle's financial condition. See
"Management" and "Certain Transactions."
Although a portion of the net proceeds of the Public Offering are to be
used for inventory purchases for new distribution centers, the Company does not
presently intend to increase the inventory levels at Eagle's present
distribution centers with such proceeds. See "Use of Proceeds."
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Eagle believes that its existing sources of liquidity, including its
present availability under its revolving credit facility and its current cash
flow, will be adequate to sustain its normal operations and satisfy its current
working capital and capital expenditure requirements.
Impact of Inflation
General inflation in the economy has driven the operating expenses of many
businesses higher, and, accordingly, Eagle has increased salaries and bore
higher prices for supplies, goods and services. Eagle continuously seeks methods
of reducing costs and streamlining operations while maximizing efficiency
through improved internal operating procedures and controls. While Eagle is
subject to inflation as described above, both Eagle and the Company believe that
inflation currently does not have a material effect on Eagle's operating
results, but there can be no assurance that this will continue to be so in the
future.
Accounting Changes
In March 1995, the Financial Accounting Standards Board ("FASB") issued
Statement of Financial Accounting Standards ("SFAS") No. 121, "Accounting for
the Impairment of Long-Lived Assets and for Long-Lived Assets to be Disposed
Of," which requires impairment losses to be recorded on long-lived assets used
in operations when indicators of impairment are present and the undiscounted
cash flows estimated to be generated by those assets are less than the assets'
carrying amount. SFAS No. 121 also addresses the accounting for long-lived
assets that are expected to be disposed of. SFAS No. 121 is effective for
financial statements for fiscal years beginning after December 15, 1995;
therefore, the Company will adopt SFAS No. 121 in the first quarter of fiscal
1997 and, based on current circumstances, does not believe the effect of
adoption will be material.
In October 1995, the FASB issued SFAS No. 123, "Accounting for Stock-Based
Compensation." SFAS No. 123 establishes financial accounting and reporting
standards for stock-based employee compensation plans. The Company will account
for stock-based compensation awards under the provisions of Accounting
Principles Board ("APB") Opinion No. 25, as permitted by SFAS No. 123. In
accordance with SFAS No. 123, beginning in fiscal 1997, the Company will make
pro forma disclosures relative to stock-based compensation as part of the
accompanying footnotes to the financial statements.
The Company adopted SFAS No. 107 "Disclosures About Fair Value of Financial
Instruments" in the fiscal year ended June 30, 1996.
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BUSINESS
Introduction
The Company was recently organized to raise capital and acquire, own,
integrate and operate seasoned, privately-held companies engaged in the
wholesale distribution of roofing supplies and related products industry and
companies which manufacture products for or supply products to such industry.
Simultaneously with the closing of the Public Offering, the Company will
consummate the Acquisition of Eagle. As a precondition to the closing of the
Public Offering, the Underwriter has required that Eagle have a net tangible
book value of not less than $1,000,000. See "Certain Transactions." Eagle, which
was founded in Florida in 1905. Eagle is a general wholesale distributor of a
complete line of roofing supplies and related products through its own
salesforce to roofing supply and related products contractors and
sub-contractors in the geographic areas where Eagle has distribution centers.
Such contractors and sub-contractors are engaged in commercial and residential
roofing repair and the construction of new residential and commercial
properties. Upon consummation of the Acquisition, Eagle will become a
wholly-owned subsidiary of the Company and will constitute the sole business
operations of the Company until and unless the Company consummates additional
acquisitions. Although the primary focus of the Company's expansion and
acquisition program will be on seeking suitable acquisition candidates which are
engaged in the wholesale distribution of roofing supplies and related products,
the Company will consider the purchase of manufacturers or vendors of products
which may be distributed through its wholesale distribution business.
During Eagle's Fiscal 1995 and Fiscal 1996, Eagle had revenues of
$50,483,469 and $59,262,226, respectively, and net income of $352,589 and
$1,315,035, respectively. There can be no assurance that the recent levels of
Eagle's revenues or net income will continue to be achieved in the future. See
"Certain Transactions."
The Company's activities to date have been limited primarily to its initial
organization, negotiating the terms and conditions of the Public Offering and
the Acquisition and obtaining initial financing.
Strategy
Based upon its management's experience in the industry, the Company
believes that the roofing supplies and related products distribution industry is
fragmented and has the potential for consolidation in response to the
competitive disadvantages faced by smaller distributors. The Company believes
that the industry is characterized by a large number of relatively small local
distribution companies and a few very large, multi-branch and multiregional
distributors and a large, national multi-branch distribu-
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tor. Roofing supplies products distributors are overwhelmingly privately owned,
relationship-based companies that emphasize service, delivery and reliability as
well as competitive pricing and breadth of product line to their customers. The
Company believes that the competitive environment faced by small distributors,
coupled with the desire of many owners of such distributors for liquidity, has
prompted a trend toward industry consolidation that offers significant
opportunities for expansion oriented distributors, such as the Company. The
Company believes that there are opportunities for a company which has the
capability to source and distribute products effectively to serve the roofing
supplies and related products markets and to effect cost savings and increased
profit opportunities through efficiencies of scale which can be applied to
companies acquired in the roofing supplies and related products industry.
The Company plans to seek acquisition candidates primarily in the roofing
supplies and related products industry throughout the United States, with
greater emphasis on the Southeastern, Midwestern and Southwestern regions and
less emphasis on Northeastern and Northwestern regions of the United States.
However, the Company may consider acquisition candidates in any of the foregoing
regions of the United States if an exceptional opportunity arises. Acquisition
candidates will be sought by members of the management team and the officers of
the Company and Eagle. Additionally, potential acquisition candidates may be
made known to the Company from various sources, such as business brokers,
venture capitalists, members of the financial community, Eagle's vendors, others
who may present unsolicited proposals and through industry associations. In
certain circumstances, the Company may agree to pay a finder's fee for services
provided by entities or persons that are not currently executive officers of the
Company or Eagle, or executive officers or directors of TDA, which submit
acquisition candidates to the Company that are subsequently acquired by the
Company. However, in the event an acquisition candidate is submitted to and
acquired by the Company by a director of the Company or Eagle who is not an
executive officer of the Company or Eagle, the Company anticipates that it may
pay any such person a finder's fee the same as if such person were an
independent third party. Purchase prices for the Company's potential acquisition
candidates will be determined by negotiations conducted by the Company's
management with the prospective sellers. The Company's management will conduct a
review of a potential acquisition candidate's business operations and historical
financial information in connection with the negotiating process. The Company
intends to attempt to make such acquisitions at the candidate's book value.
However, the Company may pay a sum in excess of a candidate's book value if the
Company's assessment of the candidate's product lines, geographic market area,
competitive position in that market, customer mix (commercial or residential),
the fair market value of its assets or perceived potential future profit
warrants such a premium.
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The Company anticipates that it will be able to enhance the profit
potential of acquired companies by combining their operations with the
operations of Eagle. It is anticipated that acquired companies should be able to
take advantage of (as well as, by becoming affiliated with Eagle, enhance)
Eagle's ability to obtain volume discounts and other favorable terms (many of
which are dependent on the volume of purchases) from vendors, enabling the
acquired companies to obtain better purchasing terms and thereby offer more
competitive pricing to customers as a result of Eagle's practice of negotiating
prices and terms from vendors on a company-wide or multi-center basis.
Additionally, it is anticipated that acquired companies should also be able to
take advantage of Eagle's centralized administrative and data processing systems
which provide real-time management information systems and centralized
administrative functions, thereby relieving acquired companies of some
recordkeeping and administrative functions and enabling them to reduce personnel
and overhead expenses. Also, acquired companies should be able to use Eagle's
centralized administrative and data processing systems, among other things, to
monitor inventory levels and sales by distribution center, allowing each
distribution center manager to better assure that his center has sufficient and
balanced product inventory to meet the customer needs in that market area. The
operations of acquired companies may be enhanced by expanding the product lines
that they carry, if they carry fewer product lines than Eagle currently carries.
Acquired companies may also be able to draw upon the industry experience of
Eagle's management to improve their product knowledge, training of branch
managers and sales personnel, and ability to service customers. The Company
intends to provide expansion capital, if necessary, and administrative and
management services to acquired companies.
The Company considers suitable acquisition candidates to be privately-owned
companies having a history of profitable operations or for which profitable
potential is perceived by the Company's management. Additionally, as roofing and
related products distributors are overwhelmingly relationship based, suitable
acquisition candidates should have key managerial personnel willing to continue
their employment after the acquisition and a stable sales force that the
Company's management anticipates to remain substantially in place after the
acquisition. Suitable acquisition candidates may also include the assets and
sites of entities which may not be currently profitable or which may be
underperforming but located in a geographical market area that the Company's
management believes to have profitable potential when restructured and placed
under new management. The Company has no present intention to make any
acquisitions from any of its affiliates.
In formulating its acquisition strategy, the Company's has relied upon the
experience of Eagle's and the Company's management in the wholesale distribution
of roofing supplies and related products industry. The majority of Eagle's
distribution center
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managers have been associated with Eagle for more than ten years. Donald E.
Morris is Vice President-Operations of the Company and Regional Manager for
Eagle's operations on the West Coast of Florida and has been associated with
Eagle in various capacities for approximately seventeen years. Thomas W. Havnes,
the President of the Company and Eagle, has been Eagle's President for more than
two years. Douglas P. Fields and Frederick M. Friedman, executive officers and
directors of the Company and Eagle, have been executive officers and directors
of Eagle for approximately twenty years. In 1973, at the time Eagle was acquired
by TDA, it had one distribution center. Eagle now has fifteen distribution
centers.
Eagle has 27 managerial employees. It is planned that Eagle's managerial
staff, other members of its staff and both Eagle's and the Company's executive
officers, other than Messrs. Fields and Friedman, will principally provide
administrative and management services to any acquired companies with Messrs.
Fields and Friedman providing oversight of that management and administrative
assistance, expertise in evaluation and negotiating and financing acquisitions.
Messrs. Fields and Friedman each have approximately twenty years experience in
the management of acquisition oriented companies. Although Messrs. Fields and
Friedman have not agreed to devote any specified amount of time to the Company
and Eagle, they intend to devote such time as is necessary to perform the
foregoing services.
Although the Company has not identified any nor has it negotiated with any
acquisition candidates and does not currently have any agreements, arrangements
or commitments with respect to any proposed acquisition in place, other than the
Acquisition, based upon its management's experience in the industry, it believes
that there are a number of suitable acquisition candidates that may meet its
criteria. However, there can be no assurance that any additional acquisitions
will be consummated. The Company intends to seek out prospective acquisition
candidates in businesses that complement or are otherwise related to the
business of Eagle. The Company anticipates that it will finance future
acquisitions, if any, through a combination of cash (including a substantial
portion of the net proceeds of the Public Offering), issuances of shares of
capital stock of the Company and additional equity or debt financing. There can
be no assurance that the Company will be able to obtain additional equity or
debt financing on terms acceptable to the Company or at all.
Expansion of Eagle
Management intends to pursue expansion of Eagle's operations by adding new
distribution centers with the proceeds of the Public Offering and by internal
growth. During Fiscal 1996, Eagle opened four new distribution centers, although
one of those centers has subsequently been closed, and is exploring the
possibility of opening several more distribution centers during its current
fiscal
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year in its current market areas and in market areas adjacent to its existing
distribution centers. In July and August 1996, Eagle opened new distribution
centers in Clearwater, Florida and Tallahassee, Florida, respectively.
The Company has allocated approximately $2,176,000 from the net proceeds of
the Public Offering to establish six new distribution centers for Eagle and
approximately $311,000 to purchase equipment (trucks, forklifts and similar
items) to support the planned six additional distribution centers which are
intended to be opened within twenty-four months following the completion of the
Public Offering and consummation of the Acquisition. The Company presently
anticipates that Eagle's six additional distribution centers will be leased from
third parties not affiliated with the Company or Eagle.
Eagle's Business
Eagle is a general wholesale distributor of a complete line of roofing
supplies and related products through its own salesforce to roofing supply and
related products contractors and sub-contractors in the geographic areas where
Eagle has distribution centers. Such contractors and sub-contractors are engaged
in commercial and residential roofing repair and the construction of new
residential and commercial properties. In general, products distributed by Eagle
include equipment, tools and accessory products for the removal of old roofing,
re-roofing and roof construction, and related materials such as shingles, tiles,
insulation, liquid roofing materials, fasteners, ventilation materials and sheet
metal of the type used in the roofing industry. Management estimates that
approximately 48%, 34% and 16%, respectively, of Eagle's Fiscal 1995 sales
volume and approximately 55%, 30% and 12%, respectively, of Eagle's Fiscal 1996
sales volume were attributable to the residential roofing, commercial roofing
and roofing sheet metal markets, respectively. Management believes that the
increase in residential roofing sales volume and the decrease in commercial
sales volume during Fiscal 1996 was attributable to hurricanes which caused more
damage to residences than to commercial properties. Management believes that the
reduction in metal sales volume during Fiscal 1996 was due to lower grade metal
being introduced into the market by competitors.
Eagle has grown from nine distribution centers in Fiscal 1991, including
locations in Florida (seven) and Alabama (two), to its current level of 14
distribution centers including locations in Florida (ten), Alabama (three) and
Mississippi (one). Eagle has pursued its expansion activities by opening new
distribution centers. After opening a new distribution center, Eagle's focus is
to develop a customer base, to develop and improve the distribution center's
market position and operational efficiency and then to expand its customer base.
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After a distribution center is opened, Eagle's management continues to
assess each distribution center's performance and profitability. As a result of
this ongoing assessment, Eagle has on occasion sold or closed certain
distribution centers.
Eagle's Operating Strategy
Key elements of Eagle's operating strategy are as follows:
Purchasing Economies. Eagle negotiates with its suppliers to obtain volume
discounts and other favorable terms. Individual distribution center managers are
responsible within their inventory budgets for selecting and ordering inventory
tailored to the varied needs of customers in their local markets. Management
believes Eagle is able to obtain competitive pricing and purchasing terms,
maintain a broad and balanced product line, ensure timely delivery of products,
maintain appropriate inventory levels and maintain satisfactory relationships
with its vendors.
Centralizing Management Information Systems and Administration. Eagle
maintains centralized computer and data processing systems to support decision
making throughout its organization including what management believes to be an
in-depth credit analysis of its customers. Distribution centers are equipped
with on-line, real time management information systems. Eagle's management
information systems enable management to perform, control and monitor accounts
receivable, inventory levels, order entry, invoicing, sales and profitability by
distribution center. Each distribution center is, therefore, able to respond to
specific customer needs and overall market demand and to monitor the effects of
actions or decisions on performance and profitability. Eagle has also
centralized many administrative functions, such as payroll and employee
benefits, credit and collection, insurance, accounting and internal auditing,
cash management, human resources, fleet management safety and legal, both to
achieve economies of scale and to help managers remain focused on maximizing
profitability of their distribution centers. Eagle is in the process of updating
its computer and data processing system with improved software, new hardware and
expanded memory to improve response time and to allow for an increase in the
number of distribution centers.
Decentralizing Operations. Eagle has adopted a decentralized operating
philosophy to maximize its responsiveness to its customers' varied needs and to
give its distribution center managers a sense of responsibility for the
performance of their own operations and Eagle as a whole. While Eagle negotiates
purchase prices and terms on a company-wide or multi-center basis and uses
central management information systems to achieve economies of scale, each
distribution center manager is responsible for selecting and ordering inventory
to meet the needs of his customers, for staffing, for controlling all line item
expenses (other than central administration allocated items), for product
pricing
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and profit margins, and for creating his annual budget. Further, each
distribution center manager has individual profit and loss responsibility for
his distribution center and receives incentive compensation based upon the
profitability of his distribution center.
Eagle's Products
Eagle distributes a variety of roofing supplies and related products and
accessories for use in the commercial and residential roofing repair and
construction industries.
Residential Roofing Products. Shingles (asphalt, ceramic, slate, concrete,
fiberglass and fiberglass combined with asphalt), tiles, felt, insulation,
waterproof underlaying, ventilation systems and skylights.
Commercial Roofing Products. Asphalt, cements, tar, other coatings,
modified bitumen and roll roofings.
Sheet Metal Products. Aluminum, copper, galvanized and stainless sheet
metal.
Eagle also sells accessory products related to each of the foregoing,
including, but not limited to, roofing equipment, power and hand tools and
fasteners.
Eagle's Vendors
Eagle distributes products manufactured by a number of major vendors. GAF
Corporation, a supplier of residential and commercial roofing materials, is
Eagle's largest supplier, accounting for approximately 19% and 21% of Eagle's
sales during Fiscal 1995 and Fiscal 1996, respectively. During Fiscal 1995 and
Fiscal 1996, three other vendors products accounted for an aggregate of
approximately 19% and 17%, respectively, of Eagle's sales. Eagle has no written
agreements with any of its vendors. Eagle's management believes that in the
event of any interruption of product deliveries from any of its suppliers, it
will be able to secure suitable replacement supplies on acceptable terms.
Eagle's Customers, Sales and Marketing
Eagle sells and distributes roofing supplies and related products to more
than 2,000 customers engaged in commercial and residential roofing repair and
the construction of new residences and commercial properties. During Fiscal
1996, approximately 91% of Eagle's customers purchased products pursuant to
short-term credit arrangements. Eagle's sales efforts are primarily directed
through its 32 salespersons assigned to its distribution centers. Of Eagle's 32
salespersons, 15 are "inside" counter persons who serve walk-in and call-in
customers, with the remaining 17 being
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"outside" salespersons calling upon past, current and potential customers.
Eagle's salespersons rely upon a range of selling techniques all based upon
personal and telephone contact, which techniques include but are not limited to
"cold calling" for new customers, maintaining relationships with current and
former customers, and arranging or locating projects for Eagle's customers.
Eagle has no supply agreements with any of its customers. No Eagle customer
accounted for more than 3% of Eagle's sales during either Fiscal 1995 or Fiscal
1996.
Competition
Eagle currently faces its principal competition in the wholesale
distribution of roofing supplies from relatively smaller distributors but also
faces competition from distribution centers and a number of multiregional and
national wholesale distributors of building products including roofing supplies
which are larger than Eagle, including Bradco Supply Corporation and American
Builders & Contractors Supply Co., Inc., which have greater financial resources
than Eagle. Eagle currently competes in the wholesale distribution of roofing
supplies on the basis of competitive pricing, breadth of product line, prompt
delivery, service, providing discounts for prompt payment and on the abilities
of its personnel. To a substantially lesser degree, Eagle also competes with
larger high volume discount general building supply stores selling standardized
lower priced products as opposed to distributors such as Eagle which carry more
extensive product lines. Eagle competes with such entities on the basis of
product delivery, credit extension, customer service and breadth of product
line.
The Company anticipates that it may experience competition from entities
and individuals (including venture capital partnerships and corporations, blind
pool companies, large industrial and financial institutions, small business
investment companies and wealthy individuals) which are well-established and
have greater financial resources and more extensive experience than the Company
and Eagle in connection with identifying and effecting acquisitions of the type
sought by the Company. The Company's and Eagle's combined financial resources
will be limited in comparison to those of many of such competitors. Such
competition could result in the loss of an acquisition candidate or an increase
in the price the Company would be required to pay for such acquisitions.
Backlog
Eagle's business is conducted on the basis of short-term orders and prompt
delivery schedules precluding any substantial backlog.
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Employees
At June 30, 1996, Eagle had approximately 195 full-time employees,
including five executives, 27 managerial employees, 32 salespersons, 105
warehouse persons, drivers and helpers, and 26 clerical and administrative
persons. Eagle has experienced difficulties in retaining drivers and helpers but
suitable replacements have been readily available without economic impact. Eagle
is not subject to any collective bargaining agreement and believes that its
relationship with its employees is good.
The Company has no employees. The Company's management currently consists
of five officers, including two officers, Douglas P. Fields and Frederick M.
Friedman, neither of whom are required to commit a specific amount of their time
to the affairs of the Company. Each of Messrs. Fields and Friedman have
significant business interests outside of the Company, including but not limited
to TDA and its subsidiaries. Messrs. Fields and Friedman currently devote
substantially all of their business time to TDA and its subsidiaries, with
approximately 5% to 10% of that time being devoted to Eagle. Accordingly,
Messrs. Fields and Friedman may have conflicts of interest in allocating their
time among various business activities. However, Messrs. Fields and Friedman
will devote no less time than they deem reasonably necessary to carry out their
duties to the Company, including the evaluation and negotiation of potential
acquisitions. See "Management" and "Certain Transactions."
Facilities
Eagle leases approximately 15,000 square feet of executive office space
located at 1451 Channelside Drive, Tampa, Florida 33629, from a wholly-owned
subsidiary of TDA, at an approximate annual rental of $120,000. See "Certain
Transactions."
The following tables list the locations of Eagle's showroom and
distribution centers.
Locations Owned By And Leased From A Wholly-Owned TDA Subsidiary
Approximate Approximate Base
City and State Square Footage Annual Rental
- -------------- -------------- ---------------
Tampa, Florida 69,000 $173,000
St. Petersburg, Florida 25,000 $ 88,000
Holiday, Florida 16,000 $ 56,000
Fort Myers, Florida 16,000 $ 56,000
Pensacola, Florida 26,000 $ 90,000(1)
Birmingham, Alabama 39,000 $127,000(1)
Mobile, Alabama 24,000 $ 65,000
- ----------
See footnotes on following page of this Prospectus
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(1) See "Certain Transactions."
As Eagle has been a wholly-owned subsidiary of TDA since 1973, generally
there has been no need for Eagle to enter into written leases with the
subsidiary of TDA which owns Eagle's foregoing distribution centers. All of the
foregoing current distribution centers of Eagle leased from TDA's subsidiary
have been pursuant to oral agreements. Eagle has not entered into any written
leases for the foregoing premises. Upon the closing of the Public Offering and
consummation of the Acquisition, Eagle will enter into written ten year leases
with a subsidiary of TDA which will provide for base annual rentals
substantially similar to those set forth above for the first five years of such
leases with provisions for increases in rent based upon the consumer price index
at the beginning of the sixth year of such ten year leases and with provisions
for five-year renewal options, increases in rent based upon the consumer price
index, and lease terms, additional rental and other charges customarily included
in such leases, including provisions requiring Eagle to insure and maintain and
pay real estate taxes on the premises as is currently required. Such leases will
be on terms no less favorable than Eagle could obtain from independent third
parties. See "Certain Transactions."
Locations Leased From Third Parties
Approximate Approximate Base
City and State Square Footage Annual Rental
- -------------- -------------- ---------------
Clearwater, Florida 5,000 $ 23,000(1)
Montgomery, Alabama 24,000 $ 44,000(2)
Panama City, Florida 15,000 $ 63,000(3)
Fort Walton Beach, Florida 8,000 $ 36,000(4)
Crystal River, Florida 12,600 $ 42,000(5)
Lakeland, Florida 13,000 $ 57,000(6)
Tallahassee, Florida 15,000 $ 45,000(7)
Gulfport, Mississippi 13,000 $ 32,000(8)
(1) The lease for the Clearwater, Florida, premises expires on or about
August 31, 1998 and provides for a five year renewal option with increased
renewal term rental payments based upon the Consumer Price Index ("CPI"), but
not to exceed 5%. Pursuant to this lease Eagle is required to pay all municipal,
county and state taxes on and maintain the premises and carry comprehensive
public liability insurance on the premises.
(2) The lease for the Montgomery, Alabama, premises expires on or about
March 31, 1997 and continues on a year-to-year basis unless terminated by either
party on ninety day notice prior to the then current term. Pursuant to this
lease, Eagle is required to
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pay its pro rata share (as defined) of increases in certain taxes, such as
property and taxes on rentals, and premium increases for fire, casualty and
other types of coverage that the landlord maintains for these premises.
(3) The lease for the Panama City, Florida, premises expires on or about
February 15, 2001 and provides for a five year renewal option at an increased
rental based on the CPI. Pursuant to this lease, Eagle is required to maintain
the premises and provide fire, windstorm and other insurance. Additionally,
Eagle is required to pay all sales and use taxes imposed upon the rental
payments for the premises. Eagle has the right of first refusal to purchase
these premises in certain events.
(4) The lease for the Panama City, Florida, premises expires on or about
December 31, 1998 and provides for a five year renewal option at increased rent
based upon the CPI along with applicable sales and use taxes. Eagle is also
required to maintain liability insurance on the premises.
(5) The lease for the Crystal River, Florida, premises expires on or about
February 28, 1998 and requires annual rental increases based upon the CPI. This
lease provides for a two year renewal option. Eagle is also required to maintain
the premises, pay certain taxes (sales, use, rent, receipts) and pay public
liability insurance premiums.
(6) The lease for the Lakeland, Florida, premises expires on or about July
31, 1997 and provides for a five year renewal option with yearly increased base
rental payments during any such extended term up to a maximum of approximately
$70,000 for the last year of the renewal term, which is July 31, 2002. This
lease also requires Eagle to maintain the premises, pay any required sales taxes
and provide liability insurance for the premises.
(7) The lease for the Tallahassee, Florida, premises expires on or about
July 31, 1997 and provides for two five year renewal options with the base
rental escalating at the rate of three percent per year during option years and
a right of first refusal to purchase the premises. This lease requires Eagle to
pay any real estate and sales taxes, maintain the premises and provide liability
insurance.
(8) The lease for the Gulfport, Mississippi, premises expires on or about
May 31, 1997 and provides for a five year renewal option on terms and conditions
to be negotiated. This lease requires Eagle to maintain liability insurance on
the premises, maintain the premises and pay any real estate and personal
property taxes.
Eagle also remains obligated for rental payments under a lease expiring on
May 1, 1999 for its distribution facility formerly
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operated in Fort Lauderdale, Florida. The Fort Lauderdale premises are owned by
a wholly-owned subsidiary of TDA. The Fort Lauderdale, Florida, premises have
been sublet to an entity not otherwise affiliated with Eagle or TDA for a term
expiring in August 1997. See "Certain Transactions."
At the time Eagle opened its former Fort Lauderdale, Florida, distribution
center, in the early part of the 1980s, TDA established a subsidiary to acquire
that facility which was financed by the issuance of an industrial revenue bond.
The financial institution providing the industrial revenue bond required a
written lease between the TDA subsidiary and Eagle as a precondition to the
issuance of that bond. The term of Eagle's lease for the Fort Lauderdale,
Florida, premises continues through May 1, 1999 even though Eagle has vacated
those premises.
Eagle closed its Fort Pierce, Florida, distribution center in June 1996 and
is seeking a subleasee for that center. Eagle will remain liable under the lease
for this former distribution center at the approximate rate of $2,600 per month
through mid-February 1998.
TDA will provide office space and administrative services to the Company at
its offices in New York City pursuant to an administrative services agreement to
be entered into by the Company and TDA upon the closing of the Public Offering
and consummation of the Acquisition. The term of the administrative services
agreement will be on a month to month basis. The fee payable by the Company to
TDA for such administrative services will be $3,000 per month. Prior to the
closing of the Public Offering, the Company utilized office space and
administrative services provided by TDA without charge. See "Certain
Transactions."
Legal Proceedings
Neither the Company nor Eagle are subject to any material legal
proceedings.
MANAGEMENT
Directors and Executive Officers
The directors and executive officers of the Company are as follows:
Name Age Position
- --------------------- --- --------------------------------------
Douglas P. Fields 54 Chairman of the Board and Chief
Executive Officer
Frederick M. Friedman 56 Executive Vice President, Treasurer,
Secretary and a Director
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Thomas W. Havnes 65 President
Donald E. Morris 50 Vice President-Operations
Lewis G. Marshall 40 Controller
Steven R. Andrews 42 Director
Paul D. Finkelstein 53 Director Nominee*
John E. Smircina 65 Director Nominee*
George Skakel III 45 Director Nominee*
* Upon successful completion of the Public Offering and consummation of the
Acquisition, said persons are anticipated to become members of the Company's
Board of Directors.
Set forth below is a brief background of the executive officers, directors
and director nominees of the Company, based on information supplied by them.
Douglas P. Fields has been the Chairman of the Board of Directors, Chief
Executive Officer and a Director of the Company since inception. From the
Company's inception until July 1996, Mr. Fields also served as its President.
For more than the past five years, Mr. Fields has been the Chairman of the Board
of Directors, President and Chief Executive Officer of TDA and Chief Executive
Officer and a Director of each of its subsidiaries, including Eagle, Cooper
Flooring International, Inc ("CFI") and Northeastern Plastics, Inc ("NPI"). TDA
is a holding company whose operating subsidiaries are engaged primarily in the
wholesale distribution of building supplies and home furnishing products (Eagle
and CFI), the manufacture and distribution of a variety of electrical devices
(NPI), the operation of an indoor tennis facility and the management of real
estate. Upon successful completion of the Public Offering and consummation of
the Acquisition, it is anticipated that Mr. Fields will devote no less time to
the Company's affairs than he deems reasonably necessary to discharge his duties
to the Company. Mr. Fields received a Master's degree in Business Administration
from the Harvard University Graduate School of Business Administration in 1966
and a B.S. degree from Fordham University in 1964.
Frederick M. Friedman has been Executive Vice President, Chief Financial
Officer, Treasurer, Secretary and a Director of the Company since inception. For
more than the past five years, Mr. Friedman has been Executive Vice President,
Chief Financial Officer, Treasurer, Secretary and a Director of TDA and Vice
President, Chief Financial Officer, Treasurer, Secretary and a
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Director of each of its subsidiaries, including Eagle, CFI and NPI. Upon
successful completion of the Public Offering and consummation of the
Acquisition, it is anticipated that Mr. Friedman will devote no less time to the
Company's affairs than he deems reasonably necessary to discharge his duties to
the Company. Mr. Friedman received a B.S. degree in Economics from The Wharton
School of the University of Pennsylvania in 1962.
Thomas W. Havnes has been President of Eagle since February 1994 and became the
Company's President in July 1996. From 1991 until joining Eagle, Mr. Havnes was
a licensed real estate broker engaged in the sale of commercial real estate. Mr.
Havnes received a B.S. degree from the University of Minnesota in 1960.
Donald E. Morris has been associated with Eagle for many years, returning to
Eagle in 1996 after five years elsewhere in a related products industry. In 1996
he became Eagle's regional manager for its operations in the West Coast of
Florida. Mr. Morris became the Company's Vice President-Operations in July 1996.
Lewis G. Marshall has been the Senior Corporate Controller of Eagle since
September 1993 and became the Company's Controller in July 1996. For more than
the five years prior to joining Eagle, he was the Controller for Crystals
International Inc., a manufacturer of freeze dried drink mixes and food
ingredients. Mr. Marshall received a B.S. degree in Accounting and a Master's
Degree in Business Administration in 1978 and 1986, respectively, from Florida
Southern College.
Steven R. Andrews has been a Director of the Company since May 1996. For more
than the past five years, Mr. Andrews has been engaged in the private practice
of law. Mr. Andrews received a Juris Doctor degree and an L.L.M. degree in 1977
and 1978 from Stetson University and New York University, respectively.
Paul D. Finkelstein has been the president and director of the Regis
Corporation, an operator of beauty salons and a cosmetic sales company, for more
than the past five years. Mr. Finkelstein received a Master's degree in Business
Administration from the Harvard University Graduate School of Business
Administration in 1966 and a B.S. degree in Economics from The Wharton School of
the University of Pennsylvania in 1964.
John E. Smircina has been a partner in the law firm of Wade, Hughes and
Smircina, P.C since April 1993. From prior to 1991 to March 1993, Mr. Smircina
was self-employed as a consultant. For more than the past five years, Mr.
Smircina has been a Director of TDA. Mr. Smircina received a Master's degree in
Industrial Management from Ohio University in 1954 and a B.A. degree in
Political Science from Ohio University in 1953.
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<PAGE>
George Skakel III, has been a private investor for more than the past five
years. Mr. Skakel received a B.S. degree in Economics from the University of
Delaware in 1973 and a master's degree in Business Administration from Harvard
University Graduate School of Business Administration in 1978.
