As filed with the Securities and Exchange Commission on August 12, 1996
Registration No. 333-
================================================================================
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
-------------------------
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
================================================================================
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
================================================================================
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 300,000 $5.00 $1,500,000 $ 517.24
par value(11) ---------
TOTAL $7,481.26
=========
- ----------
(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 AUGUST 12, 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 The Nasdaq
National Market SystemTM ("NASDAQ-NMS") or the market price 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 10, 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."
<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 NASDAQ-NMS 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>
[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 160% 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
3
<PAGE>
fiscal year. Stockholders will be able to obtain the most recent 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.
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 an
additional 200,000 shares of the Company's Common Stock valued at the per share
initial public offering price. As a precondition to the consummation of the
Acquisition, the Underwriter has required that Eagle have a net tangible book
value of not less than $1,000,000 at the consummation of the Acquisition, have
earned approximately $2,000,000 in pre-tax income and have had gross revenues of
not less than $50,000,000 during its fiscal year ended June 30, 1996 ("Fiscal
1996"). 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 year ended June 30, 1995 ("Fiscal 1995") and nine
month period ended March 31, 1996 ("Nine Months 1996"), Eagle had revenues of
$50,483,469 and $42,205,353, respectively,
5
<PAGE>
and net income of $352,589 and $925,470, 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 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-branch and multi-regional
distributors and a large national multi-branch 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.
6
<PAGE>
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.
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 for TDA's fiscal year ended June 30, 1995,
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 minimum 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."
7
<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, and for working capital pur-
poses, 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."
NASDAQ-NMS 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.
8
<PAGE>
Summary Financial Data
(in thousands, except share and per share data)
<TABLE>
<CAPTION>
Pro Forma(5)
----------------------
Nine
Year Months
Nine Months Ended Ended Ended
Year Ended June 30, March 31, June 30, March 31,
-------------------------------------------------- ---------------------- ---------- ----------
1995 1994 1993 1992 1991 1996 1995 1995 1996
---------- -------- -------- -------- -------- ---------- ---------- ---------- ----------
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C>
Statement of Operations Data(1):
Revenues ...................... $ 50,483 $ 53,925 $ 66,552 $ 46,484 $ 42,013 $ 42,205 $ 35,410 $ 50,483 $ 42,205
Gross Profit .................. 9,740 10,658 14,933 9,668 8,635 8,992 7,093 9,739 8,992
Income From Operations ........ 833 743 4,159 2,070 1,472 1,908 737 397 1,581
Net Income .................... 353 464 2,622 1,334 956 925 386 82 723
Pro Forma Net Income Per
Share ......................... $ .14 $ .36 $ .15 $ .03 $ .28
========== ========== ========== ========== ==========
Pro Forma Weighted Average
Number of Shares Outstanding(2) 2,600,000 2,600,000 2,600,000 2,600,000 2,600,000
========= ========== ========== ========== ==========
<CAPTION>
June 30, March 31, 1996
-------------------------------------------------- ----------------------------------------
1995 1994 1993 1992 1991 Actual As Adjusted(3) Pro Forma(4)
---------- -------- -------- -------- -------- ---------- -------------- ------------
<S> <C> <C> <C> <C> <C> <C> <C> <C>
Balance Sheet Data(1):
Working Capital ............... $ 5,665 $ 4,785 $ 5,963 $ 5,109 $ 4,394 $ 5,574 $ 6,512 $ 12,086
Total Assets .................. 17,831 12,947 17,190 12,582 11,786 17,998 6,512 21,916
Long-Term Debt ................ 6,290 -- -- -- -- 6,071 -- 6,071
Total Liabilities ............. 14,338 9,385 13,450 10,136 9,340 14,404 -- 14,404
Stockholders' Equity .......... 3,493 3,562 3,720 2,447 2,446 3,594 6,512 7,512
</TABLE>
- ----------
(1) Operating and actual balance sheet data was derived from the financial
statements of Eagle, because the Company was organized in May 1996 and has
conducted no business activities 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 aggregate net tangible book value at the
date of the Acquisition. See "Certain Transactions" 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.
9
<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 and 1995, and nine-month period ended March 31, 1996 its
revenues were $66,552,083, $53,925,373, $50,483,469 and $42,205,353,
respectively, and its net income for those periods were $2,621,939, $464,270,
$352,589 and $925,470, 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 the nine-month period ended March 31, 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 March 31, 1996 Eagle had borrowed $6,071,110 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
10
<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 13% and 19%
of Eagle's sales during Eagle's fiscal year ended June 30, 1995 and nine months
ended March 31, 1996, respectively. During Eagle's fiscal year ended June 30,
1995 and nine months ended March 31, 1996, three other vendors' products
accounted for an aggregate of approximately 15% and 16%,
11
<PAGE>
respectively, of Eagle's sales. 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 branch locations 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. 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. 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."
12
<PAGE>
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."
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 administra-
13
<PAGE>
tive 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 and Eagle's. 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."
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
14
<PAGE>
cancelled, TDA will directly, and Messrs. Fields and Friedman will indirectly,
derive a benefit. 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 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.
15
<PAGE>
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.
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 twelve months, respectively, from the date of this Prospectus 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."
16
<PAGE>
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 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
17
<PAGE>
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 $.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."
18
<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 May 1, 1996,
as adjusted to give effect to the Private Placement, to reflect the sale of
1,500,000 shares of Common Stock by the Company in this 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 Private Placement,
this offering and the Acquisition(1)... $ --
Increase per share attributable
to new investors ...................... 1.73
-----
Pro forma net tangible book value per
share after this offering and before
the Private Placement and the
Acquisition............................ 1.73 1.73
----
Dilution per share to new investors
before the Private Placement and
the Acquisition........................ $3.28
=====
Increase per share attributable to the
Private Placement and the
Acquisition............................ .10
----
Pro forma net tangible book value per
share after the Private Placement,
this 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 May 1, 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 Private Placement, 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.
19
<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.
<TABLE>
<CAPTION>
Shares Purchased Total Consideration
---------------- ------------------- Average
Approximate Approximate Price Per
Number Percent Amount Percent Share
------ ----------- ---------- ----------- ---------
<S> <C> <C> <C> <C> <C>
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%
</TABLE>
- ----------
(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 is based on the initial 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.
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.
20
<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 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.
(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 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 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 twelve month period
if Eagle suffers losses or if the Company effects the acquisition of a business
that subsequently suffers losses. 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.
21
<PAGE>
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 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 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.
22
<PAGE>
CAPITALIZATION
The following table sets forth the capitalization of the Company as of May
1, 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.
May 1, 1996
-------------------------------
Actual As Adjusted Pro Forma
------ ----------- ---------
Long-Term Debt .............................. $ -- $ -- $ 6,071
======= ======= =======
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; 2,100,000 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) -- (4) -- (4)
Additional Paid-in Capital .................. -- 6,512 7,512
Retained Earnings ........................... -- -- --
------- ------- -------
-- (4) 6,512 7,512
Less: Stock Subscription Receivable ......... -- (4) -- (4) -- (4)
------- ------- -------
Total Stockholders' Equity ............. -- 6,512 7,512
------- ------- -------
Total Capitalization ................... $ -- $ 6,512 $13,583
======= ======= =======
- ----------
(1) Includes 300,000 shares issued in connection with the Private Placement and
1,500,000 shares of Common Stock to be issued in this offering.
(2) Includes, in the pro forma column, 200,000 shares of Common Stock to be
issued to TDA simultaneously with the closing of this 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.
23
<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.
24
<PAGE>
UNAUDITED PRO FORMA CONDENSED CONSOLIDATED BALANCE SHEET
(in thousands)
<TABLE>
<CAPTION>
Historical
----------------------------------
Eagle Supply Eagle Supply, Inc. Pro Forma Pro Forma
Group, Inc. March 31, 1996 Adjustments
May 1, 1996
<S> <C> <C> <C> <C>
ASSETS
CURRENT ASSETS:
Cash $ -- $ 30 $ 6,218(2) $ 6,542
294(1)
Accounts and notes receivable-net -- 7,730 -- 7,730
Inventories -- 5,407 -- 5,407
Deferred tax asset -- 264 -- 264
Other current assets -- 359 -- 359
-------- -------- -------- --------
Total current assets -- 13,790 6,512 20,302
DUE FROM TDA INDUSTRIES, INC -- 2,838 (2,594)(4) 244
AND AFFILIATED COMPANIES
IMPROVEMENTS AND EQUIPMENT - Net -- 1,370 -- 1,370
-------- -------- -------- --------
$ -- $ 17,998 $ 3,918 $ 21,916
======== ======== ======== ========
LIABILITIES AND STOCKHOLDERS'
EQUITY
CURRENT LIABILITIES:
Accounts Payable $ -- $ 7,713 $ -- $ 7,713
Accrued expenses and other
current liabilities -- 503 -- 503
-------- -------- -------- --------
Total current
liabilities -- 8,216 -- 8,216
LONG TERM DEBT -- 6,071 -- 6,071
DEFERRED TAX LIABILITY -- 117 -- 117
-------- -------- -------- --------
Total liabilities -- 14,404 -- 14,404
-------- -------- -------- --------
STOCKHOLDERS' EQUITY:
Preferred shares -- -- -- --
Common shares -- (5) 59 -- (2)(5) -- (5)
-- (3)(5)
(59)(3)
Additional paid-in capital -- 1,000 6,218(2) 7,512
294(1)
Retained earnings -- 2,535 (2,594)(4) --
59(3)
-------- -------- -------- --------
3,594 3,918 7,512
Less: stock subscription
receivable -- (5) -- -- -- (5)
-------- -------- -------- --------
Total stockholders' equity -- 3,594 3,918 7,512
-------- -------- -------- --------
$ -- $ 17,998 $ 3,918 $ 21,916
======== ======== ======== ========
</TABLE>
See notes to unaudited pro forma condensed consolidated balance sheet.
25
<PAGE>
NOTES TO UNAUDITED PRO FORMA CONDENSED CONSOLIDATED BALANCE SHEET
(1) Reflects the gross proceeds from the Private Placement in June and July
1996 aggregating $300,000, net of approximately $6,000 of expenses, which
is to be used to pay a portion of the expenses related to this offering.
See "Description of Capital Stock."
(2) 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."
(3) Reflects the consummation of the Acquisition. See "Certain Transactions."
(4) Represents, as of March 31, 1996, the aggregate amount due from TDA to
Eagle for net cumulative cash advances. Upon the closing of the Public
Offering, a significant portion, if not all, of TDA's indebtedness to Eagle
will be dividended from 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."
(5) Amounts are less than $1,000.
26
<PAGE>
UNAUDITED PRO FORMA CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS
(in thousands, except share and per share amounts)
Year Ended June 30, 1995
--------------------------
Historical
--------------------------
Eagle Supply Eagle Pro Forma
Group, Inc.(5) Supply, Inc. Adjustments Pro Forma
-------------- ------------ ----------- ---------
Revenues $ -- $ 50,483 $ -- $ 50,483
Cost of Goods Sold -- 40,744 -- 40,744
-------- -------- -------- --------
Gross Profit -- 9,739 -- 9,739
-------- -------- -------- --------
Operating Expenses -- 8,147 400(1) 8,547
Intercompany Charges -- 759 36(2) 795
-------- -------- -------- --------
-- 8,906 436 9,342
-------- -------- -------- --------
Income from Operations -- 833 (436) 397
Interest Expense - Net -- (265) -- (265)
-------- -------- -------- --------
Income before Provision -- 568 (436) 132
for Income Taxes
Provision (Credit) for -- 215 (165)(3) 50
Income Taxes
-------- -------- -------- --------
Net Income (Loss) $ -- $ 353 $ (271) $ 82
======== ======== ======== ========
Pro Forma Income per Common
Share(4) $ .03
========
Pro Forma Weighted Average
Number of Common Shares
Outstanding(4) 2,600,000
=========
See notes to unaudited pro forma condensed
consolidated statements of operations.
27
<PAGE>
UNAUDITED PRO FORMA CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS
(in thousands, except share and per share amounts)
Nine Months Ended
March 31, 1996
---------------------------
Historical
---------------------------
Eagle Supply Eagle Pro Forma
Group, Inc.(5) Supply, Inc. Adjustments Pro Forma
-------------- ------------ ----------- ---------
Revenues $ -- $ 42,205 $ -- $ 42,205
Cost of Goods Sold -- 33,213 -- 33,213
-------- -------- -------- --------
Gross Profit -- 8,992 -- 8,992
-------- -------- -------- --------
Operating Expenses -- 6,515 300(1) 6,815
Intercompany Charges -- 569 27(2) 596
-------- -------- -------- --------
-- 7,084 327 7,411
-------- -------- -------- --------
Income from Operations -- 1,908 (327) 1,581
Interest Expense - Net -- (424) -- (424)
-------- -------- -------- --------
Income before Provision
for Income Taxes -- 1,484 (327) 1,157
Provision (Credit)
for Income Taxes -- 558 (124)(3) 434
-------- -------- -------- --------
Net Income (Loss) $ -- $ 926 $ (203) $ 723
======== ======== ======== ========
Pro Forma Income per
Common Share(4) $ .28
========
Pro Forma Weighted Average
Number of Common Shares
Outstanding(4) 2,600,000
=========
See notes to unaudited pro forma condensed
consolidated statements of operations.
28
<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.
(5) The Company was formed on May 1, 1996.
29
<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, 1995, 1994 and 1993 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, 1992 and 1991 and the
balance sheet data at June 30, 1993, 1992 and 1991 are derived from Eagle's
audited financial statements not included in this Prospectus. The selected
financial information presented below for the nine months ended March 31, 1996
and 1995 and as of March 31, 1996 are derived from Eagle's unaudited condensed
financial statements and the notes thereto appearing elsewhere herein, which
include, in the opinion of management, all adjustments, consisting only of
normal recurring adjustments necessary for a fair presentation of such
information for the interim periods presented. Results of operations for the
nine months ended March 31, 1996 are not necessarily indicative of results to be
expected for the year ended June 30, 1996. 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(5)
-----------------------
Nine
Year Months
Nine Months Ended Ended Ended
Year Ended June 30, March 31, June 30, March 31,
-------------------------------------------- ---------------------- --------- ----------
1995 1994 1993 1992 1991 1996 1995 1995 1996
---- ---- ---- ---- ---- ---- ---- ---- ----
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C>
Statement of Operations Data(1):
Revenues................ $50,483 $53,925 $66,552 $46,484 $42,013 $42,205 $35,410 $50,483 $42,205
Gross Profit............ 9,740 10,658 14,933 9,668 8,635 8,992 7,093 9,739 8,992
Income From Operations.. 833 743 4,159 2,070 1,472 1,908 737 397 1,581
Net Income.............. 353 464 2,622 1,334 956 925 386 82 723
Pro Forma Net Income Per
Share................... $ .14 $ .36 $ .15 $ .03 $ .28
======= ====== ====== ====== ======
Pro Forma Weighted Average
Number of Shares Outstanding(2) 2,600,000 2,600,000 2,600,000 2,600,000 2,600,000
========= ========= ========= ========= =========
</TABLE>
30
<PAGE>
<TABLE>
<CAPTION>
June 30, March 31, 1996
-------------------------------------------------- ----------------------------------------
1995 1994 1993 1992 1991 Actual As Adjusted(3) Pro Forma(4)
---- ---- ---- ---- ---- ------ -------------- -------------
<S> <C> <C> <C> <C> <C> <C> <C> <C>
Balance Sheet Data(1):
Working Capital ............ $ 5,665 $ 4,785 $ 5,963 $ 5,109 $ 4,394 $ 5,574 $ 6,512 $12,086
Total Assets ............... 17,831 12,947 17,190 12,582 11,786 17,998 6,512 21,916
Long-Term Debt ............. 6,290 -- -- -- -- 6,071 -- 6,071
Total Liabilities .......... 14,338 9,385 13,450 10,136 9,340 14,404 -- 14,404
Stockholders' Equity ....... 3,493 3,562 3,720 2,447 2,446 3,594 6,512 7,512
</TABLE>
- ----------
(1) Historical operating and balance sheet data was derived from the financial
statements of Eagle because the Company was organized in May 1996 and has
conducted no business activities 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" 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.
31
<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. In
connection with the Acquisition, TDA will be issued an additional 200,000 shares
of the Company's Common Stock valued at the per share initial public offering
price of $5.00 per share. 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
Nine Month Period Ended March 31, 1996 Compared to Nine Month
Period Ended March 31, 1995
Revenues of Eagle during the nine-month period ended March 31, 1996
increased by approximately $6,795,000 (19.2%) compared to the 1995 nine-month
period. This increase was primarily due to revenues in the aggregate amount of
approximately $1,561,000 generated from new distribution centers opened during
Fiscal 1996, improvement in business in market areas served by seasoned
distribution centers, and additional business resulting from Hurricane Opal. The
1995 nine-month period includes revenues of
32
<PAGE>
approximately $3,444,000 from a distribution center that was sold as of June 30,
1995.
Cost of goods sold increased between the 1996 and 1995 nine-month periods
at a lesser rate than the increase in revenues between these nine-month periods.
Accordingly, cost of goods sold as a percentage of revenues decreased to 78.7%
in the nine-month period ended March 31, 1996 from 80% in the 1995 period, and,
accordingly, gross profit as a percentage of revenues increased to 21.3% in the
nine-month period ended March 31, 1996 from 20% in the 1995 period. This
increase in gross profit margin may be attributed primarily to the increase in
the 1996 period 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 increased by approximately $729,000 (11.5%) between the
1996 and 1995 nine-month periods at a lesser rate than the increase in revenues
between these nine-month periods. Operating expenses in the 1995 nine-month
period includes approximately $803,000 of operating expenses attributable to the
branch that was sold as of June 30, 1995; and the 1996 nine-month period
includes approximately $463,000 of start-up costs and expenses attributable to
new distribution center operations and increased operating expenses in the
aggregate amount of approximately $1,076,000 comprised primarily of payroll and
related costs and transportation expenses directly related to the increase in
business in the 1996 period. Operating expenses as a percentage of revenues were
16.8% in the 1996 period compared to 17.9% in the 1995 period.
Interest expense increased by approximately $304,000 between the 1996 and
1995 nine-month periods. Interest expense in the 1995 period is for less than a
full nine months since borrowings under Eagle's revolving credit facility
commenced in December 1994. (See Liquidity and Capital Resources below.)
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.
Cost of goods sold decreased between the fiscal years 1995 and 1994 at a
lesser rate than the decrease in revenues between these
33
<PAGE>
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 below.)
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.
34
<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, 1995 and
1994.) TDA has guaranteed the obligations of Eagle under the Loan Agreement. At
March 31, 1996 and June 30, 1995, Eagle's borrowings under the revolving credit
facility were $6,071,110 and $6,290,453, respectively.
Eagle's working capital was approximately $5,574,000 at March 31, 1996
compared to $5,665,000 at June 30, 1995. At March 31, 1996, Eagle's current
ratio was 1.68 to 1 compared to 1.71 to 1 at June 30, 1995.
During the nine-month period ended March 31, 1996, cash flows provided by
operations approximated $1,009,000. Such amount consisted primarily of net
income ($925,000), depreciation and amortization ($370,000), decreased levels of
accounts and notes receivables ($1,128,000), increased levels of trade accounts
payable ($259,000), a net decrease in amounts due from parent and affiliated
companies ($283,000), offset by an increase in inventories ($1,887,000). 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 $633,000 and $340,000 during the
nine-month period ended March 31, 1996 and fiscal year ended June 30, 1995,
respectively. The management of Eagle does not
35
<PAGE>
anticipate a significant increase in such expenditures in the next twelve
months.
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 Change
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.
36
<PAGE>
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, have earned approximately $2,000,000 in
pre-tax income and have had gross revenues of not less than $50,000,000 during
its Fiscal 1996 year. See "Certain Transactions." Eagle, which was founded in
Florida in 1905, distributes roofing supplies and related products to
contractors and sub-contractors 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 year and Nine Months 1996, Eagle had revenues of
$50,483,469 and $42,205,353, respectively, and net income of $352,589 and
$925,470, 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 multi-regional
distributors and a large, national multi-branch distribu-
37
<PAGE>
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 intends to provide expansion capital, if necessary, and administrative
and management services to acquired companies.
Although the Company 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 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.
Eagle's Business
Eagle distributes roofing supplies and related products to contractors and
sub-contractors engaged in commercial and residential roofing repair and the
construction of new residential and
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commercial properties using its own direct sales force. 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 49%, 38% and 13%,
respectively, of Eagle's sales volume for the nine months ended March 31, 1996
were attributable to the residential roofing, commercial roofing and roofing
sheet metal markets, respectively. The reduction in metal sales during the nine
months ended March 31, 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.
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
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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 and profit margins, and for creating his or her 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.
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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 13% and 19% of Eagle's
sales during Fiscal 1995 and Nine Months 1996, respectively. During Fiscal 1995
and Nine Months 1996, three other vendors products accounted for an aggregate of
approximately 15% and 16%, 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. 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
"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 Nine
Months 1996.
Competition
Eagle currently faces its principal competition in the wholesale
distribution of roofing supplies from relatively smaller distributors but also
faces competition from branch locations of 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.
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
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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.
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 signifi-
cant 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 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 "Manage-
ment" 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.
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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(2)
- ----------
(1) See "Certain Transactions."
(2) Eagle's present Mobile, Alabama distribution center is in the process of
being relocated to a nearby site to be purchased by a TDA subsidiary and leased
to Eagle. The lease for this facility is presently on a month to month basis.
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. 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
Mobile, Alabama 24,000 $ 65,000
Montgomery, Alabama 24,000 $ 44,000
Panama City, Florida 15,000 $ 60,000
Fort Walton Beach, Florida 8,000 $ 36,000
Crystal River, Florida 12,600 $ 42,000
Lakeland, Florida 13,000 $ 57,000
Tallahassee, Florida 15,000 $ 45,000
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The foregoing leases expire on various dates through 1999. The leases
include renewal options and provide for the payment of taxes and other occupancy
costs.
Eagle also remains obligated for rental payments under a lease expiring on
May 1, 1999 for its distribution facility formerly 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."
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, Trea-
surer, Secretary and a Director
Thomas W. Havnes 65 President
Donald E. Morris 50 Vice President-Operations
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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 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
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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.
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.
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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, Executive Vice
President, Chief Financial Officer, Treasurer, Secretary and a Director of the
Company.
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
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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 has 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 failure to reappoint either of them to
his positions, 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
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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 _______, 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 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
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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.
All of such options will have a term of ten years and will vest over various
periods of time but not at a rate greater than 20% per year. 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
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
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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, 25,000,
10,000 and 5,000 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.
(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. 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.
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
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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> <C>
TDA Industries, Inc. (1)(2) 2,200,000(2) 84.6% 53.7%
Douglas P. Fields (1)(2) 2,200,000(2)(3) 84.6% 53.7%
Frederick M. Friedman (1)(2) 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) 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%
* Denotes less than 1%
</TABLE>
- ----------
(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, 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."
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TDA and each of Messrs. Fields and Friedman may be deemed to be a
"promoter" of the Company as such term is defined under the federal securities
laws.
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, have earned
approximately $2,000,000 in pre-tax income during Fiscal 1996, and have had
gross revenues of not less than $50,000,000 during Fiscal 1996. 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 from 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.
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 $636,000 and $710,000 during Fiscal 1994 and Fiscal
1995, respec-
54
<PAGE>
tively. The Company 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 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, 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 in April 1999. Subsequently, 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. See "Business" and Financial Statements and
the notes thereto.
Eagle transferred its Pensacola, Florida premises to TDA as a dividend,
said premises having originally been purchased by Eagle from an unrelated third
party 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 in March 1997. This property was also
transferred by TDA to a wholly-owned subsidiary. Eagle remains liable for the
payments under this mortgage. 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 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, 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.
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<PAGE>
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 Nine Months 1996, Eagle made dividend payments to
TDA of $421,535 and $824,510, respectively. 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 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.
In May 1996, the Company sold 2,000,000 shares of its Common Stock to TDA
for $200. In June 1996, the Company sold 100,000 shares of its Common Stock to
Steven R. Andrews, a Director of the Company, for $10. In connection with the
Acquisition, TDA will be issued an additional 200,000 shares of the Company's
Common Stock.
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.
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 signifi-
56
<PAGE>
cant 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. See "Management."
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 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
57
<PAGE>
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.
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
58
<PAGE>
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 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
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<PAGE>
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 shall be determined by the closing 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 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. 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 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.
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<PAGE>
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 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 twelve months, respectively, from the date of this Prospectus, any
shares of the Company's Common Stock owned by them on the date hereof 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
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<PAGE>
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 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.
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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.
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
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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 $8.00 per
share of Common Stock (160% of the public offering price) and $.20 per
Underlying Warrant (160% 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 $8.00 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.
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
64
<PAGE>
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 completion of this 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,
consolidation or other such transaction which the Underwriter has brought to the
Company during a period of five 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.
65
<PAGE>
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
of Common Stock Number of Shares Warrants
Beneficially of Common Stock Registered
Selling Securityholder Owned(*) Registered 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
twelve months from the date of this Prospectus, an aggregate of 300,000 shares
of Common Stock, 300,000 Warrants and 300,000 shares of Common Stock underlying
said Warrants without the prior written consent of the Underwriter.
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
66
<PAGE>
and intermediaries through whom such securities are sold may be 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 May 1, 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, 1995, and 1994 and
the statements of operations , shareholder's equity and cash flows for each of
the years in the three year period ended June 30, 1995 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.
67
<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.
68
<PAGE>
INDEX TO FINANCIAL STATEMENTS
Page
----
EAGLE SUPPLY GROUP, INC.
INDEPENDENT AUDITORS' REPORT F-2
Balance Sheet at May 1, 1996 F-3
Notes to Balance Sheet at May 1, 1996 F-4
EAGLE SUPPLY, INC.
INDEPENDENT AUDITORS' REPORT F-7
Balance Sheets at June 30, 1995 and 1994 F-8
Statements of Operations for the Years Ended
June 30, 1995, 1994 and 1993 F-9
Statements of Shareholder's Equity for the Years Ended
June 30, 1995, 1994 and 1993 F-10
Statements of Cash Flows for the Years Ended
June 30, 1995, 1994 and 1993 F-11
Notes to Financial Statements for the Years Ended
June 30, 1995, 1994 and 1993 F-12
(Unaudited) Condensed Balance Sheet at March 31, 1996 F-17
(Unaudited) Condensed Statements of Operations and
Retained Earnings for the Nine Months Ended
March 31, 1996 and 1995 F-18
(Unaudited) Condensed Statements of Cash Flows for the
Nine Months Ended March 31, 1996 and 1995 F-19
(Unaudited) Notes to Condensed Financial Statements for the
Nine Months Ended March 31, 1996 and 1995 F-20
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 May 1, 1996 (inception). This financial statement is the
responsibility of the Company's management. Our responsibility is to express an
opinion on this financial statement 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 balance sheet is free of material misstatement. An
audit includes examining, on a test basis, evidence supporting the amounts and
disclosures in the balance sheet. An audit also includes assessing the
accounting principles used and significant estimates made by management, as well
as evaluating the overall balance sheet presentation. We believe that our audit
provides a reasonable basis for our opinion.
In our opinion, such balance sheet presents fairly, in all material respects,
the financial position of Eagle Supply Group, Inc. as of May 1, 1996 (inception)
in conformity with generally accepted accounting principles.
Deloitte & Touche LLP
Tampa, Florida
August 8, 1996
F - 2
<PAGE>
EAGLE SUPPLY GROUP, INC.
BALANCE SHEET
MAY 1, 1996
- --------------------------------------------------------------------------------
ASSETS
TOTAL $ --
=======
LIABILITIES AND STOCKHOLDERS' EQUITY
LIABILITIES $ --
-------
STOCKHOLDERS' EQUITY:
Preferred stock, $.0001 par value per share,
2,000,000 authorized; none issued and outstanding --
Common stock, $.0001 par value per share, 15,000,000
authorized; 2,100,000 shares subscribed for 210
-------
Less: Stock subscriptions receivable (210)
-------
Total stockholders' equity --
-------
TOTAL $ --
=======
See notes to balance sheet.
F - 3
<PAGE>
EAGLE SUPPLY GROUP, INC.
NOTES TO BALANCE SHEET
MAY 1, 1996 (INCEPTION)
- --------------------------------------------------------------------------------
1. BASIS OF PRESENTATION AND SIGNIFICANT ACCOUNTING POLICIES
Business Description - Eagle Supply Group, Inc. (the "Company") was
recently 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 will adopt 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
F - 4
<PAGE>
No. 25 and will disclose the impact of the new standard in the Notes to
Financial Statements at June 30, 1996.
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, net of sublease income of approximately $200,000
for these facilities, including taxes and other occupancy costs, aggregated
approximately $710,000, $636,000 and $645,000 in fiscal 1995, 1994 and
1993, 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 of the company, is also a director of TDA.
3. STOCKHOLDERS' EQUITY
Initial Capitalization - In May and June 1996, the Company issued 2,000,000
shares of common stock to TDA for a subscription price of $200 and 100,000
shares of common stock to a director for a subscription price of $10. Such
shares were previously subscribed for.
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 effect and the common stock is qualified for sale or
exempt from qualification under applicable state
F - 5
<PAGE>
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. (the "Underwriter") 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 (the "Warrants") (collectively the
"Securities"). Such Securities are to be separately offered and are
separately transferable at any time from the effective date of the
Offering. 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.
******
F - 6
<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,
1995 and 1994, and the related statements of operations, shareholder's equity
and cash flows for each of the three years in the period ended June 30, 1995.
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, 1995 and
1994 and the results of its operations and its cash flows for each of the three
years in the period ended June 30, 1995, in conformity with generally accepted
accounting principles.
Deloitte & Touche LLP
Tampa, Florida
September 6, 1995
F - 7
<PAGE>
EAGLE SUPPLY, INC.
(A Wholly-Owned Subsidiary of TDA Industries, Inc.)
BALANCE SHEETS
JUNE 30, 1995 AND 1994
- --------------------------------------------------------------------------------
ASSETS 1995 1994
CURRENT ASSETS:
Cash and cash equivalents $ 698,132 $ 457,640
Accounts and notes receivable - trade (net of
allowance for doubtful accounts - 1995 -
$751,000; 1994 - $677,000) 8,761,145 7,161,850
Inventories 3,519,462 3,155,934
Deferred tax asset (Note 5) 297,750 267,362
Other current assets 325,467 534,570
----------- -----------
Total current assets 13,601,956 11,577,356
DUE FROM PARENT AND AFFILIATED COMPANIES
(Notes 3 and 4) 3,121,475 --
IMPROVEMENTS AND EQUIPMENT (net of accumulated
depreciation and amortization) (Notes 2 and 4) 1,107,507 1,370,097
----------- -----------
$17,830,938 $12,947,453
=========== ===========
LIABILITIES AND SHAREHOLDER'S EQUITY
CURRENT LIABILITIES:
Accounts payable $ 7,454,011 $ 6,442,984
Accrued expenses and other current liabilities 482,639 349,337
----------- -----------
Total current liabilities 7,936,650 6,792,321
LONG-TERM DEBT (Note 3) 6,290,453 --
DUE TO PARENT AND AFFILIATED COMPANIES
(Notes 3 and 4) -- 2,491,159
DEFERRED TAX LIABILITY (Note 5) 110,544 101,736
----------- -----------
Total liabilities 14,337,647 9,385,216
----------- -----------
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
Additional paid-in capital 1,000,000 1,000,000
Retained earnings 2,433,991 2,502,937
----------- -----------
Total shareholder's equity 3,493,291 3,562,237
----------- -----------
$17,830,938 $12,947,453
=========== ===========
See notes to financial statements.
F - 8
<PAGE>
EAGLE SUPPLY, INC.
(A Wholly-Owned Subsidiary of TDA Industries, Inc.)
<TABLE>
<CAPTION>
STATEMENTS OF OPERATIONS
YEARS ENDED JUNE 30, 1995, 1994 AND 1993
- ----------------------------------------------------------------------------------------------
1995 1994 1993
<S> <C> <C> <C>
REVENUES $ 50,483,469 $ 53,925,373 $ 66,552,083
COST OF SALES 40,743,901 43,267,360 51,619,292
------------ ------------ ------------
9,739,568 10,658,013 14,932,791
------------ ------------ ------------
OPERATING EXPENSES, including a provision
for doubtful accounts of $74,049, $64,141 and
$121,453 in 1995, 1994 and 1993, respectively
(Notes 4, 6 and 7) 8,147,086 9,228,624 10,078,115
INTERCOMPANY CHARGES (Note 4) 759,368 686,011 695,205
------------ ------------ ------------
8,906,454 9,914,635 10,773,320
------------ ------------ ------------
INCOME FROM OPERATIONS 833,114 743,378 4,159,471
------------ ------------ ------------
OTHER INCOME (EXPENSE):
Interest income 22,511 28,578 39,468
Interest expense (Note 3) (288,036) (33,686) --
------------ ------------ ------------
(265,525) (5,108) 39,468
------------ ------------ ------------
INCOME BEFORE PROVISION FOR
INCOME TAXES 567,589 738,270 4,198,939
PROVISION FOR INCOME TAXES (Note 5) 215,000 274,000 1,577,000
------------ ------------ ------------
NET INCOME $ 352,589 $ 464,270 $ 2,621,939
============ ============ ============
</TABLE>
See notes to financial statements.
F - 9
<PAGE>
EAGLE SUPPLY, INC.
(A Wholly-Owned Subsidiary of TDA Industries, Inc.)
<TABLE>
<CAPTION>
STATEMENTS OF SHAREHOLDER'S EQUITY
YEARS ENDED JUNE 30, 1995, 1994 AND 1993
- ---------------------------------------------------------------------------------------------------------
Additional
Common Shares Paid-In Retained
Shares Amount Capital Earnings Total
<S> <C> <C> <C> <C> <C>
BALANCE, JULY 1, 1992 593 $ 59,300 $ -- $ 2,387,545 $ 2,446,845
Capital contribution from Parent -- -- 1,000,000 -- 1,000,000
Net income -- -- -- 2,621,939 2,621,939
Dividend paid to Parent -- -- -- (2,348,572) (2,348,572)
--- -------- ----------- ----------- -----------
BALANCE, JUNE 30, 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
=== ======== =========== =========== ===========
</TABLE>
See notes to financial statements.
F - 10
<PAGE>
EAGLE SUPPLY, INC.
(A Wholly-Owned Subsidiary of TDA Industries, Inc.)
<TABLE>
<CAPTION>
STATEMENTS OF CASH FLOWS
YEARS ENDED JUNE 30, 1995, 1994 AND 1993
- -------------------------------------------------------------------------------------------------------------
1995 1994 1993
<S> <C> <C> <C>
CASH FLOWS FROM OPERATING ACTIVITIES:
Net income $ 352,589 $ 464,270 $ 2,621,939
Adjustments to reconcile net income to net cash (used in)
provided by operating activities:
Depreciation and amortization 532,906 681,746 518,762
Deferred income taxes (21,580) (35,343) (94,512)
Increase in allowance for doubtful accounts 74,049 64,141 121,453
(Gain) loss on sale of equipment (29,561) (2,140) 4,498
Changes in operating assets and liabilities:
(Increase) decrease in accounts and notes receivable (1,673,344) 2,168,199 (2,233,919)
(Increase) decrease in inventories (363,528) 2,324,336 (1,614,295)
Decrease (increase) in other current assets 209,103 (210,584) (105,619)
Increase (decrease) in accounts payable 1,011,027 (2,575,535) 2,809,954
Increase (decrease) in accrued expenses and other
current liabilities 133,302 (297,862) 281,360
(Increase) decrease in due (to) from Parent and
affiliated companies - net (5,612,634) (1,423,205) 317,425
----------- ----------- -----------
Net cash (used in) provided by operating activities (5,387,671) 1,158,023 2,627,046
----------- ----------- -----------
CASH FLOWS FROM INVESTING ACTIVITIES:
Capital expenditures (339,628) (600,330) (1,217,215)
Proceeds from sale of equipment 98,873 90,685 53,570
----------- ----------- -----------
Net cash used in investing activities (240,755) (509,645) (1,163,645)
----------- ----------- -----------
CASH FLOWS FROM FINANCING ACTIVITIES:
Proceeds from long-term debt - net 6,290,453 -- --
Capital contribution from Parent -- -- 1,000,000
Dividends paid to Parent (421,535) (622,245) (2,348,572)
----------- ----------- -----------
Net cash provided by (used in) financing activities 5,868,918 (622,245) (1,348,572)
----------- ----------- -----------
NET INCREASE IN CASH AND CASH EQUIVALENTS 240,492 26,133 114,829
CASH AND CASH EQUIVALENTS, BEGINNING OF YEAR 457,640 431,507 316,678
----------- ----------- -----------
CASH AND CASH EQUIVALENTS, END OF YEAR $ 698,132 $ 457,640 $ 431,507
=========== =========== ===========
SUPPLEMENTAL DISCLOSURE OF CASH FLOW INFORMATION:
Cash paid during the year for interest $ 288,036 $ 33,686 $ --
=========== =========== ===========
Income taxes paid to Parent $ 215,000 $ 274,000 $ 1,577,000
=========== =========== ===========
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 - 11
<PAGE>
EAGLE SUPPLY, INC.
(A Wholly-Owned Subsidiary of TDA Industries, Inc.)
NOTES TO FINANCIAL STATEMENTS
YEARS ENDED JUNE 30, 1995, 1994 AND 1993
- --------------------------------------------------------------------------------
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 $527,000, $557,000 and
$658,000 for fiscal 1995, 1994 and 1993, respectively, and income before
provision for income taxes would have decreased by approximately $30,000
and $101,000 in fiscal 1995 and 1994, respectively, and increased by
$170,000 in fiscal 1993.
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.
F - 12
<PAGE>
2. IMPROVEMENTS AND EQUIPMENT
The major classes of improvements and equipment are as follows:
June 30, Estimated
1995 1994 Useful Lives
Automotive equipment $2,318,504 $2,395,367 5 years
Furniture, fixtures and equipment 1,790,152 2,055,346 5-7 years
Leasehold improvements 515,374 360,702 10 years
---------- ----------
4,624,030 4,811,415
Less: Accumulated depreciation
and amortization 3,516,523 3,441,318
---------- ----------
$1,107,507 $1,370,097
========== ==========
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 $12,281,000 at June 30, 1995). 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 debt. The Company remains the primary obligor on the first
mortgage which had a balance due of $536,104 and $547,119 at June 30, 1995
and 1994, respectively.
The Company is liable on a real estate mortgage on property located in
Pensacola, Florida which had a balance due of $397,124 and $410,348 at June
30, 1995 and 1994, respectively, on property transferred to its Parent in
prior years. The mortgage is repayable in monthly payments of approximately
$4,800 through March 1997 and a balloon payment of approximately $361,000
due in March 1997.
During fiscal 1993, the Company's Parent increased its investment in the
Company by $1,000,000.
F - 13
<PAGE>
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 leases from a subsidiary of its Parent on a month to month basis.
Rent expense for these facilities, net of sublease income of approximately
$200,000 including taxes and other occupancy costs, aggregated
approximately $710,000, $636,000 and $645,000 in fiscal 1995, 1994 and
1993, 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
1996 $ 710,000
1997 710,000
1998 710,000
1999 710,000
2000 710,000
-----------
$ 3,550,000
===========
Fees of $50,000 have been charged to the Company by its Parent in each of
fiscal 1995, 1994 and 1993. Such fees represent audit fees and accounting
services incurred on behalf of the Company.
The following is a reconciliation of the activity in the Due from (to)
Parent and Affiliated Companies account for the periods presented:
Year Ended June 30,
1995 1994 1993
Balance, beginning of year $(2,491,159) $(3,914,364) $(3,596,939)
Intercompany charges for auditing and
accounting services (50,000) (50,000) (50,000)
Rent - net of sublease income (709,368) (636,011) (645,205)
Income taxes paid to Parent (215,000) (274,000) (1,577,000)
Dividends paid to Parent (421,535) (622,245) (2,348,572)
Capital contributions from Parent -- -- 1,000,000
Transfers of property to Parent 90,204 216,321 --
Cash advances - net 6,918,333 2,789,140 3,303,352
----------- ----------- -----------
Balance, end of year $ 3,121,475 $(2,491,159) $(3,914,364)
=========== =========== ===========
F - 14
<PAGE>
5. INCOME TAXES
Components of the provision for income taxes are as follows:
Year Ended June 30,
1995 1994 1993
Current:
Federal $ 203,131 $ 265,406 $ 1,431,623
State and local 33,449 43,937 239,889
Deferred (21,580) (35,343) (94,512)
----------- ----------- -----------
$ 215,000 $ 274,000 $ 1,577,000
=========== =========== ===========
A reconciliation of income taxes at the Federal statutory rate to amounts
provided is as follows:
Year Ended June 30,
1995 1994 1993
Tax provision at statutory rate $ 193,468 $ 250,588 $ 1,427,625
State and local income taxes 19,866 25,839 146,963
Other 1,666 (2,427) 2,412
----------- ----------- -----------
$ 215,000 $ 274,000 $ 1,577,000
=========== =========== ===========
Temporary differences which give rise to deferred tax assets and
liabilities are as follows:
June 30,
1995 1994
Deferred tax assets:
Reserve for bad debts $ 285,523 $ 257,384
Inventory capitalization 12,227 9,978
--------- ---------
297,750 267,362
Deferred tax liability:
Depreciation (110,544) (101,736)
--------- ---------
Net deferred tax asset $ 187,206 $ 165,626
========= =========
6. COMMITMENTS AND CONTINGENCIES
The Company is committed to unrelated parties for long-term leases for
property. The leases expire on various dates through 1999. The leases
include renewal options and provide for the payment of taxes and other
occupancy costs.
F - 15
<PAGE>
The approximate future minimum rental commitments under these leases are as
follows:
Year Ending
June 30,
1996 $ 271,000
1997 310,000
1998 132,000
1999 40,000
-----------
$ 753,000
===========
Rent expense, other than amounts paid to a subsidiary of the Company's
Parent (Note 4), amounted to approximately $191,000, $289,000 and $335,000
in fiscal 1995, 1994 and 1993, respectively, and includes certain occupancy
costs.
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 1995 or 1994. A contribution of
approximately $9,000 was made by the Company to the Plan in fiscal 1993.
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 of approximately
$1,230,000 attributable to the operations and disposition of two branches
located in South Florida, compared to income of approximately $1,256,000
from these two branches in fiscal 1993. Revenues from these two branches
were $6,705,000 and $19,364,000 for fiscal 1994 and 1993, respectively.
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.
******
F - 16
<PAGE>
EAGLE SUPPLY, INC.
(A Wholly-Owned Subsidiary of TDA Industries, Inc.)
CONDENSED BALANCE SHEET
MARCH 31, 1996
(Unaudited)
- --------------------------------------------------------------------------------
ASSETS
CURRENT ASSETS:
Cash and cash equivalents $ 30,368
Accounts and notes receivable - trade (net of allowance for
doubtful accounts of $655,000) 7,729,678
Inventories 5,406,507
Deferred tax asset 264,057
Other current assets 359,295
-----------
Total current assets 13,789,905
DUE FROM PARENT AND AFFILIATED COMPANIES 2,838,119
IMPROVEMENTS AND EQUIPMENT (net of accumulated depreciation
and amortization) 1,370,234
-----------
$17,998,258
===========
LIABILITIES AND SHAREHOLDER'S EQUITY
CURRENT LIABILITIES:
Accounts payable $ 7,713,110
Accrued expenses and other current liabilities 502,639
-----------
Total current liabilities 8,215,749
LONG-TERM DEBT 6,071,110
DEFERRED TAX LIABILITY 117,148
-----------
Total liabilities 14,404,007
-----------
SHAREHOLDER'S EQUITY:
Common Shares, $ 100 par value:
Authorized - 1,500 shares
Outstanding - 593 shares 59,300
Additional paid-in capital 1,000,000
Retained earnings 2,534,951
-----------
Total shareholder's equity 3,594,251
-----------
$17,998,258
===========
See notes to condensed financial statements.
F - 17
<PAGE>
EAGLE SUPPLY, INC.
(A Wholly-Owned Subsidiary of TDA Industries, Inc.)
CONDENSED STATEMENTS OF OPERATIONS AND RETAINED EARNINGS
(Unaudited)
- --------------------------------------------------------------------------------
Nine Months Ended
March 31,
1996 1995
REVENUES $ 42,205,353 $ 35,410,165
COST OF SALES 33,213,267 28,316,998
------------ ------------
8,992,086 7,093,167
------------ ------------
OPERATING EXPENSES 6,515,250 5,805,231
INTERCOMPANY CHARGES 569,076 550,447
------------ ------------
7,084,326 6,355,678
------------ ------------
INCOME FROM OPERATIONS 1,907,760 737,489
------------ ------------
OTHER INCOME (EXPENSE):
Interest income 15,582 17,203
Interest expense (439,872) (135,466)
------------ ------------
(424,290) (118,263)
------------ ------------
INCOME BEFORE PROVISION FOR INCOME TAXES 1,483,470 619,226
PROVISION FOR INCOME TAXES 558,000 233,000
------------ ------------
NET INCOME 925,470 386,226
RETAINED EARNINGS, BEGINNING OF PERIOD 2,433,991 2,502,937
DIVIDENDS PAID TO PARENT (824,510) (855,667)
------------ ------------
RETAINED EARNINGS, END OF PERIOD $ 2,534,951 $ 2,033,496
============ ============
See notes to condensed financial statements.
F - 18
<PAGE>
EAGLE SUPPLY, INC.
(A Wholly-Owned Subsidiary of TDA Industries, Inc.)
<TABLE>
<CAPTION>
CONDENSED STATEMENTS OF CASH FLOWS
(Unaudited)
- -------------------------------------------------------------------------------------------
Nine Months Ended
March 31,
1996 1995
<S> <C> <C>
CASH FLOWS FROM OPERATING ACTIVITIES:
Net income $ 925,470 $ 386,226
Adjustments to reconcile net income to net cash
provided by (used in) operating activities:
Depreciation and amortization 370,486 366,822
Deferred income taxes 40,297 (85,707)
(Decrease) increase in allowance for doubtful accounts (96,488) 239,187
Changes in operating assets and liabilities:
Decrease (increase) in accounts and notes receivable 1,127,955 (1,029,902)
Increase in inventories (1,887,045) (218,175)
(Increase) decrease in other current assets (33,828) 89,707
Increase (decrease) in accounts payable 259,099 (280,978)
Increase (decrease) in accrued expenses and
other current liabilities 20,000 (112,208)
Decrease (increase) in due (to) from Parent and
affiliated companies - net 283,356 (5,100,297)
----------- -----------
Net cash provided by (used in) operating activities 1,009,302 (5,745,325)
----------- -----------
CASH FLOWS FROM INVESTING ACTIVITIES -
Capital expenditures (633,213) (216,915)
----------- -----------
Net cash used in investing activities (633,213) (216,915)
----------- -----------
CASH FLOWS FROM FINANCING ACTIVITIES:
(Repayments) proceeds from long-term debt - net (219,343) 6,383,029
Dividends paid to Parent (824,510) (855,667)
----------- -----------
Net cash (used in) provided by financing activities (1,043,853) 5,527,362
----------- -----------
NET DECREASE IN CASH AND CASH EQUIVALENTS (667,764) (434,878)
CASH AND CASH EQUIVALENTS, BEGINNING OF PERIOD 698,132 457,640
----------- -----------
CASH AND CASH EQUIVALENTS, END OF PERIOD $ 30,368 $ 22,762
=========== ===========
SUPPLEMENTAL DISCLOSURE OF CASH FLOW
INFORMATION -
Cash paid during the period for interest $ 439,872 $ 135,466
=========== ===========
Income taxes paid to Parent $ 588,000 $ 233,000
=========== ===========
</TABLE>
See notes to condensed financial statements.
F - 19
<PAGE>
EAGLE SUPPLY, INC.
(A Wholly-Owned Subsidiary of TDA Industries, Inc.)
NOTES TO CONDENSED FINANCIAL STATEMENTS
NINE MONTHS ENDED MARCH 31, 1996 AND 1995
(Unaudited)
- --------------------------------------------------------------------------------
1. BASIS OF FINANCIAL STATEMENT PRESENTATION
The condensed financial statements of Eagle Supply, Inc. (the "Company"), a
wholly-owned subsidiary of TDA Industries, Inc. (the "Parent"), included
herein have been prepared by the Company, which is responsible for their
integrity and objectivity, without audit. In the opinion of management, all
adjustments, consisting of normal recurring adjustments, necessary for the
fair presentation of financial position, results of operations and cash
flows have been included. These condensed financial statements, which, to
the best of management's knowledge and belief, were prepared in accordance
with generally accepted accounting principles, should be read in
conjunction with the financial statements and notes thereto for the year
ended June 30, 1995. Operating results for the interim period are not
necessarily indicative of results for the entire year.
2. PROPOSED SALE OF THE COMPANY
The Company's Parent intends to sell the Company to a newly formed entity,
Eagle Supply Group, Inc. ("ESG"). ESG was organized on May 1, 1996 for the
purpose of acquiring, integrating and operating 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. The acquisition of the Company by ESG is
contingent upon the successful completion of an initial public offering of
1,500,000 shares of ESG common stock, par value $.0001 per share, and
1,500,000 redeemable common stock purchase warrants to purchase one share
of ESG common stock exercisable at $5.00 per share (subject to adjustment).
Upon consummation of the acquisition, the Company will constitute the sole
business operations of ESG until such time, if any, as ESG consummates
additional acquisitions.
Upon completion of the offering, a significant portion of the Parent's
indebtedness to the Company will be dividended from the Company to the
Parent, with the Company retaining $1,000,000 in net tangible book value.
******
F - 20
<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 .......................................................... 10
Dilution .............................................................. 19
Use of Proceeds ....................................................... 21
Capitalization ........................................................ 23
Unaudited Pro Forma Condensed
Consolidated Financial Statements .................................... 24
Selected Financial Information ........................................ 30
Management's Discussion and Analysis
of Financial Condition and Results
of Operations ........................................................ 32
Business .............................................................. 37
Management ............................................................ 44
Principal Stockholders ................................................ 52
Certain Transactions .................................................. 54
Description of Securities ............................................. 57
Shares Eligible for Future Sale ....................................... 61
Underwriting .......................................................... 62
Selling Securityholders ............................................... 65
Legal Matters ......................................................... 67
Experts ............................................................... 67
Additional Information ................................................ 68
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................... $ 7,481.24
NASD Filing Fee........................ (1)*
NASDAQ Listing and Filing Fees ........ 10,000.00
Printing and Engraving Expenses........ (1)*
Accounting Fees and Expenses........... (1)*
Legal Fees and Expenses................ (1)*
Blue Sky Fees and Expenses............. (1)*
Transfer and Warrant Agent
Fees and Expenses.................. (1)*
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 Com-
mon 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- $6,250.00
rities*
- --------------------------------------------------------------------------------
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 (2)
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 Registrant's Form of Lease to be entered into with wholly-owned
subsidiary of TDA (2)
10.9 Registrant's Stock Option Plan (1)
23.1 Consent of Gusrae, Kaplan & Bruno (to be included in
Exhibit 5.1) (2)
23.2 Consents of Deloitte & Touche LLP (1)
- ----------
(1) Filed herewith.
(2) To be Filed by Amendment.
II-5
<PAGE>
(b) Financial Statement Schedule
Schedule II -- Valuation and Qualifying Accounts
Allowance for Doubtful Accounts(1)
<TABLE>
<CAPTION>
=========================================================================================
Balance at Charged to
Beginning of Costs and Balance at
Year Expenses Deductions End of Year
- -----------------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
Year Ended
June 30, 1993 $491,733 $779,620 ($658,167) $613,186
- -----------------------------------------------------------------------------------------
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
=========================================================================================
</TABLE>
- ----------
(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 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 12th day of August, 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 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 August 12, 1996
- ------------------------- Directors, Chief Executive
Douglas P. Fields Officer and Director
(Principal Executive Officer)
/s/ Frederick M. Friedman Executive Vice President, August 12, 1996
- ------------------------- Treasurer, Secretary and
Frederick M. Friedman Director (Principal Financial
and Accounting Officer)
/s/ Steven R. Andrews Director August 12, 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 (2)
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 Registrant's Form of Lease to be entered into with wholly-owned
subsidiary of TDA (2)
10.9 Registrant's Stock Option Plan (1)
23.1 Consent of Gusrae, Kaplan & Bruno (to be included in
Exhibit 5.1) (2)
23.2 Consents of Deloitte & Touche LLP (1)
- ----------
(1) Filed herewith.
(2) To be Filed by Amendment.
Exhibit 1.1
EAGLE SUPPLY GROUP, INC.
1,500,000 Shares of Common Stock and
1,500,000 Common Stock Purchase Warrants
UNDERWRITING AGREEMENT
Boca Raton, Florida
_____________, 1996
Barron Chase Securities, Inc.
7700 West Camino Real, Suite 200
Boca Raton, Florida 33433
Gentlemen:
Eagle Supply Group, Inc. (the "Company"), on the basis of the
representations, warranties, covenants and conditions contained herein, hereby
proposes to issue and sell to Barron Chase Securities, Inc. (the "Underwriter"),
pursuant to the terms of this Underwriting Agreement (the "Agreement"), on a
"firm commitment" basis, 1,500,000 shares of Common Stock (the "Shares") at
$5.00 per Share and 1,500,000 Redeemable Common Stock Purchase Warrants (the
"Warrants") at $.125 per Warrant. The Shares and the Warrants are collectively
referred to as the "Securities". Each Warrant is exercisable to purchase one (1)
share of Common Stock (the "Common Stock") at $5.00 per share at any time during
the period between the Effective Date and three (3) years from the Effective
Date. The date upon which the Securities and Exchange Commission ("Commission")
shall declare the Registration Statement of the Company effective shall be the
"Effective Date". The Warrants are subject to redemption under certain
circumstances. In addition, the Company proposes to grant to the Underwriter the
option referred to in Section 2(b) to purchase all or any part of an aggregate
of 225,000 additional Shares and/or 225,000 additional Warrants (the "Option
Securities").
You have advised the Company that you desire to purchase the Securities,
and that you are authorized to execute this Agreement. The Company confirms the
agreements made by it with respect to the purchase of the Securities by the
Underwriter, as follows:
1. Representations and Warranties of the Company.
The Company represents and warrants to, and agrees with the Underwriter as
of the Effective Date (as defined above), the Closing Date (as hereinafter
defined) and the Option Closing Date (as hereinafter defined) that:
<PAGE>
(a) A registration statement (File No. 333-____) on Form S-1 relating to
the public offering of the Securities, including a preliminary form of the
prospectus, copies of which have heretofore been delivered to you, has been
prepared by the Company in conformity with the requirements of the Securities
Act of 1933, as amended (the "Act"), and the rules and regulations (the "Rules
and Regulations") of the Commission thereunder, and has been filed with the
Commission under the Act. The Company has prepared in the same manner and
proposes to file, prior to the Effective Date of such registration statement, an
additional amendment or amendments to such registration statement, including a
final form of Prospectus, copies of which shall be delivered to you.
"Preliminary Prospectus" shall mean each prospectus filed pursuant to the Rules
and Regulations under the Act prior to the Effective Date. The registration
statement (including all financial schedules and exhibits) as amended at the
time it becomes effective and the final prospectus included therein are
respectively referred to as the "Registration Statement" and the "Prospectus",
except that (i) if the prospectus first filed by the Company pursuant to Rule
424(b) of the Rules and Regulations shall differ from said prospectus as then
amended, the term "Prospectus" shall mean the prospectus first filed pursuant to
Rule 424(b), and (ii) if such registration statement or prospectus is amended or
such prospectus is supplemented, after the effective date of such registration
statement and prior to the Option Closing Date (as hereinafter defined), the
terms "Registration Statement" and "Prospectus" shall include such registration
statement and prospectus as so amended, and the term "Prospectus" shall include
the prospectus as so supplemented, or both, as the case may be.
(b) At the Effective Date and at all times subsequent thereto up to the
Option Closing Date, if any, and during such longer period as the Prospectus may
be required to be delivered in connection with sales by the Underwriter or
Selected Dealers: (i) the Registration Statement and Prospectus will in all
respects conform to the requirements of the Act and the Rules and Regulations;
and (ii) neither the Registration Statement nor the Prospectus will include any
untrue statement of a material fact or omit to state any material fact required
to be stated therein or necessary to make statements therein, in light of the
circumstances under which they are made, not misleading; provided, however, that
the Company makes no representations, warranties or agreement as to information
contained in or omitted from the Registration Statement or Prospectus in
reliance upon, and in conformity with, written information furnished to the
Company by the Underwriter specifically for use in the preparation thereof. It
is understood that the statements set forth in the Prospectus with respect to
stabilization, under the heading "Underwriting" and regarding the identity of
counsel to the Underwriter under the heading "Legal Matters" constitute the only
information furnished in writing by the Underwriter for inclusion in the
Prospectus.
2
<PAGE>
(c) Each of the Company and each subsidiary has been duly incorporated and
is validly existing as a corporation in good standing under the laws of the
jurisdiction of its incorporation, with full power and authority (corporate and
other) to own its properties and conduct its business as described in the
Prospectus and is duly qualified to do business as a foreign corporation and is
in good standing in all other jurisdictions in which the nature of its business
or the character or location of its properties requires such qualification,
except where failure to so qualify will not materially affect the Company's
business, properties or financial condition.
(d) The authorized, issued and outstanding securities of the Company as of
the date of the Prospectus is as set forth in the Prospectus under
"Capitalization"; all of the issued and outstanding securities of the Company
have been, or will be when issued as set forth in the Prospectus, duly
authorized, validly issued and fully paid and non-assessable; the issuances and
sales of all such securities complied in all material respects with applicable
Federal and state securities laws; the holders thereof have no rights of
rescission against the Company with respect thereto, and are not subject to
personal liability by reason of being such holders; none of such securities were
issued in violation of the preemptive rights of any holders of any security of
the Company or similar contractual rights granted by the Company; except as set
forth in the Prospectus, no options, warrants or other rights to purchase,
agreements or other obligations to issue, or agreements or other rights to
convert any obligation into, any securities of the Company have been granted or
entered into by the Company; and all of the securities of the Company, issued
and to be issued as set forth in the Registration Statement, conform to all
statements relating thereto contained in the Registration Statement and
Prospectus.
(e) The Shares are duly authorized, and when issued, delivered and paid
for pursuant to this Agreement, will be duly authorized, validly issued, fully
paid and non-assessable and free of preemptive rights of any security holder of
the Company. Neither the filing of the Registration Statement nor the offering
or sale of the Securities as contemplated in this Agreement gives rise to any
rights, other than those which have been waived or satisfied, for or relating to
the registration of any securities of the Company, except as described in the
Registration Statement.
The Warrants have been duly authorized and, when issued, delivered and
paid for pursuant to this Agreement, will have been duly authorized, issued and
delivered and will constitute valid and legally binding obligations of the
Company enforceable in accordance with their terms and entitled to the benefits
provided by the warrant agreement pursuant to which such Warrants are to be
issued (the "Warrant Agreement"), which will be substantially in
3
<PAGE>
the form filed as an exhibit to the Registration Statement. The shares of Common
Stock issuable upon exercise of the Warrants have been reserved for issuance and
when issued in accordance with the terms of the Warrants and Warrant Agreement,
will be duly and validly authorized, validly issued, fully paid and
non-assessable, free of pre-emptive rights and no personal liability will attach
to the ownership thereof. The Warrant exercise price and the Warrant exercise
period may not be changed or revised by the Company, without the prior written
consent of the Underwriter. The Warrant Agreement has been duly authorized and,
when executed and delivered pursuant to this Agreement, will have been duly
executed and delivered and will constitute the valid and legally binding
obligation of the Company enforceable in accordance with its terms.
The Common Stock Underwriter Warrants, the Warrant Underwriter Warrants,
the Underlying Warrants, the shares of Common Stock issuable upon exercise of
the Common Stock Underwriter Warrants, and the shares of Common Stock issuable
upon exercise of the Underlying Warrants (all as defined in the Underwriter's
Warrant Agreement described in Section 12 herein), have been duly authorized
and, when issued, delivered and paid for, will be validly issued, fully paid,
non-assessable, free of pre-emptive rights and no personal liability will attach
to the ownership thereof, and will constitute valid and legally binding
obligations of the Company enforceable in accordance with their terms and
entitled to the benefits provided by the Underwriter's Warrant Agreement.
(f) This Agreement, the Warrant Agreement, the Financial Advisory
Agreement, the Merger and Acquisition Agreement (the "M/A Agreement") and the
Underwriter's Warrant Agreement have been duly and validly authorized, executed
and delivered by the Company, and assuming due execution of this Agreement by
the other party hereto, constitute valid and binding obligations of the Company
enforceable against the Company in accordance with their terms, except as
enforceability may be limited by bankruptcy, insolvency or other laws affecting
the rights of creditors generally. The Company has full power and lawful
authority to authorize, issue and sell the Securities to be sold by it hereunder
on the terms and conditions set forth herein, and no consent, approval,
authorization or other order of any governmental authority is required in
connection with such authorization, execution and delivery or with the
authorization, issue and sale of the Securities or the securities to be issued
pursuant to the Underwriter's Warrant Agreement, except such as may be required
under the Act or state securities laws, or as otherwise have been obtained.
(g) Except as described in the Prospectus, neither the Company nor any
subsidiary is in material violation, breach of or default under, and
consummation of the transactions herein contemplated and the fulfillment of the
terms of this Agreement will not conflict with, or result in a breach of, or
constitute a
4
<PAGE>
material default under, or result in the creation or imposition of any lien,
charge or encumbrance upon any of the property or assets of the Company or each
subsidiary or any of the terms or provisions of any indenture, mortgage, deed of
trust, loan agreement or other agreement or instrument to which the Company or
each subsidiary is a party or by which the Company or each subsidiary may be
bound or to which any of the property or assets of the Company or each
subsidiary is subject, nor will such action result in any material violation of
the provisions of the articles of incorporation or by-laws of the Company or
each subsidiary, as amended, or any statute or any order, rule or regulation
applicable to the Company or subsidiary of any court or of any regulatory
authority or other governmental body having jurisdiction over the Company or
each subsidiary.
(h) Subject to the qualifications stated in the Prospectus, the Company
and each subsidiary have good and marketable title to all properties and assets
described in the Prospectus as owned by each of them, free and clear of all
liens, charges, encumbrances or restrictions, except such as are not materially
significant or important in relation to its business; all of the material leases
and subleases under which the Company or each subsidiary is the lessor or
sublessor of properties or assets or under which the Company or each subsidiary
holds properties or assets as lessee or sublessee as described in the Prospectus
are in full force and effect, and, except as described in the Prospectus,
neither the Company nor each subsidiary is in default in any material respect
with respect to any of the terms or provisions of any of such leases or
subleases, and no claim has been asserted by anyone adverse to rights of the
Company or each subsidiary as lessor, sublessor, lessee, or sublessee under any
of the leases or subleases mentioned above, or affecting or questioning the
right of the Company or each subsidiary to continued possession of the leased or
subleased premises or assets under any such lease or sublease except as
described or referred to in the Prospectus; and the Company and each subsidiary
owns or leases all such properties described in the Prospectus as are necessary
to its operations as now conducted and, except as otherwise stated in the
Prospectus, as proposed to be conducted as set forth in the Prospectus.
(i) Deloitte & Touche, LLP, who have given their reports on certain
financial statements filed and to be filed with the Commission as part of the
Registration Statement, and which are included in the Prospectus, are with
respect to the Company, independent public accountants as required by the Act
and the Rules and Regulations.
(j) The financial statements and schedules, together with related notes,
set forth in the Prospectus and the Registration Statement present fairly the
financial position and results of operations and changes in financial position
of the Company on the basis stated in the Registration Statement, at the
respective dates
5
<PAGE>
and for the respective periods to which they apply. Said statements and related
notes and schedules have been prepared in accordance with generally accepted
accounting principles applied on a basis which is consistent during the periods
involved. The Company's internal accounting controls and procedures are
sufficient to cause the Company and each subsidiary to prepare financial
statements which comply in all material respects with generally accepted
accounting principles applied on a basis which is consistent during the periods
involved. During the preceding five (5) year period, nothing has been brought to
the attention of the Company's management that would result in any reportable
condition relating to the Company's internal accounting procedures, weaknesses
or controls.
(k) Subsequent to the respective dates as of which information is set
forth in the Registration Statement and the Prospectus and to and including the
Option Closing Date, except as set forth in or contemplated by the Registration
Statement and the Prospectus, (i) neither the Company nor any subsidiary has
incurred and will not have incurred any material liabilities or obligations,
direct or contingent, and has not entered into and will not have entered into
any material transactions other than in the ordinary course of business and/or
as contemplated in the Registration Statement and the Prospectus; (ii) neither
the Company nor any subsidiary has and will not have paid or declared any
dividends or have made any other distribution on its capital stock; (iii) there
has not been any change in the capital stock of, or any incurrence of long-term
debt by, the Company or any subsidiary; (iv) neither the Company nor any
subsidiary has issued any options, warrants or other rights to purchase the
capital stock of the Company or any subsidiary; and (v) there has not been and
will not have been any material adverse change in the business, financial
condition or results of operations of the Company or any subsidiary, or in the
book value of the assets of the Company or any subsidiary, arising for any
reason whatsoever.
(l) Except as set forth in the Prospectus, there is not pending or, to the
knowledge of the Company or any subsidiary, threatened, any material action,
suit, proceeding, inquiry, arbitration or investigation against the Company or
any subsidiary, or any of the officers or directors of the Company or any
subsidiary, or any material action, suit, proceeding, inquiry, arbitration, or
investigation, which might result in any material adverse change in the
condition (financial or other), business prospects, net worth, or properties of
the Company or any subsidiary.
(m) Except as disclosed in the Prospectus, each of the Company and each
subsidiary has filed all necessary federal, state and foreign income and
franchise tax returns and has paid all taxes shown as due thereon; and there is
no tax deficiency which has been or to the knowledge of the Company might be
asserted against the
6
<PAGE>
Company or any subsidiary that has not been provided for in the financial
statements.
(n) Except as set forth in the Prospectus, each of the Company and each
subsidiary has sufficient licenses, permits and other governmental
authorizations currently required for the conduct of its business or the
ownership of its property as described in the Prospectus and is in all material
respects in compliance therewith and owns or possesses adequate right to use all
material patents, patent applications, trademarks, service marks, trade-names,
trademark registrations, service mark registrations, copyrights, and licenses
necessary for the conduct of such business and has not received any notice of
conflict with the asserted rights of others in respect thereof. To the best of
the Company's knowledge, none of the activities or business of the Company or
any subsidiary are in violation of, or cause the Company or any subsidiary to
violate, any law, rule, regulation or order of the United States, any state,
county or locality, or of any agency or body of the United States or of any
state, county or locality, the violation of which would have a material adverse
impact upon the condition (financial or otherwise), business, property,
prospective results of operations, or net worth of the Company and any
subsidiary.
(o) Neither the Company nor any subsidiary has, directly or indirectly, at
any time (i) made any contributions to any candidate for political office, or
failed to disclose fully any such contribution, in violation of law or (ii) made
any payment to any state, federal or foreign governmental officer or official,
or other person charged with similar public or quasi-public duties, other than
payments or contributions required or allowed by applicable law.
(p) On the Closing Dates (herein defined) all transfer or other taxes
(including franchise, capital stock or other tax, other than income taxes,
imposed by any jurisdiction) if any, which are required to be paid in connection
with the sale and transfer of the Securities to the Underwriter hereunder will
have been fully paid or provided for by the Company and all laws imposing such
taxes will have been fully complied with.
(q) All contracts and other documents which are required to be described
in or filed as exhibits to the Registration Statement have been so described
and/or filed.
(r) Except as described in the Registration Statement and Prospectus, no
holders of Common Stock or of any other securities of the Company have the right
to include such Common Stock or other securities in the Registration Statement
and Prospectus.
(s) Except as set forth in or contemplated by the Registration Statement
and the Prospectus, neither the Company nor
7
<PAGE>
any subsidiary has any material contingent liabilities.
(t) The Company has no subsidiary corporations except as disclosed in the
Registration Statement and Prospectus, nor has it any equity interest in any
partnership, joint venture, association or other entity except as disclosed in
the Registration Statement or Prospectus. Except as described in the
Registration Statement and Prospectus, the Company owns all of the outstanding
securities of each of its subsidiaries.
(u) The Commission has not issued an order preventing or suspending the
use of any Preliminary Prospectus with respect to the offer and sale of the
Securities and each Preliminary Prospectus, as of its date, has conformed fully
in all material respects with the requirements of the Act and the Rules and
Regulations and did not include any untrue statement of a material fact or omit
to state a material fact necessary to make the statements therein not
misleading.
(v) Neither the Company, nor, to the Company's knowledge, any of its
officers, directors, employees or stockholders, have taken or will take,
directly or indirectly, any action designed to cause or result in, or which has
constituted or which might reasonably be expected to constitute, the
stabilization or manipulation of the price of any of the securities of the
Company.
(w) Item 15 of Part II of the Registration Statement accurately discloses
all unregistered securities sold by the Company within the three year period
prior to the date as of which information is presented in the Registration
Statement. All of such securities were sold in transactions which were exempt
from the registration provisions of the Act and not in violation of Section 5
thereof.
(x) Other than as set forth in the Prospectus, the Company has not entered
into any agreement pursuant to which any person is entitled, either directly or
indirectly, to compensation from the Company for services as a finder in
connection with the proposed offering, and the Company agrees to indemnify and
hold harmless the Underwriter against any losses, claims, damages or
liabilities, which shall include, but not be limited to, all costs to defend
against any such claim, so long as such claim arises out of agreements made or
allegedly made by the Company.
(y) Based upon written representations received by the Company, no
officer, director or five percent (5%) or greater stockholder of the Company or
any subsidiary has any direct or indirect affiliation or association with any
member of the National Association of Securities Dealers, Inc. ("NASD"), except
as disclosed to the Underwriter in writing, and no beneficial owner of the
Company's unregistered securities has any direct or indirect affiliation or
association with any NASD member except as disclosed
8
<PAGE>
to the Underwriter in writing. The Company will advise the Underwriter and the
NASD if any five percent (5%) or greater shareholder of the Company or any
subsidiary is or becomes an affiliate or associated person of an NASD member
participating in the distribution.
(z) The Company and each subsidiary is in compliance in all material
respects with all federal, state and local laws and regulations respecting the
employment of its employees and employment practices, terms and conditions of
employment and wages and hours relating thereto. There are no pending
investigations involving the Company or any subsidiary by the U.S. Department of
Labor, or any other governmental agency responsible for the enforcement of such
federal, state or local laws and regulations. There is no unfair labor practice
charge or complaint against the Company or any subsidiary pending before the
National Labor Relations Board or any strike, picketing, boycott, dispute,
slowdown or stoppage pending or to the knowledge of the Company, threatened
against or involving the Company or any subsidiary or any predecessor entity. No
question concerning representation exists respecting the employees of the
Company or any subsidiary and no collective bargaining agreement or modification
thereof is currently being negotiated by the Company or any subsidiary. No
grievance or arbitration proceeding is pending under any expired or existing
collective bargaining agreements of the Company or any subsidiary, if any.
(aa) Neither the Company nor any subsidiary maintains, sponsors nor
contributes to, nor is it required to contribute to, any program or arrangement
that is an "employee pension benefit plan", an "employee welfare benefit plan",
or a "multi-employer plan" as such terms are defined in Sections 3(2), 3(1) and
3(37), respectively, of the Employee Retirement Income Security Act of 1974, as
amended ("ERISA") ("ERISA Plans"). Neither the Company nor any subsidiary
maintained or contributed to a defined benefit plan, as defined in Section 3(35)
of ERISA.
(ab) Based upon written representations received from the officers and
directors of the Company and each subsidiary, except as disclosed in the
Prospectus, during the past five years, none of the officers or directors of the
Company or any subsidiary have been:
(1) Subject of a petition under the Federal bankruptcy laws or
any state insolvency law filed by or against them, or by a receiver,
fiscal agent or similar officer appointed by a court for their
business or property, or any partnership in which either or them was
a general partner at or within two years before the time of such
filing, or any corporation or business association of which either
of them was an executive officer at or within two years before the
time of such
9
<PAGE>
filing;
(2) Convicted in a criminal proceeding or a named subject of a
pending criminal proceeding (excluding traffic violations and other
minor offenses);
(3) The subject of any order, judgment, or decree not
subsequently reversed, suspended or vacated, of any court of
competent jurisdiction, permanently or temporarily enjoining either
of them from, or otherwise limiting, any of the following
activities:
(i) acting as a futures commission merchant, introducing
broker, commodity trading advisor, commodity pool operator,
floor broker, leverage transaction merchant, any other person
regulated by the Commodity Futures Trading Commission, or an
associated person of any of the foregoing, or as an investment
adviser, underwriter, broker or dealer in securities, or as an
affiliated person, director or employee of any investment
company, bank, savings and loan association or insurance
company, or engaging in or continuing any conduct or practice
in connection with any such activity;
(ii) engaging in any type of business
practice; or
(iii) engaging in any activity in connection with the
purchase or sale of any security or commodity or in connection
with any violation of Federal or State securities law or
Federal Commodity laws.
(4) The subject of any order, judgment or decree, not
subsequently reversed, suspended or vacated of any Federal or State
authority barring, suspending or otherwise limiting for more than
sixty (60) days either of their right to engage in any activity
described in paragraph (3)(i) above, or be associated with persons
engaged in any such activity;
(5) Found by any court of competent jurisdiction in a civil
action or by the Securities and Exchange Commission to have violated
any Federal or State securities law, and the judgment in such civil
action or finding by the Commission has not been subsequently
reversed, suspended or vacated; or
(6) Found by a court of competent jurisdiction in a civil
action or by the Commodity Futures Trading Commission to have
violated any Federal Commodities Law,
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and the judgment in such civil action or finding by the Commodity
Futures Trading Commission has not been subsequently reversed,
suspended or vacated.
(ac) Based upon written representations received from the officers and
directors of the Company, each of the officers and directors of the Company has
reviewed the sections in the Prospectus relating to their biographical data and
equity ownership position in the Company, and all information contained therein
is true and accurate.
2. Purchase, Delivery and Sale of the Securities.
(a) Subject to the terms and conditions of this Agreement and upon the
basis of the representations, warranties and agreements herein contained, the
Company hereby agrees to issue and sell to the Underwriter an aggregate of
1,500,000 Shares at $4.50 per Share and 1,500,000 Warrants at $.1125 per Warrant
(the public offering price less ten percent (10%)), at the place and time
hereinafter specified. The price at which the Underwriter shall sell the
Securities to the public shall be $5.00 per Share and $.125 per Warrant.
Delivery of the Securities against payment therefor shall take place at
the offices of Barron Chase Securities, Inc., 7700 West Camino Real, Suite 200,
Boca Raton, Florida 33433 (or at such other place as may be designated by the
Underwriter) at 10:00 a.m., Eastern Time, on such date after the Registration
Statement has become effective as the Underwriter shall designate, but not later
than ten (10) business days (holidays excepted) following the first date that
any of the Securities are released to you, such time and date of payment and
delivery for the Securities being herein called the "Closing Date".
(b) In addition, subject to the terms and conditions of this Agreement,
and upon the basis of the representations, warranties and agreements herein
contained, the Company hereby grants an option to the Underwriter to purchase
all or any part of an aggregate of an additional 225,000 Shares and 225,000
Warrants at the same price per Share and Warrant as the Underwriter shall pay
for the Securities being sold pursuant to the provisions of subsection (a) of
this Section 2 (such additional Securities being referred to herein as the
"Option Securities"). This option may be exercised within thirty (30) days after
the Effective Date of the Registration Statement upon notice by the Underwriter
to the Company advising as to the amount of Option Securities as to which the
option is being exercised, the names and denominations in which the certificates
for such Option Securities are to be registered and the time and date when such
certificates are to be delivered. Such time and date shall be determined by the
Underwriter but shall not be later than ten (10) full business days after the
exercise of said option, nor in any event prior to the Closing Date, and such
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<PAGE>
time and date is referred to herein as the "Option Closing Date". Delivery of
the Option Securities against payment therefor shall take place at the offices
of the Underwriter. The Option granted hereunder may be exercised only to cover
overallotments in the sale by the Underwriter of the Securities referred to in
subsection (a) above. In the event the Company declares or pays a dividend or
distribution on its Common Stock, whether in the form of cash, shares of Common
Stock or any other consideration, prior to the Option Closing Date, such
dividend or distribution shall also be paid on the Option Closing Date.
(c) The Company will make the certificates for the Securities to be sold
hereunder available to you for inspection at least two (2) full business days
prior to the Closing Date at the offices of the Underwriter, and such
certificates shall be registered in such names and denominations as you may
request. Time shall be of the essence and delivery at the time and place
specified in this Agreement is a further condition to the obligations of the
Company to the Underwriter.
Definitive certificates in negotiable form for the Securities to be
purchased by the Underwriter hereunder will be delivered by the Company to you
for the account of the Underwriter against payment of the purchase prices by the
Underwriter, by certified or bank cashier's checks in New York Clearing House
funds, payable to the order of the Company or by wire transfer in New York
Clearing House funds.
In addition, in the event the Underwriter exercises the option to purchase
from the Company all or any portion of the Option Securities pursuant to the
provisions of subsection (b) above, payment for such Securities shall be made
payable in New York Clearing House funds at the offices of the Underwriter, or
by wire transfer in New York Clearing House funds, at the time and date of
delivery of such Securities as required by the provisions of subsection (b)
above, against receipt of the certificates for such Securities by the
Underwriter for the account of the Underwriter registered in such names and in
such denominations as the Underwriter may request.
It is understood that the Underwriter proposes to offer the Securities to
be purchased hereunder to the public upon the terms and conditions set forth in
the Registration Statement, after the Registration Statement is declared
effective by the Commission.
3. Covenants of the Company. The Company covenants and agrees with the
Underwriter that:
(a) The Company, upon notification from the Commission that the
Registration Statement has become effective, will so advise you and will not at
any time, whether before or after the Effective Date, file any amendment to the
Registration Statement or
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<PAGE>
supplement to the Prospectus of which you shall not previously been advised and
furnished with a copy or to which you or your counsel shall have objected in
writing, acting reasonably, or which is not in compliance with the Act and the
Rules and Regulations. At any time prior to the later of (i) the completion by
the Underwriter of the distribution of the Securities as contemplated hereby; or
(ii) 25 days after the date on which the Registration Statement shall have
become or been declared effective, the Company will prepare and file with the
Commission, promptly upon your request, any amendments or supplements to the
Registration Statement or Prospectus which may be necessary or advisable in
connection with the distribution of the Securities and as mutually agreed by the
Company and the Underwriter.
After the Effective Date and as soon as the Company is advised thereof,
the Company will advise you, and confirm the advice in writing, of the receipt
of any comments of the Commission, of the effectiveness of any post-effective
amendment to the Registration Statement, of the filing of any supplement to the
Prospectus or any amended Prospectus, of any request made by the Commission for
amendment of the Registration Statement or for supplementing of the Prospectus
or for additional information with respect thereto, of the issuance by the
Commission or any state or regulatory body of any stop order or other order
suspending the effectiveness of the Registration Statement or any order
preventing or suspending the use of any Preliminary Prospectus, or of the
suspension of the qualification of the Securities for offering in any
jurisdiction, or of the institution of any proceedings for any of such purposes,
and will use its best efforts to prevent the issuance of any such order, and, if
issued, to obtain as soon as possible the lifting thereof.
The Company has caused to be delivered to you copies of each Preliminary
and Final Prospectus, and the Company has consented and hereby consents to the
use of such copies for the purposes permitted by the Act. The Company authorizes
the Underwriter and Selected Dealers to use the Prospectus in connection with
the sale of the Securities for such period as in the opinion of counsel to the
Underwriter the use thereof is required to comply with the applicable provisions
of the Act and the Rules and Regulations. In case of the happening, at any time
within such period as a Prospectus is required under the Act to be delivered in
connection with sales by the Underwriter or Selected Dealers, of any event of
which the Company has knowledge and which materially affects the Company or the
securities of the Company, or which in the opinion of counsel for the Company or
counsel for the Underwriter, should be set forth in an amendment to the
Registration Statement or a supplement to the Prospectus, in order to make the
statements therein not then misleading, in light of the circumstances existing
at the time the Prospectus is required to be delivered to a purchaser of the
Securities, or in case it shall be necessary to amend or supplement the
Prospectus to comply with law or with the
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<PAGE>
Act and the Rules and Regulations, the Company will notify you promptly and
forthwith prepare and furnish to you copies of such amended Prospectus or of
such supplement to be attached to the Prospectus, in such quantities as you may
reasonably request, in order that the Prospectus, as so amended or supplemented,
will not contain any untrue statement of a material fact or omit to state any
material facts necessary in order to make the statements in the Prospectus, in
the light of the circumstances under which they are made, not misleading. The
preparation and furnishing of any such amendment or supplement to the
Registration Statement or amended Prospectus or supplement to be attached to the
Prospectus shall be without expense to the Underwriter.
The Company will comply with the Act, the Rules and Regulations
thereunder, the Securities Exchange Act of 1934 (the "1934 Act"), and the rules
and regulations thereunder in connection with the offering and issuance of the
Securities.
(b) The Company will act in good faith and use its best efforts and
cooperate with you and your counsel to qualify to register the Securities for
sale under the securities or "blue sky" laws of such jurisdictions as the
Underwriter may designate and will make such applications and furnish such
information as may be required for that purpose and to comply with such laws,
provided the Company shall not be required to qualify as a foreign corporation
or a dealer in securities or to execute a general consent to service of process
in any jurisdiction in any action other than one arising out of the offering or
sale of the Securities. The Company will, from time to time, prepare and file
such statements and reports as are or may be required to continue such
qualification in effect for so long a period as the Underwriter may reasonably
request.
(c) If the sale of the Securities provided for herein is not consummated,
the Company shall pay all costs and expenses incident to the performance of the
Company's obligations hereunder, including, but not limited to, all such
expenses itemized in Section 8(a) and 8(c) hereof, and either (i) the
out-of-pocket expenses of the Underwriter, not to exceed the $50,000 previously
paid if the Underwriter elects to terminate the offering for any reason; or (ii)
the out-of-pocket expenses of the Underwriter if the Company elects to terminate
the offering for any reason. For the purposes of this sub-paragraph, the
Underwriter shall be deemed to have assumed such expenses when they are billed
or incurred, regardless of whether such expenses have been paid. The Underwriter
shall not be responsible for any expenses of the Company or others, or for any
charges or claims relative to the proposed public offering if it is not
consummated.
(d) The Company will deliver to you at or before the Closing Date two
signed copies of the Registration Statement, including all financial statements
and exhibits filed therewith, and of each
14
<PAGE>
amendment or supplement thereto. The Company will deliver to or upon the order
of the Underwriter, from time to time until the Effective Date of the
Registration Statement, as many copies of any Preliminary Prospectus filed with
the Commission prior to the Effective Date of the Registration Statement as the
Underwriter may reasonably request. The Company will deliver to the Underwriter
on the Effective Date of the Registration Statement and thereafter for so long
as a Prospectus is required to be delivered under the Act, from time to time, as
many copies of the Prospectus, in final form, or as thereafter amended or
supplemented as the Underwriter may from time to time reasonably request.
(e) For so long as the Company is a reporting company under either Section
12 or 15 of the 1934 Act, the Company, at its expense, will furnish to the
Underwriter during the period ending five (5) years from the Effective Date, (i)
as soon as practicable after the end of each fiscal year, a balance sheet of the
Company and any of its subsidiaries as at the end of such fiscal year, together
with statements of income, surplus and cash flow of the Company and any
subsidiaries for such fiscal year, all in reasonable detail and accompanied by a
copy of the certificate or report thereon of independent accountants; (ii) as
soon as they are available, a copy of all reports (financial or other) mailed to
security holders; (iii) as soon as they are available, a copy of all
non-confidential documents, including annual reports, periodic reports and
financial statements, furnished to or filed with the Commission under the Act
and the 1934 Act; (iv) copies of each press release, news item and article with
respect to the Company's affairs released by the Company; and (v) such other
information as you may from time to time reasonably request.
(f) In the event the Company has an active subsidiary or subsidiaries,
such financial statements referred to in subsection (e) above will be on a
consolidated basis to the extent the accounts of the Company and its subsidiary
or subsidiaries are consolidated in reports furnished to its stockholders
generally.
(g) The Company will make generally available to its stockholders and to
the registered holders of its Warrants and deliver to you as soon as it is
practicable, but in no event later than the first day of the sixteenth full
calendar month following the Effective Date, an earnings statement (which need
not be audited) covering a period of at least twelve consecutive months
beginning with the Effective Date of the Registration Statement, which shall
satisfy the requirements of Section 11(a) of the Act.
(h) On the Closing Date, the Company shall have taken the necessary action
to become a reporting company under Section 12 of the 1934 Act, and the Company
will make all filings required to, and will have obtained approval for the
listing of the Shares and Warrants on The NASDAQ National Market System, and
will use its best efforts to maintain such listing for at least seven (7) years
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<PAGE>
from the date of this Agreement.
(i) For such period as the Company's securities are registered under the
1934 Act, the Company will hold an annual meeting of stockholders for the
election of Directors within 180 days after the end of each of the Company's
fiscal years and, within 150 days after the end of each of the Company's fiscal
years will provide the Company's stockholders with the audited financial
statements of the Company as of the end of the fiscal year just completed prior
thereto. Such financial statements shall be those required by Rule 14a-3 under
the 1934 Act and shall be included in an annual report pursuant to the
requirements of such Rule.
(j) The Company will apply the net proceeds from the sale of the
Securities substantially in accordance with its statement under the caption "Use
of Proceeds" in the Prospectus, and will file such reports with the Commission
with respect to the sale of the Securities and the application of the proceeds
therefrom as may be required by Sections 12, 13 and/or 15 of the 1934 Act and
pursuant to Rule 463 under the Act.
(k) The Company will, promptly upon your request, prepare and file with
the Commission any amendments or supplements to the Registration Statement,
Preliminary Prospectus or Prospectus and take any other action, which in the
reasonable opinion of counsel to the Underwriter and the Company may be
reasonably necessary or advisable in connection with the distribution of the
Securities and will use its best efforts to cause the same to become effective
as promptly as possible.
(l) On the Closing Date, the Company shall execute and deliver to you the
Underwriter's Warrant Agreement. The Underwriter's Warrant Agreement and Warrant
Certificates will be substantially in the form of the Underwriter's Warrant
Agreement filed as an Exhibit to the Registration Statement.
(m) The Company will reserve and keep available for issuance that maximum
number of its authorized but unissued securities which are issuable upon
exercise of the Underwriter's Warrants outstanding from time to time.
(n) All beneficial owners of the Company's securities (including Warrants,
Options and Common Stock of the Company), as of the Effective Date, shall agree
in writing, in a form satisfactory to the Underwriter, not to sell, transfer or
otherwise dispose of any of such securities or underlying securities for a
period of twenty-four (24) months from the Effective Date, or any longer period
required by any State, without the prior written consent of the Underwriter. All
sales of the Company's securities by officers and/or directors of the Company
shall be effected through the Underwriter.
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<PAGE>
(o) The Company will obtain, on or before the Closing Date, key person
life insurance on each of the lives of Douglas P. Fields and Frederick M.
Friedman in an amount of not less than $1,000,000 each, and will use its best
efforts to maintains such insurance for a period of at least five (5) years from
the Effective Date.
(p) At the Closing Date, the Company will engage the Underwriter as a
non-exclusive financial advisor to the Company for a period of thirty-six (36)
months commencing on the first day of the month following the Company's receipt
of the proceeds of this offering, at an aggregate fee of $108,000, all of which
shall be payable to the Underwriter on the Closing Date. The financial advisory
agreement will provide that the Underwriter shall, at the Company's request,
provide advice and consulting services to the Company concerning potential
merger and acquisition proposals and the obtaining of short or long-term
financing for the Company, whether by public financing or otherwise.
(q) Prior to the Closing Date, the Company shall, at its own expense,
undertake to list the Company's securities in the appropriate recognized
securities manual or manuals published by Standard & Poor's Corporation and such
other manuals as the Underwriter may designate, such listings to contain the
information required by such manuals and the Uniform Securities Act. The Company
hereby agrees to use its best efforts to maintain such listing for a period of
not less than five (5) years. The Company shall take such action as may be
reasonably requested by the Underwriter to obtain a secondary market trading
exemption in such states as may be reasonably requested by the Underwriter.
(r) During the one hundred eighty (180) day period commencing on the
Closing Date, the Company will not, without the prior written consent of the
Underwriter, grant options or warrants to purchase the Company's Common Stock at
a price less than the initial per share public offering price.
(s) Prior to the Closing Date, neither the Company nor any subsidiary will
issue, directly or indirectly, without your prior consent, any press release or
other communication or hold any press conference with respect to the Company or
its activities or the offering of the Securities other than routine customary
advertising of the Company's products and services, and except as required by
any applicable law or the directives of any relevant regulatory authority in any
relevant jurisdiction.
(t) The Company shall employ the services of a firm of independent
certified public accountants in connection with the preparation of the financial
statements to be included in any registration statement or similar disclosure
document to be filed by the Company hereunder, or any amendment or supplement
thereto. For a period of five (5) years from the Effective Date, the Company, at
its expense, shall cause its regularly engaged independent certified public
accountants to review (but not audit)
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the Company's financial statements for each of the first three (3) fiscal
quarters prior to the announcement of quarterly financial information, the
filing of the Company's quarterly report and the mailing of quarterly financial
information to stockholders.
(u) The Company shall retain Continental Stock Transfer & Trust Company as
the transfer agent for the securities of the Company, or such other transfer
agent as you may agree to in writing. In addition, the Company shall direct such
transfer agent to furnish the Underwriter with daily transfer sheets as to each
of the Company's securities as prepared by the Company's transfer agent and
copies of lists of stockholders and warrantholders as reasonably requested by
the Underwriter, for a five (5) year period commencing from the Closing Date.
(v) The Company shall cause the Depository Trust Company, or such other
depository of the Company's securities, to deliver a "special security position
report" to the Underwriter on a daily and weekly basis at the expense of the
Company, for a five (5) year period from the Effective Date.
(w) Following the Effective Date, the Company shall, at its sole cost and
expense, prepare and file such Blue Sky applications with such jurisdictions as
the Underwriter shall designate and the Company may reasonably agree.
(x) On the Effective Date and for a period of three (3) years thereafter,
the Company's Board of Directors shall consist of a minimum of five (5) persons,
two (2) of whom shall be independent and not otherwise affiliated with the
Company or associated with any of the Company's affiliates. The Underwriter
shall have the opportunity to invite an observer to attend Board of Directors
meetings of the Company at the expense of the Company.
(y) On the Closing Date, the Company shall execute and deliver to you a
non-exclusive M/A Agreement with the Underwriter in a form satisfactory to the
Underwriter, providing:
(1) The Underwriter will be paid a finder's fee, of from five
percent (5%) of the first $1,000,000 ranging in $1,000,000 increments down
to one percent (1%) of the excess, if any, over $4,000,000 of the
consideration involved in any transaction introduced in writing by the
Underwriter (including mergers, acquisitions, joint ventures, and any
other business for the Company introduced by the Underwriter) consummated
by the Company, as an "Introduced, Consummated Transaction", by which the
Underwriter introduced the other party to the Company during a period
ending five (5) years from the date of the M/A Agreement; and
(2) That any such finder's fee due to the Underwriter will be paid
in cash or stock as mutually agreed at the
18
<PAGE>
closing of the particular Introduced, Consummated Transaction
for which the finder's fee is due.
(z) After the Closing Date, the Company shall prepare and publish
"tombstone" advertisements of at least 5 x 5 inches in publications to be
designated by the Underwriter at a total cost not to exceed $15,000.
(aa) For such period as any Warrants are outstanding, the Company shall
use its best efforts to cause post-effective amendments to the Registration
Statement or a new Registration Statement to become effective in compliance with
the Act and without any lapse of time between the effectiveness of any such
post-effective amendments and cause a copy of each Prospectus, as then amended,
to be delivered to each holder of record of a Warrant and to furnish to the
Underwriter and each dealer as many copies of each such Prospectus as the
Underwriter or such dealer may reasonably request. Such post-effective
amendments or new Registration Statements shall also register the Underwriter's
Warrants and all the securities underlying the Underwriter's Warrants. The
Company shall not call for redemption of any of the Warrants unless a
Registration Statement covering the securities underlying the Warrants has been
declared effective by the Commission and remains current at least until the date
fixed for redemption. In addition, the Warrants shall not be redeemable during
the first year after the Effective Date without the written consent of the
Underwriter.
(ab) Until such time as the securities of the Company are listed or quoted
on either the New York Stock Exchange or the American Stock Exchange, the
Company shall engage the Company's legal counsel to deliver to the Underwriter a
written opinion detailing those states in which the Shares and Warrants of the
Company may be traded in non-issuer transactions under the Blue Sky laws of the
fifty states ("Secondary Market Trading Opinion"). The initial Secondary Market
Trading Opinion shall be delivered to the Underwriter on the Effective Date, and
the Company shall continue to update such opinion and deliver same to the
Underwriter on a timely basis, but in any event at the beginning of each fiscal
quarter, for a five (5) year period, if required.
(ac) As promptly as practicable after the Closing Date, the Company will
prepare, at its own expense, hard cover "bound volumes" relating to the
offering, and will distribute such volumes to the individuals designated by the
Underwriter or counsel to the Underwriter.
4. Conditions of Underwriters' Obligations. The obligations of the
Underwriter to purchase and pay for the Securities which they have agreed to
purchase hereunder from the Company are subject, as of the date hereof and as of
each Closing Date, to the continuing accuracy of, and compliance with, the
representations
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<PAGE>
and warranties of the Company herein, to the accuracy of statements of officers
of the Company made pursuant to the provisions hereof, to the performance by the
Company of its obligations hereunder, and to the following conditions:
(a) (i) The Registration Statement shall have become effective not later
than 5:00 p.m., Eastern Time, on the date of this Agreement, or at such later
time or on such later date as you may agree to in writing; (ii) at or prior to
the Closing Date, no stop order suspending the effectiveness of the Registration
Statement shall have been issued by the Commission and no proceeding for that
purpose shall have been initiated or pending, or shall be threatened, or to the
knowledge of the Company, contemplated by the Commission; (iii) no stop order
suspending the effectiveness of the qualification or registration of the
Securities under the securities or "blue sky" laws of any jurisdiction (whether
or not a jurisdiction which you shall have specified) shall be threatened or to
the knowledge of the Company contemplated by the authorities of any such
jurisdiction or shall have been issued and in effect; (iv) any request for
additional information on the part of the Commission or any such authorities
shall have been complied with to the satisfaction of the Commission and any such
authorities, and to the satisfaction of counsel to the Underwriter; and (v)
after the date hereof no amendment or supplement to the Registration Statement
or the Prospectus shall have been filed unless a copy thereof was first
submitted to the Underwriter and the Underwriter did not object thereto.
(b) At the Closing Date, since the respective dates as of which
information is presented in the Registration Statement and the Prospectus, (i)
there shall not have been any material change in the capital stock or other
securities of the Company or any subsidiary or any material adverse change in
the long-term debt of the Company or any subsidiary except as set forth in or
contemplated by the Registration Statement, (ii) there shall not have been any
material adverse change in the general affairs, business, properties, condition
(financial or otherwise), management, or results of operations of the Company or
any subsidiary, whether or not arising from transactions in the ordinary course
of business, in each case other than as set forth in or contemplated by the
Registration Statement or Prospectus; (iii) neither the Company nor any
subsidiary shall have sustained any material interference with its business or
properties from fire, explosion, flood or other casualty, whether or not covered
by insurance, or from any labor dispute or any court or legislative or other
governmental action, order or decree, which is not set forth in the Registration
Statement and Prospectus; and (iv) the Registration Statement and the Prospectus
and any amendments or supplements thereto shall contain all statements which are
required to be stated therein in accordance with the Act and the Rules and
Regulations, and shall in all material respects conform to the requirements
thereof, and neither the Registration Statement nor
20
<PAGE>
the Prospectus nor any amendment or supplement thereto shall contain any untrue
statement of a material fact or omit to state any material fact required to be
stated therein or necessary to make the statements therein, in light of the
circumstance under which they are made, not misleading.
(c) Except as set forth in the Prospectus, there is not pending or, to the
knowledge of the Company or any subsidiary, threatened, any material action,
suit, proceeding, inquiry, arbitration or investigation against the Company or
any subsidiary, or any of the officers or directors of the Company or any
subsidiary, or any material action, suit, proceeding, inquiry, arbitration, or
investigation, which might result in any material adverse change in the
condition (financial or other), business prospects, net worth, or properties of
the Company or any subsidiary.
(d) Each of the representations and warranties of the Company contained
herein shall be true and correct as of this date and at the Closing Date as if
made at the Closing Date, and all covenants and agreements herein contained to
be performed on the part of the Company and all conditions herein contained to
be fulfilled or complied with by the Company at or prior to the Closing Date
shall have been duly performed, fulfilled or complied with.
(e) At each Closing Date, you shall have received the opinion, dated as of
each Closing Date, from Gusrae, Kaplan & Bruno, counsel for the Company, in form
and substance satisfactory to counsel for the Underwriter, to the effect that:
(i) the Company and each subsidiary has been duly incorporated and
is validly existing as a corporation in good standing under the laws of
its jurisdiction of incorporation, with full corporate power and authority
to own its properties and conduct its business as described in the
Registration Statement and Prospectus and is duly qualified or licensed to
do business as a foreign corporation and is in good standing in each other
jurisdiction in which the ownership or leasing of its properties or
conduct of its business requires such qualification except for
jurisdictions in which the failure to so qualify would not have a material
adverse effect on the Company and each subsidiary as a whole;
(ii) the authorized capitalization of the Company is as set forth
under "Capitalization" in the Prospectus; all shares of the Company's
outstanding stock and other securities requiring authorization for
issuance by the Company's Board of Directors have been duly authorized,
validly issued, are fully paid and non-assessable and conform to the
description thereof contained in the Prospectus; the outstanding shares of
Common Stock of the Company and other securities have not been issued in
violation of the preemptive rights of any shareholder and
21
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the shareholders of the Company do not have any preemptive rights or, to
such counsel's knowledge, other rights to subscribe for or to purchase
securities of the Company, nor, to such counsel's knowledge, are there any
restrictions upon the voting or transfer of any of the securities of the
Company, except as disclosed in the Prospectus; the Common Stock, the
Shares, the Warrants, and the securities contained in the Underwriter's
Warrant Agreement conform to the respective descriptions thereof contained
in the Prospectus; the Common Stock, the Shares, the Warrants, the shares
of Common Stock to be issued upon exercise of the Warrants and the
securities contained in the Underwriter's Warrant Agreement, have been
duly authorized and, when issued, delivered and paid for, will be duly
authorized, validly issued, fully paid, non-assessable, free of
pre-emptive rights and no personal liability will attach to the ownership
thereof; all prior sales by the Company of the Company's securities have
been made in compliance with or under an exemption from registration under
the Act and applicable state securities laws and no shareholders of the
Company have any rescission rights against the Company with respect to the
Company's securities; a sufficient number of shares of Common Stock has
been reserved for issuance upon exercise of the Warrants and the
Underwriter Warrants, and to the best of such counsel's knowledge, neither
the filing of the Registration Statement nor the offering or sale of the
Securities as contemplated by this Agreement gives rise to any
registration rights or other rights, other than those which have been
waived or satisfied or described in the Registration Statement;
(iii) this Agreement, the Underwriter's Warrant Agreement, the
Warrant Agreement, the Financial Advisory Agreement and the M/A Agreement
have been duly and validly authorized, executed and delivered by the
Company and, assuming the due authorization, execution and delivery of
this Agreement by the Underwriter, are the valid and legally binding
obligations of the Company, enforceable in accordance with their terms,
except (a) as such enforceability may be limited by applicable bankruptcy,
insolvency, moratorium, reorganization or similar laws from time to time
in effect which effect creditors' rights generally; and (b) no opinion is
expressed as to the enforceability of the indemnity provisions or the
contribution provisions contained in this Agreement;
(iv) the certificates evidencing the outstanding securities of the
Company, the Shares, the Common Stock and the Warrants are in valid and
proper legal form;
(v) to the best of such counsel's knowledge, except as set forth in
the Prospectus, there is not pending or, to the
22
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knowledge of the Company, threatened, any material action, suit,
proceeding, inquiry, arbitration or investigation against the Company or
any subsidiary or any of the officers of directors of the Company or any
subsidiary, nor any material action, suit, proceeding, inquiry,
arbitration, or investigation, which might materially and adversely affect
the condition (financial or otherwise), business prospects, net worth, or
properties of the Company or any subsidiary;
(vi) the execution and delivery of this Agreement, the Underwriter's
Warrant Agreement, the Warrant Agreement, the Financial Advisory Agreement
and the M/A Agreement, and the incurrence of the obligations herein and
therein set forth and the consummation of the transactions herein or
therein contemplated, will not result in a violation of, or constitute a
default under (a) the Articles of Incorporation or By-Laws of the Company
and each subsidiary; (b) to the best of such counsel's knowledge, any
material obligations, agreement, covenant or condition contained in any
bond, debenture, note or other evidence of indebtedness or in any
contract, indenture, mortgage, loan agreement, lease, joint venture or
other agreement or instrument to which the Company or any subsidiary is a
party or by which it or any of its properties is bound; or (c) to the best
of such counsel's knowledge, any material order, rule, regulation, writ,
injunction, or decree of any government, governmental instrumentality or
court, domestic or foreign;
(vii) the Registration Statement has become effective under the Act,
and to the best of such counsel's knowledge, no stop order suspending the
effectiveness of the Registration Statement is in effect, and no
proceedings for that purpose have been instituted or are pending before,
or threatened by, the Commission; the Registration Statement and the
Prospectus (except for the financial statements and other financial data
contained therein, or omitted therefrom, as to which such counsel need
express no opinion) comply as to form in all material respects with the
applicable requirements of the Act and the Rules and Regulations; and
(viii) no authorization, approval, consent, or license of any
governmental or regulatory authority or agency is necessary in connection
with the authorization, issuance, transfer, sale or delivery of the
Securities by the Company, in connection with the execution, delivery and
performance of this Agreement by the Company or in connection with the
taking of any action contemplated herein, or the issuance of the
Underwriter's Warrants or the Securities underlying the Underwriter's
Warrants, other than registrations or qualifications of the Securities
under applicable state or foreign securities or Blue Sky laws and
registration under the Act.
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Such opinion shall also cover such matters incident to the transactions
contemplated hereby as the Underwriter or counsel for the Underwriter shall
reasonably request. In rendering such opinion, such counsel may rely upon
certificates of any officer of the Company or public officials as to matters of
fact; and may rely as to all matters of law, upon opinions of counsel
satisfactory to you and counsel to the Underwriter. The opinion of such counsel
to the Company shall state that the opinion of any such other counsel is in form
satisfactory to such counsel and that the Underwriter is justified in relying
thereon.
Such counsel shall also include a statement to the effect that such
counsel has participated in the preparation of the Registration Statement and
the Prospectus and nothing has come to the attention of such counsel to lead
such counsel to believe that the Registration Statement or any amendment thereto
at the time it became effective contained any untrue statement of a material
fact or omitted to state any material fact required to be stated therein or
necessary to make the statements therein, in light of the circumstances under
which they are made, not misleading or that the Prospectus or any supplement
thereto contains any untrue statement of a material fact or omits to state a
material fact required to be stated therein or necessary in order to make
statements therein, in light of the circumstances under which they are made, not
misleading (except, in the case of both the Registration Statement and any
amendment thereto and the Prospectus and any supplement thereto, for the
financial statements, notes thereto and other financial information and
statistical data contained therein, as to which such counsel need express no
opinion).