Directors of the Company serve until the next annual meeting of stockholders of
the Company and until their successors are elected and duly qualified. Officers
of the Company will be elected annually by the Board of Directors and serve at
the discretion of the Board of Directors.
The Board of Directors has established an Executive Committee which is composed
of Douglas P. Fields and Frederick M. Friedman. The Board of Directors of the
Company can delegate to the Executive Committee all of the powers and authority
(other than those reserved by statute to the full Board of Directors) of the
full Board of Directors in the management of the business and affairs of the
Company.
In 1976, in connection with certain transactions which occurred in 1971 and
1973, Messrs. Fields and Friedman and TDA, then a public company, without
admitting or denying the allegations set forth in a civil action commenced by
the Commission, consented to a final judgement of permanent injunction which, in
summary, provided that Messrs. Fields and Friedman and TDA were permanently
enjoined from violating the registration, reporting, proxy and the anti-fraud
provisions of the federal securities laws and rules. Additionally, Messrs.
Fields and Friedman agreed to certain ancillary relief which included their
agreements, for a period of two years, to resign as directors of TDA and a
publicly held subsidiary of TDA and not to vote any securities of TDA and the
subsidiary owned or controlled by them. The Commission's complaint alleged,
among other things, that in 1973 TDA and Messrs. Fields and Friedman, in
connection with TDA's acquisition of Eagle, caused an improper finder's fee to
be paid to Messrs. Fields' and Friedman's designee with a portion of such
finder's fee being paid back to Mr. Friedman. Based upon facts related to the
injunctive action, in 1979, Messrs. Fields and Friedman were found guilty of
conspiring to violate the federal securities laws and making false statements in
filings made with the Commission. Messrs. Fields and Friedman were sentenced to
six and three months incarceration, respectively, and both were fined. Also, on
facts related to the injunctive action, Mr. Friedman was found guilty of mail
and wire frauds. Mr. Friedman was sentenced to one month incarceration on each
of three counts.
The Company has applied for "Key Person" life insurance policies in the amount
of $1,000,000 on each of the lives of Douglas P. Fields, its Chairman of the
Board and Chief Executive Officer, and Frederick M. Friedman, its Executive Vice
President, Chief Financial Officer, Treasurer, Secretary and a Director of the
Company.
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<PAGE>
Executive Compensation
The following table sets forth certain summary information with respect to
the compensation paid by Eagle for services rendered in all capacities to Eagle
during Fiscal 1995 by Eagle's President and, during Fiscal 1994, by Eagle's
Chairman Emeritus. Neither the Company nor Eagle have had any other executive
officer whose total annual salary and bonus exceeded $100,000 for either of said
fiscal years:
Summary Compensation Table
Fiscal Year
Name and Ended
Principal Position June 30, Salary($) Bonus($)
- ------------------ ----------- --------- --------
Thomas W. Havnes, 1995 $104,200 -0-
President of Eagle*
Robert L. Noojin,
Chairman Emeritus of Eagle 1994 $125,000 -0-
- ----------
* Mr. Havnes is currently compensated at the rate of $120,000 per year.
Employment Agreements and Arrangements
The Company and Eagle have entered into employment agreements with Messrs.
Fields and Friedman, to become effective upon closing of the Public Offering and
consummation of the Acquisition, pursuant to which they will act as Chairman of
the Board and Chief Executive Officer, and Executive Vice President, Chief
Financial Officer, Treasurer, Secretary and a Director of the Company and Eagle,
respectively, for a five year period, at annual salaries of $200,000 each,
subject to annual increases or bonuses as may be determined by the Board of
Directors. Pursuant to their employment agreements, Messrs. Fields' and
Friedman's written consent is required if they are to be employed other than in
proximity to their residences. Messrs. Fields and Friedman reside in Connecticut
and New York, respectively. The employment agreements require the Company and
Eagle to provide their beneficiaries and each of them, respectively, with twelve
months salary in the event of death or disability and indemnify them to the full
extent permitted under the Delaware General Corporation Law. Their employment
agreements do not require either Messrs. Fields or Friedman to commit a specific
amount of their time to the affairs of the Company. However, Messrs. Fields and
Friedman will devote no less time than they deem reasonably necessary to carry
out their duties to the Company, including the evaluation and negotiation of
potential acquisitions.
The Company's employment agreements with Messrs. Fields and Friedman
contain provisions for payments of salary and benefits following a change of
control (as defined) of the Company, the
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<PAGE>
failure to reappoint either of them to his position, a salary reduction or the
Company's failure to perform its obligation under their respective employment
agreements. In general, under such circumstances, each of Messrs. Fields and
Friedman would be entitled to a cash payment equivalent to his salary for the
remaining term of his agreement, and continued life, health and disability
insurance benefits for a period of two years. Assuming a closing of the Public
Offering and consummation of the Acquisition on November 1, 1996, based upon
current contract salary terms, the aggregate amount payable by the Company in
any of the foregoing events, is __________ for each of Messrs. Fields and
Friedman.
Upon the closing of the Public Offering and consummation of the
Acquisition, pursuant to the Company's 1996 Stock Option Plan, the Company
intends to grant to each of Messrs. Fields and Friedman options exercisable to
purchase 21,500 shares of Common Stock. Such options will have a term of ten
years and will be exercisable at the offering price of the Common Stock sold
pursuant to the Public Offering. Such options will vest as to 20% of the
underlying shares of Common Stock on each successive anniversary of the date of
grant commencing one year from the date of the closing of the Public Offering,
provided that they are employees of the Company on such dates.
Compensation of Directors
Directors of the Company do not receive compensation for their services as
directors; however, the Board of Directors may authorize the payment of
compensation to directors for their attendance at regular and special meetings
of the Board and for attendance at meetings of committees of the Board as is
customary for similar companies. Directors will be reimbursed for their
reasonable out-of-pocket expenses incurred in connection with their duties to
the Company. Upon completion of the Public Offering and consummation of the
Acquisition, all non-officer directors and director nominees, except for Mr.
Andrews, of the Company will each receive options to purchase 10,000 shares of
the Company's Common Stock, exercisable at $5.00 per share.
Limitation on Liability of Directors
The Delaware General Corporation Law permits a corporation, through its
Certificate of Incorporation, to exonerate its directors from personal liability
to the corporation or to its stockholders for monetary damages for breach of
fiduciary duty of care as a director, with certain exceptions. The exceptions
include a breach of the director's duty of loyalty, acts or omissions not in
good faith or which involve intentional misconduct or knowing violation of law,
improper declarations of dividends, and transactions from which the directors
derived an improper personal benefit. The Company's Certificate of Incorporation
exonerates its directors from monetary liability to the extent
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<PAGE>
permitted by this statutory provision. The Company has been advised that it is
the position of the Commission that, insofar as the foregoing provision may be
invoked to disclaim liability for damages arising under the Securities Act, that
provision is against public policy as expressed in the Securities Act and is
therefore unenforceable.
Stock Option Plan
In August 1996, the Board of Directors adopted and the stockholders
approved the Company's 1996 Stock Option Plan (the "1996 Stock Option Plan").
The 1996 Stock Option Plan provides for the grant of (i) options that are
intended to qualify as incentive stock options ("Incentive Stock Options")
within the meaning of Section 422A of the Internal Revenue Code, as amended (the
"Code"), to certain employees, directors and consultants and (ii) options not
intended to so qualify ("Non-Qualified Stock Options") to employees (including
directors and officers who are employees of the Company), directors and
consultants. The total number of shares of Common Stock for which options may be
granted under the 1996 Stock Option Plan is 1,000,000 shares. Upon the closing
of the Public Offering and consummation of the Acquisition, the Company intends
to grant options exercisable into 450,000 shares of Common Stock to various of
its employees, including options to purchase an aggregate of 203,000 shares
which will be issued to Messrs. Fields, Friedman, Havnes, Morris and Marshall.
The exercise price of these options will be the price to the public of the
shares of Common Stock offered in the Public Offering.
Upon the closing of the Public Offering and consummation of the
Acquisition, Messrs. Finkelstein, Smircina and Skakel, director nominees of the
Company, will each be granted options to purchase 10,000 shares of Common Stock
pursuant to the Company's 1996 Stock Option Plan. Such options will have a term
of ten years and will be exercisable at $5.00 per share and will vest on the
first anniversary of the date of grant.
The 1996 Stock Option Plan is to be administered by the Board of Directors
or a committee of the Board of Directors which will determine the terms of
options granted, including the exercise price, the number of shares subject to
the option and the terms and conditions of exercise. No option granted under the
1996 Stock Option Plan is transferable by the optionee other than by will or the
laws of descent and distribution and each option is exercisable during the
lifetime of the optionee only by such optionee.
The exercise price of all stock options granted under the 1996 Stock Option
Plan must be at least equal to the fair market value of such shares on the date
of grant. With respect to any participant who owns stock possessing more than
10% of the voting rights of all classes of the Company's outstanding capital
stock, the exercise price of any Incentive Stock Option must be not less than
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<PAGE>
110% of the fair market value on the date of grant. The term of each option
granted pursuant to the 1996 Stock Option Plan may be established by the Board
of Directors or a committee of the Board of Directors, in its sole discretion;
provided, however, that the maximum term of each Incentive Stock Option granted
pursuant to the 1996 Stock Option Plan is ten years. With respect to any
Incentive Stock Option granted to a participant who owns stock possessing more
than 10% of the voting rights of all classes of the Company's outstanding
capital stock, the maximum term is five years. Options shall become exercisable
at such times and in such installments as the Board of Directors or a committee
of the Board of Directors shall provide in the terms of each individual option.
Options Granted Pursuant to the 1996 Stock Option Plan to Executive Officers,
Directors and Director Nominees of the Company
The table below shows, as to each of the executive officers, Directors and
Director Nominees of the Company and as to all executive officers, Directors and
Director Nominees of the Company as a group, the following information with
respect to stock options to be granted under the 1996 Stock Option Plan: (i) the
aggregate amounts of shares of Common Stock subject to options to be granted on
the closing date of the Public Offering and consummation of the Acquisition; and
(ii) the price or range per share option exercise price for options to be
granted on the closing date of the Public Offering and consummation of the
Acquisition for these individuals. No other options for these individuals have
been issued or will be issued and outstanding on the closing date of the Public
Offering and consummation of the Acquisition.
Names of Executive Officers, Shares Subject Per Share
Directors and Director Nominees to Options Exercise Price
- ------------------------------- -------------- --------------
Douglas P. Fields(1) 21,500 $5.00
Frederick M. Friedman(1) 21,500 $5.00
Thomas W. Havnes(2) 100,000 $5.00
Donald E. Morris(2) 40,000 $5.00
Lewis G. Marshall(2) 20,000 $5.00
Paul D. Finkelstein(3) 10,000 $5.00
John E. Smircina(3) 10,000 $5.00
George Skakel III(3) 10,000 $5.00
All Executive Officers, Directors 233,000 $5.00
and Director Nominees as a group
(9 persons)
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- ----------
(1) The options to be granted to Messrs. Fields and Friedman will vest at a rate
of 20% per year from the closing date of the Public Offering.
(2) Of the options to be granted to Messrs. Havnes, Morris and Marshall, 75,000,
30,000 and 15,000 of such options, respectively, will vest over various periods
of time but not at a rate greater than 20% per year from the closing date of the
Public Offering. The remainder of the options to be granted to Messrs. Havnes,
Morris and Marshall will vest at a rate of one-third on each of the seventh,
eighth and ninth anniversaries from the closing date of the Public Offering
unless certain budgeting thresholds are met, in which case the vesting of such
options will be accelerated. Such acceleration will allow such options to vest
at a rate of one-fifth per year beginning in 1997 and every year thereafter and
further limited such that the total amount of all options granted to each of
them and vesting in any single year does not exceed $100,000 at the exercise
price.
(3) The options to be granted to Messrs. Finkelstein, Smircina and Skakel will
not vest until one year from the closing date of the Public Offering.
Other Compensation
Eagle provides basic health, major medical and life insurance for its
employees, including its executive officers. Eagle has also adopted a 401(K)
Retirement Savings Plan for eligible employees, as described below. No other
retirement, pension or similar program has been adopted by the Company or Eagle.
These and other benefits may be adopted by the Company for its employees in the
future.
In July 1992, Eagle adopted a 401(K) Retirement Savings Plan for employees
of Eagle Supply, Inc. (the "401(K) Plan"). Eligible employees include all
employees of Eagle who have completed one year of employment and have attained
the age of 21. The 401(K) Plan permits employees to make voluntary contributions
to the 401(K) Plan up to a dollar limit set by law. Eagle may contribute in
discretionary matching contributions equal to an Eagle determined percentage of
the employee's contributions. Benefits under the 401(K) Plan are distributable
upon retirement, disability, termination of employment or certain financial
hardship, subject to regulatory requirements. Each participant's share of
Eagle's contributions vests at the rate of 20% per year until after six years of
service, at which time the participant becomes fully vested.
Since its fiscal year ended June 30, 1993, Eagle has not made a
contribution to the 401(K) Plan. Amounts to be contributed in the future are at
the discretion of Eagle's Board of Directors.
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Accordingly, it is not possible to estimate the amount of benefits that will be
payable to participants in the 401(K) Plan upon their retirement. The trustees
under the 401(K) Plan are Lewis G.
Marshall and Robert L. Noojin.
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PRINCIPAL STOCKHOLDERS
The following table set forth, as of the date of this Prospectus, after
giving effect to the Acquisition as if it had occurred on that date, certain
information concerning beneficial ownership of shares of Common Stock with
respect to (i) each person known to the Company to own 5% or more of the
outstanding shares of Common Stock, (ii) each executive officer, director and
director nominee of the Company, and (iii) all officers, directors and director
nominees of the Company as a group:
<TABLE>
<CAPTION>
Amount and Approximate Per- Approximate Per-
Nature of centage of Common centage of Common
Beneficial Stock Owned Before Stock Owned After
Ownership Public Offering Public Offering (3)
---------- ------------------ -------------------
<S> <C> <C> <C>
TDA Industries, Inc.(1) 2,200,000(2) 84.6% 53.7%
Douglas P. Fields(1) 2,200,000(2)(3) 84.6% 53.7%
Frederick M. Friedman(1) 2,200,000(2)(3) 84.6% 53.7%
Thomas W. Havnes(1) 0(3) * *
Donald E. Morris(1) 0(3) * *
Lewis G. Marshall(1) 0(3) * *
Steven R. Andrews(1) 100,000 3.9% 2.4%
Paul D. Finkelstein(1) 0(3) * *
John E. Smircina(1) 2,200,000(2)(3) 84.6% 53.7%
George Skakel III(1) 0(3) * *
All executive officers,
directors and director-nomi-
nees as a group (9 persons) 2,300,000(2)(3) 88.5% 56.1%
</TABLE>
* Denotes less than 1%
- ----------
(1) The address for TDA Industries, Inc. is 122 East 42nd Street, New York, New
York 10168. The address for Messrs. Fields and Friedman is c/o Eagle Supply
Group, Inc. at the foregoing street address, Suite 1116. The address for Mr.
Andrews is 822 North Monroe Street, Tallahassee, Florida 32303. The address for
Messrs. Havnes, Marshall and Morris is c/o Eagle Supply, Inc., 1451 Channelside
Drive, Tampa, Florida 33629. The address for Mr. Finkelstein is c/o Regis Corp.,
7201 Metro Boulevard, Minneapolis, Minnesota 55439-2130. The address for Mr.
Smircina is 616 N. Washington Street, Alexandria, Virginia 22314. The address
for Mr. Skakel is 333 Ludlow Street, Stamford, Connecticut 06902.
(2) Includes 2,000,000 shares of Common Stock currently owned by TDA. Also
includes 200,000 shares of Common Stock to be issued to TDA upon consummation of
the Acquisition. Messrs. Fields and Friedman are officers and directors and
principal stockholders of TDA. Mr. Smircina is a director of TDA. Each of
Messrs. Fields,
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Friedman and Smircina may be deemed to exercise voting control over securities
of the Company owned by TDA.
(3) Does not include options granted under the Company's 1996 Stock Option Plan.
See "Management."
CERTAIN TRANSACTIONS
Simultaneously with the closing of the Public Offering, the Company will
consummate the Acquisition. The Underwriter, as preconditions to a closing of
the Public Offering, requires that Eagle have a net tangible book value of not
less than $1,000,000 at the consummation of the Acquisition. The Company
believes that the foregoing have been and will be met. Upon consummation of the
Acquisition, Eagle will become a wholly-owned subsidiary of the Company and will
constitute the sole business operations and source of revenue of the Company
until such time, if any, as the Company consummates additional acquisitions.
TDA is a holding company which operates four business enterprises,
including Eagle, and real estate investment companies. At the date of this
Prospectus, Eagle is wholly owned by TDA. See "Principal Stockholders." For
TDA's fiscal years ended June 30, 1995 and 1996, Eagle's revenues constituted a
majority of TDA's revenues.
On or about December 23, 1994, Eagle secured a four year bank revolving
credit facility in the amount of $7,500,000, guaranteed by TDA (the "Facility").
Eagle's obligations under the Facility are collateralized by certain tangible
and intangible current assets of Eagle with borrowings based on a formula
relating to certain levels of receivables and inventory, as defined therein. By
the end of Fiscal 1995, Eagle used its borrowings under this revolving credit
facility to repay $2,325,533 of its indebtedness to TDA and to advance
$3,308,681 to TDA. Upon completion of the Public Offering and consummation of
the Acquisition, a significant portion,if not all, of TDA's indebtedness to
Eagle will be dividended by Eagle to TDA in the form of cancellation of such
indebtedness, with Eagle retaining $1,000,000 in net tangible book value. Any
portion of TDA's indebtedness to Eagle not so cancelled pursuant to this
provision will be paid to Eagle by TDA within 45 days of the completion of the
Public Offering. Additionally, the Facility requires TDA's reaffirmation of its
guaranty in certain events including, but not limited to, the event that TDA or
TDA's stockholders cease to own all of Eagle's securities. See Financial
Statements and the notes thereto.
TDA, through a wholly-owned subsidiary, has rented to Eagle on a month to
month basis without formal written leases the premises for several of Eagle's
distribution facilities and Eagle's executive offices at aggregate annual
rentals of approximately $709,000 during each of Fiscal 1995 and Fiscal 1996.
The Company
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believes that the amounts of these rental payments are fair and reasonable to
Eagle and are not in excess of what Eagle would be required to pay independent
third parties for comparable facilities. Upon successful completion of the
Public Offering and the consummation of the Acquisition, Eagle and TDA intend to
enter into ten year leases for said premises on economic terms substantially
similar to current arrangements. However, the leases will now be written and on
a long-term, ten (10) year basis, and it is anticipated that TDA will derive a
profit therefrom. See "Business."
Eagle had purchased the premises for its Birmingham, Alabama, distribution
center from an unrelated third party in April 1994, with a purchase money
mortgage and promissory note in the principal amount of $550,000 to be paid in
fifty-nine equal monthly installments of approximately $4,700 and a "balloon"
payment of approximately $440,000 due on that date. The mortgage and promissory
note for the Birmingham, Alabama, premises bears interest at the lending bank's
fluctuating prevailing prime rate. Prior to June 30, 1994, Eagle transferred
this property to TDA in partial repayment of intercompany debt, and TDA then
transferred the property to a wholly-owned subsidiary. Eagle remains liable for
the payments under this mortgage, and, in the event of a default under the
mortgage by the relevant TDA subsidiary, Eagle could be held liable for the
monthly and "balloon" mortgage payments in addition to its rental payments. See
"Business" and Financial Statements and the notes thereto.
Eagle transferred its Pensacola, Florida, premises to TDA as a dividend in
1987, said premises having originally been purchased by Eagle from an unrelated
third party in that year with a purchase money mortgage and a promissory note
which requires monthly payments of approximating $4,800 through March 1997 and a
"balloon" payment of approximating $361,000 due on that date. The mortgage and
promissory note for the Pensacola, Florida, premises bears interest at the rate
of ten and one-half percent (10 1/2%) per year. This property was also
transferred by TDA to a wholly-owned subsidiary. Eagle remains liable for the
payments under this mortgage, and, in the event of a default under the mortgage
by the relevant TDA subsidiary, Eagle could be held liable for the monthly and
"balloon" mortgage payments in addition to its rental payments. See "Business"
and Financial Statements and the notes thereto.
Eagle's rental payment obligations to the TDA subsidiary for the
Birmingham, Alabama, and Pensacola, Florida, properties, which are two of the
premises leased by Eagle from a subsidiary of TDA for use as distribution
centers, have exceeded the amounts due to the mortgage holders for those
properties and have not required Eagle to pay any sums in excess of its rental
payments.
Eagle also remains responsible to a wholly-owned subsidiary of TDA pursuant
to a lease for Eagle's former Fort Lauderdale,
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Florida, distribution center expiring on May 1, 1999, which requires approximate
annual rental payments including a "balloon" payment of approximately $580,000
due on May 1, 1999 for an industrial revenue bond underlying these premises.
These premises have been subleased by Eagle to an unrelated third party at an
approximate annual rental of $200,000, which amount is approximately equal to
Eagle's lease obligation. The payments by Eagle to the TDA subsidiary have
included through June 30, 1995, a ratable share of the "balloon" payment. These
payments, together with anticipated sublessee rental payments, are currently
projected by the Company to fully fund the "balloon" payment. The foregoing
anticipated sublessee rental payments assume the execution and performance by
the subleasee of a negotiated, but unsigned, extension of the sublease.
Upon completion of the Public Offering and as part of the Acquisition, TDA
or its relevant subsidiaries will agree to indemnify Eagle for any payment that
Eagle is required to make pursuant to the Birmingham, Alabama and Pensacola,
Florida mortgages and the Fort Lauderdale, Florida lease in excess of Eagle's
obligations under its leases for said premises.
During Fiscal 1995 and 1996, Eagle made dividend payments to TDA of
$421,535 and $1,097,000, respectively. After June 30, 1996, Eagle has continued
to make dividend payments of approximately $150,000 per month to TDA. During
each of Fiscal 1995 and Fiscal 1996, Eagle was charged by TDA the amounts of
$50,000 for accounting and auditing fees. Upon a closing of the Public Offering
and consummation of the Acquisition, all such dividends will cease and such
accounting and auditing fees will be incurred directly by Eagle. See Financial
Statements and the notes thereto.
The foregoing transactions that Eagle has engaged in with TDA have
benefitted or may be deemed to have benefitted TDA directly or indirectly.
Messrs. Fields and Friedman, the Company's Chief Executive Officer and Chairman
of its Board of Directors and Executive Vice President, Chief Financial Officer,
Treasurer, Secretary, and a Director of the Company, respectively, are also
executive officers, directors and principal stockholders of TDA and have
benefitted or may be deemed to have benefitted, directly or indirectly, from
Eagle's transactions with TDA. TDA is a holding company which, among other
things, owns Eagle, a distributor of home furnishing products, a manufacturer
and distributor of electrical devices, an indoor tennis facility and owns and
manages commercial and undeveloped real estate. TDA and/or certain of its
subsidiaries derive funds from all of the foregoing sources, including dividend
and lease payments from Eagle. These sources pay TDA's operating expenses,
including the payment of salaries and benefits to Messrs. Fields and Friedman.
In or about May 1996, the Company sold 2,000,000 shares of its Common Stock
to TDA and 100,000 shares of its Common Stock to
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Steven R. Andrews for the aggregate sum of $210. TDA and Mr. Andrews were the
Company's founding stockholders and are also the principal stockholder and a
Director of the Company, respectively. In connection with the Acquisition, TDA
will be issued 200,000 shares of the Company's Common Stock and will be granted
"piggyback" registration rights with respect to said shares of the Company's
Common Stock for any registration statement filed with the Commission by the
Company at any time commencing two years after the completion of the Public
Offering.
In June and July 1996, the Company sold an aggregate of 300,000 shares of
its Common Stock and a like number of Warrants to 12 private investors for
aggregate gross proceeds of $300,000. The private investors are identified in
this Prospectus under "Selling Securityholders."
Upon completion of the Public Offering and consummation of the Acquisition,
TDA will provide office space and administrative services to the Company at
TDA's offices in New York City pursuant to an administrative services agreement
to be entered into by the Company and TDA. The term of the administrative
services agreement will be on a month to month basis. The fee payable by the
Company to TDA for such administrative services will be $3,000 per month. Prior
to the date of this Prospectus, the Company utilized office space and
administrative services provided by TDA without charge.
During Fiscal 1996, Eagle loaned $200,000 to a TDA subsidiary which was
repaid in that same fiscal year together with interest at the rate of 9 1/4% per
year.
Messrs. Fields and Friedman are also officers, directors and principal
stockholders of TDA and Mr. Smircina is an officer and director of TDA and,
consequently, they will be able, through TDA to direct the election of the
Company's directors, effect significant corporate events and generally direct
the affairs of the Company. The Company does not intend to enter into any
material transactions with TDA and its affiliates in the future unless such
transaction is fair and reasonable to the Company and is on terms no less
favorable than could be obtained from unaffiliated third parties. See
"Management."
Each of TDA and Messrs. Fields and Friedman may be deemed to be a
"promoter" of the Company as such term is defined under the federal securities
laws.
DESCRIPTION OF SECURITIES
Common Stock
The Company is authorized to issue up to 15,000,000 shares of Common Stock,
$.0001 par value per share, 2,400,000 of which are issued and outstanding as of
the date of this Prospectus. The holders of Common Stock are entitled to receive
dividends equally
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when, as and if declared by the Board of Directors, out of funds legally
available therefor.
Subject to the rights that may be designated by the Board of Directors to
the holders of any shares of Preferred Stock, the holders of the Common Stock
have voting rights, one vote for each share held of record, and are entitled
upon liquidation of the Company to share ratably in the net assets of the
Company available for distribution. Shares of the Company's Common Stock do not
have cumulative voting rights. Therefore, the holders of a majority of the
shares of Common Stock may elect all of the directors of the Company and control
its affairs and day to day operations. The shares of Common Stock are not
redeemable and have no preemptive or similar rights. All 2,400,000 outstanding
shares of the Company's Common Stock are fully paid and non-assessable.
2,000,000 shares of the Company's Common Stock are owned by TDA and 100,000
shares are owned by Steven R. Andrews, Esq. TDA and Mr. Andrews purchased their
shares of the Company's Common Stock at the per share par value. The remaining
300,000 shares of the Company's Common Stock were sold in the Private Placement.
In connection with the Acquisition, TDA will be issued an additional 200,000
shares of the Company's Common Stock.
Preferred Stock
The Company is authorized to issue 2,000,000 shares of Preferred Stock, par
value $.0001 per share ("Preferred Stock"). The Board of Directors of the
Company, without further stockholder action, may issue shares of Preferred Stock
in any number of series and may establish as to each such series the designation
and number of shares to be issued and the relative rights and preferences of the
shares of each series, including provisions regarding voting powers, redemption,
dividend rights, rights upon liquidation and conversion rights. The issuance of
shares of Preferred Stock by the Board of Directors could adversely affect the
rights of holders of Common Stock by, among other matters, establishing
preferential dividends, liquidation rights and voting power. The Company has not
issued any shares of Preferred Stock and has no present intention to issue
shares of Preferred Stock. The issuance thereof could discourage or defeat
efforts to acquire control of the Company through acquisition of shares of
Common Stock. The Company has agreed not to issue any shares of Preferred Stock
until the third anniversary of the date of this Prospectus without the
Underwriter's written consent.
Redeemable Common Stock Purchase Warrants
The Company has authorized the issuance of up to 1,725,000 Redeemable
Common Stock Purchase Warrants to be sold in the Public Offering. As of the date
of this Prospectus, the Company had 300,000 Warrants issued and outstanding.
Said 300,000 issued and outstanding Warrants were sold as part of a private
placement offering of the Company's securities in June and July 1996.
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The following statements and summaries of the material provisions of the
Warrants are subject to the more detailed provisions of the Warrants, a copy of
which has been included as an Exhibit to the Registration Statement of which
this Prospectus forms a part.
Rights to Purchase Shares of Common Stock
Each Warrant entitles the registered holder to purchase from the Company
one share of Common Stock at an exercise price of $5.00 per share during the
period commencing on the date of this Prospectus and ending on the third
anniversary of such date. The exercise price is subject to adjustment in certain
circumstances as defined herein.
Exercise
Each holder of a Warrant may exercise such Warrant, in whole or in part, by
surrendering the certificate evidencing such Warrant, with the form of election
to purchase attached to such certificate properly completed and executed,
together with payment of the exercise price and any required transfer taxes, to
the Company. No Warrants may be exercised unless at the time of exercise there
is a current prospectus encompassing the shares of Common Stock issuable upon
the exercise of such Warrants under an effective registration statement. The
Company will endeavor to maintain an effective registration statement, including
such current prospectus, so long as any of the exercisable Warrants remain
outstanding. While it is the Company's intention to comply with this intention,
there can be no assurance that it will be able to do so.
The exercise price and any required transfer taxes will be payable in cash
or by certified or official bank check payable to the Company. If fewer than all
of the Warrants evidenced by a warrant certificate are exercised, a new
certificate will be issued for the remaining number of Warrants. Certificates
evidencing the Warrants may be exchanged for new certificates of different
denominations by presenting the Warrant certificate at the offices of the
Company's Warrant Agent.
Adjustments
The exercise price and the number of shares of Common Stock purchasable
upon exercise of the Warrants are subject to adjustment upon the occurrence of
certain events including stock dividends, reclassifications, reorganizations,
consolidations, mergers, and certain issuances and redemptions of Common Stock
and securities convertible into or exchangeable for Common Stock excluding the
Company's 2,100,000 shares of Common Stock issued to TDA and Mr. Andrews, any
issuances of the Company's securities in connection with a June and July 1996
private placement of the Company's securities, the Public Offering and the
Company's stock option plan. No adjustments in the exercise price will be
required to be
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made with respect to the Warrants until cumulative adjustments amount to $.05.
In the event of any capital reorganization, certain reclassifications of the
Common Stock, any consolidation or merger involving the Company (other than (i)
a consolidation or merger which does not result in any reclassification or
change in the outstanding shares of Common Stock or (ii) the Acquisition or the
acquisition of any other business), or sale of the properties and assets of the
Company, as, or substantially as, an entirety to any other corporation, Warrants
will thereupon become exercisable only for the number of shares of stock or
other securities, assets, or cash to which a holder of the number of shares of
Common Stock of the Company purchasable (at the time of such reorganization,
reclassification, consolidation, merger or sale) upon exercise of such Warrants
would have been entitled upon such reorganization, reclassification,
consolidation, merger or sale.
Other Rights
In the event of an adjustment in the number of shares of Common Stock
issuable upon exercise of the Warrants, the Company will not be required to
issue fractional shares of Common Stock upon exercise of the Warrants. In lieu
of fractional shares of Common Stock, there will be paid to the holders of the
Warrants, at the time of such exercise, an amount in cash equal to the same
fraction of the current market price of a share of Common Stock of the Company.
Warrant holders do not have voting or any other rights of stockholders of
the Company and are not entitled to dividends, if any.
Redemption of Warrants
If the market price of the Common Stock shall have averaged at least $10.00
per share for a period of 30 consecutive trading days at any time after the date
of this Prospectus, the Company may redeem the Warrants by paying holders $.25
per Warrant, provided that notice of such redemption is mailed not later than 10
days after the end of such period and prescribes a redemption date at least 30
days thereafter. For these purposes, the market price of the Common Stock, if
the Common Stock is listed on a national securities exchange, shall be
determined by the closing sales price on the primary exchange on which the
Common Stock is traded. Warrant holders will be entitled to exercise Warrants at
any time up to the business day next preceding the redemption date. The Warrants
are not redeemable prior to the first anniversary of the date of this Prospectus
without the written consent of the Underwriter. Additionally, the Warrants may
not be redeemed unless at the time of redemption there is a current prospectus
encompassing the shares of Common Stock issuable upon exercise of such Warrants
under an effective registration statement.