(f) You shall have received on each Closing Date a certificate dated as of
each Closing Date, signed by the Chief Executive Officer and the Chief Financial
Officer of the Company and such other officers of the Company as the Underwriter
may request, certifying that:
(i) No Order suspending the effectiveness of the Registration
Statement or stop order regarding the sale of the Securities in effect and
no proceedings for such purpose are pending or are, to their knowledge,
threatened by the Commission;
(ii) They do not know of any litigation instituted or, to their
knowledge, threatened against the Company or any subsidiary or any officer
or director of the Company or any subsidiary of a character required to be
disclosed in the Registration Statement which is not disclosed therein;
they do not know of any contracts which are required to be summarized in
the Prospectus which are not so summarized; and they do not know of any
material contracts required to be filed as exhibits to the Registration
Statement which are not so filed;
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<PAGE>
(iii) They have each carefully examined the Registration Statement
and the Prospectus and, to the best of their knowledge, neither the
Registration Statement nor the Prospectus nor any amendment or supplement
to either of the foregoing contains an untrue statement of any material
fact or omits to state any material fact required to be stated therein or
necessary to make the statement therein, in light of the circumstances
under which they are made, not misleading; and since the Effective Date,
to the best of their knowledge, there has occurred no event required to be
set forth in an amended or supplemented Prospectus which has not been so
set forth;
(iv) Since the respective dates as of which information is given in
the Registration Statement and the Prospectus, there has not been any
material adverse change in the condition of the Company or any subsidiary,
financial or otherwise, or in the results of its operations, except as
reflected in or contemplated by the Registration Statement and the
Prospectus and except as so reflected or contemplated since such date,
there has not been any material transaction entered into by the Company or
any subsidiary;
(v) The representations and warranties set forth in this Agreement
are true and correct in all material respects and the Company has complied
with all of its agreements herein contained;
(vi) Neither the Company nor any subsidiary is delinquent in the
filing of any federal, state and municipal tax return or the payment of
any federal, state or municipal taxes; they know of no proposed
redetermination or reassessment of taxes, adverse to the Company or any
subsidiary, and the Company and each subsidiary has paid or provided by
adequate reserves for all known tax liabilities;
(vii) They know of no material obligation or liability of the
Company or any subsidiary, contingent or otherwise, not disclosed in the
Registration Statement and Prospectus;
(viii) This Agreement, the Underwriter's Warrant Agreement, the
Warrant Agreement, the Financial Advisory Agreement and the M/A Agreement,
the consummation of the transactions therein contemplated, and the
fulfillment of the terms thereof, will not result in a breach by the
Company of any terms of, or constitute a default under, its Articles of
Incorporation or By-Laws, any indenture, mortgage, lease, deed or trust,
bank loan or credit agreement or any other material agreement or
undertaking of the Company or any subsidiary including, by way of
specification but not by way of limitation, any agreement or instrument to
which the Company or any subsidiary is now a party or pursuant to which
the
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Company or any subsidiary has acquired any right and/or obligations by
succession or otherwise;
(ix) The financial statements and schedules filed with and as part
of the Registration Statement present fairly the financial position of the
Company as of the dates thereof all in conformity with generally accepted
principles of accounting applied on a consistent basis throughout the
periods involved. Since the respective dates of such financial statements,
there have been no material adverse change in the condition or general
affairs of the Company, financial or otherwise, other than as referred to
in the Prospectus;
(x) Subsequent to the respective dates as of which information is
given in the Registration Statement and Prospectus, except as may
otherwise be indicated therein, neither the Company nor any subsidiary
has, prior to the Closing Date, either (i) issued any securities or
incurred any material liability or obligation, direct or contingent, for
borrowed money, or (ii) entered into any material transaction other than
in the ordinary course of business. The Company has not declared, paid or
made any dividend or distribution of any kind on its capital stock;
(xi) They have reviewed the sections in the Prospectus relating to
their biographical data and equity ownership position in the Company, and
all information contained therein is true and accurate; and
(xii) Except as disclosed in the Prospectus, during the past five
years, they have not been:
(1) Subject of a petition under the Federal bankruptcy laws or
any state insolvency law filed by or against them, or by a receiver,
fiscal agent or similar officer appointed by a court for their
business or property, or any partnership in which either or them was
a general partner at or within two years before the time of such
filing, or any corporation or business association of which either
of them was an executive officer at or within two years before the
time of such filing;
(2) Convicted in a criminal proceeding or a named subject of a
pending criminal proceeding (excluding traffic violations and other
minor offenses);
(3) The subject of any order, judgment, or decree not
subsequently reversed, suspended or vacated, of any court of
competent jurisdiction, permanently or temporarily enjoining either
of them from, or otherwise limiting, any of the following
activities:
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(i) acting as a futures commission merchant, introducing
broker, commodity trading advisor, commodity pool operator,
floor broker, leverage transaction merchant, any other person
regulated by the Commodity Futures Trading Commission, or an
associated person of any of the foregoing, or as an investment
adviser, underwriter, broker or dealer in securities, or as an
affiliated person, director or employee of any investment
company, bank, savings and loan association or insurance
company, or engaging in or continuing any conduct or practice
in connection with any such activity;
(ii) engaging in any type of business
practice; or
(iii) engaging in any activity in connection with the
purchase or sale of any security or commodity or in connection
with any violation of Federal or State securities law or
Federal Commodity laws.
(4) The subject of any order, judgment or decree, not
subsequently reversed, suspended or vacated of any Federal or State
authority barring, suspending or otherwise limiting for more than
sixty (60) days either of their right to engage in any activity
described in paragraph (3)(i) above, or be associated with persons
engaged in any such activity;
(5) Found by any court of competent jurisdiction in a civil
action or by the Securities and Exchange Commission to have violated
any Federal or State securities law, and the judgment in such civil
action or finding by the Commission has not been subsequently
reversed, suspended or vacated; or
(6) Found by a court of competent jurisdiction in a civil
action or by the Commodity Futures Trading Commission to have
violated any Federal Commodities Law, and the judgment in such civil
action or finding by the Commodity Futures Trading Commission has
not been subsequently reversed, suspended or vacated.
(g) The Underwriter shall have received from Deloitte & Touche, LLP,
independent auditors to the Company, certificates or letters, one dated and
delivered on the Effective Date and one dated and delivered on the Closing Date,
in form and substance satisfactory to the Underwriter, stating that:
(i) they are independent certified public accountants with respect
to the Company within the meaning of the Act and
27
<PAGE>
the applicable Rules and Regulations;
(ii) the financial statements and the schedules included in the
Registration Statement and the Prospectus were examined by them and, in
their opinion, comply as to form in all material respects with the
applicable accounting requirements of the Act, the Rules and Regulations
and instructions of the Commission with respect to Registration Statements
on Form S-1;
(iii) on the basis of inquiries and procedures conducted by them
(not constituting an examination in accordance with generally accepted
auditing standards), including a reading of the latest available unaudited
interim financial statements or other financial information of the Company
(with an indication of the date of the latest available unaudited interim
financial statements), inquiries of officers of the Company who have
responsibility for financial and accounting matters, review of minutes of
all meetings of the shareholders and the Board of Directors of the Company
and other specified inquiries and procedures, nothing has come to their
attention as a result of the foregoing inquiries and procedures that
causes them to believe that:
(a) during the period from (and including) the date of the
financial statements in the Registration Statement and the
Prospectus to a specified date not more than five days prior to the
date of such letters, there has been any change in the Common Stock,
long-term debt or other securities of the Company (except as
specifically contemplated in the Registration Statement and
Prospectus) or any material decreases in net current assets, net
assets, shareholder's equity, working capital or in any other item
appearing in the Company's financial statements as to which the
Underwriter may request advice, in each case as compared with
amounts shown in the balance sheet as of the date of the financial
statement in the Prospectus, except in each case for changes,
increases or decreases which the Prospectus discloses have occurred
or will occur;
(b) during the period from (and including) the date of the
financial statements in the Registration Statement and the
Prospectus to such specified date there was any material decrease in
revenues or in the total or per share amounts of income or loss
before extraordinary items or net income or loss, or any other
material change in such other items appearing in the Company's
financial statements as to which the Underwriter may request advice,
in each case as compared with the fiscal period ended as of the date
of the financial statement in the Prospectus, except in each case
for increases, changes or
28
<PAGE>
decreases which the Prospectus discloses have occurred or will
occur;
(c) the unaudited interim financial statements of the Company
appearing in the Registration Statement and the Prospectus (if any)
do not comply as to form in all material respects with the
applicable accounting requirements of the Act and the Rules and
Regulations or are not fairly presented in conformity with generally
accepted accounting principles and practices on a basis
substantially consistent with the audited financial statements
included in the Registration Statements or the Prospectus.
(iv) they have compared specific dollar amounts, numbers of shares,
percentages of revenues and earnings, statements and other financial
information pertaining to the Company set forth in the Prospectus in each
case to the extent that such amounts, numbers, percentages, statements and
information may be derived from the general accounting records, including
work sheets, of the Company and excluding any questions requiring an
interpretation by legal counsel, with the results obtained from the
application of specified readings, inquiries and other appropriate
procedures (which procedures do not constitute an examination in
accordance with generally accepted auditing standards) set forth in the
letter and found them to be in agreement; and
(v) they have not during the immediately preceding five (5) year
period brought to the attention of the Company's management any reportable
condition related to the Company's internal accounting procedures,
weaknesses and/or controls.
Such letters shall also set forth such other information as may be
requested by counsel for the Underwriter. Any changes, increases or decreases in
the items set forth in such letters which, in the judgment of the Underwriter,
are materially adverse with respect to the financial position or results of
operations of the Company shall be deemed to constitute a failure of the Company
to comply with the conditions of the obligations to the Underwriter hereunder.
(h) Upon exercise of the option provided for in Section 2(b) hereof, the
obligation of the Underwriter to purchase and pay for the Option Securities
referred to therein will be subject (as of the date hereof and as of the Option
Closing Date) to the following additional conditions:
(i) The Registration Statement shall remain effective at the Option
Closing Date, and no stop order suspending the effectiveness thereof shall
have been issued and no proceedings for that purpose shall have been
instituted or
29
<PAGE>
shall be pending, or, to your knowledge or the knowledge of the Company,
shall be contemplated by the Commission, and any reasonable request on the
part of the Commission for additional information shall have been complied
with to the satisfaction of counsel to the Underwriter.
(ii) At the Option Closing Date, there shall have been delivered to
you the signed opinion from Gusrae, Kaplan & Bruno, counsel for the
Company, dated as of the Option Closing Date, in form and substance
satisfactory to counsel to the Underwriter, which opinion shall be
substantially the same in scope and substance as the opinion furnished to
you at the Closing Date pursuant to Section 4(e) hereof, except that such
opinion, where appropriate, shall cover the Option Securities.
(iii) At the Option Closing Date, there shall have been delivered to
you a certificate of the Chief Executive Officer and Chief Financial
Officer of the Company, dated the Option Closing Date, in form and
substance satisfactory to counsel to the Underwriter, substantially the
same in scope and substance as the certificate furnished to you at the
Closing Date pursuant to Section 4(f) hereof.
(iv) At the Option Closing Date, there shall have been delivered to
you a letter in form and substance satisfactory to you from Deloitte &
Touche, LLP, independent auditors to the Company, dated the Option Closing
Date and addressed to the Underwriter confirming the information in their
letter referred to in Section 4(g) hereof and stating that nothing has
come to their attention during the period from the ending date of their
review referred to in said letters to a date not more than five business
days prior to the Option Closing Date, which would require any change in
said letter if it were required to be dated the Option Closing Date.
(v) All proceedings taken at or prior to the Option Closing Date in
connection with the sale and issuance of the Option Securities shall be
satisfactory in form and substance to the Underwriter, and the Underwriter
and counsel to the Underwriter shall have been furnished with all such
documents, certificates, and opinions as you may request in connection
with this transaction in order to evidence the accuracy and completeness
of any of the representations, warranties or statements of the Company or
its compliance with any of the covenants or conditions contained herein.
(i) No action shall have been taken by the Commission or the NASD, the
effect of which would make it improper, at any time prior to the Closing Date,
for members of the NASD to execute transactions (as principal or agent) in the
Common Stock and no proceedings for the taking of such action shall have been
instituted or shall be pending, or, to the knowledge of the
30
<PAGE>
Underwriter or the Company, shall be contemplated by the Commission or the NASD.
The Company represents that at the date hereof it has no knowledge that any such
action is in fact contemplated by the Commission or the NASD. The Company shall
advise the Underwriter of any NASD affiliations of any of its officers,
directors, or stockholders or their affiliates in accordance with paragraph 1(y)
of this Agreement.
(j) At the Effective Date, you shall have received from counsel to the
Company, dated as of the Effective Date, in form and substance satisfactory to
counsel for the Underwriter, a written Secondary Market Trading Opinion
detailing those states in which the Shares and Warrants may be traded in
non-issuer transactions under the Blue Sky laws of the fifty (50) states after
the Effective Date, in accordance with paragraph 3(ab) of this Agreement.
(k) The authorization and issuance of the Securities and delivery thereof,
the Registration Statement, the Prospectus, and all corporate proceedings
incident thereto shall be satisfactory in all respects to counsel for the
Underwriter, and such counsel shall be furnished with such documents,
certificates and opinions as they may reasonably request to enable them to pass
upon the matters referred to in this sub-paragraph.
(l) Prior to the Effective Date, the Underwriter shall have received
clearance from the NASD as to the amount of compensation allowable or payable to
the Underwriter, as described in the Registration Statement.
(m) If any of the conditions herein provided for in this Section shall not
have been fulfilled as of the date indicated, this Agreement and all obligations
of the Underwriter under this Agreement may be canceled at, or at any time prior
to, the Closing Date and/or the Option Closing Date by the Underwriter notifying
the Company of such cancellation in writing or by telegram or facsimile at or
prior to the applicable Closing Date. Any such cancellation shall be without
liability of the Underwriter to the Company.
5. Conditions of the Obligations of the Company. The obligation of the
Company to sell and deliver the Securities is subject to the following
conditions:
(i) The Registration Statement shall have become effective not later
than 5:00 p.m., Eastern Time, on the date of this Agreement, or on such
later time or date as the Company and the Underwriter may agree in
writing; and
(ii) At the Closing Date and the Option Closing Date, no stop orders
suspending the effectiveness of the Registration Statement shall have been
issued under the Act or any
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<PAGE>
proceedings therefore initiated or threatened by the Commission.
If the conditions to the obligations of the Company provided for in this
Section have been fulfilled on the Closing Date but are not fulfilled after the
Closing Date and prior to the Option Closing Date, then only the obligation of
the Company to sell and deliver the Securities on exercise of the option
provided for in Section 2(b) hereof shall be affected.
6. Indemnification. (a) The Company indemnifies and holds harmless the
Underwriter and each person, if any, who controls the Underwriter within the
meaning of the Act against any losses, claims, damages or liabilities (which
shall, for all purposes of this Agreement, include but not be limited to, all
reasonable costs of defense and investigation and all attorneys' fees), to which
the Underwriter or such controlling person may become subject, under the Act or
otherwise, insofar as such losses, claims, damages or liabilities (or actions in
respect thereof) arise out of or are based upon any untrue statement or alleged
untrue statement of any material fact contained in (i) the Registration
Statement, any Preliminary Prospectus, the Prospectus, or any amendment or
supplement thereto, (ii) any blue sky application or other document executed by
the Company specifically for that purpose or based upon written information
furnished by the Company and filed in any state or other jurisdiction in order
to qualify any or all of the Securities under the securities laws thereof (any
such application, document or information being hereinafter called a "Blue Sky
Application"), or arise out of or are based upon the omission or alleged
omission to state in the Registration Statement, any Preliminary Prospectus,
Prospectus, or any amendment or supplement thereto, or in any Blue Sky
Application, a material fact required to be stated therein or necessary to make
the statements therein not misleading; provided, however, that the Company will
not be liable in any such cases to the extent, but only to the extent, that any
such losses, claim, damages or liability arises out of or is based upon an
untrue statement or alleged untrue statement or omission or alleged omission
made in reliance upon and in conformity with written information furnished to
the Company by or on behalf of the Underwriter specifically for use in the
preparation of the Registration Statement or any such amendment or supplement
thereof or any such Blue Sky Application or any such Preliminary Prospectus or
the Prospectus or any such amendment or supplement thereto. Notwithstanding the
foregoing, the Company shall have no liability under this section if such untrue
statement or omission made in a Preliminary Prospectus is cured in the
Prospectus and the Prospectus is not delivered to the person or persons alleging
the liability upon which indemnification is being sought. This indemnity will be
in addition to any liability which the Company may otherwise have.
(b) The Underwriter indemnifies and holds harmless the
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Company, each of its directors, each nominee (if any) for director named in the
Prospectus, each of its officers who have signed the Registration Statement, and
each person, if any, who controls the Company within the meaning of the Act,
against any losses, claims, damages or liabilities (which shall, for all
purposes of this Agreement, include, but not be limited to, all costs of defense
and investigation and all attorneys' fees) to which the Company or any such
director, nominee, officer or controlling person may become subject under the
Act or otherwise, insofar as such losses, claims, damages, or liabilities (or
actions in respect thereof) arise out of or are based upon any untrue statement
or alleged untrue statement of any material fact contained in the Registration
Statement, any Preliminary Prospectus, the Prospectus, or any amendment or
supplement thereto, or arise out of or are based upon the omission or the
alleged omission to state therein a material fact required to be stated therein
or necessary to make the statements therein not misleading, in each case to the
extent, but only to the extent, that such untrue statements or alleged untrue
statement or omission or alleged omission was made in the Registration
Statement, any Preliminary Prospectus, the Prospectus, or any amendment or
supplement thereto, in reliance upon and in conformity with written information
furnished to the Company by you or by any Underwriter through you specifically
for use in the preparation thereof. Notwithstanding the foregoing, the
Underwriter shall have no liability under this section if such untrue statement
or omission made in a Preliminary Prospectus is cured in the Prospectus and the
Prospectus is not delivered to the person or persons alleging the liability upon
which indemnification is being sought through no fault of the Underwriter. This
indemnity agreement will be in addition to any liability which the Underwriter
may otherwise have.
(c) Promptly after receipt by an indemnified party under this Section of
notice of the commencement of any action, such indemnified party will, if a
claim in respect thereof is to be made against the indemnifying party under this
Section, notify in writing the indemnifying party of the commencement thereof;
but the omission so to notify the indemnifying party will not relieve it from
any liability which it may have to any indemnified party otherwise than under
this Section. In case any such action is brought against any indemnified party,
and it notifies the indemnifying party of the commencement thereof, the
indemnifying party will be entitled to participate in, and, to the extent that
it may wish, jointly with any other indemnifying party similarly notified, to
assume the defense thereof, subject to the provisions herein stated, with
counsel reasonably satisfactory to such indemnified party, and after notice from
the indemnifying party to such indemnified party of its election so to assume
the defense thereof, the indemnifying party will not be liable to such
indemnified party under this Section for any legal or other expenses
subsequently incurred by such indemnified party in connection with the defense
thereof other than reasonable costs of
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investigation. The indemnified party shall have the right to employ separate
counsel in any such action and to participate in the defense thereof, but the
fees and expenses of such counsel shall not be at the expense of the
indemnifying party if the indemnifying party has assumed the defense of the
action with counsel reasonably satisfactory to the indemnified party; provided
that if the indemnified party is an Underwriter or a person who controls such
Underwriter within the meaning of the Act, the fees and expenses of such counsel
shall be at the expense of the indemnifying party if (i) the employment of such
counsel has been specifically authorized in writing by the indemnifying party or
(ii) the named parties to any such action (including any impleaded parties)
include both the Underwriter or such controlling person and the indemnifying
party and in the reasonable judgment of the Underwriter, it is advisable for the
Underwriter or controlling persons to be represented by separate counsel (in
which case the indemnifying party shall not have the right to assume the defense
of such action on behalf of the Underwriter or such controlling person, it being
understood, however, that the indemnifying party shall not, in connection with
any one such action or separate but substantially similar or related actions in
the same jurisdiction arising out of the same general allegations or
circumstances, be liable for the reasonable fees and expenses of more than one
separate firm of attorneys for all such Underwriter and controlling persons,
which firm shall be designated in writing by you). No settlement of any action
against an indemnified party shall be made without the consent of the
indemnifying party, which shall not be unreasonably withheld in light of all
factors of importance to such indemnifying party.
7. Contribution. In order to provide for just and equitable contribution
under the Act in any case in which (i) the Underwriter makes claim for
indemnification pursuant to Section 6 hereof but it is judicially determined (by
the entry of a final judgment or decree by a court of competent jurisdiction and
the expiration of time to appeal or the denial of the last right of appeal) that
such indemnification may not be enforced in such case, notwithstanding the fact
that the express provisions of Section 6 provide for indemnification in such
case, or (ii) contribution under the Act may be required on the part of the
Underwriter, then the Company and each person who controls the Company, in the
aggregate, and the Underwriter shall contribute to the aggregate losses, claims,
damages or liabilities to which it may be subject (which shall, for all purposes
of this Agreement, include, but not be limited to, all reasonable costs of
defense and investigation and all reasonable attorneys' fees) in either such
case (after contribution from others) in such proportions that the Underwriter
is responsible in the aggregate for that portion of such losses, claims, damages
or liabilities represented by the percentage that the underwriting discount per
Share and per Warrant appearing on the cover page of the Prospectus bears to the
public offering price appearing thereon, and the Company shall be responsible
for the remaining
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portion, provided, however, that (a) if such allocation is not permitted by
applicable law then the relative fault of the Company and the Underwriter and
controlling persons, in the aggregate, in connection with the statements or
omissions which resulted in such damages and other relevant equitable
considerations shall also be considered. The relative fault shall be determined
by reference to, among other things, whether in the case of an untrue statement
of a material fact or the omission to state a material fact, such statement or
omission relates to information supplied by the Company, or the Underwriter and
the parties' relative intent, knowledge, access to information and opportunity
to correct or prevent such untrue statement or omission. The Company and the
Underwriter agree that it would not be just and equitable if the respective
obligations of the Company and the Underwriter to contribute pursuant to this
Section 7 were to be determined by pro rata or per capita allocation of the
aggregate damages (even if the Underwriter and their controlling persons in the
aggregate were treated as one entity for such purpose) or by any other method of
allocation that does not take account of the equitable considerations referred
to in the first sentence of this Section. No person ultimately determined to be
guilty of a fraudulent misrepresentation (within the meaning of Section 11(f) of
the Act) shall be entitled to contribution from any person who is not ultimately
determined to be guilty of such fraudulent misrepresentation. As used in this
paragraph, the term "Underwriter" includes any officer, director, or other
person who controls the Underwriter within the meaning of Section 15 of the Act,
and the word "Company" includes any officer, director, or person who controls
the Company within the meaning of Section 15 of the Act. If the full amount of
the contribution specified in this paragraph is not permitted by law, then the
Underwriter and each person who controls the Underwriter shall be entitled to
contribution from the Company, its officers, directors and controlling persons
to the full extent permitted by law. This foregoing agreement shall in no way
affect the contribution liabilities of any persons having liability under
Section 11 of the Act other than the Company and the Underwriter. No
contribution shall be requested with regard to the settlement of any matter from
any party who did not consent to the settlement; provided, however, that such
consent shall not be unreasonably withheld in light of all factors of importance
to such party.
8. Costs and Expenses. (a) Whether or not this Agreement becomes effective
or the sale of the Securities to the Underwriter is consummated, the Company
will pay all costs and expenses incident to the performance of this Agreement by
the Company including but not limited to the fees and expenses of counsel to the
Company and of the Company's accountants; the costs and expenses incident to the
preparation, printing, filing and distribution under the Act of the Registration
Statement (including the financial statements therein and all amendments and
exhibits thereto), Preliminary Prospectus and the Prospectus, as amended or
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<PAGE>
supplemented; the fee of the National Association of Securities Dealers, Inc.
("NASD") in connection with the filing required by the NASD relating to the
offering of the Securities contemplated hereby; all state filing fees, expenses
and disbursements and legal fees of counsel to the Underwriter who shall serve
as Blue Sky counsel to the Company in connection with the filing of applications
to register the Securities under the state securities or blue sky laws (which
legal fees shall be payable by the Company in the sum of $20,000, of which
$10,000 has been paid); the cost of printing and furnishing to the Underwriter
copies of the Registration Statement, each Preliminary Prospectus, the
Prospectus, this Agreement, the Selected Dealers Agreement, and the Blue Sky
Memorandum; the cost of printing the certificates evidencing the securities
comprising the Securities; the cost of preparing and delivering to the
Underwriter and its counsel bound volumes containing copies of all documents and
appropriate correspondence filed with or received from the Securities and
Exchange Commission and the National Association of Securities Dealers, Inc.,
and all closing documents; and the fees and disbursements of the transfer agent
for the Company's securities. The Company shall pay any and all taxes (including
any original issue, transfer, franchise, capital stock or other tax imposed by
any jurisdiction) on sales to the Underwriter hereunder. The Company will also
pay all costs and expenses incident to the furnishing of any amended Prospectus
or of any supplement to be attached to the Prospectus. The Company shall also
engage the Company's counsel to provide the Underwriter with a written Secondary
Market Trading Opinion in accordance with paragraphs 3(ab) and 4(j) of this
Agreement.
(b) In addition to the foregoing expenses, the Company shall at the
Closing Date pay to the Underwriter a non-accountable expense allowance equal to
three percent (3%) of the gross proceeds received from the sale of the
Securities, of which an advance of $50,000 has been paid to date. In the event
the overallotment option is exercised, the Company shall pay to the Underwriter
at the Option Closing Date an additional amount equal to three percent (3%) of
the gross proceeds received upon exercise of the overallotment option.
(c) Other than as disclosed in the Registration Statement, no person is
entitled either directly or indirectly to compensation from the Company, from
the Underwriter or from any other person for services as a finder in connection
with the proposed offering, and the Company agrees to indemnify and hold
harmless the Underwriter against any losses, claims, damages or liabilities,
which shall, for all purposes of this Agreement, include, but not be limited to,
all costs of defense and investigation and all attorneys' fees, to which the
Underwriter may become subject insofar as such losses, claims, damages or
liabilities (or actions in respect thereof) arise out of or are based upon the
claim of any person (other than an employee of the party claiming indemnity) or
entity that he or
36
<PAGE>
it is entitled to a finder's fee in connection with the proposed offering by
reason of such person's or entity's influence or prior contact with the
indemnifying party.
9. Effective Date. The Agreement shall become effective upon its execution
except that you may, at your option, delay its effectiveness until 11:00 a.m.,
Eastern time, on the first full business day following the effective date of the
Registration Statement, or at such earlier time after the effective date of the
Registration Statement as you in your discretion shall first commence the public
offering by the Underwriter of any of the Securities. The time of the public
offering shall mean the time after the effectiveness of the Registration
Statement when the Securities are first generally offered by you to the Selected
Dealers. This Agreement may be terminated by you at any time before it becomes
effective as provided above, except that Sections 3(c), 6, 7, 8, 12, 13, 14, 15,
16 and 17 shall remain in effect notwithstanding such termination.
10. Termination. (a) This Agreement, except for Sections 3(c), 6, 7, 8,
12, 13, 14, 15, 16, and 17 hereof, may be terminated at any time prior to the
Closing Date, and the option referred to in Section 2(b) hereof, if exercised,
may be cancelled at any time prior to the Option Closing Date, by you if in your
judgment it is impracticable to offer for sale or to enforce contracts made by
the Underwriter for the resale of the Securities agreed to be purchased
hereunder by reason of: (i) the Company having sustained a material adverse
loss, whether or not insured, by reason of fire, earthquake, flood, accident or
other calamity, or from any labor dispute or court or government action, order
or decree; (ii) trading in securities on the New York Stock Exchange or the
American Stock Exchange having been suspended or limited; (iii) material
governmental restrictions having been imposed on trading in securities generally
(not in force and effect on the date hereof); (iv) a banking moratorium having
been declared by Federal or New York or Florida state authorities; (v) an
outbreak of major international hostilities or other national or international
calamity having occurred involving the United States; (vi) the passage by the
Congress of the United States or by any state legislative body of similar
impact, of any act or measure, or the adoption of any orders, rules or
regulations by any governmental body or any authoritative accounting institute
or board, or any governmental executive, which is reasonably believed likely by
the Underwriter to have a material adverse impact on the business, financial
condition or financial statements of the Company or the market for the
securities offered hereby; (vii) any material adverse change in the financial or
securities markets beyond normal market fluctuations having occurred since the
date of this Agreement; (viii) any material adverse change having occurred,
since the respective dates as of which information is given in the Registration
Statement and Prospectus, in the earnings, business prospects or general
condition of the Company, financial or
37
<PAGE>
otherwise, whether or not arising in the ordinary course of business; (ix) a
pending or threatened legal or governmental proceeding or action relating
generally to the Company's business, or a notification having been received by
the Company of the threat of any such proceeding or action, which could, in the
reasonable judgment of the Underwriter, materially adversely affect the Company;
(x) except as contemplated by the Prospectus, the Company is merged or
consolidated into or acquired by another company or group or there exists a
binding legal commitment for the foregoing or any other material change of
ownership or control occurs; or (xi) the Company shall not have complied in all
material respects with any term, condition or provisions on their part to be
performed, complied with or fulfilled (including but not limited to those set
forth in this Agreement) within the respective times therein provided.
(b) If you elect to prevent this Agreement from becoming effective or to
terminate this Agreement as provided in this Section, the Company shall be
promptly notified by you, by telephone, telegram or facsimile, confirmed by
letter.
11. Underwriter's Warrant Agreement. At the Closing Date, the Company will
issue to the Underwriter and/or persons related to the Underwriter, for an
aggregate purchase price of $10, and upon the terms and conditions set forth in
the form of Underwriter's Warrant Agreement annexed as an exhibit to the
Registration Statement, Underwriter Warrants to purchase up to an aggregate of
150,000 Shares and 150,000 Warrants, in such denominations as the Underwriter
shall designate. In the event of conflict in the terms of this Agreement and the
Underwriter's Warrant Agreement, the language of the form of Underwriter's
Warrant Agreement shall control.
12. Representations, Warranties and Agreements to Survive Delivery. The
respective indemnities, agreements, representations, warranties and other
statements of the Company and its principal officers, where appropriate, and the
Underwriter set forth in or made pursuant to this Agreement will remain in full
force and effect, regardless of any investigation made by or on behalf of the
Underwriter, the Company or any of its officers or directors or any controlling
person and will survive delivery of and payment for the Securities and the
termination of this Agreement.
13. Notice. All communications hereunder will be in writing
and, except as otherwise expressly provided herein, will be mailed,
delivered or telegraphed and confirmed:
If to the Underwriter: Robert T. Kirk, President
Barron Chase Securities, Inc.
7700 West Camino Real, Suite 200
Boca Raton, Florida 33433
38
<PAGE>
Copy to: David A. Carter, P.A.
355 West Palmetto Park Road
Boca Raton, Florida 33432
If to the Company: Douglas P. Fields, Chairman
Eagle Supply Group, Inc.
100 Midwood Road
Greenwich, Connecticut 06830
Copy to: Robert Perez, Esq.
Gusrae, Kaplan & Bruno
120 Wall Street
New York, New York 10005
14. Parties in Interest. This Agreement herein set forth is made solely
for the benefit of the Underwriter, the Company and, to the extent expressed,
any person controlling the Company or the Underwriter, and directors of the
Company, nominees for directors (if any) named in the Prospectus, its officers
who have signed the Registration Statement, and their respective executors,
administrators, successors, assigns and no other person shall acquire or have
any right under or by virtue of this Agreement. The term "successors and
assigns" shall not include any purchaser of the Securities, as such purchaser,
from the Underwriter.
15. Applicable Law. This Agreement shall be governed and construed in
accordance with the laws of the State of Florida applicable to contracts made
and to be performed entirely within the State of Florida. The parties agree that
any action brought by any party against another party in connection with any
rights or obligations arising out of this Agreement shall be instituted properly
in a federal or state court of competent jurisdiction with venue only in the
Fifteenth Judicial Circuit Court in and for Palm Beach County, Florida or the
United States District Court for the Southern District of Florida, West Palm
Beach Division. A party to this Agreement named as a Defendant in any action
brought in connection with this Agreement in any court outside of the above
named designated county or district shall have the right to have the venue of
said action changed to the above designated county or district or, if necessary,
have the case dismissed, requiring the other party to refile such action in an
appropriate court in the above designated county or federal district.
16. Counterparts. This Agreement may be executed in any number of
counterparts and each of such counterparts shall for all purposes be deemed to
be an original, and such counterparts shall together constitute but one and the
same instrument.
17. Entire Agreement. This Agreement and the agreements referred to within
this Agreement constitute the entire agreement of the parties, and supersedes
all prior agreement, understanding, negotiations and discussions, whether
written or oral, of the
39
<PAGE>
parties hereto.
If the foregoing is in accordance with your understanding of our
agreement, kindly sign and return this Agreement, whereupon it will become a
binding Agreement between the Company and the Underwriter in accordance with its
terms.
Very truly yours,
EAGLE SUPPLY GROUP, INC.
BY:___________________________________
Thomas W. Havnes, President
The foregoing Underwriting Agreement is hereby confirmed and accepted as of the
date first above written.
BARRON CHASE SECURITIES, INC.
BY:___________________________________
Robert T. Kirk, President
40
<PAGE>
EAGLE SUPPLY GROUP, INC.
1,500,000 Shares of Common Stock and
1,500,000 Common Stock Purchase Warrants
SELECTED DEALER AGREEMENT
Boca Raton, Florida
_____________, 1996
Gentlemen:
1. Barron Chase Securities, Inc. (the "Underwriter") is offering for sale
an aggregate of 1,500,000 Shares of Common Stock (the "Shares") and 1,500,000
Warrants (the "Warrants") (collectively the "Firm Securities") of Eagle Supply
Group, Inc. (the "Company"), which the Underwriter has agreed to purchase from
the Company, and which are more particularly described in the Registration
Statement, Underwriting Agreement and Prospectus. In addition, the Underwriter
has been granted an option to purchase from the Company up to an additional
225,000 Shares and an additional 225,000 Warrants (the "Option Securities") to
cover overallotments in connection with the sale of the Firm Securities. The
Firm Securities and any Option Securities purchased are herein called the
"Securities". The Securities and the terms under which they are to be offered
for sale by the Underwriter is more particularly described in the Prospectus.
2. The Securities are to be offered to the public by the Underwriter at
the price per Share and price per Warrant set forth on the cover page of the
Prospectus (the "Public Offering Price"), in accordance with the terms of
offering set forth in the Prospectus.
3. The Underwriter, subject to the terms and conditions hereof, is
offering a portion of the Securities for sale to certain dealers who are
actually engaged in the investment banking or securities business and who are
either (a) members in good standing of the National Association of Securities
Dealers, Inc. (the "NASD"), or (b) dealers with their principal places of
business located outside the United States, its territories and its possessions
and not registered as brokers or dealers under the Securities Exchange Act of
1934, as amended (the "1934 Act"), who have agreed not to make any sales within
the United States, its territories or its possessions or to persons who are
nationals thereof or residents therein (such dealers who shall agree to sell
Securities hereunder being herein called "Selected Dealers") at the public
offering price, less a selling concession (which may be changed) of not in
excess of $____ per Share and/or $____ per Warrant payable as hereinafter
provided, out of which concession an amount not exceeding $____ per Share and/or
$____ per
1
<PAGE>
Warrant may be reallowed by Selected Dealers to members of the NASD or foreign
dealers qualified as aforesaid. The Selected Dealers who are members of the NASD
agree to comply with all of the provisions of the NASD Conduct Rules. Foreign
Selected Dealers agree to comply with the provisions of Section 2740 of the NASD
Conduct Rules, and, if any such dealer is a foreign dealer and not a member of
the NASD, such Selected Dealer also agrees to comply with the NASD's
Interpretation with Respect to Free-Riding and Withholding, and to comply, as
though it were a member of the NASD, with the provisions of Sections 2730 and
2750 of the NASD Conduct Rules, and to comply with Section 2420 thereof as that
section applies to non-member foreign dealers. The Underwriter has agreed that,
during the term of this Agreement, it will be governed by the terms and
conditions hereof.
4. Barron Chase Securities, Inc. shall act as Underwriter and shall have
full authority to take such action as we may deem advisable in respect to all
matters pertaining to the public offering of the Securities.
5. If you desire to act as a Selected Dealer, and purchase any of the
Securities, your application should reach us promptly by facsimile or telegraph
at the offices of Barron Chase Securities, Inc., 7700 West Camino Real, Suite
200, Boca Raton, Florida 33433. We reserve the right to reject subscriptions in
whole or in part, to make allotments, and to close the subscription books at any
time without notice. The Securities allotted to you will be confirmed, subject
to the terms and conditions of this Agreement.
6. The privilege of subscribing for the Securities is extended to you only
on the condition that the Underwriter may lawfully sell the Securities to
Selected Dealers in your state or other applicable jurisdiction.
7. Any Securities to be purchased by you under the terms of this Agreement
may be immediately reoffered to the public in accordance with the terms of
offering as set forth herein and in the Prospectus, subject to the securities or
Blue Sky laws of the various states or other jurisdictions.
You agree to pay us on demand for the account of the Underwriter an amount
equal to the Selected Dealer concession as to any Securities purchased by you
hereunder which, prior to the completion of the public offering as defined in
paragraph 8 below, we may purchase or contract to purchase for our account and,
in addition, we may charge you with any broker's commission and transfer tax
paid in connection with such purchase or contract to purchase. Certificates for
Securities delivered on such repurchases need not be the identical certificates
originally purchased.
2
<PAGE>
You agree to advise us from time to time, upon request, of the number of
Securities purchased by you hereunder and remaining unsold at the time of such
request, and, if in our opinion any such Securities shall be needed to make
delivery of the Securities sold or overallotted for the account of the
Underwriter, you will, forthwith upon our request, grant to us for the account
of the Underwriter the right, exercisable promptly after receipt of notice from
you that such right has been granted, to purchase, at the Public Offering Price
less the selling concession or such part thereof as we shall determine, such
number of Securities owned by you as shall have been specified in our request.
No expenses shall be charged to Selected Dealers. A single transfer tax,
if payable, upon the sale of the Securities by the Underwriter to you will be
paid when such Securities are delivered to you. However, you shall pay any
transfer tax on sales of Securities by you and you shall pay your proportionate
share of any transfer tax (other than the single transfer tax described above)
in the event that any such tax shall from time to time be assessed against you
and other Selected Dealers as a group or otherwise.
Neither you nor any other person is or has been authorized to give any
information or to make any representation in connection with the sale of the
Securities other than as contained in the Prospectus.
8. The first three paragraphs of Section 7 hereof will terminate when we
shall have determined that the public offering of the Securities has been
completed and upon telefax notice to you of such termination, but, if not
theretofore terminated, they will terminate at the close of business on the 30th
full business day after the date hereof; provided, however, that we shall have
the right to extend such provisions for a further period or periods, not
exceeding an additional 30 days in the aggregate upon telefax notice to you.
9. For the purpose of stabilizing the market in the Securities, we have
been authorized to make purchases and sales of the Securities of the Company, in
the open market or otherwise, for long or short account, and, in arranging for
sales, to overallot.
10. On becoming a Selected Dealer, and in offering and selling the
Securities, you agree to comply with all the applicable requirements of the
Securities Act of 1933, as amended (the "1933 Act"), and the 1934 Act. You
confirm that you are familiar with Rule 15c2-8 under the 1934 Act relating to
the distribution of preliminary and final prospectuses for securities of an
issuer (whether or not the issuer is subject to the reporting requirements of
Section 13 or 15(d) of the 1934 Act) and confirm that you have complied and will
comply therewith.
3
<PAGE>
We hereby confirm that we will make available to you such number of copies
of the Prospectus (as amended or supplemented) as you may reasonably request for
the purposes contemplated by the 1933 Act or the 1934 Act, or the rules and
regulations thereunder.
11. Upon request, you will be informed as to the states and other
jurisdictions in which we have been advised that the Securities are qualified
for sale under the respective securities or Blue Sky laws of such states and
other jurisdictions, but we shall not assume any obligation or responsibility as
to the right of any Selected Dealer to sell the Securities in any state or other
jurisdiction or as to the eligibility of the Securities for sale therein. We
will, if requested, file a Further State Notice in respect of the Securities
pursuant to Article 23-A of the General Business Law of the State of New York.
12. No Selected Dealer is authorized to act as agent for the Underwriter,
or otherwise to act on our behalf, in offering or selling the Securities to the
public or otherwise or to furnish any information or make any representation
except as contained in the Prospectus.
13. Nothing will constitute the Selected Dealers an association or other
separate entity or partners with the Underwriter, or with each other, but you
will be responsible for your share of any liability or expense based on any
claim to the contrary. We shall not be under any liability for or in respect of
value, validity or form of the Securities, or the delivery of the certificates
for the Securities, or the performance by anyone of any agreement on its part,
or the qualification of the Securities for sale under the laws of any
jurisdiction, or for or in respect of any other matter relating to this
Agreement, except for lack of good faith and for obligations expressly assumed
by us or by the Underwriter in this Agreement and no obligation on our part
shall be implied herefrom. The foregoing provisions shall not be deemed a waiver
of any liability imposed under the 1933 Act.
14. Payment for the Securities sold to you hereunder is to be made at the
Public Offering Price less the above-mentioned selling concession on such time
and date as we may advise, at the office of Barron Chase Securities, Inc., 7700
West Camino Real, Suite 200, Boca Raton, Florida 33433, by a certified or
official bank check or wire transfer in current New York Clearing House funds,
payable to the order of Barron Chase Securities, Inc., as Underwriter, against
delivery of certificates for the Securities so purchased. If such payment is not
made at such time, you agree to pay us interest on such funds at the prevailing
broker's loan rate.
15. Notices to us should be addressed to us at the offices of Barron Chase
Securities, Inc., 7700 West Camino Real, Suite 200, Boca Raton, Florida 33433,
Attention: Robert T. Kirk. Notices to you shall be deemed to have been duly
given if telephoned,
4
<PAGE>
telefaxed, telegraphed or mailed to you at the address to which this letter is
addressed.
16. This Agreement shall be governed by and construed in accordance with
the laws of the State of Florida without giving effect to the choice of law or
conflicts of law principles thereof.
17. If you desire to purchase any Securities and act as a Selected Dealer,
please confirm your application by signing and returning to us your confirmation
on the duplicate copy of this letter enclosed herewith, even though you may have
previously advised us thereof by telephone or telegraph. Our signature hereon
may be by facsimile.
Very truly yours,
BARRON CHASE SECURITIES, INC.
BY:_________________________________
Authorized Officer
5
<PAGE>
Robert T. Kirk, President
Barron Chase Securities, Inc.
7700 West Camino Real, Suite 200
Boca Raton, Florida 33433
We hereby subscribe for ___________ Shares and/or ___________ Warrants of
Eagle Supply Group, Inc. in accordance with the terms and conditions stated in
the foregoing Selected Dealers Agreement and letter. We hereby acknowledge
receipt of the Prospectus referred to in the Selected Dealers Agreement and
letter. We further state that in purchasing said Shares and/or Warrants we have
relied upon said Prospectus and upon no other statement whatsoever, whether
written or oral. We confirm that we are a dealer actually engaged in the
investment banking or securities business and that we are either (i) a member in
good standing of the National Association of Securities Dealers, Inc. ("NASD");
or (ii) a dealer with its principal place of business located outside the United
States, its territories and its possessions and not registered as a broker or
dealer under the Securities Exchange Act of 1934, as amended, who hereby agrees
not to make any sales within the United States, its territories or its
possessions or to persons who are nationals thereof or residents therein. As a
member of the NASD, we hereby agree to comply with all of the provisions of NASD
Conduct Rules. If we are a foreign Selected Dealer, we agree to comply with the
provisions of Section 2740 of the Conduct Rules, and if we are a foreign dealer
and not a member of the NASD, we agree to comply with the NASD's interpretation
with respect to free-riding and withholding, and agree to comply, as though we
were a member of the NASD, with provisions of Sections 2730 and 2750 of such
Conduct Rules, and to comply with Section 2420 thereof as that Section applies
to non-member foreign dealers.
Firm:____________________________
By:____________________________
(Name and Position)
Address:____________________________
____________________________
Telephone No.:____________________________
Dated: __________________, 1996
6
Exhibit 3.1
PAGE 1
State of Delaware
Office of the Secretary of State
--------------------------------
I, EDWARD J. FREEL, SECRETARY OF STATE OF THE STATE OF DELAWARE, DO HEREBY
CERTIFY THE ATTACHED IS A TRUE AND CORRECT COPY OF THE CERTIFICATE OF
INCORPORATION OF "EAGLE SUPPLY GROUP, INC.", FILED IN THIS OFFICE ON THE FIRST
DAY OF MAY, A.D. 1996, AT 3 O'CLOCK P.M.
A CERTIFIED COPY OF THIS CERTIFICATE HAS BEEN FORWARDED TO THE NEW CASTLE
COUNTY RECORDER OF DEEDS FOR RECORDING.
/s/ Edward J. Freel
------------------------------------
Edward J. Freel, Secretary of State
[Seal]
Authentication: 7931222
Date: 05-02-96
<PAGE>
CERTIFICATE OF INCORPORATION
OF
EAGLE SUPPLY GROUP, INC.
1. The name of the corporation is EAGLE SUPPLY GROUP, INC.
2. The address of its registered office in the State of Delaware is
Corporation Trust Center, 1209 Orange Street, in the City of Wilmington, County
of New Castle, zip code 19801. The name of its registered agent at such address
is The Corporation Trust Company.
3. The nature of the business or purposes to be conducted or promoted is:
To engage in any lawful act or activity for which corporations may be organized
under the General Corporation Law of Delaware.
4. The total number of shares of stock which the Corporation shall have
authority to issue is seventeen million (17,000,000), of which stock fifteen
million (15,000,000) shares of par value of One Hundredth of One Cent ($.0001)
each, amounting in the aggregate to One Thousand Five Hundred Dollars ($1,500),
shall be Common Stock and two million (2,000,000) shares of the par value of One
Hundredth of One Cent ($.0001) each, amounting in the aggregate to Two Hundred
Dollars ($200), shall be Preferred Stock.
The powers, preferences and rights, and the qualifications, limitations and
restrictions of the Corporation's Common Stock and Preferred Stock are as
follows:
(a) holders of the Corporation's Common Stock as a class, have equal ratable
rights to receive dividends when, as
<PAGE>
and if declared by the Board of Directors, out of funds legally available
therefor and are entitled upon liquidation of the Company to share ratably
in the net assets available for distribution, are not redeemable and have
no pre-emptive or similar rights; and holders of the Corporation's Common
Stock have one non-cumulative vote for each share held of record on all
matters to be voted on by the Corporation's stockholders.
(b) The shares of Preferred Stock may be issued in series, and shall have such
voting powers, full or limited, or no voting powers, and such designations,
preferences and relative participating, optional or other special rights,
and qualifications, limitations or restrictions thereof, as shall be stated
and expressed in the resolution or resolutions providing for the issuance
of such stock adopted from time to time by the Board of Directors. The
Board of Directors is hereby expressly vested with the authority to
determine and fix in the resolution or resolutions providing for the
issuances of Preferred Stock the voting powers, designations, preferences
and rights, and the qualifications, limitations or restrictions thereof, of
each such series to the full extent now or hereafter permitted by the laws
of the State of Delaware.
5. The Corporation is to have perpetual existence.
6. In furtherance and not in limitation of the powers
2
<PAGE>
conferred by statute, the Board of Directors is expressly authorized to make,
alter or repeal the By-Laws of the Corporation.
7. Meetings of stockholders may be held within or without the State of
Delaware, as the By-Laws may provide. The books of the Corporation may be kept
(subject to any provision contained in the statutes) outside the State of
Delaware at such place or places as may be designated from time to time by the
Board of Directors or in the By-Laws of the Corporation. Elections of directors
need not be by written ballot unless the By-Laws of the Corporation shall so
provide.
8. The Corporation reserves the right to amend, alter, change or repeal any
provision contained in this Certificate of Incorporation, in the manner now or
hereafter prescribed by statute, and all rights conferred upon stockholders,
directors or any other person herein are granted subject to this reservation.
9. No director of the Corporation shall be personally liable to the
Corporation or any of its stockholders for monetary damages for breach of
fiduciary duty as a director, except for liability (i) for any breach of the
director's duty of loyalty to the Corporation or its stockholders, (ii) for acts
or ommissions not in good faith or which involve intentional misconduct or a
knowing violation of law, (iii) under Section 174 of the Delaware General
Corporation Law, as the same exists or hereafter may be amended, or (iv) for any
transaction from which the director derived an improper personal benefit. If the
Delaware General Corporation Law hereafter is amended to authorize the further
elimination or
3
<PAGE>
limitation of the liability of directors, then the liability of a director of
the Corporation, in addition to the limitation on personal liability provided
herein, shall be limited to the fullest extent permitted by the amended Delaware
Corporation Law. Any repeal or modification of this Article by the stockholders
of the Corporation shall be prospective only, and shall not adversely affect any
limitation on the personal liability of a director of the Corporation existing
at the time of such repeal or modification.
10. The Corporation elects not to be governed by Section 203 of the
Delaware General Corporation Law.
11. The name and mailing address of the incorporator is:
D.M. Dembkowski
Corporation Trust Center
1209 Orange Street
Wilmington, Delaware 19801
I, THE UNDERSIGNED, being the sole incorporator hereinbefore named, for the
purpose of forming a corporation pursuant to the General Corporation Law of the
State of Delaware, do make this Certificate, hereby declaring and certifying
that this is my act and deed and the facts herein state are true, and
accordingly have hereunto set my hand this 1st day of May 1996.
D.M. Dembkowski
-------------------------
4
Exhibit 3.2
BY-LAWS
OF
EAGLE SUPPLY GROUP, INC.
(Delaware)
ARTICLE I - OFFICES
The office of the Corporation shall be located in the City and State designated
in the Articles of Incorporation. The Corporation may also maintain offices at
such other places within or without the United States as the Board of Directors
may, from time to time, determine.
ARTICLE II - MEETING OF STOCKHOLDERS
Section 1 - Annual Meetings:
The annual meeting of the stockholders of the Corporation shall be held within
five months after the close of the fiscal year of the Corporation, for the
purpose of electing directors, and transacting such other business as may
properly come before the meeting.
Section 2 - Special Meetings:
Special meetings of the stockholders may be called at any time by the Board of
Directors or by the President, and shall be called by the President or the
Secretary at the request in writing of a majority of the directors or
stockholders entitled to vote or as otherwise required by the Delaware General
Corporation Law (the "Corporation Law").
Section 3 - Place of Meetings:
All meetings of stockholders shall be held at the principal office of the
Corporation or at such other places as shall be designated in the notices or
waivers of notice of such meetings.
Section 4 - Notice of Meetings:
(a) Except as otherwise provided by statute, written notice of each meeting of
stockholders, whether annual or special, stating the time when and place where
it is to be held, shall be served either personally or by mail, not less than
ten or more than fifty days before the meeting, upon each stockholder of record
entitled to vote at such meeting and to any other stockholder to whom the giving
of notice may be required by law. Notice of a special meeting shall also state
the purpose or purposes for which the meeting is called and shall indicate that
it is being issued by, or at the direction of, the person or persons calling the
meeting.
<PAGE>
If, at any meeting, action is proposed to be taken that would, if taken, entitle
stockholders to receive payment for their shares pursuant to statute, the notice
of such meeting shall include a statement of that purpose and to that effect. If
mailed, such notice shall be directed to each such stockholder at his address as
it appears on the records of the stockholders of the Corporation, unless he
shall have previously filed with the Secretary of the Corporation a written
request that notices intended for him be mailed to some other address, in which
case, it shall be mailed to the address designated in such request.
(b) Notice of any meeting need not be given to any person who may become a
stockholder of record after the mailing of such notice and prior to the meeting
or to any stockholder who attends such meeting, in person or by proxy, or to any
stockholder who, in person or by proxy, submits a signed waiver of notice either
before or after such meeting. Notice of any adjourned meeting of stockholders
need not be given, unless otherwise required by statute.
Section 5 - Quorum:
(a) Except as otherwise provided herein, or by statute, or in the
Certificate of Incorporation (such Certificate and any amendments
thereof being hereinafter collectively referred to as the "Certificate of
Incorporation"), at all meetings of stockholders of the Corporation, the
presence at the commencement of such meetings in person or by proxy of
stockholders holding of record a majority of the total number of shares of the
Corporation then issued and outstanding and entitled to vote shall be necessary
and sufficient to constitute a quorum for the transaction of any business. The
withdrawal of any stockholder after the commencement of a meeting shall have no
effect on the existence of a quorum, after a quorum has been established at such
meeting.
(b) In case a quorum shall not be present at any meeting, a majority in interest
of the stockholders entitled to vote thereat, present in person or by proxy,
shall have power to adjourn the meeting from time to time, without notice other
than announcement at the meeting, until the requisite number of shares entitled
to vote shall be present. At any such adjourned meeting at which the requisite
number of shares entitled to vote shall be represented, any business may be
transacted which might have been transacted at the meeting as originally
noticed; but only those stockholders entitled to vote at the meeting as
originally noticed shall be entitled to vote at any adjournment or adjournments
thereof.
Section 6 - Voting:
(a) Except as otherwise provided herein, or by statute or by the Certificate of
Incorporation, any corporate action, to be taken by vote of the stockholders,
shall be authorized by a majority of votes cast at a meeting of stockholders by
the holders of shares
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entitled to vote thereon.
(b) Except as otherwise provided herein, or by statute or by the Certificate of
Incorporation or by any certificate of Designations (as filed with the Secretary
of State of the State of Delaware pursuant to Section 131(g) of the Corporation
Law) at each meeting of stockholders, each holder of record of stock of the
Corporation entitled to vote thereat shall be entitled to one vote for each
share of stock registered in his name on the books of the Corporation.
(c) Each stockholder entitled to vote or to express consent or dissent without a
meeting may do so by proxy; provided, however, that the instrument authorizing
such proxy to act shall have been executed in writing by the stockholder himself
or by his attorney-in-fact thereunto duly authorized in writing. No proxy shall
be valid after the expiration of eleven months from the date of its execution,
unless the person executing it shall have specified therein the length of time
it is to continue in force. Such instrument shall be exhibited to the Secretary
at the meeting and shall be filed with the records of the Corporation.
Section 7 - Action Without Meeting:
Except as otherwise provided by the Certificate of Incorporation, whenever the
vote of stockholders at a meeting thereof is required or permitted to be taken
in connection with any corporate action by any provisions of the Corporation Law
or the Certificate of Incorporation or of these By-Laws, the meeting and vote of
shareholders may be dispensed with if the majority of the stockholders who would
have been entitled to vote upon the action if such meeting were held shall
consent in writing to such corporate action being taken.
ARTICLE III - BOARD OF DIRECTORS
Section 1 - Number, Election and Term of Office:
(a) The number of the directors of the Corporation shall be as
determined by resolution of the Board of Directors.
(b) Except as may otherwise be provided herein, in the Certificate of
Incorporation or in the Corporation Law, the members of the Board of Directors
of the Corporation, who need not be stockholders, shall be elected by a majority
of the votes cast at a meeting of stockholders by the holders of shares, present
in person or by proxy, entitled to vote in the election.
(c) Each director shall hold office until the annual meeting of the stockholders
next succeeding his election and until his successor is elected and qualified,
or until his prior death, resignation or removal.
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Section 2 - Duties and Powers:
The Board of Directors shall be responsible for the control and management of
the affairs, property and interests of the Corporation, and may exercise all
powers of the Corporation, except as are in the Certificate of Incorporation or
by statute expressly conferred upon or reserved to the stockholders.
Section 3 - Annual and Regular Meetings; Notice:
(a) A regular annual meeting of the Board of Directors shall be held immediately
following the annual meeting of the stockholders, at the place of such annual
meeting of stockholders.
(b) The Board of Directors, from time to time, may provide by resolution for the
holding of other regular meetings of the Board of Directors, and may fix the
time and place thereof.
(c) Notice of any regular meeting of the Board of Directors shall not be
required to be given and, if given, need not specify the purpose of the meeting;
provided, however, that in case the Board of Directors shall fix or change the
time or place of any regular meeting, notice of such action shall be given to
each director who shall not have been present at the meeting at which such
action was taken within the time limited, and in the manner set forth in
paragraph (b) Section 4 of this Article III, with respect to special meetings,
unless such notice shall be waived in the manner set forth in paragraph (c) of
such Section 4.
Section 4 - Special Meetings; Notice:
(a) Special meetings of the Board of Directors shall be held whenever called by
the President or by a majority of the directors, at such time and place as may
be specified in respective notices or waivers of notice thereof.
(b) Except as otherwise required by statute, notice of special meeting shall be
mailed directly to each director, addressed to him at his residence or usual
place of business, at least two (2) days before the day on which the meeting is
to be held, or shall be sent to him at such place by telegram, radio,
telecopier, facsimile transmission or cable, or shall be delivered to him
personally or given to him orally, not later than the day before the day on
which the meeting is to be held. A notice, or waiver of notice, except as
required by Section 8 of this Article III, need not specify the purpose of the
meeting.
(c) Notice of any special meeting shall not be required to be given to any
director who shall attend such meeting without protesting prior thereto or at
its commencement the lack of notice to him, or who submits a signed waiver of
notice, whether before or after the meeting. Notice of any adjourned meeting
shall not be
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required to be given.
Section 5 - Telecommunication Meetings Permitted:
Members of the Board of Directors or any committee designated by the Board may
participate in a meeting of such Board or committee by means of conference
telephone or similar communications equipment by means of which all persons
participating in the meeting can hear each other, and participation in a meeting
pursuant to this By-Law shall constitute presence in person at such meeting.
Section 6 - Chairman:
At all meetings of the Board of Directors, the Chairman of the Board, if any and
if present, shall preside. If there shall be no Chairman, or he shall be absent,
then the President shall preside, and in his absence, a Chairman chosen by the
directors shall preside.
Section 7 - Quorum and Adjournments:
(a) At all meetings of the Board of Directors, the presence of a majority of the
entire Board shall be necessary and sufficient to constitute a quorum for the
transaction of business, except as otherwise provided by law, by the Certificate
of Incorporation, or by these By-Laws.
(b) A majority of the directors present at the time and place of any regular or
special meeting, although less than a quorum, may adjourn the same from time to
time without notice, until a quorum shall be present.
Section 8 - Manner of Acting:
(a) At all meetings of the Board of Directors, each director present shall have
one vote, irrespective of the number of shares of stock, if any, which he may
hold.
(b) Except as otherwise provided by statute, by the Certificate of
Incorporation, or by these By-Laws, the action of a majority of the directors
present at any meeting at which a quorum is present shall be the act of the
Board of Directors. Any action authorized, in writing, by all of the directors
entitled to vote thereon and filed with the minutes of the Corporation shall be
the act of the Board of Directors with the same force and effect as if the same
had been passed by unanimous vote at a duly called meeting of the Board.
Section 9 - Vacancies:
Any vacancy in the Board of Directors occurring by reason of an increase in the
number of directors, or by reason of the death,
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resignation, disqualification, removal (unless a vacancy created by the removal
of a director by the stockholders shall be filled by the stockholders at the
meeting at which the removal was effected) or inability to act of any director,
or otherwise, shall be filled for the unexpired portion of the term by a
majority vote of the remaining directors, though less than a quorum, at any
regular meeting or special meeting of the Board of Directors called for that
purpose.
Section 10 - Resignation:
Any director may resign at any time by giving written notice to the Board of
Directors, the President or the Secretary of the Corporation. Unless otherwise
specified in such written notice, such resignation shall take effect upon
receipt thereof by the Board of Directors or such officer, and the acceptance of
such resignation shall not be necessary to make it effective.
Section 11 - Removal:
Any director may be removed with or without cause at any time by the affirmative
vote of stockholders holding of record in the aggregate at least a majority of
the outstanding shares of the Corporation at a special meeting of the
stockholders called for that purpose, and may be removed for cause by action of
the Board.
Section 12 - Salary:
No stated salary shall be paid to directors, as such, for their services, but by
resolution of the Board of Directors a fixed sum and expenses of attendance, if
any, may be allowed for attendance at each regular or special meeting of the
Board; provided, however, that nothing herein contained shall be construed to
preclude any director from serving the Corporation in any other capacity and
receiving compensation therefor.
Section 13 - Contracts:
(a) No contract or other transaction between this Corporation and any other
corporation shall be impaired, affected or invalidated, nor shall any director
be liable in any way by reason of the fact that any one or more of the directors
of this Corporation is or are interested in, or is a director or officer, or are
directors or officers of such other corporation, provided that such facts are
disclosed or made known to the Board of Directors.
(b) Any director, personally and individually, may be a party to or
may be interested in any contract or transaction of this Corporation, and no
director shall be liable in any way by reason of such interest, provided that
the fact of such interest be disclosed or made known to the Board of Directors,
and provided that the Board of Directors shall authorize, approve or ratify such
contract or
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transaction by the vote (not counting the vote of any such interested director)
of a majority of a quorum, notwithstanding the presence of any such director at
the meeting at which such action is taken. If there be no disinterested
director, the stockholders of the Company may authorize, approve or ratify such
contract or transaction by the vote of a majority of a quorum. Such director or
directors may be counted in determining the presence of a quorum at such
meeting. This Section shall not be construed to impair or invalidate or in any
way affect any contract or other transaction which would otherwise be valid
under the law (common, statutory or otherwise) applicable thereto.
Section 14 - Committees:
The Board of Directors, by resolution adopted by a majority of the entire Board,
may from time to time designate from among its members an executive committee
and such other committees, the Chairman of such committees and alternate members
thereof as they may deem desirable, each consisting of two or more members, with
such powers and authority (to the extent permitted by law) as may be provided in
such resolution. Each such committee shall serve at the pleasure of the Board.
ARTICLE IV - OFFICERS
Section 1 - Number, Qualifications, Election and Term of Office:
(a) The officers of the Corporation shall consist of a President, a Secretary, a
Treasurer, and such officers, including a Chairman of the Board of Directors,
Chief Executive Officer and one or more Vice Presidents (including Senior and
Executive Vice Presidents), and Assistants to any of the foregoing as the Board
of Directors may from time to time deem advisable. Any officer may be, but is
not required to be, a director of the Corporation. Any two or more offices may
be held by the same person.
(b) The officers of the Corporation shall be elected by the Board of Directors
at the regular annual meeting of the Board following the annual meeting of
stockholders. Additionally, an Assistant Secretary, Assistant Treasurer and
persons holding similar or other ministerial offices may be appointed from time
to time by the President or the Chief Executive Officer.
(c) Any Assistant Secretary or Assistant Treasurer and persons holding similar
or other ministerial titles shall serve in their offices at the discretion of
the officer who appointed them or his successor. All other officers shall hold
office until the annual meeting of the Board of Directors next succeeding his
election, and until his successor shall have been elected and qualified, or
until his death, resignation or removal.
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Section 2 - Resignation:
Any officer may resign at any time by giving written notice of such resignation
to the Board of Directors, or to the President or the Secretary of the
Corporation. Unless otherwise specified in such written notice, such resignation
shall take effect upon receipt thereof by the Board of Directors or by such
officer, and the acceptance of such resignation shall not be necessary to make
it effective.
Section 3 - Removal:
Any officer may be removed, either with or without cause, and a successor
elected by a majority vote of the Board of Directors at any time.
Section 4 - Vacancies:
A vacancy in any office by reason of death, resignation, inability to act,
disqualification, or any other cause, may at any time be filled for the
unexpired portion of the term by a majority vote of the Board of Directors.
Section 5 - Duties of Officers:
Officers of the Corporation shall, unless otherwise provided by the Board of
Directors, each have such powers and duties as generally pertain to their
respective offices as well as such powers and duties as may be set forth in
these By-Laws or may from time to time be specifically conferred or imposed by
the Board of Directors. The Treasurer shall be the chief financial officer of
the Corporation.
Section 6 - Sureties and Bonds:
In case the Board of Directors shall so require, any officer,
employee or agent of the Corporation shall execute to the Corporation a bond in
such sum, and with such surety or sureties as the Board of Directors may direct,
conditioned upon the faithful performance of his duties to the Corporation,
including responsibility for negligence and for the accounting for all property,
funds or securities of the Corporation which may come into his hands.
Section 7 - Shares of Other Corporations:
Whenever the Corporation is the holder of shares of any other corporation, any
rights or power of the Corporation as such stockholder (including the
attendance, acting and voting at stockholders' meetings and execution of
waivers, consents, proxies or other instruments) may be exercised on behalf of
the Corporation by the President, Chief Executive Officer, any Vice President,
or
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such other person as the Board of Directors may authorize.
ARTICLE V - SHARES OF STOCK
Section 1 - Certificate of Stock:
(a) The certificates representing shares of the Corporation shall be in such
form as shall be adopted by the Board of Directors and shall be numbered and
registered in the order issued. They shall bear the holder's name and the number
of shares and shall be signed by (i) the Chairman of the Board or the President
or the Chief Executive Officer or a Vice President and (ii) the Secretary or
Treasurer, or any Assistant Secretary or Assistant Treasurer, and shall bear the
corporate seal.
(b) No certificate representing shares shall be issued until the full amount of
consideration therefor has been paid, except as otherwise permitted by law.
(c) To the extent permitted by law, the Board of Directors may authorize the
issuance of certificates for fractions of a share which shall entitle the holder
to exercise voting rights, receive dividends and participate in liquidating
distributions, in proportion to the fractional holdings; or it may authorize the
payment in cash of the fair value of fractions of a share as of the time when
those entitled to receive such fractions are determined; or it may authorize the
issuance, subject to such conditions as may be permitted by law, of scrip in
registered or bearer form over the signature of an officer or agent of the
Corporation, exchangeable as therein provided for full shares, but such scrip
shall not entitle the holder to any rights of a stockholder, except as therein
provided.
Section 2 - Lost or Destroyed Certificates:
The holder of any certificate representing shares of the Corporation shall
immediately notify the Corporation of any loss or destruction of the certificate
representing the same. The Corporation may issue a new certificate in the place
of any certificate theretofore issued by it, alleged to have been lost or
destroyed. On production of such evidence of loss or destruction as the Board of
Directors in its discretion may require, the Board of Directors may, in its
discretion, require the owner of the lost or destroyed certificate, or his legal
representatives, to give the Corporation a bond in such sum as the Board may
direct, and with such surety or sureties as may be satisfactory to the Board, to
indemnify the Corporation against any claims, loss, liability or damage it may
suffer on account of the issuance of the new certificate. A new certificate may
be issued without requiring any such evidence or bond when, in the judgment of
the Board of Directors, it is proper to do so.
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Section 3 - Transfers of Shares:
(a) Transfers of shares of the Corporation shall be made on the share records of
the Corporation only by the holder of record thereof, in person or by his duly
authorized attorney, upon surrender for cancellation of the certificate or
certificates representing such shares, with an assignment or power of transfer
endorsed thereon or delivered therewith, duly executed, with such proof of the
authenticity of the signature and of authority to transfer and of payment of
transfer taxes as the Corporation or its agents may require.
(b) The Corporation shall be entitled to treat the holder of record of any share
or shares as the absolute owner thereof for all purposes and, accordingly, shall
not be bound to recognize any legal, equitable or other claim to, or interest
in, such share or shares on the part of any other person, whether or not it
shall have express or other notice thereof, except as otherwise expressly
provided by law.
Section 4 - Record Date:
In lieu of closing the share records of the Corporation, the Board of Directors
may fix, in advance, a date not exceeding fifty days, nor less than ten days, as
the record date for the determination of stockholders entitled to receive notice
of, or to vote at, any meeting of stockholders, or to consent to any proposal
without a meeting, or for the purpose of determining stockholders entitled to
receive payment of any dividends, or allotment of any rights, or for the purpose
of any other action. If no record date is fixed, the record date for the
determination of stockholders entitled to notice of or to vote at a meeting of
stockholders shall be at the close of business on the day next preceding the day
on which notice is given, or, if no notice is given, the day on which the
meeting is held; the record date for determining stockholders for any other
purpose shall be at the close of business on the day on which the resolution of
the directors relating thereto is adopted. When a determination of stockholders
of record entitled to notice of or to vote at any meeting of stockholders has
been made as provided for herein, such determination shall apply to any
adjournment thereof, unless the directors fix a new record date for the
adjourned meeting.
ARTICLE VI - DIVIDENDS
Subject to applicable law, dividends may be declared and paid out of any funds
available therefor, as often, in such amounts, and at such time or times as the
Board of Directors may determine.
ARTICLE VII - FISCAL YEAR
The fiscal year of the Corporation shall be fixed by the Board of
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Directors from time to time, subject to applicable law.
ARTICLE VIII - CORPORATE SEAL
The corporate seal, if any, shall be in such form as shall be approved from time
to time by the Board of Directors.
ARTICLE IX - AMENDMENTS
Section 1 - By Stockholders:
All By-Laws of the Corporation shall be subject to alteration or repeal, and new
By-Laws may be made, by the affirmative vote of stockholders holding of record
in the aggregate at least a majority
of the outstanding shares entitled to vote in the election of directors at any
annual or special meeting of stockholders, provided that the notice or waiver of
notice of such meeting shall have summarized or set forth in full therein the
proposed amendment.
Section 2 - By Directors:
The Board of Directors shall have power to make, adopt, alter, amend and repeal,
from time to time, By-Laws of the Corporation; provided, however, that the
stockholders entitled to vote with respect thereto as in this Article IX
above-provided may alter, amend or repeal By-Laws made by the Board of
Directors, except that the Board of Directors shall have no power to change the
quorum for meetings of stockholders or of the Board of Directors, or to change
any provisions of the By-Laws with respect to the removal of directors or the
filing of vacancies in the Board resulting from the removal by the stockholders.
If any By-Law regulating an impending election of directors is adopted, amended
or repealed by the Board of Directors, there shall be set forth in the notice of
the next meeting of stockholders for the election of directors the By-Law so
adopted, amended or repealed, together with a concise statement of the changes
made.
ARTICLE X - INDEMNITY
The Corporation shall indemnify to the full extent authorized by law any person
made or threatened to be made a party to an action or proceeding, whether civil,
criminal, administrative or investigative, by reason of the fact that he, his
testator or intestate is or was a director, officer or employee or agent of the
Corporation or any predecessor of the Corporation or serves or served any other
enterprise as a director, officer or employee or agent at the request of the
Corporation or any predecessor of the Corporation.
ARTICLE XI - CONFLICTS OF INTEREST
Any conflicts of interest that may arise between the Corporation
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and the interests of its officers and directors will be resolved in a fair
manner which will protect the interest of the Corporation pursuant to Delaware
law. No contract or other transaction between the Corporation and any of its
directors or any other entity in which one or more of the Corporation's
directors are directors or officers, or are financially or otherwise interested,
will be invalidated because of such relationship if (i) the fact of such
relationship or interest is disclosed or known to the Board of Directors or
committee which authorizes, approves or ratifies the contract or transaction by
a vote or consent sufficient for the purpose without counting the votes or
consents of the interested director, (ii) the fact of such relationship or
interest is disclosed or known to the stockholders entitled to vote and the
stockholders authorize, approve or ratify the contract or transaction; or (iii)
the contract or transaction is fair and reasonable to the Corporation.
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Exhibit 4.1
UNDERWRITER'S WARRANT AGREEMENT (the "Underwriter's Warrant Agreement" or
"Agreement"), dated as of , 1996, between EAGLE SUPPY GROUP, INC. (the
"Company"), and BARRON CHASE SECURITIES, INC. (the "Underwriter").
W I T N E S S E T H:
WHEREAS, the Underwriter has agreed, pursuant to the underwriting
agreement (the "Underwriting Agreement") dated as of the date hereof between the
Company and the Underwriter, to act as the Underwriter in connection with the
Company's proposed public offering of 1,500,000 shares of the Company's Common
Stock at $5.00 per share and 1,500,000 Warrants ("Public Warrants") at $.125 per
warrant (the "Public Offering"); and
WHEREAS, the Company proposes to issue to the Underwriter and/or persons
related to the Underwriter as those persons are defined in Rule 2710 of the NASD
Conduct Rules (the "Holder"), 150,000 warrants ("Common Stock Underwriter
Warrants") to purchase 150,000 shares of the Company's Common stock (the
"Shares") and 150,000 warrants ("Warrant Underwriter Warrants") to purchase
150,000 Common Stock Purchase Warrants ("Underlying Warrants") exercisable to
purchase 150,000 shares of the Company's Common Stock. The "Common Stock
Underwriter Warrants" and the "Warrant Underwriter Warrants" are collectively
referred to as the "Warrants". The "Shares" and the "Underlying Warrants" are
collectively referred to as the "Warrant Securities"; and
WHEREAS, the Warrants to be issued pursuant to this Agreement will be
issued on the Closing Date (as such term is defined in the Underwriting
Agreement) by the Company to the Holders in consideration for, and as part of
the compensation in connection with, the Underwriter acting as Underwriter
pursuant to the Underwriting Agreement.
NOW, THEREFORE, in consideration of the premises, the payment by the
Underwriter to the Company of TEN DOLLARS AND NO CENTS ($10.00), the agreements
herein set forth and other good and valuable consideration, the receipt and
sufficiency of which are hereby acknowledged, the parties hereto agree as
follows:
1. Grant and Period.
The Public Offering has been registered under a Registration Statement on
Form S-1 (File No. 333-____) and declared effective by the Securities and
Exchange Commission (the "SEC" or "Commission") on ________, 1996 (the
"Effective Date"). This Agreement, relating to the purchase of the Warrants, is
entered into pursuant to the Underwriting Agreement between the Company and the
Underwriter in connection with the Public Offering.
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Pursuant to the Warrants, the Holders are hereby granted the right to
purchase from the Company, at any time during the period commencing on the
Effective Date and expiring five (5) years thereafter (the "Expiration Time"),
up to 150,000 Shares at an initial exercise price (subject to adjustment as
provided in Article 8 hereof) of $8.00 per share (160% of the public offering
price) and/or 150,000 non-redeemable Underlying Warrants at an initial exercise
price of $.20 per warrant (160% of the public offering price) (the "Exercise
Price" or "Purchase Price"), subject to the terms and conditions of this
Agreement. Each Underlying Warrant is exercisable to purchase one (1) share of
Common Stock at $8.00 per share during the three (3) year period commencing on
the Effective Date.
Except as specifically otherwise provided herein, the Shares and the
Underlying Warrants constituting the Warrant Securities shall bear the same
terms and conditions as such securities described under the caption "Description
of Securities" in the Registration Statement, and as designated in the Company's
Articles of Incorporation and any amendments thereto, and the Underlying
Warrants shall be governed by the terms of the Warrant Agreement executed in
connection with the Company's public offering (the "Warrant Agreement"), except
as provided herein, and the Holders shall have registration rights under the
Securities Act of 1933, as amended (the "Act"), for the Warrants, the Shares,
the Underlying Warrants, and the shares of Common Stock underlying the
Underlying Warrants, as more fully described in paragraph seven (7) of this
Underwriter's Warrant Agreement. In the event of any extension of the expiration
date or reduction of the exercise price of the Public Warrants, the same such
changes to the Underlying Warrants shall be simultaneously effected, except that
the Underlying Warrants shall expire no later than five (5) years from the
Effective Date.
2. Warrant Certificates.
The warrant certificates (the "Warrant Certificate") delivered and to be
delivered pursuant to this Agreement shall be in the form set forth in the form
of Warrant Certificate, attached hereto and made a part hereof, with such
appropriate insertions, omissions, substitutions, and other variations as
required or permitted by this Agreement.
3. Exercise of Warrant.
3.1 Full Exercise.
(i) The Holder hereof may effect a cash exercise of the Common Stock
Underwriter Warrants and/or the Warrant Underwriter Warrants and/or the
Underlying Warrants by surrendering the Warrant Certificate, together with
a Subscription in the form of Exhibit "A" attached thereto, duly
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executed by such Holder to the Company, at any time prior to the
Expiration Time, at the Company's principal office, accompanied by payment
in cash or by certified or official bank check payable to the order of the
Company in the amount of the aggregate purchase price (the "Aggregate
Price"), subject to any adjustments provided for in this Agreement. The
aggregate price hereunder for each Holder shall be equal to the exercise
price as set forth in Section six (6) hereof multiplied by the number of
Warrants, Underlying Warrants or Shares that are the subject of each
Holder's Warrant (as adjusted as hereinafter provided).
(ii) The Holder hereof may effect a cashless exercise of the Common
Stock Underwriter Warrants and/or the Underlying Warrants by delivering
the Warrant Certificate to the Company together with a Subscription in the
form of Exhibit "B" attached thereto, duly executed by such Holder, in
which case no payment of cash will be required. Upon such cashless
exercise, the number of Shares to be purchased by each Holder hereof shall
be determined by dividing: (i) the number obtained by multiplying the
number of Shares that are the subject of each Holder's Warrant Certificate
by the amount, if any, by which the then Market Value (as hereinafter
defined) exceeds the Purchase Price; by (ii) the then per share Market
Value or purchase price, whichever is greater. In no event shall the
Company be obligated to issue any fractional securities and, at the time
it causes a certificate or certificates to be issued, it shall pay the
Holder in lieu of any fractional securities or shares to which such Holder
would otherwise be entitled, by the Company check, in an amount equal to
such fraction multiplied by the Market Value. The Market Value shall be
determined on a per Share basis as of the close of the business day
preceding the exercise, which determination shall be made as follows: (a)
if the Common Stock is listed for trading on a national or regional stock
exchange or is included on the NASDAQ National Market or Small-Cap Market,
the average closing sale price quoted on such exchange or the NASDAQ
National Market or Small-Cap Market which is published in The Wall Street
Journal for the ten (10) trading days immediately preceding the date of
exercise, or if no trade of the Common Stock shall have been reported
during such period, the last sale price so quoted for the next day prior
thereto on which a trade in the Common Stock was so reported; or (b) if
the Common Stock is not so listed, admitted to trading or included, the
average of the closing highest reported bid and lowest reported ask price
as quoted on the National Association of Securities Dealer's OTC Bulletin
Board or in the "pink sheets" published by the National Daily Quotation
Bureau for the first day immediately preceding the date of exercise on
which the Common Stock is traded.
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3.2 Partial Exercise. The securities referred to in paragraph 3.1 above
also may be exercised from time to time in part by surrendering the Warrant
Certificate in the manner specified in Section 3.1 hereof, except that with
respect to a cash exercise, the Purchase Price payable shall be equal to the
number of securities being purchased hereunder multiplied by the per security
Purchase Price, subject to any adjustments provided for in this Agreement. Upon
any such partial exercise, the Company, at its expense, will forthwith issue to
the Holder hereof a new Warrant Certificate or Warrants of like tenor calling in
the aggregate for the number of securities (as constituted as of the date
hereof) for which the Warrant Certificate shall not have been exercised, issued
in the name of the Holder hereof or as such Holder (upon payment by such Holder
of any applicable transfer taxes) may direct.
4. Issuance of Certificates.
Upon the exercise of the Warrants and/or the Underlying Warrants, the
issuance of certificates for the shares of Common Stock and/or other securities
shall be made forthwith (and in any event within three (3) business days
thereafter) without charge to the Holder thereof including, without limitation,
any tax which may be payable in respect of the issuance thereof, and such
certificates shall (subject to the provisions of Sections 5 and 7 hereof) be
issued in the name of, or in such names as may be directed by, the Holder
thereof; provided, however, that the Company shall not be required to pay any
tax which may be payable in respect of any transfer involved in the issuance and
delivery of any such certificates in a name other than that of the Holder and
the Company shall not be required to issue or deliver such certificates unless
or until the person or persons requesting the issuance thereof shall have paid
to the Company the amount of such tax or shall have established to the
satisfaction of the Company that such tax has been paid.
The Warrant Certificates and the certificates representing the shares of
Common Stock and/or other securities shall be executed on behalf of the Company
by the manual or facsimile signature of the then present Chairman or Vice
Chairman of the Board of Directors or President or Vice President of the Company
under its corporate seal reproduced thereon, attested to by the manual or
facsimile signature of the then present Secretary or Assistant Secretary of the
Company. Warrant Certificates shall be dated the date of execution by the
Company upon initial issuance, division, exchange, substitution or transfer.
5. Restriction On Transfer of Warrants.
The Holder of a Warrant Certificate, by its acceptance thereof, covenants
and agrees that the Warrants may not be sold, transferred, assigned,
hypothecated or otherwise disposed of, in whole or in part, for a period of one
(1) year from the Effective
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Date of the Public Offering, except (a) to officers of the Underwriter or to
officers and partners of Selected Dealers participating in the Public Offering;
(b) by will; or (c) by operation of law.
6. Exercise Price.
6.1 Initial and Adjusted Exercise Prices.
The initial exercise price of each Common Stock Underwriter Warrant shall
be $8.00 per share (160% of the public offering price). The initial exercise
price of each Warrant Underwriter Warrant shall be $.20 per Underlying Warrant
(160% of the public offering price). The initial exercise price of each
Underlying Warrant shall be $8.00 per share. The adjusted exercise price shall
be the price which shall result from time to time from any and all adjustments
of the initial exercise price in accordance with the provisions of Section 8
hereof. The Warrant Underwriter Warrants and the Underlying Warrants are
exercisable during the three (3) year period commencing on the Effective Date.
6.2 Exercise Price.
The term "Exercise Price" herein shall mean the initial exercise price or
the adjusted exercise price, depending upon the context.
7. Registration Rights.
7.1 Registration Under the Securities Act of 1933.
The Warrants, the Shares, the Underlying Warrants and the shares of Common
Stock issuable upon exercise of the Underlying Warrants (collectively the
"Registrable Securities") have been registered under the Securities Act of 1933,
as amended (the "Act"). Upon exercise, in part or in whole, of the Warrants,
certificates representing the Shares, the Underlying Warrants and/or the shares
of Common Stock issuable upon exercise of the Underlying Warrants shall bear the
following legend in the event there is no current registration statement
effective with the Securities and Exchange Commission at such time as to such
securities:
The securities represented by this certificate may not be offered or sold
except pursuant to (i) an effective registration statement under the Act,
(ii) to the extent applicable, Rule 144 under the Act (or any similar rule
under such Act relating to the disposition of securities), or (iii) an
opinion of counsel, if such opinion shall be reasonably satisfactory to
counsel to the issuer, that an exemption from registration under such Act
and applicable state securities laws is
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available.
7.2 Piggyback Registration.
If, at any time commencing after the Effective Date of the offering and
expiring seven (7) years thereafter, the Company prepares and files a
post-effective amendment to the Registration Statement, or a new Registration
Statement, under the Act, or files a Notification on Form 1-A or otherwise
registers securities under the Act, or files a similar disclosure document with
the Commission (collectively the "Registration Documents") as to any of its
securities under the Act (other than under a Registration Statement pursuant to
Form S-8), it will give written notice by registered mail, at least thirty (30)
days prior to the filing of each such Registration Document, to the Underwriter
and to all other Holders of the Registrable Securities of its intention to do
so. If the Underwriter and/or other Holders of the Registrable Securities notify
the Company within twenty (20) days after receipt of any such notice of its or
their desire to include any such Registrable Securities in such proposed
Registration Documents, the Company shall afford the Underwriter and such
Holders of such Registrable Securities the opportunity to have any Registrable
Securities registered under such Registration Documents or any other available
Registration Document.
Notwithstanding the provisions of this Section 7.2, the Company shall have
the right at any time after it shall have given written notice pursuant to this
Section 7.2 (irrespective of whether a written request for inclusion of any such
securities shall have been made) to elect not to file any such proposed
registration statement, or to withdraw the same after the filing but prior to
the effective date thereof.
7.3 Demand Registration.
(a) At any time commencing one (1) year after the Effective Date of the
Public Offering, and expiring four (4) years thereafter, the Holders of
Registrable Securities representing more than 50% of such securities at that
time outstanding shall have the right (which right is in addition to the
registration rights under Section 7.2 hereof), exercisable by written notice to
the Company, to have the Company prepare and file with the Commission, on one
occasion, a registration statement and/or such other documents, including a
prospectus, and/or any other appropriate disclosure document as may be
reasonably necessary in the opinion of both counsel for the Company and counsel
for the Underwriter and Holders, in order to comply with the provisions of the
Act, so as to permit a public offering and sale of their respective Registrable
Securities for nine (9) consecutive months (or such longer period of time as
permitted by the Act) by such Holders and any other Holders of any of the
Registrable Securities who notify the Company within ten (10) days after being
given notice from the
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Company of such request. A Demand Registration shall not be counted as a Demand
Registration hereunder until such Demand Registration has been declared
effective by the SEC and maintained continuously effective for a period of at
least nine months or such shorter period when all Registrable Securities
included therein have been sold in accordance with such Demand Registration,
provided that a Demand Registration shall be counted as a Demand Registration
hereunder if the Company ceases its efforts in respect of such Demand
Registration at the request of the majority Holders making the demand for a
reason other than a material and adverse change in the business, assets,
prospects or condition (financial or otherwise) of the Company and its
subsidiaries taken as a whole.
(b) The Company covenants and agrees to give written notice of any
registration request under this Section 7.3 by the majority of the Holders to
all other registered Holders of any of the Registrable Securities within ten
(10) days from the date of the receipt of any such registration request.
(c) In addition to the registration rights under Section 7.2 and
subsection (a) of this Section 7.3, at any time commencing one (1) year after
the Effective Date of the offering, and expiring four (4) years thereafter, the
Holders of a majority of the Registrable Securities shall have the right,
exercisable by written request to the Company, to have the Company prepare and
file, on one occasion, with the Commission a registration statement or any other
appropriate disclosure document so as to permit a public offering and sale for
nine (9) consecutive months (or such longer period of time as permitted by the
Act) by any such Holder of Registrable Securities; provided, however, that the
provisions of Section 7.4(b) hereof shall not apply to any such registration
request and registration and all costs incident thereto shall be at the expense
of the Holder or Holders participating in the offering pro-rata.
(d) Any written request by the Holders made pursuant to this Section 7.3
shall:
(i) specify the number of Registrable Securities which the Holders
intend to offer and sell and the minimum price at which the Holders intend
to offer and sell such securities;
(ii) state the intention of the Holders to offer such securities for
sale;
(iii) describe the intended method of distribution of such
securities; and
(iv) contain an undertaking on the part of the Holders to provide
all such information and materials concerning the Holders and take all
such action as may be reasonably required to permit the Company to comply
with all applicable
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requirements of the Commission and to obtain acceleration of the effective
date of the registration statement.
(e) In the event the Company receives from the Holders of any Registrable
Securities representing more than 50% of such securities at that time
outstanding, a request that the Company effect a registration on Form S-3 with
respect to the Registrable Securities and if Form S-3 is available for such
offering, the Company shall, as soon as practicable, effect such registration as
would permit or facilitate the sale and distribution of the Registrable
Securities as are specified in the request. All expenses incurred in connection
with a registration requested pursuant to this Section shall be borne by the
Company. Registrations effected pursuant to this Section 7.3(e) shall not be
counted as registrations pursuant to Section 7.3(a) and 7.3(c) hereof.
7.4 Covenants of the Company With Respect to Registration.
In connection with any registration under Section 7.2 or 7.3 hereof, the
Company covenants and agrees as follows:
(a) The Company shall use its best efforts to file a registration
statement within forty-five (45) days of receipt of any demand pursuant to
Section 7.3, and shall use its best efforts to have any such registration
statement declared effective at the earliest practicable time. The Company will
promptly notify each seller of such Registrable Securities and confirm such
advice in writing, (i) when such registration statement becomes effective, (ii)
when any post-effective amendment to such registration statement becomes
effective and (iii) of any request by the SEC for any amendment or supplement to
such registration statement or any prospectus relating thereto or for additional
information.
The Company shall furnish to each seller of such Registrable Securities
such number of copies of such registration statement and of each such amendment
and supplement thereto (in each case including each preliminary prospectus and
summary prospectus) in conformity with the requirements of the Act, and such
other documents as such seller may reasonably request in order to facilitate the
disposition of the Registrable Securities by such seller.
(b) The Company shall pay all costs (excluding transfer taxes, if any, and
fees and expenses of Holder(s)' counsel and the Holder's pro-rata portion of the
selling discount or commissions), fees and expenses in connection with all
registration statements filed pursuant to Sections 7.2 and 7.3(a) hereof
including, without limitation, the Company's legal and accounting fees, printing
expenses, blue sky fees and expenses. The Holder(s) will pay all costs, fees and
expenses in connection with any registration statement filed pursuant to Section
7.3(c).
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If the Company shall fail to comply with the provisions of Section 7.3(a), the
Company shall, in addition to any other equitable or other relief available to
the Holder(s), be liable for any or all special and consequential damages
sustained by the Holder(s) requesting registration of their Registrable
Securities.
(c) The Company shall prepare and file with the SEC such amendments and
supplements to such registration statement and the prospectus used in connection
therewith as may be reasonably necessary to keep such registration statement
effective for at least nine months (or such longer period as permitted by the
Act), and to comply with the provisions of the Act with respect to the
disposition of all securities covered by such registration statement during such
period in accordance with the intended methods of disposition by the seller or
sellers of Registrable Securities set forth in such registration statement. If
at any time the SEC should institute or threaten to institute any proceedings
for the purpose of issuing a stop order suspending the effectiveness of any such
registration statement, the Company will promptly notify each seller of such
Registrable Securities and will use all reasonable efforts to prevent the
issuance of any such stop order or to obtain the withdrawal thereof as soon as
possible. The Company will use its good faith reasonable efforts and take all
reasonably necessary action which may be required in qualifying or registering
the Registrable Securities included in a registration statement for offering and
sale under the securities or blue sky laws of such states as reasonably are
required by the Holder(s), provided that the Company shall not be obligated to
execute or file any general consent to service of process or to qualify as a
foreign corporation to do business under the laws of any such jurisdiction. The
Company shall use its good faith reasonable efforts to cause such Registrable
Securities covered by such registration statement to be registered with or
approved by such other governmental agencies or authorities of the United States
or any State thereof as may be reasonably necessary to enable the seller or
sellers thereof to consummate the disposition of such Registrable Securities.
(d) The Company shall indemnify the Holder(s) of the Registrable
Securities to be sold pursuant to any registration statement and each person, if
any, who controls such Holders within the meaning of Section 15 of the Act or
Section 20(a) of the Securities Exchange Act of 1934, as amended ("Exchange
Act"), against all loss, claim, damage, expense or liability (including all
expenses reasonably incurred in investigating, preparing or defending against
any claim whatsoever) to which any of them may become subject under the Act, the
Exchange Act or otherwise, arising from such registration statement but only to
the same extent and with the same effect as the provisions pursuant to which the
Company has agreed to indemnify the Underwriter as contained in the Underwriting
Agreement.
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(e) If requested by the Company prior to the filing of any registration
statement covering the Registrable Securities, each of the Holder(s) of the
Registrable Securities to be sold pursuant to a registration statement, and
their successors and assigns, shall severally, and not jointly, indemnify the
Company, its officers and directors and each person, if any, who controls the
Company within the meaning of Section 15 of the Act or Section 20(a) of the
Exchange Act, against all loss, claim, damage or expense or liability (including
all expenses reasonably incurred in investigating, preparing or defending
against any claim whatsoever) to which they may become subject under the Act,
the Exchange Act or otherwise, arising from written information furnished by
such Holder, or their successors or assigns, for specific inclusion in such
registration statement to the same extent and with the same effect as the
provisions contained in the Underwriting Agreement pursuant to which the
Underwriter has agreed to indemnify the Company, except that the maximum amount
which may be recovered from each Holder pursuant to this paragraph or otherwise
shall be limited to the amount of net proceeds received by the Holder from the
sale of the Registrable Securities.
(f) Nothing contained in this Agreement shall be construed as requiring
the Holder(s) to exercise their Warrants or Underlying Warrants prior to the
filing of any registration statement or the effectiveness thereof.
(g) The Company shall not permit the inclusion of any securities other
than the Registrable Securities to be included in any registration statement
filed pursuant to Section 7.3 hereof without the prior written consent of the
Holders of the Registrable Securities representing a majority of such
securities.
(h) The Company shall furnish to each Holder participating in the offering
and to each underwriter, if any, a signed counterpart, addressed to such Holder
or underwriter, of (i) an opinion of counsel to the Company, dated the effective
date of such registration statement (and, if such registration includes an
underwritten public offering, an opinion dated the date of the closing under the
underwriting agreement), and (ii) a "cold comfort" letter dated the effective
date of such registration statement (and, if such registration includes an
underwritten public offering, a letter dated the date of the closing under the
underwriting agreement) signed by the independent public accountants who have
issued a report on the Company's financial statements included in such
registration statement, in each case covering substantially the same matters
with respect to such registration statement (and the prospectus included
therein) and, in the case of such accountants' letter, with respect to events
subsequent to the date of such financial statements, as are customarily covered
in opinions of issuer's counsel and in accountants' letters delivered to
underwriters in underwritten public offerings of securities.
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(i) The Company shall deliver promptly to each Holder participating in the
offering requesting the correspondence and memoranda described below and the
managing underwriter copies of all correspondence between the Commission and the
Company, its counsel or auditors and all memoranda relating to discussions with
the Commission or its staff with respect to the registration statement and
permit each Holder and underwriter to do such investigation, upon reasonable
advance notice, with respect to information contained in or omitted from the
registration statement as it deems reasonably necessary to comply with
applicable securities laws or rules of the National Association of Securities
Dealers, Inc. ("NASD"). Such investigation shall include access to books,
records and properties and opportunities to discuss the business of the Company
with its officers and independent auditors, all to such reasonable extent and at
such reasonable times and as often as any such Holder shall reasonably request.
(j) With respect to a registration statement filed pursuant to Section
7.3, the Company, if requested, shall enter into an underwriting agreement with
the managing underwriter, reasonably satisfactory to the Company, selected for
such underwriting by Holders holding a majority of the Registrable Securities
requested to be included in such underwriting. Such agreement shall be
satisfactory in form and substance to the Company, each Holder and such managing
underwriters, and shall contain such representations, warranties and covenants
by the Company and such other terms as are customarily contained in agreements
of that type used by the managing underwriter. The Holders, if required by the
Underwriter to be parties to any underwriting agreement relating to an
underwritten sale of their Registrable Securities, may, at their option, require
that any or all the representations, warranties and covenants of the Company to
or for the benefit of such underwriters shall also be made to and for the
benefit of such Holders. Such Holders shall not be required to make any
representations or warranties to or agreements with the Company or the
underwriters except as they may relate to such Holders and their intended
methods of distribution.
(k) Notwithstanding the provisions of paragraph 7.2 or paragraph 7.3 of
this Agreement, the Company shall not be required to effect or cause the
registration of Registrable Securities pursuant to paragraph 7.2 or paragraph
7.3 hereof if, within thirty (30) days after its receipt of a request to
register such Registrable Securities (i) counsel for the Company delivers an
opinion to the Holders requesting registration of such Registrable Securities,
in form and substance satisfactory to counsel to such Holder(s), to the effect
that the entire number of Registrable Securities proposed to be sold by such
Holder(s) may otherwise be sold, in the manner proposed by such Holder(s),
without registration under the Securities Act, or (ii) the SEC shall have issued
a no-action position, in form and substance satisfactory to counsel for the
Holder(s) requesting registration of such
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Registrable Securities, to the effect that the entire number of Registrable
Securities proposed to be sold by such Holder(s) may be sold by it, in the
manner proposed by such Holder(s), without registration under the Securities
Act.
(l) After completion of the Public Offering, the Company shall not,
directly or indirectly, enter into any merger, business combination or
consolidation in which (a) the Company shall not be the surviving corporation
and (b) the stockholders of the Company are to receive, in whole or in part,
capital stock or other securities of the surviving corporation, unless the
surviving corporation shall, prior to such merger, business combination or
consolidation, agree in writing to assume the obligations of the Company under
this Agreement, and for that purpose references hereunder to "Registrable
Securities" shall be deemed to include the securities which the Holders would be
entitled to receive in exchange for Registrable Securities under any such
merger, business combination or consolidation, provided that to the extent such
securities to be received are convertible into shares of Common Stock of the
issuer thereof, then any such shares of Common Stock as are issued or issuable
upon conversion of said convertible securities shall also be included within the
definition of "Registrable Securities".
8. Adjustments to Exercise Price and Number of Securities.
8.1 Adjustment for Dividends, Subdivisions, Combinations or
Reclassifications.
In case the Company shall (a) pay a dividend or make a distribution in
shares of its capital stock (whether shares of Common Stock or of capital stock
of any other class), (b) subdivide its outstanding shares of Common Stock into a
greater number of shares, (c) combine its outstanding shares of Common Stock
into a smaller number of shares, or (d) issue by reclassification of its shares
of Common Stock any shares of capital stock of the Company; then, and in each
such case, the per share Exercise Price and the number of Warrant Securities in
effect immediately prior to such action shall be adjusted so that the Holder of
this Warrant thereafter upon the exercise hereof shall be entitled to receive
the number and kind of shares of the Company which such Holder would have owned
immediately following such action had this Warrant been exercised immediately
prior thereto. An adjustment made pursuant to this Section shall become
effective immediately after the record date in the case of a dividend or
distribution and shall become effective immediately after the effective date in
the case of a subdivision, combination or reclassification. If, as a result of
an adjustment made pursuant to this Section, the Holder of this Warrant shall
become entitled to receive shares of two or more classes of capital stock of the
Company, the Board of Directors of the Company (whose determination shall be
conclusive) shall determine the allocation of the adjusted Exercise Price
between or
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among shares of such class of capital stock.
Immediately upon any adjustment of the Exercise Price pursuant to this
Section, the Company shall send written notice thereof to the Holder of Warrant
Certificates (by first class mail, postage prepaid), which notice shall state
the Exercise Price resulting from such adjustment, and any increase or decrease
in the number of Warrant Securities to be acquired upon exercise of the
Warrants, setting forth in reasonable detail the method of calculation and the
facts upon which such calculation is based.
8.2 Adjustment For Reorganization, Merger or Consolidation.
In case of any reorganization of the Company or 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), the
corporation formed by such consolidation or merger shall execute and deliver to
the Holder a supplemental Warrant agreement providing that the Holder of each
Warrant then outstanding or to be outstanding shall have the right thereafter
(until the expiration of such Warrant) to receive, upon exercise of such
warrant, the kind and amount of shares of stock and other securities and
property receivable upon such consolidation or merger, by a holder of the number
of shares of Common Stock of the Company for which such warrant might have been
exercised immediately prior to such reorganization, consolidation, merger,
conveyance, sale or transfer. Such supplemental Warrant agreement shall provide
for adjustments which shall be identical to the adjustments provided in Section
8 and such registration rights and other rights as provided in this Agreement.
The Company shall not effect any such consolidation, merger, or similar
transaction as contemplated by this paragraph, unless prior to or simultaneously
with the consummation thereof, the successor corporation (if other than the
Company) resulting from such consolidation or merger or the corporation
purchasing, receiving, or leasing such assets or other appropriate corporation
or entity shall assume, by written instrument executed and delivered to the
Holders, the obligation to deliver to the Holders, such shares of stock,
securities, or assets as, in accordance with the foregoing provisions, such
holders may be entitled to purchase, and to perform the other obligations of the
Company under this Agreement. The above provision of this Subsection shall
similarly apply to successive consolidations or successively whenever any event
listed above shall occur.
8.3 Dividends and Other Distributions.
In the event that the Company shall at any time prior to the exercise of
all of the Warrants and/or Underlying Warrants distribute to its stockholders
any assets, property, rights, evidences of indebtedness, securities (other than
a distribution
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made as a cash dividend payable out of earnings or out of any earned surplus
legally available for dividends under the laws of the jurisdictions of
incorporation of the Company), whether issued by the Company or by another, the
Holders of the unexercised Warrants shall thereafter be entitled, in addition to
the shares of Common Stock or other securities and property receivable upon the
exercise thereof, to receive, upon the exercise of such Warrants, the same
property, assets, rights, evidences of indebtedness, securities or any other
thing of value that they would have been entitled to receive at the time of such
distribution as if the Warrants had been exercised immediately prior to such
distribution. At the time of any such distribution, the Company shall make
appropriate reserves to ensure the timely performance of the provisions of this
subsection or an adjustment to the Exercise Price, which shall be effective as
of the day following the record date for such distribution.
8.4 Adjustment in Number of Securities.
Upon each adjustment of the Exercise Price pursuant to the provisions of
this Section 8, the number of securities issuable upon the exercise of each
Warrant and/or Underlying Warrant shall be adjusted to the nearest full amount
by multiplying a number equal to the Exercise Price in effect immediately prior
to such adjustment by the number of securities issuable upon exercise of the
Warrants and/or the Underlying Warrants immediately prior to such adjustment and
dividing the product so obtained by the adjusted Exercise Price.
8.5 No Adjustment of Exercise Price in Certain Cases.
No adjustment of the Exercise Price shall be made if the amount of said
adjustment shall be less than 5 cents ($.05) per Share, 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 adjustment which, together with any adjustment so carried
forward, shall amount to at least 5 cents ($.05) per Share.
8.6 Accountant's Certificate of Adjustment.
In each case of an adjustment or readjustment of the Exercise Price or the
number of any securities issuable upon exercise of the Warrants and/or
Underlying Warrants, the Company, at its expense, shall cause independent
certified public accountants of recognized standing selected by the Company (who
may be the independent certified public accountants then auditing the books of
the Company) to compute such adjustment or readjustment in accordance herewith
and prepare a certificate showing such adjustment or readjustment, and shall
mail such certificate, by first class mail, postage prepaid, to any Holder of
the Warrants and/or Underlying Warrants at the Holder's address as shown on the
Company's books.
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The certificate shall set forth such adjustment or readjustment, showing in
detail the facts upon which such adjustment or readjustment is based including,
but not limited to, a statement of (i) the Exercise Price at the time in effect,
and (ii) the number of additional securities and the type and amount, if any, of
other property which at the time would be received upon exercise of the Warrants
and/or Underlying Warrants.
8.7 Adjustment of Underlying Warrant Exercise Price.
With respect to any of the Underlying Warrants whether or not the
Underlying Warrants have been exercised (or are exercisable) and whether or not
the Underlying Warrants are issued and outstanding, the Underlying Warrant
exercise price and the number of shares of Common Stock underlying such
Underlying Warrants shall be automatically adjusted in accordance with the
Warrant Agreement between the Company and the Company's transfer agent, upon
occurrence of any of the events relating to adjustments described therein.
Thereafter, the Underlying Warrants shall be exercisable at such adjusted
Underlying Warrant exercise price for such adjusted number of underlying shares
of Common Stock or other securities, properties or rights.
9. Exchange and Replacement of Warrant Certificates.
Each Warrant Certificate is exchangeable without expense, upon the
surrender thereof by the registered Holder at the principal executive office of
the Company, for a new Warrant Certificate of like tenor and date representing
in the aggregate the right to purchase the same number of securities in such
denominations as shall be designated by the Holder thereof at the time of such
surrender.
Upon receipt by the Company of evidence reasonably satisfactory to it of
the loss, theft, destruction or mutilation of any Warrant Certificate, and, in
case of loss, theft or destruction, of indemnity or security reasonably
satisfactory to it, and reimbursement to the Company of all reasonable expenses
incidental thereto, and upon surrender and cancellation of the Warrants, if
mutilated, the Company will make and deliver a new Warrant Certificate of like
tenor, in lieu thereof.
10. Elimination of Fractional Interest.
The Company shall not be required to issue certificates representing
fractions of shares of Common Stock upon the exercise of the Warrants and/or
Underlying Warrants, nor shall it be required to issue script or pay cash in
lieu of fractional interests, it being the intent of the parties that all
fractional interests may be eliminated, at the Company's option, by rounding any
fraction up to the nearest whole number of shares of Common Stock or other
securities, properties or rights, or in lieu thereof
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paying cash equal to such fractional interest multiplied by the current value of
a share of Common Stock.
11. Reservation and Listing.
The Company shall at all times reserve and keep available out of its
authorized shares of Common Stock, solely for the purpose of issuance upon the
exercise of the Warrants and the Underlying Warrants, such number of shares of
Common Stock or other securities, properties or rights as shall be issuable upon
the exercise thereof. The Company covenants and agrees that, upon exercise of
the Warrants and/or the Underlying Warrants, and payment of the Exercise Price
therefor, all shares of Common Stock and other securities issuable upon such
exercise shall be duly and validly issued, fully paid, non-assessable and not
subject to the preemptive rights of any stockholder. As long as the Warrants
and/or Underlying Warrants shall be outstanding, the Company shall use its best
efforts to cause all shares of Common Stock issuable upon the exercise of the
Warrants and the Underlying Warrants to be listed and quoted (subject to
official notice of issuance) on all securities Exchanges and Systems on which
the Common Stock and/or the Public Warrants may then be listed and/or quoted,
including NASDAQ.
12. Notices to Warrant Holders.
Nothing contained in this Agreement shall be construed as conferring upon
the Holders of the Warrants and/or Underlying Warrants the right to vote or to
consent or to receive notice as a stockholder in respect of any meetings of
stockholders for the election of directors or any other matter, or as having any
rights whatsoever as a stockholder of the Company. If, however, at any time
prior to the expiration of the Warrants and/or Underlying Warrants and their
exercise, any of the following events shall occur:
(a) the Company shall take a record of the holders of its shares of
Common Stock for the purpose of entitling them to receive a dividend or
distribution payable otherwise than in cash, or a cash dividend or
distribution payable otherwise than out of current or retained earnings,
as indicated by the accounting treatment of such dividend or distribution
on the books of the Company; or
(b) the Company shall offer to all the holders of its Common Stock
any additional shares of capital stock of the Company or securities
convertible into or exchangeable for shares of capital stock of the
Company, or any option, right or warrant to subscribe therefor; or
(c) a dissolution, liquidation or winding up of the Company (other
than in connection with a consolidation or
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merger) or a sale of all or substantially all of its property, assets and
business as an entirety shall be proposed;
then, in any one or more of said events, the Company shall give written notice
of such event at least fifteen (15) days prior to the date fixed as a record
date of the date of closing the transfer books for the determination of the
stockholders entitled to such dividend, distribution, convertible or
exchangeable securities or subscription rights, or entitled to vote on such
proposed dissolution, liquidation, winding up or sale. Such notices shall
specify such record date or the date of closing the transfer books, as the case
may be. Failure to give such notice or any defect therein shall not affect the
validity of any action taken in connection with the declaration or payment of
any such dividend, or the issuance of any convertible or exchangeable
securities, or subscription rights, options or warrants, or any proposed
dissolution, liquidation, winding up or sale.
13. Underlying Warrants.
The form of the certificate representing the Underlying Warrants (and the
form of election to purchase shares of Common Stock upon the exercise of the
Underlying Warrants and the form of assignment printed on the reverse thereof)
shall be substantially as set forth in the exhibits to the Warrant Agreement.