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Warrant Agreement and Exchange of Warrants
Upon the closing of the Public Offering and consummation of the
Acquisition, the Company will enter into a warrant agreement ("Warrant
Agreement") with Continental Stock Transfer & Trust Company, as warrant agent
("Warrant Agent"). It is anticipated that the Warrant Agreement will contain
provisions permitting the Company and the Warrant Agent, without the consent of
the Warrant holders, to supplement or amend the Warrant Agreement in order to
cure any ambiguity or defect or to make any other provisions in regard to
matters or questions arising thereunder that the Company and the Warrant Agent
may deem necessary or desirable and that does not adversely affect the interests
of the Warrant holders. At that same time, the Company will exchange with the
Warrant holders which purchased Warrants in the Private Placement printed
warrant certificates for the typewritten format certificates delivered to the
Private Placement purchasers.
Dividend Policy
The Company has not paid dividends to date. The payment of dividends, if
any, in the future is within the discretion of the Board of Directors. The
payment of dividends, if any, in the future will depend upon the Company's
earnings, capital requirements and financial conditions and other relevant
factors. The Company's Board of Directors does not presently intend to declare
any dividends in the foreseeable future but instead intends to retain all
earnings, if any, for use in the Company and Eagle's business operations.
Transfer Agent and Warrant Agent
The Transfer Agent for the Company's Common Stock and the Warrant Agent for
the Company's Warrants is Continental Stock Transfer & Trust Company, New York,
New York.
SHARES ELIGIBLE FOR FUTURE SALE
Upon completion of the Public Offering and consummation of the Acquisition,
the Company will have 4,100,000 shares of Common Stock outstanding (4,325,000
shares if the Underwriters' Overallotment Option is exercised in full). All of
the shares of Common Stock sold in the Public Offering will be freely tradeable
without restriction or further registration under the Securities Act, except for
any shares purchased by an "affiliate" of the Company which will be subject to
certain limitations of Rule 144 adopted under the Securities Act.
2,100,000 of the 2,400,000 presently outstanding shares of Common Stock and
the 200,000 shares of Common Stock to be issued to TDA in connection with the
Acquisition will be restricted securities and will be subject to the resale
limitations provided for in Rule 144. Under Rule 144, as currently in effect,
subject to the
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satisfaction of certain other conditions, a person, including an affiliate of
the Company, which has owned restricted shares of Common Stock beneficially for
at least two years, is entitled to sell, within any three month period, a number
of shares that does not exceed the greater of 1% of the total number of
outstanding shares of the same class or, if the Common Stock is quoted on an
exchange, the average weekly trading volume during the four calendar weeks
preceding the sale. A non-affiliate which has not been an affiliate of the
Company for at least the three months immediately preceding the sale and which
has beneficially owned such shares for at least three years is entitled to sell
such shares under Rule 144 without regard to any of the limitations described
above. In meeting the two and three year holding periods described above, a
holder which has purchased shares can include the holding periods of a prior
owner which was not an affiliate of the Company.
The holders of approximately 2,300,000 (including the 200,000 shares of
Common Stock to be issued to TDA in connection with the Acquisition) and 300,000
shares of the Company's Common Stock have agreed not to sell, for periods of two
years and fifteen months, respectively, from the date of this Prospectus, any
shares of the Company's Common Stock owned by them on the date hereof, and as to
said approximate 2,300,000 shares without the prior written consent of the
Underwriter.
Furthermore, in connection with the Public Offering, the Underwriter has
been granted warrants to purchase up to 150,000 shares of Common Stock and up to
150,000 Warrants. The holders thereof have the right to require the Company to
register said Underwriter Warrants, and/or the underlying securities under
certain circumstances. In addition, the holders of said warrants have the right
to "piggy-back" said Underwriter Warrants and/or underlying securities on
registration statements of the Company. Any exercise of such registration rights
may result in dilution in the interest of the Company's stockholders, may hinder
efforts by the Company to arrange future financing and may have an adverse
effect on the market price for the Company's securities.
Prior to the Public Offering, there has been no market for any securities
of the Company. The effect, if any, of public sales of any of the Company's
securities by present securityholders or the availability of such securities for
future sale at prevailing market prices cannot be predicted. Nevertheless, the
possibility that substantial amounts of the Company's securities may be resold
in the public market may adversely affect prevailing market prices for the
Company's securities, if any such market should develop.
UNDERWRITING
Pursuant to the terms and subject of the conditions in the Underwriting
Agreement, Barron Chase Securities, Inc. (the "Underwriter") has agreed to
purchase from the Company an aggregate
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of 1,500,000 shares of Common Stock ("Shares") and 1,500,000 Warrants. The
Securities are offered by the Underwriter subject to prior sale, when, as and if
delivered to and accepted by the Underwriter and subject to approval of certain
legal matters by counsel and certain other conditions. The Underwriter is
committed to purchase all Securities offered by this Prospectus, if any are
purchased. References under this heading "Underwriting" to "this offering" are
to the Public Offering.
The Company has been advised by the Underwriter that the Underwriter
proposes to offer the Securities to the public at the offering price set forth
on the cover page of this Prospectus, and that the Underwriter may offer the
Securities through certain selected dealers who are members of the National
Association of Securities Dealers, Inc. ("NASD") and who agree to sell the
Securities in conformity with the NASD Rules of Conduct. The Underwriter may
allow a concession to such selected dealers, however, such concession shall not
exceed the amount of the underwriting discount that the Underwriter is to
receive.
The Company has granted to the Underwriter an Overallotment Option,
exercisable for 30 days from the date of this Prospectus, to purchase up to an
additional 225,000 shares of Common Stock and an additional 225,000 Warrants at
the public offering price less the Underwriting Discount set forth on the cover
page of this Prospectus. The Underwriter may exercise this option solely to
cover overallotments in the sale of the Securities being offered by the
Underwriter pursuant to this Prospectus.
Officers and directors of the Company may introduce the Underwriter to
persons to consider this offering and to purchase Securities either through the
Underwriter, or through participating dealers. In this connection, officers and
directors will not receive any commissions or any other compensation. Officers
and directors of the Company may purchase the Securities offered hereby.
The Company has agreed to pay the Underwriter a commission of ten percent
(10%) of gross proceeds of this offering as an Underwriting Discount, including
the gross proceeds from the sale of the Underwriter's Overallotment Option, if
exercised. In addition, the Company has agreed to pay to the Underwriter a
non-accountable expense allowance of three percent (3%) of the gross proceeds of
this offering, including proceeds from any Securities purchased pursuant to the
Underwriter's Overallotment Option. The Underwriter's expenses, if any, in
excess of the non-accountable expense allowance will be borne by the
Underwriter. To the extent that the expenses of the Underwriter are less than
the amount of the non-accountable expense allowance received, such excess shall
be deemed to be additional compensation to the Underwriter.
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Prior to this offering, there has been no public market for the Common
Stock or Warrants of the Company. Consequently, the initial public offering
price for the Securities and the terms of the Warrants (including the exercise
price of the Warrants) have been determined by negotiation between the Company
and the Underwriter. Among the factors considered in determining the public
offering price were the history of, and the prospects for, the Company's
business, an assessment of the Company's management, its past and present
operations, the Company's development and the general condition of the
securities market at the time of the offering. The initial public offering
prices do not necessarily bear any relationship to the Company's asset value,
book value, earnings or other established criteria of value. Such prices are
subject to change as a result of market conditions and other factors, and no
assurance can be given that a public market for the Common Stock and/or Warrants
will develop after the close of this offering or, if a public market in fact
develops, that such public market will be sustained, or that the Common Stock
and/or Warrants can be resold at any time at the offering or any other price.
The Company has agreed to indemnify the Underwriter against any costs or
liabilities incurred by the Underwriter by reason of misstatements or omissions
to state material facts in connection with the statements made in the
Registration Statement and the Prospectus. The Underwriter has in turn agreed to
indemnify the Company against any liabilities by reason of misstatements or
omissions to state material facts in connection with the statements made in the
Registration Statement based on information relating to the Underwriter and
furnished in writing by the Underwriter. To the extent that the foregoing
agreements may purport to provide exculpation from possible liabilities arising
under the federal securities laws, in the opinion of the Commission, such
indemnification is contrary to public policy and, therefore, is unenforceable.
At the closing of this offering, the Company will issue to the Underwriter
and/or persons related to the Underwriter, for nominal consideration, warrants
(the "Underwriter's Warrants") to purchase 150,000 shares of Common Stock and
150,000 Warrants (the "Underlying Warrants"). The Underwriter's Warrants will be
exercisable for a five year period commencing from the date of this Prospectus.
The initial exercise price of the Underwriter's Warrants shall be $8.25 per
share of Common Stock (165% of the public offering price) and $.21 per
Underlying Warrant (165% of the public offering price). Each Underlying Warrant
will be exercisable for a three year period commencing from the date of this
Prospectus at an exercise price of $8.25 per share of Common Stock. The
Underwriter's Warrants will not be transferable for one year from the date of
this Prospectus except (i) to officers of the Underwriter and members of the
selling group and officers and partners thereof; (ii) by will; or (iii) by
operation of law.
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The Underwriter's Warrants and Underlying Warrants contain provisions
providing for appropriate adjustment in the event of any merger, consolidation,
recapitalization, reclassification, stock dividend, stock split or similar
transaction. The Underwriter's Warrants contain net issuance provisions
permitting the holders thereof to elect to exercise the Underwriter's Warrants
in whole or in part and to instruct the Company to withhold from the Securities
issuable upon exercise, a number of Securities, valued at the current fair
market value on the date of exercise, to pay the exercise price. Such net
exercise provisions have the effect of requiring the Company to issue shares of
Common Stock without a corresponding increase in capital. A net exercise of the
Underwriter's Warrants will have the same dilutive effect on the interests of
the Company's stockholders as will a cash exercise. The Underwriter's Warrants
and the Underlying Warrants do not entitle the Underwriter to any rights as a
stockholder of the Company until such Underwriter's Warrants are exercised and
shares of Common Stock are purchased thereunder.
The Underwriter's Warrants and the securities issuable thereunder may not
be offered for sale except in compliance with the applicable provisions of the
Securities Act. The Company has agreed that if it shall cause a post-effective
amendment, a new registration statement, or similar offering document to be
filed with the Commission, the holders shall have the right, for seven years
from the date of this Prospectus, to include in such registration statement or
offering statement the Underwriter's Warrants and/or the securities issuable
upon their exercise at no expense to the holders. Additionally, the Company has
agreed that, upon request by the holders of 50% or more of the Underwriter's
Warrants within the period commencing one year from the date of this Prospectus
and expiring four years thereafter, the Company will, under certain
circumstances, register the Underwriter's Warrants and/or any of the securities
issuable upon their exercise.
The Company has further agreed that the Underwriter may designate an
observer to attend Board meetings at the expense of the Company.
The Company has agreed to engage the Underwriter as a financial advisor for
a period of three (3) years from the first day of the month following the
completion of the Public Offering at a total fee of $108,000, all of which is
payable to the Underwriter on the closing date. Pursuant to the terms of a
financial advisory agreement, the Underwriter has agreed to provide, at the
Company's request, advice to the Company concerning potential merger and
acquisition and financing proposals, whether by public financing or otherwise.
The Company has also agreed that if the Company participates in any merger,
acquisition, joint venture, debt or equity placements, consolidation or other
such corporate financing transaction which the Underwriter has brought to the
Company during a period of five
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years after the closing of this offering and which is consummated after the
closing of this offering (including an acquisition of assets or stock for which
it pays, in whole or in part, with shares of the Company's Common Stock or other
securities), or if the Company retains the services of the Underwriter in
connection with any merger, consolidation or other such transaction, then the
Company will pay for the Underwriter's services an amount equal to 5% of up to
one million dollars of value paid or received in the transaction, declining by
1% in $1,000,000 increments down to 1% of the excess, if any, of such value over
$4,000,000.
The foregoing is a summary of the principal terms of the agreements
described above and does not purport to be complete. Reference is made to copies
of each such agreement and document which are filed as exhibits to the
Registration Statement. See "Additional Information."
SELLING SECURITYHOLDERS
The Registration Statement of which this Prospectus forms a part also
covers the offering of 300,000 shares of Common Stock, 300,000 Warrants and
300,000 shares of Common Stock underlying said Warrants owned by the Selling
Securityholders. The resale of such securities by the Selling Securityholders is
subject to prospectus delivery and other requirements of the Securities Act.
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The Company's securities are being offered by the following Selling
Securityholders in the amounts set forth below.
(1) (2) (3)
Number of Shares Number of Shares Number of
of Common Stock of Common Stock Warrants
Beneficially Registered Registered
Selling Securityholder Owned(*) Herein(*) Herein
- ---------------------- ---------------- ---------------- ----------
Nina Allen 50,000 50,000 25,000
William C. Bossung 50,000 50,000 25,000
James A. Croson 50,000 50,000 25,000
D&R Partnership 50,000 50,000 25,000
Eugene Geller 25,000 25,000 12,500
Warren & Marianne Gilbert 50,000 50,000 25,000
HiTel Group, Inc. 100,000 100,000 50,000
Paul Schmidt 62,500 62,500 31,250
Donald & Linda Silpe 50,000 50,000 25,000
Florence & Eric Stein 50,000 50,000 25,000
William Tonyes 50,000 50,000 25,000
Kenneth Zengage 12,500 12,500 6,250
- ----------
(*) The Number of Shares of Common Stock Beneficially Owned and the Number of
Shares of Common Stock Registered Herein as set forth above includes equal
amounts of shares of Common Stock and shares of Common Stock issuable on the
exercise of the Warrants.
After the completion of the sale by the respective Selling Securityholders
of the number of shares of Common Stock and Warrants set forth opposite their
names in Columns (2) and (3) above, none of the Selling Securityholders will own
any of such shares of Common Stock or Warrants.
The foregoing persons and entities have agreed not to sell, for a period of
fifteen months from the date of this Prospectus, an aggregate of 300,000 shares
of Common Stock and 300,000 Warrants but not 300,000 shares of Common Stock
underlying said Warrants.
The Warrants and/or the shares of the Company's Common Stock underlying
such Warrants may be sold from time to time directly by the Selling
Securityholders. Alternatively, the Selling Securityholders may from time to
time offer such securities through underwriters, dealers or agents. The
distribution of securities by the Selling Securityholders may be effected in one
or more transactions that may take place on the over-the-counter market,
including ordinary broker's transactions, privately-negotiated transactions or
through sales to one or more broker-dealers for resale of such shares as
principals, at market prices prevailing at the time of sale. Commissions may be
paid by the Selling Securityholders in connection with such sales. The Selling
Securityholders and intermediaries through whom such securities are sold may be
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deemed "underwriters" within the meaning of the Securities Act with respect to
the securities offered, and any profits realized or commissions received may be
deemed underwriting compensation. The Company will derive proceeds from
exercises of the Warrants but will not derive any proceeds from the sale of the
Company's securities by the Selling Securityholders. There can be no assurance
that any of the Warrants will be exercised.
At a time an offer of securities is made by or on behalf of a Selling
Securityholder, it is the Company's intent that a prospectus be distributed
setting forth, based upon information provided by the Selling Securityholder,
the number of securities being offered and the terms of the offering, including
the name or names of any underwriters, dealers or agents, if any, the purchase
price paid by any underwriter for securities purchased from the Selling
Securityholder and any discounts, commissions or concessions allowed or
re-allowed or paid to dealers, and the proposed selling price to the public.
Sales of securities by the Selling Securityholders could have an adverse
effect on the market prices of the securities offered pursuant to the Public
Offering.
LEGAL MATTERS
The validity of the issuances of the securities offered in the Public
Offering will be passed upon for the Company by Gusrae, Kaplan & Bruno, Esqs.,
New York, New York. Certain legal matters in connection with this Public
Offering will be passed upon for the Underwriter by David A. Carter, P.A., Boca
Raton, Florida.
EXPERTS
The balance sheet of the Company as of June 30, 1996 and the statement of
cash flows for the period May 1, 1996 (inception) to June 30, 1996 appearing in
this Prospectus has been audited by Deloitte & Touche LLP, independent auditors,
as stated in their report appearing herein and has been so included in reliance
upon the report of such firm given upon their authority as experts in accounting
and auditing.
The balance sheets of Eagle Supply, Inc. as of June 30, 1996 and 1995 and
the statements of operations , shareholder's equity and cash flows for each of
the years in the three year period ended June 30, 1996 appearing in this
Prospectus have been audited by Deloitte & Touche LLP, independent auditors, as
stated in their report appearing herein, and have been so included in reliance
upon the report of such firm given upon their authority as experts in accounting
and auditing.
77
<PAGE>
ADDITIONAL INFORMATION
The Company has filed with the Washington, D.C. office of the Commission a
Registration Statement (the "Registration Statement") under the Securities Act
with respect to the Securities offered by this Prospectus. This Prospectus does
not contain all the information set forth in the Registration Statement, certain
parts of which are omitted in accordance with the rules and regulations of the
Commission. For further information with respect to the Company and this
offering, reference is made to the Registration Statement, including the
exhibits filed therewith, which may be inspected without charge or copies made
at prescribed rates from the Commission at its principal office at 450 Fifth
Street, N.W., Washington, D.C. 20549 or at its Northeast Regional Office located
at Seven World Trade Center, New York, New York 10048. Statements contained in
the Prospectus as to the contents of any contract or other document are not
necessarily complete and reference is made to each such contract or other
document filed as an exhibit to the Registration Statement, each such statement
being qualified in all respects by such reference.
Upon effectiveness of the Registration Statement, of which this Prospectus
forms a part, the Company will be subject to the reporting requirements of the
Exchange Act and in accordance therewith will file reports and other information
with the Commission. Reports and other information filed by the Company with the
Commission can be inspected and copied at the public reference facilities
maintained by the Commission at the following addresses: Northeast Regional
Office, Seven World Trade Center, New York, New York 10048; and Midwest Regional
Office, 500 West Madison Street, Chicago, Illinois 60661. Copies of such
materials can be obtained from the Public Reference Section of the Commission at
450 Fifth Street, N.W., Washington, D.C. 20549 at prescribed rates.
78
<PAGE>
INDEX TO FINANCIAL STATEMENTS
PAGE
EAGLE SUPPLY GROUP, INC.
INDEPENDENT AUDITORS' REPORT F-2
Balance Sheet at June 30, 1996 F-3
Statement of Cash Flows for the Period
May 1, 1996 (Inception) to June 30, 1996 F-4
Notes to Financial Statements for the Period
May 1, 1996 (Inception) to June 30, 1996 F-5
EAGLE SUPPLY, INC.
INDEPENDENT AUDITORS' REPORT F-8
Balance Sheets at June 30, 1996 and 1995 F-9
Statements of Operations for the Years Ended
June 30, 1996, 1995 and 1994 F-10
Statements of Shareholder's Equity for the Years Ended
June 30, 1996, 1995 and 1994 F-11
Statements of Cash Flows for the Years Ended
June 30, 1996, 1995 and 1994 F-12
Notes to Financial Statements for the Years Ended
June 30, 1996, 1995 and 1994 F-13
F-1
<PAGE>
INDEPENDENT AUDITORS' REPORT
To the Board of Directors and Stockholders of
Eagle Supply Group, Inc.
We have audited the accompanying balance sheet of Eagle Supply Group, Inc. (the
"Company") as of June 30, 1996 and the related statement of cash flows for the
period May 1, 1996 (inception) to June 30, 1996. These financial statements are
the responsibility of the Company's management. Our responsibility is to
express an opinion on these financial statements based on our audit.
We conducted our audit in accordance with generally accepted auditing standards.
Those standards require that we plan and perform the audit to obtain reasonable
assurance about whether the financial statements are free of material
misstatement. An audit includes examining, on a test basis, evidence supporting
the amounts and disclosures in the financial statements. An audit also includes
assessing the accounting principles used and significant estimates made by
management, as well as evaluating the overall financial statement presentation.
We believe that our audit provides a reasonable basis for our opinion.
In our opinion, such financial statements present fairly, in all material
respects, the financial position of Eagle Supply Group, Inc. as of June 30,
1996, and the results of its cash flows for the period May 1, 1996 (inception)
to June 30, 1996, in conformity with generally accepted accounting principles.
Tampa, Florida
September 19, 1996
F-2
<PAGE>
EAGLE SUPPLY GROUP, INC.
BALANCE SHEET
JUNE 30, 1996
- --------------------------------------------------------------------------------
ASSETS
CASH $ 243,960
STOCK SUBSCRIPTIONS RECEIVABLE (Note 5) 56,250
----------
TOTAL $ 300,210
----------
----------
LIABILITIES AND STOCKHOLDERS' EQUITY
CURRENT LIABILITIES:
Loan payable to stockholder $ 6,105
----------
COMMITMENTS AND CONTINGENCIES (Notes 1, 2 and 4)
STOCKHOLDERS' EQUITY (Notes 3 and 5):
Preferred stock, $.0001 par value per share,
2,000,000 shares authorized;
none issued and outstanding -
Common stock, $.0001 par value per share,
15,000,000 shares authorized;
2,400,000 shares issued and outstanding 240
Additional paid-in capital 293,865
----------
Total stockholders' equity 294,105
----------
TOTAL $ 300,210
----------
----------
See notes to financial statements.
F-3
<PAGE>
EAGLE SUPPLY GROUP, INC.
STATEMENT OF CASH FLOWS
PERIOD MAY 1, 1996 (INCEPTION) TO JUNE 30, 1996
- --------------------------------------------------------------------------------
CASH FLOWS FROM FINANCING ACTIVITIES:
Proceeds from loan payable to stockholder $ 6,105
Proceeds from sale of common stock - net of expenses 237,855
----------
Net cash provided by financing activities 243,960
----------
NET INCREASE IN CASH 243,960
CASH, BEGINNING OF PERIOD -
----------
CASH, END OF PERIOD $ 243,960
----------
----------
See notes to financial statements.
F-4
<PAGE>
EAGLE SUPPLY GROUP, INC.
NOTES TO FINANCIAL STATEMENTS
MAY 1, 1996 (INCEPTION) TO JUNE 30, 1996
- --------------------------------------------------------------------------------
1. BASIS OF PRESENTATION AND SIGNIFICANT ACCOUNTING POLICIES
BUSINESS DESCRIPTION - Eagle Supply Group, Inc. (the "Company") was
organized to acquire, integrate and operate seasoned, privately-held
companies operating in the roofing supplies and related products
distribution industry and companies which manufacture products for or
supply products to such industry.
YEAR-END - The Company has adopted a June 30 year-end.
ACQUISITION - Upon completion of the Offering described in Note 4, the
Company will acquire (the "Acquisition") all of the issued and outstanding
capital stock of Eagle Supply, Inc. ("Eagle") from TDA Industries, Inc.
("TDA") for consideration consisting of 200,000 shares of common stock.
Eagle was founded in 1905 and is engaged in the wholesale distribution of
roofing supplies and related products utilized primarily in the
construction industry primarily throughout Florida, Alabama and
Mississippi. The acquisition of Eagle will be accounted for as the
combining of two entities under common control with the net assets of Eagle
recorded at historical carryover values. The 200,000 shares of common
stock to be issued to TDA will be recorded at Eagle's historical net book
value at the date of acquisition. Accordingly, this transaction will not
result in any revaluation of Eagle's assets or the creation of goodwill.
Upon the consummation of the Acquisition, Eagle will become a wholly-owned
subsidiary of the Company and will constitute the sole business operations
of the Company until such time, if any, as the Company consummates
additional acquisitions.
STOCK OPTIONS AND WARRANTS - In October 1995, the Financial Accounting
Standards Board issued Statement of Financial Accounting Standards No. 123,
"Accounting for Stock-Based Compensation," which requires adoption of the
disclosure provisions no later than fiscal years beginning after
December 15, 1995 and adoption of the measurement and recognition
provisions for nonemployee transactions no later than December 15, 1995.
The new standard defines a fair value method of accounting for stock
options and other equity instruments. Under the fair value method,
compensation cost is measured at the grant date based on the fair value of
the award and is recognized over the service period, which is usually the
vesting period.
Pursuant to the new standard, companies are encouraged, but are not
required, to adopt the fair value method of accounting for employee stock-
based transactions. Companies are also permitted to continue to account
for such transactions under Accounting Principles Board Opinion No. 25,
"Accounting for Stock Issued to Employees" ("APB No. 25"), but would be
required to disclose in a note to the financial statements pro forma net
income and, if presented, earnings per share as if the Company had applied
the new method of accounting. The new standard also requires increased
disclosures for stock-based compensation arrangements regardless of the
method chosen to measure and recognize compensation for employee stock-
based arrangements.
The accounting requirements of the new method are effective for all
transactions entered into during the fiscal year of adoption. The Company
has determined it will elect to follow the provisions of APB No. 25 and
will disclose the impact of the new standard in the Notes to Financial
Statements beginning in fiscal 1997.
F-5
<PAGE>
2. CONTEMPLATED TRANSACTIONS WITH RELATED PARTIES
TDA will provide office space and administrative services to the Company at
its offices in New York City pursuant to an administrative services
agreement to be entered into by the Company and TDA upon the closing of the
Offering. The administrative services agreement will be on a month-to-
month basis, and the fee payable by the Company to TDA for such
administrative services will be $3,000 per month.
Prior to the Offering, Eagle operated a substantial portion of its business
from facilities which it leases from a subsidiary of TDA on a month to
month basis. Rent expense for these facilities, including taxes and other
occupancy costs, net of sublease income of approximately $200,000,
aggregated approximately $709,000, $709,000 and $636,000 in fiscal 1996,
1995 and 1994, respectively. Upon completion of the Offering and the
Acquisition, Eagle and TDA intend to enter into ten year leases for such
facilities.
Douglas P. Fields, the Chief Executive Officer and Chairman of the Board of
Directors of the Company, is an officer and a director of TDA and Eagle.
Additionally, Frederick M. Friedman, the Executive Vice President,
Secretary, Treasurer and a director of the Company, is an officer and a
director of TDA and Eagle.
John E. Smircina, a director nominee of the Company, is also a director of
TDA.
The Company and Eagle have entered into employment agreements with Messrs.
Fields and Friedman, to become effective upon closing of the Offering and
consummation of the Acquisition, for a five year period, at annual salaries
of $200,000 each, subject to annual increases or bonuses as may be
determined by the Board of Directors. The employment agreements provide
for, among other things, payments of salary and continued benefits, under
certain conditions.
3. STOCKHOLDERS' EQUITY
INITIAL CAPITALIZATION - In May 1996, the Company approved the issuance of
2,000,000 shares of common stock to TDA (a founding stockholder) for a
subscription price of $200 and 100,000 shares of common stock to Steven R.
Andrews (a founding stockholder and director) for a subscription price of
$10.
COMMON STOCK - Holders of common stock are entitled to one vote for each
share held of record on each matter submitted to a vote of stockholders.
There is no cumulative voting for election of directors. Subject to the
prior rights of any series of preferred stock which may from time to time
be outstanding, if any, holders of common stock are entitled to receive
dividends when and if declared by the Board of Directors out of funds
legally available thereof and, upon the liquidation, dissolution or winding
up of the Company, are entitled to share ratably in all assets remaining
after payment of liabilities and payment of accrued dividends and
liquidation preferences on the preferred stock, if any. Holders of common
stock have no pre-emptive rights and have no rights to convert their common
stock into any other securities.
PREFERRED STOCK - The preferred stock may be issued in one or more series,
the terms of which may be determined at the time of issuance by the Board
of Directors, without further action by stockholders, and may include
voting rights (including the right to vote as a series on particular
matters), preferences as to dividends and liquidation, conversion and
redemption rights and sinking fund provisions.
WARRANTS - Each warrant entitles the registered holder to purchase one
share of common stock at an exercise price of $5.00 per share (subject to
adjustment) for three years commencing on the date of the Offering,
provided that during such time a current prospectus relating to the common
stock is then in
F-6
<PAGE>
effect and the common stock is qualified for sale or exempt from
qualification under applicable state securities laws. The warrants
included in the Units in the Offering are transferable separately from the
common stock (Note 4).
STOCK OPTION PLAN - In August 1996, the Board of Directors adopted and
stockholders approved the Company's 1996 Stock Option Plan (the "1996 Stock
Option Plan"). The 1996 Stock Option Plan provides for the grant of
options that are intended to qualify as incentive stock options ("Incentive
Stock Options") within the meaning of Section 422A of the Internal Revenue
Code, as amended (the "Code"), to certain employees, officers and
directors. The total number of shares of common stock for which options
may be granted under the 1996 Stock Option Plan is 1,000,000 shares. Upon
the closing of the Offering, the Company intends to grant options
exercisable into 450,000 shares of common stock to various of its
employees, including options to purchase an aggregate of 203,000 shares
which will be issued to Messrs. Fields, Friedman, Havnes, Morris and
Marshall. All of such options will have a term of ten years. The exercise
price of these options will be the price to the public of the shares of
common stock offered in the Offering and will vest at a rate of no more
than 20% per year commencing on the first anniversary of the date of grant.
Upon the closing of the Offering and consummation of the Acquisition,
Messrs. Finkelstein, Smircina and Skakel, director nominees of the Company,
will each be granted options to purchase 10,000 shares of common stock
pursuant to the Company's 1996 Stock Option Plan. All such options will
have a term of ten years and will be exercisable at $5.00 per share, which
is equivalent to the offering price. All of such options will vest on the
first anniversary of the date of grant.
4. INITIAL PUBLIC OFFERING
In April 1996, the Company signed a letter of intent with Barron Chase
Securities, Inc. for an initial public offering (the "Offering"). The
Offering is expected to be for 1,500,000 shares of common stock, par value
$.0001 per share, of the Company and 1,500,000 redeemable common stock
purchase warrants (collectively the "Units"). Each warrant entitles the
holder to purchase one share of common stock exercisable at $5.00 per share
(subject to adjustment). The warrants will be exercisable for a period of
three years commencing on the closing of the Offering.
5. PRIVATE PLACEMENT
In June and July 1996, the Company sold an aggregate of 300,000 shares of
common stock and 300,000 warrants to private investors for aggregate gross
proceeds of $300,000. Stock subscriptions receivable aggregating $56,250
were paid in July, 1996.
******
F-7
<PAGE>
INDEPENDENT AUDITORS' REPORT
To the Board of Directors and Shareholder of
Eagle Supply, Inc.
We have audited the accompanying balance sheets of Eagle Supply, Inc. (the
"Company"), a wholly-owned subsidiary of TDA Industries, Inc., as of June 30,
1996 and 1995, and the related statements of operations, shareholder's equity
and cash flows for each of the three years in the period ended June 30, 1996.
These financial statements are the responsibility of the Company's management.
Our responsibility is to express an opinion on these financial statements based
on our audits.
We conducted our audits in accordance with generally accepted auditing
standards. Those standards require that we plan and perform the audit to obtain
reasonable assurance about whether the financial statements are free of material
misstatement. An audit includes examining, on a test basis, evidence supporting
the amounts and disclosures in the financial statements. An audit also includes
assessing the accounting principles used and significant estimates made by
management, as well as evaluating the overall financial statement presentation.
We believe that our audits provide a reasonable basis for our opinion.
In our opinion, such financial statements present fairly, in all material
respects, the financial position of Eagle Supply, Inc. as of June 30, 1996 and
1995 and the results of its operations and its cash flows for each of the three
years in the period ended June 30, 1996, in conformity with generally accepted
accounting principles.
Tampa, Florida
August 30, 1996
F-8
<PAGE>
EAGLE SUPPLY, INC.
(A Wholly-Owned Subsidiary of TDA Industries, Inc.)