Subject to the terms of this Agreement, one (1) Underlying Warrant shall
evidence the right to initially purchase one (1) fully-paid and non-assessable
share of Common Stock at an initial purchase price of $8.00 during the three (3)
year period commencing on the Effective Date of the Registration Statement, at
which time the Underlying Warrants, unless the exercise period has been
extended, shall expire. The exercise price of the Underlying Warrants and the
number of shares of Common Stock issuable upon the exercise of the Underlying
Warrants are subject to adjustment, whether or not the Warrants have been
exercised and the Underlying Warrants have been issued, in the manner and upon
the occurrence of the events set forth in the Warrant Agreement, which is hereby
incorporated herein by reference and made a part hereof as if set forth in its
entirety herein. Subject to the provisions of this Agreement and upon issuance
of the Underlying Warrants, each registered holder of such Underlying Warrant
shall have the right to purchase from the Company (and the Company shall issue
to such registered holders) up to the number of fully-paid and non-assessable
shares of Common Stock (subject to adjustment as provided in the Warrant
Agreement) set forth in such Warrant Certificate, free and clear of all
preemptive rights of stockholders, provided that such registered Holder complies
with the terms governing exercise of the Underlying Warrant set forth in the
Warrant Agreement, and pays the applicable exercise price, determined in
accordance with the terms of the Warrant Agreement. Upon exercise of the
Underlying Warrants, the Company shall forthwith issue to the registered Holder
of any such
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<PAGE>
Underlying Warrant in his name or in such name as may be directed by him,
certificates for the number of shares of Common Stock so purchased. Except as
otherwise provided herein and in this Agreement, the Underlying Warrants shall
be governed in all respects by the terms of the Warrant Agreement. The
Underlying Warrants shall be transferrable in the manner provided in the Warrant
Agreement, and upon any such transfer, a new Underlying Warrant certificate
shall be issued promptly to the transferee. The Company covenants to send to
each Holder, irrespective of whether or not the Warrants have been exercised,
any and all notices required by the Warrant Agreement to be sent to holders of
Underlying Warrants.
14. Notices.
All notices, requests, consents and other communications hereunder shall
be in writing and shall be deemed to have been duly given when personally
delivered, or mailed by registered or certified mail, return receipt requested:
(a) If to the registered Holder of any of the Registrable
Securities, to the address of such Holder as shown on the books of the
Company; or
(b) If to the Company, to the address set forth below or to such
other address as the Company may designate by notice to the Holders.
Douglas P. Fields, Chairman
Eagle Supply Group, Inc.
100 Midwood Road
Greenwich, Connecticut 06830
With a copy to: Robert Perez, Esq.
Gusrae, Kaplan & Bruno
120 Wall Street
New York, New York 10005
15. Entire Agreement: Modification.
This Agreement (and the Underwriting Agreement and Warrant Agreement to
the extent applicable) contain the entire understanding between the parties
hereto with respect to the subject matter hereof, and the terms and provisions
of this Agreement may not be modified, waived or amended except in a writing
executed by the Company and the Holders of at least a majority of Registrable
Securities (based on underlying numbers of shares of Common Stock). Notice of
any modification, waiver or amendment shall be promptly provided to any Holder
not consenting to such modification, waiver or amendment.
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16. Successors.
All the covenants and provisions of this Agreement shall be binding upon
and inure to the benefit of the Company, the Holders and their respective
successors and assigns hereunder.
17. Termination.
This Agreement shall terminate at the close of business on ____________,
2003. Notwithstanding the foregoing, the indemnification provisions of Section 7
shall survive such termination.
18. Governing Law; Submission to Jurisdiction.
This Agreement and each Warrant Certificate issued hereunder shall be
deemed to be a contract made under the laws of the State of Florida and for all
purposes shall be construed in accordance with the laws of said State without
giving effect to the rules of said State governing the conflicts of laws. The
Company, the Underwriter and the Holders hereby agree that any action,
proceeding or claim arising out of, or relating in any way to, this Agreement
shall be brought and enforced in a federal or state court of competent
jurisdiction with venue only in the Fifteenth Judicial Circuit Court in and for
Palm Beach County, Florida or the United States District Court for the Southern
District of Florida, West Palm Beach Division, and irrevocably submits to such
jurisdiction, which jurisdiction shall be exclusive. The Company, the
Underwriter and the Holders hereby irrevocably waive any objection to such
exclusive jurisdiction or inconvenient forum. Any such process or summons to be
served upon any of the Company, the Underwriter and the Holders (at the option
of the party bringing such action, proceeding or claim) may be served by
transmitting a copy thereof, by registered or certified mail, return receipt
requested, postage prepaid, addressed to it at the address set forth in Section
14 hereof. Such mailing shall be deemed personal service and shall be legal and
binding upon the party so served in any action, proceeding or claim.
19. Severability.
If any provision of this Agreement shall be held to be invalid or
unenforceable, such invalidity or unenforceability shall not affect any other
provision of this Agreement.
20. Captions.
The caption headings of the Sections of this Agreement are for convenience
of reference only and are not intended, nor should they be construed as, a part
of this Agreement and shall be given no substantive effect.
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<PAGE>
21. Benefits of this Agreement.
Nothing in this Agreement shall be construed to give to any person or
corporation other than the Company and the Underwriter and any other registered
Holder(s) of the Warrant Certificates or Registrable Securities any legal or
equitable right, remedy or claim under this Agreement; and this Agreement shall
be for the sole and exclusive benefit of the Company and the Underwriter and any
other Holder(s) of the Warrant Certificates or Registrable Securities.
22. Counterparts.
This Agreement may be executed in any number of counterparts and each of
such counterparts shall for all purposes be deemed to be an original, and such
counterparts shall together constitute but one and the same instrument.
IN WITNESS HEREOF, the parties hereto have caused this Agreement to be
duly executed, as of the day and year first above written.
EAGLE SUPPLY GROUP, INC.
By: _________________________________
Thomas W. Havnes, President
Attest:
________________________________
Frederick M. Friedman, Secretary
BARRON CHASE SECURITIES, INC.
By: _________________________________
Robert Kirk, President
20
<PAGE>
WARRANT CERTIFICATE
THE WARRANTS REPRESENTED BY THIS CERTIFICATE AND THE OTHER SECURITIES ISSUABLE
UPON EXERCISE THEREOF MAY NOT BE OFFERED OR SOLD EXCEPT PURSUANT TO (i) AN
EFFECTIVE REGISTRATION STATEMENT UNDER THE SECURITIES ACT OF 1933, (ii) TO THE
EXTENT APPLICABLE, RULE 144 UNDER SUCH ACT (OR ANY SIMILAR RULE UNDER SUCH ACT
RELATING TO THE DISPOSITION OF SECURITIES), OR (iii) AN OPINION OF COUNSEL, IF
SUCH OPINION SHALL BE REASONABLY SATISFACTORY TO COUNSEL FOR THE ISSUER, THAT AN
EXEMPTION FROM REGISTRATION UNDER SUCH ACT IS AVAILABLE.
THE TRANSFER OR EXCHANGE OF THE WARRANTS REPRESENTED BY THIS CERTIFICATE IS
RESTRICTED IN ACCORDANCE WITH THE WARRANT AGREEMENT REFERRED TO HEREIN.
EXERCISABLE ON OR BEFORE
5:30 P.M, EASTERN TIME ON _________________, 200___
NO. W-_______ ________ Common Stock
Underwriter
Warrants and/or
________ Warrant
Underwriter
Warrants
This Warrant Certificate certifies that __________, or registered assigns,
is the registered holder of __________ Common Stock Underwriter Warrants and/or
__________ Warrant Underwriter Warrants. Each Common Stock Underwriter Warrant
permits the Holder hereof to purchase initially, at any time from __________,
1996 ("Purchase Date") until 5:30 p.m. Eastern Time on __________, 2001
("Expiration Date"), one (1) share of Eagle Supply Group, Inc. (the "Company")
Common Stock at the initial exercise price, subject to adjustment in certain
events (the "Exercise Price"), of $8.00 per share (160% of the public offering
price). Each Warrant Underwriter Warrant permits the Holder hereof to purchase
initially, at any time from the Purchase Date until three (3) years from the
Purchase Date, one (1) Underlying Warrant at the Exercise Price of $.20 per
Underlying Warrant. Each Underlying Warrant permits the Holder thereof to
purchase, at any time from the Purchase Date until three (3) years from the
Purchase Date, one (1) share of the Company's Common Stock at the Exercise Price
of $8.00 per share.
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<PAGE>
Any exercise of Common Stock Underwriter Warrants and/or Warrant
Underwriter Warrants shall be effected by surrender of this Warrant Certificate
and payment of the Exercise Price at an office or agency of the Company, but
subject to the conditions set forth herein and in the Underwriter's Warrant
Agreement dated as of ________, 1996, between the Company and Barron Chase
Securities, Inc. (the "Underwriter's Warrant Agreement"). Payment of the
Exercise Price shall be made by certified check or official bank check in New
York Clearing House funds payable to the order of the Company in the event there
is no cashless exercise pursuant to Section 3.1(ii) of the Underwriter's Warrant
Agreement. The "Common Stock Underwriter Warrants" and the "Warrant Underwriter
Warrants" are collectively referred to as "Warrants". The Underlying Warrants
shall be exercised pursuant to the provisions of the Underwriter's Warrant
Agreement and pursuant to the Warrant Agreement entered into by the Company
relating to the Public Warrants, unless there is a cashless exercise pursuant to
Section 3.1(ii) of the Underwriter's Warrant Agreement.
No Warrant may be exercised after 5:30 p.m., Eastern Time, on the
Expiration Date, at which time all Warrants evidenced hereby, unless exercised
prior thereto, hereby shall thereafter be void.
The Warrants evidenced by this Warrant Certificate are part of a duly
authorized issue of Warrants issued pursuant to the Underwriter's Warrant
Agreement, which Underwriter's Warrant Agreement is hereby incorporated by
reference in and made a part of this instrument and is hereby referred to for a
description of the rights, limitation or rights, obligations, duties and
immunities thereunder of the Company and the holders (the words "holders" or
"holder" meaning the registered holders or registered holder) of the Warrants.
The Underwriter's Warrant Agreement provides that upon the occurrence of
certain events, the Exercise Price and the type and/or number of the Company's
securities issuable thereupon may, subject to certain conditions, be adjusted.
In such event, the Company will, at the request of the holder, issue a new
Warrant Certificate evidencing the adjustment in the Exercise Price and the
number and/or type of securities issuable upon the exercise of the Warrants;
provided, however, that the failure of the Company to issue such new Warrant
Certificates shall not in any way change, alter, or otherwise impair, the rights
of the holder as set forth in the Underwriter's Warrant Agreement.
Upon due presentment for registration or transfer of this Warrant
Certificate at an office or agency of the Company, a new Warrant Certificate or
Warrant Certificates of like tenor and evidencing in the aggregate a like number
of Warrants shall be issued to the transferee(s) in exchange for this Warrant
Certificate, subject to the limitations provided herein and in the Underwriter's
Warrant Agreement, without any charge except for any tax or other governmental
charge imposed in connection with such
22
<PAGE>
transfer.
Upon the exercise of less than all of the Warrants evidenced by this
Certificate, the Company shall forthwith issue to the holder hereof a new
Warrant Certificate representing such numbered unexercised Warrants.
The Company may deem and treat the registered holder(s) hereof as the
absolute owner(s) of this Warrant certificate (notwithstanding any notation of
ownership or other writing hereon made by anyone), for the purpose of any
exercise hereof, and of any distribution to the holder(s) hereof, and for all
other purposes, and the Company shall not be affected by any notice to the
contrary.
All terms used in this Warrant Certificate which are defined in the
Underwriter's Warrant Agreement shall have the meanings assigned to them in the
Underwriter's Warrant Agreement.
IN WITNESS WHEREOF, the Company has caused this Warrant Certificate to be
duly executed under its corporate seal.
Dated as of ____________, 1996
EAGLE SUPPLY GROUP, INC.
By: _________________________________
Thomas W. Havnes, President
(Seal)
Attest:
________________________________
Frederick M. Friedman, Secretary
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<PAGE>
EXHIBIT "A"
FORM OF SUBSCRIPTION (CASH EXERCISE)
(To be signed only upon exercise of Warrant)
TO: Eagle Supply Group, Inc.
100 Midwood Road
Greenwich, Connecticut 06830
The undersigned, the Holder of Warrant Certificate number __ (the
"Warrant"), representing ___________ Common Stock Underwriter Warrants and/or
___________ Warrant Underwriter Warrants of Eagle Supply Group, Inc. (the
"Company"), which Warrant Certificate is being delivered herewith, hereby
irrevocably elects to exercise the purchase right provided by the Warrant
Certificate for, and to purchase thereunder, ___________ Shares and/or
___________ Underlying Warrants of the Company, and herewith makes payment of
$___________ therefor, and requests that the certificates for such securities be
issued in the name of, and delivered to,
____________________________________________, whose address is,
____________________________________________, all in accordance with the
Underwriter's Warrant Agreement and the Warrant Certificate.
Dated: _________________
______________________________
(Signature must conform in all
respects to name of Holder as
specified on the face of the
Warrant Certificate)
______________________________
______________________________
(Address)
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<PAGE>
EXHIBIT "B"
FORM OF SUBSCRIPTION (CASHLESS EXERCISE)
TO: Eagle Supply Group, Inc.
100 Midwood Road
Greenwich, Connecticut 06830
The undersigned, the Holder of Warrant Certificate number (the "Warrant"),
representing ________________ Common Stock Underwriter Warrants and/or
________________ Underlying Warrants of Eagle Supply Group, Inc. (the
"Company"), which Warrant is being delivered herewith, hereby irrevocably elects
the cashless exercise of the purchase right provided by the Underwriter's
Warrant Agreement and the Warrant Certificate for, and to purchase thereunder,
Shares of the Company in accordance with the formula provided at Section three
(3) of the Underwriter's Warrant Agreement. The undersigned requests that the
certificates for such Shares be issued in the name of, and delivered to,
________________________________________________, whose address is,
______________________________________________________________, all in
accordance with the Warrant Certificate.
Dated: _________________
______________________________
(Signature must conform in all
respects to name of Holder as
specified on the face of the
Warrant Certificate)
______________________________
______________________________
(Address)
25
<PAGE>
EXHIBIT "C"
FORM OF SUBSCRIPTION (CASH EXERCISE)
(To be signed only upon exercise of Warrant)
TO: Eagle Supply Group, Inc.
100 Midwood Road
Greenwich, Connecticut 06830
The undersigned, the Holder of Warrant Certificate number _________ (the
"Warrant"), representing ____________ Underlying Warrants of Eagle Supply Group,
Inc. (the "Company"), which Warrant Certificate is being delivered herewith,
hereby irrevocably elects to exercise the purchase right provided by the Warrant
Certificate for, and to purchase thereunder, ____________ Shares of the Company,
and herewith makes payment of $____________ therefor, and requests that the
certificates for such securities be issued in the name of, and delivered to,
____________________________________, whose address
is,____________________________________, all in accordance with the
Underwriter's Warrant Agreement and the Warrant Certificate.
Dated: _________________
______________________________
(Signature must conform in all
respects to name of Holder as
specified on the face of the
Warrant Certificate)
______________________________
______________________________
(Address)
26
<PAGE>
(FORM OF ASSIGNMENT)
(To be exercised by the registered holder if such holder desires
to transfer the Warrant Certificate.)
FOR VALUE RECEIVED _____________________________________________________________
hereby sells, assigns and transfers unto
(Print name and address of transferee)
this Warrant Certificate, together with all right, title and interest therein,
and does hereby irrevocably constitute and appoint
__________________________________________ Attorney, to transfer the within
Warrant Certificate on the books of the within-named Company, and full power of
substitution.
Dated: Signature:
___________________ _______________________________
(Signature must conform in all
respects to name of holder as
specified on the fact of the
Warrant Certificate)
_______________________________
(Insert Social Security or
Other Identifying Number of
Assignee)
27
Exhibit 4.2
FINANCIAL ADVISORY AGREEMENT
This Agreement is made and entered into as of the ________ day
of ___________ , 1996, between Eagle Supply Group, Inc. (the
"Company") and Barron Chase Securities, Inc. (the "Financial
Advisor").
W I T N E S S E T H :
WHEREAS, The Company has engaged the Financial Advisor to act as the
Underwriter in connection with the public offering of the Company's securities;
and
WHEREAS, the Financial Advisor has experience in providing
financial and business advice to public and private companies; and
WHEREAS, the Company is seeking and the Financial Advisor is willing to
furnish business and financial related advice and services to the Company on the
terms and conditions hereinafter set forth.
NOW, THEREFORE, in consideration of, and for the mutual promises and
covenants contained herein, and for other good and valuable consideration, the
receipt of which is hereby acknowledged, the parties agree as follows:
1. Purpose. The Company hereby engages the Financial Advisor on a
non-exclusive basis for the term specified in this Agreement to render financial
advisory and consulting advice to the Company as an investment banker relating
to financial and similar matters upon the terms and conditions set forth herein.
2. Representations of the Financial Advisor and the Company. The Financial
Advisor represents and warrants to the Company that
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<PAGE>
(i) it is a member in good standing of the National Association of Securities
Dealers, Inc. ("NASD") and that it is engaged in the securities brokerage
business; (ii) in addition to its securities brokerage business, the Financial
Advisor provides consulting advisory services; and (iii) it is free to enter
into this Agreement and the services to be provided pursuant to this Agreement
are not in conflict with any other contractual or other obligation to which the
Financial Advisor is bound. The Company acknowledges that the Financial Advisor
is in the business of providing financial services and consulting advice (of the
type contemplated by this Agreement) to others and that nothing herein contained
shall be construed to limit or restrict the Financial Advisor in conducting such
business with respect to others, or rendering such advice to others.
3. Duties of the Financial Advisor. During the term of this Agreement, the
Financial Advisor will provide the Company with consulting advice as specified
below at the request of the Company, provided that the Financial Advisor shall
not be required to undertake duties not reasonably within the scope of the
consulting advisory service in which the Financial Advisor is engaged generally.
In performance of these duties, the Financial Advisor shall provide the Company
with the benefits of its best judgment and efforts. It is understood and
acknowledged by the parties that the value of the Financial Advisor's advice is
not measurable in any quantitative manner, and that the amount of time spent
rendering such consulting advice shall be determined according to
2
<PAGE>
the Financial Advisor's discretion.
The Financial Advisor's duties may include, but will not necessarily be
limited to:
1) Advice relating to corporate financing activities;
2) Recommendations relating to specific business operations and
investments;
3) Advice relating to financial planning; and
4) Advice regarding future financings involving securities of the
Company or any subsidiary.
4. Term. The term of this Agreement shall be for thirty-six (36) months
commencing on the first day of the month following the Company's receipt of the
proceeds from the contemplated public offering (the "Commencement Date");
provided, however, that this Agreement may be renewed or extended upon such
terms and conditions as may be mutually agreed upon by the parties hereto.
5. Fee. The Company shall pay the Financial Advisor a fee of $108,000 for
the financial services to be rendered pursuant to this Agreement, all of which
shall be payable at the Closing Date of the Company's proposed public offering.
6. Expenses. In addition to the fees payable hereunder, the Company shall
reimburse the Financial Advisor, within five (5) business days of its request,
for any and all reasonable out-of-pocket expenses incurred in connection with
the services performed by the Financial Advisor and its counsel pursuant to this
Agreement, including (i) reasonable hotel, food and associated expenses; (ii)
reasonable charges for travel; (iii) reasonable
3
<PAGE>
long-distance telephone calls; and (iv) other reasonable expenses spent or
incurred on the Company's behalf. All such expenses in excess of $500 shall be
pre-approved by the Company.
7. Introduction of Customers, Origination of Line of Credit and Similar
Transactions. In the event the Financial Advisor originates a line of credit
with a lender or a corporate partner, the Company and the Financial Advisor will
mutually agree on a satisfactory fee and the terms of payment of such fee. In
the event the Financial Advisor introduces the Company to a joint venture
partner or customer and sales develop as a result of the introduction, the
Company agrees to pay a fee of five percent (5%) of total sales generated
directly from this introduction during the first two years following the date of
the first sale. Total sales shall mean cost receipts less any applicable
refunds, returns, allowances, credits and shipping charges and monies paid by
the Company by way of settlement or judgment arising out of claims made by or
threatened against the Company. Commission payments shall be paid on the 15th
day of each month following the receipt of customers' payments. In the event any
adjustments are made to the total sales after the commission has been paid, the
Company shall be entitled to an appropriate refund or credit against future
payments under this Agreement.
All fees to be paid pursuant to this paragraph, except as otherwise
specified, are due and payable to the Financial Advisor in cash at the closing
or closings of any transaction specified in this paragraph. In the event that
this Agreement shall not be
4
<PAGE>
renewed or if terminated for any reason, notwithstanding any such non-renewal or
termination, the Financial Advisor shall be entitled to a full fee as provided
under this paragraph for any transaction for which the discussions were
initiated during the term of this Agreement and which is consummated within a
period of twelve months after non-renewal or termination of this Agreement.
Nothing herein shall impose any obligation on the part of the Company to enter
into any transaction or to use any services of the Financial Advisor offered
pursuant to this paragraph or this Agreement.
8. Use of Advice by the Company; Public Market for the Company's
Securities. The Company acknowledges that all opinions and advice (written or
oral) given by the Financial Advisor to the Company in connection with the
engagement of the Financial Advisor are intended solely for the benefit and use
of the Company in considering the transaction to which they relate, and the
Company agrees that no person or entity other than the Company shall be entitled
to make use of or rely upon the advice of the Financial Advisor to be given
hereunder, and no such opinion or advice shall be used for any other purpose or
reproduced, disseminated, quoted or referred to at any time, in any manner or
for any purpose, nor may the Company make any public references to the Financial
Advisor, or use of the Financial Advisor's name in any annual reports or any
other reports or releases of the Company without the prior written consent of
the Financial Advisor.
The Company acknowledges that the Financial Advisor makes no commitment
whatsoever as to making a public trading market in the
5
<PAGE>
Company's securities or to recommending or advising its clients to purchase the
Company's securities. Research reports or corporate finance reports that may be
prepared by the Financial Advisor will, when and if prepared, be done solely on
the merits or judgment and analysis of the Financial Advisor or any senior
corporate finance personnel of the Financial Advisor.
9. Company Information; Confidentially. The Company recognizes and
confirms that, in advising the Company and in fulfilling its engagement
hereunder, the Financial Advisor will use and rely on data, material and other
information furnished to the Financial Advisor by the Company. The Company
acknowledges and agrees that in performing its services under this engagement,
the Financial Advisor may rely upon the data, material and other information
supplied by the Company without independently verifying the accuracy,
completeness or veracity of same. In addition, in the performance of its
services, the Financial Advisor may look to such others for such factual
information, economic advice and/or research upon which to base its advice to
the Company hereunder as the Financial Advisor shall in good faith deem
appropriate.
Except as contemplated by the terms hereof or as required by applicable
law, the Financial Advisor shall keep confidential all non-public information
provided to it by the Company, and shall not disclose such information to any
third party without the Company's prior written consent, other than such of its
employees and advisors as the Financial Advisor determines to have a need to
know.
6
<PAGE>
10. Indemnification.
The Company shall indemnify and hold harmless the Financial Advisor
against any and all liabilities, claims, lawsuits, including any and all awards
and/or judgments to which it may become subject under the Securities Act of
1933, (the "Act"), the Securities Exchange Act of 1934, as amended (the "1934
Act") or any other federal or state statute, at common law or otherwise, insofar
as said liabilities, claims and lawsuits (including costs, expenses, awards
and/or judgments) arise out of or are in connection with the services rendered
by the Financial Advisor or any transactions in connection with this Agreement,
except for any liabilities, claims and lawsuits (including awards and/or
judgments), arising out of willful misconduct or willful omissions of the
Financial Advisor. In addition, the Company shall also indemnify and hold
harmless the Financial Advisor against any and all reasonable costs and
expenses, including reasonable counsel fees, incurred relating to the foregoing.
The Financial Advisor shall give the Company prompt notice of any such
liability, claim or lawsuit which the Financial Advisor contends is the subject
matter of the Company's indemnification and the Company thereupon shall be
granted the right to take any and all necessary and proper action, at its sole
cost and expense, with respect to such liability, claim and lawsuit, including
the right to settle, compromise and dispose of such liability, claim or lawsuit,
excepting therefrom any and all proceedings or hearings before any regulatory
bodies and/or authorities.
7
<PAGE>
The Financial Advisor shall indemnify and hold the Company harmless
against any and all liabilities, claims and lawsuits, including any and all
awards and/or judgments to which it may become subject under the Act, the 1934
Act or any other federal or state statute, at common law or otherwise, insofar
as said liabilities, claims and lawsuits (including costs, expenses, awards
and/or judgments) arise out of or are based upon willful misconduct or willful
omissions of the Financial Advisor. In addition, the Financial Advisor shall
also indemnify and hold the Company harmless against any and all reasonable
costs and expenses, including reasonable counsel fees, incurred relating to the
foregoing.
The Company shall give the Financial Advisor prompt notice of any such
liability, claim or lawsuit which the Company contends is the subject matter of
the Financial Advisor's indemnification and the Financial Advisor thereupon
shall be granted the right to take any and all necessary and proper action, at
its sole cost and expense, with respect to such liability, claim and lawsuit,
including the right to settle, compromise or dispose of such liability, claim or
lawsuit, excepting therefrom any and all proceedings or hearings before any
regulatory bodies and/or authorities.
11. The Financial Advisor as an Independent Contractor. The Financial
Advisor shall perform its services hereunder as an independent contractor and
not as an employee of the Company or an affiliate thereof. It is expressly
understood and agreed to by the
8
<PAGE>
parties hereto that the Financial Advisor shall have no authority to act for,
represent or bind the Company or any affiliate thereof in any manner, except as
may be agreed to expressly by the Company in writing from time to time.
12. Miscellaneous.
(a) This Agreement between the Company and the Financial Advisor
constitutes the entire agreement and understanding of the parties hereto, and
supersedes any and all previous agreements and understandings, whether oral or
written, between the parties with respect to the matters set forth herein.
(b) Any notice or communication permitted or required hereunder shall be
in writing and shall be deemed sufficiently given if hand-delivered or sent
postage prepaid by certified or registered mail, return receipt requested, to
the respective parties as set forth below, or to such other address as either
party may notify the other in writing:
If to the Company: Douglas P. Fields, Chairman
Eagle Supply Group, Inc.
100 Midwood Road
Greenwich, Connecticut 06830
Copy to: Robert Perez, Esq.
Gusrae, Kaplan & Bruno
120 Wall Street
New York, New York 10005
If to the
Financial Advisor: Robert T. Kirk, President
Barron Chase Securities, Inc.
7700 West Camino Real, Suite 200
Boca Raton, Florida 33433
Copy to: David A. Carter, P.A.
355 West Palmetto Park Road
Boca Raton, Florida 33432
9
<PAGE>
(c) This Agreement shall be binding upon and inure to the benefit of each
of the parties hereto and their respective successors, legal representatives and
assigns.
(d) This Agreement may be executed in any number of counterparts, each of
which together shall constitute one and the same original document.
(e) No provision of this Agreement may be amended, modified or waived,
except in a writing signed by all of the parties hereto.
(f) This Agreement shall be construed in accordance with and governed by
the laws of the State of Florida, without giving effect to conflict of law
principles. The parties hereby agree that any dispute which may arise between
them arising out of or in connection with this Agreement shall be adjudicated
before a court located in Palm Beach County, Florida, and they hereby submit to
the exclusive jurisdiction of the courts of the State of Florida located in Palm
Beach County, Florida and of the federal courts in the Southern District of
Florida with respect to any action or legal proceeding commenced by any party,
and irrevocably waive any objection they now or hereafter may have respecting
the venue of any such action or proceeding brought in such a court or respecting
the fact that such court is an inconvenient forum, relating to or arising out of
this Agreement, and consent to the service of process in any such action or
legal proceeding by means of registered or certified mail, return receipt
requested, in care of the address set forth in paragraph 12(b) hereof.
(g) This Agreement has been duly authorized, executed and
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<PAGE>
delivered by and on behalf of the Company and the Financial Advisor.
IN WITNESS WHEREOF, the parties hereto have caused this Agreement to be
duly executed, as of the day and year first above written.
Very truly yours,
EAGLE SUPPLY GROUP, INC.
BY:____________________________
Thomas W. Havnes, President
BARRON CHASE SECURITIES, INC.
BY:____________________________
Robert T. Kirk, President
11
Exhibit 4.3
_________________, 1996
Thomas W. Havnes, President
Eagle Supply Group, Inc.
100 Midwood Road
Greenwich, Connecticut 06830
Re: Merger and Acquisition Agreement
Gentlemen:
You have agreed that Barron Chase Securities, Inc., (the "Finder") may act
as a non-exclusive finder or financial consultant for you in various
transactions in which Eagle Supply Group, Inc. (the "Company") may be involved,
such as mergers, acquisitions, joint ventures, debt or equity placements and
similar or other on-balance or off-balance sheet corporate finance transactions.
The Company hereby agrees that in the event that the Finder shall first
introduce to the Company another party or entity, in writing, and that as a
result of such introduction, a transaction between such entity and the Company
is consummated ("Consummated Transaction"), then the Company shall pay to the
Finder a finder's fee as follows:
a. Five percent (5%) of the first $1,000,000 of the consideration paid
in such transaction;
b. Four percent (4%) of the consideration in excess of $1,000,000 and
up to $2,000,000;
c. Three percent (3%) of the consideration in excess of $2,000,000 and
up to $3,000,000;
d. Two percent (2%) of any consideration in excess of $3,000,000 and up
to $4,000,000; and
e. One percent (1%) of any consideration in excess of $4,000,000.
The fee due the Finder shall be paid by the Company in cash and/or in
stock at the closing of the Consummated Transaction as mutually agreed between
the Company and the Finder, without regard to whether the Consummated
Transaction involves payments in cash, in stock, or a combination of stock and
cash, or is made on an installment sale basis. By way of example, if the
Consummated Transaction involves securities of the acquiring entity (whether
securities of the Company, if the Company is the acquiring party, or securities
of another entity, if the Company is the selling party) having a value of
$5,000,000, the consideration to be paid by the Company to the Finder at closing
shall be $150,000.
<PAGE>
In the event that for any reason the Company shall fail to pay to the
Finder all or any portion of the finder's fee payable hereunder when due,
interest shall accrue and be payable on the unpaid balance due hereunder from
the date when first due through and including that date when actually collected
by the Finder, at a rate equal to two (2) points over the prime rate of
Citibank, N.A. in New York, New York, computed on a daily basis and adjusted as
announced from time to time.
This agreement shall be effective on the date hereof and shall expire on
the fifth anniversary of the date hereof.
Notwithstanding anything herein to the contrary, if the Company shall,
within 180 days immediately following the termination of the five year period
provided above, conclude a Consummated Transaction with any party introduced by
the Finder to the Company prior to the termination of said five year period, the
Company shall also pay the Finder the fee determined above.
The Company represents and warrants to the Finder that the engagement of
the Finder hereunder has been duly authorized and approved by the Board of
Directors of the Company and this letter agreement has been duly executed and
delivered by the Company and constitutes a legal, valid and binding obligation
of the Company.
This agreement has been executed and delivered in the State of Florida and
shall be governed by the laws of such state, without giving effect to the
conflicts of laws rules thereunder.
This agreement shall be binding upon, and enforceable against, the
successors and assigns of each of the undersigned.
Please sign this letter at the place indicated below, whereupon it will
constitute our mutually binding agreement with respect to the matters contained
herein.
Very truly yours,
BARRON CHASE SECURITIES, INC.
BY:________________________________
Robert T. Kirk, President
Agreed to and Accepted:
EAGLE SUPPLY GROUP, INC.
BY:________________________________
Thomas W. Havnes, President
2
Exhibit 4.5
THE REGISTERED HOLDER OF THIS WARRANT, BY ITS ACCEPTANCE HEREOF, AGREES THAT IT
WILL NOT SELL, TRANSFER OR ASSIGN THIS WARRANT EXCEPT AS HEREIN PROVIDED.
Warrant No.________
REDEEMABLE COMMON STOCK PURCHASE WARRANT
To Subscribe For The Purchase of up to ______ Shares of Common Stock
of
EAGLE SUPPLY GROUP, INC.
(a Delaware corporation)
1. Warrant.
THIS CERTIFIES THAT _________________________ (the "Holder"), as
registered owner of this Redeemable Common Stock Purchase Warrant (the
"Warrant"), of EAGLE SUPPLY GROUP, INC. (the "Company") is entitled, at any time
during the three year period (the "Exercise Period") commencing on the date of
the declaration of effectiveness ("Effective Date") by the Securities and
Exchange Commission of an initial public offering of securities of the Company
(an "IPO"), but not thereafter, to subscribe for, purchase and receive, in whole
or in part, up to ________ shares of Common Stock, $.0001 par value (the "Common
Stock"), of the Company. This Warrant shall be initially exercisable as to each
share of Common Stock covered hereby at $5.00 per share (the "Exercise Price").
The term "Exercise Price" shall mean the initial exercise price or such exercise
price, as adjusted in the manner provided herein, depending on the context.
This Warrant is one of the Warrants being issued by the Company in
connection with the Company's private placement to accredited investors (the
"Private Placement") of units consisting of up to an aggregate of (i) 300,000
shares of Common Stock and (ii) 300,000 Warrants to purchase up to 300,000
shares of Common Stock.
2. Exercise.
In order to exercise this Warrant, the exercise form attached hereto must
be duly executed, completed and delivered to the Company at its principal office
as set forth in Section 8.4 hereof during the Exercise Period, together with
this Warrant and payment of the Exercise Price for the shares of the Common
Stock being purchased and any required transfer tax. The Company shall issue a
certificate or certificates evidencing the shares of Common Stock which are the
subject of any such exercise as soon as practicable after its receipt of an
exercise form. The Holder shall not have any rights whatsoever as a stockholder
of the Company until such time as the certificate or certificates evidencing
shares of Common Stock issuable upon exercise of this Warrant have been issued
by the Company upon due exercise of this Warrant by the Holder. If the rights
represented hereby shall not have been exercised at or before 5:00 p.m., Eastern
Time, on the last day during the Exercise Period, this Warrant shall become and
be void and without further force or effect and all rights represented hereby
shall cease and expire.
3. Restrictions on Transfer. Registration of Transfer.
3.1 Restrictions on Transfer. The registered Holder of this Warrant, by
<PAGE>
its acceptance hereof, agrees that prior to any proposed transfer of all or any
part of this Warrant or any securities purchased upon the exercise of this
Warrant, if such transfer is not made pursuant to an effective registration
statement under the Securities Act of 1933, as amended (the "Act"), such holder
will, if requested by the Company, deliver to the Company:
(i) an opinion of counsel reasonably satisfactory in form and substance to
the Company that the Warrant or the securities purchased upon the exercise
of the Warrant may be transferred without registration under the Act;
(ii) an agreement by the proposed transferee to the impression of
the restrictive investment legend set forth below on the Warrant or
the securities to be received;
(iii) an agreement by such transferee that the Company may place a
notation in the stock books of the Company or a "stop transfer order" with
any transfer agent or registrar with respect to the Warrant and the
securities purchased upon exercise of the Warrant; and
(iv) an agreement by such transferee to be bound by the provisions of this
Section 3 relating to the transfer of such Warrant or the securities
purchased upon exercise of such warrant.
Each Warrant holder agrees that each Warrant and each certificate
representing securities purchased upon exercise of this Warrant shall bear the
following legend unless such securities have been registered under the Act:
The Securities represented by this Certificate have not been registered
under the Securities Act of 1933, as amended. These Securities have been
acquired for investment purposes and not with a view to distribution or
resale, and may not be sold, assigned, pledged, hypothecated or otherwise
transferred without an effective Registration Statement for such
Securities under the Securities Act of 1933, as amended, and applicable
state securities laws, or an opinion of counsel satisfactory to Eagle
Supply Group, Inc. to the effect that registration is not required under
such Act and such state securities laws.
3.2 Registration of Transfers. In order to make any permitted transfer or
assignment of this Warrant, the Holder must deliver to the Company the
assignment form attached hereto duly executed and completed, together with this
Warrant and payment of all transfer taxes, if any, payable in connection
therewith. Upon receipt of such form and this Warrant, the Company shall
immediately transfer this Warrant or any part thereof specified in the
assignment form on the books of the Company and shall execute and deliver a new
warrant or warrants of like tenor to the appropriate assignee(s) expressly
evidencing the right to purchase the number of shares of Common Stock
purchasable hereunder or such portion of such number as shall be contemplated by
such assignment.
4. New Warrants to be Issued.
4.1 Partial Exercise or Transfer. Subject to the restrictions in Section 3
hereof, this Warrant may be exercised or assigned in whole or in part. In the
event of the exercise or assignment hereof in part only, upon delivery to the
Company of this Warrant for cancellation, together with the duly executed
exercise or assignment form and funds sufficient to pay the Exercise Price and
any required transfer tax, the Company shall promptly cause to be delivered to
the Holder without charge a new Warrant or new warrants of like tenor with this
Warrant in the name of the Holder evidencing the right to purchase in the
aggregate the remaining number of underlying shares of Common Stock purchasable
2
<PAGE>
hereunder after giving effect to any such partial exercise or assignment.
4.2 Lost Certificate. Upon receipt by the Company of evidence satisfactory
to it of the loss, theft, destruction or mutilation of this Warrant and of an
indemnification by the Holder in favor of the Company, reasonably satisfactory
to it, the Company shall execute and deliver to the Holder a new warrant of like
tenor and date.
5. Adjustments to Exercise Price and Number of Securities.
5.1 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 Exercise Price shall forthwith be proportionately decreased in the
case of subdivision or increased in the case of combination.
5.2 Adjustment in Number of Shares. Upon each adjustment of the Exercise
Price pursuant to the provisions of this Section 5, the number of shares of
Common Stock issuable upon the exercise of this Warrant shall be adjusted to the
nearest full number obtained by multiplying the Exercise Price in effect
immediately prior to such adjustment by the number of shares of Common Stock
issuable upon exercise of this Warrant immediately prior to such adjustment and
dividing the product so obtained by the adjusted Exercise Price.
5.3 Recapitalization. For the purpose of this Warrant, the term "Common
Stock" shall also mean any other class of stock resulting from successive
changes or reclassifications 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.
5.4 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, this 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.
5.5 No Adjustment of Exercise Price in Certain Cases. No adjustment of
the Exercise Price shall be made:
(i) upon the issuance of the Warrants (including shares of Common Stock
issued upon exercise of those warrants) and Common Stock issued in
connection with the Private Placement;
(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 an IPO;
(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 adjustment which, together with any
adjustment so carried forward, shall amount to at least five
3
<PAGE>
cents ($.05) per share of Common Stock;
(v) upon the issuance of shares of Common Stock in connection with the
acquisition of Eagle Supply, Inc., a Florida corporation, or any other
acquisition of a business;
(vi) upon the issuance of up to 2,100,000 shares of the Company's
Common Stock.
5.6 Redemption of Warrants. (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
equal or exceed $10.00 per share (the "Target Price"), subject to adjustment as
set forth in Section 5 hereof. Market price for the purpose of this Section 5.6
shall mean (i) the average of the closing bid prices for thirty (30) consecutive
trading days, ending within ten (10) days of the date of the notice of
redemption of the Common Stock, as reported by the National Association of
Securities Dealers, Inc.'s Automated Quotation System ("NASDAQ") or (ii) the
last reported sale price, for thirty (30) consecutive trading days, ending
within ten (10) days of the date of the notice of redemption, on the primary
exchange on which the Common Stock is traded, if the Common Stock is traded on a
national securities exchange or the national market system of NASDAQ.
Notwithstanding the foregoing, in the event the Company completes an IPO, this
Warrant is not redeemable prior to the first anniversary of the Effective Date
without the written consent of the underwriter of an IPO.
(ii) Providing the conditions set forth in Section 5.6(i) are met, and the
Company shall desire to exercise its right to redeem 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 the (i) 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 not 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
4
<PAGE>
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 Certificates, 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 or smaller number of shares of Common Stock, the
Target Price shall be proportionally 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.
5.7 Dividends and Other Distributions. In the event that the Company shall
at any time during the Exercise Period prior to the exercise in full of this
Warrant declare a non-cash dividend (other than a dividend consisting solely of
shares of Common Stock) or otherwise distribute to its stockholders any assets,
property, rights, evidences of indebtedness, securities (other than shares of
Common Stock), whether issued by the Company or by another, or any other thing
of value other than cash, the Holder of this Warrant shall thereafter be
entitled, in addition to the shares of Common Stock or other securities and
property receivable upon the exercise thereof, to receive, upon the exercise of
such Warrant, the same property, assets,rights, evidences of indebtedness,
securities or any other thing of value that it would have been entitled to
receive at the time of such dividend or distribution as if the Warrant had been
exercised immediately prior to such dividend or distribution. At the time of any
such dividend or distribution, the Company shall make appropriate reserves to
ensure the timely performance of the provisions of this Section 5.7.
5.8 Elimination of Fractional Interests. The Company shall not be required
to issue certificates representing fractions of shares of Common Stock upon the
exercise of the Warrant. In lieu of fractional shares of Common Stock there will
be paid to the Holder, at the time of exercise, an amount of cash equal to the
same fraction of the current market price of a share of Common Stock.
6. Exchange.
In the event the Company consummates an IPO and the securities offered in
the IPO include warrants which are exercisable to purchase shares of Common
Stock ("IPO Warrants"), on the closing date of the IPO, this Warrant shall be
exchangeable, at the option of the Holder, at the aforesaid office of the
Company for warrants having the same terms, conditions, rights and obligations
as those sold in the Company's IPO.
7. Reservation.
The Company shall at all times reserve and keep available out of its
authorized shares of Common Stock, solely for the purpose of issuance upon
exercise of the Warrants, such number of shares of Common Stock or other
securities, properties or rights as shall be issuable upon the exercise thereof.
The Company covenants and agrees that, upon exercise of the Warrants and payment
of the Exercise Price therefor, all shares of Common stock and other securities,
properties and rights issuable upon such exercise shall be duly and validly
issued, fully paid and nonassessable and not subject to preemptive rights of any
stockholder.
8. Certain Notice Requirements.
8.1 Holder's Rights to Receive Notice. Nothing herein shall be construed
5
<PAGE>
as conferring upon the Holder the right to vote or consent or to receive notice
as a stockholder for the election of directors or any other matter. The Holder
shall not have any right whatsoever as a stockholder of the Company until such
time as the certificate or certificates evidencing shares of Common Stock
issuable upon exercise of this Warrant have been issued by the Company upon due
exercise of this Warrant by the Holder. If, however, at any time prior to the
expiration of the Warrant or its exercise, any of the events described in
Section 8.2 shall occur, then, in one or more of said events, the Company shall
give written notice of such event at least fifteen (15) days prior to the date
fixed as a record date or the date of closing the transfer books for the
determination of the stockholders entitled to such dividend, distribution,
conversion or exchange of securities or subscription rights, or entitled to vote
on such proposed dissolution, liquidation, winding up or sale. Such notice shall
specify such record date of the closing of the transfer books, as the case may
be.
8.2 Events Requiring Notice. The Company shall be required to give the
notice described in this Section 8 upon one or more of the following events: (i)
if the Company shall declare a record date to calculate the holders of its
shares of Common Stock for the purpose of entitling them to receive a dividend
or distribution payable otherwise than in cash as set forth in Section 5.7, or a
cash dividend or distribution payable otherwise than out of retained earnings,
as indicated by the accounting treatment of such dividend or distribution on the
books of the Company, or (ii) the Company shall offer to all the holders of its
Common Stock any additional shares of capital stock of the Company or securities
convertible into or exchangeable for shares of capital stock of the Company, or
any option, right or warrant to subscribe therefor, or (iii) a dissolution,
liquidation or winding up of the Company (other than in connection with a
consolidation or merger) or a sale of all or substantially all of its property,
assets and business shall be proposed to the Company's stockholders, or (iv) a
merger or consolidation pursuant to Section 5.4 hereof.
8.3 Notice of Change in Exercise Price. The Company shall, promptly after
an event requiring a change in the Exercise Price pursuant to Section 5 hereof,
send notice to the Holder of such event and change (the "Price Notice"). The
Price Notice shall describe the event causing the change and the method of
calculating same and shall be certified as being true and accurate by the
Company's Chief Executive Officer or Treasurer.
8.4 Transmittal of Notices. All notices, requests, consents and other
communications under this Warrant shall be in writing and shall be deemed to
have been duly given or made when hand delivered, or when delivered by
responsible overnight courier or by registered or certified mail, return receipt
requested, addressed as set forth below.
(i) If to the registered Holder of this Warrant, to his or her
address as stated on the books and records of the Company; and
(ii) if to the Company, to:
Eagle Supply Group, Inc.
122 East 42nd Street, Suite 1116
New York, New York 10168
Attention: Douglas P. Fields
Either of the Holder or the Company may change the foregoing address by notice
given pursuant to this Section 8.4.
9. Miscellaneous.
9.1 Amendments. All material modifications or amendments to this Warrant
shall require the written consent of the party against whom enforcement of the
modification or amendment is sought.
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<PAGE>
9.2 Headings. The headings contained herein are for the sole purpose of
convenience of reference, and shall not in any way limit or affect the meaning
or interpretation of any of the terms or provisions of this Warrant.
9.3 Entire Agreement. This Warrant constitutes the entire agreement of the
parties hereto with respect to the subject matter hereof and supersedes all
prior agreements and understandings of the parties, oral and written, with
respect to the subject matter hereof.
9.4 Binding Effect. This Warrant shall inure solely to the benefit of and
shall be binding upon the Holder and the Company and their permitted assignees,
respective successors, legal representatives and assigns, and no other person
shall have or be construed to have any legal or equitable right, remedy or claim
under or in respect of or by virtue of this Warrant or any provisions herein
contained.
9.5 Governing Law. Submission to Jurisdiction. This Warrant shall be
governed by and construed and enforced in accordance with the internal laws of
the State of New York, without giving effect to the conflict of laws provisions
thereof. Any action, proceeding or claim against the Company or the Holder
arising out of or relating in any way to this Warrant shall be brought and
enforced in the courts of the State and County of New York or of the United
States of America for the Southern District of New York, and the Company and the
Holder irrevocably submit to such jurisdiction, which jurisdiction shall be
exclusive. The Holder and the Company waive any objection to such exclusive
jurisdiction and that such courts represent an inconvenient forum. The
prevailing party in any such action shall be entitled to recover from the other
party all of its reasonable attorney's fees and expenses relating to such action
or proceeding and/or incurred in connection with the preparation therefor. The
Holder and the Company waive their right to trial by jury.
9.6 Waiver, Etc. The failure of the Company or the Holder to at any time
enforce any of the provisions of this Warrant shall not be deemed or construed
to be a waiver of any such provision, nor to in any way affect the validly of
this Warrant or any provision hereof or the right of the Company or any Holder
to thereafter enforce each and every provision of this Warrant. No waiver of any
breach, noncompliance or nonfulfillment of any of the provisions of this Warrant
shall be effective unless set forth in a written instrument executed by the
party or parties against whom or which enforcement of such waiver is sought; and
no wavier of any such breach, noncompliance or nonfulfillment shall be construed
or deemed to be a waiver of any other or subsequent breach, noncompliance or
nonfulfillment.
9.7 Severability. In the event that any provision of this Warrant shall be
determined to be illegal or unenforceable, the remaining provisions of this
Warrant shall remain binding and in full force and effect.
IN WITNESS WHEREOF, the Company has caused this Warrant to be signed by
its duly authorized officer on the _____ day of _______, 1996.
EAGLE SUPPLY GROUP, INC.
By: _______________________________
Douglas P. Fields, President
Chief Executive Officer
7
<PAGE>
Form to be used to exercise Warrant:
EAGLE SUPPLY GROUP, INC.
122 East 42nd Street, Suite 1116
New York, New York 10168
Date: __________________, 19 ___
The Undersigned hereby elects irrevocably to exercise the within Warrant
and to purchase _________________ shares of Common Stock of Eagle Supply Group,
Inc. (a Delaware corporation) and hereby makes payment of $____________________
(at the rate of $____________ per share) in payment of the Exercise Price
pursuant thereto and transfer taxes, if any such taxes are required to be paid.
Please issue the shares as to which this Warrant is exercised in accordance with
the instructions given below.
___________________________________________
Signature
___________________________________________
Signature Guaranteed
Print Name, Address and Social Security or
Taxpayer Identification Number:
___________________________________________
___________________________________________
___________________________________________
___________________________________________
INSTRUCTIONS FOR REGISTRATION OF SECURITIES
Name:__________________________________________________________________________
(Print in Block Letters)
Address:_______________________________________________________________________
NOTICE: The signature to this form must correspond with the name as written upon
the face of the within Warrant in every particular without alteration or
enlargement or any change whatsoever, and must be guaranteed by a bank, other
than a savings bank, or by a trust company or by a firm having membership on a
registered national securities exchange.
<PAGE>
Form to be used to assign Warrant:
ASSIGNMENT
(To be executed by the registered Holder to effect a transfer of all or part of
the within Warrant):
EAGLE SUPPLY GROUP, INC.
122 East 42nd Street, Suite 1116
New York, New York 10168
FOR VALUE RECEIVED, _____________________, does hereby sell, assign and
transfer unto _____________________ the right to purchase _____________________
shares of Common Stock of Eagle Supply Group, Inc. (the "Company") evidenced by
the within Warrant and does hereby authorize the Company to transfer such right
on the books of the Company.
Dated: __________________, 19
___________________________________________
Signature
___________________________________________
Signature Guaranteed
Print Name, Address and Social Security or
Taxpayer Identification Number:
___________________________________________
___________________________________________
___________________________________________
___________________________________________
NOTICE: The signature to this form must correspond with the name as written upon
the face of the within Warrant in every particular without alteration or
enlargement or any change whatsoever, and must be guaranteed by a bank, other
than a savings bank, or by a trust company or by a firm having membership on a
registered national securities exchange.
Exhibit 10.1
PURCHASE AGREEMENT
Purchase Agreement made this ____ day of ________ , 1996, by and between
TDA Industries, Inc., a New York corporation, with an office at 122 East 42nd
Street, Suite 1116, New York, New York 10168 (hereinafter the "Seller"), and
Eagle Supply Group, Inc., a Delaware corporation with an office at 122 East 42nd
Street, Suite 1116, New York, New York 10168 (hereinafter the "Buyer").
WITNESSETH:
WHEREAS, Seller is the owner of all the issued and outstanding capital
stock of Eagle Supply, Inc., a Florida corporation, with an office at 1451
Channelside Drive, Tampa, Florida 33629 (hereinafter "Eagle"); and
WHEREAS, Seller hereby agrees to sell and deliver to Buyer, and Buyer
agrees to purchase, all of the issued and outstanding capital stock of Eagle;
and
WHEREAS, Buyer has filed a registration statement on Form S-1 (such
registration statement and the financial statements contained therein and all
amendments and exhibits thereto are hereinafter referred to as the "Registration
Statement") for an underwritten public offering of its equity securities
pursuant to which it will derive gross proceeds of not less than $7,687,500 (the
"Public Offering").
NOW, THEREFORE, in consideration of the promises and the
representations, warranties, covenants and agreements contained in
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this Agreement, each of the parties hereto hereby agrees as
follows:
ARTICLE I
RECITALS
Recitals. The parties confirm that each of the foregoing
recitations are true and correct in all respects and are incorpo-
rated herein.
ARTICLE II
THE EAGLE SHARES
The Eagle Shares. Seller shall sell to Buyer Five Hundred Ninety Three
(593) restricted shares of Eagle's Common Stock (the "Eagle Shares"),
representing all of the issued and outstanding capital stock of Eagle, for the
consideration specified in Article IV hereof.
ARTICLE III
CLOSING
The Closing. Simultaneously with a closing of the Public Offering, the
closing of this Agreement and the transactions contemplated hereby (the
"Closing") are to take place simultaneously with the delivery of the documents
evidencing consideration for the transactions contemplated herein as set forth
in Article IV below at the law offices of David A. Carter, Esq., 355 West
Palmetto Park Road, Boca Raton, Florida 33432, or at such other location as the
parties hereto may agree upon. The date upon which the closing occurs is herein
referred to as the "Closing Date".
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ARTICLE IV
CONSIDERATION
4.1 Eagle Shares. At the Closing, the Seller will deliver to
Buyer the Eagle Shares.
4.2 Shares of the Buyer. At the Closing, the Buyer will deliver to Seller
certificate(s) representing 200,000 shares of Buyer's Common Stock ($.0001 par
value), duly executed by its authorized officers and directors and in proper
form for transfer (the "Buyer's Shares").
4.3 Dividend of Eagle. Eagle shall issue to Seller a dividend (the
"Dividend") in the form first of cancellation of indebtedness due to Eagle from
Seller and then in the form of cash in that sum equal to the amount of Eagle's
net tangible book value at the Closing Date which is in excess of One Million
($1,000,000) Dollars which amount will be affirmed by a certificate signed by
Seller's and Eagle's respective chief financial officers.
ARTICLE V
REPRESENTATIONS AND WARRANTIES OF SELLER
5.1 Representations and Warranties of Seller. Except as and/or to the
extent disclosed in the Registration Statement, for the Public Offering as filed
with the Securities and Exchange Commission (the "Commission") under the
Securities Act of 1933, as amended (the "Act"), true copies of which
Registration Statement have been and/or will be delivered by Seller to Buyer as
a material inducement to Buyer to execute and perform its obligations under this
Agreement, Seller represents and warrants to Buyer as of the
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date hereof, as follows:
A. Organization and Good Standing - Compliance. Eagle is duly
organized, validly existing and in good standing under the laws of the State of
Florida, with full power and authority to own or lease and operate its
properties and assets, material to the operation of its business, and to carry
on its business as presently being conducted, and has obtained all licenses,
permits or other authorizations and has taken all actions required by applicable
law or governmental regulations, material to the operation of its business, to
conduct its business. Seller has received no notice of, and does not know of,
any violation of any applicable regulation, ordinance or other law, order, or
governmental requirement, material to the operation of its business. A true copy
of the Articles of Incorporation and By-Laws certified by the Secretary of
Eagle, and true copies of all corporate minutes of Eagle have been made
available to or delivered to Buyer, including all amendments thereto.
B. Eagle's Capitalization. Eagle's total authorized
capital stock is Fifteen Hundred (1,500) shares of Common Stock
(par value $100.00 per share), of which Five Hundred Ninety Three
(593) shares are issued and outstanding.
C. Liens and Encumbrances. There are no liens,
encumbrances, pledges, probational agreements or claims of any
nature against the Eagle Shares to be delivered to Buyer by Seller.
D. Securities Law. The Eagle Shares are validly issued,
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fully paid and non-assessable and were offered and sold in accordance with
applicable federal and state securities laws or applicable exceptions
thereunder, and there are no preemptive rights in respect thereof. There are no
outstanding options, warrants, rights, calls, puts, commitments, plans or other
agreements of any character providing for the purchase or issuance of any
authorized but unissued capital stock of Eagle.
E. Financial Statements. Eagle's financial statements contained in
the Registration Statement represent accurately and fairly the financial
condition and results of the operations of Eagle at the respective dates or for
the respective periods covered thereby in accordance with generally accepted
accounting principles applied on a consistent basis or in accordance with the
descriptions relating to such financial statements as set forth in the
Registration Statement.
F. Books and Records. The books and records of Eagle reflect all of
the material debts, liabilities and obligations of any nature (whether absolute,
accrued or otherwise, and whether due or to become due) of Eagle at the dates
thereof. There are no contingent liabilities of Eagle of a material nature,
other than as reflected in such books and records and the Registration
Statement, and Eagle has not given any guarantees of the obligations of any
other person or entity other than as reflected in the Registration Statement.
G. Absence of Undisclosed Liabilities. Eagle has no
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material liabilities, whether accrued, absolute, contingent, or otherwise,
including without limitation, tax liabilities due or to become due, and whether
incurred in respect of or measured by the income of Eagle except as reflected in
the Registration Statement or incurred subsequent to the date of the financial
statements set forth in the Registration Statement in the ordinary course of
Eagle's business. Seller does not know or have reasonable grounds to know of any
basis for the assertion against Eagle of any material liability not fully
reflected or reserved against.
H. Title to Properties. Eagle has good and marketable title to its
assets, including those reflected in the Registration Statement (except as may
be sold, exchanged or otherwise disposed of in the ordinary course of business).
The assets of Eagle are not subject to any material security interest, mortgage,
pledge, lien, encumbrance, or charge except for liens disclosed in the
Registration Statement as securing specified liabilities set forth therein.
I. Subsidiaries. Eagle has no material subsidiaries or
interest in any other corporation, firm, partnership or other
entity.
J. Common Stock of Eagle. Seller has full power to
sell and deliver the Eagle Shares upon the terms set forth herein.
There is no agreement to issue any additional shares of Eagle or to
redeem, purchase or otherwise acquire any of the Eagle Shares.
Upon delivery of the Eagle Shares, the Buyer will receive good and
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marketable title thereto, free and clear of all liens, encumbrances, equities
and claims whatsoever and subject only to the restrictions of state and federal
securities laws.
K. Tax Returns and Payments. Eagle has duly filed all tax returns,
tax reporting forms and reports required to be filed by it, and has paid all
taxes, assessments, governmental charges and payments to third party payors
which were due and payable. Eagle has not entered into any agreement, waiver or
other arrangement providing for an extension of time with respect to the filing
of any tax return or the payment or assessment of any tax, governmental charge,
deficiency or third party payment relating to Eagle. Eagle has withheld from
each payment to each of its employees the amount of all taxes (including but not
limited to United States federal income taxes, applicable state and municipal
income taxes, Federal Insurance Contribution Act contributions and all other
mandated employee taxes or contributions) legally required to be withheld
therefrom and has paid the same to the proper tax receiving offices, except for
such amounts withheld but not yet payable, if any.
L. Tax Returns. Eagle has duly filed all reports or
returns required to be filed with governmental authorities relating
in any manner to any of its properties, which the failure to file
may materially adversely affect the operation of its business.
M. Insurance. Eagle maintains in full force and effect
all policies of insurance and any renewals thereof and has given
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all notices and presented all claims, if any, under all policies of insurance
when due except as reflected in the Registration Statement.
N. Mortgages, Liens and Encumbrances. Eagle has not
mortgaged, pledged, hypothecated or otherwise encumbered any of its
assets, tangible or intangible, material to the operation of its
business except as set forth in the Registration Statement.
O. No Asset Sale. Eagle has not entered into or agreed
to enter into any agreement or arrangement granting any rights to
purchase any of its assets material to the operation of its
business other than in the ordinary course of Eagle's business.
P. Capital Expenditures. Eagle has not made any
commitment for capital expenditures of a material nature that is
not in the ordinary course of Eagle's business.
Q. Material Agreements. Eagle has not entered into, become a party
to, waived any right under, amended or cancelled any material contract,
agreement or commitment nor has there been any material defaults thereunder
except as reflected in the Registration Statement or except in the ordinary
course of Eagle's business.
R. Material Obligations. Eagle has paid all of its
material obligations to third parties, including vendors, in a
timely manner in the ordinary course of business.
S. No Financial Charges. Since the respective dates of
the financial statements contained in the Registration Statement,
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there has been no material change in the condition or general affairs of Eagle,
financial or otherwise, other than as contemplated by this Agreement or
reflected in the Registration Statement.
T. No Suits Pending or Imminent. Except as may be immaterial to
Eagle, its business, financial condition and results of operations, there are no
actions at law or equity or administrative proceedings pending or threatened
against Eagle in which Eagle is a plaintiff, defendant, petitioner, indemnifier,
or respondent, or in which it is anticipated that Eagle will join or be joined
as a party.
U. Copies of Tax Returns. Seller has delivered to Buyer true and
correct copies of each federal and state tax return (or outstanding extension,
if any) filed by Eagle during the period of time commencing on July 1, 1991
through the Closing of this Agreement.
V. Compliance with Law. The business and operations of
Eagle have been and are being conducted in accordance with all
applicable laws, rules and regulations.
W. No Default of Contracts, Employee Obligations, Contractual
Obligations or Organizational Documents. None of the contracts, or obligations
or liabilities, material to Eagle's business operations, are in default. All
such contracts are valid and binding obligations of the parties thereto in
accordance with their respective terms, there have been no amendments or
modifications thereto since the date hereof other than in the ordinary
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course of Eagle's business, and there are no known material liabilities of the
parties thereto arising from any breach of or default in any provision thereof
by any party thereto. Eagle is not in default under any of its agreements,
contracts or instruments, material to Eagle's business operations, which require
services to be performed, and no claim of default has been made or threatened by
or against Eagle with respect to any such agreement, contract or instrument.
Eagle is not in violation of its Articles of Incorporation, By-Laws or other
organizational documents.
X. Agreement Creating Default or Acceleration. Except for the
Dividend and any debt cancellation resulting from said Dividend, and except as
reflected in the Registration Statement or contemplated by this Agreement, the
execution, delivery and performance of this Agreement and of each and every
agreement, document and instrument and the consummation of the transactions
contemplated hereby and thereby do not and will not (i) constitute a breach or
default (or an occurrence which by lapse of time and/or by the giving of notice
would constitute a breach or default) under any agreement, lease, license,
franchise, contract or commitment to which Seller or Eagle is a party or by
which either of them or their properties or assets are bound; (ii) result in the
creation or the imposition of any lien, encumbrance, security interest or charge
in favor of any other party upon any of the properties or assets of Seller or
Eagle; and (iii) result in the cancellation or termination of, or the
acceleration of the performance of any
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obligations or of any indebtedness under any contract, agreement, commitment,
indenture, mortgage, note, bond, license or other instrument or obligation to
which Seller or Eagle is now a party or by which Seller or Eagle or either of
their respective properties or assets may be bound or affected.
5.2 Investment Intent. Seller is acquiring Buyer's Shares for its own
account, for investment only and not with a view to the distribution or resale
thereof. Seller and its officers and directors have such knowledge and
experience in financial and business matters that they are capable of evaluating
the merits and risks of Seller's purchasing the Buyer's Shares; and Seller
understands that none of the Buyer's Shares have been registered for resale
under the Act. Seller is fully aware of the fact that Buyer is transferring to
Seller the Buyer's Shares in reliance upon the exemption provided in Section
4(2) of the Act and is relying upon this investment representation, and Seller
hereby represents that it will not pledge, hypothecate, offer, sell, transfer,
assign or otherwise dispose of the Buyer's Shares except in compliance with the
provisions of the Act.
Seller acknowledges that the certificate(s) for the Buyer's Shares will be
legended to indicate that the Buyer's Shares represented thereby have not been
registered under the Act, the Buyer's Shares were acquired for investment and
may not be pledged, hypothecated, sold or transferred in the absence of a
Registration Statement effective under the Act for the Shares or an opinion of
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counsel satisfactory to Buyer that registration is not required under the Act,
and that "stop transfer" instructions with respect to the Buyer's Shares will be
maintained by the transfer agent for Buyer and/or on Buyer's transfer and stock
records.
5.3 Accuracy of Representations. To the best of Seller's knowledge and
belief, no representation or warranty in this Article V or elsewhere in this
Agreement, or in any certificate or document furnished or to be furnished by
Seller pursuant hereto, contains any untrue statement of a material fact or
omits to state a material fact necessary to make the statements contained herein
or therein not misleading. To the best of Seller's knowledge and belief, all
facts have been disclosed in the Registration Statement regarding matters that
would materially adversely affect Eagle or its business operations.
ARTICLE VI
REPRESENTATIONS AND WARRANTIES OF BUYER
6. Representations and Warranties of Buyer: Except as disclosed in the
Registration Statement, as a material inducement to Seller to execute and
perform its obligations under this Agreement, Buyer represents and warrants to
Seller as of the date hereof as follows:
A. Investment Intent. Buyer is acquiring the Eagle
Shares for its own account, for investment only and not with a view
to the distribution or resale thereof. Buyer (and its officers and
directors) has such knowledge and experience in financial and
business matters that it is capable of evaluating the merits and
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risks of purchasing the Eagle Shares; and it understands that none of the Eagle
Shares have been registered for resale under the Act. Buyer is fully aware of
the fact that Seller is selling the Eagle Shares in reliance upon the exemption
provided in Section 4(2) of the Act and is relying upon this investment
representation, and Buyer hereby represents that it will not pledge,
hypothecate, offer, sell, transfer, assign or otherwise dispose of the Eagle
Shares except in compliance with the provisions of the Act.
Buyer acknowledges that the certificate(s) for the Eagle Shares will
be legended to indicate that the Eagle Shares represented thereby have not been
registered under the Act, as amended, the Eagle Shares were acquired for
investment and may not be pledged, hypothecated, sold or transferred in the
absence of a registration statement effective under the Act for the Eagle Shares
or an opinion of counsel that registration is not required under the Act, and
that "stop transfer" instructions with respect to the Eagle Shares will be
maintained by the transfer agent for Eagle and/or on Eagle's stock transfer
records.
B. Agreement Creating Default or Acceleration. The execution,
delivery and performance of this Agreement and of each and every agreement,
document and instrument and the consummation of the transactions contemplated
hereby and thereby do not and will not (i) constitute a breach or default (or an
occurrence which by lapse of time and/or by the giving of notice would
constitute a breach or default) under any agreement, lease, license, franchise,
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contract or commitment to which Buyer is subject or party or by which its
properties or assets are bound; (ii) result in the creation or the imposition of
any lien, encumbrance, security interest or charge in favor of any other party
upon any of Buyer's properties or assets; and (iii) result in the cancellation
or termination of, or the acceleration of the performance of any obligations or
of any indebtedness under any contract, agreement, commitment, indenture,
mortgage, note, bond, license or other instrument or obligation to which Buyer
is now a party or by which Buyer or its properties or assets may be bound or
affected, except as reflected in the Registration Statement or contemplated by
this Agreement.
C. Authority of Buyer. Buyer has full power and authority to enter
into this Agreement and to perform each and every obligation hereunder.
D. Accuracy of Representations. To the best of Buyer's knowledge and
belief, no representation or warranty in this Article VI, the Registration
Statement or elsewhere in this Agreement, or in any certificate or document
furnished or to be furnished by Buyer pursuant hereto, contains any untrue
statement of a material fact or omits to state a material fact necessary to make
the statements contained herein or therein not misleading.
ARTICLE VII
SURVIVAL OF REPRESENTATIONS
Survival of Representations and Warranties. All the representations,
warranties, covenants and agreements made by Buyer, Eagle
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and Seller in this Agreement (including statements contained in any exhibit,
certificate or other instrument delivered by or on behalf of any party hereto or
in connection with the transactions contemplated hereby) shall survive for a
period of two years following the consummation of the Agreement. No performance
or execution of this Agreement in whole or in part by any party hereto, no
course of dealing between or among the parties hereto or any delay or failure on
the part of any party in exercising any rights hereunder or at law or in equity,
and no investigation by any party hereto shall operate as a waiver of any rights
of such party, except to the extent expressly waived in writing by such party.
ARTICLE VIII
CLOSING OBLIGATIONS OF THE PARTIES
8.1 Documents to be Delivered to Buyer by Seller. At a closing of this
Agreement, Seller shall deliver or cause the following to be delivered to Eagle
or Buyer:
(A) Certificates representing the Eagle Shares;
(B) All books, records, minute books, ledgers, instru- ments,
agreements, contracts, tax returns and all other documents of whatsoever
description of, relating to or concerning Eagle; and
(C) A copy of certified resolutions of Seller's Board of Directors
authorizing the execution and delivery of this Agreement.
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8.2 Documents to be Delivered to Seller by Buyer.
(A) Certificates representing the Buyer's Shares;
(B) A copy of certified resolutions of Buyer's Board of Directors
authorizing the execution and delivery of this Agreement; and
(C) Documents, satisfactory to the Seller, confirming the Dividend.
ARTICLE IX
POST CLOSING OBLIGATIONS
9.1 Seller shall or shall cause its subsidiaries, identified under Column
(A) of Schedule I attached hereto, to indemnify Eagle for any payments that
Eagle is obligated to make for the properties and pursuant to the obligations
set forth opposite the subsidiary's name under Column (B) of Schedule I in
excess of Eagle's rental obligations to TDA or such subsidiary.
9.2 Seller agrees that any indebtedness due to Eagle from TDA outstanding
on the Closing Date and not cancelled by the Dividend shall be paid to Eagle by
TDA within 45 days of the completion of the Public Offering.
9.3 Buyer hereby grants to Seller an unlimited number of "piggyback"
registration rights with respect to the Buyer's Shares for any registration
statement filed with the Securities and Exchange Commission by the Buyer during
the period of time commencing two years after the consummation of the
Acquisition.
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ARTICLE X
MISCELLANEOUS
10.1 Entire Agreement-Amendments. This Agreement and any agreements or
instruments executed pursuant hereto or concurrently herewith contain the entire
agreement between the parties hereto with respect to the transactions
contemplated by this Agreement and supersede all prior agreements, writings,
negotiations and understandings. This Agreement contains all of the covenants,
representations, warranties and agreements between the parties with respect to
the subject matter of this Agreement, and each party to this Agreement
acknowledges that no representations, warranties, covenants, inducements,
promises or agreements, orally or otherwise, have been made by any party, or
anyone acting on behalf of any party, which are not embodied herein, and no
other or prior agreement, statement, representation, warranty or covenant not
contained in this Agreement shall be binding or valid.
10.2 Headings. The headings or captions in this Agreement are for
convenience and reference only and do not form a part hereof and do not in any
way modify, interpret or construe the intent of the parties or affect any to the
provisions of this Agreement.
10.3 Binding on Successors. This Agreement shall inure to the benefit of
and shall be binding upon the parties hereto and their respective legal
representatives, successors and assigns.
10.4 Counterparts. This Agreement may be executed in
counterparts, each of which shall be deemed an original and the
counterparts shall together constitute one and the same agreement,
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binding each of the parties hereto, notwithstanding that all of the parties are
not signatory to the original or the same counterpart; however, no party shall
be bound by this Agreement until and unless all parties have executed this
Agreement.
10.5 Waiver. Any provision of this Agreement which may be waived by a
corporate party hereto may be waived (but only in writing) by any duly
authorized officer thereof. No waiver shall be deemed a continual waiver or
waivers with respect to any subsequent breach or default, whether of a similar
or different nature, unless expressly so stated in writing.
10.6 Governing Law. The validity, construction and interpretation of this
Agreement shall be governed by the laws of the State of New York and the proper
venue and jurisdiction shall be the Supreme Court of the State of New York, New
York County or the United States District Courts located in the Southern
District of New York.
10.7 Further Acts. At any time and from time to time, on and after the
Closing Date, any party shall, at the request of any other party, perform or
cause to be performed and execute, acknowledge and deliver, or cause to be
executed, acknowledged and delivered all such further acts, deeds, assignments
and documents as may be necessary or desirable to more fully consummate the
transactions contemplated by this Agreement.
10.8 Notices. All notices and other communications required
or permitted under the terms of this Agreement shall be in writing
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and shall be deemed given (1) upon hand delivery, or (2) ten days after deposit
of the same by U.S. certified mail, return receipt requested, first class
postage and certification fees prepaid and correctly addressed to the other
parties at the addresses set forth in the first paragraph hereof.
10.9 Waiver of Jury Trial. Each of the parties hereto hereby knowingly,
voluntarily, and intentionally waives any rights it may have to a trial by jury
in respect of any litigation based hereon or arising out of, under or in
connection with this Agreement.
IN WITNESS WHEREOF, the parties have duly executed this Agreement on the
date first above written.
SELLER:
TDA INDUSTRIES, INC.
By: ___________________________
BUYER:
EAGLE SUPPLY GROUP, INC.
By: ___________________________
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Exhibit 10.2
EMPLOYMENT AGREEMENT
DOUGLAS P. FIELDS
AGREEMENT, dated as of the ____ day of ________, 1996, among Eagle Supply,
Inc., a Florida corporation, having a place of business at 1451 Channelside
Drive, Tampa, Florida 33629 (the "Company"), Eagle Supply Group, Inc., a
Delaware corporation having an office located at 122 East 42nd Street, New York,
New York 10168 (the "Parent"), and Douglas P. Fields, an individual residing at
100 Midwood Road, Greenwich, Connecticut 06830(the "Executive").
WHEREAS, the Company is principally engaged in the business of
the distribution of roofing supplies and related products; and
WHEREAS, the Parent is principally engaged in the business of seeking
acquisition candidates engaged in the wholesale distribution of roofing supplies
and related products and vendors or suppliers to such distribution businesses
and businesses related thereto; and
WHEREAS, all of the issued and outstanding securities of the
Company are being purchased by Parent (the "Acquisition"); and
WHEREAS, the Company desires to employ the Executive as its
Chairman of the Board of Directors and Chief Executive Officer; and
WHEREAS, Parent desires to employ the Executive as its
Chairman of the Board of Directors and Chief Executive Officer; and
WHEREAS, Parent and Company acknowledge that Executive is a party to an
employment agreement with TDA Industries, Inc. ("TDA") which has been assumed by
Pemberton Services Corporation ("PSC"); and
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WHEREAS, Executive is willing to accept such employment by the Parent and
Company, all in accordance with the conditions and other provisions hereinafter
set forth and the acknowledgment, approval and consent of TDA and PSC as
indicated by their acknowledgment, approval and consent as set forth at the foot
of this Agreement; and
NOW, THEREFORE, in consideration of the promises and mutual
representations, covenants, and agreements set forth herein, and for other good
and valuable consideration, the receipt and sufficiency of which is hereby
acknowledged, the parties hereto agree effective upon the consummation of the
Acquisition as follows:
1. Term: Subject to and conditioned upon TDA's and PSC's acknowledgment,
approval and consent to Executive in entering into this Agreement and TDA's and
PSC's acknowledgement that this agreement shall not be deemed to be a violation
of any of the terms and conditions of Executive's agreements with TDA and PSC,
the term of this Agreement shall be for a period of five (5) years commencing on
the consummation of the Acquisition and terminating on the fifth anniversary
date of the consummation of the Acquisition, subject to earlier termination as
provided herein or unless extended by mutual consent of the parties.
2. Employment: (A) Subject to the terms and conditions and for the
compensation hereinafter set forth, the Parent and the Company hereby agree to
employ Executive for and during the term of
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this Agreement. Executive is hereby employed by the Parent and the Company as
the Chairman of the Board of Directors and Chief Executive Officer of each. The
Executive's powers and duties shall be those of an executive nature which are
appropriate for a Chairman of the Board of Directors and Chief Executive Officer
in accordance with the Parent's and Company's respective By-Laws; and Executive
does hereby accept such employment or greater employment as may be mutually
agreed upon by the parties hereto and agrees to devote as much time to the
affairs of the Parent and the Company as Executive deems necessary to discharge
his duties to them during the term of this Agreement. Executive shall report to
the Boards of Directors of the Parent and the Company. Neither the Parent nor
the Company shall require Executive to be employed in any location other than in
proximity to his residence unless he consents in writing to such location.
(B) During the term of this Agreement, Executive shall be furnished with
office space and facilities commensurate with his position and adequate for the
performance of his duties; he shall be provided with the perquisites customarily
associated with the position of Chairman of the Board of Directors and Chief
Executive Officer of the Parent and the Company.
(C) During the term of this Agreement, the Parent shall be responsible (i)
to pay to Executive the compensation set forth in Section 3; (ii) reimburse
Executive for expenses as provided in Section 4; and (iii) provide Executive
with the benefits and
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vacation set forth in Section 5. In the event the Parent fails to perform any of
its obligations under Sections 3, 4, 5, 7, or any other Section of this
Agreement, the Company shall be so obligated.
(D) The executive agrees to submit to any medical examination(s) and
provide any information and documents reasonably necessary for the Parent or the
Company to obtain any insurance required by this Agreement and "Key Man" life
insurance on the Executive's life.
3. Compensation:
(A) Salary: During the term of this Agreement, the Parent agrees to pay
Executive, and Executive agrees to accept, an annual salary of not less than Two
Hundred Thousand Dollars ($200,000) per year, payable in accordance with the
Parent's policies, for services rendered by Executive hereunder.
(B) Bonus: As additional compensation, the Parent may pay Executive a
periodic bonus as determined by the Board of Directors.
(C) Increases: The annual salary is subject to periodic increases at the
discretion of the Board of Directors with such increases to take effect no later
than on each anniversary date of this Agreement.
4. Expenses: The Parent shall reimburse Executive for all reasonable and
actual business expenses incurred by him in connection with his service to the
Parent and the Company, upon submission by him of appropriate vouchers and
expense account reports.
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5. Benefits:
(A) Insurance: In addition to the salary and bonus to be paid to Executive
hereunder, the Parent shall maintain family medical and dental insurance, life
insurance in the amount of not less than Fifty Thousand Dollars ($50,000) on the
life of Executive and for which Executive shall designate the beneficiary(ies),
and long term disability insurance providing monthly disability benefits to
Executive of not less than Five Thousand Dollars ($5,000). Executive and his
dependents shall be entitled to participate in such other benefits as are
extended to active executive employees of the Parent or the Company and their
dependents including but not limited to pension, retirement, profit-sharing,
401(k), stock option, bonus and incentive plans, group insurance,
hospitalization, medical or other benefits made available by the Parent or the
Company to their employees generally.
(B) Vacation: Executive shall be entitled to take up to four (4) weeks of
paid vacation annually at a time mutually convenient to the Parent, Company and
Executive.
6. Restrictive Covenants: (A) Executive recognizes and acknowledges that
the Parent and the Company, through the expenditure of considerable time and
money, have developed and will continue to develop in the future information
concerning customers, clients, marketing, business and operational methods of
the Parent and the Company and their customers or clients, contracts,
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financial or other data, technical data or any other confidential or proprietary
information possessed, owned or used by the Parent or the Company, and that the
same are confidential and proprietary, and are "confidential information" of the
Parent and the Company. In consideration of his employment by the Parent and the
Company hereunder, Executive agrees that he will not, without the consent of the
Board of Directors of Parent, make any disclosure of confidential information
now or hereafter possessed by the Parent or the Company to any person,
partnership, corporation or entity either during or after the term hereunder,
except to employees of the Parent or the Company or their subsidiaries or
affiliates and to others within or without the Parent or the Company as the
Executive may deem necessary in order to conduct the Parent's or the Company's
business and except as may be required pursuant to any court order, judgment or
decision from any court of competent jurisdiction. The foregoing shall not apply
to information which is in the public domain on the date hereof; which, after it
is disclosed to Executive by the Parent or the Company, is published or becomes
part of the public domain through no fault of Executive; which is known to
Executive prior to disclosure thereof to him by the Parent or the Company as
evidenced by his written records; or, after Executive is no longer employed by
the Parent and the Company, which is thereafter disclosed to Executive in good
faith by a third party which is not under any obligation of confidence or
secrecy to the Parent or the Company with respect to such
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information at the time of disclosure to him. The provisions of this Section 6
shall continue in full force and effect notwithstanding any lawful termination
of Executive's employment under this Agreement for a period of six months
following said termination of employment.
(B) Except in the ordinary course of his duties as Chairman of the Board
of Directors and Chief Executive Officer, or in the furtherance of the business
of the Parent or the Company, during the period from the date of this Agreement
until one (1) year following the date on which his employment with the Parent
and the Company is lawfully and properly terminated, Executive will not,
directly or indirectly:
(i) persuade or attempt to persuade any person or entity which is or
was a customer, client or supplier of the Parent or the Company on the
date on which Executive's employment with the Company is terminated to
cease doing business with the Parent or the Company, or to reduce the
amount of business it does with the Parent or the Company;
(ii) solicit for himself or any other person or entity other than the
Parent or the Company the business of any person or entity which is a
customer or client of the Parent or the Company, or was a customer or
client within six (6) months prior to the termination of his employment by
the Parent or the Company, with respect to the distribution of roofing
supplies and related products; or
(iii) persuade or attempt to persuade any employee of the Parent or the
Company, or any individual who was an employee of the Parent or the
Company during the six (6) month period prior to the lawful and proper
termination of this Agreement, to leave Parent's or the Company's employ,
or to become employed by any person or entity other than the Parent or the
Company.
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(C) Executive acknowledges that the restrictive covenants (the
"Restrictive Covenants") contained in this Section 6 are a condition of his
employment and are reasonable and valid in geographical and temporal scope and
in all other respects. If any court determines that any of the Restrictive
Covenants, or any part of any of the Restrictive Covenants, is invalid or
unenforceable, the remainder of the Restrictive Covenants and parts thereof
shall not thereby be affected and shall be given full effect, without regard to
the invalid portion. If any court determines that any of the Restrictive
Covenants, or any part thereof, is invalid or unenforceable because of the
geographic or temporal scope of such provision, such court shall have the power
to reduce the geographic or temporal scope of such provision, as the case may
be, and, in its reduced form, such provision shall then be enforceable.
(D) If Executive breaches, or threatens to breach, any of the Restrictive
Covenants, the Parent, in addition to and not in lieu of any other rights and
remedies it may have at law or in equity, shall have the right to injunctive
relief; it being acknowledged and agreed to by Executive that any such breach or
threatened breach would cause irreparable and continuing injury to the Parent or
the Company and that money damages would not provide an adequate remedy to the
Parent or the Company.
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7. Termination:
(A) Death: In the event of Executive's death ("Death") during the term of
his employment, Executive's designated beneficiary(ies), or in the absence of
such beneficiary designation, his estate shall be entitled to payment of
Executive's salary from date of Death to the expiration of one (1) year
thereafter. In addition, Executive's beneficiary(ies) and/or dependents shall be
entitled, for the same one year period, to continuation, at the Parent's or the
Company's expense, of such benefits as are then being provided to them under
Section 5(A) hereof, and any additional benefits as may be provided to
dependents of the Parent's or the Company's executive officers in accordance
with the terms of the Parent's or the Company's policies and practices. In
addition, any options granted to Executive which have not, by the terms of the
options, vested shall be deemed to have vested as of the date of his Death and
shall thereafter be exercisable by Executive's beneficiary(ies) or estate for
the maximum period of time allowed for exercise thereof under the terms of such
options.
(B) Disability:
(a) In the event Executive, by reason of physical or mental incapacity,
shall be disabled ("Disability") for a period of at least six (6) consecutive
months, the Parent shall have the option at any time thereafter to terminate
Executive's employment hereunder for Disability. Such termination will be
effective
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thirty (30) days after the Board of Directors of Parent gives written notice of
such termination to Executive, unless Executive shall have returned to the
performance of his duties prior to the effective date of the notice. All
obligations of the Parent or the Company hereunder shall cease upon the
effectiveness of such termination, provided that such termination shall not
affect or impair any rights Executive may have under any policy of long term
disability insurance or benefits then maintained on his behalf by the Parent or
the Company. In addition, for a period of one (1) year following termination of
Executive's employment for Disability, Executive and his dependents, as the case
may be, shall continue to receive the benefits set forth under Section 3(A) and
5(A) hereof, less any benefits received by the Executive and his dependents
under any long term disability insurance policy during such one (1) year period,
as well as such benefits as are extended to the Parent's and the Company's
active executive employees and their dependents during such period. Any options
granted to the Executive which have not, by the terms of the options, vested
shall be deemed to have vested at the termination and shall thereafter be
exercisable by the Executive, his beneficiary(ies), conservator or estate, as
applicable, for the maximum period of time allowed for exercise thereof under
the terms of such options.
(b) "Incapacity" as used herein shall mean the inability of the Executive
due to physical or mental illness, injury or disease substantially to perform
his normal duties as Chairman of the Board
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of Directors and Chief Executive Officer. Executive's salary as provided for
hereunder shall continue to be paid during any period of incapacity prior to and
including the date on which Executive's employment is terminated for Disability
and for one (1) year following termination for Disability in accordance with
Section 7(B)(a).
(C) By The Parent For Cause:
(a) The Parent shall have the right, before the expiration of the term of
this Agreement, to terminate this Agreement and to discharge Executive for cause
(hereinafter "Cause"), and all compensation to Executive shall cease to accrue
upon discharge of Executive for Cause. For the purposes of this Agreement, the
term "Cause" shall mean (i) Executive's conviction, after the date hereof, of a
felony; (ii) the alcoholism or drug addiction of Executive; (iii) gross
negligence or willful misconduct of Executive in connection with his duties
hereunder; (iv) the determination by any regulatory or judicial authority
(including any securities self-regulatory organization) that Executive directly
violated, before or after the date hereof, any federal or state securities law,
any rule or regulation adopted thereunder; or (v) the continued and willful
failure by Executive substantially and materially to perform his material duties
hereunder.
(b) If the Parent elects to terminate Executive's employment for Cause
under Section 7(C)(a) above, such termination shall be effective fifteen (15)
days after the Parent gives written notice
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of such termination to Executive. In the event of a termination of Executive's
employment for Cause in accordance with the provisions of Section 7(C)(a), the
Parent and the Company shall have no further obligation to the Executive, except
for the payment of all compensation and other vested benefits which have accrued
through the date of such termination and not paid and any other benefits to
which he or his dependents may be entitled by law.
(D) By Executive for Reason:
Executive shall have the right to terminate his employment at any time for
"reason" (herein designated and referred to as "Reason"). The term Reason shall
mean (i) the failure to elect or appoint, or re-elect or re-appoint, Executive
to, or removal or improperly attempted removal of Executive from, his positions
as Chairman of the Board of Directors or Chief Executive Officer with the Parent
or the Company, except in connection with the proper termination of Executive's
employment by reason of Cause, Death or Disability; (ii) a reduction in
Executive's overall compensation other than his discretionary bonus under
Section 3(B) above or an adverse change in the nature or scope of the
authorities, powers, functions or duties normally attached to the Executive's
position with the Parent or the Company; (iii) the Parent's or the Company's
failure or refusal to perform any obligations required to be performed in
accordance with this Agreement after a reasonable notice and an opportunity to
cure same; or (iv) a Change in Control of the Company, as defined herein.
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(E) Severance: (a) In the event Executive's employment hereunder shall be
terminated by the Executive for Reason or by the Parent or the Company for other
than Cause, Death or Disability: (1) the Executive shall thereupon receive as
severance pay in a lump sum the amount of salary and bonuses which the Executive
would have received for the remaining term of this Agreement had there been no
termination, provided however, that in no event shall such lump sum payment be
less than one year's salary and bonus; and (2) the Executive's (and his
dependents') participation in any and all life, disability, medical and dental
insurance plans shall be continued, or equivalent benefits provided to him or
them by the Parent or the Company, at no cost to him or them, for a period of
two years from such termination; and (3) any options granted to Executive which
have not, by the terms of the options, vested shall be deemed to have vested at
the termination and shall thereafter be exercisable for the maximum period of
time allowed for exercise thereof under the terms of such options;
(b) an election by Executive to terminate his employment under the
provisions of this Section 7 shall not be deemed a voluntary termination of
employment of Executive for the purpose of interrupting the provisions of any of
the Parent's or the Company's employee benefit plans, programs or policies.
(F) Resignation: In the event Executive resigns without Reason prior to
the expiration hereof, he shall receive any unpaid fixed salary through such
resignation date and such benefits to
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which he is entitled by law.
(G) Extension of Benefits: Any extension of benefits following the
termination of employment provided for herein shall be deemed to be in addition
to, and not in lieu of, any period for the continuation of benefits provided for
by law, either at the Parent's, the Company's, Executive's or his dependents'
expense.
(H) Change in Control: For purposes hereof, a Change in Control shall be
deemed to have occurred (i) if there has occurred a "change in control" as such
term is used in Item 1 (a) of Form 8- K promulgated under the Securities
Exchange Act of 1934, as amended("Exchange Act") or (ii) if there has occurred a
change in control as the term "control" is defined in Rule 12b-2 promulgated
under the Exchange Act.
8. Indemnification: The Parent and the Company hereby indemnify and hold
Executive harmless to the extent of any and all claims, suits, proceedings,
damages, losses or liabilities incurred by Executive and arising out of any acts
or decisions done or made in the authorized scope of his employment hereunder.
The Parent and the Company hereby agree to pay all expenses, including
reasonable attorney's fees, actually incurred by Executive in connection with
the investigation of any such matter, the defense of any such action, suit or
proceeding and in connection with any appeal thereon including the costs of
settlements. Nothing contained herein shall entitle Executive to indemnification
by the Parent or the Company in excess of that permitted under applicable
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law.
9. Waiver: No delay or omission to exercise any right, power or remedy
accruing to any party hereto shall impair any such right, power or remedy or
shall be construed to be a waiver of or an acquiescence to any breach hereof. No
waiver of any breach hereof shall be deemed to be a waiver of any other breach
hereof theretofore or thereafter occurring. Any waiver of any provision hereof
shall be effective only to the extent specifically set forth in an applicable
writing. All remedies afforded to any party under this Agreement, by law or
otherwise, shall be cumulative and not alternative and shall not preclude
assertion by such party of any other rights or the seeking of any other rights
or remedies against any other party.
10. Governing Law: The validity of this Agreement or of any of the
provisions hereof shall be determined under and according to the laws of the
State of New York, and this Agreement and its provisions shall be construed
according to the laws of the State of New York, without regard to the principles
of conflicts of law and the actual domiciles of the parties hereto.
11. Notices: All notices, demands or other communications required or
permitted to be given in connection with this Agreement shall be given in
writing, shall be transmitted to the appropriate party by hand delivery, by
certified mail, return receipt requested, postage prepaid or by overnight
courier and shall be addressed to a party at such party's address shown on the
first page hereof.
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A party may designate by written notice given to the other parties a new address
to which any notice, demand or other communication hereunder shall thereafter be
given. Each notice, demand or other communication transmitted in the manner
described in this Section 11 shall be deemed to have been given and received for
all purposes at the time it shall have been (i) delivered to the addressee as
indicated by the return receipt (if transmitted by mail), the affidavit of the
messenger (if transmitted by hand delivery or overnight courier) or (ii)
presented for delivery during normal business hours, if such delivery shall not
have been accepted for any reason.
12. Assignments: This Agreement shall be binding upon and inure to the
benefit of the parties and each of their respective successors, assigns, heirs
and legal representatives; provided, however, that Executive may not assign or
delegate his obligations, responsibilities and duties hereunder except as
permitted by the Parent's or the Company's By-Laws, custom, practice, policies
or the respective Board of Directors. Neither the Parent nor the Company may
assign this Agreement without the prior written consent of the Executive.
13. Miscellaneous: This Agreement contains the entire understanding
among the parties hereto and supersedes all other oral and written agreements or
understandings among them with respect to the subject matter hereof. No
modification or addition hereto or waiver or cancellation of any provision shall
be valid except by a
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writing signed by the party to be charged therewith.
14. Obligations of a Continuing Nature: It is expressly
understood and agreed that the covenants, agreements and restrictions undertaken
by or imposed on Executive, the Parent and the Company hereunder, which are
stated to exist or continue after termination of Executive's employment with the
Parent or the Company, shall exist and continue irrespective of the method or
circumstances of such termination for the respective periods of time set forth
herein.
15. Severability: The parties agree that if any of the covenants,
agreements or restrictions contained herein are held to be invalid by any court
of competent jurisdiction, the remainder of the other covenants, agreements,
restrictions and parts thereof herein contained shall be severable so not to
invalidate any others, and such other covenants, agreements, restrictions and
parts thereof shall be given full effect without regard to the invalid covenant,
agreement, restriction or part thereof.
16. Venue: Jurisdiction: The Parent, the Company and the Executive hereby
agree that any action, proceeding or claim against any of them arising out of or
relating in any way to this Agreement shall be brought and enforced in any of
the courts of the State of New York in New York County, New York, or the United
States District Court for the Southern District of New York, and irrevocably
submit to such jurisdiction. The Parent, the Company and the Executive hereby
waive any objection to such jurisdiction
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and that such courts represent an inconvenient forum. The Parent, the Company
and the Executive hereby waive the right to a trial by jury in any action,
proceeding or claim against any of them arising out of or relating in any way to
this Agreement. Any process or summons to be served upon the Parent, the Company
or the Executive may be served by transmitting a copy thereof by registered or
certified mail, return receipt requested, postage prepaid, addressed to their
respective addresses set forth in the initial paragraph of this Agreement or
such other address as a party may so notify the other parties hereto in the
manner provided by Section 11 hereof. Such mailing shall be deemed personal
service and shall be legal and binding upon the Parent, the Company and the
Executive in any action, proceeding or claim.
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IN WITNESS WHEREOF, the parties have duly executed this Agreement as of
the day and year first above written.
EAGLE SUPPLY GROUP, INC.
By: ______________________________
Frederick M. Friedman,
Executive Vice President
EAGLE SUPPLY, INC.
By: _____________________________
Frederick M. Friedman,
Executive Vice President
-------------------------------
Douglas P. Fields, Executive
ACKNOWLEDGED, CONSENTED TO AND
APPROVED:
TDA INDUSTRIES, INC.
By: ______________________________
Frederick M. Friedman,
Executive Vice President
PEMBERTON SERVICES CORP.
By: _____________________________
Frederick M. Friedman,
Executive Vice President
19
Exhibit 10.3
EMPLOYMENT AGREEMENT
FREDERICK M. FREIDMAN
AGREEMENT, dated as of the _____ day of __________, 1996, among Eagle
Supply, Inc., a Florida corporation, having a place of business at 1451
Channelside Drive, Tampa, Florida 33629 (the "Company"), Eagle Supply Group,
Inc., a Delaware corporation having an office located at 122 East 42nd Street,
New York, New York 10168 (the "Parent"), and Frederick M. Freidman, an
individual residing at 911 Park Avenue, New York, New York 10028 (the
"Executive").
WHEREAS, the Company is principally engaged in the business of
the distribution of roofing supplies and related products; and
WHEREAS, the Parent is principally engaged in the business of seeking
acquisition candidates engaged in the wholesale distribution of roofing supplies
and related products and vendors or suppliers to such distribution businesses
and businesses related thereto; and
WHEREAS, all of the issued and outstanding securities of the
Company are being purchased by Parent (the "Acquisition"); and
WHEREAS, the Company desires to employ the Executive as its
Executive Vice President, Secretary and Treasurer; and
WHEREAS, Parent desires to employ the Executive as its
Executive Vice President, Secretary and Treasurer; and
WHEREAS, Parent and Company acknowledge that Executive is a party to an
employment agreement with TDA Industries, Inc. ("TDA") which has been assumed by
Pemberton Services Corporation ("PSC"); and
<PAGE>
WHEREAS, Executive is willing to accept such employment by the Parent and
Company, all in accordance with the conditions and other provisions hereinafter
set forth and the acknowledgment, approval and consent of TDA and PSC as
indicated by their acknowledgment, approval and consent as set forth at the foot
of this Agreement; and
NOW, THEREFORE, in consideration of the promises and mutual
representations, covenants, and agreements set forth herein, and for other good
and valuable consideration, the receipt and sufficiency of which is hereby
acknowledged, the parties hereto agree effective upon the consummation of the
Acquisition as follows:
1. Term: Subject to and conditioned upon TDA's and PSC's acknowledgment,
approval and consent to Executive in entering into this Agreement and TDA's and
PSC's acknowledgement that this agreement shall not be deemed to be a violation
of any of the terms and conditions of Executive's agreements with TDA and PSC,
the term of this Agreement shall be for a period of five (5) years commencing on
the consummation of the Acquisition and terminating on the fifth anniversary
date of the consummation of the Acquisition, subject to earlier termination as
provided herein or unless extended by mutual consent of the parties.
2. Employment: (A) Subject to the terms and conditions and for the
compensation hereinafter set forth, the Parent and the Company hereby agree to
employ Executive for and during the term of
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this Agreement. Executive is hereby employed by the Parent and the Company as
the Executive Vice President, Secretary and Treasurer of each. The Executive's
powers and duties shall be those of an executive nature which are appropriate
for a Executive Vice President, Secretary and Treasurer in accordance with the
Parent's and Company's respective By-Laws; and Executive does hereby accept such
employment or greater employment as may be mutually agreed upon by the parties
hereto and agrees to devote as much time to the affairs of the Parent and the
Company as Executive deems necessary to discharge his duties to them during the
term of this Agreement. Executive shall report to the Boards of Directors of the
Parent and the Company. Neither the Parent nor the Company shall require
Executive to be employed in any location other than in proximity to his
residence unless he consents in writing to such location.
(B) During the term of this Agreement, Executive shall be furnished with
office space and facilities commensurate with his position and adequate for the
performance of his duties; he shall be provided with the perquisites customarily
associated with the positions of Executive Vice President, Secretary and
Treasurer of the Parent and the Company.
(C) During the term of this Agreement, the Parent shall be responsible (i)
to pay to Executive the compensation set forth in Section 3; (ii) reimburse
Executive for expenses as provided in Section 4; and (iii) provide Executive
with the benefits and vacation set forth in Section 5. In the event the Parent
fails to
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perform any of its obligations under Sections 3, 4, 5, 7, or any other Section
of this Agreement, the Company shall be so obligated.
(D) The executive agrees to submit to any medical examination(s) and
provide any information and documents reasonably necessary for the Parent or the
Company to obtain any insurance required by this Agreement and "Key Man" life
insurance on the Executive's life.
3. Compensation:
(A) Salary: During the term of this Agreement, the Parent agrees to pay
Executive, and Executive agrees to accept, an annual salary of not less than Two
Hundred Thousand Dollars ($200,000) per year, payable in accordance with the
Parent's policies, for services rendered by Executive hereunder.
(B) Bonus: As additional compensation, the Parent may pay Executive a
periodic bonus as determined by the Board of Directors.
(C) Increases: The annual salary is subject to periodic increases at the
discretion of the Board of Directors with such increases to take effect no later
than on each anniversary date of this Agreement.
4. Expenses: The Parent shall reimburse Executive for all reasonable and
actual business expenses incurred by him in connection with his service to the
Parent and the Company, upon submission by him of appropriate vouchers and
expense account reports.
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5. Benefits:
(A) Insurance: In addition to the salary and bonus to be paid to Executive
hereunder, the Parent shall maintain family medical and dental insurance, life
insurance in the amount of not less than Fifty Thousand Dollars ($50,000) on the
life of Executive and for which Executive shall designate the beneficiary(ies),
and long term disability insurance providing monthly disability benefits to
Executive of not less than Five Thousand Dollars ($5,000). Executive and his
dependents shall be entitled to participate in such other benefits as are
extended to active executive employees of the Parent or the Company and their
dependents including but not limited to pension, retirement, profit-sharing,
401(k), stock option, bonus and incentive plans, group insurance,
hospitalization, medical or other benefits made available by the Parent or the
Company to their employees generally.
(B) Vacation: Executive shall be entitled to take up to four (4) weeks of
paid vacation annually at a time mutually convenient to the Parent, Company and
Executive.
6. Restrictive Covenants: (A) Executive recognizes and acknowledges that
the Parent and the Company, through the expenditure of considerable time and
money, have developed and will continue to develop in the future information
concerning customers, clients, marketing, business and operational methods of
the Parent and the Company and their customers or clients, contracts, financial
or other data, technical data or any other confidential
5
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or proprietary information possessed, owned or used by the Parent or the
Company, and that the same are confidential and proprietary, and are
"confidential information" of the Parent and the Company. In consideration of
his employment by the Parent and the Company hereunder, Executive agrees that he
will not, without the consent of the Board of Directors of Parent, make any
disclosure of confidential information now or hereafter possessed by the Parent
or the Company to any person, partnership, corporation or entity either during
or after the term hereunder, except to employees of the Parent or the Company or
their subsidiaries or affiliates and to others within or without the Parent or
the Company as the Executive may deem necessary in order to conduct the Parent's
or the Company's business and except as may be required pursuant to any court
order, judgment or decision from any court of competent jurisdiction. The
foregoing shall not apply to information which is in the public domain on the
date hereof; which, after it is disclosed to Executive by the Parent or the
Company, is published or becomes part of the public domain through no fault of
Executive; which is known to Executive prior to disclosure thereof to him by the
Parent or the Company as evidenced by his written records; or, after Executive
is no longer employed by the Parent and the Company, which is thereafter
disclosed to Executive in good faith by a third party which is not under any
obligation of confidence or secrecy to the Parent or the Company with respect to
such information at the time of disclosure to him. The provisions of
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this Section 6 shall continue in full force and effect notwithstanding any
lawful termination of Executive's employment under this Agreement for a period
of six months following said termination of employment.
(B) Except in the ordinary course of his duties as Executive Vice
President, Secretary and Treasurer, or in the furtherance of the business of the
Parent or the Company, during the period from the date of this Agreement until
one (1) year following the date on which his employment with the Parent and the
Company is lawfully and properly terminated, Executive will not, directly or
indirectly:
(i) persuade or attempt to persuade any person or entity which is or
was a customer, client or supplier of the Parent or the Company on the
date on which Executive's employment with the Company is terminated to
cease doing business with the Parent or the Company, or to reduce the
amount of business it does with the Parent or the Company;
(ii) solicit for himself or any other person or entity other than
the Parent or the Company the business of any person or entity which is a
customer or client of the Parent or the Company, or was a customer or
client within six (6) months prior to the termination of his employment by
the Parent or the Company, with respect to the distribution of roofing
supplies and related products; or
(iii) persuade or attempt to persuade any employee of the Parent or
the Company, or any individual who was an employee of the Parent or the
Company during the six (6) month period prior to the lawful and proper
termination of this Agreement, to leave Parent's or the Company's employ,
or to become employed by any person or entity other than the Parent or the
Company.
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(C) Executive acknowledges that the restrictive covenants (the
"Restrictive Covenants") contained in this Section 6 are a condition of his
employment and are reasonable and valid in geographical and temporal scope and
in all other respects. If any court determines that any of the Restrictive
Covenants, or any part of any of the Restrictive Covenants, is invalid or
unenforceable, the remainder of the Restrictive Covenants and parts thereof
shall not thereby be affected and shall be given full effect, without regard to
the invalid portion. If any court determines that any of the Restrictive
Covenants, or any part thereof, is invalid or unenforceable because of the
geographic or temporal scope of such provision, such court shall have the power
to reduce the geographic or temporal scope of such provision, as the case may
be, and, in its reduced form, such provision shall then be enforceable.
(D) If Executive breaches, or threatens to breach, any of the Restrictive
Covenants, the Parent, in addition to and not in lieu of any other rights and
remedies it may have at law or in equity, shall have the right to injunctive
relief; it being acknowledged and agreed to by Executive that any such breach or
threatened breach would cause irreparable and continuing injury to the Parent or
the Company and that money damages would not provide an adequate remedy to the
Parent or the Company.
8
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7. Termination:
(A) Death: In the event of Executive's death ("Death") during the term of
his employment, Executive's designated beneficiary(ies), or in the absence of
such beneficiary designation, his estate shall be entitled to payment of
Executive's salary from date of Death to the expiration of one (1) year
thereafter. In addition, Executive's beneficiary(ies) and/or dependents shall be
entitled, for the same one year period, to continuation, at the Parent's or the
Company's expense, of such benefits as are then being provided to them under
Section 5(A) hereof, and any additional benefits as may be provided to
dependents of the Parent's or the Company's executive officers in accordance
with the terms of the Parent's or the Company's policies and practices. In
addition, any options granted to Executive which have not, by the terms of the
options, vested shall be deemed to have vested as of the date of his Death and
shall thereafter be exercisable by Executive's beneficiary(ies) or estate for
the maximum period of time allowed for exercise thereof under the terms of such
options.
(B) Disability:
(a) In the event Executive, by reason of physical or mental incapacity,
shall be disabled ("Disability") for a period of at least six (6) consecutive
months, the Parent shall have the option at any time thereafter to terminate
Executive's employment hereunder for Disability. Such termination will be
effective thirty
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<PAGE>
(30) days after the Board of Directors of Parent gives written notice of such
termination to Executive, unless Executive shall have returned to the
performance of his duties prior to the effective date of the notice. All
obligations of the Parent or the Company hereunder shall cease upon the
effectiveness of such termination, provided that such termination shall not
affect or impair any rights Executive may have under any policy of long term
disability insurance or benefits then maintained on his behalf by the Parent or
the Company. In addition, for a period of one (1) year following termination of
Executive's employment for Disability, Executive and his dependents, as the case
may be, shall continue to receive the benefits set forth under Section 3(A) and
5(A) hereof, less any benefits received by the Executive and his dependents
under any long term disability insurance policy during such one (1) year period,
as well as such benefits as are extended to the Parent's and the Company's
active executive employees and their dependents during such period. Any options
granted to the Executive which have not, by the terms of the options, vested
shall be deemed to have vested at the termination and shall thereafter be
exercisable by the Executive, his beneficiary(ies), conservator or estate, as
applicable, for the maximum period of time allowed for exercise thereof under
the terms of such options.
(b) "Incapacity" as used herein shall mean the inability of the Executive
due to physical or mental illness, injury or disease substantially to perform
his normal duties as Executive Vice
10
<PAGE>
President, Secretary and Treasurer. Executive's salary as provided for hereunder
shall continue to be paid during any period of incapacity prior to and including
the date on which Executive's employment is terminated for Disability and for
one (1) year following termination for Disability in accordance with Section
7(B)(a).