BALANCE SHEETS
JUNE 30, 1996 AND 1995
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
1996
PROFORMA
ASSETS (UNAUDITED) 1996 1995
(NOTE 8)
<S> <C> <C> <C>
CURRENT ASSETS:
Cash and cash equivalents $ 198,441 $ 198,441 $ 698,132
Accounts and notes receivable - trade
(net of allowance for doubtful accounts -
1996 - $465,000; 1995 - $751,000) 8,291,831 8,291,831 8,761,145
Inventories 4,825,902 4,825,902 3,519,462
Deferred tax asset (Note 5) 193,528 193,528 297,750
Other current assets 535,731 535,731 325,467
----------- ----------- -----------
Total current assets 14,045,433 14,045,433 13,601,956
DUE FROM PARENT AND AFFILIATED
COMPANIES
(Notes 3 and 4) - 2,494,632 3,121,475
IMPROVEMENTS AND EQUIPMENT
(net of accumulated depreciation
and amortization) (Notes 2 and 4) 1,433,099 1,433,099 1,107,507
----------- ----------- -----------
$15,478,532 $17,973,164 $17,830,938
----------- ----------- -----------
----------- ----------- -----------
LIABILITIES AND SHAREHOLDER'S EQUITY
CURRENT LIABILITIES:
Accounts payable $ 8,193,812 $ 8,193,812 $ 7,454,011
Accrued expenses and other current liabilities 814,158 814,158 482,639
Dividend payable to parent 216,694 - -
----------- ----------- -----------
Total current liabilities 9,224,664 9,007,970 7,936,650
LONG-TERM DEBT (Note 3) 5,163,529 5,163,529 6,290,453
DEFERRED TAX LIABILITY (Note 5) 90,339 90,339 110,544
----------- ----------- -----------
Total liabilities 14,478,532 14,261,838 14,337,647
----------- ----------- -----------
COMMITMENTS AND CONTINGENCIES
(Notes 4 and 6)
SHAREHOLDER'S EQUITY (Note 4):
Common shares, $100 par value:
Authorized - 1,500 shares
Outstanding - 593 shares 59,300 59,300 59,300
Additional paid-in capital 940,700 1,000,000 1,000,000
Retained earnings - 2,652,026 2,433,991
----------- ----------- -----------
Total shareholder's equity 1,000,000 3,711,326 3,493,291
----------- ----------- -----------
$ 15,478,532 $ 17,973,164 $ 17,830,938
----------- ----------- -----------
----------- ----------- -----------
See notes to financial statements.
</TABLE>
F-9
<PAGE>
EAGLE SUPPLY, INC.
(A Wholly-Owned Subsidiary of TDA Industries, Inc.)
STATEMENTS OF OPERATIONS
YEARS ENDED JUNE 30, 1996, 1995 AND 1994
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
1996 1995 1994
<S> <C> <C> <C>
REVENUES $ 59,262,226 $ 50,483,469 $ 53,925,373
COST OF SALES 46,685,356 40,743,901 43,267,360
----------- ----------- -----------
12,576,870 9,739,568 10,658,013
----------- ----------- -----------
OPERATING EXPENSES (including a provision
for doubtful accounts of $203,133, $403,169 and
$474,591 in 1996, 1995 and 1994, respectively) 9,128,762 8,147,086 9,228,624
INTERCOMPANY CHARGES (Note 4) 758,818 759,368 686,011
----------- ----------- -----------
9,887,580 8,906,454 9,914,635
----------- ----------- -----------
INCOME FROM OPERATIONS 2,689,290 833,114 743,378
----------- ----------- -----------
OTHER INCOME (EXPENSE):
Interest income 23,250 22,511 28,578
Interest expense (Note 3) (604,505) (288,036) (33,686)
----------- ----------- -----------
(581,255) (265,525) (5,108)
----------- ----------- -----------
INCOME BEFORE PROVISION FOR
INCOME TAXES 2,108,035 567,589 738,270
PROVISION FOR INCOME TAXES (Note 5) 793,000 215,000 274,000
----------- ----------- -----------
NET INCOME $ 1,315,035 $ 352,589 $ 464,270
----------- ----------- -----------
----------- ----------- -----------
See notes to financial statements.
</TABLE>
F-10
<PAGE>
EAGLE SUPPLY, INC.
(A Wholly-Owned Subsidiary of TDA Industries, Inc.)
STATEMENTS OF SHAREHOLDER'S EQUITY
YEARS ENDED JUNE 30, 1996, 1995 AND 1994
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
ADDITIONAL
COMMON SHARES PAID-IN RETAINED
SHARES AMOUNT CAPITAL EARNINGS TOTAL
<S> <C> <C> <C> <C> <C>
BALANCE, JULY 1, 1993 593 $ 59,300 $ 1,000,000 $ 2,660,912 $ 3,720,212
Net income - - - 464,270 464,270
Dividend paid to Parent - - - (622,245) (622,245)
------ --------- ------------ ------------ ------------
BALANCE, JUNE 30, 1994 593 59,300 1,000,000 2,502,937 3,562,237
Net income - - - 352,589 352,589
Dividend paid to Parent - - - (421,535) (421,535)
------ --------- ------------ ------------ ------------
BALANCE, JUNE 30, 1995 593 59,300 1,000,000 2,433,991 3,493,291
Net income - - - 1,315,035 1,315,035
Dividend paid to Parent - - - (1,097,000) (1,097,000)
------ --------- ------------ ------------ ------------
BALANCE, JUNE 30, 1996 593 $ 59,300 $ 1,000,000 $ 2,652,026 $ 3,711,326
------ --------- ------------ ------------ ------------
------ --------- ------------ ------------ ------------
See notes to financial statements.
</TABLE>
F-11
<PAGE>
EAGLE SUPPLY, INC.
(A Wholly-Owned Subsidiary of TDA Industries, Inc.)
STATEMENTS OF CASH FLOWS
YEARS ENDED JUNE 30, 1996, 1995 AND 1994
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
1996 1995 1994
<S> <C> <C> <C>
CASH FLOWS FROM OPERATING ACTIVITIES:
Net income $ 1,315,035 $ 352,589 $ 464,270
Adjustments to reconcile net income to net cash provided by (used in)
operating activities:
Depreciation and amortization 538,831 532,906 681,746
Deferred income taxes 84,017 (21,580) (35,343)
(Decrease) increase in allowance for doubtful accounts (286,215) 74,049 64,141
Gain on sale of equipment (975) (29,561) (2,140)
Changes in operating assets and liabilities:
Decrease (increase) in accounts and notes receivable 755,529 (1,673,344) 2,168,199
(Increase) decrease in inventories (1,306,440) (363,528) 2,324,336
(Increase) decrease in other current assets (210,264) 209,103 (210,584)
Increase (decrease) in accounts payable 739,801 1,011,027 (2,575,535)
Increase (decrease) in accrued expenses and other current liabilities 331,519 133,302 (297,862)
Decrease (increase) in due from (to) Parent and affiliated companies - net 626,843 (5,612,634) (1,423,205)
----------- ----------- -----------
Net cash provided by (used in) operating activities 2,587,681 (5,387,671) 1,158,023
----------- ----------- -----------
CASH FLOWS FROM INVESTING ACTIVITIES:
Capital expenditures (900,498) (339,628) (600,330)
Proceeds from sale of equipment 37,050 98,873 90,685
----------- ----------- -----------
Net cash used in investing activities (863,448) (240,755) (509,645)
----------- ----------- -----------
CASH FLOWS FROM FINANCING ACTIVITIES:
(Repayments) proceeds from long-term debt - net (1,126,924) 6,290,453 -
Dividends paid to Parent (1,097,000) (421,535) (622,245)
----------- ----------- -----------
Net cash (used in) provided by financing activities (2,223,924) 5,868,918 (622,245)
----------- ----------- -----------
NET (DECREASE) INCREASE IN CASH AND CASH EQUIVALENTS (499,691) 240,492 26,133
CASH AND CASH EQUIVALENTS, BEGINNING OF YEAR 698,132 457,640 431,507
----------- ----------- -----------
CASH AND CASH EQUIVALENTS, END OF YEAR $ 198,441 $ 698,132 $ 457,640
----------- ----------- -----------
----------- ----------- -----------
SUPPLEMENTAL DISCLOSURE OF CASH FLOW INFORMATION:
Cash paid during the year for interest $ 604,505 $ 288,036 $ 33,686
----------- ----------- -----------
----------- ----------- -----------
Income taxes paid to Parent $ 793,000 $ 215,000 $ 274,000
----------- ----------- -----------
----------- ----------- -----------
SUPPLEMENTAL DISCLOSURE OF NONCASH INVESTING
AND FINANCING ACTIVITIES:
Mortgage obligation incurred for purchase of land and building $ - $ - $ 550,000
----------- ----------- -----------
----------- ----------- -----------
Transfer of leasehold improvements in 1995, and transfer of
land, building and improvements (net of related mortgage of
$547,118) in 1994 in payment of intercompany debt $ - $ 90,204 $ 216,189
----------- ----------- -----------
----------- ----------- -----------
</TABLE>
See notes to financial statements.
F-12
<PAGE>
EAGLE SUPPLY, INC.
(A Wholly-Owned Subsidiary of TDA Industries, Inc.)
NOTES TO FINANCIAL STATEMENTS
YEARS ENDED JUNE 30, 1996, 1995 AND 1994
- --------------------------------------------------------------------------------
1. SIGNIFICANT ACCOUNTING POLICIES
BUSINESS DESCRIPTION - The Company is a wholly-owned subsidiary of TDA
Industries, Inc. (the "Parent") and is engaged in the wholesale
distribution of roofing supplies and related products utilized primarily in
the construction industry throughout Florida, Alabama and Mississippi. The
Company operates in a single industry segment.
INVENTORIES - Inventories are valued at the lower of cost or market. Cost
is determined by using the last-in, first-out (LIFO) method. If
inventories had been valued at the lower of first-in, first-out (FIFO) cost
or market, inventories would be higher by approximately $510,000, $527,000
and $557,000 for fiscal 1996, 1995 and 1994, respectively, and income
before provision for income taxes would have decreased by approximately
$17,000, $30,000 and $101,000 in fiscal 1996, 1995 and 1994, respectively.
DEPRECIATION AND AMORTIZATION - Depreciation and amortization of
improvements and equipment are provided principally by an accelerated
method at various rates calculated to extinguish the carrying values of the
respective assets over their estimated useful lives.
INCOME TAXES - The Company is included in the consolidated federal income
tax return of its Parent. Income taxes are calculated on a separate return
filing basis.
CASH AND CASH EQUIVALENTS - The Company considers money market accounts and
bank repurchase agreements to be cash equivalents for the purpose of these
statements.
USE OF ESTIMATES - The preparation of financial statements in conformity
with generally accepted accounting principles requires management to make
estimates and assumptions that affect the reported amounts of assets and
liabilities and disclosure of contingent assets and liabilities at the date
of the financial statements and the reported amount of revenues and
expenses during the reporting period. Actual results could differ from
those estimates.
FAIR VALUE OF FINANCIAL INSTRUMENTS - The following disclosure of the
estimated fair value of financial instruments is made in accordance with
the requirements of Statement of Financial Accounting Standards No. 107,
DISCLOSURES ABOUT FAIR VALUE OF FINANCIAL INSTRUMENTS. The estimated fair
value amounts have been determined by the Company, using available market
information and appropriate valuation methodologies. However, considerable
judgment is required in interpreting market data to develop the estimates
of fair value. Accordingly, the estimates presented herein are not
necessarily indicative of the amounts that the Company could realize in a
current market exchange. The use of different market assumptions and/or
estimation methodologies may have a material effect on the estimated fair
value amounts.
CASH AND CASH EQUIVALENTS, ACCOUNTS AND NOTES RECEIVABLE, ACCOUNTS
PAYABLE AND ACCRUED EXPENSES - The carrying amounts of these items are
a reasonable estimate of their fair value.
F-13
<PAGE>
LONG-TERM DEBT - Interest rates that are currently available to the
Company for issuance of debt with similar terms and remaining
maturities are used to estimate fair value for debt issues for which
no market quotes are available. The carrying amount of this item is
a reasonable estimate of fair value.
The fair value estimates presented herein are based on pertinent
information available to management as of June 30, 1996. Although
management is not aware of any factors that would significantly affect the
estimated fair value amounts, such amounts have not been comprehensively
revalued for purposes of these financial statements since that date, and
current estimates of fair value may differ significantly from the amounts
presented herein.
2. IMPROVEMENTS AND EQUIPMENT
The major classes of improvements and equipment are as follows:
<TABLE>
<CAPTION>
JUNE 30, ESTIMATED
1996 1995 USEFUL LIVES
<S> <C> <C> <C>
Automotive equipment $ 2,404,487 $ 2,318,504 5 years
Furniture, fixtures and equipment 2,063,708 1,790,152 5-7 years
Leasehold improvements 587,226 515,374 10 years
------------ ------------
5,055,421 4,624,030
Less: Accumulated depreciation and amortization 3,622,322 3,516,523
------------ ------------
$ 1,433,099 $ 1,107,507
------------ ------------
------------ ------------
</TABLE>
3. LONG-TERM DEBT
On December 23, 1994, the Company entered into a Loan Agreement which
provides for secured borrowing consisting of a four-year revolving credit
facility in the amount of $7,500,000, guaranteed by the Company's Parent.
Obligations under the revolving credit facility are collateralized by
certain tangible and intangible current assets of the Company (aggregating
approximately $13,118,000 at June 30, 1996). Borrowings are based on a
formula relating to certain levels of receivables and inventory, as
defined. Interest only is payable monthly at a floating rate equal to the
lender's prime rate, plus one-percent, or at the London interbank offered
rate, plus three and one-quarter percent, at the option of the Company.
The initial borrowing under the revolving credit facility (approximately
$4,594,000) was advanced to the Company's Parent partially in repayment of
intercompany debt ($2,325,533) and the balance as an advance to the Parent.
4. TRANSACTIONS WITH PARENT AND AFFILIATED COMPANIES
During fiscal 1995, the Company transferred leasehold improvements to a
building no longer occupied by the Company (at a net book value of $90,204)
to its Parent in partial repayment of intercompany debt.
During fiscal 1994, the Company purchased land and a building in
Birmingham, Alabama, for $735,000, of which $550,000 was financed by a
first mortgage. The mortgage is repayable in fifty-nine equal monthly
installments of approximately $4,700 and a balloon payment of approximately
$440,000 due in April 1999. During fiscal 1994, the Company transferred
this property, including related improvements (at a net book value of
$216,189, net of the mortgage), to its Parent in partial repayment of
intercompany
F-14
<PAGE>
debt. The Company remains the primary obligor on the first mortgage which
had a balance due of $525,713 and $536,104 at June 30, 1996 and 1995,
respectively.
The Company is liable on a real estate mortgage on property located in
Pensacola, Florida, which had a balance due of $381,369 and $397,124 at
June 30, 1996 and 1995, respectively, on property transferred to its Parent
in prior years. The mortgage is repayable in monthly installments of
approximately $4,800 and a balloon payment of approximately $361,000 due in
March 1997.
The Company is liable for certain lease payments to a subsidiary of its
Parent under a lease for a former distribution center in Fort Lauderdale,
Florida, including a balloon payment due May 1, 1999 in the approximate
amount of $580,000 relating to industrial revenue bonds used to acquire and
develop the Fort Lauderdale, Florida, property. The lease expires on May
1, 1999. These premises have been subleased to an unrelated third party at
an approximate annual rental of $200,000, which amount is approximately
equal to the Company's annual lease obligation. The sublease expires in
August, 1997. The payments by the Company have included, through June 30,
1995, a ratable share of the balloon payment.
The Company operates a substantial portion of its business from facilities
which it has been leasing from a subsidiary of its Parent on a month to
month basis. The Company intends to enter into long-term leases for these
facilities. Rent expense for these facilities, net of sublease income of
approximately $200,000, including taxes and other occupancy costs,
aggregated approximately $709,000, $709,000 and $636,000 in fiscal 1996,
1995 and 1994, respectively.
The approximate future minimum rental commitments under these leases, net
of sublease income of approximately $200,000, are as follows:
YEAR ENDING
JUNE 30, AMOUNT
1997 $ 710,000
1998 710,000
1999 710,000
2000 710,000
2001 710,000
------------
$ 3,550,000
------------
------------
Fees of $50,000 have been charged to the Company by its Parent in each of
fiscal 1996, 1995 and 1994. Such fees represent audit fees and accounting
services incurred on behalf of the Company.
During 1996, the Company loaned $200,000 to a subsidiary of its Parent.
Such amount was repaid prior to June 30, 1996, with interest computed at
the rate of 9 1/4% per annum.
F-15
<PAGE>
The following is a reconciliation of the activity in the Due from (to)
Parent and Affiliated Companies account for the periods presented:
<TABLE>
<CAPTION>
YEAR ENDED JUNE 30,
1996 1995 1994
<S> <C> <C> <C>
Balance, beginning of year $3,121,475 $(2,491,159) $(3,914,364)
Fees for auditing and accounting services (50,000) (50,000) (50,000)
Rent - net of sublease income (708,818) (709,368) (636,011)
Income taxes paid to Parent (793,000) (215,000) (274,000)
Dividends paid to Parent (1,097,000) (421,535) (622,245)
Transfers of property to Parent - 90,204 216,321
Cash advances - net 2,021,975 6,918,333 2,789,140
---------- ---------- -----------
Balance, end of year $2,494,632 $3,121,475 $(2,491,159)
---------- ---------- -----------
---------- ---------- -----------
5. INCOME TAXES
Components of the provision for income taxes are as follows:
YEAR ENDED JUNE 30,
1996 1995 1994
Current:
Federal $ 609,000 $ 203,131 $ 265,406
State and local 99,983 33,449 43,937
Deferred 84,017 (21,580) (35,343)
---------- ---------- -----------
$ 793,000 $ 215,000 $ 274,000
---------- ---------- -----------
---------- ---------- -----------
A reconciliation of income taxes at the Federal statutory rate to amounts
provided is as follows:
YEAR ENDED JUNE 30,
1996 1995 1994
Tax provision at statutory rate $ 716,732 $ 193,468 $ 250,588
State and local income taxes 60,000 19,866 25,839
Other 16,268 1,666 (2,427)
---------- ---------- -----------
$ 793,000 $ 215,000 $ 274,000
---------- ---------- -----------
---------- ---------- -----------
</TABLE>
F-16
<PAGE>
Temporary differences which give rise to deferred tax assets and
liabilities are as follows:
JUNE 30,
1996 1995
Deferred Tax Assets:
Provision for doubtful accounts $ 176,762 $ 285,523
Inventory capitalization 16,766 12,227
---------- ----------
193,528 297,750
Deferred Tax Liability:
Depreciation (90,339) (110,544)
---------- ----------
Net deferred tax asset $ 103,189 $ 187,206
---------- ----------
---------- ----------
6. COMMITMENTS AND CONTINGENCIES
The Company is committed to unrelated parties for long-term leases for
property and automotive and data processing equipment. The leases expire
on various dates through 2001. The lease for property includes renewal
options and provides for the payment of taxes and other occupancy costs.
The approximate future minimum rental commitments under these leases are
as follows:
YEAR ENDING
JUNE 30, AMOUNT
1997 $ 824,000
1998 666,000
1999 562,000
2000 406,000
2001 271,000
------------
$ 2,729,000
------------
------------
Rent expense for the facilities under these leases amounted to
approximately $371,000, $191,000 and $289,000 in fiscal 1996, 1995 and
1994, respectively, and includes certain occupancy costs.
During the fiscal years ended June 30, 1996, 1995 and 1994, the Company
purchased approximately 21%, 19% and 17%, respectively, of its product
lines from one supplier. Since similar products are available to the
Company from other suppliers, the loss of this supplier would not have a
material adverse effect on the business of the Company.
The Company has a 401(k) plan covering eligible employees (the "Plan").
The Plan provides for contributions at the Company's discretion. No
contribution was made to the Plan in fiscal 1996, 1995 or 1994.
7. RESTRUCTURING COSTS
During fiscal 1994, the Company made a decision to discontinue operating in
South Florida and to expand into other market areas. The Company's results
of operations in fiscal 1994 include a loss in the amount
F-17
<PAGE>
of approximately $1,230,000 attributable to the operations and disposition
of two branches located in South Florida. Revenues from these two branches
were $6,705,000 for fiscal 1994.
During fiscal 1995, the Company opened two new branches and discontinued
operating one additional branch. The Company's results of operations in
fiscal 1995 include nonrecurring start-up costs and operating losses in the
aggregate amount of approximately $418,000 attributable to these branches;
and additional expenses in the amount of approximately $252,000
attributable to the operations and disposition of the two branches located
in South Florida.
During fiscal 1996, the Company opened four new branches, one of which was
closed prior to the end of the fiscal year, and commenced the distribution
of a new product line. The Company's result of operations in fiscal 1996
include start-up costs and operating losses of approximately $290,000
attributable to these four branches and the introduction of the new product
line; and additional expenses in the amount of approximately $32,000
attributable to the operations of branches disposed of in prior fiscal
years.
8. CONTEMPLATED TRANSACTION WITH RELATED PARTY
In April 1996, Eagle Supply Group, Inc. ("Eagle"), a majority-owned
subsidiary of the Company's Parent, signed a letter of intent with an
underwriter for an initial public offering (the "Offering"). The Offering
is expected to be for 1,500,000 shares of common stock of Eagle, par value
$.0001 per share, and 1,500,000 redeemable common stock purchase warrants.
The Offering is expected to raise approximately $6,200,000 net of expenses.
Upon closing of the Offering, Eagle will acquire all of the issued and
outstanding capital stock of the Company from its Parent for consideration
consisting of 200,000 shares of Eagle's common stock (the "Acquisition").
The Acquisition will be accounted for as the combining of two entities
under common control and will not result in any revaluation of the
Company's assets or the creation of goodwill. Upon the consummation of the
Acquisition, the Company will become a wholly-owned subsidiary of Eagle and
will constitute the sole business operations of Eagle until such time, if
any, as Eagle consummates additional acquisitions.
As a precondition to the consummation of the Acquisition, the Company's
Parent has agreed that the Company will have a net tangible book value of
$1,000,000, have earned approximately $2,000,000 in pretax income during
fiscal 1996 and have had gross revenues of not less than $50,000,000 during
fiscal 1996.
Upon closing of the Offering and consummation of the Acquisition, the
Company's equity in excess of $1,000,000 (approximately $2,711,000 at June
30, 1996) will be dividended to its Parent in the form of cancellation of
the Parent's indebtedness to the Company (approximately $2,495,000 at June
30, 1996) and the balance payable in cash.
The pro forma balance sheet at June 30, 1996 reflects this dividend to the
Company's Parent.
******
F-18
<PAGE>
================================================================================
No dealer, salesperson or other person has been authorized in connection with
this offering to give any information or to make any representations other than
those contained in this Prospectus. This Prospectus does not constitute an offer
or a solicitation in any jurisdiction to any person to whom it is unlawful to
make such an offer or solicitation. Neither the delivery of this Prospectus nor
any sale made hereunder shall, under any circumstances, create an implication
that there has been no change in the circumstances of the Company or the facts
herein set forth since the date hereof.
TABLE OF CONTENTS
-----------------
Page
----
Prospectus Summary...................................................... 5
Risk Factors............................................................ 12
Dilution ............................................................... 22
Use of Proceeds ........................................................ 24
Capitalization ......................................................... 26
Unaudited Pro Forma Condensed
Consolidated Financial Statements ..................................... 27
Selected Financial Information ......................................... 32
Management's Discussion and Analysis
of Financial Condition and Results
of Operations ......................................................... 34
Business ............................................................... 41
Management ............................................................. 52
Principal Stockholders ................................................. 62
Certain Transactions ................................................... 63
Description of Securities .............................................. 66
Shares Eligible for Future Sale ........................................ 70
Underwriting ........................................................... 71
Selling Securityholders ................................................ 75
Legal Matters .......................................................... 77
Experts ................................................................ 77
Additional Information ................................................. 78
Index to Financial Statements .......................................... F-1
Until ________, 1996 (25 days after the date of the Prospectus), all dealers
effecting transactions in the registered securities, whether or not
participating in this distribution, may be required to deliver a Prospectus.
This is in addition to the obligation of dealers to deliver a Prospectus when
acting as Underwriters and with respect to their unsold allotments or
subscriptions.
================================================================================
================================================================================
EAGLE SUPPLY GROUP, INC.
1,500,000 Shares of
Common Stock and
1,500,000 Redeemable
Common Stock Purchase Warrants
___________________
PROSPECTUS
___________________
BARRON CHASE SECURITIES
7700 W. Camino Real
Suite 200
Boca Raton, Florida 33433
(561) 347-1200
Atlanta, Georgia
Beverly Hills, California
Boston, Massachusetts
Chicago, Illinois
Clearwater, Florida
Dallas, Texas
Denver, Colorado
East Boca Raton, Florida
Hoopeston, Illinois
Miami, Florida
Middletown, New Jersey
Minneapolis, Minnesota
Oklahoma City, Oklahoma
Phoenix, Arizona
Sarasota, Florida
Tampa, Florida
Tulsa, Oklahoma
__________, 1996
================================================================================
<PAGE>
PART II
INFORMATION NOT REQUIRED IN PROSPECTUS
Item 13. Other Expenses of Issuance and Distribution
The estimated expenses of this offering, all of which are to be paid by the
Registrant, in connection with the issuance and distribution of the Securities
being registered, are as follows:
SEC Registration Fee............................. $ 7,481.26
NASD Filing Fee.................................. 2,669.57
Listing and Filing Fees ........ ................ 40,000.00 *
Printing and Engraving Expenses.................. 80,000.00 *
Accounting Fees and Expenses..................... (1) *
Legal Fees and Expenses.......................... 130,000.00
Blue Sky Fees and Expenses....................... (1) *
Transfer and Warrant Agent
Fees and Expenses............................ 7,500.00
Underwriter's Non Accountable
Expense Allowance ........................... 230,625.00
Miscellaneous Expenses........................... (1) *
-----------
Total............................................ $700,000.00 *
===========
- ----------
(1) To be supplied by Amendment.
* Estimated.
Item 14. Indemnification of Directors and Officers
In general, Section 145 of the Delaware General Corporation Law provides
that persons who are officers or directors of a corporation may be indemnified
by the corporation for acts performed in their capacities as such. The
Registrant's By-Laws authorize indemnification in accordance with and to the
extent permitted by said statute.
The Registrant's Certificate of Incorporation and By-Laws provide for
indemnification to the fullest extent permitted by law.
Reference is also made to Section 6 of the Underwriting Agreement filed as
Exhibit 1.1 to this Registration Statement.
II-1
<PAGE>
Item 15. Recent Sales of Unregistered Securities
The Registrant has sold the following securities within the past three years:
A
DATE PERSON/ENTITY NUMBER OF SECURITIES CONSIDERATION
05/17/96 TDA Industries,Inc. 2,000,000 shares of
Common Stock $200.00
06/06/96 Steven R. Andrews 100,000 shares of
Common Stock $10.00
In June and July 1996, the Company sold, to the persons and entities
identified below, the securities of the Company for the consideration
indicated opposite their names:
B
PERSON/ENTITY NUMBER OF SECURITIES CONSIDERATION
One Unit of the Com-
Nina Allen pany's Securities* $25,000.00
One Unit of the Com-
William C. Bossung pany's Securities* $25,000.00
One Unit of the Com-
James A. Croson pany's Securities* $25,000.00
One Unit of the Com-
D&R Partnership pany's Securities* $25,000.00
One Half of a Unit of
Eugene Geller the Company's Securi- $12,500.00
ties*
Warren & Marianne One Unit of the Com-
Gilbert pany's Securities* $25,000.00
Two Units of the Com-
HiTel Group, Inc. pany's Securities $50,000.00
One and One-Fourth of
Paul Schmidt a Unit of the Comp- $31,250.00
any's Securities*
Donald & Linda One Unit of the Com-
Silpe pany's Securities* $25,000.00
II-2
<PAGE>
PERSON/ENTITY NUMBER OF SECURITIES CONSIDERATION
Florence & Eric One Unit of the Com-
Stein pany's Securities* $25,000.00
One Unit of the Com-
William Tonyes pany's Securities* $25,000.00
One Fourth of a Unit
Ken Zengage of the Company's Secu-
rities* $ 6,250.00
----------
TOTAL $300,000.00
===========
* Each Unit consisting of 25,000 shares of Common Stock and 25,000 Redeemable
Common Stock Purchase Warrants.
These transactions were exempt from registration under the Securities Act
of 1933, as amended (the "Act"), under Section 4(2) of that Act as not involving
a public offering, and as to those sales set forth under subsection B above,
reliance is placed upon Rule 506 of Regulation D and Section 4(6) of the Act. No
underwriter was engaged by the Company in connection with the issuances
described above. The recipients of all of the foregoing securities represented
that such securities were being acquired for investment and not with a view to
the distribution thereof. In addition, the certificates evidencing such
securities bear restrictive legends.
II-3
<PAGE>
Item 16. Exhibits and Financial Statement Schedules
(a) Exhibits
1.1 Forms of Underwriting Agreement and Selected Dealers Agreement (1)
3.1 Registrant's Articles of Incorporation (1)
3.2 Registrant's By-Laws (1)
4.1 Form of Underwriter's Warrant Agreement with Form of Warrant
Certificate (1)
4.2 Form of Financial Advisory Agreement to be entered into by and
between the Registrant and the Underwriter (1)
4.3 Form of Merger and Acquisition Agreement to be entered into by and
between the Registrant and the Underwriter (1)
4.4 Form of Common Stock Certificate (2)
4.5 Form of Redeemable Stock Purchase Warrants delivered to Selling
Securityholders (1)
4.6 Form of Redeemable Common Stock Purchase Warrants (printed version)
(2)
4.7 Form of Warrant Agreement between Registrant and Continental Stock
Transfer & Trust Company (2)
5.1 Opinion of Gusrae, Kaplan & Bruno (3)
10.1 Form of Stock Purchase Agreement between the Registrant and TDA
Industries, Inc. ("TDA") (1)
10.2 Form of Employment Agreement with Douglas P. Fields (1)
10.3 Form of Employment Agreement with Frederick M. Friedman (1)
10.4 Eagle Supply, Inc. Mortgage and Note regarding its Birmingham,
Alabama Distribution Center (1)
10.5 Eagle Supply, Inc. Mortgage, Deed and Purchase Agreement regarding
its Pensacola, Florida Distribution Center (1)
II-4
<PAGE>
10.6 Eagle Supply, Inc. Lease, as Amended, regarding its former
distribution center located in Fort Lauderdale, Florida (1)
10.7 Eagle Supply, Inc. Bank Credit Facility (1)
10.8 Form of Lease to be entered into with wholly-owned subsidiary of
TDA (2)
10.9 Registrant's Stock Option Plan (1)
10.10 Form of Administrative Services Agreement to be entered into by and
between Registrant and TDA (2)
23.1 Consent of Gusrae, Kaplan & Bruno (to be included in Exhibit 5.1)
(3)
23.2 Consents of Deloitte & Touche LLP (2)
23.3 Consent of Paul D. Finkelstein (2)
23.4 Consent of John E. Smircina (2)
23.5 Consent of George Skakel III (2)
- ----------
(1) Filed with initial filing on August 12, 1996.
(2) Filed herewith.
(3) To be Filed by Amendment.
II-5
<PAGE>
(b) Financial Statement Schedule
Schedule II -- Valuation and Qualifying Accounts
Allowance for Doubtful Accounts(1)
Balance at Charged to
Beginning of Costs and Balance at
Year Expenses Deductions End of Year
Year Ended
June 30, 1994 613,186 474,591 (410,450) 677,327
Year Ended
June 30, 1995 677,327 403,169 (329,120) 751,376
Year Ended
June 30, 1996 751,376 203,133 (489,509) 465,000
- ----------
(1) Data relates to Eagle due to the fact that the Company was organized in May
1996 and has conducted no business activities to date.
All other schedules are omitted, as the required information is either
inapplicable or presented in the financial statements or related notes.