(C) By The Parent For Cause:
(a) The Parent shall have the right, before the expiration of the term of
this Agreement, to terminate this Agreement and to discharge Executive for cause
(hereinafter "Cause"), and all compensation to Executive shall cease to accrue
upon discharge of Executive for Cause. For the purposes of this Agreement, the
term "Cause" shall mean (i) Executive's conviction, after the date hereof, of a
felony; (ii) the alcoholism or drug addiction of Executive; (iii) gross
negligence or willful misconduct of Executive in connection with his duties
hereunder; (iv) the determination by any regulatory or judicial authority
(including any securities self-regulatory organization) that Executive directly
violated, before or after the date hereof, any federal or state securities law,
any rule or regulation adopted thereunder; or (v) the continued and willful
failure by Executive substantially and materially to perform his material duties
hereunder.
(b) If the Parent elects to terminate Executive's employment for Cause
under Section 7(C)(a) above, such termination shall be effective fifteen (15)
days after the Parent gives written notice
11
<PAGE>
of such termination to Executive. In the event of a termination of Executive's
employment for Cause in accordance with the provisions of Section 7(C)(a), the
Parent and the Company shall have no further obligation to the Executive, except
for the payment of all compensation and other vested benefits which have accrued
through the date of such termination and not paid and any other benefits to
which he or his dependents may be entitled by law.
(D) By Executive for Reason:
Executive shall have the right to terminate his employment at any time for
"reason" (herein designated and referred to as "Reason"). The term Reason shall
mean (i) the failure to elect or appoint, or re-elect or re-appoint, Executive
to, or removal or improperly attempted removal of Executive from, his positions
as Executive Vice President, Secretary or Treasurer with the Parent or the
Company, except in connection with the proper termination of Executive's
employment by reason of Cause, Death or Disability; (ii) a reduction in
Executive's overall compensation other than his discretionary bonus under
Section 3(B) above or an adverse change in the nature or scope of the
authorities, powers, functions or duties normally attached to the Executive's
position with the Parent or the Company; (iii) the Parent's or the Company's
failure or refusal to perform any obligations required to be performed in
accordance with this Agreement after a reasonable notice and an opportunity to
cure same; or (iv) a Change in Control of the Company, as defined herein.
12
<PAGE>
(E) Severance: (a) In the event Executive's employment hereunder shall be
terminated by the Executive for Reason or by the Parent or the Company for other
than Cause, Death or Disability: (1) the Executive shall thereupon receive as
severance pay in a lump sum the amount of salary and bonuses which the Executive
would have received for the remaining term of this Agreement had there been no
termination, provided however, that in no event shall such lump sum payment be
less than one year's salary and bonus; and (2) the Executive's (and his
dependents') participation in any and all life, disability, medical and dental
insurance plans shall be continued, or equivalent benefits provided to him or
them by the Parent or the Company, at no cost to him or them, for a period of
two years from such termination; and (3) any options granted to Executive which
have not, by the terms of the options, vested shall be deemed to have vested at
the termination and shall thereafter be exercisable for the maximum period of
time allowed for exercise thereof under the terms of such options;
(b) an election by Executive to terminate his employment under the
provisions of this Section 7 shall not be deemed a voluntary termination of
employment of Executive for the purpose of interrupting the provisions of any of
the Parent's or the Company's employee benefit plans, programs or policies.
(F) Resignation: In the event Executive resigns without Reason prior to
the expiration hereof, he shall receive any unpaid
13
<PAGE>
fixed salary through such resignation date and such benefits to which he is
entitled by law.
(G) Extension of Benefits: Any extension of benefits following the
termination of employment provided for herein shall be deemed to be in addition
to, and not in lieu of, any period for the continuation of benefits provided for
by law, either at the Parent's, the Company's, Executive's or his dependents'
expense.
(H) Change in Control: For purposes hereof, a Change in Control shall be
deemed to have occurred (i) if there has occurred a "change in control" as such
term is used in Item 1 (a) of Form 8- K promulgated under the Securities
Exchange Act of 1934, as amended ("Exchange Act") or (ii) if there has occurred
a change in control as the term "control" is defined in Rule 12b-2 promulgated
under the Exchange Act.
8. Indemnification: The Parent and the Company hereby indemnify and hold
Executive harmless to the extent of any and all claims, suits, proceedings,
damages, losses or liabilities incurred by Executive and arising out of any acts
or decisions done or made in the authorized scope of his employment hereunder.
The Parent and the Company hereby agree to pay all expenses, including
reasonable attorney's fees, actually incurred by Executive in connection with
the investigation of any such matter, the defense of any such action, suit or
proceeding and in connection with any appeal thereon including the costs of
settlements. Nothing contained here-
14
<PAGE>
in shall entitle Executive to indemnification by the Parent or the Company in
excess of that permitted under applicable law.
9. Waiver: No delay or omission to exercise any right, power or remedy
accruing to any party hereto shall impair any such right, power or remedy or
shall be construed to be a waiver of or an acquiescence to any breach hereof. No
waiver of any breach hereof shall be deemed to be a waiver of any other breach
hereof theretofore or thereafter occurring. Any waiver of any provision hereof
shall be effective only to the extent specifically set forth in an applicable
writing. All remedies afforded to any party under this Agreement, by law or
otherwise, shall be cumulative and not alternative and shall not preclude
assertion by such party of any other rights or the seeking of any other rights
or remedies against any other party.
10. Governing Law: The validity of this Agreement or of any of the
provisions hereof shall be determined under and according to the laws of the
State of New York, and this Agreement and its provisions shall be construed
according to the laws of the State of New York, without regard to the principles
of conflicts of law and the actual domiciles of the parties hereto.
11. Notices: All notices, demands or other communications
required or permitted to be given in connection with this Agreement
shall be given in writing, shall be transmitted to the appropriate
party by hand delivery, by certified mail, return receipt request-
ed, postage prepaid or by overnight courier and shall be addressed
15
<PAGE>
to a party at such party's address shown on the first page hereof. A party may
designate by written notice given to the other parties a new address to which
any notice, demand or other communication hereunder shall thereafter be given.
Each notice, demand or other communication transmitted in the manner described
in this Section 11 shall be deemed to have been given and received for all
purposes at the time it shall have been (i) delivered to the addressee as
indicated by the return receipt (if transmitted by mail), the affidavit of the
messenger (if transmitted by hand delivery or overnight courier) or (ii)
presented for delivery during normal business hours, if such delivery shall not
have been accepted for any reason.
12. Assignments: This Agreement shall be binding upon and inure to the
benefit of the parties and each of their respective successors, assigns, heirs
and legal representatives; provided, however, that Executive may not assign or
delegate his obligations, responsibilities and duties hereunder except as
permitted by the Parent's or the Company's By-Laws, custom, practice, policies
or the respective Board of Directors. Neither the Parent nor the Company may
assign this Agreement without the prior written consent of the Executive.
13. Miscellaneous: This Agreement contains the entire understanding
among the parties hereto and supersedes all other oral and written agreements or
understandings among them with respect to the subject matter hereof. No
modification or addition hereto or waiver
16
<PAGE>
or cancellation of any provision shall be valid except by a writing signed by
the party to be charged therewith.
14. Obligations of a Continuing Nature: It is expressly understood and
agreed that the covenants, agreements and restrictions undertaken by or imposed
on Executive, the Parent and the Company hereunder, which are stated to exist or
continue after termination of Executive's employment with the Parent or the
Company, shall exist and continue irrespective of the method or circumstances of
such termination for the respective periods of time set forth herein.
15. Severability: The parties agree that if any of the covenants,
agreements or restrictions contained herein are held to be invalid by any court
of competent jurisdiction, the remainder of the other covenants, agreements,
restrictions and parts thereof herein contained shall be severable so not to
invalidate any others, and such other covenants, agreements, restrictions and
parts thereof shall be given full effect without regard to the invalid covenant,
agreement, restriction or part thereof.
16. Venue: Jurisdiction: The Parent, the Company and the Executive hereby
agree that any action, proceeding or claim against any of them arising out of or
relating in any way to this Agreement shall be brought and enforced in any of
the courts of the State of New York in New York County, New York, or the United
States District Court for the Southern District of New York, and irrevocably
submit to such jurisdiction. The Parent, the Company
17
<PAGE>
and the Executive hereby waive any objection to such jurisdiction and that such
courts represent an inconvenient forum. The Parent, the Company and the
Executive hereby waive the right to a trial by jury in any action, proceeding or
claim against any of them arising out of or relating in any way to this
Agreement. Any process or summons to be served upon the Parent, the Company or
the Executive may be served by transmitting a copy thereof by registered or
certified mail, return receipt requested, postage prepaid, addressed to their
respective addresses set forth in the initial paragraph of this Agreement or
such other address as a party may so notify the other parties hereto in the
manner provided by Section 11 hereof. Such mailing shall be deemed personal
service and shall be legal and binding upon the Parent, the Company and the
Executive in any action, proceeding or claim.
IN WITNESS WHEREOF, the parties have duly executed this Agreement as of
the day and year first above written.
EAGLE SUPPLY GROUP, INC.
By: _______________________________
Douglas P. Fields,
Chief Executive Officer
18
<PAGE>
EAGLE SUPPLY, INC.
By: _______________________________
Douglas P. Fields,
Chief Executive Officer
-------------------------------
Frederick M. Freidman,
Executive
ACKNOWLEDGED, CONSENTED TO AND
APPROVED:
TDA INDUSTRIES, INC.
By: _______________________________
Douglas P. Fields,
Chief Executive Officer
PEMBERTON SERVICES CORP.
By: _______________________________
Douglas P. Fields,
Chief Executive Officer
19
Exhibit 10.4
All references herein to the Bank, Central Bank or Central
Bank of the South refer to Compass Bank.
--------------------------------------------------
FILE
UNDER:
--------------------------------------------------
, ALABAMA $
--------------------------------------------------
LOAN
,19 OFFICER
--------------------------------------------------
CENTRAL BANK [LOGO]
PROMISSORY NOTE
1. Promise to Pay
FOR VALUE RECEIVED, this the 20 day of April, 1994, the undersigned,
jointly and severally, if more than one (herein, the "Borrower", whether one or
more), promise to pay to the order of COMPASS BANK (herein called "Bank", or
Bank and any subsequent holder hereof, as applicable, are referred to as the
"Holder"), at the Bank's office or at such other place as Holder may designate
from time to time without grace and in lawful money of the United States of
America, the principal sum of FIVE HUNDRED FIFTY THOUSAND and 00/100 Dollars
($550,000.00), (or if there is more than one advance hereunder, the aggregate
principal amount of all advances by Holder to Borrower pursuant to this Note),
together with interest thereon, all as evidenced by the records of Holder.
Borrower promises to pay principal and interest as set forth in Sections 2 and 3
below. Unless otherwise elected by Holder, all payments shall be applied as
billed by Holder, and if not billed, then first to late and other charges, if
any, payable hereunder or under any Loan Document, then to interest and then to
principal.
2. Payment of Principal (2.4 relates to principal and interest) Principal
shall be paid as follows: (check one)
2.1 |_| On demand.
2.2 |_| ____________ after the date hereof, due on _________, 19__.
2.3 |_| Principal payments shall be made in _________ consecutive
_______________ installments of $______________ each, commencing
_________________, 19__, and a final installment equal to the total
unpaid principal, interest and charges, due and payable in full on
_______________, which date shall be the maturity date of this Note.
2.4 |X| Principal and interest payments shall be made in 59 consecutive
monthly installments of $4,715.82 each, based on a 180 month
amortization schedule, commencing May 20, 1994, and a final
installment equal to the total unpaid principal, interest and
charges due and payable in full on April 20, 2009, which date shall
be the maturity date of this Note.,
3. Interest, Payment of Interest
Interest from date on the outstanding unpaid principal balance shall be
calculated by multiplying the product of the principal amount and the applicable
rate set forth herein by the actual number of days elapsed, and dividing by 360.
"Central Bank Prime", as used herein, is a reference rate established by the
Bank for use in computing and adjusting interest, is subject to increase,
decrease or change at the Bank's discretion, and is only one of the reference
rates or indices that the Bank uses. The Bank may lend to others at rates of
interest at, or greater or less than, Central Bank Prime or the rate provided
herein. In no event shall the rate of interest calculated hereunder exceed the
maximum amount allowed by law. Any principal amounts outstanding hereunder after
maturity shall continue to bear interest at the rate, and calculated in the
manner, set forth herein. The applicable rate hereunder shall be determined and
paid as follows (check one):
3.1 |_| The applicable rate shall be ________%. Interest shall be billed
and paid __________________________________.
3.2 |X| The applicable rate shall be equal to Central Bank Prime from
time to time prevailing at Bank. In no event shall the applicable
rate exceed 99% or be less than 4%. Any change in said rate
resulting from a change in Central Bank Prime shall take effect
immediately. Interest shall be billed and paid monthly as provided
in 2.4 above.
3.3 |_| The applicable rate shall be equal to ________ percentage points
above Central Bank Prime from time to time prevailing Bank. The
applicable rate is subject to adjustment in accordance with the
provisions of this Section 3.3 based on the formula set forth below,
relating (i) the average net usable funds of the non-interest
bearing deposit balances maintained during the preceding _______
months ("Averaging Period") by Borrower with Bank to (ii) the
Borrower's average outstanding loan balance during the Average
Period (herein "Compensation"). The Averaging Period may not be the
immediate preceding _______ month period because of time needed for
computational purposes. Any change in the applicable rate resulting
from a change in Central Bank Prime shall take effect
____________________________.
Interest shall be billed and paid ______________________________. As
used herein, the term "net usable funds" shall mean the investable,
collected funds held by Bank after deducting the reserve
requirements imposed upon Bank and Bank's standard service charges
and other actual charges incurred by Bank with respect to the
account(s). Collected funds are determined and calculated based on
the then current Federal Reserve Bank availability schedules, and,
if not covered thereby, when actually collected. The average net
usable funds shall be reviewed monthly, at which time the applicable
rate will be adjusted in increments of 1/2 (.50) percentage points,
based on Central Bank Prime on the last day of the Averaging Period
pursuant to the following formula. No reduction shall be applicable
when Central Bank Prime on the last day of the Averaging Period is
less than 5%.
<TABLE>
<CAPTION>
Central Bank Prime Compensation Required To Central Bank Prime Compensation Required To
on the Last Day of the Reduce Applicable Rate on the Last Day of the Reduce Applicable Rate
Averaging Period by 1/2 Percentage Point Averaging Period by 1/2 Percentage Point
---------------------- ------------------------- ---------------------- ------------------------
<S> <C> <C> <C> <C>
5% to 5.9% 14% 12% to 12.9% 5%
6% to 6.9% 11% 13% to 14.9% 4.5%
7% to 7.9% 9% 15% to 16.9% 4%
8% to 8.9% 8% 17% to 18.9% 3.5%
9% to 9.9% 7% Greater than 19% 3%
10% to 11.9% 6%
</TABLE>
A minimum of $__________________ in average net usable funds is
required to qualify for any reduction to the applicable rate. If the
greater of (i) this minimum amount, or (ii) an amount of
compensation sufficient to qualify for a 1/2 percentage point rate
reduction has not been satisfied for any three (3) consecutive
monthly review periods, the Bank shall have no further obligations
to make such reviews, and the Borrower thereafter shall not be
entitled to any reduction to the applicable rate.
Rate floor and ceiling
(a) |_| In no event shall the applicable rate under this Section
3.3 exceed ____________% or be less than ______________%. If a
minimum of $___________ in average net usable funds is not
maintained for three (3) consecutive monthly reviews,
thereafter the provisions of paragraph (b) below shall apply
in lieu of the provisions of this paragraph (a).
(b) |_| In no event shall the applicable rate under this Section
3.3 exceed _________% or be less than the greater of
__________ percentage points ______________ Central Bank Prime
or __________%.
3.4 |_| If checked, see Addendum 1 for applicable interest formula and
payment of interest.
4. Security
(Check and complete applicable options) Borrower has given Bank:
4.1 |_| title to and a security interest under the Uniform Commercial
Code of Alabama or other state, as applicable, in the collateral
described in the separate security agreement(s) ("Security
Agreement");
4.2 |X| a mortgage on, or deed of trust, deed to secure debt, or other
lien or interest in real property and improvements ("Mortgage")
4.3 |_| ______________________________________________________________
The Security Agreement, Mortgage, loan agreement and any other Loan
Document evidencing, securing or guaranteeing all or any part of the
indebtedness hereunder are sometimes collectively referred to as "Loan
Documents". Borrower acknowledges having read and understood the Holder's rights
under such separate agreements. References to the Loan Documents and to such
other agreements shall not affect or impair the absolute and unconditional
obligation of the Borrower to pay the principal of and interest on this Note
when due.
To the extent permitted by applicable law, Holder may, but shall not be
required to, apply to or set off against any amount owed under this Note,
without notice to Borrower, any funds, credit or property held by, in transit to
or in possession of, Holder for the account of any Borrower.
5. Purpose of Loan
The purpose of the loan is: to refinance existing indebtedness. The
Borrower represents and warrants to the Bank that this transaction is
exclusively for the business purposes of the Borrower.
6. Prepayment
Prepayments may result in an early maturity date. (check one)
|X| This Note may be prepaid in whole or in part at any time without a
prepayment charge.
|_| This Note may be prepaid __________________________________________
__________________________________________________________________.
Section 7, 8, 9 & 10 appearing on the reverse side are a part of this
Note.
CAUTION - IT IS IMPORTANT THAT YOU THOROUGHLY READ THE CONTRACT BEFORE YOU
SIGN IT.
1301 N. FORTH AVENUE EAGLE SUPPLY, INC.
- --------------------------------------- -----------------------------
Address
TAMPA, FLORIDA 33605 By /s/ , as V.P.
- --------------------------------------- -----------------------------
Its Vice President
(813) 248-4911
- ---------------------------------------- -----------------------------
S.S. No or TAX I.D. No. Phone Number
<PAGE>
All references herein to Central Bank or
Central Bank of the South are references
to Compass Bank.
CENTRAL BANK [LOGO]
FUTURE ADVANCE MORTGAGE,
ASSIGNMENT OR RENTS AND LEASES
AND SECURITY AGREMENTS
(ALABAMA)
STATE OF ALABAMA
COUNTY OF JEFFERSON
THIS INDENTURE (herein this "Mortgage") made this 20th day of April, 1994,
between EAGLE SUPPLY, INC., a ____________________________ (hereinafter called
the "Borrower", whether one or more), Mortgagor, and COMPASS BANK (hereinafter
called "Bank"), Mortgagee.
THIS MORTGAGE IS FILED AS, AND SHALL CONSTITUTE A FIXTURE FILING IN ACCORDANCE
WITH THE PROVISIONS OF SECTION 7-9-402(6) OF THE CODE OF ALABAMA.
check if |_| THIS MORTGAGE IS A "CONSTRUCTION MORTGAGE" AS DEFINED IN
applicable SECTION 7-9-313(1)(C) OF THE CODE OF ALABAMA, AND SECURES,
AMOUNT OTHER OBLIGATIONS, AN OBLIGATION INCURRED FOR THE
CONSTRUCTION OF AN IMPROVEMENT OF LAND
WITNESSETH:
WHEREAS, Borrower is justly indebted to Bank on a loan in the principal
sum of Five Hundred Fifty Thousand AND 00/100 DOLLARS ($550,000.00) (the
"Loan"), or so much as may from time to time be disbursed thereunder, as
evidenced by a promissory note dated April, 1994, payable to Bank with interest
thereon (the "Note") as follows:
check if |_| On _____________, ___________ or such earlier maturity date as
applicable provided in the Note or as provided in any Loan Document as
defined below;
If not checked above, then on demand or as otherwise provided
in the Note; and
WHEREAS, Borrower may hereafter become indebted to Bank or to a subsequent
holder of this Mortgage on loans or otherwise (the Bank and any subsequent
holder of this Mortgage being referred to herein as "Lender"); and
WHEREAS, the parties desire to secure the principal amount of the Note
with interest, and all renewals, extensions and modifications thereof, and all
refinancings of any part of the Note.
NOW, THERFORE, the Borrower, in consideration of making the Loan, and to
secure the prompt payment of same, with the interest thereon, and any
extensions, renewals, modifications and refinancings of same, and any charges
herein incurred by Lender on account of Borrower, including but not limited to
attorney's fees, and any and all Other Indebtedness as set forth above, and
further to secure the performance of the covenants, conditions and agreements
hereinafter set forth and set forth in the Note and set forth in all other
documents evidencing, securing or executed in connection with the Loan,
including, when executed, a loan agreement (the "Loan Documents"), and as may be
set forth in instruments evidencing or securing Other Indebtedness (the "Other
Indebtedness Instruments") has bargained and sold and does hereby grant,
bargain, sell, alien and convey unto the Lender, its successors and assigns, the
following described land, real estate, estates, buildings, improvements,
fixtures, furniture, and personal property (which together with any additional
such property in the possession of the Lender or hereafter acquired by the
Borrower and subject to the lien of this Mortgage, or intended to be so, as the
same may be constituted from time to time is hereinafter sometimes referred to
as the "Mortgaged Property") to-wit:
(a) All that tract or parcel or parcels of land and estates particularly
described in Exhibit A attached hereto and made a part hereof (the
"Land");
(b) All buildings, structures, and improvements of every nature
whatsoever nor or hereafter situated on the Land, and all fixtures
and fittings, building materials, machinery and equipment that
constitute fixtures whatsoever now or hereafter owned by the
Borrower and used or intended to be used in connection with or with
the operation of said property, buildings, structures or other
improvements, including all extensions, additions, improvements,
betterments, renewals, substitutions, replacements and accessions to
any of the foregoing, whether such fixtures, fittings, building
materials, machinery, equipment, are actually located on or adjacent
to the Land or not and whether in storage or otherwise wheresoever
the same may be located;
(c) Together with all easements, rights of way, gores of land, streets,
ways, alleys, passages, sewer rights, waters, water courses, water
rights and powers, and all estates, leases, subleases, licenses,
rights, titles, interest, privileges, liabilities, tenements,
hereditaments, and appurtenances whatsoever, in any way belonging,
relating or appertaining to any of the property hereinabove
described, or which hereafter shall in any way belong, relate or be
appurtenant thereto, whether now owned or hereafter acquired by the
Borrower, and
- --------------------------------------------------------------------------------
LOAN NO.________________ THIS INSTRUMENT ________________________
PREPARED BY: ________________________
________________________
____ /33-2265 (5/89) ________________________
- --------------------------------------------------------------------------------
<PAGE>
the reversion and reversions, rents, issues and profits thereof, and
all the estate, right, title, interest, property, possession, claim
and demand whatsoever at law, as well as in equity, of the Borrower
of, in and to the same, including but not limited to:
(i) All rents, royalties, profits, issues and revenues of the
Mortgaged Property from time to time accruing, whether under
leases or tenancies now existing or hereafter created; and
(ii) All judgments, awards of damages and settlements hereafter
made resulting from condemnation proceedings of the taking of
the Mortgaged Property or any part thereof under the power of
eminent domain, or for any damage (whether caused by such
taking or otherwise) to the Mortgaged Property or the
improvements thereon or any part thereof, or to any rights
appurtenant thereto, including any award for change of grade
or streets. Lender is hereby authorized on behalf of and in
the name of Borrower to execute and deliver valid acquittances
for, and appeal from, any such judgments or awards. Lender may
apply all such sums or any part thereof so received, after the
payment of all its expenses, including costs and attorneys'
fees, on any of the indebtedness secured hereby in such manner
as it elects or, at its option, the entire amount or any part
thereof so received may be released.
(d) All cash proceeds and all products of any of the foregoing items or
types of property described in (a), (b) or (c) above, including, but
not limited to, all insurance, contract and tort proceeds and
claims.
TO HAVE AND TO HOLD the Mortgaged Property and all parts thereof unto the
Lender, its successors and assigns forever, subject however to the terms and
conditions herein;
PROVIDED HOWEVER, that these presents are upon the condition that, if the
Borrower shall fully pay or cause to be fully paid to the Lender the principal
and interest payable in respect to the Note, and any extensions, renewals,
modifications and refinancings of same, at the times and in the manner
stipulated therein and herein, all without any deduction or credit for taxes or
other similar charges paid by the Borrower, and shall pay all charges incurred
herein by Lender on account of Borrower, including, but not limited to,
attorneys' fees, and shall pay any and all Other Indebtedness, and shall keep,
perform and observe all and singular the covenants, conditions and agreements in
this Mortgage, in the Note, in the Loan Documents, and in the Other Indebtedness
Instruments expressed to be kept, performed, and observed by or on the part of
the Borrower, all without fraud or delay, then this Mortgage, and all the
properties, interest and rights hereby granted, bargained, sold and conveyed
shall cease, terminate and be void, but shall otherwise remain in full force and
effect.
AND the Borrower further represents, warrants, covenants and agrees with
the Lender as follows:
ARTICLE I
GENERAL
1.01 Performance of Mortgage, Note and Loan Documents. The Borrower shall
perform, observe and comply with all provisions hereof, and of the Note, and of
the Loan Documents, and of the Other Indebtedness Instruments, and shall duly
and punctually pay to the Lender the sum of money expressed in the Note, with
interest thereon,, and all other sums required to be paid by the Borrower
pursuant to the provisions of this Mortgage, of the Note, of the Loan Documents,
and of the Other Indebtedness Instruments, all without any deductions or credit
for taxes or other similar charges paid by the Borrower.
1.02 Warranty of Title. Borrower hereby warrants that, subject to any
exceptions described on Exhibit A, it is lawfully seized of an indefeasible
estate in fee simple in the land and real property hereby Mortgaged, or is
lawfully seized of such other estate or interest as is described on Exhibit A
hereto, and has good and absolute title to all existing personal property hereby
granted as security, and has good right, full power and lawful authority to
sell, convey, mortgage and grant a security interest in the same in the manner
and form aforesaid; that the same is free and clear of all grants,
reservations, security interests, liens, charges, and encumbrances whatsoever,
including, as to the personal property and fixtures, conditional sales
contracts, chattel mortgages, security agreements, financing statements, and
anything of a similar nature, and that Borrower shall and will warrant and
forever defend the title thereto and the quite use and enjoyment thereof unto
the Lender, its successors and assigns, against the lawful claims of all persons
whomsoever.
1.03 Further Advances, Revolving and Open-End Loans, and Other Debts. It
is expressly understood that this Mortgage is intended to and does secure not
only the Loan, but also future advances and any and all Other Indebtedness,
obligations and liabilities, direct or contingent, of the Borrower to the
Lender, whether now existing or hereafter arising, and any and all extensions,
renewals, modifications and refinancings of same, of any part thereof, existing
at any time before actual cancellation of this instrument on the probate records
of the county or counties where the Mortgaged Property is located, and whether
the same be evidenced by note, open account, assignment, endorsement, guaranty,
pledge or otherwise. The Loan and the Other Indebtedness may, if provided in the
applicable loan instruments, provide for revolving or open-end loans and
advances, all of which shall be secured by this Mortgage.
Page 2
<PAGE>
1.05 Other Taxes, Utilities and Liens.
(a) The Borrower shall pay promptly, when and as due, and, if requested,
will exhibit promptly to the Lender receipts for the payment of all taxes,
assessments, water rates, utility charges, dues, charges, fines, penalties,
costs and other expenses incurred, and impositions of every nature whatsoever
imposed, levied or assessed or to be imposed, levied or assessed upon or against
the Mortgaged Property or any part thereof or upon the revenues, rents, issues
and profits of the Mortgaged Property or arising in respect of the occupancy,
use or possession thereof, or upon the interest of the Lender in the Mortgaged
Property (other than any of the same for which provisions has been made in
paragraph 1.04 of this Article I), or any charge which, if unpaid, would become
a lien or charge upon the Mortgaged Property.
(b) The Borrower promptly shall pay and shall not suffer any mechanic's,
laborer's, statutory or other lien to be created or to remain outstanding upon
any of the Mortgaged Property.
(c) In the event of the passage of any state, federal, municipal or other
governmental law, order, rule or regulation, subsequent to the date hereof, in
any manner changing or modifying the laws now in force governing the taxation of
mortgages or debts secured by mortgages or the manner of collecting taxes, then
Borrower immediately shall pay any increased taxes if allowed by law, and if
Borrower fails to pay such additional taxes, or if Borrower is prohibited from
paying such taxes, or if Lender in any way is adversely affected by such law,
order, rule or regulation, then in any of such events, all indebtedness secured
by this Mortgage and all interest accrued thereon shall without notice become
due and payable forthwith at the option of the Lender.
1.06 Insurance.
(a) The Borrower shall procure for, deliver to, and maintain for the
benefit of the Lender during the terms of this Mortgage insurance policies in
such amounts as the Lender shall require, insuring the Mortgaged Property
against fire, extended coverage, war damage (if available), and such other
insurable hazards, casualties and contingencies as the Lender may require. The
form of such policies and the companies issuing them shall be acceptable to the
Lender, and, unless otherwise agreed by the Lender in writing, shall provide for
coverage without coinsurance or deductibles. All policies shall contain a New
York standard, non-contributory mortgage endorsement making losses payable to
the Lender, as mortgagee. At least fifteen (15) days prior to the expiration
date of all such policies, renewals thereof satisfactory to the Lender shall be
delivered to the Lender. The Borrower shall deliver to the Lender receipts
evidencing the payment of all such insurance policies and renewals. In the event
of the foreclosure of this Mortgage or any transfer of title to the Mortgaged
Property in partial or full extinguishment of the indebtedness secured hereby,
all right, title and interest of the Borrower, or its assigns, in and to all
insurance policies then in force shall pass to the purchase or grantee.
(b) The Lender is hereby authorized and empowered, at its option, to
adjust or compromise any loss under any insurance policies on the Mortgaged
Property, and to collect and receive the proceeds from any such policy or
policies. Each insurance company is hereby authorized and directed to make
payment for all such losses directly to the Lender instead of to the Borrower
and Lender jointly. After deducting from said insurance proceeds any expenses
incurred by Lender in the collection or handling of said funds, the Lender may
apply the net proceeds, at its option, either toward repairing or restoring the
improvements on the Mortgaged Property, or as a credit on any portion of the
Borrower's indebtedness selected by Lender, whether then matured or to mature in
the future, or at the option of the Lender, such sums either wholly or in part
may be used to repair such improvements, or to build new improvements in their
place or for any other purpose and in a manner satisfactory to the Lender, all
without affecting the lien of this Mortgage for the full amount secured hereby
before such payment took place. Lender shall not be liable to Borrower or
otherwise responsible for any failure to collect any insurance proceeds due
under the terms of any policy regardless of the cause of such failure.
1.07 Condemnation. If all or any part of the Mortgaged Property shall be
damaged or taken through condemnation (which term when used in this Mortgage
shall include any damage or taking by any governmental or private authority, and
any transfer by private sale in lieu thereof), either temporarily or
permanently, the entire indebtedness secured hereby shall at the option of the
Lender become immediately due and payable. The Lender shall be entitled to all
compensation, awards, and other payments or relief for any condemnation and is
hereby authorized, at its option, to commence, appear in and prosecute, in its
own or the Borrower's name, any action or proceeding relating to any
condemnation, and to settle or compromise any claim in connection therewith. All
such compensation, awards, damages, claims, rights of action and proceeds and
the right thereto are hereby assigned by the Borrower to the Lender, which,
after deducting therefrom all its expenses, including attorneys' fees, may
release any moneys so received by it without affecting the lien of this Mortgage
or may apply the same in such manner as the Lender shall determine to the
reduction of the indebtedness secured hereby, and any balance of such moneys
then remaining shall be paid to the Borrower. The Borrower agrees to execute
such further assignments of any compensations, awards, damages, claims, rights
of action and proceeds as the Lender may require. The Borrower shall promptly
notify the Lender in the event of the institution of any condemnation or eminent
domain proceeding or in the event of any threat thereof. The Lender shall be
entitled to retain, at the expense of Borrower, its own legal counsel in
connection with any such proceedings or threatened proceedings. Lender shall be
under no obligation to the Borrower or to any other person to determine the
sufficiency or legality of any condemnation award and may accept any such award
without question or further inquiry.
1.08 Care of the Property.
(a) The Borrower will preserve and maintain the Mortgaged Property in good
condition and repair, and will not commit or suffer any waste and will not do or
suffer to be done anything which will increase the risk of fire or other hazard
to the Mortgaged Property or any part thereof.
(b) Except as otherwise provided herein, no buildings, fixtures, personal
property, or other part of the Mortgaged Property shall be removed, demolished
or substantially altered without the prior written consent of the Lender.
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(c) If the Mortgaged Property or any part thereof is damaged by fire or
any other cause, the Borrower will give immediate written notice of the same to
the Lender.
(d) The Lender is hereby authorized to enter upon and inspect the
Mortgaged Property, and to inspect the Borrower's or Borrower's agent's records
with respect to the ownership, use, management and operation of the Mortgaged
Property, at any time during normal business hours.
(e) The Borrower will promptly comply with all present and future laws,
ordinances, rules, regulations, orders and decrees of any governmental authority
affecting the Mortgaged Property or any part thereof.
(f) If all or any part of the Mortgaged Property shall be damaged by fire
or other casualty, the Borrower will promptly restore the Mortgaged Property to
the equivalent of its original condition, regardless of whether or not there
shall be any insurance proceeds therefor; provided, however, that if there are
insurance proceeds, the Borrower shall not be required to restore the Mortgaged
Property as aforesaid unless the Lender shall apply any net proceeds from the
casualty in question and held by Lender, as allowed under Paragraph 1.06, toward
restoring the damaged improvements. If a part of the Mortgaged Property shall be
physically damaged through condemnation, the Borrower will promptly restore,
repair or alter the remaining property in a manner satisfactory to the Lender;
provided, however, that if there are condemnation proceeds or awards, the
Borrower shall not be required to store the Mortgaged Property as aforesaid
unless the Lender shall apply any net proceeds or awards from the condemnation
and held by Lender, as provided in Paragraph 1.07, toward restoring the damaged
improvements.
1.09 Further Assurances; After-Acquired Property.
(a) At any time, and from time to time, upon request by the Lender, the
Borrower, at Borrower's expense, will make, execute and deliver or cause to be
made, executed and delivered to the Lender and, where appropriate, to cause to
be recorded and/or filed and from time to time thereafter to be re-recorded
and/or refiled at such time and in such offices and places as shall be deemed
desirable by the Lender any and all such other and further mortgages,
instruments of further assurance, certificates and other documents as may, in
the opinion of the Lender, be necessary or desirable in order to effectuate,
complete, or perfect, or to continue and preserve the obligation of the Borrower
under the Note and this Mortgage, and the priority of this Mortgage as a first
and prior lien upon all of the Mortgaged Property, whether now owned or
hereafter acquired by the Borrower. Upon any failure by the Borrower so to do,
the Lender may make, execute, and record any and all such mortgages,
instruments, certificates, and documents for and in the name of the Borrower and
the Borrower hereby irrevocably appoints the Lender the agent and
attorney-in-fact of the Borrower so to do. The lien and rights hereunder
automatically will attach, without further act, to all after-acquired property
(except consumer goods, other than accessions, not acquired within ten (10) days
after the Lender has given value under the Note) attached to and/or used in the
operation of the Mortgaged Property or any part thereof.
(b) Without limitation to the generality of the other provisions of this
Mortgage, including subparagraph (a) of this Paragraph 1.09, it hereby expressly
is covenanted, agreed and acknowledged that the lien and rights hereunder
automatically will attach to any further, greater, additional, or different
estate, rights, titles or interests in or to any of the Mortgaged Property at
any time acquired by the Borrower by whatsoever means, including that in the
event that the Borrower is the owner of an estate or interest in the Mortgaged
Property or any part thereof (such, as for example, as the lessee or tenant)
other than as the fee simple owner thereof, and prior to the satisfaction of
record of this Mortgage the Borrower obtains or otherwise acquired such fee
simple or other estate, then such further, greater, additional, or different
estate in the Mortgaged Property, or a part thereof, shall automatically, and
without any further action or filing or recording on the part of the Borrower or
the Lender or any other person or entity, be and become subject to this Mortgage
and the lien hereof. In consideration of Lender making the Loan as aforesaid,
and to secure the same indebtedness and obligations set forth above, Borrower
hereby grants, bargains, sells and conveys to Lender, on the same terms as set
forth in this Mortgage and intended to be a part hereof, all such after-acquired
property and estates.
1.10 Applicable of Funds; Default. On an Event of Default, the Lender may,
in addition to any other rights provided by this Mortgage or any other of the
Loan Documents, but shall not be obligated to, apply to the payment of the Note
or Other Indebtedness secured hereby, and in such manner as the Lender may
determine, any such monies, securities or other property of the Borrower held or
controlled by the Lender. No such application of funds shall, unless otherwise
expressly agreed by the Lender in writing, reduce, alter, delay or otherwise
affect any regularly schedules payment with respect to the Note or such Other
Indebtedness or obligations.
1.11 Leases Affecting Mortgaged Property. The Borrower shall comply with
and observe its obligations as landlord or tenant under all leases affecting the
Mortgaged Property or any part thereof. If requested by Lender, Borrower will
furnish Lender with executed copies of all leases now or hereafter created on
the Mortgaged Property; and all leases nor or hereafter entered into will be in
form and substance subject to the approval of Lender. Borrower will not accept
payment of rent more than one (1) month in advance without the express written
consent of Lender. If requested by the Lender, the Borrower will execute and
deliver to Lender, as additional security, such other documents as may be
requested by Lender to further evidence the assignment to Lender hereunder, and
to assign any and all such leases whether now existing or hereafter created,
including, without limitation, all rents, royalties, issues and profits of the
Mortgaged Property from time to time accruing. The Borrower shall not cancel,
surrender or modify any lease affecting the Mortgaged Property or any part
thereof without the written consent of the Lender.
1.12 Expenses. The Borrower will pay or reimburse the Lender for all
reasonable attorneys' fees, costs and expenses incurred by the Lender in
connection with the collection of the indebtedness secured hereby or the
enforcement of any rights or remedies provided for in its Mortgage, in any of
the Loan Documents or the Other Indebtedness Instruments, or as may otherwise be
provided by law, or incurred by Lender in any proceeding involving the estate of
a decedent or an insolvent, or in any action, proceeding or dispute of any kind
in which the Lender is made a party, or appears
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as party plaintiff or defendant, affecting this Mortgage, the Note, any of the
Loan Documents, any of the Other Indebtedness Instruments, Borrower or the
Mortgaged Property, including but not limited to the foreclosure of this
Mortgage, any condemnation action involving the Mortgaged Property, any
environmental condition of or affecting the Mortgaged Property, or any action to
protect the security hereof; and any such amounts paid or incurred by the Lender
shall be added to the indebtedness secured hereby and shall be further secured
by this Mortgage.
1.13 Performance by Lender of Defaults by Borrower. If the Borrower shall
default in the payment of any tax, lien, assessment or charge levied or assessed
against the Mortgaged Property, or otherwise described in Paragraphs 1.04 and
1.05 hereof; in the payment of any utility charge, whether public or private; in
the payment of insurance premiums; in the procurement of insurance coverage and
the delivery of the insurance policies required hereunder; or in the performance
or observance of any other covenant, condition or term of this Mortgage, of the
Note, of any of the Loan Documents, or of any of the Other Indebtedness
Instruments, then the Lender, at its option, may perform or observe the same;
and all payments made for costs or expenses incurred by the Lender in connection
therewith shall be secured hereby and shall be, without demand, immediately
repaid by the Borrower to the Lender with interest thereon calculated in the
manner and at the rate set forth in the Note, plus two percentage points (2%).
The Lender shall be the sole judge of the legality, validity and priority of any
such tax, lien, assessment, charge, claim and premium, of the necessity for any
such actions and of the amount necessary to be paid in satisfaction thereof. The
Lender is hereby empowered to enter and to authorize others to enter upon the
Mortgaged Property or any part thereof for the purpose of performing or
observing any such defaulted covenant, condition or term, without thereby
becoming liable to the Borrower or any person in possession holding under the
Borrower for trespass or otherwise.
1.15 Estoppel Affidavits. The Borrower within ten (10) days after written
request from the Lender shall furnish a written statement, duly acknowledged,
setting forth the unpaid principal of an interest on the Note and Other
Indebtedness and whether or not any offsets or defenses exist against any
principal and interest.
1.16 Alienation or Sale or Mortgaged Property. The Borrower shall not
sell, assign, mortgage, encumber, grant a security interest in or otherwise
convey all or any part of the Mortgaged Property, or any of the rents thereof,
without obtaining the express written consent of the Lender at least thirty (30)
days prior to such conveyance. If Borrower should sell, assign, mortgage,
encumber, grant a security interest in or convey all, or any part of, the
Mortgaged Property, or any of the rents thereof, without such consent by Lender,
then, in such event, the entire balance of the indebtedness (including the Loan
and all Other Indebtedness) secured by this Mortgage and all interest accrued
thereon (or such parts as Lender may elect) shall without notice become due and
payable forthwith at the option of the Lender.
1.17 Environmental Matters. Borrower represents, warrants and covenants as
follows:
(a) No Hazardous Materials (hereinafter defined) have been, are, or will
be while any part of the indebtedness secured this Mortgage remains unpaid,
contained in, treated, stored, handled, located on, discharged from, or disposed
of on, or constitute a part of, the Mortgaged Property. As used herein, the term
"Hazardous Materials" include without limitation, any asbestos, urea
formaldehyde foam insulation, flammable explosives, radioactive materials,
hazardous materials, hazardous wastes, hazardous or toxic substances, or related
or unrelated substances or materials defined, regulated, controlled, limited or
prohibited in the Comprehensive Environmental Response Compensation and
Liability Act of 1980 (CERCLA), as amended (42 U.S.C. Sections 9601, et seq.),
the Hazardous Materials Transportation Act, as amended (49 U.S.C. Sections 1801
et seq.), the Resource Conservation and Recovery Act (RCRA), as amended (42
U.S.C. Sections 6901, et seq.), the Clean Water Act, as amended (33 U.S.C.
Sections 1251, et seq.), the Clean Air Act, as amended (42 U.S.C. Sections 7401,
et seq.), the Toxic Substances Control Act, as amended (15 U.S.C. Sections 2601,
et seq.), and in the rules and regulations adopted and publications promulgated
pursuant thereto, and in the rules and regulations of the Occupational Safety
and Health Administration (OSHA) pertaining to occupational exposure to
asbestos, as amended, or in any other federal, state or local environmental law,
ordinance, rule, or regulation now or hereafter in effect;
(b) No underground storage tanks, whether in use or not in use, are
located in, on or under any part of the Mortgaged Property;
(c) All of the Mortgaged Property complies and will comply in all respects
with applicable environmental laws, rules, regulations, and court or
administrative orders;
(d) There are no pending claims or threats of claims by private or
governmental or administrative authorities relating to environmental impairment,
conditions, or regulatory requirements with respect to the Mortgaged Property;
and
(e) Borrower shall give immediate oral and written notice to Bank of its
receipt of any notice of a violation of any law, rule or regulation covered by
this Paragraph 1.17, or of any notice of other claim relating to the
environmental condition of the Mortgaged Property, or of its discovery of any
matter which would make the representations, warranties and/or covenants herein
to be inaccurate or misleading in any respect.
Borrower hereby agrees to indemnify and hold Lender harmless from all
loss, cost, damage, claim and expense incurred by Lender on account of (i) the
violation of any representation, warranty or covenant set forth in this
Paragraph 1.17, (ii) Borrower's failure to perform any obligations of this
Paragraph 1.17, (iii) Borrower's or the Mortgaged Property's failure to fully
comply with all environmental laws, rules and regulations, or with all
occupational health and safety laws, rules and regulations, or (iv) any other
matter related to environmental conditions on, under or affecting the Mortgaged
Property. This indemnification shall survive the closing of the Loan, payment of
the Loan, the exercise of any right or remedy under any Loan Document, any
subsequent sale or transfer of the Mortgaged Property, and all similar or
related events or occurrences.
ARTICLE II
ASSIGNMENT OF RENTS AND LEASES
2.01 Assignment. Borrower, in consideration of Lender's making the Loan as
aforesaid and for other good and valuable consideration, and to secure the
prompt payment of same, with the interest thereon, and any extensions, renewals,
modifications and refinancings of same, and any charges herein incurred by
Lender on account of Borrower, including but not limited to attorneys' fees, and
any and all Other Indebtedness, and further
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to secure the performance of the covenants, conditions and agreements
hereinafter set forth and set forth in the Note, in the Loan Documents, and in
the Other Indebtedness Instruments, does hereby sell, assign and transfer unto
the Lender all leases and subleases of all or part of the Mortgaged Property,
including without limitation those certain leases, if any, specifically
described on an exhibit to this Mortgage, and all the rents, issues and profits
now due and which may hereafter become due under or by virtue of any such lease,
whether written or verbal, or any letting of, or of any agreement for the use or
occupancy of the Mortgaged Property or any part thereof, which may have been
heretofore or may be hereafter made or agreed to or which may be made or agreed
to by the Lender under the powers herein granted, it being the intention of the
parties to hereby establish an absolute transfer and assignment of all the said
leases, subleases and agreements, and all the avails thereof, to the Lender, and
the Borrower does hereby appoint irrevocably the Lender its true and lawful
attorney in its name and stead (with or without taking possession of the
aforesaid Mortgaged Property as hereinafter provided), to rent, lease or let all
or any portion of the Mortgaged Property to any party or parties at such rental
and upon such term, in its discretion as it may determine, and to collect all of
said avails, rents, issues and profits arising from or accruing at any time
hereafter, and all now due, or that may hereafter become due under each and all
of the leases, subleases and agreements, written or verbal, or other tenancy
existing or which may hereafter exist on the Mortgaged Property, with the same
rights and powers and subject to the same immunities, exoneration of liability
and rights of recourse and indemnity as the Lender would have upon taking
possession of the Mortgaged Property pursuant to the provisions hereinafter set
forth.
2.02. Prepayment of Rent. The Borrower represents and agrees that no rent
has been or will be paid by any person in possession of any portion of the
Mortgaged Property for more than one installment in advance and that the payment
of none of the rents to accrue for any portion of said Mortgaged of said
Mortgaged Property has been or will be waived, released, reduced, or discounted,
or otherwise discharged or compromised by the Borrower. The Borrower waives any
right of setoff against any person in possession of any portion of the Mortgaged
Property. The Borrower agrees that it will not assign any of the rents or
profits except to the purchaser or grantee of the Mortgaged Property.
2.03 Not Mortgagee in Possession; No Liability. Nothing herein contained
shall be construed as constituting the Lender as "mortgagee in possession" in
the absence of the taking of actual possession of the Mortgaged Property by the
Lender pursuant to the provisions hereinafter contained. In the exercise of the
powers herein granted the Lender, no liability shall be asserted or enforced
against the Lender, all such liability being expressly waived and released by
the Borrower.
2.04 Present Assignment. Although it is the intention of the parties that
this assignment of rents and leases shall be a present assignment, it is
expressly understood and agreed, anything herein contained to the contrary
notwithstanding, that the Lender shall not exercise any of the rights and powers
conferred upon it in this Article II until and unless an Event of Default shall
occur under this Mortgage.
2.05 No Obligation of Lender Under Leases. The Lender shall not be
obligated to perform or discharge, nor does it hereby undertake to perform or
discharge, any obligation, duty or liability under any leases, subleases or
rental agreements relating to the Mortgaged Property, and the Borrower shall and
does hereby agree to indemnify and hold the Lender harmless of and from any and
all liability, loss or damage which it may or might incur under any leases,
subleases or agreements or under or by reason of the assignment thereof and of
and from any and all claims and demands whatsoever which may be asserted against
it by reason of any alleged obligations or undertakings on its part to perform
or discharge any of the terms, covenants or agreements contained in said leases,
subleases or agreements. Should the Lender incur any such liability, loss or
damage, under said leases or under or by reason of the assignment thereof, or in
the defense of any claims or demands asserted against the Lender in connection
with any one or more of said leases, subleases or agreements, the Borrower
agrees to reimburse the Lender for the amount thereof, including costs, expenses
and reasonable attorneys' fees immediately upon demand, and until the same are
fully reimbursed by the Borrower, all such costs, expenses and attorneys' fees
shall be secured by the assignment hereunder and by this Mortgage.
2.06 Instruction to Lessees. The Borrower does further specifically
authorize and instruct each and every present and future lessee, tenant,
sublessee or subtenant of the whole or any part of the Mortgaged Property to pay
all unpaid rental agreed upon in any lease, sublease or tenancy to the Lender
upon receipt of demand for said Lender to pay the same.
2.07 Default (Assignment). Upon the occurrence of any Event of Default, as
described in paragraph 4.01 of this Mortgage, then Lender shall have all rights
and remedies set forth in Article IV or elsewhere in this Mortgage.
ARTICLE III
SECURITY AGREEMENT
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ARTICLE IV
EVENTS OF DEFAULT AND REMEDIES
4.01 Event of Default. The term "Event of Default", wherever used in this
Mortgage, shall mean the occurrence or existence of any one or more of the
following events or circumstances:
(a) Failure by the Borrower to pay as and when due and payable any
installment of principal, interest or escrow deposit, or other charge payable
under the Note, this Mortgage or under any other Loan Document; or
(b) Failure by the Borrower to duly observe any other covenant, condition
or agreement of this Mortgage, of the Note, of any of the Loan Documents, or of
any of the Other Indebtedness Instruments, and the continuance of such failure
for ten (10) days or more; or
(c) The filing by the Borrower or any guarantor of any indebtedness
secured hereby or of any of Borrower's obligations hereunder, of a voluntary
petition in bankruptcy or the Borrower's or any such guarantor's adjudication as
a bankrupt or insolvent, or the filing by the Borrower or any such guarantor of
any petition or answer seeking or acquiescing in any reorganization,
arrangement, composition, readjustment, liquidation, dissolution or similar
relief for itself under any present or future federal, state or other statute,
law or regulation relating to bankruptcy, insolvency or other relief for
debtors, or the Borrower's or any such guarantor's seeking or consenting to or
acquiescence in the appointment of any trustee, receiver or liquidator of the
Borrower or any such guarantor or of all or any substantial part of the
Mortgaged Property or of any or all of the rents, revenues, issues, earnings,
profits or income thereof, or of any interest or estate therein, or the making
of any general assignment for the benefit of creditors or the admission in
writing of its inability to pay its debts generally as they become due; or
(d) The entry by a court of competent jurisdiction or any order, judgment,
or decree approving a petition filed against the Borrower or any guarantor of
any of the indebtedness secured hereby or of any of Borrower's obligations
hereunder, seeking any reorganization, arrangement, composition, readjustment,
liquidation, dissolution or similar relief under any present of future federal,
state or other statute, law or regulation relating to bankruptcy, insolvency or
other relief for debtors, which order, judgment or decree remains unvacated and
unstayed for an aggregate of thirty (30) days (whether or not consecutive) from
the date of entry thereof, or the appointment of any trustee, receiver or
liquidator of the Borrower or any such guarantor or of all or any substantial
part of the Mortgaged Property or of any or all of the rents, revenues, issues,
earnings, profits or income thereof, or of any interest or estate therein,
without the consent or acquiescence of the Borrower and/or any such guarantor
which appointment shall remain unvacated and unstayed for an aggregate of thirty
(30) days (whether or not consecutive); or
(e) The filing or enforcement of any other mortgage, lien or encumbrance
on the Mortgaged Property or any part thereof, or of any interest or estate
therein; or
(f) If any portion of the Mortgaged Property is a leasehold estate, the
occurrence of a default under such lease or other instrument creating the
estate.
4.02 Acceleration of Maturity. If an Event of Default shall have occurred,
then the entire balance of the indebtedness (including but not limited to the
Loan and the Other Indebtedness) secured hereby (or such parts as Lender may
elect) with interest accrued thereon (or such parts as Lender may elect) shall,
at the option of the Lender, become due and payable without notice or demand,
time being of the essence. Any omission on the part of the Lender to exercise
such option when entitled to do so shall not be considered as a waiver of such
right.
4.03 Right of Lender to Enter and Take Possession.
(a) If an Event of Default shall have occurred and be continuing, the
Borrower, upon demand of the Lender, shall forthwith surrender to the Lender the
actual possession of the Mortgaged Property, and if and to the extent permitted
by law, the Lender of its agents may enter and take and maintain possession of
all the Mortgaged Property, together with all the documents, books, records,
papers and accounts of the Borrower or then owner of the Mortgaged Property
relating thereto, and may exclude the Borrower and its agents and employees
wholly therefrom.