II-6
<PAGE>
Item 17. Undertakings
The Registrant hereby undertakes:
(1) To file, during any period in which offers or sales are being made, a
post-effective amendment to this registration statement;
(i) To include any prospectus required by Section 10(a)(3) of the
Securities Act of 1933;
(ii) To reflect in the prospectus any facts or events arising after the
effective date of the registration statement (or the most recent post-effective
amendment thereof) which, individually or in the aggregate, represent a
fundamental change in the information set forth in the registration statement;
(iii) To include any material information with respect to the plan of
distribution not previously disclosed in the registration statement or any
material change to such information in the registration statement;
(2) That, for the purpose of determining any liability under the Securities
Act of 1933, each such post-effective amendment shall be deemed to be a new
registration statement relating to the securities offered therein, and the
offering of such securities at that time shall be deemed to be the initial bona
fide offering thereof;
(3) To remove from registration by means of a post-effective amendment any
of the securities being registered which remain unsold at the termination of the
offering;
(4) Insofar as indemnification for liabilities arising under the Securities
Act of 1933 (the "Act") may be permitted to directors, officers and controlling
persons of the registrant pursuant to the foregoing provisions, or otherwise,
the registrant has been advised that in the opinion of the Securities and
Exchange Commission such indemnification is against public policy as expressed
in the Act and is, therefore, unenforceable. In the event that a claim for
indemnification against such liabilities (other than the payment by the
registrant of expenses incurred or paid by a director, officer or controlling
person of the registrant in the successful defense of any action, suit or
proceeding) is asserted by such director, officer or controlling person in
connection with the securities being registered, the registrant will, unless in
the opinion of its counsel the matter has been settled by controlling precedent,
submit to a court of appropriate jurisdiction the question of whether such
indemnification by it is against public policy as expressed in the Act and will
be governed by the final adjudication of such issue.
(5) The undersigned registrant hereby undertakes to provide to the
underwriters, at the closing specified in the underwriting agreement,
certificates in such denominations and registered in such names as required by
the underwriter to permit prompt delivery to each purchaser.
II-7
<PAGE>
SIGNATURES
Pursuant to the requirements of the Securities Act of 1933, as amended, the
Registrant has duly caused this Amendment to the Registration Statement to be
signed on its behalf by the undersigned, thereunto duly authorized in the City
of New York, State of New York, on the 15th day of October, 1996.
By: /s/ Douglas P. Fields
----------------------
Douglas P. Fields,
Chief Executive Officer
Pursuant to the requirements of the Securities Act of 1933, as amended,
this Amendment to the Registration Statement has been signed by the following
persons in the capacities and on the dates indicated:
Signature Title Date
- --------- ----- ----
/s/ Douglas P. Fields Chairman of the Board of October 15, 1996
- ------------------------- Directors, Chief Executive
Douglas P. Fields Officer and Director
(Principal Executive Officer)
/s/ Frederick M. Friedman Executive Vice President, October 15, 1996
- ------------------------- Treasurer, Secretary and
Frederick M. Friedman Director (Principal Financial
and Accounting Officer)
/s/ Steven R. Andrews Director October 15, 1996
- -------------------------
Steven R. Andrews
II-8
<PAGE>
EXHIBIT INDEX
Exhibit Description of Exhibits
1.1 Forms of Underwriting Agreement and Selected Dealers Agreement (1)
3.1 Registrant's Articles of Incorporation (1)
3.2 Registrant's By-Laws (1)
4.1 Form of Underwriter's Warrant Agreement with Form of Warrant Certificate
(1)
4.2 Form of Financial Advisory Agreement to be entered into by and between the
Registrant and the Underwriter (1)
4.3 Form of Merger and Acquisition Agreement to be entered into by and between
the Registrant and the Underwriter (1)
4.4 Form of Common Stock Certificate (2)
4.5 Form of Redeemable Stock Purchase Warrants delivered to Selling
Securityholders (1)
4.6 Form of Redeemable Common Stock Purchase Warrants (printed version) (2)
4.7 Form of Warrant Agreement between Registrant and Continental Stock
Transfer & Trust Company (2)
5.1 Opinion of Gusrae, Kaplan & Bruno (3)
10.1 Form of Stock Purchase Agreement between the Registrant and TDA
Industries, Inc. ("TDA") (1)
10.2 Form of Employment Agreement with Douglas P. Fields (1)
10.3 Form of Employment Agreement with Frederick M. Friedman (1)
10.4 Eagle Supply, Inc. Mortgage and Note regarding its Birmingham, Alabama
Distribution Center (1)
10.5 Eagle Supply, Inc. Mortgage, Deed and Purchase Agreement regarding its
Pensacola, Florida Distribution Center (1)
10.6 Eagle Supply, Inc. Lease, as Amended, regarding its former distribution
center located in Fort Lauderdale, Florida (1)
<PAGE>
10.7 Eagle Supply, Inc. Bank Credit Facility (1)
10.8 Form of Lease to be entered into with wholly-owned subsidiary of TDA (2)
10.9 Registrant's Stock Option Plan (1)
10.10 Form of Administrative Services Agreement to be entered into by and
between Registrant and TDA (2)
23.1 Consent of Gusrae, Kaplan & Bruno (to be included in Exhibit 5.1) (3)
23.2 Consents of Deloitte & Touche LLP (2)
23.3 Consent of Paul D. Finkelstein (2)
23.4 Consent of John E. Smircina (2)
23.5 Consent of George Skakel III (2)
- ----------
(1) Filed with initial filing on August 12, 1996.
(2) Filed herewith.
(3) To be Filed by Amendment.
<PAGE>
EXHIBIT 4.4
FORM OF
COMMON STOCK CERTIFICATE
<PAGE>
[FORM OF FACE OF STOCK CERTIFICATE]
[LOGO]
EAGLE SUPPLY GROUP, INC.
Number Shares
ESG- See Reverse For
Certain Definitions
This certifies that
is the record holder of
FULLY PAID AND NON-ASSESSABLE SHARES OF COMMON STOCK, $.0001 PAR VALUE, OF
EAGLE SUPPLY GROUP, INC.
(hereinafter called the Corporation) transferable on the books of the
Corporation by the holder hereof in person or by duly authorized attorney upon
surrender of this certificate properly endorsed. This certificate is not valid
until countersigned and registered by the Transfer Agent and Registrar.
Witness the facsimile signatures of the Corporation's duly authorized officers.
Dated:
CHAIRMAN OF THE BOARD AND EXECUTIVE VICE-PRESIDENT
CHIEF EXECUTIVE OFFICER AND SECRETARY
Countersigned and Registered:
Continental Stock Transfer Trust Company
By
Authorized Signature
<PAGE>
[FORM OF REVERSE OF STOCK CERTIFICATE]
EAGLE SUPPLY GROUP, INC.
The Corporation will furnish without charge to each stockholder who so
requests a statement of the powers, designations, preferences and relative,
participating, optional, or other special rights of each class of stock or
series thereof and the qualifications, limitations or restrictions of such
preferences and/or rights.
The following abbreviations, when used in the inscription on the face of
this certificate, shall be construed as though they were written out in full
according to applicable laws or regulations:
TEN COM - as tenants in common UNIF GIFT MIN ACT-__________ Custodian_______
(Cust) (Minor)
TEN ENT - as tenants by
the entireties under Uniform Gifts to Minors Act
JT TEN - as joint tenants UNIF TRF ACT-__________
with right of Custodian (until age ______)
survivorship and (Cust)
not as
tenants in common ________ under Uniform Transfer to Minor Acts
(Minor)
___________________________
(State)
Additional abbreviations may also be used though not in the above list.
FOR VALUE RECEIVED, ___________________ HEREBY SELL, ASSIGN AND TRANSFER UNTO
Please insert social security or other
identifying number of assignee
[ ]_____________________________________________________________
(Please print or type name and address, including zip code
of assigned)
________________________________________________________________________________
________________________________________________________________________________
OF THE CAPITAL STOCK REPRESENTED BY THE WITHIN CERTIFICATE, AND DO HEREBY
IRREVOCABLY CONSTITUTE AND APPOINT ATTORNEY TO TRANSFER THE SAID STOCK ON THE
SAID STOCK ON THE BOOKS OF THE WITHIN-NAMED CORPORATION WITH FULL POWER OF
SUBSTITUTION IN THE PREMISES.
<PAGE>
DATED:___________________ X________________________________________________
X________________________________________________
Notice: The signature(s) to this assignment must
correspond with the names(s) as written upon the
face of the certificate, in every particular,
without alteration or enlargement, or any change
whatsoever.
SIGNATURE GUARANTEED:___________________________________________________________
The signature(s) should be guaranteed by an eligible
guarantor institution (banks stockbrokers, savings and loan
associations and credit unions with membership in an approved
signature guarantee medallion program), pursuant to S.E.C.
Rule 17Ad-15
<PAGE>
EXHIBIT 4.6
FORM OF
REDEEMABLE COMMON STOCK
PURCHASE WARRANTS
<PAGE>
[FORM OF FACE OF WARRANT CERTIFICATE]
No. W ________ (_____) Warrants
VOID AFTER ___________, 1999
REDEEMABLE WARRANT CERTIFICATE
FOR PURCHASE OF COMMON STOCK OF
EAGLE SUPPLY GROUP, INC.
This certifies that FOR VALUE RECEIVED _______________________ or
registered assigns (the "Registered Holder") is the owner of the number of
Redeemable Warrants (the "Warrants") specified above. Each Warrant initially
entitles the Registered Holder to purchase, subject to the terms and conditions
set forth in this Certificate and the Warrant Agreement (as hereinafter
defined), one fully paid and nonassessable share of Common Stock, $.0001 par
value, of Eagle Supply Group, Inc., a Delaware corporation (the "Company"), at
any time between ________, 1996 and the Expiration Date (as hereinafter
defined), upon the presentation and surrender of this Warrant Certificate with
the Subscription Form on the reverse hereof duly executed, at the corporate
office of Continental Stock Transfer & Trust Company as Warrant Agent, or its
successor (the "Warrant Agent"), accompanied by payment of $5.00 per share (the
"Purchase Price") in lawful money of the United States of America in cash or by
official bank or certified check made payable to the Warrant Agent.
This Warrant Certificate and each Warrant represented hereby are issued
pursuant to and are subject in all respects to the terms and conditions set
forth in the Warrant Agreement (the "Warrant Agreement"), dated as of
______________, 1996, by and between the Company and the Warrant Agent.
In the event of certain contingencies provided for in the Warrant
Agreement, the Purchase Price or the number of shares of Common Stock subject to
purchase upon the exercise of each Warrant represented hereby are subject to
modification or adjustment.
Each Warrant represented hereby is exercisable at the option of the
Registered Holder, but no fractional shares of Common Stock will be issued. In
the case of the exercise of less than all the Warrants represented hereby, the
Company shall cancel this Warrant Certificate upon the surrender hereof and
shall execute and deliver a new Warrant Certificate or Warrant Certificates of
like tenor, which the Warrant Agent shall countersign, for the balance of such
Warrants.
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<PAGE>
The term "Expiration Date" shall mean 5:00 p.m. (Eastern time) on
_______________, 1999, or such earlier date as the Warrants shall be redeemed.
If such date shall in the State of New York be a holiday or a day on which the
banks are authorized to close, then the Expiration Date shall be 5:00 p.m.
(Eastern time) the next day which in the State of New York is not a holiday nor
a day in which banks are authorized to close.
The Company shall not be obligated to deliver any securities pursuant to
the exercise of this Warrant unless a registration statement under the
Securities Act of 1933, as amended, with respect to such securities is
effective. The Company has covenanted and agreed that it will use its best
efforts to cause the same to become effective and to keep such registration
statement current while any of the Warrants are outstanding. This Warrant shall
not be exercisable by a Registered Holder in any state where such exercise would
be unlawful.
This Warrant Certificate is exchangeable, upon the surrender hereof by the
Registered Holder at the corporate office of the Warrant Agent, for a new
Warrant Certificate or Warrant Certificates of like tenor representing an equal
aggregate number of Warrants, each of such new Warrant Certificates to represent
such number of Warrants as shall be designated by such Registered Holder at the
time of such surrender. Upon due presentment together with any tax or other
governmental charge imposed in connection therewith, for registration of
transfer of this Warrant Certificate at such office, a new Warrant Certificate
or Warrant Certificates representing an equal aggregate number of Warrants will
be issued to the transferee in exchange therefor, subject to the limitations
provided in the Warrant Agreement.
Prior to the exercise of any Warrant represented hereby, the Registered
Holder shall not be entitled to any rights of a stockholder of the Company,
including, without limitation, the right to vote or to receive dividends or
other distributions, and shall not be entitled to receive any notice of any
proceedings of the Company, except as provided in the Warrant Agreement.
This Warrant may be redeemed at the option of the Company, at a Redemption
Price of $0.25 per Warrant, provided that the average market price (ad defined
below) of the Company's Common Stock exceeds $10.00 per share for a period of 30
consecutive trading days. Notice of redemption shall be mailed within ten (10)
days after the end of such period and be given not later than the thirtieth
(30th) day before the date fixed for redemption, all as provided in the Warrant
Agreement. On and after the date fixed for redemption, the Registered Holder
shall have no rights with respect to this Warrant except to receive the $0.25
per Warrant upon surrender of this Certificate.
2
<PAGE>
The term "market price" shall mean of closing per share bid price, as
reported by NASDAQ, so long as the Common Stock is quoted on NASDAQ, and if the
Common Stock is listed on a national securities exchange or on NASDAQ-NMS
system, shall be determined by the closing sales price on the primary exchange
on which the Common Stock is traded on or NASDAQ-NMS if such shares are not
listed on an exchange. Warrant holders will be entitled to exercise Warrants at
any time up to the business day next preceding the redemption date. The Warrants
are not redeemable prior to the first anniversary of the date of this Prospectus
without the written consent of the Underwriter. Additionally, the Warrants may
not be redeemed unless at the time of redemption there is a current prospectus
encompassing the shares of Common Stock issuable upon exercise of such Warrants
under an effective registration statement.
Warrant Agreement and Exchange of Warrants
Upon the closing of the Public Offering and Consummation of the
Acquisition, the Company will enter into a warrant agreement ("Warrant
Agreement") with Continental Stock Transfer & Trust Company, as warrant agent
("Warrant Agent"). It is anticipated that the Warrant Agreement will contain
provisions permitting the Company and the Warrant Agent, without the consent of
the Warrant holders, to supplement or amend the Warrant Agreement in order to
cure any ambiguity or defect or to make any other provisions in regard to
matters or questions arising thereunder that the Company and the Warrant Agent
may deem necessary or desirable and that does not adversely affect the interests
of the Warrant holders. At that same time, the Company will exchange with the
Warrant holders which purchased Warrants in the Private Placement printed
warrant certificates for the typewritten format certificates to be delivered to
the Private Placement purchasers.
Dividend Policy
The Company has not paid dividends to date. The payment of dividends, if
any, in the future is within the discretion of the Board of Directors. The
payment of dividends, if any, in the future will depend upon the Company's
earnings, capital requirements and financial conditions and other relevant
factors. The Company's Board of Directors does not presently intend to declare
any dividends in the foreseeable future but instead intends to retain all
earnings, if any, for use in the Company and Eagle's business operations.
Prior to due presentment for registration of transfer hereof, the Company
and the Warrant Agent may deem and treat the Registered Holder as the absolute
owner hereof and of each Warrant represented hereby (notwithstanding any
notations of ownership or writing hereon made by anyone other than a duly
authorized officer of the Company or the Warrant Agent) for all purposes and
shall not be
3
<PAGE>
affected by any notice to the contrary.
This Warrant Certificate shall be governed by and construed in accordance
with the laws of the State of New York.
This Warrant Certificate is not valid unless countersigned by the Warrant
Agent.
IN WITNESS WHEREOF, the Company has caused this Warrant Certificate to be
duly executed, manually or in facsimile by two (2) of its officers thereunto
duly authorized and a facsimile of its corporate seal to be imprinted hereon.
Dated: ________________________
EAGLE SUPPLY GROUP, INC.
By: ____________________________________
Douglas P. Fields,
Chief Executive Officer
By: ____________________________________
Frederick M. Friedman, Secretary
[seal]
Countersigned:
CONTINENTAL STOCK TRANSFER & TRUST COMPANY
By: _____________________________________
Authorized Officer
4
<PAGE>
[FORM OF REVERSE OF WARRANT CERTIFICATE]
EAGLE SUPPLY GROUP, INC.
SUBSCRIPTION FORM
To Be Executed by the Registered Holder
in Order to Exercise Warrants
The undersigned Registered Holder hereby irrevocably elects to exercise
__________________ (________________) Warrants represented by this Warrant
Certificate, and to purchase the securities issuable upon the exercise of such
Warrants, and requests that certificates for such securities shall be issued in
the name of
PLEASE INSERT SOCIAL SECURITY OR OTHER IDENTIFYING NUMBER
_____________________________
_____________________________
_____________________________
_____________________________
[please print or type name and address]
and be delivered to
_____________________________
_____________________________
_____________________________
_____________________________
[please print or type name and address]
and if such number of Warrants shall not be all the Warrants evidenced by this
Warrant Certificate, that a new Warrant Certificate for the balance of such
Warrants be registered in the name of, and delivered to, the Registered Holder
at the address stated below.
5
<PAGE>
The undersigned represents that the exercise of the within Warrant was
solicited by
________________________________
(Indicate the name of
soliciting broker)
Dated: _________________________ ________________________________
Signature
________________________________
Street Address
________________________________
City, State and Zip Code
________________________________
Taxpayer ID Number
Signature Guaranteed:
________________________________
6
<PAGE>
ASSIGNMENT
To Be Executed by the Registered Holder
in Order to Assign Warrants
FOR VALUE RECEIVED, the undersigned hereby sells, assigns and transfers
unto
PLEASE INSERT SOCIAL SECURITY OR OTHER IDENTIFYING NUMBER
_____________________________
_____________________________
_____________________________
_____________________________
[please print or type name and address]
_____________________________ (___________________) of the Warrants represented
by this Warrant Certificate, and hereby irrevocably constitutes and appoints
____________________ Attorney to transfer this Warrant Certificate on the books
of the Company, with full power of substitution in the premises.
Dated: ______________________ ________________________________
Signature Guaranteed:
________________________________
THE SIGNATURE MUST BE GUARANTEED BY A MEDALLION BANK.
7
<PAGE>
EXHIBIT 4.7
FORM OF
WARRANT AGREEMENT
BETWEEN REGISTRANT
AND
CONTINENTAL STOCK TRANSFER & TRUST COMPANY
<PAGE>
EAGLE SUPPLY GROUP, INC.
and
CONTINENTAL STOCK TRANSFER & TRUST COMPANY
WARRANT AGREEMENT
Dated as of ____, 1996
<PAGE>
WARRANT AGREEMENT, dated as of _______________, 1996, by and between EAGLE
SUPPLY GROUP, INC., a Delaware corporation (the "Company") and CONTINENTAL STOCK
TRANSFER & TRUST COMPANY, as warrant and transfer agent (hereinafter called the
Warrant Agent").
WHEREAS, the Company proposes to issue and sell to the public up to
1,725,000 shares of Common Stock, $.0001 par value (hereinafter referred to as
"Common Stock" or "Common Shares"), and 1,725,000 Redeemable Common Stock
Purchase Warrants to purchase a share of Common Stock at $5.00 per share (the
"Warrant") (including the underwriter's over-allotment option granted to Barron
Chase Securities, Inc. (the "Underwriter")), (the "Public Offering"); and
WHEREAS, the Company desires the Warrant Agent to act on behalf of the
Company, and the Warrant Agent is willing to so act, in connection with the
issuance, registration, transfers, exchanges and exercise of the Warrants;
NOW, THEREFORE, in consideration of the premises and mutual agreements
herein set forth, the parties hereto agree as follows:
Section 1. Appointment of Warrant Agent:Defined Terms. The Company hereby
appoints the Warrant Agent to act as agent ("Agent") for the Company in
accordance with the instructions hereinafter in this Agreement set forth, and
the Warrant Agent hereby accepts such appointment. The capitalized terms shall
have the meanings set forth in the recitals and the Sections of this Agreement
and the Addendum attached hereto.
Section 2. Form of Warrant. The text of the Warrant and of the form of
election to purchase shares as is printed on the reverse thereof as now
outstanding, is substantially as set forth respectively in Exhibit A attached
hereto. The per share Warrant Price (as hereinafter defined) and the number of
shares issuable upon exercise of the Warrants are subject to adjustment upon the
occurrence of certain events, all as hereinafter provided. The Warrants shall be
executed on behalf of the Company by the manual or facsimile signature of the
present or any future Chairman, President, or Vice President of the Company,
under its corporate seal, affixed or in facsimile, attested by the manual or
facsimile signature of the present or any future Secretary or Assistant
Secretary of the Company.
The Warrants will be dated as of the date of issuance by the Warrant Agent
either upon initial issuance or upon transfer or exchange.
Section 3. Countersignature and Registration. The Warrant Agent shall
maintain books for the transfer and registration of Warrants. Upon the initial
issuance of the Warrants, the Warrant
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<PAGE>
Agent shall issue and register the Warrants in the names of the respective
holders thereof. The Warrants shall be countersigned manually or by facsimile by
the Warrant Agent (or by any successor to the Warrant Agent then acting as
warrant agent under this Agreement) and shall not be valid for any purpose
unless so countersigned. Warrants may be so countersigned, however, by the
Warrant Agent (or by its successor as warrant agent) and be delivered by the
Warrant Agent, notwithstanding that the persons whose manual or facsimile
signatures appear thereon as proper officers of the Company shall have ceased to
be such officers at the time of such countersignature or delivery.
Section 4. Transfers and Exchanges. The Warrant Agent shall transfer, from
time to time, any outstanding Warrants upon the books to be maintained by the
Warrant Agent for that purpose, upon surrender thereof for transfer properly
endorsed or accompanied by appropriate instructions for transfer. Upon any such
transfer, a new Warrant shall be issued to the transferee and the surrendered
Warrant shall be delivered by the Warrant Agent. Warrants so cancelled shall be
cancelled by the Warrant Agent to the Company from time to time upon request.
Warrants may be exchanged at the option of the holder thereof, when surrendered
at the office of the Warrant Agent, for another Warrant, or other Warrants of
different denominations, of like tenor or representing in the aggregate the
right to purchase a like number of Common Shares.
Section 5. Rights of Redemption by Company. (i) commencing on the Effective
Date and on not less than thirty (30) days notice, the Warrants may be redeemed,
at the option of the Company, at a redemption price of $.25 per Warrant,
provided the market price of the Common Stock receivable upon exercise of the
Warrant shall have averaged at least$10.00 per share (the "Target Price"),
subject to adjustment as set forth in Section 11 hereof, for a period of thirty
consecutive trading days. For these purposes, the market price of the Common
Stock shall be determined by the closing bid price, as reported by the National
Association of Securities Dealers, Inc.'s ("NASD") Automated Quotation System
known as NASDAQ, so long as the Common Stock is quoted on NASDAQ, and, if the
Common Stock is listed on a national securities exchange or on NASDAQ's National
Market System ("NASDAQ-NMS"), shall be determined by the closing sales price on
the primary exchange on which the Common Stock is traded or on NASDAQ-NMS if
such shares are not listed on an exchange. Warrant holders will be entitled to
exercise Warrants at any time up to the business day next preceding the
redemption date. Notwithstanding the foregoing, the Warrants are not redeemable
prior to the first anniversary of the Effective Date without the written consent
of the Underwriter.
(ii) Providing the conditions set forth in Section 5(i) are met, and the
Company shall desire to exercise its right to redeem
2
<PAGE>
the Warrants, it shall mail a notice of redemption to the holders of the
Warrants to be redeemed, first class, postage prepaid, not later than the
thirtieth (30th) day before the date fixed for redemption, at his/her last
address as shall appear on the records of the Company. Any notice mailed in the
manner provided herein shall be conclusively presumed to have been duly given
whether or not the holder receives such notice.
(iii) The notice of redemption shall specify (i) the redemption price, (ii)
the date fixed for redemption, (iii) the place where the Warrant Certificates
shall be delivered and the redemption price paid, and (iv) that the right to
exercise the Warrant shall terminate at 5:00 p.m. (New York time) on the trading
day immediately preceding the date fixed for redemption. The date fixed for
redemption of the Warrants shall be the Redemption Date. No failure to mail such
notice nor any defect therein or in the mailing thereof shall affect the
validity of the proceedings for such redemption except as to a holder (a) to
whom notice was mailed; or (b) whose notice was defective. An affidavit of the
Secretary or an Assistant Secretary of the Company that notice of redemption has
been mailed shall, in the absence of fraud, be prima facie evidence of the facts
stated therein.
(iv) Except as provided herein, any right to exercise a Warrant shall
terminate at 5:00 p.m. (New York time) on the trading day immediately proceeding
the Redemption Date. On and after the Redemption Date, the holders shall have no
further rights except to receive, upon surrender of the Warrant, the redemption
price.
(v) From and after the Redemption Date, the Company shall, at the place
specified in the notice of redemption, upon presentation and surrender to the
Company by or on behalf of the holder thereof of one or more Warrants to be
redeemed, deliver or cause to be delivered to or upon the written order of such
holder a sum in cash equal to the redemption price of each such Warrant. From
and after the date fixed for redemption and upon the deposit or setting aside by
the Company of a sum sufficient to redeem all the Warrants called for
redemption, such Warrants shall expire and become void and all rights hereunder
and under the Warrant Certificate, except the right to receive payment of the
redemption price, shall cease.
(vi) If the shares of the Company's Common Stock are subdivided or combined
into a greater of smaller number of shares of Common Stock, the Target Price
shall be proportionately adjusted by the ratio which the total number of shares
of Common Stock outstanding immediately prior to such event bears to the total
number of shares of Common Stock to be outstanding immediately after such event.
3
<PAGE>
Section 6. Exercise of Warrants. Subject to the provisions of this
Agreement, each registered holder of Warrants shall have the right which may be
exercised through _____________, 1999 commencing from the Effective Date and
ending at the close of business on _____________, 1999 to purchase from the
Company (and the Company shall issue and sell to such registered holder of
Warrants) the number of fully paid and non-assessable Common Shares specified in
such Warrants, upon surrender to the Company at the office of the Warrant Agent
of such Warrants, with the form of election to purchase duly filled in and
signed, and upon payment to the order of the Company of the Warrant Price,
determined in accordance with Sections 10 and 11 herein, for the number of
shares in respect of which such Warrants are then exercised. Payment of such
Warrant Price shall be made in cash or by certified check or official bank
check, payable in United States dollars, to the order of the Company. No
adjustments shall be made for any dividends on any Common Shares issuable upon
exercise of a Warrant. Subject to Section 7, upon such surrender of Warrants,
and payment of the Warrant Price as aforesaid, the Company shall issue and cause
to be delivered with all reasonable dispatch to or upon the written order of the
registered holder of such Warrants and in such name or names as such registered
holder may designate, a certificate or certificates for the largest number of
whole Common Shares so purchased upon the exercise of such Warrants. The Company
shall not be required to issue any fraction of a share of Common Stock or make
any cash or other adjustment except as provided in Section 12 herein, in respect
of any fraction of a Common Share otherwise issuable upon such surrender. Such
certificate or certificates shall be deemed to have been issued and any person
so designated to be named therein shall be deemed to have become a holder of
record of such shares as of the date of the surrender of such Warrants and
payment of the Warrant Price as aforesaid, provided, however, that if, at the
date of surrender of such Warrants and payment of such Warrant Price, the
transfer books for the Common Shares or other class of stock purchasable upon
the exercise of such Warrants shall be closed, the certificates for the shares
in respect of which such Warrants are then exercised shall be issuable as of the
date on which such books shall be opened, and until such date the Company shall
be under no duty to deliver any certificate for such shares; provided, further,
however, that the transfer books aforesaid, unless otherwise required by law or
by applicable rule of any national securities exchange, shall not be closed at
any one time for a period longer than 20 days. The rights of purchase
represented by the Warrants shall be exercisable, at the election of the
registered holders thereof, either as an entirety or form time to time for part
only of the shares specified therein and, in the event that any Warrant is
exercised in respect of less than all of the shares specified therein at any
time prior to the date of expiration of the Warrant, a new Warrant or Warrants
will be issued to such registered holders for the remaining number of shares
4
<PAGE>
specified in the Warrant so surrendered, and the Warrant Agent is hereby
irrevocably authorized to countersign and to deliver the required new Warrants
pursuant to the provisions of this Section during the Warrant exercise period,
and the Company, whenever requested by the Warrant Agent, will supply the
Warrant Agent, with Warrants duly executed on behalf of the Company for such
purpose.
Section 7. Payment of Taxes. The Company will pay any documentary stamp
taxes attributable to the initial issuance of Common Shares issuable upon the
exercise of Warrants; provided, however, that the Company shall not be required
to pay any tax or taxes which may be payable in respect of any transfer involved
in the issuance or delivery of any certificates for Common Shares in a name
other than that of the registered holder of Warrants in respect of which such
shares are issued, and in such case neither the Company nor the Warrant Agent
shall be required to issue or deliver any certificate for Common Shares or any
Warrant until the person requesting the same has paid to the Company the amount
of such tax or has established to the Company's satisfaction that such tax has
been paid.
Section 8. Mutilated or Missing Warrants. In case any of the Warrants shall
be mutilated, lost, stolen or destroyed, the Company may in its discretion
issue, and the Warrant Agent shall countersign and deliver, in exchange and
substitution for and upon cancellation of the mutilated Warrant, or in lieu of
and substitution for the Warrant lost, stolen or destroyed, a new Warrant of
like tenor and representing an equivalent right or interest, but only upon
receipt of evidence satisfactory to the Company and the Warrant Agent of such
loss, theft or destruction of such Warrant and indemnity, if requested, also
satisfactory to them. Applicants for such substitute Warrants shall also comply
with such other reasonable regulations and pay such reasonable charges as the
Company or the Warrant Agent may prescribe.
Section 9. Reservation of Common Shares. There have been reserved, and the
Company shall at all times keep reserved, out of the authorized and unissued
Common Shares, a number of shares sufficient to provide for the exercise of the
rights of purchase represented by the Warrants, and the Transfer Agent for the
Common Shares and every subsequent transfer agent for any shares of the
Company's capital stock issuable upon the exercise of any of the rights of
purchase aforesaid are hereby irrevocably authorized and directed at all times
to reserve such number of authorized and unissued shares as shall be requisite
for such purpose. The Company agrees that all Common Shares issued upon exercise
of the Warrants shall be, at the time of delivery of the certificates for such
Common Shares, validly issued and outstanding, fully paid and non-assessable and
listed on any securities exchange upon which the other Common Shares are then
listed. The Company will file such
5
<PAGE>
registration statement(s) pursuant to the Securities Act of 1933, as amended,
with respect to the Common Shares as may be necessary to permit it to deliver to
each person exercising a Warrant, a Prospectus meeting the requirements of
Section 11(a) (3) of such act and otherwise complying therewith, and will
deliver such a Prospectus to each such person; provided, that the Company shall
only be obligated to use its reasonable, good faith efforts to have any such
registration statement declared effective by the Securities and Exchange
Commission, and to have such reserved shares qualified for delivery to holders
of the Warrants under applicable state securities laws, and to the extent that
the Company has used such prescribed efforts but has been unsuccessful in
obtaining any such registration(s) or qualification(s), it shall not constitute
a breach of this Agreement by the Company. The Company will keep a copy of this
Agreement on file with the Transfer Agent for the Common Shares and with every
subsequent transfer agent for any shares of the Company's capital stock issuable
upon the exercise of the rights of purchase represented by the Warrants. The
Warrant Agent is hereby irrevocably authorized to requisition from time to time
such Transfer Agent for stock certificates required to honor outstanding
Warrants. The Company will supply such Transfer Agent with duly executed stock
certificates for such purpose. All Warrants surrendered in the exercise of the
rights thereby evidenced shall be cancelled by the Warrant Agent and shall
thereafter be delivered to the Company, and such cancelled Warrants shall
constitute sufficient evidence of the number of Common Shares which have been
issued upon the exercise of such Warrants. Promptly after the date of expiration
of the Warrants, the Warrant Agent shall certify to the Company the total
aggregate amount of Warrants then outstanding, and thereafter no Common Shares
shall be subject to reservation in respect to such Warrants which shall have
expired.
Section 10. Warrant Price. The Warrant Price at which Common Stock shall be
purchasable shall be $5.00 per whole share. No fractional shares shall be
issued.
Section 11. Adjustments. Subject and pursuant to the provisions of this
Section 11, the Warrant Price and number of Common Shares subject to this
Warrant shall be subject to adjustment from time to time as set forth
hereinafter.
(A) Subdivision and Combination. In case the Company shall at any time
during the Exercise Period subdivide or combine the outstanding shares of Common
Stock, the Warrant Price shall forthwith be proportionately decreased in the
case of subdivision or increased in the case of combination.
(B) Adjustment in Number of Shares. Upon each adjustment of the Warrant
Price pursuant to the provisions of this Section 11,
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<PAGE>
the number of shares of Common Stock issuable upon the exercise of the Warrants
shall be adjusted to the nearest full number obtained by multiplying the Warrant
Price in effect immediately prior to such adjustment by the number of shares of
Common Stock issuable upon exercise of the Warrants immediately prior to such
adjustment and dividing the product so obtained by the adjusted Warrant Price.
(C) Recapitalization. For the purpose of the Warrants, the term "Common
Stock" shall also mean any other class of stock resulting from successive
changes or reclassification of Common Stock consisting solely of changes in par
value, or from par value to no par value, or from no par value to par value.
(D) Merger or Consolidation. In case of any capital reorganization,
reclassification of the Common Stock, consolidation of the Company with, or
merger of the Company with, or merger of the Company into, another corporation
(other than a consolidation or merger which does not result in any
reclassification or change of the outstanding Common Stock), or sale of the
properties and assets of the Company, as or substantially as, an entirety to any
other corporation, during the Exercise Period, the Warrant will thereupon become
exercisable only for the number of shares of stock or other securities, assets,
or cash to which a holder of the number of shares of Common Stock of the Company
purchasable (at the time of such reorganization, reclassification,
consolidation, merger, or sale) upon exercise of the Warrant would be entitled
to receive upon such reorganization, reclassification, consolidation, merger or
sale.
(E) No Adjustment in Certain Cases. No adjustment shall be made:
(i) upon the issuance of the Warrants and underlying shares of the
Company's Common Stock issued in connection with a private placement of the
Company's securities in June and July of 1996;
(ii) upon the issuance of shares of Common Stock and Warrants (including
shares of Common Stock issued upon exercise of those warrants) issued in
connection with the Public Offering;
(iii) upon the issuance or sale of shares of Common Stock issuable upon the
exercise of any stock options granted under any stock option plan of the
Company;
(iv) if the amount of said adjustment shall be less than five cents ($.05)
per share of Common Stock, provided, however, that in such case, any
adjustment that would otherwise be required then to be made shall be
carried forward and shall be made at the time of and together with the next
subsequent ad-
7
<PAGE>
justment which, together with any adjustment so carried forward, shall
amount to at least five cents ($.05) per share of Common Stock; and
(v) upon the issuance of any securities of the Company prior to or on the
date hereof.
(F) On the effective date of any new Warrant Price the number of shares as
to which any Warrant may be exercised shall be increased or decreased so that
the total sum payable to the Company on the exercise of such Warrant shall
remain constant.
(G) The form of Warrant need not be changed because of any change pursuant
to this Section, and Warrants issued after such change may state the same
Warrant Price and the same number of shares as is stated in the Warrants
initially issued pursuant to this Agreement. However, the Company may at any
time in its sole discretion (which shall be conclusive) make any change in the
form of Warrant that the Company may deem appropriate and that does not effect
the substance thereof; and any Warrant thereafter issued or countersigned,
whether in exchange or substitution for an outstanding Warrant or otherwise, may
be in the form as so changed.
Section 12. Fractional Interest. The Company shall not be required to issue
fractions of Common Stock on the exercise of Warrants or any cash or other
adjustment in respect of such fractions of Common Shares. If any fraction of a
Common Share would, except for the provisions of this Section 12, be issuable on
the exercise of any Warrant (or specified portions thereof), the Company shall
issue such number of shares of Common Stock to which the Warrant holder is
entitled, rounded up to the nearest number of whole shares.
Section 13. Notices to Warrantholders.
(A) Upon any adjustment of the Warrant Price and the number of shares
issuable on exercise of a Warrant, then and in each such case the Company shall
give written notice thereof to the Warrant Agent, which notice shall state the
Warrant Price resulting from such adjustment and the increase or decrease, if
any, in the number of shares purchasable at such price upon the exercise of a
Warrant, setting forth in reasonable detail the method of calculation and the
facts upon which such calculation is based.
(B) In case at any time:
(a) the Company shall pay any dividends payable in stock upon its
Common Stock or make any distribution (other than regular cash dividends) to the
holders of its Common Stock;
8
<PAGE>
(b) the Company shall offer for subscription pro rata to the holders
of its Common Stock any additional shares of stock of any class or other rights;
(c) there shall be any capital reorganization or reclassification of
the capital stock of the Company, or consolidation or merger of the Company (in
which the Company is not the surviving corporation) with, or sale of all or
substantially all of its assets to, another corporation; or
(d) there shall be a voluntary or involuntary dissolution,
liquidation, or winding up of the Company;
then, in any one or more such cases, the Company shall give written notice to
all Warrant holders of record not fewer than 10 days' prior to the date of which
the books of the Company shall close or a record shall be taken for (i) such
dividend, distribution, or subscription rights, or (ii) such reorganization,
reclassification, consolidation, merger, sale, dissolution, liquidation, or
winding up shall take place, as the case may be. Such notice shall also specify
the date as of which the holders of Common Stock of record shall participate in
such dividend, distribution, or subscription rights, or shall be entitled to
exchange their Common Stock for securities or other property deliverable upon
such reorganization, reclassification, consolidation, merger, sale, dissolution,
liquidation, or winding up, as the case may be. Failure to give or publish such
notice, or any defect therein, shall not affect the legality or validity of any
of the matters set forth in this Section 13 inclusive.
(C) The Company shall cause copies of all financial statements and reports,
proxy statements and other documents as it shall send to its stockholders to be
sent by first-class mail, postage prepaid, on the date of mailing to such
stockholders, to each registered holder of Warrants at his address appearing on
the Warrant register as of the record date for the determination of the
stockholders entitled to such documents.
Section 14. Disposition of Proceeds on Exercise of Warrants.
(A) The Warrant Agent shall forward promptly to the Company, with respect
to Warrants exercised, the funds which will be deposited in a special account in
a bank designated by the Company for the benefit of the Company, for the
purchase of Common Shares through the exercise of such Warrants.
(B) The Warrant Agent shall keep copies of this Agreement available for
inspection by holders of Warrants during normal business hours.
9
<PAGE>
Section 15. Merger or Consolidation or Change of Name of Warrant Agent.
Any corporation or company which may succeed to the business of the Warrant
Agent by any merger or consolidation or otherwise to which the Warrant Agent
shall be a party shall be the successor Warrant Agent hereunder without the
execution or filing of any paper or any further act on the part of any of the
parties hereto; provided that such corporation would be eligible for appointment
as a successor Warrant Agent under the provisions of Section 17 of this
Agreement. In case at the time such successor to the Warrant Agent shall succeed
to the agency created by this Agreement, any of the Warrants shall have been
countersigned but not delivered, any such successor to the Warrant Agent may
adopt the countersignature of the original Warrant Agent and deliver such
Warrants so countersigned; and in case at that time any of the Warrants shall
not have been countersigned, any successor to the Warrant Agent may countersign
such Warrants either in the name of the predecessor Warrant Agent or in the name
of the successor warrant agent; and in all such cases such Warrants shall have
the full force provided in the Warrants and in this Agreement.
In case at any time the name of the Warrant Agent shall be changed and at
such time any of the Warrants shall have been countersigned but not delivered,
the Warrant Agent may adopt the countersignature under its prior name and
deliver Warrants so countersigned, and in case at that time any of the Warrants
shall not have been countersigned, the Warrant Agent may countersign such
Warrants either in its prior name or in its changed name; and in all such cases
such Warrants shall have the full force provided in the Warrants and in this
Agreement.
Section 16. Duties of Warrant Agent. The Warrant Agent undertakes the
duties and obligations imposed by this Agreement upon the following terms and
conditions, by all of which the Company and the holders of Warrants, by their
acceptance thereof, shall be bound:
A. The statements of fact and recitals contained herein and in the Warrants
shall be taken as statements of the Company, and the Warrant Agent assumes no
responsibility for the correctness of any of the same except such as describe
the Warrant Agent or actions taken or to be taken by it. The Warrant Agent
assumes no responsibility with respect to the distribution of the Warrants
except as herein expressly provided.
B. The Warrant Agent shall not be responsible for any failure of the
Company to comply with any of the covenants contained in this Agreement or in
the Warrants to be complied with by the Company.
10
<PAGE>
C. The Warrant Agent may consult at any time with counsel satisfactory to
it (who may be counsel for the Company) and the Warrant Agent shall incur no
liability or responsibility to the Company or to any holder of any Warrant in
respect of any action taken, suffered or omitted by it hereunder in good faith
and in accordance with the opinion or the written advice of such counsel.
D. The Warrant Agent shall incur no liability or responsibility to the
Company or to any holder of any Warrant for any action taken in reliance on any
notice, resolution, waiver, consent, order, certificate, or other paper,
document or instrument reasonably believed by it to be genuine and to have been
signed, sent or presented by the proper party or parties.
E. The Company agrees to pay to the Warrant Agent reasonable compensation
for all services rendered by the Warrant Agent in the execution of this
Agreement, to reimburse the Warrant Agent for all expenses, taxes and
governmental charges and other charges of any kind and nature incurred by the
Warrant Agent in the execution of this Agreement and to indemnify the Warrant
Agent and save it harmless against any and all liabilities, including judgments,
costs and reasonable counsel fees, for anything done or omitted by the Warrant
Agent in the execution of this Agreement except as a result of the Warrant
Agent's negligence or bad faith.
F. The Warrant Agent shall be under no obligation to institute any action,
suit or legal proceeding or to take any other action likely to involve expense
unless the Company or one or more registered holders of Warrants shall furnish
the Warrant Agent with reasonable security and indemnity for any costs and
expenses which may be incurred, but this provision shall not affect the power of
the Warrant Agent to take such action as the Warrant Agent may consider proper,
whether with or without any such security or indemnity. All rights of action
under this Agreement or under any of the Warrants may be enforced by the Warrant
Agent without the possession of any of the Warrants or the production thereof at
any trial or other proceeding relative thereto, and any such action, suit or
proceeding instituted by the Warrant Agent shall be brought in its name as
Warrant Agent, and any recovery of judgment shall be for the ratable benefit of
the registered holders of the Warrants, as their respective rights or interests
may appear.
G. The Warrant Agent and any stockholder, director, officer, partner or
employee of the Warrant Agent may buy, sell or deal in any of the Warrants or
other securities of the Company or become pecuniarily interested in any
transaction in which the Company may be interested, or contract with or lend
money to or otherwise act as fully and freely as though it were not Warrant
Agent under this Agreement. Nothing herein shall preclude the
11
<PAGE>
Warrant Agent from acting in any other capacity for the Company or for any other
legal entity.
H. The Warrant Agent shall act hereunder solely as agent and not in a
ministerial capacity, and its duties shall be determined solely by the
provisions hereof. The Warrant Agent shall not be liable for anything which it
may do or refrain from doing in connection with this Agreement except for its
own negligence or bad faith.
I. The Warrant Agent may execute and exercise any of the rights or powers
hereby vested in it or perform any duty hereunder either itself or by or through
its attorneys, agents or employees, and the Warrant Agent shall not be
answerable or accountable for any act, default, neglect or misconduct of any
such attorneys, agents, or employees or for any loss to the Company resulting
from such neglect or misconduct, provided reasonable care has been exercised in
the selection and continued employment thereof.
J. Any request, direction, election, order or demand of the Company shall
be sufficiently evidenced by an instrument signed in the name of the Company by
its President or a Vice President or its Secretary or an Assistant Secretary or
its Treasurer or an Assistant Treasurer (unless other evidence in respect
thereof be herein specifically prescribed); and any resolution of the Board of
Directors of the Company may be evidenced to the Warrant Agent by a copy thereof
certified by the Secretary or an Assistant Secretary of the Company.
Section 17. Change of Warrant Agent. The Warrant Agent may resign and be
discharged from its duties under this Agreement by giving to the Company notice
in writing, and to the holders of the Warrants notice by mailing such notice to
holders at their addresses appearing on the Warrant register, of such
resignation, specifying a date when such resignation shall take effect. The
Warrant Agent may be removed by like notice to the Warrant Agent from the
Company and by like mailing of notice to the holders of the Warrants. If the
Warrant Agent shall resign or be removed or shall otherwise become incapable of
acting, the Company shall appoint a successor to the Warrant Agent. If the
Company shall fail to make such appointment within a period of 30 days after
such removal or after it has been notified in writing of such resignation or
incapacity by the resigning or incapacitated Warrant Agent or by the registered
holder of a Warrant (who shall, with such notice, submit his Warrant for
inspection by the Company), then the registered holder of any Warrant may apply
to any court of competent jurisdiction for the appointment of a successor to the
Warrant Agent. Any successor warrant agent, whether appointed by the Company or
by such court, shall be a bank, or trust company or active transfer agent, in
good standing, incorporated under the
12
<PAGE>
laws of a state of the United States of America. After appointment, the
successor warrant agent shall be vested with the same powers, rights, duties and
responsibilities as if it had been originally named as Warrant Agent without
further act or deed; but the former Warrant Agent shall deliver and transfer to
the successor warrant agent all cancelled Warrants, records and property at the
time held by it hereunder, and execute and deliver any further assurance,
conveyance, act or deed necessary for the purpose. Failure to file or mail any
notice provided by this Section, however, or any defect therein, shall not
affect the legality or validity of the resignation or removal of the Warrant
Agent or the appointment of the successor warrant agent, as the case may be.
Section 18. Identity of Transfer Agent. Forthwith upon the appointment of
any Transfer Agent for the Common Shares or of any subsequent transfer agent for
Common Shares or other shares of the Company's capital stock issuable upon
exercise of the rights of purchase represented by the Warrants, the Company will
file with the Warrant Agent a statement setting forth the name and address of
such Transfer Agent. The Warrant Agent hereby acknowledges that it is, at the
time of execution hereof, the Transfer Agent, and waives any statement required
herein with respect thereto.
Section 19. Notices. Any notice pursuant to this Agreement to be given or
made by the Warrant Agent or by the registered holder of any Warrant to or on
the Company shall be sufficiently given or made if sent by first-class mail,
postage prepaid, addressed (until another address is filed in writing by the
Company with the Warrant Agent) as follows:
Eagle Supply Group, Inc.
122 East 42nd Street, Suite 1116
New York, New York 10168
Attn: Douglas P. Fields, Chief Executive Officer
With a copy to:
Robert Perez, Esq.
120 Wall Street, 11th Floor
New York, New York 10005
Any notice pursuant to this Agreement to be given or made by the Company or
by the registered holder of any Warrant to or on the Warrant Agent shall be
sufficiently given or made if sent by first-class mail, postage prepaid,
addressed (until another address is filed in writing by the Warrant Agent with
the Company) as follows:
Continental Stock Transfer & Trust Company
2 Broadway
New York, New York 10004
Attn: Stephen G. Nelson
13
<PAGE>
Section 20. Supplements and Amendments. The Company and the Warrant Agent
may from time to time supplement or amend this Agreement without the approval of
any holders of Warrants in order to cure any ambiguity or to correct or
supplement any provision contained herein which may be defective or inconsistent
with any other provision herein, or to make any other provisions in regard to
matters or questions arising hereunder which the Company and the Warrant Agent
may deem necessary or desirable and which shall not be inconsistent with the
provisions of the Warrants and which shall not adversely affect the interests of
the holders of Warrants.
Section 21. Successors. All the covenants and provisions of this Agreement
by or for the benefit of the Company or the Warrant Agent shall bind and inure
to the benefit of their respective successors and assigns hereunder.
Section 22. New York Contract. This Agreement shall be deemed to be a
contract made under the laws of the State of New York and for all purposes shall
be construed in accordance with laws of said state.
Section 23. Benefits of This Agreement. Nothing in this Agreement shall be
construed to give to any person or corporation other than the Company, the
Warrant Agent and the registered holders of the Warrant any legal or equitable
right, remedy or claim under this Agreement; but this Agreement shall be for the
sole and exclusive benefit of the Company, the Warrant Agent and the registered
holders of the Warrants.
Section 24. Counterparts. This Agreement may be executed in any number of
counterparts and each such counterparts shall be considered an original.
Section 25. Effectiveness. This Agreement shall be deemed binding, and,
therefore, in effect, as of and subject to the effective date of the
Registration Statement for the Public Offering.
IN WITNESS WHEREOF, the parties hereto have caused this Agreement to be
duly executed as of the day and year first above written.
EAGLE SUPPLY GROUP, INC.
(Corporate Seal)
By:_______________________________
Douglas P. Fields,
Chief Executive Officer
14
<PAGE>
Attest:
________________________________
Frederick M. Friedman, Secretary
CONTINENTAL STOCK TRANSFER
& TRUST COMPANY
By:_______________________________
Steven G. Nelson, Chairman
15
<PAGE>
ADDENDUM
Warrant Agreement by and between
Eagle Supply Group, Inc. and
Continental Stock Transfer & Trust Company
(the "Agreement")
The terms set forth below, for the purposes of the Agreement to which this
Addendum is attached, shall have the meanings specified:
The term "Effective Date" shall mean the date(s) the Commission declares
effective the Company's registration statement under Commission File Number
333-9951 or any other registration statement required to be filed by the Company
pursuant to the Agreement.
The term "Transfer Agent" shall mean Continental Stock Transfer & Trust
Company.
The term "Warrant Price" shall mean the sum of money specified in Section
10 of the Agreement, as may be adjusted from time to time pursuant to Section 11
of the Agreement.
The term "Warrant Certificates" shall mean typed or printed renditions of
the Warrants, specifying the names of the holders thereof and the number of
shares of the Company's Common Stock purchasable thereunder.
<PAGE>
EXHIBIT 10.8
FORM OF
LEASE TO BE ENTERED INTO
WITH WHOLLY OWNED
SUBSIDIARY OF TDA
<PAGE>
LEASE
Between
39 ACRE CORP.
Landlord,
and
EAGLE SUPPLY, INC.
Tenant.
Dated as of _________________, 1996
<PAGE>
TABLE OF CONTENTS
SECTION 1. Term........................................................ -1-
SECTION 2. Fixed Rent.................................................. -1-
SECTION 3. Taxes....................................................... -3-
SECTION 4. Use......................................................... -4-
SECTION 5. Compliance with Laws........................................ -5-
SECTION 6. No Landlord Warranties...................................... -6-
SECTION 7. Assignment; Subletting...................................... -7-
7.1 Landlord's Consent Required................................. -7-
7.2 Tenant's Application (Assignment and Sublease).............. -7-
7.3 Recapture................................................... -7-
7.4 Collection/Effect of Transfer............................... -8-
7.5 Waiver...................................................... -8-
7.6 Implied Assignment.......................................... -9-
7.7 Assumption by Trustee In Bankruptcy For Tenant.............. -9-
7.8 Attorneys' Fee Related to Transfer.......................... -9-
7.9 Landlord's Right to Assign.................................. -9-
SECTION 8. Required Insurance.......................................... -9-
SECTION 9. Maintenance and Repairs..................................... -10-
SECTION 10. Damage; Use of Insurance Proceeds........................... -11-
SECTION 11. Alterations................................................. -12-
SECTION 12. Eminent Domain.............................................. -14-
SECTION 13. Right of Entry.............................................. -15-
SECTION 14. Subordination; Attornment; Estoppel Certificate............. -16-
SECTION 15. Installations; Tenant's Property............................ -17-
SECTION 16. Indemnification............................................. -18-
SECTION 17. No Liens; Adjacent Excavation............................... -19-
<PAGE>
SECTION 18. Surrender of Premises....................................... -21-
SECTION 19. Quiet Enjoyment............................................. -21-
SECTION 20. Written Notices............................................. -21-
SECTION 21. Real Estate Brokers......................................... -21-
SECTION 22. Defaults; Remedies.......................................... -22-
22.1 Events of Default........................................... -22-
22.3 Right of Landlord to Cure Tenant's Default.................. -24-
22.4 Right of Reentry............................................ -24-
22.5 Waivers..................................................... -25-
22.6 Jurisdiction................................................ -25-
SECTION 23. Memorandum of Lease......................................... -26-
SECTION 24. Miscellaneous............................................... -26-
SECTION 25. Right of First Refusal...................................... -27-
SECTION 26. Radon Gas................................................... -27-
Schedule "A" Description of the Premises................................. -29-
Schedule "B" Required Insurance.......................................... -30-
Schedule "C" Permitted Encumbrances...................................... -32-
<PAGE>
LEASE
LEASE, made as of ______________________, 1996 between 39 ACRE CORP., a New
York corporation, 122 East 42nd Street, New York, New York ("Landlord") and
EAGLE SUPPLY, INC., 1451 N. Channelside Drive, Tampa, Florida 33605, a Florida
corporation, ("Tenant").
W I T N E S S E T H:
WHEREAS, Landlord is the owner of the building located in the County of
________, City of __________________ and State of Florida having an address of
_____________________________, and more particularly described in Schedule "A"
(the "Premises"), which the parties acknowledge contains approximately
___________________ square feet; and
WHEREAS, in this Lease, unless and except as otherwise specifically
provided, any reference to the "Premises," means the entire Premises and/or any
portion or part thereof, together with all alterations, additions,
installations, and improvements thereto now or hereafter existing, and all
Installations (as defined below); and
WHEREAS, Landlord desires to lease to Tenant, and Tenant desires to hire
from Landlord, the Premises, upon the terms, covenants, conditions, and
provisions set forth below.
NOW, THEREFORE, in consideration of the rents and agreements set forth
herein, and intending to be legally bound hereby, Landlord and Tenant agree as
follows;
SECTION 1. Term. Upon the terms, covenants, conditions, and provisions
hereinafter set forth, Landlord hereby leases the Premises to Tenant, and Tenant
hereby rents the Premises from Landlord, for a term commencing the day and year
first above written (the "Commencement Date") and expiring on _________________
(or upon such earlier date as this Lease may otherwise expire in accordance with
the terms, covenants, conditions, and provisions hereinafter set forth referred
to herein as the "Term").
SECTION 2. Fixed Rent.
2.1 For the first five (5) years of the Term, Tenant shall pay fixed rent
("Fixed Rent") for the premises at the annual rate of
________________________________________________ Thousand ($_________________)
Dollars, payable in monthly installments of
_________________________________________________________ Thousand
($____________________) Dollars per month, payable on the first day of each
month, commencing on the day and year first above written and up to and
including ____________________________________________. For the second five (5)
years of the Term, which will commence on ____________, 2001, the Fixed Rent
shall be increased to an amount obtained by multiplying the Fixed Rent by a
fraction, the numerator of which fraction shall be the CPI (as hereinafter
defined) for the third month immediately preceding the Commencement Date and the
denominator of which shall be the CPI for the third month immediately preceding
the commencement date of the second five (5) years of the term.
<PAGE>
The Fixed Rent, as adjusted, shall be the per annum Fixed Rent for each year
during the second five (5) years of the Term and shall be payable each year in
equal monthly installments on the first day of each month.
As used herein, the term "CPI" means the Consumer Price Index, All Cities,
All Items, All Urban Consumers (1982-84 = 100) published by the Bureau of Labor
Statistics or other governmental agency then publishing the CPI (or if such CPI
is no longer published, the index most closely comparable to the CPI).
2.2 Tenant shall pay, as additional rent ("Additional Rent"), all sums of
money, costs, real estate tax escalations, Taxes, expenses or charges, interest,
or fees (including, but not limited to, attorneys' fees) of every kind or amount
whatsoever (other than Fixed Rent) which Tenant assumes or agrees to pay to
Landlord, or which otherwise become due and payable by Tenant under this Lease.
Landlord shall have the same rights and remedies for Tenant's failure to pay any
Additional Rent as for Tenant's failure to pay Fixed Rent.
2.3 Tenant shall pay Fixed Rent and Additional Rent to Landlord at 122 East
42nd Street, New York, New York 10168 (or at such other address as Landlord may
designate by Written Notice from time to time), in lawful money of the United
States of America, promptly when due and payable, without notice or demand and
without any setoff or counterclaim whatsoever (except and unless as otherwise
specifically provided in this Lease).
2.4 Landlord and Tenant intend and agree that Landlord shall receive Fixed
Rent and Additional Rent free of all charges, expenses, damages and deductions
of any and every kind whatsoever (and that Tenant shall pay and bear each and
every charge, expense, and/or damage whatsoever) which, except for execution and
delivery of this Lease, would (or will) be charged against the Premises and
payable by Landlord.
2.5 If Tenant fails to make any payment whatsoever required by this Lease
(other than Fixed Rent), or if Tenant otherwise defaults in the performance of
any term, covenant, condition or provision of this Lease, at Landlord's sole
option (but without obligation to do so) Landlord may:
(a) make any such payment; and/or
(b) take such action as Landlord deems necessary to perform and
fulfill such term, covenant, condition or provision.
Tenant shall reimburse Landlord, upon Landlord's demand by Written Notice, for
Landlord's payment and/or for all amounts paid or incurred by Landlord to
perform and fulfill such term, covenant, condition, or provision (including, but
not limited to, attorneys' fees), together with interest thereon at the Lease
Interest Rate from the date of Landlord's demand.
-2-
<PAGE>
2.6 In this Lease, Fixed Rent and Additional Rent are sometimes referred to
collectively as "Rents".
2.7 In addition to the Fixed Rent and Additional Rent payable under this
Lease, Tenant shall pay to Landlord, with each installment of Fixed Rent and
Additional Rent, as set forth herein, all sales or use taxes as may from time to
time be provided by law.
SECTION 3. Taxes.
3.1 In this Lease "Taxes" shall mean any and all of the following imposed
by any Government Entity upon or with respect to the Premises and/or the use,
occupancy, possession, operation and/or maintenance of the Premises:
(i) any personal property taxes;
(ii) all occupancy and rent taxes;
(iii) all real property taxes and assessments;
(iv) all water, water meter, sewer rents, rates and charges, and
all costs and charges (if any) for installing, repairing, or
replacing water meters;
(v) all excises, levies, licenses and permit fees;
(vi) all service charges, it any, with respect to police and fire
protection, security, or street maintenance and lighting;
(vii) all fees and charges for construction, maintenance,
occupancy or use of any vault, passageway or space in, on or
over or under the street or sidewalks adjacent to the
Premises, or for the construction, maintenance or use of any
part of the building covered by this Lease within the limits
of any street;
(viii) all other levies, fees, rents, assessments, taxes and
charges, general or special, ordinary or extraordinary,
foreseen or unforeseen, of any kind or nature whatsoever;
and
(ix) all fines, penalties and similar governmental charges, if
any, applicable to the foregoing, and all interest or costs
with respect thereto.
-3-
<PAGE>
(However, "Taxes" shall not include franchise, corporation, inheritance,
succession or income taxes of Landlord unless the same are levied as substitutes
for taxes described in (1) through (ix) above.)
3.2 Any Tax covering any fiscal period of the taxing authority which
includes a period after the expiration of the Term shall be apportioned between
Landlord and Tenant.
3.3 Tenant shall deliver to Landlord receipts of the appropriate taxing
authority evidencing payment within thirty (30) days after a Tax is due and
payable.
3.4 To the extent permitted by Laws, Tenant may contest, at Tenant's
expense and by appropriate proceedings, the amount or validity of any Tax, in
whole or in part (and to the extent permitted by Laws, Tenant may defer payment
of any such Tax during such contest); provided, however, that:
(a) Tenant shall first deliver to Landlord a surety company bond in
form and substance satisfactory to Landlord in an amount
equivalent to one hundred fifty per cent (150%) of the contested
Tax, which bond shall provide for payment of the contested Tax in
full (together with all costs, penalties and interest) within ten
(10) days after a final determination if and to the extent that
Tenant's contest is unsuccessful;
(b) Tenant shall pay all Taxes before the time when the Premises
might be forfeited by reason of non-payment;
(c) Tenant shall conduct the contest diligently; and
(d) Tenant shall advise Landlord regularly as to the status of the
contest.
3.5 A certificate or report of a title insurance company licensed to do
business in Florida or the certificate or report of the pertinent Governmental
Entity, shall be prima facie
(a) as to non-payment, that a Tax was duly assessed and became a lien
against the Premises and was unpaid as of the date of such
certificate or report; or
(b) as to payment, that a Tax was duly paid as of the date of such
certificate or report.
SECTION 4. Use.
4.1 Tenant may use and occupy the Premises for any lawful purpose permitted
by the Certificate of Occupancy.
-4-
<PAGE>
4.2 Tenant shall not:
(a) disfigure or deface the Premises or suffer the same to be done;
(b) obstruct or permit the obstruction of the street or sidewalk
adjacent to the Premises;
(c) do anything or suffer anything to be done, upon the Premises
which will be liable to cause structural injury to the Premises;
(d) permit the accumulation of waste or refuse matter in or about the
Premises;
(e) use the Premises (or suffer the same to be used) for any purpose
deemed extra-hazardous on account of fire risk; and/or
(f) whether with respect to an Alteration or otherwise, undertake or
permit any work or construction of any kind which would reduce
the value or character of the Premises.
SECTION 5. Compliance with Laws.
5.1 As used in this Lease:
(a) "Law" means each and every law, rule, regulation, order,
ordinance, statute, requirement, code, or executive mandate of
any kind whatsoever, present or future, used by any Government
Entity applicable to or affecting the Premises, and/or the use,
occupancy, possession, operation, and/or maintenance of the
Premises; and
(b) "Government Entity" means the United States, the State of
Florida, City ______________________, the County of
___________________________, and any and every other agency,
department, commission, rule making body, bureau, instrumentality
and/or political subdivision of government of any kind
whatsoever, now existing or hereafter created, now or hereafter
having jurisdiction over the premises, and/or the use, occupancy,
possession, operation and/or maintenance of the Premises.
5.2 At Tenant's expense, Tenant shall comply with all Laws. The parties
intend and agree that Tenant shall bear all costs and expenses of complying with
Laws and (to the extent permitted by Laws) that Landlord shall have no
obligation whatsoever to comply with Laws.
-5-
<PAGE>
5.3 To the extent permitted by Laws, Tenant may contest, at Tenant's
expense and by appropriate proceedings, the validity or affect of any Law (and
Tenant may defer compliance during such contest); provided, however, that:
(a) Tenant shall first delivery to Landlord a surety company bond in
form and substance satisfactory to Landlord in an amount
equivalent to one hundred fifty per cent (150%) of the cost of
full compliance with the contested Law, which bond shall provide
for the payment of all costs of compliance with such Law and
shall indemnify Landlord against all loss, cost, penalties and
interest (including, but not limited to, attorneys' fees) which
Landlord may suffer by reason of failure to comply (or delay in
complying) with such Law;
(b) Tenant shall conduct the contest diligently; and
(c) Tenant shall advise Landlord regularly as to the status of the
contest.
SECTION 6. No Landlord Warranties.
6.1 Tenant has inspected the Premises, knows the condition thereof, and
agrees to accept the same "AS IS" on the Commencement Date. Tenant acknowledges
that Landlord has made no representations or warranties whatsoever with respect
to the Premises (unless and except as expressly set forth in this Lease).
6.2 Tenant accepts and assumes full and sole responsibility for the
condition, operation, maintenance, and management of the Premises during the
Term. Tenant agrees that:
(a) Landlord shall have no obligation whatsoever to improve, repair,
alter, decorate, or rebuild in preparation for Tenant's use and
occupancy or at any time during the Term;
(b) Landlord shall have no responsibility whatsoever for any defect
in, or change in the condition of, the Premises, including but
not limited to structural defects and repairs, which shall also
be the sole responsibility of Tenant; and
(c) Landlord shall have no responsibility to provide or furnish any
services or utilities or any kind whatsoever to or for Tenant or
the Premises.
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SECTION 7. Assignment; Subletting.
7.1 Landlord's Consent Required
Tenant shall not voluntarily or by operation of law assign, license,
franchise, transfer, mortgage, hypothecate, or otherwise encumber (collectively
"Transfer") all or any part of this Lease or any interest therein, and shall not
sublet, franchise, change ownership or license (also included as a "Transfer")
all or any part of the Premises, without first obtaining the prior written
consent of Landlord. Any attempted Transfer without such consent being first had
and obtained shall be wholly void and shall confer no rights upon any third
parties. Without in any way limiting Landlord's right to refuse to give such
consent for any other reason or reasons, Landlord hereby reserves the right to
refuse to give such consent if in Landlord's sole discretion (i) the quality of
the business operation conducted on the Premises is or may in any way be
adversely affected during the Term of the Lease by such proposed Transfer, (ii)
the financial net worth of a proposed new tenant is less than that of Tenant, or
(iii) the proposed new tenant is a governmental agency or instrumentality
thereof. Furthermore, Landlord hereby reserves the right to condition Landlord's
consent to any Transfer upon Landlord's receipt from Tenant of a written
agreement, in form and substance acceptable to Landlord, pursuant to which
Tenant shall pay over to Landlord all rent or other consideration received by
Tenant from any such subtenant or assignee, either initially or over the term of
the assignment or sublease, in excess of the Rents called for hereunder, or, in
case of the sublease of a portion of the Premises, in excess of such rent fairly
allocable to such portion, after appropriate adjustments to assure that all
other payments called for hereunder are taken into account (the "Transfer
Premium"). Consent by Landlord to any Transfer of the Premises or any interest
therein shall not be a waiver of Landlord's rights under this Section 7.1 as to
any subsequent Transfer.
7.2 Tenant's Application (Assignment and Sublease)
In the event that Tenant desires at any time to Transfer the Premises or
any portion thereof, Tenant shall submit to Landlord at least sixty (60) days
prior to the proposed effective date of the Transfer ("Proposed Effective
Date"), in writing: (a) a request for permission to Transfer, setting forth the
Proposed Effective Date, which shall be no less than sixty (60) nor more than
ninety (90) days after the sending of such notice; (b) the name of the proposed
subtenant or assignee or other party; (c) the nature of the business to be
carried in the Premises after the Transfer: (d) the terms and provisions of the
proposed Transfer; (e) a copy of all existing executed and/or proposed
documentation pertaining to the Transfer; and (f) current financial statements
(audited, if available) of Tenant and the proposed subtenant or assignee; and
such additional information that Landlord may reasonably request in order to
make a reasoned judgment.
7.3 Recapture
If Tenant proposes to assign this Lease, Landlord may, at its option,
exercisable upon written notice to Tenant within thirty (30) days after receipt
of the notice from Tenant set forth
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in paragraph 7.2 above, elect to recapture the Premises and terminate this
Lease. If Tenant proposes to sublease all or part of the Premises, Landlord may,
at its option exercisable upon written notice to Tenant, within thirty (30) days
after receipt of the notice from Tenant set forth in paragraph 7.2 above, elect
to recapture such portion of the Premises as Tenant proposes to sublease and,
upon such election by Landlord, this Lease shall terminate as to the portion of
the Premises recaptured. In the event a portion only of the Premises is
recaptured, the Fixed Rent under this Lease shall be proportionately reduced. If
Landlord does not elect to recapture pursuant to this paragraph 7.3, Tenant may
thereafter enter into a valid assignment or sublease with respect to the
Premises provided Landlord, pursuant to this paragraph 7, consents thereto, and
provided further that (a) such assignment or sublease is executed within ninety
(90) days after notification to Landlord of such proposal, and (b) the rental
therefrom is not more than that stated in such notification.
7.4 Collection/Effect of Transfer
If this Lease be assigned, or if the Premises or any part thereof be sublet
or occupied by anybody other than Tenant, Landlord may collect Rents from the
assignee, subtenant or occupant and apply the net amount collected to the Rents
herein reserved and retain any excess Rents so collected, but no such
assignment, subletting, occupancy or collection shall be deemed a waiver of
Tenant's covenant set forth in the first sentence of paragraph 7.1 above, nor
shall such assignment, subletting, occupancy or collection be deemed an
acceptance by Landlord of the assignee, subtenant or occupant as tenant, or a
release of Tenant or any guarantor from the further performance by Tenant of
covenants on the part of Tenant herein contained, or affect the continuing
primary liability of Tenant hereunder (which, following any assignment, shall be
joint and several with the assignee). If Landlord consents to a Transfer, (i)
the terms and conditions of this Lease shall in no way be deemed to have been
waived or modified, (ii) such consent shall not be deemed consent to any further
Transfer by either Tenant or a transferee, (iii) Tenant shall deliver to
Landlord, promptly after execution, an original executed copy of all
documentation pertaining to the Transfer in form reasonably acceptable to
Landlord, and (iv) Tenant shall furnish upon Landlord's request a complete
statement, certified by an independent certified public accountant, or Tenant's
chief financial officer, setting forth in detail the computation of any Transfer
Premium Tenant has derived and shall derive from such Transfer. Landlord or its
authorized representatives shall have the right at all reasonable times to audit
the books, records and papers of Tenant relating to any Transfer, and shall have
the right to make copies thereof. If the Transfer Premium respecting any
Transfer shall be found understated, Tenant shall within thirty (30) days after
demand, pay the deficiency, and if understated by more than two percent (2%),
Tenant shall pay Landlord's costs of such audit.
7.5 Waiver
Notwithstanding any assignment or sublease, or any indulgences, waivers or
extensions of time granted by Landlord to assignee or sublessee, or any failure
by Landlord to take action against any assignee or sublessee, Tenant waives
notice of any default of any assignee or sublessee and agrees that Landlord may,
at Landlord's option, proceed against Tenant without
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having taken action against or joined such assignee or sublessee, except that
Tenant shall have the benefit of any indulgences, waivers and extensions of time
granted to any such assignee or sublessee.
7.6 Implied Assignment
If Tenant hereunder is a corporation, an unincorporated association or a
partnership, the transfer, merger, assignment or hypothecation of any stock or
interest in such corporation, association or partnership in the aggregate in
excess of twenty-five percent (25%) shall be deemed an assignment within the
meaning and provisions of this paragraph 7; provided, however, that: (a) an
assignment of any such stock or interest with respect to a corporation or
partnership whose shares or partnership interests are publicly traded, (b) an
assignment or sublease to any corporation which controls, is controlled by or is
under common control with Tenant, or (c) an assignment or sublease by a
shareholder or member to his spouse or children, are all excepted from the
foregoing provision.
7.7 Assumption by Trustee In Bankruptcy For Tenant
In the event that Tenant files any type of petition in bankruptcy or has
such petition filed against it, and Landlord cannot elect to terminate this
Lease pursuant to law, and in the event that the trustee or receiver appointed
by the bankruptcy court assumes or adopts this Lease and fails or refuses to
give Landlord adequate assurance of compliance with this Lease pursuant to law,
then Landlord shall have the right to terminate this Lease within thirty (30)
days after gaining knowledge of such failure to give such adequate assurances,
or within thirty (30) days after receipt of written notice from said trustee or
receiver of refusal to give such adequate assurances, whichever is earlier.
7.8 Attorneys' Fee Related to Transfer
Landlord may make reasonable charges to Tenant for any reasonable
attorneys' fees or expenses incident to any documentation relating to any
proposed Transfer by Tenant.
7.9 Landlord's Right to Assign
Landlord's right to assign its interest under this Lease shall in all
events remain unqualified and unrestricted.
SECTION 8. Required Insurance.
8.1 In this Lease, "Required Insurance" means the insurance coverages
specified in Schedule "B". At Tenant's expense, Tenant shall secure and keep in
force all Required Insurance at all times during the Term of this Lease.
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8.2 All Required Insurance shall be evidenced by valid and enforceable
policies issued by companies licensed to do business in the State of Florida.
(Each policy providing Required Insurance is referred to in this Lease as an
"Insurance Policy".) Tenant shall deliver copies of all Insurance Policies (with
evidence of full payment) to Landlord upon the execution and delivery of this
Lease. Thereafter Tenant shall deliver copies of all renewal or replacement
Insurance Policies (with evidence of full payment) to Landlord not more than
thirty (30) days after the expiration date of the applicable Required Policy.
Each copy of each Insurance Policy shall be accompanied by a Certificate of
Insurance naming the Landlord as an additional insured and, in addition, shall
provide that the same shall not be cancelled except after thirty (30) days prior
Written Notice to Landlord (whether or not such provision is obtainable only by
payment of additional premium). No Insurance Policy shall contain any
endorsement permitting cancellation for default in payment of a loan financing
the premium. Each Insurance Policy shall include a standard mortgagee clause
without contribution pursuant to which all loss or losses are payable to any
mortgagee (or mortgagees) designated by Landlord from time to time.
8.3 Tenant shall not secure separate insurance concurrent in form or
contributing in the event of loss with any Insurance Policy required under this
Lease unless Landlord is included as a named insured with loss payable to
Landlord. Tenant shall give Landlord Written Notice promptly upon securing any
such separate insurance, specify the insurer and full particulars of applicable
policies.
8.4 All policies of insurance carried by Landlord and Tenant shall include,
if available without additional premium, a waiver by the insurer of all right of
subrogation against the Landlord or Tenant in connection with any loss or damage
thereby insured against. Neither party (nor its agents, employees or guests)
shall be liable to the other for loss or damage caused by any risk covered by
such insurance, to the extent that policies are obtainable with waiver of
subrogation. If insurance policies with such waivers are available only at extra
premium, the insured party will give Written Notice to the other party, who mail
pay the extra premium for such waiver within thirty (30) days after giving of
such Written Notice and the insured party will then secure the waiver of
subrogation. If the release of either Landlord or Tenant in this Section
contravenes any law respecting exculpatory agreements, the party purportedly
released hereunder shall not be released, but such party's liability shall be
secondary to that of the other party's insurer.
SECTION 9. Maintenance and Repairs.
9.1 At Tenant's sole cost and expense:
(a) Tenant shall keep the Premises clean and safe;
(b) Tenant shall maintain the Premises in good condition and repair
(reasonable wear and tear excepted); and
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(c) In furtherance (and not in limitation of (a) and (b) above),
Tenant shall maintain the class and character of the Premises as
existing on the date hereof.
9.2 At Tenant's sole cost and expense, Tenant shall make all repairs,
renewals, replacements, additions, improvements and Restorations of every kind
or nature whatsoever (structural or otherwise and whether or not required after
damage or otherwise) necessary to keep and maintain the Premises in the
condition described in Section 9.1.
9.3 At Tenant's sole cost and expense, Tenant shall keep clear and free
from dirt, snow, ice, rubbish, obstructions and encumbrances, all sidewalks,
sidewalk railings, gutters and alleys adjoining the Premises, and any vaults
used by Tenant.
9.4 All work by Tenant shall be of good quality and shall comply in all
respects with the requirements of Section 11.
SECTION 10. Damage; Use of Insurance Proceeds.
10.1 In this Lease:
(a) "Damage" means any and all damage or destruction to or of the
Premises resulting from fire, casualty, or any other cause
whatsoever; and
(b) "Restoration" (or "to Restore") means and includes any and all
repairs, restorations, rebuilding, reconstruction, alterations,
improvements or replacements of every kind.
10.2 Tenant shall notify Landlord in writing of any Damage as promptly as
reasonably possible after Tenant receives notice of the same.
10.3 In case of Damage, and regardless of the amount thereof or the
estimated cost of Restoration, at Tenant's sole cost and expense and whether or
not insurance proceeds (if any) are sufficient for the purpose, Tenant shall
promptly undertake and complete Restoration of the Premises at least to the
extent of the value and as nearly as possible to the condition and character
described in, and required under, Section 9.1. If Tenant fails to Restore with
reasonable diligence, or, having commenced, fails to complete Restoration with
reasonable diligence in accordance with this Lease, Landlord may (but shall not
be obligated to) undertake and/or complete Restoration at Tenant's expense; and
all costs and expenses of any kind whatsoever expanded by Landlord for such
Restoration shall be Additional Rent payable by Tenant upon demand (by Written
Notice), with interest at the Lease Interest Rate from the date of Landlord's
demand.
10.4 If any sum of money becomes payable under any Insurance Policy by
reason of Damage, Landlord shall permit Tenant (subject to the requirements of
any mortgage then a lien
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on the Premises) to use the available insurance proceeds (after deducting all
expenses of collecting the same) for Restoration upon the following conditions.
(a) Tenant shall not be in default then or thereafter in payment of
any Rents whatsoever due and payable under this Lease; and
(b) Tenant shall comply with each and every requirement of Section
13, and all other applicable provisions of this Lease in
connection with the Restoration and all work relating thereto.
SECTION 11. Alterations.
11.1 In this Lease, "Alterations" shall mean:
(a) any demolition or replacement of the Promises; and/or
(b) any material alteration, construction, improvement, or
modification of or to the Premises; and/or
(c) any addition to the Premises; and/or
(d) any work affecting the structure or exterior of the Premises.
In (b) above, "material" shall mean reasonably estimated to require an
expenditure in excess of Twenty-Five Thousand Dollars ($25,000.00).
11.2 Tenant shall not undertake any Alteration, whether voluntarily or in
connection with a Restoration required by this Lease, unless Tenant complies
with all of the following requirements:
(a) Tenant shall not commence any Alteration without the prior
written consent of Landlord;
(b) Tenant shall cause all necessary designs, plans and
specifications for a proposed Alteration to be prepared at
Tenant's expense by a licensed architect (or engineer if
appropriate) and shall submit the same to Landlord for Landlord's
written approval; provided however, that Landlord's approval (if
given) shall not imply that the Alteration is properly designed
or complies with Laws,
(c) Tenant shall procure or cause to be procured all permits,
approvals, consents, licenses and filings of any kind required by
Laws;
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(d) Tenant shall obtain (and pay any additional costs for) the
consent of any insurer to such Alteration if required to keep any
Insurance Policy in full force and effect;
(e) Tenant shall undertake, prosecute, and complete all work in
connection with the Alteration continuously and expeditiously and
in a good and workmanlike manner; and Tenant shall incorporate in
the Alteration only new materials (and equipment, if applicable)
of the best quality specified in the plans and specifications as
approved by Landlord;
(f) Tenant agrees that the Alteration:
(i) will be of good quality and free from faults and defects,
latent or otherwise;
(ii) will be free and clear of all liens and encumbrances of any
kind whatsoever;
(iii) will conform to the plans and specifications as approved by
Landlord;
(iv) will be fit for the intended use and purpose; and
(v) will be of such character as not to reduce the value of the
Premises below its value immediately before commencement of
the Alteration.
11.3 If the estimated cost of any Alteration exceeds Twenty-Five Thousand
Dollars ($25,000.00), before commencing any work with respect to such
Alteration, Tenant shall, at Tenant's sole cost and expense:
(a) deliver to Landlord the following, each in form satisfactory to
Landlord and each issued by a surety company previously approved
in writing by Landlord:
(i) a payment bond guaranteeing to Landlord and/or Landlord's
assigns Tenant's timely payment for all labor, services,
materials and equipment furnished in connection with the
Alteration of any portion thereof (and to all persons or
firms furnishing the same);
(ii) contractor's comprehensive general public liability
insurance in an amount not less than Five Million Dollars
($5,000,000) for bodily injury or death and not less than
Five Million Dollars
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($5,000,000) for property damage, which shall cover
operations-premises liability, contractor's protective
liability on the operations of all subcontractors, completed
operations, explosions, collapse, underground damage,
contractual liability, and automobile liability (owned and
not owned);
(iii) if the Alteration will involve foundation, excavation, or
demolition work, an endorsement that such operations are
covered under the insurance described in (ii) above and that
the "XCU Exclusions" have been deleted;
(iv) owner's protective insurance written under a comprehensive
general liability policy form (separate from the
contractor's comprehensive general liability policy required
by (ii) above), naming Landlord and any mortgagee(s)
designated by Written Notice from Landlord to Tenant as
their respective interests may appear, in an amount not less
than Five Million Dollars ($5,000,000) for bodily injury and
death and not less that Five Million Dollars ($5,000,000)
for property damage;
(v) builder's risk insurance on an "all risk" basis including
(but not limited to) flood, earthquake, collapse and theft,
written on a completed value (non-reporting basis) naming
Landlord and any mortgagee(s) designated by Written Notice
from Landlord to Tenant as their respective interests may
appear (and if any off-site storage location is used,
covering, for actual replacement value, all materials and
equipment on or about any such off-site storage location
intended for use with respect to the Premises); and
(vi) such other insurance in such amounts as Landlord may
reasonably require from time to time, provided that such
insurance shall be customarily required by prudent owners of
similar buildings for similar construction projects.
SECTION 12. Eminent Domain.
If the whole or any substantial part of the Premises, including the land or
parking area serving the Premises, shall be taken by any legally constituted
authority for public quasi-public use, eminent domain or by private purchase in
lieu thereof, Landlord shall have the right to terminate this Lease as of the
date possession is required to be surrendered to the authority. If more than
twenty-five percent (25%) of the rentable square feet of the Premises is taken
for a period in excess of one hundred eighty (180) days, and provided the
balance of the Premises remaining cannot be effectively utilized by Tenant for
the purposes that Tenant is currently using
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the Premises (it being understood that a reduction of the available square
footage does not in and of itself operate to terminate the Lease unless it
renders the Premises untenantable by Tenant), Tenant shall have the option to
terminate this Lease effective as of the date possession is required to be
surrendered to the authority. If this Lease is terminated pursuant to the terms
of this paragraph 12, all Fixed Rent and Additional Rent shall be prorated to
the date Tenant gives up possession of the Premises. In the event the Lease is
not terminated pursuant to the terms of this paragraph 12, then Tenant shall be
responsible for Fixed Rent and Additional Rent to the date of such taking or
purchase; after which date Fixed Rent shall be reduced proportionately as the
usable floor area of the remaining Premises compares to the usable floor area of
the Premises before such taking or purchase. Landlord shall be entitled to the
entire award from the condemning authority for each and every interest of
Landlord in this Lease and the Premises. However, Tenant shall have the right to
seek an award from the condemning authority effecting such condemnation or
purchase for the value of alterations made to the Premises by Tenant, moving
expenses and other damages suffered by Tenant as a result of any such
condemnation or transaction in lieu of condemnation, provided that Landlord's
interests in the condemnation award are not thereby diminished.
SECTION 13. Right of Entry.
13.1 Tenant authorizes Landlord and/or Landlord's authorized representative
or agent to enter the Premises at all times during usual business hours on
reasonable notice but at any time in case of emergency (and by force if
necessary in such event):
(a) to inspect the Premises; and/or
(b) (if Landlord so desires, but without obligation to do so) to
perform any maintenance or to make any repair to the Premises
required under Section 9 which Tenant has failed to perform or
make (and Landlord may keep and store all necessary materials,
tools, supplies and equipment on the Premises during and in
connection with such maintenance or repairs).
13.2 Landlord shall not be liable (and Tenant shall not be entitled to any
abatement or adjustment of Fixed Rent or Additional Rent) for inconvenience,
annoyance, disturbance, loss of business or other damage of any kind whatsoever
to Tenant by reason of Landlord's entry on, or work in, the Premises pursuant to
Section 13.1 (or of bringing or storing materials, tools, supplies and equipment
into, on, or through the Promises during or in connection with the same).
However, Landlord shall repair any damage to property caused by willful acts or
negligence of Landlord, or Landlord's employees or contractors.
13.3 Tenant agrees to permit Landlord and/or any authorized representative
or agent of Landlord to enter the Premises at all reasonable times during usual
business hours on reasonable notice to exhibit the Premises in connection with:
(a) any prospective sale of the Building;
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(b) any prospective securing, refinancing, or assignment of any
mortgage and/or
(c) during the final twelve (12) months of the Term, any prospective
lessee of the Premises.
13.4 If, during the last month of the Term, Tenant shall have removed all
of Tenant's Property therefrom, Landlord may (at Landlord's option but without
any liability to do so) immediately enter and alter, renovate and redecorate the
Premises, without abatement or adjustment of Fixed Rent or Additional Rent or
incurring liability to Tenant for any compensation; and such acts shall have no
affect upon this Lease.
SECTION 14. Subordination; Attornment; Estoppel Certificate.
14.1 This Lease and Tenant's estate hereunder are and shall be subject and
Subordinate in every respect to all Permitted Encumbrances specified in Schedule
"C". This subordination shall be self-operative; and no further instrument of
subordination shall be required by any party to whom (or to whose interest) this
Lease and Tenant's estate are subordinate. In furtherance (and not in
limitation) of the foregoing, Tenant shall execute and deliver promptly any
certificate or instrument evidencing such subordination which Landlord may
request.
14.2 Upon request of any present or future fee owner, mortgagee, or ground
lessor succeeding to the rights of Landlord hereunder (any such person, a "New
Landlord"), whether through conveyance pursuant to sale, possession, foreclosure
action, expiration or any earlier termination of any ground lease, or otherwise,
Tenant shall attorn to and recognize New Landlord as "Landlord" under this Lease
(as the same may then have been amended or modified); and Tenant shall promptly
execute and deliver any instrument which New Landlord may reasonably request to
evidence such attornment. Upon such attornment, this Lease (as the same may then
have been amended or modified) shall continue in full force and effect as, or as
it were, a direct lease between New Landlord and Tenant; except, however, that
Now Landlord shall not:
(a) be liable for any previous act or omission of Landlord under this
Lease, or any claim which shall have previously accrued to Tenant
against Landlord; or
(b) be bound by any prepayment to Landlord of more than one month's
Fixed Rent, unless such prepayment shall have been expressly
approved in writing by New Landlord.
14.3 From time to time, upon Landlord's request, Tenant shall execute,
acknowledge and deliver to Landlord a written statement (each such, an "Estoppel
Certificate") certifying that, except as specifically disclosed in such Estoppel
Certificate and as of the date thereof:
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(a) there are no agreements other than the Lease (and no
modifications of the Lease) in effect between Tenant and Landlord
(or any other party) with respect to the Premises;
(b) the Lease is valid and in full force and effect and Tenant has no
setoffs. Claims for defenses of any kind whatsoever to
enforcement of the Lease;
(c) Tenant has no claim, demand, cause of action or right to
institute any legal proceeding against Landlord arising out of or
by virtue of the Lease or by reason of Tenant's occupancy and use
of the Premises;
(d) Landlord is not in default in the performance of any of
Landlord's obligations (if any) under the Lease; and Tenant has
not given any notice of default to Landlord.
In each Estoppel Certificate Tenant shall certify, also, the amount of annual
Fixed Rent then payable under the Lease, the amount (and elements) of Additional
Rent then payable, and the dates to which Tenant has paid the same. Tenant
acknowledges and agrees that a prospective purchaser or mortgagee of Landlord's
interest in this Lease or the Premises (or the assignee of any such mortgagee)
may rely upon Tenant's Estoppel Certificate.
SECTION 15. Installations; Tenant's Property.
15.1 In this Lease the following terms shall have the following meanings:
(a) "Installations" means all fixtures, machinery and equipment of
every kind whatsoever installed or incorporated in or upon the
Premises, and all alterations, modifications, or improvements of
every kind whatsoever in or upon the Premises other than Tenant's
Property. "Installations" shall include (but not limited to)
machinery; equipment; engines; boilers; elevators; escalators;
heating; ventilating and air conditioning equipment; ducts;
pipes; conduits wiring, and fittings; plumbing equipment and
fixtures; window fixtures; and sprinkler equipment.
(b) "Tenant's Property" means all furniture, movable equipment,
computers, business trade and equipment and fixtures, office
machinery, and other articles of personal property installed or
located in the Premises by Tenant which can be removed without
permanent damage to the Premises.
15.2 All Installations installed by Tenant in or upon the Premises (whether
at Tenant's expense or otherwise) shall become, upon installation, part of the
Premises and Landlord's property and shall be surrendered to Landlord at the end
of the Term or other expiration of this Lease. However, by Written Notice to
Tenant not less than thirty (30) days prior to the end of the Term (or within
thirty (30) days after any other termination of this Lease) Landlord may
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require Tenant to remove any Installations installed by Tenant without
Landlord's prior written consent.
15.3 Prior to the end of the Term (or other expiration of this Lease), at
Tenant's sole cost and expense, Tenant shall;
(a) remove all of Tenant's Property from the Premises;
(b) remove from the Premises all Installations designated by Landlord
for removal pursuant to 15.2; and
(c) repair all damage to the Premises caused by any such removal.
15.4 All Installations and/or Tenant's Property which this Section requires
Tenant to remove from the Premises shall be deemed abandoned property if not
removed as and when required under this Lease (hereinafter "Abandoned
Property"). At Landlord's election, Landlord may retain as Landlord's property
all (or any part) of any Abandoned Property; and/or, without liability of any
kind whatsoever to Tenant, Landlord may remove, sell, destroy or otherwise
dispose of all (or any part of) Abandoned Property. Tenant shall reimburse
Landlord, upon demand, for all costs incurred by Landlord to remove Abandoned
Property from the Premises and/or to repair any damage to the Premises caused by
or related to removal of Abandoned Property, with interest at the Lease Interest
Rate from the date of Landlord's demand.
SECTION 16. Indemnification.
16.1 In this Lease "Landlord's Affiliates" means:
(i) any corporation controlling Landlord and any parent
corporation controlling the same (whether directly or
indirectly);
(ii) any corporation controlled by Landlord and any corporation
controlled by the same (whether directly or indirectly);
(iii) any person, firm, or corporation which acquires
substantially all of the assets or capital stock of Landlord
or any corporation into which Landlord may be merged or with
which Landlord may be consolidated; and
(iv) all shareholders, directors, officers, employees, and agents
of Landlord and of every corporation referred to in (i),
(ii) and (iii) above.
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For purposes of this Section, "control" means the ownership of more than twenty
per cent (20%) of the common stock of a corporation or of the beneficial
ownership of an unincorporated enterprise.
16.2 Landlord and Landlord's Affiliates shall not be liable to Tenant for
any injury or damage to persons or property resulting from any cause of
whatsoever nature (unless caused by or due to the willful acts or negligence of
Landlord or Landlord's Affiliates).
16.3 In furtherance (and not in limitations of the terms, covenants,
conditions, and provisions of this Lease, Tenant agrees to indemnify Landlord
and Landlord's Affiliates and hold Landlord and/or Landlord's Affiliates
harmless from and against all loss, liability, obligation, damage, penalty,
cost, charge and expense of any kind whatsoever (including, but not limited to,
attorneys' fees), whensoever asserted or occurring, which Landlord and/or
Landlord's Affiliates may incur or pay out, or which may be asserted against
Landlord and/or Landlord's Affiliates:
(a) in whole or in part by reason of any failure of or by Tenant to
perform or comply with any and all of the terms, covenants,
conditions and provisions of this Lease; and/or
(b) in whole or in part by reason of any work or thing of whatsoever
kind done in, on or about the Premises of the building(s) by
Tenant or Tenant's employees, contractors, agents, or licensees
(including, but not limited to, construction, alterations,
repairs, or similar acts of any kind whatsoever, and whether or
not authorized by this Lease); and/or
(c) in whole or in part by reason of any negligence or willful act or
omission of Tenant or Tenant's employees, contractors, agents or
licensees; and/or
(d) in whole or in part by reason of any injuries to persons or
property occurring in, on, or about the Premises caused by Tenant
or Tenant's employees, contractors, agents, or licenses
(provided, however, that this (d) shall not apply to injuries to
persons or property caused by willful acts or negligence of
Landlord or Landlord's Affiliates).
SECTION 17. No Liens; Adjacent Excavation.
17.1 Tenant covenants and agrees to advise all contractors and person's
supplying labor, material or services in connection with such work of the
provisions of this Section 17.1. Landlord's interest in the Premises shall not
be subject to liens for improvements made by Tenant, and Tenant shall have no
power or authority to create any lien or permit any lien to attach to Tenant's
leasehold or to the estate, reversion or other estate of Landlord in the
Premises. All contractors, artisans, mechanics and laborers and other persons
supplying materials or labor or contracting with Tenant with respect to the
Premises or any part thereof,
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or any party entitled to claim a construction lien under the laws of Florida
(whether same shall proceed in law or in equity) are hereby charged with notice
that they shall look solely to Tenant to secure payment of any amounts due for
work done or material furnished to Tenant relating to the Premises, or for any
other purpose during the term of this lease.
Tenant shall indemnify Landlord against any loss or expenses incurred as a
result of the assertion of any such lien, and Tenant covenants and agrees to
transfer any claimed or asserted lien to a bond or such other security as may be
permitted by law within ten (10) days of the assertion of any such lien or claim
of lien. In the event Tenant fails to transfer such lien to bond or other
security within such ten (10) day period then, in addition to its other remedies
specified in this Lease, Landlord shall have the right to discharge the lien or
to transfer the lien claimed to bond or other security permitted by law and in
any such event Tenant shall pay all costs so incurred by Landlord immediately
upon demand therefor. Tenant shall advise all persons furnishing designs, labor,
materials or services to the Premises in connection with Tenant's improvement(s)
thereof of the provisions of this section.
Tenant has received the sum of Fifty and No/100 Dollars ($50.00) from
Landlord as consideration for the indemnification agreements of Tenant set forth
in this paragraph 17 and other provisions of this Lease.
17.2 If any excavation shall be commenced upon property adjacent to the
Premises, unless Tenant obtains a court order preventing or limiting such
excavation (and/or the manner or method thereof), Tenant shall:
(a) afford the persons lawfully authorized to undertake such
excavation the right to enter upon the Premises in a reasonable
manner to do such work as may be necessary to preserve any walls
or structures of the Premises from injury or damage and to
support the same by proper foundations; and, if requested by
Tenant, such entry and work shall be done in the presence of a
representative of Tenant, who shall be designated by Tenant by
Written Notice promptly upon Landlord's request; and
(b) undertake all such work, at Tenant's sole cost and expense, as
may be necessary to preserve any of the walls or structures of
the Premises from injury or damage and to support the same by
proper foundations.
Tenant shall not, by reason of any such excavation or work, have any claim
against Landlord for damages or for indemnify or for abatement or reduction of
any Rents payable by Tenant hereunder.
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SECTION 18. Surrender of Premises.
Upon expiration of the Term or other termination of this Lease, Tenant
shall peaceably and quietly leave and yield over to Landlord the Premises broom
clean, in the condition required under the terms, covenants, conditions, and
provisions of this Lease.
SECTION 19. Quiet Enjoyment.
Upon paying Fixed Rent and Additional Rent and otherwise observing all
terms, covenants, conditions and provisions of this Lease, Tenant shall and may
lawfully and quietly hold and enjoy the Premises during the Term of this Lease
without hindrance, ejection, molestation or interruption.
SECTION 20. Written Notices.
All notices, requests, demands, elections, consents, approvals and other
communication hereunder must be in writing (each such, a "Written Notice") and
addressed as follows (or to any other address which either party may designate
by Written Notice):
If to Landlord:
39 ACRE CORP.
122 East 42nd Street
Suite 1116
New York, New York 10168
Attn: Mr. Frederick M. Friedman
If to Tenant:
Eagle Supply, Inc.
1451 N. Channelside Drive
Tampa, Florida 33605
Attn: Mr. Lewis Marshall
Any written Notice required by this Lease to be given or made within a
specified period of time, or on or before a date certain, shall be deemed to
have been duly given only if delivered by hand or mailed by first class,
registered mail, return receipt requested, postage and fees prepaid. A written
Notice sent by registered mail (as above) shall be deemed given when mailed. All
other Written Notices shall be deemed given when received.
SECTION 21. Real Estate Brokers.
21.1 No broker brought about this transaction. Tenant agrees to indemnify
and hold Landlord harmless from and against any commission or fee claimed by any
with whom Tenant
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has dealt in connection with the negotiation and execution of this Lease or any
matter whatsoever pertaining or related thereto, as well as all expenses which
Landlord incurs to defend against any such commission or fee (including, but not
limited to, attorneys, fees).
SECTION 22. Defaults; Remedies.
22.1 Events of Default
The following events shall be deemed to be events of default by Tenant
under this Lease:
22.1.1 Non-Payment of Rent
Tenant shall fail to pay any installment of Fixed Rent, Additional Rent or
any other charge or assessment required of Tenant pursuant to the terms hereof
within three (3) days after Tenant's receipt of Landlord's notice of said
failure.
22.1.2 Non-Compliance With Lease
22.1.2.1 Except as set forth in paragraph 22.1.2.2, below, Tenant
shall fail to comply with any term, provision, covenant or warranty made under
this Lease by Tenant, other than as described in paragraph 22.1.1 above, and
Tenant shall not cure such failure within thirty (30) days after Landlord's
notice thereof to Tenant. In the event Tenant cannot comply with such term,
provision, covenant or warranty within said thirty (30) day period, Tenant shall
not be in default if Tenant is making a diligent effort to comply with such
term, provision, covenant or warranty, and Tenant reimburses Landlord for
Landlord's reasonable out-of-pocket expenses resulting from Tenant's failure to
comply with said term, provision, covenant or warranty within said thirty (30)
day period and Tenant completes the cure of the default.
22.1.2.2 The failure by Tenant to observe or perform according to
the provisions of paragraphs 4, 7, or 14 of this Lease where such failure
continues for more than five (5) days after notice from Landlord.
22.1.3 Insolvency
Tenant or any guarantor of this Lease shall become insolvent, or shall
make a transfer in fraud of creditors or shall make an assignment for the
benefit of creditors.
22.1.4 Petitioning for Relief Under Bankruptcy Code
Tenant or any guarantor of this Lease shall file a petition under any
chapter of the federal bankruptcy act, as amended, or under any similar law or
statute of the United States or any state.
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22.1.5 Adjudged Bankrupt
There shall be filed against Tenant or any guarantor of this Lease an
involuntary petition in bankruptcy or insolvency or a similar proceeding, and
such filing or proceeding shall not be dismissed within ninety (90) days.
22.1.6 Appointment of a Receiver
A receiver or trustee shall be appointed for the Premises or for all
or substantially all of the assets of Tenant or any guarantor of this Lease.
22.1.7 Vacating Premises
Tenant's vacating or abandoning the Premises (it being expressly
agreed that Tenant's failure to occupy the Premises for thirty (30) consecutive
days without Landlord's prior approval shall be deemed an abandonment or
vacation of the Premises).
22.1.8 Sale by Legal Process
Tenant's interest under this Lease being sold under execution or other
legal process.
22.1.9 Modification by Operation of Law
Tenant's interest under this Lease being modified or altered by any
unauthorized assignment or subletting or by operation of law.
22.1.10 Impounding by Legal Proceeding
Any of the goods or chattels of Tenant used in, or incident to, the
operation of Tenant's business in the Premises being seized, sequestered, or
impounded by virtue of, or under authority of, any legal proceeding.
22.1.11 Failure to Take Occupancy of Premises
Tenant's failure to take occupancy of the Premises when same is
tendered by Landlord to Tenant, unless Fixed Rent has been prepaid to cover the
applicable period of non-occupancy.
In the event of the occurrence of any of the events described in paragraph
22.1, Landlord, at its election, may exercise one or more of the following
options, the exercise of any of which shall not be deemed to preclude the
exercise of any others herein listed or otherwise provided by statute or general
law at the same time or at subsequent times or actions:
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22.2.1 Take Possession of Premises
Reenter and retake possession of the Premises and relet or attempt to
relet the Premises on behalf of Tenant at such rent and under such terms and
conditions as Landlord may deem best under the circumstances for the purpose of
reducing Tenant's liability. Landlord shall not be deemed to have terminated
this Lease or thereby accepted a surrender of the Premises, and Tenant shall
remain liable for all Fixed Rent, Additional Rent, or other sums due under this
Lease and for all damages suffered by Landlord by reason of Tenant's breach of
any of the covenants of the Lease.
22.2.2 Terminate Lease
Declare this Lease in writing to be terminated, ended and null and
void, and reenter upon and take possession of the Premises, whereupon all right,
title and interest of Tenant in the Premises shall end.
22.2.3 Accelerate Payment of Rent
Accelerate and declare the entire remaining unpaid Fixed Rent and
Additional Rent for the balance of the Term of this Lease to be immediately due
and payable forthwith, and may, at once, take legal action to recover and
collect the present value of the same.
22.3 Right of Landlord to Cure Tenant's Default
If: (a) Tenant defaults in the making of any payment or in the doing of any
act herein required to be made or done by Tenant; or (b) Tenant defaults in the
making of payment to any third party, or doing any act required to be made or
done by Tenant for or on behalf of said third party relating to the Premises,
then Landlord may, but shall not be required to, make such payment or do such
act, and charge the amount of the expense thereof, if made or done by Landlord,
with interest thereon at the lesser of the rate of eighteen percent (18%) or the
maximum rate allowable by law, from the date paid by Landlord to the date of
payment thereof by Tenant. Such payment and interest shall constitute Additional
Rent hereunder due and payable with the next monthly installment of Fixed Rent;
but the making of such payment or the taking or such action by Landlord shall
not operate to cure such default or to stop Landlord from the pursuit of any
remedy to which Landlord would otherwise be entitled.
22.4 Right of Reentry
No reentry or retaking possession of the Premises by Landlord shall be
construed as an election on its part to terminate this Lease, unless a written
notice of such intention be given to Tenant, nor shall pursuit of any remedy
herein provided constitute a forfeiture or waiver of any Fixed Rent, Additional
Rent or other monies due to Landlord hereunder or of any damages accruing to
Landlord by reason of the violations of any of the terms, provisions and
covenants herein contained. Landlord's acceptance of Fixed Rent or Additional
Rent or other monies
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following any event of default hereunder shall not be construed as Landlord's
waiver of such event of default. No forbearance by Landlord of action upon any
violation or breach of any of the terms, provisions, and covenants herein
contained shall be deemed or construed to constitute a waiver of the terms,
provisions, and covenants herein contained. Forbearance by Landlord to enforce
one or more of the remedies herein provided upon an event of default shall not
be deemed or construed to constitute a waiver of any other violation or default.
Legal actions to recover for loss or damage that Landlord may suffer by reason
of termination of this Lease or the deficiency from any reletting as provided
for above shall include the expense of repossession or reletting, including
brokerage commissions, and any repairs or remodeling undertaken by Landlord
following repossession.
22.5 Waivers
THE PARTIES HERETO SHALL, AND THEY HEREBY DO, WAIVE TRIAL BY JURY IN ANY
ACTION, PROCEEDING, OR COUNTERCLAIM BROUGHT BY EITHER OF THE PARTIES HERETO
AGAINST THE OTHER ON ANY MATTERS WHATSOEVER ARISING OUT OF, OR IN ANY WAY
CONNECTED WITH, THIS LEASE, THE BUILDING, AND/OR CLAIM OF INJURY OR DAMAGE. In
the event Landlord commences any proceeding to enforce this Lease or the
landlord/tenant relationship between the parties, or for nonpayment of Fixed
Rent, Additional Rent or additional monies due Landlord from Tenant under this
Lease, Tenant will not interpose any counterclaim of whatever nature or
description in any such proceedings. In the event Tenant must, because of
applicable court rules, interpose any counterclaim or other claim against
Landlord in such proceedings, Landlord and Tenant covenant and agree that, in
addition to any other lawful remedy of Landlord, upon motion of Landlord, such
counterclaim or other claim asserted by Tenant shall be severed out of the
proceedings instituted by Landlord (and, if necessary, transferred to a court of
different jurisdiction), and the proceedings instituted by Landlord may proceed
to final judgment separately and apart from and without consolidation with or
reference to the status of each counterclaim or any other claim asserted by
Tenant.
22.6 Jurisdiction
The parties hereto agree that all suits for any and every breach of this
Lease shall be instituted and maintained only in the courts of competent
jurisdiction in the county or municipality in which the Premises are located. In
the event it shall become necessary (as determined by Landlord) for Landlord at
any time to institute or defend any legal action or proceedings of any nature
for the enforcement of, or as regards this Lease, or any of the provisions
hereof, or any of Landlord's statutory or common law rights as concern Tenant,
or to employ an attorney therefor, Tenant agrees to pay all court costs,
including without limitation attorneys' fees, paralegals fees and sales tax on
such fees and costs, incurred by Landlord, whether (a) a lawsuit is filed or
not; (b) at all trial and appellate levels; and (c) in all bankruptcy
proceedings.
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SECTION 23. Memorandum of Lease.
If either requests by Written Notice, Landlord and Tenant shall execute and
acknowledge a memorandum of this Lease sufficient for recording but otherwise
containing only the information required for such purpose by the applicable
recording law. Such memorandum shall not in any event be deemed to change,
affect or alter any of the terms, covenants, conditions or provisions of this
Lease.
SECTION 24. Miscellaneous.
24.1 This Lease shall be construed and enforced in accordance with, and
governed by, the laws of the State of Florida. This Lease embodies the entire
agreement and understanding between the parties and supersedes all prior
agreements and understandings relating to the subject matter hereof. This Lease
may not be modified or amended or any term or provision hereof waived or
discharged except in writing signed by the party against whom such amendment,
modification, waiver or discharge is sought to be enforced. Subject to Section
7, all the terms of this Lease, whether so expressed or not, shall be binding
upon the respective successors,, assigns and legal representatives of the
parties hereto and shall inure to the benefit of and be enforceable by the
parties hereto and their respective successors, assigns and legal
representatives. The headings of this Lease are for purposes of reference only
and shall not limit or otherwise affect the meaning thereof. This Lease may be
executed in reverse counterparts, each of which shall be deemed an original but
all of which together shall constitute one and the same instrument.
24.2 In this Lease, "Lease Interest Rate" means an annual rate of interest
two (2) percentage points higher than the prime lending rate of Chase Manhattan
Bank, N.A., New York, New York in effect during any period to which the Lease
Interest Rate shall apply. If no such prime rate can be identified, the Lease
Interest Rate shall be fifteen per cent (15%) per annum. However, in no event
shall the Lease Interest Rate exceed the maximum rate of interest permitted by
Laws for any loan by Landlord to Tenant.
24.3 Any liability of Landlord and/or Landlord's and/or Affiliates for
damages or otherwise under or with respect to this Lease shall be limited to
Landlord's interest in the Premises and the proceeds of any Insurance Policies
and/or Awards actually collected by Landlord. Landlord and Landlord's Affiliates
shall have no personal liability in excess of the foregoing; and no other
property or assets of Landlord or Landlord's Affiliates shall be subject to
levy, execution or any other procedure whatsoever for the satisfaction of
remedies.
24.4 Tenant is hereby given the option to terminate this Lease during the
remaining Term, at any time after the first anniversary of the commencement date
of the Term of this Lease, under the conditions hereinafter set forth, which
option may be exercised only as follows and providing that this Tenant is not
then in default. Upon written notice to the Landlord, sent or delivered as
hereinbefore provided, the Tenant may notify the Landlord that it intends to
terminate this Lease and vacate the Premises at a specified date in the future,
which date shall
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be not less than six (6) months after the date on which the said notice is sent
or delivered. Any such notice which purports to terminate this Lease as of a
date less than six (6) months after the sending or delivery of said written
notice shall be null and void and shall not be effective to terminate this Lease
as of any date. On or prior to the date specified by the Tenant in its notice,
Tenant shall vacate the Premises and the end of the Term of this Lease shall be
deemed to have been reached. In the event Tenant fails to vacate possession of
the Premises in accordance with its notice, Landlord may, at its option, either:
(a) treat the Lease as having come to the end of the Term; or (b) deem the
Tenant as leaving defaulted in exercising its option to terminate, in which
event the Term will continue as if the Tenant had not sought to exercise the
option to terminate. All obligations of the Tenant which are intended to survive
the Term shall survive the termination of this Lease by the exercise of this
option by the Tenant, including any default arising after the date of the
Tenant's aforesaid notice. The termination of the Term will not relieve the
Tenant of any obligations hereunder except for obligations which accrue after
the exercise of the option to terminate and the timely vacating of the Premises
by the Tenant in accordance with its notice to terminate.
24.5 If Tenant defaults in the performance of any of the covenants of this
Lease and by reason thereof Landlord employs the services of attorneys to
enforce performance of the covenants by Tenant, to evict Tenant, to collect
monies due by Tenant or to perform any other service based upon said default,
then, in any of said events, Tenant agrees to pay reasonable attorneys' fees and
all reasonable expenses and costs incurred by Landlord pertaining thereto and in
enforcement of any remedy available to Landlord including, without limitation,
any and all pretrial, trial, appellate and post-judgment proceedings.
SECTION 25. Right of First Refusal. If Landlord shall receive from any
third party, other than one controlled by any of Landlord's Affiliates, an
acceptable bona fide offer to purchase Premises, it shall submit a written copy
of such offer to Tenant, giving Tenant thirty (30) days within which to elect to
meet such offer. If Tenant elects to meet the terms and conditions of such
offer, it shall give Landlord Written Notice of the election within thirty (30)
days thereafter. If Tenant shall fail to make such election within such period
of time, Landlord shall be free to sell the Premises to such third party in
accordance with the terms and conditions of the foregoing offer.
SECTION 26. Radon Gas. Landlord hereby provides the following notice to
Tenant as required by Florida law:
Radon is a naturally occurring radioactive gas that when it has accumulated
in a building in sufficient quantities, may present health risks to persons who
are exposed to it over time. Levels of radon that exceed federal and state
guidelines have been found in buildings in Florida. Additional information
regarding radon and radon testing may be obtained from your county public health
unit.
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IN WITNESS WHEREOF, THIS LEASE HAS BEEN DULY EXECUTED ON THE DAY AND
YEAR FIRST ABOVE WRITTEN.
EAGLE SUPPLY, INC.
_________________________ By:_________________________________
Print Name:______________
Name:_______________________________
Title:______________________________
Print Name:______________
39 ACRE CORP.
_________________________ By:_________________________________
Print Name:______________
Name:_______________________________
_________________________ Title:______________________________
Print Name:______________
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Schedule "A"
Description of the Premises
[INSERT TO COME]
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Schedule "B"
Required Insurance
In this Lease "Required Insurance" means:
(a) coverage insuring the Premises against loss or damage by fire,
windstorm, tornado, hail and all other hazards covered by the usual
extended coverage and "all risk" endorsements then commercially
available (including, without limitation, and specifically, damage by
water to the extent available) in an amount sufficient to prevent
Tenant or Landlord from becoming a co-insurer under provisions of
applicable policies of insurance, but in any event in an amount not
less than eighty percent (80%) of the actual replacement value thereof
(including the cost of debris removal, but excluding foundations and
excavations);
(b) insurance against liability for bodily injury and death and property
damage and boiler insurance as follows:
(i) comprehensive general public liability insurance containing the
so-called "occurrence" clause (which shall include specifically
the Premises and all parking areas, streets, bridges, alleys,
vaults and sidewalks appurtenant to the Premises);
(ii) the insurance against liability for bodily injury and death shall
be in an amount not less than Five Million Dollars ($5,000,000)
for any occurrence, and for property damage shall be in an amount
not less than Two Hundred Thousand Dollars ($200,000) for any
occurrence; and
(iii) with respect to any boilers on the Premises, boiler insurance
shall be in an amount not less than eighty per cent (80%) of the
actual replacement value of the Premises (including the cost of
debris removal, but excluding foundations and excavations).
(c) workers' compensation as required by law covering all persons employed
at the Premises;
(d) demolition and increased cost of construction coverage, in an amount
not less than fifteen per cent (15%) of the value of the Premises;
(e) rent insurance with "all risk" coverage in an amount at least equal to
the aggregate of Rents to be paid by Tenant during the last year of
the Term;
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(f) with respect to any sprinkler system in the Premises, sprinkler
leakage insurance in amounts approved by Landlord (which approval
shall not be unreasonably withheld or delayed); and
(g) other insurance in such amounts as Landlord may reasonably require
from time to time against such other insurance hazards as at the time
are commonly insured against in the case if similarly situated
properties.
Each Insurance Policy shall be accompanied by a Certificate of Insurance
which shall be delivered to the Landlord and which shall name the Landlord as an
additional insured and shall provide that the same shall not be cancelled except
after thirty (30) days prior Written Notice to Landlord (whether or not such
provision is obtainable only by payment of additional premium). No Insurance
Policy shall contain any endorsement permitting cancellation for default in
payment of a loan financing the premium. Each Insurance Policy shall include a
standard mortgagee clause without contribution pursuant to which all loss or
losses are payable to any mortgagee (or mortgagees) designated by Landlord from
time to time.
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Schedule "C"
Permitted Encumbrances
The following are "Permitted Encumbrances" to which this Lease is and shall be
subject and subordinate:
(a) any and all mortgages now or at any time hereafter constituting liens
on or against the Premises;
(b) zoning regulations and ordinances of the City of __________ which are
not violated by existing structures;
(c) any federal, state or local laws, ordinances, regulations and/or
orders whatsoever governing environmental quality or land use now or
hereafter in effect;
(d) consents by Landlord or any former owner for the erection of any
structure or structures on, under or above any street or streets on
which the Premises abut;
(e) encroachments of stoops, areas, cellar steps, trim, and cornices, if
any, upon any street or highway;
(f) utility company rights, licenses, and/or easement to maintain poles,
lines, wires, towers, stations, cables, pipes, boxes and/or other
fixtures or installations presently serving, crossing, existing, or
granted on, under or with respect to the Premises;
(g) right, lack of right or restricted right of any owner of the Premises
to construct or maintain a vault or vaulted area in or under the
sidewalks abutting the Premises; and any licensing statute, ordinance,
or regulation, and/or the terms of any license pertaining thereto and
the rights, if any, of the City of __________ with respect to vaults
under the sidewalk beyond the building line of the Premises;
(h) existing or future designation of the Premises (or any portion
thereof) as an historic landmark, or designation of a district in
which the Premises are located as an historic district, and all
related restrictions applicable to the Premises;
(i) all other covenants, restrictions, easements, reservations or other
agreements (if any) of record against the Premises;
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(j) any certificate of occupancy (or amended certificate of occupancy)
issued with respect to the Premises, whether or not the same conforms
to the present condition, use or configuration of the Premises; and
(k) any and all laws, rules, regulations, codes, ordinances, statutes,
requirements, or directives of any kind whatsoever, present or future,
of or issued by any government entity whatsoever (including, but not
limited to, federal, state, county, and municipal governments), and
any and every violation or claimed violation of the same, affecting,
applicable to, or filed against the Premises, and/or the use,
occupancy and/or operation thereof.
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EXHIBIT 10.10
FORM OF
ADMINISTRATIVE SERVICES
AGREEMENT TO BE ENTERED
INTO BY AND BETWEEN
REGISTRANT AND TDA
<PAGE>
ADMINISTRATIVE SERVICES AGREEMENT
ADMINISTRATIVE SERVICES AGREEMENT, dated as of ___________, 1996, by and
between Eagle Supply Group, Inc., a Delaware corporation (the "Corporation"),
and TDA Industries, Inc., a New York corporation ("TDA").
W I T N E S S E T H:
WHEREAS, the Corporation, simultaneously herewith, is consummating both a
public offering of its securities and the acquisition of all of the outstanding
capital stock of Eagle Supply, Inc., a Florida corporation, from TDA; and
WHEREAS, the Corporation desires to engage TDA to provide and perform
certain office space and administrative services for the Corporation under the
terms and subject to the conditions hereinafter set forth, and TDA desires to be
so engaged.
NOW, THEREFORE, in consideration of the premises and the mutual covenants
hereinafter set forth, the parties hereto agree as follows:
1. Engagement and Duties. (a) The Corporation hereby engages TDA to
continue to provide to the Corporation office space, secretarial services and
other administrative services at TDA's New York City offices, in substantially
the type and amount that the Corporation has utilized in the several months
prior to the date hereof.
(b) Neither TDA nor any employee or agent thereof shall be required to
devote any minimum amount of time to the performance of its duties hereunder, or
report on or perform its duties hereunder on a fixed or periodic basis, and TDA
and any employee or agent thereof may engage or participate in such other
activities incidental to any other employment, occupation or business venture or
enterprise which do not materially interfere with its ability to perform its
duties hereunder.
(c) TDA hereby accepts such engagement and agrees that throughout the
period of its engagement it shall faithfully and diligently, in furtherance of
the business of the Corporation, perform the duties incidental to its engagement
hereunder.
2. Term. The engagement of TDA hereunder shall commence on the date hereof
and continue on a month to month basis unless terminated by either party upon
not less than five days written notice to the other party. This Agreement shall
terminate on the first day of the month following the giving of timely notice of
termination.
<PAGE>
3. Administrative Fee. In consideration for TDA's services hereunder, the
Corporation shall pay to TDA a monthly fee of $3,000 during the term of this
Agreement.
4. Expenses. TDA shall pay all of its ordinary day-to-day out-of-pocket
expenses incurred in providing services to the Corporation. TDA shall be
reimbursed by the Corporation for all other reasonable expenses incurred by TDA
in the performance of its duties hereunder.
5. Exculpation; Indemnification. (a) Neither TDA nor any of its respective
affiliates, nor any of their respective officers, directors, partners, employees
or agents, shall be liable, in damages or otherwise, to the Corporation for any
act or omission performed or omitted by any such person pursuant to authority
granted by this Agreement, except if such act or omission results from gross
negligence, willful misconduct or bad faith, or a knowing and material violation
of the provisions of this Agreement. TDA shall be entitled to rely in good faith
on the advice of counsel to the Corporation, the Corporation's accountants or
other independent experts retained by the Corporation experienced in the matter
at issue, and any act or omission of TDA in reasonable reliance on such advice
shall in no event subject TDA to liability to the Corporation.
(b) The Corporation, to the fullest extent permitted by law, shall
indemnify and hold harmless TDA, its affiliates, and their respective officers,
directors, partners, employees and agents (collectively, the "Indemnified
Persons") from and against any and all claims or liabilities of any nature
whatsoever, including legal fees and other expenses reasonably incurred, arising
out of or in connection with any action taken or omitted by any such Indemnified
Person by or on behalf of the Corporation pursuant to authority granted by this
Agreement, except where found by a court of competent jurisdiction to be
attributable to the gross negligence, willful misconduct or bad faith of any
such person, or a knowing and material violation by such person of the
provisions of this Agreement.
(c) Any Indemnified Person entitled to indemnification from the
Corporation hereunder shall seek recovery under any insurance policies by which
such person is covered and shall obtain the written consent of the Board of
Directors of the Corporation prior to entering into any compromise or settlement
which would result in an obligation of the Corporation to indemnify such
Indemnified Person. If such Indemnified Person shall actually recover any
amounts under any applicable insurance policies, it shall offset the net
proceeds so received against any amounts owed by the Corporation by reason of
the indemnification provided hereunder or, if all such amounts
2
<PAGE>
shall have been paid by the Corporation in full prior to the actual receipt of
such net insurance proceeds, it shall pay over such proceeds (up to the amount
of indemnification paid by the Corporation to such Indemnified Person) to the
Corporation. If the amounts in respect of which indemnification is sought arise
out of the conduct of the business and affairs of the Corporation and also of
any other person for which the Indemnified Person hereunder was then acting in a
similar capacity, the amount of the indemnification provided by the Corporation
shall be limited to the Corporation's proportionate share thereof as determined
in good faith by the Board of Directors of the Corporation in light of its
fiduciary duties to the Corporation.
(d) The satisfaction of any indemnification pursuant to this Section 5
shall be from and limited to Corporation assets.
6. Nature of Engagement. TDA is engaged as, and shall be deemed for all
purposes to be, an independent contractor with respect to the Corporation. In
particular, the Corporation shall not withhold, deduct or otherwise be obligated
to pay, or be accountable for, any federal, state or local taxes or FICA
contributions due from or on behalf of TDA or any of its employees or agents.
Except as expressly provided herein, no provision hereof is intended, or shall
be deemed, to create any corporation, joint venture or association among the
parties hereto, or to authorize or empower any party hereto to act on behalf of,
obligate or bind any other party hereto.
7. Agreement to Not Compete. As a material inducement for the Corporation
to enter into this Agreement, TDA and each of Douglas P. Fields and Frederick M.
Friedman hereby agree not to engage in, for the term of this Agreement, any
activity of any nature that competes with the Corporation in the roofing
supplies and related products markets.
8. Successors and Assigns. This Agreement may not be assigned, in whole or
in part, by any party hereto, without the prior written consent of the other
parties hereto, and any purported assignment without such consent shall be void
and without effect. This Agreement shall be binding upon and inure to the
benefit of, and be enforceable by, the parties hereto and their respective
successors and permitted assigns. This Agreement is not intended, and shall not
be deemed, to create or confer any right or interest for the benefit of any
person not a party hereto.
9. Notices. Any notice or demand required or permitted to be given or made
to or upon any party hereto pursuant to any of the provisions of this Agreement
shall be deemed to have been duly given or made for all purposes if (i) in
writing and delivered by hand against receipt, or sent by certified or
registered mail, postage prepaid, return
3
<PAGE>
receipt requested, or (ii) sent by telegram, telecopy, telex or other electronic
means and followed by a copy delivered or sent in the manner provided in clause
(i) above, as follows:
To TDA, at: TDA Industries, Inc.
122 East 42nd Street, Suite 1116
New York, New York 10168
Attn.: Frederick M. Friedman,
Executive Vice President
To the Corporation, at: Eagle Supply Group, Inc.
122 East 42nd Street, Suite 1116
New York, New York 10168
Attn.: Douglas P. Fields
in each case, with a copy to: Gusrae, Kaplan & Bruno
120 Wall Street
New York, New York 10005
Attn.: Robert Perez, Esq.
or to such other address as any party hereto may at any time, or from time to
time, direct by notice given to the other party in accordance with this Section.
The date of giving or making of any such notice or demand shall be the earlier
of the date of actual receipt, or five business days after such notice or demand
is sent, or, if sent in accordance with clause (ii), the business day next
following the day such notice or demand is actually transmitted.
10. Waiver. No course of dealing or omission or delay on the part of any
party hereto in asserting or exercising any right hereunder shall constitute or
operate as a waiver of any such right. No waiver of any provision hereof shall
be effective unless in writing and signed by or on behalf of the party to be
charged therewith. No waiver shall be deemed a continuing waiver or waiver in
respect of any other or subsequent breach or default, unless expressly so stated
in writing.
11. Governing Law. This Agreement shall be governed by, and interpreted and
enforced in accordance with, the laws of the State of New York, without giving
effect to the provisions thereof relating to choice or conflict of laws.
12. Jurisdiction; Service of Process. Each party hereto hereby irrevocably
(a) consents to the exclusive jurisdiction of the courts of the County of New
York, State of
4
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New York and of any federal court located therein in connection with any suit,
action or other proceeding arising out of or relating to this Agreement or the
transactions contemplated hereby, (b) waives any objection to venue in the
County of New York, State of New York, and (c) agrees that service of process in
connection with any such proceeding may be effected by mailing same in the
manner provided in Section 9 hereof.
13. Further Assurances. Each party hereto covenants and agrees promptly to
execute, deliver, file or record such agreements, instruments, certificates and
other documents and to do and perform such other and further acts and things as
any other party hereto may reasonably request or as may otherwise be necessary
or proper to consummate and perfect the transactions contemplated hereby.
14. Counterparts. This Agreement may be executed in counterparts, each of
which shall be deemed an original and which together shall constitute one and
the same instrument.
15. Titles and Captions. The titles and captions of the Sections of this
Agreement are for convenience of reference only and do not in any way define or
interpret the intent of the parties or modify or otherwise affect any of the
provisions hereof.
16. References. The terms "herein," "hereto," "hereof," "hereby," and
"hereunder," and other terms of similar import, refer to this Agreement as a
whole, and not to any Section or other part hereof.
17. Entire Agreement. This Agreement embodies the entire agreement of the
parties hereto with respect to the subject matter hereof and supersedes any
prior agreement, commitment or arrangement relating thereto.
IN WITNESS WHEREOF, the parties hereto have duly executed this Agreement as
of the date first above written.
EAGLE SUPPLY GROUP, INC.
By:_________________________________
Name: Douglas P. Fields
Title: Chief Executive Officer
5
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TDA INDUSTRIES, INC.
By:_________________________________
Name: Frederick M. Friedman
Title: Executive Vice President
Agreed to for Purposes of Section 7 only:
____________________________________
Douglas P. Fields
____________________________________
Frederick M. Friedman
6
<PAGE>
EXHIBIT 23.2
CONSENTS OF
DELOITTE & TOUCHE LLP
<PAGE>
INDEPENDENT AUDITORS' CONSENT AND REPORT ON SCHEDULE
To the Board of Directors and Stockholder of Eagle Supply, Inc.
We consent to the use in this Registration Statement of Eagle Supply Group, Inc.
on Form S-1 of our report dated August 30, 1996 related to the financial
statements of Eagle Supply, Inc. appearing in the Prospectus, which is part of
this Registration Statement.
We also consent to the reference to us under the headings "Selected Financial
Information" and "Experts" in such Prospectus.
Our audits of the financial statements referred to in our aforementioned report
also included the financial statement schedule of Eagle Supply, Inc. (the
"Company") listed in Item 16. This financial statement schedule is the
responsibility of the Company's management. Our responsibility is to express an
opinion based on our audit. In our opinion, such financial statement schedule
when considered in relation to the basic financial statements taken as a whole,
presents fairly in all material respects the information set forth therein.
/s/ Deloitte & Touche LLP
Tampa, Florida
October 11, 1996
<PAGE>
INDEPENDENT AUDITORS' CONSENT
We consent to the use in this Registration Statement of Eagle Supply Group, Inc.
on Form S-1 of our report dated September 19, 1996, appearing in the Prospectus,
which is part of this Registration Statement.
We also consent to the reference to us under the headings "Selected Financial
Information" and "Experts" in such Prospectus.
/s/ Deloitte & Touche LLP
Tampa, Florida
October 11, 1996
<PAGE>
EXHIBIT 23.3
CONSENT OF
PAUL D. FINKELSTEIN
<PAGE>
To: The Board of Directors
Eagle Supply Group, Inc.
I hereby consent to serve as a director of Eagle Supply Group, Inc. (the
"Company") after the effective date of the Company's Registration Statement on
Form S-1 (File No. 333-9951) and to the use of my name in such Registration
Statement.
Dated: October 15, 1996
S/ Paul D. Finkelstein
----------------------
Paul D. Finkelstein
<PAGE>
EXHIBIT 23.4
CONSENT OF
JOHN E. SMIRCINA
<PAGE>
To: The Board of Directors
Eagle Supply Group, Inc.
I hereby consent to serve as a director of Eagle Supply Group, Inc. (the
"Company") after the effective date of the Company's Registration Statement on
Form S-1 (File No.333-9951) and to the use of my name in such Registration
Statement.
Dated: October 15, 1996
s/ John E. Smircina
-------------------
John E. Smircina
<PAGE>
EXHIBIT 23.5
CONSENT OF
GEORGE SKAKEL III
<PAGE>
To: The Board of Directors
Eagle Supply Group, Inc.
I hereby consent to serve as a director of Eagle Supply Group, Inc. (the
"Company") after the effective date of the Company's Registration Statement on
Form S-1 (File No.333-9951) and to the use of my name in such Registration
Statement.
Dated: October 15, 1996
s/ George Skakel III
--------------------
George Skakel III