(b) Upon every such entering upon or taking possession, the Lender, as
attorney-in-fact or agent of the Borrower, or in its own name as mortgagee and
under the powers herein granted, may hold, store, use, operate, manage and
control the Mortgaged Property (or any portion thereof selected by Lender) and
conduct the business thereof either personally or by its agents, and, from time
to time (i) make all necessary and proper
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maintenance, repairs, renewals, replacements, additions, betterments and
improvements thereto and thereon and purchase or otherwise acquire additional
fixtures, personalty and other property; (ii) insure or keep the Mortgaged
Property (or any portion thereof selected by Lender) insured; (iii) manage and
operate the Mortgaged Property (or any portion thereof selected by Lender) and
exercise all the rights and powers of the Borrower in its name or otherwise,
with respect to the same, including legal actions for the recovery of rent,
legal dispossessory actions against tenants holding over and legal actions in
distress of rent, and with full power and authority to cancel or terminate any
lease or sublease for any cause or on any ground which would entitle the
Borrower to cancel the same, and to elect to disaffirm any lease or sublease
made subsequent to this Mortgage or subordinated to the lien hereof; (iv) enter
into any and all agreements with respect to the exercise by others of any of the
powers herein granted the Lender, all as the Lender from time to time may
determine to be to its best advantage; and the Lender may collect and receive
all the income, revenues, rents, issues and profits of the Mortgaged Property
(or any portion thereof selected by Lender), including those past due as well as
those accruing thereafter, and, after deducting (aa) all expenses of taking,
holding, managing, and operating the Mortgaged Property (including compensation
for the services of all persons employed for such purposes); (bb) the cost of
all such maintenance, repairs, renewals, replacements, additions, betterments,
improvements and purchases and acquisitions; (cc) the cost of such insurance;
(dd) such taxes, assessments and other charges prior to this Mortgage as the
Lender may determine to pay; (ee) other proper charges upon the Mortgaged
Property or any part thereof; and (ff) the reasonable compensation, expenses and
disbursements of the attorneys and agents of the Lender; shall apply the
remainder of the moneys so received by the Lender, first to the payment of
accrued interest under the Note; second to the payment of tax deposits required
in Paragraph 1.04; third to the payment of any other sums required to be paid by
Borrower under this Mortgage or under the Loan Documents; fourth to the payment
of overdue installments of principal on the Note; fifth to the payment of any
sums due under Other Indebtedness Instruments, whether principal, interest or
otherwise; and the balance, if any, as otherwise required by law.
(c) Whenever all such Events of Default have been cured and satisfied, the
Lender may, at its option, surrender possession of the Mortgaged Property to the
Borrower, or to whomsoever shall be entitled to possession of the Mortgaged
Property as a matter of law. The same right of taking possession, however, shall
exist if any subsequent Event of Default shall occur and be continuing.
4.04 Receiver
(a) If an Event of Default shall have occurred and be continuing, the
Lender, upon application to a court of competent jurisdiction, shall be entitled
without notice and regard to the adequacy of any security for the indebtedness
hereby secured or the solvency of any party bound for its payment, to the
appointment of a receiver to take possession of and to operate the Mortgaged
Property and to collect the rents, profits, issues, royalties and revenues
thereof.
(b) The Borrower shall pay to the Lender upon demand all costs and
expenses, including receiver's fees, attorneys' fees, costs and agent's
compensation, incurred pursuant to the provisions contained in this Paragraph
2.04; and all such expenses shall e secured by this Mortgage.
4.05 Lender's Power of Enforcement. If an Event of Default shall have
occurred and be continuing, the Lender may, either with or without entry or
taking possession as hereinabove provided or otherwise, proceed by suit or suits
at law or in equity or any other appropriate proceeding or remedy (a) to enforce
payment of the Note; (b) to foreclose this Mortgage; (c) to enforce or exercise
any right under any Other Indebtedness Instrument; and (d) to pursue any other
remedy available to Lender, all as the Lender may elect.
4.06 Rights of a Secured Party. Upon the occurrence of an Event of
Default, the Lender, in addition to any and all remedies it may have or exercise
under this Mortgage, the note, the Loan Documents, the Other Indebtedness
Instruments or under applicable law, may immediately and without demand,
exercise any and all of the rights of a secured party upon default under the
Uniform Commercial Code, all of which shall be cumulative. Such rights shall
include, without limitation:
(a) The right to take possession of the Collateral without judicial
process and to enter upon any premises where the Collateral may be located for
the purposes of taking possession of, securing, removing, and/or disposing of
the Collateral without interference from Borrower and without any liability for
rent, storage, utilities or other sums;
(b) The right to sell, lease, or otherwise dispose of any or all of the
Collateral, whether in its then condition or after further processing or
preparation, at public sale, and unless the Collateral is perishable or
threatens to decline speedily in value or is of a type customarily sold on a
recognized market, Lender shall give to Borrower at least ten (10) days' prior
notice of the time and place of any public sale of the Collateral or of the time
after which any private sale or other intended disposition of the Collateral is
to be made, all of which Borrower agrees shall be reasonable notice of any sale
or disposition of the Collateral;
(c) The right to require Borrower, upon request of Lender, to assemble and
make the Collateral available to Lender at a place reasonably convenient to
Borrower and Lender; and
(d) The right to notify account debtors, and demand and receive payment
therefrom.
To effectuate the rights and remedies of Lender upon default, Borrower
does hereby irrevocably appoint Lender attorney-in-fact for Borrower, with full
power of substitution to sign, execute, and deliver any and all instruments and
documents and do all acts and things to the same extent as Borrower could do,
and to sell, assign, and transfer any collateral to Lender or any other party.
4.07 Power of Sale. If an Event of Default shall have occurred Lender may
sell the Mortgaged Property to the highest bidder at public auction in front of
the courthouse door in the county or counties, as may be required, where the
Mortgaged Property is located, either in person or by auctioneer, after having
first given notice of the time, place and terms of sale, together with a
description of the property to be sold, by publication once a week for three (3)
successive weeks prior to said sale in some newspaper published in said county
or counties, as may be required, and, upon payment of the purchase money, Lender
or any person conducting the sale for Lender is authorized to execute to the
purchaser at said sale a deed to the Mortgaged Property so purchased. Lender may
bid at said sale and purchase the Mortgaged Property, or any part thereof, if
the highest bidder therefor. At the foreclosure sale the Mortgaged Property may
be offered for sale and sold as a whole without first offering it in any other
manner or may be offered for sale and sold in any other manner as Lender may
elect. The provisions of Paragraph 4.06 of this Mortgage shall apply with
respect to Lender's enforcement of rights or interests in personal property
which constitutes Mortgaged Property hereunder.
4.08 Application of Foreclosure or Sale Proceeds. The proceeds of any
foreclosure sale pursuant to Paragraph 4.07, or any sale pursuant to Paragraph
4.06 shall be applied as follows:
Page 8
<PAGE>
(a) First, to the costs and expenses of (i) retaking, holding, storing and
processing the Collateral and preparing the Collateral or the Mortgaged Property
(as the case may be) for sale, and (ii) making the sale, including a reasonable
attorneys' fee for such services as may be necessary in the collection of the
indebtedness secured by this Mortgage or the foreclosure of this Mortgage;
(b) Second, to the repayment of any money, with interest thereon to the
date of sale at the applicable rate or rates specified in the Note, this
Mortgage, the Loan Documents or the Other Indebtedness instruments, as
applicable, which Lender may have paid, or become liable to pay, or which it may
then be necessary to pay for taxes, insurance, assessments or other charges,
liens, or debts as hereinabove provided, and as may be provided in the Note or
the Loan Documents, such repayment to be applied in the manner determined by
Lender;
(c) Third, to the payment of the indebtedness (including but not limited
to the Loan, and the Other Indebtedness) secured hereby, with interest to date
of sale at the applicable rate or rates specified in the Note, this Mortgage,
the Loan Documents or the Other Indebtedness Instruments, as applicable, whether
or not all of such indebtedness is then due;
(d) Fourth, the balance, if any, shall be paid as provided by law.
4.09 Lender's Option on Foreclosure. At the option of the Lender, this
Mortgage may be foreclosed as provided by law or in equity, in which event a
reasonable attorneys' fee shall, among other costs and expenses, be allowed and
paid out of the proceeds of the sale. In the event Lender exercises its option
to foreclose this Mortgage in equity, Lender may, at its option, foreclose this
Mortgage subject to the rights of any tenants of the Mortgaged Property, and the
failure to make any such tenants parties defendants to any such foreclosure
proceeding and to foreclose their rights will not be, nor be asserted to be by
the Borrower, a defense to any proceedings instituted by the Lender to collect
the sums secured hereby, or to collect any deficiency remaining unpaid after the
foreclosure sale of the Mortgaged Property.
4.10 Waiver of Exemption. Borrower waives all rights of exemption
pertaining to real or personal property as to any indebtedness secured by or
that may be secured by this Mortgage, and Borrower waives the benefit of any
statute regulating the obtaining of a deficiency judgment or requiring that the
value of the Mortgaged Property be set off against any part of the indebtedness
secured hereby.
4.11 Suits to Protect the Mortgaged Property. The Lender shall have power
(a) to institute and maintain such suits and proceedings as it may deem
expedient to prevent any impairment of the Mortgaged Property by any acts which
may be unlawful or in violation of this Mortgage; (b) to preserve or protect its
interest in the Mortgaged Property and in the income, revenues, rents and
profits arising therefrom; and (c) to restrain the enforcement of or compliance
with any legislation or other governmental enactment, rule or order that may be
unconstitutional or otherwise invalid, if the enforcement of or compliance with,
such enactment, rule or order would impair the security hereunder or be
prejudicial to the interest of the Lender.
4.12 Borrower to Pay the Note on any Default in Payment; Application of
Moneys by Lender. If default shall be made in the payment of any amount due
under this Mortgage, the Note, any of the Loan Documents or any of the Other
Indebtedness Instruments, or if any Event of Default shall occur under this
Mortgage, then, upon demand of the Lender, the Borrower shall pay to the Lender
the whole amount due and payable under the Note and under all Other Indebtedness
Instruments; and in case the Borrower shall fail to pay the same forthwith upon
such demand, the Lender shall be entitled to sue for and to recover judgment for
the whole amount so sue and unpaid together with costs, which shall include the
reasonable compensation, expenses and disbursements of the Lender's agents and
attorneys.
4.13 Delay or Omission No Waiver.. No delay or omission of the Lender or
of any holder of the Note to exercise any right, power or remedy accruing upon
any default shall exhaust or impair any such right, power or remedy or shall be
construed to be a waiver of any such default, or acquiescence therein; and every
right, power and remedy given by the Note, this Mortgage, the Loan Documents, or
the Other Indebtedness Instruments to the Lender may be exercised from time to
time and as often as may be deemed expedient by the Lender.
4.14 No Waiver of One Default to Affect Another. No waiver of any default
hereunder, under any of the Loan Documents, or under any of the Other
Indebtedness Instruments shall extend to or shall affect any subsequent or any
other then existing default or shall impair any rights, powers or remedies
consequent thereon.
If the Lender (a) grants forbearance or an extension of time for the
payment of any indebtedness secured hereby; (b) takes other or additional
security for the payment thereof; (c) waives or does not exercise any right
granted herein, in the Note, in any of the Loan Documents, or in any of the
Other Indebtedness Instruments; (d) releases any part of the Mortgaged Property
from this Mortgage or otherwise changes any of the terms of this Mortgage, the
Note, the Loan Documents or the Other Indebtedness Instruments; (e) consents to
the filing of any map, plat, or replat of or consents to the granting of any
easement on, all or any part of the Mortgaged Property; or (f) makes or consents
to any agreement subordinating the priority of this Mortgage, any such act or
omission shall not release, discharge, modify, change, or affect the original
liability under this Mortgage, the Note, the Loan Documents, or the Other
Indebtedness Instruments of the Borrower or any subsequent purchaser of the
Mortgaged Property or any part thereof, or any maker, co-signer, endorser,
surety or guarantor; nor shall any such act or omission preclude the Lender from
exercising any right, power or privilege herein granted or intended to be
granted in the event of any other default then made or of any subsequent
default, nor, except as otherwise expressly provided in an instrument or
instruments executed by the Lender shall the provisions of this Mortgage be
altered thereby. In the event of the sale or transfer by operation of law or
otherwise of all or any part of the Mortgaged Property, the Lender, without
notice to any person, corporation or other entity (except notice shall be given
to Borrower so long as Borrower remains liable under the Note, this Mortgage and
the Loan Documents) is hereby authorized and empowered to deal with any such
vendee or transferee with reference to the Mortgaged Property or the
indebtedness secured hereby, or with reference to any of the terms or conditions
hereof, or of the Loan Documents, as fully and to the same extent as it might
deal with the original parties hereto and without in any way releasing or
discharging any of the liabilities or undertakings hereunder.
4.15 Discontinuance of Proceedings - Position of Parties, Restored. In
case the Lender shall have proceeded to enforce any right or remedy under this
Mortgage by foreclosure, entry or otherwise, and such proceedings shall have
been discontinued or abandoned for any reason, or shall have been determined
adversely to the Lender, then and in every such case the Borrower and the Lender
shall be restored to their former positions and rights hereunder, and all
rights, powers and remedies of the Lender shall continue as if no such
proceeding had been taken.
4.16 Remedies Cumulative. No right, power, or remedy conferred upon or
reserved to the Lender by this Mortgage is intended to be exclusive of any other
right, power or remedy, but each and every such right, power and remedy shall be
cumulative and concurrent and shall be in addition to any other right, power and
remedy given hereunder, or under the Note, the Loan Documents, the Other
Indebtedness Instruments or now or hereafter existing at law or in equity or by
statute.
Page 9
<PAGE>
ARTICLE V
MISCELLANEOUS
5.01 Binding Effect. Wherever in this Mortgage one of the parties hereto
is named or referred to, the heirs, administrators, executors, successors,
assigns, distributees, and legal and personal representatives of such party
shall be included, and all covenants and agreements contained in this Mortgage
by or on behalf of the Borrower or by or on behalf of Lender shall bind and
inure to the benefit of their respective heirs, administrators, executors,
successors, assigns, distributees, and legal and personal representatives,
whether so expressed or not. Notwithstanding the foregoing, the Borrower shall
not be entitled to assign any of its rights, titles, and interest hereunder, or
to delegate any of its obligations, liabilities, duties, or responsibilities
hereunder, and will not permit any such assignment or delegation to occur
(voluntarily or involuntarily, or directly or indirectly), without the prior
written consent of the Lender.
5.02 headings. The headings of the articles, sections, paragraphs and
subdivisions of this Mortgage are for convenience of reference only, are not to
be considered a part hereof, and shall not limit or otherwise affect any of the
terms hereof. "Herein," "hereby," "hereunder." "hereof," and other equivalent
words or phrases refer to this Mortgage and not solely to the particular portion
thereof in which any such word or phrase is used, unless otherwise clearly
indicated by the context.
5.03 Gender; Number. Whenever the context so requires, the masculine
includes the feminine and neuter, the singular includes the plural, and the
plural includes the singular.
5.04 Invalid Provisions to Affect No Others. In case any one or more of
the covenants, agreements, terms or provisions contained in this Mortgage, in
the Note, in the Loan Documents, or in the Other Indebtedness Instruments shall
be invalid, illegal or unenforceable in any respect, the validity of the
remaining covenants, agreements, terms or provisions contained herein, and in
the Note, the Loan Documents and the Other Indebtedness Instruments shall be in
no way affected, prejudiced or disturbed thereby.
5.05 Conflict in Loan Documents. In the event of conflict in the terms of
any provisions in this Mortgage, the Note, the Loan Documents, or the Other
Indebtedness Instruments, the terms of the provisions most favorable to the
Lender shall apply.
5.06 Instrument Under Seal. This Mortgage is given under the seal of all
parties hereto, and it is intended that this Mortgage is and shall constitute
and have the effect of a sealed instrument according to law.
5.07 Addresses and Other Information. The following information is
provided in order that this Mortgage shall comply with the requirements of the
Uniform Commercial Code, as enacted in the State of Alabama, for instruments to
be filed as financing statements.
(a) Name of Borrower (Debtor): EAGLE SUPPLY, INC.
Address of Borrower 1301 Fourth Avenue
Tampa, Florida 33605
(b) Name of Lender (Secured Party): COMPASS BANK
Address of Lender: Post Office Box 10566
Birmingham, Alabama 35296
Attention: Laura Clarke
(c) Record Owner of Real Estate
described on Exhibit A hereto: EAGLE SUPPLY, INC.
5.08 Rider. Additional provisions of this Mortgage, if any, are set forth
below or on a Rider attached hereto and made a part hereof.
See attached Rider to Future Advance Mortgage, Assignment of Rents
and leases and Security Agreement (Alabama).
5.09 Notwithstanding any provision herein to the contrary, the Borrower
hereunder is granting a security interest only in the real property described on
Exhibit "A" and the personalty so affixed thereto is to constitute a fixture.
5.10 Notwithstanding any provision herein to the contrary, this Mortgage
secured only indebtedness created under the Note or any extensions,
modifications or renewals thereof, and all references herein or in any other
Loan Documents to indebtedness and other indebtedness refer only to indebtedness
created under the Note, any extensions, modifications or renewals thereof.
================================================================================
Page 10
<PAGE>
IN WITNESS WHEREOF, Borrower has caused this Mortgage to be executed and
effective as of the day and year first above written, although actually executed
on the date or dates reflected below.
LENDER: (Mortgagee, Secured Party):
COMPASS BANK
By: /s/ Laura R. Clarke
-------------------------------------
Its: Sr. Com'l Loan Officer
BORROWER: (Mortgagor, Debtor):
EAGLE SUPPLY, INC.
ATTEST:
By: /s/ Lucille Manno By: /s/ Frederick Friedman, as V.P.
------------------------------- --------------------------------------
Its: Its: Vice President
WITNESS:
- ---------------------------------- -----------------------------------------
WITNESS:
- ---------------------------------- -----------------------------------------
CORPORATE OR PARTNERSHIP ACKNOWLEDGMENT
STATE OF NEW YORK
COUNTY OF NEW YORK
I, Lucille Manno, a notary public in and for said county in said state,
hereby certify that Frederick M. Friedman, whose name as Vice Pres. of Eagle
Supple, Inc., a Corporation, is signed to the foregoing instrument and who is
known to me, acknowledged before me on this day that, being informed of the
contents of such instrument, *, as such Vice Pres. and with full authority,
executed the same voluntarily for and the act of said Corporation.
Given under my hand and official seal this 19th day of April, 1994.
/s/ Lucille Manno
----------------------------------------
Notary Public
My commission Expires: 11/30/94
Lucille Manno
Notary Public, State of New York
No. 01MA4518395
Qualified in Suffolk county
Commission Expires 11/30/94
Page 11
<PAGE>
INDIVIDUAL ACKNOWLEDGMENTS
STATE OF ALABAMA
CONTY OF JEFFERSON
I, Linda G. Arrowood, a notary public in and or said county in said state,
hereby certify that Laura R. Clarke, whose name is signed to the foregoing
instrument and who is known to me, acknowledged before me on this day, that,
being informed of the contents of such instrument, she executed the same
voluntary on the day the same bears date.
Given under my hand and official seal this 20th day of April, 1994.
/s/ Linda G. Arrowood
----------------------------------------
Notary Public
[Notarial Seal] My Commission Expires: 5/4/95
STATE OF ALABAMA
COUNTY OF
I _______________________________, a notary public in and for said county
in said state, hereby certify that ______________________, whose name
__________________ signed to the foregoing instrument and who _________________
known to me on this day, that, being informed of the contents of such
instrument, ________________________ executed the same voluntary on the day the
same bears date.
Given under my hand and official seal this _____ day of _____________,
19__.
-----------------------------
Notary Public
[Notarial Seal] My Commission Expires: _____________
Page 12
<PAGE>
EXHIBIT A
Description of Mortgaged Property
A parcel of land located in the Southwest 1/4 of the Northeast 1/4 of Section
27, Township 18 South, Range 3 West, Jefferson County, Alabama, more
particularly described as follows:
Commence at the Northwest corner of Section 27, Township 18 South, Range 3 West
and run Easterly 2.084.08 feet along the North line of said section to a point
on the centerline of Oxmoor Road; thence right 91 (degrees) 47'45" and run
Southerly 469.97 feet along said centerline to a point of intersection with the
centerline extended of Snow Drive; thence left 91 (degrees) 47'45" and run
Easterly 1,418.92 feet along said centerline of Snow Drive to a point of
intersection with the centerline of a proposed 60-foot road right of way; thence
right 90 (degrees) 00'00" and run Southerly 695.54 feet along said centerline to
a point, said point being the point of beginning and the Southeast corner of a
tract of land conveyed to the United States Postal Service as recorded in Real
Volume 1524, page 419, in the Office of the Judge of Probate of Jefferson
County; thence continue Southerly along said centerline 272.23 feet to a point
on the centerline of a proposed 20 feet easement for drainage purposes; thence
right 90 (degrees) 00'00" and run Northerly 272.23 feet to a point on the South
line of said tract conveyed to the United States Postal Service; thence right 90
(degrees) 00'00" and run Easterly along the South line of said United States
Postal Service tract 450.51 feet to the point of beginning.
Situated in Jefferson County, Alabama.
<PAGE>
[LOGO] Compass Bank
RIDER TO
FUTURE ADVANCE MORTGAGE, ASSIGNMENT OF RENTS
AND LEASES AND SECURITY AGREEMENT (ALABAMA)
March 24, 1994
Mr. Fred Friedman
Eagle Supply, Inc.
122 East 42nd Street
New York, NY 10168
Dear Mr. Friedman:
We are pleased to advise you that Compass Bank ("Bank") has approved a loan (the
"Loan") for Eagle Supply, Inc. (the "Borrower") subject to the following terms
and conditions.
AMOUNT
The Loan shall consist of a $550,000.00 term Loan.
PURPOSE
The proceeds of the Loan shall be used to refinance some of Borrower's existing
indebtedness.
INTEREST RATE
At least 5 business days prior to the closing, Borrower must select one of the
following interest rate options for the Loan:
(1) Compass Bank Prime; provided, however, that in no event shall the
applicable interest rate be less than four percent (4%), or
(2) the fixed rate, which the Bank would be required to pay, for a Loan of
this size, term and structure, if the Bank obtained an interest rate swap
for five years pursuant to which the Bank would receive a rate equal to
"Prime" (as defined in the international Swap Dealers Associates Code).
"Compass Bank Prime" is a reference rate established by Bank for use in
computing and adjusting interest, is subject to increase, decrease or change at
Bank's discretion and is only one of the reference rates or indices Bank uses.
Bank may lend to others at rates at or greater or less than Compass Bank Prime
or the rate(s) provided for herein. Interest on all Loan facilities shall be
calculated on the basis of a 360-day year multiplying the product of the
principle amount outstanding and the applicable rate by the actual number of
days elapsed and dividing by 360.
TERMS AND PAYMENTS
The Loan shall have payments as follows: (i) installment payments of principal
and accrued interest due and payable monthly based on a 180 month amortization;
and (ii) a final payment due in 60 months, which shall be the final maturity
date and termination date for the Loan, at which time, all unpaid principal,
interest and charges shall be due and payable in full unless due sooner by
reason of default or otherwise.
PREPAYMENT CHARGE
With respect to the Loan, during any period in which a floating interest rate is
applicable, the Loan may be prepaid in whole or in part without penalty.
During any period in which a fixed rate is applicable, there shall be charged a
fee in the amount of 5% of loan balance prepaid during the first year of the
Loan, 4% of the Loan balance prepaid during the second year of the Loan, 3% of
the Loan balance prepaid during the third year of the Loan, 2% of the Loan
balance prepaid during the fourth year of the loan, and 1% of the Loan balance
prepaid during the fifth year of the loan.
<PAGE>
Eagle Supply, Inc.
March 24, 1994
Page 2
DISBURSEMENTS
Prior to obtaining any proceeds under the Loan, the Borrower shall comply with
the conditions imposed by Bank. Without limiting the generality of the forgoing,
the Bank shall, among other reasons, be under no obligation to make any
disbursements under the Loan at any time after any event of default has occurred
or is continuing under any one or more of the Loan Documents of if Borrower are
not otherwise in compliance with all terms and conditions of all Loan Documents.
LATE CHARGE
Any scheduled payment of principal and/or interest which is not paid within ten
(10) days from the date due will be subject to a late charge of five percent
(5%) of such scheduled payment.
COLLATERAL
The Loan shall be secured by a first mortgage lien on all property and
improvement located at 289 Snow Drive, Birmingham, Alabama.
APPRAISAL
This commitment is subject to receipt, review and approval by the Bank of a
current appraisal (within the last six months) of the property at 289 Snow
Drive, addressed to Bank and prepared by an independent MAI appraiser selected
and engaged by Bank. Such appraisal shall be in form and content satisfactory to
Bank. Bank shall select the appraiser and order all appraisals required for the
Loan, and the cost of such appraisal shall be the responsibility of the
Borrower.
COVENANTS
In addition to the other terms, events of default, conditions, representations,
warranties, and affirmative and negative covenants, the Loan Documents will
contain covenants covering the following:
A. That Borrower's Tangible Net Worth shall not be less than
$2,000,000.00. Borrower's Tangible Net Worth shall be defined and
calculated in accordance with generally accepted accounting
principles.
B. That the Borrower shall not cause, allow or suffer to occur any
change in the controlling ownership, nature, or structure of the
Borrower, nor the merger or consolidation of or involving the
Borrower, which would result in a change in the controlling
ownership of Borrower, or the sale of all or substantially all the
assets of Borrower.
C. That Borrower's Funded Debt to Tangible Net Worth Ratio shall not
exceed 0.4:1. Borrower's Funded Debt to Tangible Net Worth Ratio
shall be defined as the ratio of Borrower's total debt and
guarantees, if any, but excluding current liabilities (except for
the current portion of long term debt) and intercompany debt, to
Borrower's Tangible Net Worth.
D. That Borrower shall maintain a minimum fixed Charge Coverage Ratio
of 1.1:1.0. Fixed Charge Coverage Ratio shall be defined as the sum
of net income before taxes divided by the annual required principal
payment of Funded Debt.
GENERAL TERMS AND CONDITIONS
Addendum "A" is attached hereto and made a part of this Commitment letter
regarding additional terms and conditions to this Commitment and necessary
documentation required to close this transaction. All documents, exhibits,
certificates or instruments required by Addendum "A" here of and such other
matters as the Bank, or its counsel, may require in the documentation of the
Loan shall be in form and content acceptable to the Bank.
<PAGE>
Eagle Supply, Inc.
March 24, 2994
Page 3
EXPENSES
Borrower, by acceptance of this commitment, agrees to and will pay to Bank all
expenses incurred in connection with the Loan and the Loan Documents, including,
without limitation, fees and expenses of Bank's counsel, filing fees, appraisal
fees, recording costs, insurance premiums, taxes and costs of collection,
irrespective of whether the Loan closes or funds.
FINANCIAL STATEMENTS
Borrower shall submit to the Bank such financial and other information which
Bank shall request regarding Borrower and the Collateral, including, without
limitation, quarterly financial statements of Borrower which may be internally
prepared, no later than forty-five (45) days after the period then ending, and
audited fiscal year end statements of the Borrower, bearing an unqualified
opinion from a certified public accountant acceptable to Bank, no later than one
hundred twenty (120) days after the period then ending. Bank shall also receive
annual audited financial statements on TDA Industries, Inc., bearing an
unqualified opinion from a certified public accountant acceptable to Bank, no
later than one hundred twenty (120) days after the period then ending.
ACCEPTANCE
This commitment letter constitutes the entire agreement between Bank and
Borrower concerning the Loan and, when accepted, supersedes all prior
agreements, negotiations and undertakings, whether written or oral. Any
amendment or modification of this commitment letter must be in writing, signed
by Bank and Borrower. THIS COMMITMENT LETTER REPRESENTS THE FINAL AGREEMENT
BETWEEN THE PARTIES AND MAY NOT BE CONTRADICTED BY EVIDENCE OF PRIOR,
CONTEMPORANEOUS, OR SUBSEQUENT ORAL AGREEMENTS OF THE PARTIES. THERE ARE NOT
UNWRITTEN ORAL AGREEMENTS BETWEEN THE BANK AND BORROWER.
By acceptance of this commitment letter, Borrower acknowledges that this
commitment letter is issued at a time when Bank has not undertaken a full
business, credit and legal analysis of Borrower, the Collateral and the
transactions contemplated by the commitment letter. As the Lender, Bank is the
sole judge of what is an impediment to closing and whether the impediment is so
serious as to preclude closing.
This commitment letter shall be accepted by borrower by March 25, 1994, or it
shall become null and void at Bank's option. Acceptance is to be indicated by
the return of an executed copy of this letter to Bank by mail courier or
facsimile.
This commitment, once accepted, will continue in force until April 30, 1994, by
which date, if all closing papers required by Bank have not been executed and
delivered to Bank, and all conditions of this commitment have not been
satisfied, this commitment will expire and become null and void, at Bank's
option.
Compass Bank wishes to thank you for the opportunity to issue this commitment
letter. We look forward to working with you toward consummating a rewarding and
mutually beneficial relationship.
Sincerely,
COMPASS BANK
By: /s/ Laura Clarke
------------------------------
Its: Sr. Commercial Loan Officer
------------------------------
<PAGE>
Eagle Supply, Inc.
March 24, 1994
Page 4
Accepted this 24th day of March, 1994
BORROWER:
Eagle Supply, Inc.
By: /s/ Frederick Friedman
---------------------------------
Its: Vice President
<PAGE>
[LOGO] Compass Bank ADDENDUM A
GENERAL TERMS AND CONDITIONS
Borrower's Name: Eagle Supply Inc.
Date Of Commitment
Letter: March 21, 1994
1. DEFINITIONS:
a. "360-Day Year". Interest shall be calculated on the basis of a
360-day year, by multiplying the product of the principal amount
outstanding and the applicable rate by the actual number of days
elapsed, and dividing by 360.
b. "Compass Bank Prime". If the interest rate is based on Compass Bank
Prime prevailing at the Bank from time to time, then this paragraph
1.b. is applicable. "Compass Bank Prime" is a reference rate
established by Bank for use in computing and adjusting interest, is
subject to increase, decrease or change at the Bank's discretion,
and is only one of the reference rates or indices the Bank uses.
The Bank may lend to others at rates at or greater or less than
Compass Bank Prime or the rate provided herein.
c. "Collateral". Any and all property, real or personal, tangible or
intangible, mortgaged, pledged, conveyed, delivered or otherwise
granted to Bank to secure the Loan, including without limitation,
the Mortgaged Property.
d. "Commitment". The Commitment Letter, together with this Addendum A
and all other addenda and exhibits referenced herein or in such
Commitment Letter.
e. "Commitment Letter". The commitment letter to Borrower from Bank
dated as of the date first set forth above.
f. "Index Rate". If the interest is based on the Index Rate, as
adjusted, then this paragraph 1.e. is applicable. The "Index Rate"
is the auction rate for United Sates Treasury Bills having
maturities of twenty-six (26) weeks, as established at the most
recent auction prior tot he date reference is first made in the Note
to the Index Rate, and prior to each subsequent interest adjustment
date.
g. "Loan". The Loan referenced in the Commitment Letter.
h. "Loan Document". The Note the Loan Agreement, the Commitment Letter
and all other documents evidenced or securing the Note, or otherwise
given in connection with the Loan.
i. "Mortgaged Property". All that certain property which is to be
mortgaged to Bank to secure the Loan.
j. "Note". The promissory note or notes given to evidence the Loan.
2. TITLE INSURANCE: Bank shall be furnished a mortgagee's title insurance
policy in the amount of the Loan on the standard ALTA form (the "Title
Policy"). The Title Policy shall be issued by the title insurance company
acceptable to Bank, and shall insure the validity of the first mortgage on
the Mortgaged Property, subject only to such exception as may be approved
in writing by Bank. Further, unless waived in writing by Bank, the title
Policy shall contain the following affirmative endorsements: (i)
endorsement for a affirmative coverage regarding legal and physical access
to one or more dedicated, open and accepted public roads or streets; (ii)
zoning endorsements (ALTA form 3.1); (iii) endorsement for affirmative
coverage against disturbance of the surface in the exercise of any mining
or mineral rights not consented to by Bank; (iv) same land - survey
endorsement; (v) endorsement for affirmative coverage regarding mechanic's
and materialmen's liens; (vi) future advances endorsement; (vii) usury
endorsement; (viii) doing business endorsement; (ix) street assessments
endorsement (ALTA form 1); (x) variable rate mortgage endorsement (ALTA
form 6.1); and (xi) comprehensive general endorsement ("California 100").
The Title Policy shall contain no exception for (i) matters that would be
revealed by a survey, or (ii) mechanics' and materialmen's liens.
The Title Policy shall name Bank as mortgages payable, and shall be
satisfactory to Bank as to form and substance. Prior to the date of each
construction disbursement, Bank may require a "date-down endorsement" to
the Title Policy to insure that no mechanics' and materialmen's liens or
other liens have been filed.
3. ORGANIZATION; AUTHORITY: Bank shall receive proof acceptable to Bank, as
applicable, of the organization, due incorporation, good standing and
authorization to enter into the transaction contemplated hereby, for all
corporations, partnerships or other business organizations involved in the
Loan.
4. SURVEY: Prior to the closing, Bank shall be furnished and shall have
approved an accurate survey of the Mortgaged Property, certified within 60
days of closing by a registered surveyor to the Bank and to the title
insurance company, showing the location of all present and proposed
improvements, boundaries, means of public ingress and egress, building
setback lines, right-of-way, easements and encroachments. The survey must
contain a certification as to whether or not the Mortgaged Properties
within a designated flood hazard
<PAGE>
area. Borrower shall provide foundation and as-built surveys as
construction progresses. The survey shall be prepared in accordance with
the instruction attached hereto as Exhibit A-1.
5. SOILS ANALYSIS AND ENVIRONMENTAL REPORT: Prior to the closing, Bank shall
receive and approve (i) a soils analysis report relating to the Mortgaged
Property in form and content satisfactory to Bank (ii) an environmental
report which shall certify results related to toxic and other hazardous
substances on the Mortgaged Property, such report to be prepared in
accordance with the instructions attached hereto as Exhibit A-2. All soil
and environmental reports must be acceptable to the Bank.
7. GOVERNMENTAL AUTHORIZATION AND APPROVAL; UTILITIES: Prior to the closing,
Borrower shall provide to Bank a certificate of proper zoning, and a copy
of all governmental and other licenses, permits, approvals and
authorizations necessary for making of the Loan by Borrower and the
construction (or, as appropriate, for the occupancy and operation) of the
project.
All of said licenses, permits, authorizations, and approvals shall be in
form and content satisfactory to counsel for Bank. Borrower shall furnish
to Bank (i) such information as required by Bank to assure that proper
zoning, permits and licenses to construct (or, as appropriate, to occupy
and operate) the Project for its intended purposes have been obtained,
including but not limited to, the issuance of building permits and
certificates of occupancy, and (ii) such additional information as Bank
deems necessary or desirable to insure that the Project complies with all
applicable laws, regulations and requirements including but not limited to
environmental laws, the Americans With Disabilities Act of 1990 and
similar legislation, and rules and regulations promulgated with respect
thereto. The Project shall at all times fully comply with all laws, rules
and regulations applicable to the Project and to Borrower. Borrower shall
provide evidence satisfactory to Bank of the availability of sewer, water,
gas, electrical and telephone service to the Project, including letters of
availability from the providers of such services.
8. BUDGET; DISBURSEMENTS; ADDITIONAL EQUITY:
10. INSURANCE: Borrower shall provide builders risk/extended multi-peril
hazard insurance in an amount not less than the Loan amount, along with
workmen's compensation and general liability insurance on and with respect
to the Mortgaged Property, all with companies approved by Bank and in form
and substance and containing such coverage as shall be required by Bank.
Such builders risk/extended multi-peril hazard policies shall cover risks,
pursuant to one hundred percent (100%) non-reporting policies. Unless
waived in writing, loss of rent insurance must be provided in an amount at
lease equal to twelve (12) months' gross rental. Bank shall be named as
mortgages loss payee in all builders risk/extended multi-peril hazard
insurance policies in the New York standard mortgagee clause, and as an
additional insured on all liability insurance policies. Flood insurance
will be required if it is determined that any improvement lie within a
designed flood hazard area. All policies of insurance shall contain a
commitment of the insurer to give at least thirty (30) days' notice to the
Bank prior to any cancellation, termination or expiration of such policy.
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<PAGE>
11. HAZARDOUS MATERIALS; ENVIRONMENTAL REPRESENTAITONS AND INDEMNITY: The Loan
documents shall contain representations, warranties and covenants of the
Borrower in substantially the following form:
a. No Hazardous Materials (hereinafter defined) have been, are, or will
be any part of the indebtedness secured by the Mortgage remains
unpaid, contained in, treated, stored, handled, generated, located
on, discharged from, or disposed of on, or constitute a part of,
the Mortgaged Property. As used herein, the term "Hazardous
Materials" includes without limitation, any asbestos, urea
formaldehyde foam insulation, flammable explosives, radioactive
materials, hazardous materials, hazardous wastes, hazardous or toxic
substances, or related or unrelated substances or materials defined,
regulated, controlled, limited or prohibited in the Comprehensive
Environmental Response Compensation and Liability Act of 19980
(CERCLA), (42 U.S.C. Sections 9601, et seq.), the Hazardous
Materials Transportation Act, (49 U.S.C. Sections 1801 et seq.), the
Resource Conservation and Recovery Act (RCRA), (42 U.S.C. Sections
6901, et seq.), the Clean Water Act. (33 U.S.C. Sections 1251, et
seq.), the Clean Air Act, (42 U.S.C. Sections 7401, et seq.), the
Toxic Substances Control Act, (15 U.S.C. Sections 2601, et seq.),
each such Act as amended from time to time, or in the rules,
regulations and publications adopted and promulgated pursuant
thereto, or in the rules and regulations of the Occupational Safety
and Health Administration (OSHA) pertaining to occupational exposure
to asbestos, as amended from time to time, or in any other federal ,
state or local environmental law, ordinance, rule, or regulation now
or hereafter in effect;
b. No underground storage tanks, whether in use or not in use, are or
will be located in, on or any part of the Mortgaged Property;
c. All of the Mortgaged Property complies and will comply in all
respects with applicable environmental laws, rules, regulations, and
court or administrative orders;
d. there are no pending claims or threats of claims by private or
governmental or administrative authorities relating to environmental
impairment, conditions, or regulatory requirements with respect to
the Mortgaged Property; and
e. Borrower shall give immediate oral and written notice to Bank of its
receipt of any notice of a violation of any law, rule or regulation
covered by this Paragraph, or of any notice of other claim relating
to the environmental condition of the Mortgaged Property, or of its
discovery of any matter which would make the representations,
warranties and/or covenants herein to be inaccurate or misleading in
any respect.
Borrower agrees to and does hereby indemnify and hold Bank harmless from
all loss, cost, damage, claim and expense incurred by Bank on account of
(i) the violation of any representation or warranty set forth in this
Paragraph, (ii) Borrowers' failure to perform any obligations of this
Paragraph, (iii) Borrower's or the Mortgaged Property's failure to fully
comply with all environment laws, rules and regulations, or with all
occupational health and safety laws, rules and regulations, or (iv) any
other matter related to environmental conditions on, under or affecting
the Mortgaged Property. This indemnification shall survive the closing of
the Loan payment of the Loan, the exercise of any right or remedy under
any Loan Document, and any subsequent sale or transfer of the Mortgaged
Property, and all similar or related events or occurrences. However, this
indemnification shall not apply to any new Hazardous Materials first
stored, generated or placed on the Mortgaged Property after the
acquisition of title to the Mortgaged property by Bank through foreclosure
or deed in lieu of foreclosure or purchase from a third party after the
Loan has been paid in full. Borrower hereby releases and waives any future
claims against Bank for indemnity or contribution in the event Borrower
becomes liable for cleanup or other costs related to the Mortgaged
Property including without limitation under any applicable laws, rules,
regulations or court orders.
The Borrower shall furnish to Bank prior to closing appropriate
certifications of Borrower's architect, engineer, surveyor and/or other
appropriate persons (i) regarding the absence of Hazardous Materials on
the Mortgaged Property or in any structure or improvements constructed or
to be constructed on the Mortgaged property, (ii) regarding the absence of
any underground storage tanks, whether in use or not in use, in, on or
under any part of the Mortgaged Property, (iii) regarding compliance with
environmental laws, and (iv) that the Mortgaged Property is not located on
or near sites listed on the CERCLA National Priorities list, CERCLIS list
or applicable State environmental agency list of sites where Hazardous
Materials have been disposed. Bank has the right to require such
certificates from an engineer or consultant selected by Bank, the expense
of which shall be reimbursed by Borrower. Borrower shall obtain and
furnish to Bank similar certificates upon completion of construction.
In addition to other inspection rights of Bank, the Borrower shall and
hereby does grant and convey to the Bank, its agents, representatives,
contractors, and employees, an easement and license to enter on the
Mortgaged Property at any time and from time to time for the purpose of
making such audits, tests, inspections, and examinations, including,
without limitation, inspection of buildings and improvements, subsurface
exploration and testing and groundwater testing, as the Bank, in its sole
discretion, deems necessary, convenient, or proper to determine whether
the ownership, use and operation of the Mortgaged Property are in
compliance with the terms and conditions set forth in the Loan Documents
and with all federal, state, and local environmental laws, ordinances,
rules and regulations. Any tests or inspections made by Bank shall be for
Bank's purposes only and shall not be construed to create any
responsibility or liability on the part of Bank to Borrower or to any
other person or entity. Bank shall have no obligation to perform any such
audits, tests, inspections, or examinations, or to take any remedial
action. All the costs and expenses incurred by the Bank with respect to
any audits, tests, inspections, examinations, and interviews which the
Bank may conduct or take pursuant to this paragraph, including, without
limitation, the fees of any engineers, laboratories, and contractors,
shall be repaid by the Borrower, with interest, and shall be secured by
the Mortgage and the other Loan Documents.
12. EXPENSES: By Borrower's acceptance of the commitment, Borrower
unconditionally agrees to pay all expenses incurred by Bank in connection
with the underwriting, closing, servicing or collection of the Loan,
including, but not limited to, legal fees, including the fees of Bank's
counsel, appraisal fees, the fees of the Construction Consultant, all
title insurance and other title report fees and premiums, other insurance
premiums, survey costs, intangible taxes, note taxes, transfer taxes, all
recording costs, and all license and
Page 3
<PAGE>
permit fees, whether or not the Loan is closed. All such expenses will be
paid at the loan closing or, in the event that the loan does not close,
then upon the expiration of this Commitment.
13. OPINIONS OF COUNSEL: Bank shall be provided with opinions of counsel for
such persons and entities and covering such matters as Bank shall deem
necessary or desirable in connection with the Loan, including without
limitation, opinion of counsel to the Borrower and any Guarantors with
respect to the due authorization, execution and enforceability of the Loan
Documents. Without limitation to the foregoing, if the Collateral is
located in a state other than Alabama, Borrower will provide for local
counsel to give the Bank appropriate opinions as to the enforceability of
the Loan Documents in such state, local usury laws, and whether the Bank,
by making the Loan, will be considered to be "doing business" in such
state.
14. DOCUMENTATION: The title commitment (with copies of all exceptions to
title), the survey, and the soil and environmental reports must be
furnished to Bank at least 10 business days in advance of closing the
Loan.
The provisions of this Commitment are intended to serve only as a general
outline of the terms and conditions under which Bank will make the Loan.
The documentation to be executed in connection with the Loan shall be
prepared or approved by Bank's counsel, shall contain such terms and
conditions as the Bank deems necessary or desirable, and may, in the
Bank's sole discretion and without limitation, include a promissory note,
a loan agreement, a mortgage and security agreement, an assignment of
rents and leases, UCC financing statements, an assignment of any
management contracts, an assignment of construction and architect
contracts, lien subordination and indemnity agreements from the general
contractor(s) and the architect, guarantees (as applicable), and any other
documents deemed appropriate by Bank or its counsel. The costs of the
preparation of all documents shall be borne by the Borrower, whether or
not the Loan is closed.
16. DEFAULT: In addition to other events or circumstances that may be set
forth in the Loan documentation, and at the option of Bank, the following
shall be events of default under the Loan: (a) failure to pay when due or
to perform or comply with any of the (i) obligations or provisions under
the promissory note, (ii) obligations or provisions under any Loan
Document, or (iii) other obligations or indebtedness of Borrower to Bank,
now existing or hereafter incurred or arising, and whether direct or
indirect; (b) the general assignment by, judgment against or filing of
petition in bankruptcy by or against Borrower, or any general partner of
Borrower; (c) the filing of application in any court for a receiver for
Borrower, or any general partner of Borrower; or (d) the death,
incapacity, dissolution or liquidation of Borrower or any general partner
of Borrower.
20. MERGER OF PRIOR STATEMENTS; AMENDMENTS: No statements, agreements or
representations, oral or written, which may have been made to you or
Borrower or to any employee or agent of yours or Borrower's, either by
Bank or by any employee, agent or broker acting on Bank's behalf, with
respect to the Loan, shall be of any force or effect, except to the extent
stated in this Commitment, and all prior agreements and representations in
respect of the Loan are merged herein. This Commitment may not be (i)
changed except by written agreement signed by Borrower and Banks, or (ii)
assigned by Borrower by operation of law or otherwise, unless Bank shall
consent in writing to such assignment.
21. CANCELLATION: Bank may, at its option, terminate and cancel this
Commitment without further notice or obligation upon the occurrence of any
one or more of the following:
a. If all applicable conditions contained in this commitment have not
been met to Bank's satisfaction and the satisfactions of Bank's
counsel, and the Loan has not been closed, b the date specified in
the Commitment Letter; or
b. If any representation made in connection with, or as an inducement
to the issuance of this commitment or any extension of the Loan is
untrue or misleading in any respect; or
c. (illegible) respect to the Project, the Borrower, any Guarantor, the
Collateral, or any others
Page 4
<PAGE>
22. RESTRICTIOIN OF SECONDARY FINANCING AND SALE OF COLLATERAL: So long at
this Commitment or any part of (illegible) outstanding, the collateral
shall remain free and clear of all encumbrances, liens, mortgages,
security interests and secondary financing, except those approved in
advance in writing by Bank, and Borrower shall not and shall not allow or
suffer any other person or entity without the prior written consent of
Bank, to sell, transfer or convey all or any part of its interest in the
Collateral or any portion thereof. Unless otherwise agreed in writing by
Bank, the ownership of Borrower shall at all times remain unchanged.
The occurrence of any of the foregoing shall, at the option of Bank,
constitute grounds for terminating this Commitment and for accelerating
any and all sums unpaid under the Loan.
23. ASSIGNMENT: NO THIRD PARTY BENEFICIARIES: This Commitment may not be
assigned by Borrower Bank has the right at all times to assign the Loan
or any part thereof to third parties and to otherwise participate the Loan
or any part thereof to third parties. Monitoring, inspections and review
of financial information by Bank may not be relied upon by Borrower or any
other person or entity and shall be for the sole benefit of Bank. There
are no third party beneficiaries of this Commitment and no person or
entity other than Bank and Borrower shall be entitled to rely hereon or
benefit herefrom.
24. APPLICABLE LAW: JURISDICTION: The Borrower and Guarantors agree that this
Commitment and the Loan Documents shall be governed by and constituted
under the laws of the State of Alabama. Borrower and Guarantor hereby
acknowledge that (i) the negotiation, execution, and delivery of the Loan
Documents constitutes the transaction of business within the State of
Alabama, (ii) any cause of action arising under any of said Loan Documents
will be a cause of action arising from such transaction of business, and
(iii) Borrower and Guarantor understand, anticipate and foresee that any
action for enforcement of the Loan or the Loan documents may be brought
against them in the State of Alabama. To the extent allowed by law,
Borrower and Guarantor hereby submit themselves to jurisdiction in the
State of Alabama for any action or cause of action arising out of in
connection with the Loan or the Loan Documents, agree that venue for any
such action shall be in Jefferson County, Alabama, and waive any and all
rights under the laws of any state to object to jurisdiction or venue
within Jefferson County, Alabama. Notwithstanding the foregoing, nothing
contained in this paragraph shall prevent Bank from bringing any action or
exercising any rights against Borrower, any Guarantor, any security for
the Loan, or any of Borrower's properties in any other county, state or
jurisdiction. Initiating such action or proceeding or taking any such
action in any other state shall in no event constitute a waiver by Bank
of any of the foregoing.
25. SURVIVAL OF COMMITMENT: The terms and conditions of this Commitment shall
survive the closing of the Loan; provided, however, that if any of the
terms and conditions of this Commitment shall conflict with all of the
terms and conditions of the Loan Documents, the terms and conditions of
the Loan Documents shall prevail.
26. BORROWER-LENDER RELATIONSHIP: Nothing contained herein, or in any of the
documents contemplated hereby, shall be deemed to render the Bank on the
one hand, and the Borrower on the other hand partners or venturers for any
purpose.
27. PLACE OF CLOSING: The Loan shall be closed, and the Loan Documents shall
be executed in the State of Alabama.
28. RIDER: Additional provisions of these General Terms and Conditions, if any
are set forth below or on a Rider attached hereto and made a part thereof.
================================================================================
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<PAGE>
GEORGE R. REYNOLDS, JUDGE MICHAEL F. BOLIN, JUDGE
PROBATE COURT OF JEFFERSON COUNTY
BIRMINGHAM, ALABAMA 35263 BESSEMER, ALABAMA 35020
(205) 325-5420 (205) 481-4100
04/20/94
CASE/BOOK/FILE NUMBER: 9/405/4597 INSTRUMENT 340 PR
RECEIVED OF: BERKOWITZ AMOUNT $882.00
EAGLE SUPPLY INC. I CERTIFY THAT THIS DOCUMENT
COMPASS BANK WAS FILED WITH DATE, TIME AND
MTG. TAX: 825.00 GEORGE R. REYNOLDS
DEED TAX: JUDGE OF PROBATE
FEE AMT: 57.00
CHECK BATCH NBR 989 TELLER 12 12:28 P.M.
BY:
<PAGE>
CLOSING STATEMENT
Lender: Compass Bank
Borrower: Eagle Supply, Inc.
Date: April 20, 1994
Property: Snow Drive
Birmingham, Alabama
LOAN PROCEEDS $550,000.00
Plus Cash From Borrower $5,352.00
- -----------------------
Less Disbursement:
- ------------------
Land Title 1,070.00
(Insurance Premium)
Phase I Assessment-Reliance Letter 50.00
Berkowitz, Lefkovits, Isom 1,350.00
& Kushner
(Fees and Expenses, including
federal express, facsimile and
photocopying.)
Appraisal 2,000.00
Recording Fees 882.00
(Mortgage, Probate Judge, Jefferson County) ---------
Total Disbursements $5,352.00
NET PROCEEDS AVAILABLE TO BORROWER: $550,000.00
The foregoing statement has been examined and found to be correct, the
disbursement of the loan proceeds as above stated is hereby authorized and
directed. Receipt of the loan proceeds as above stated and a copy of this
statement are hereby acknowledge by Borrower. Berkowitz, Lefkovits, Isom &
Kushner, P.C. represents only the Lender in the within transaction and Borrower
acknowledges that no advice or certificates have been made to the Borrower with
regard to this Loan. If any of the costs or disbursements reflected above are
based upon incorrect information or if any additional amounts are needed to
close this loan in accordance with the terms of the loan commitment, Borrower
agrees to pay the same immediately upon demand.
This statement can be signed in two or more counterparts.
LENDER: BORROWER:
- ------- ---------
COMPASS BANK EAGLE SUPPLY, INC.
By:/s/ Laura R. Clarke By:/s/ Frederick Friedman
-------------------------- -----------------------------
Its: Sr. Com'l Loan Officer Its: Vice President
<PAGE>
STATE OF ALABAMA )
JEFFERSON COUNTY )
BORROWER'S CLOSING AFFIDAVIT
WHEREAS, EAGLE SUPPLY, INC., a Florida corporation, located at 1301 Fourth
Avenue, Tampa, Florida 33605 (the "Borrower"), has entered into an Agreement for
financing with COMPASS BANK (the "Lender") as of April 20, 1994, providing for a
mortgage loan (the "Loan") secured by a lien upon the real property described in
Exhibit "A" attached hereto and made a part hereof (the "Property"); and
WHEREAS, the following instruments, among others (the "Loan documents")
have this day been duly executed and delivered to the Lender by the Borrower
pursuant to the terms, provision and conditions of the Loan Agreement:
1. Promissory Note of even date herewith (the "Note") made by the Borrower
in the principal sum of Five hundred Fifty Thousand and 00/100 dollars
($550,000.00) and payable to the order of the Lender with interest at the rate
or rates therein provided; and
2. Future Advance Mortgage, Assignment of Rents and Leases and Security
Agreement (the "Mortgage") of even date herewith, from the Borrower to the
Lender, creating a lien on and security interest in the Property, securing the
payment of the Note.
NOW, THERFORE, the undersigned being first duly sworn, on oath,
represents, warrants, and state as follows:
1. There are no mechanics' or materialmen's liens, lienable bills, or other
claims constituting or that may constitute a lien on the Property, or any part
thereof.
2. The Property and the use which the Borrower contemplates therefor
comply with all applicable restrictive covenants, zoning ordinances, and
building codes, all applicable health and environmental laws and regulations,
and all other applicable laws, rules and regulation. The Borrower has obtained
all requisite zoning, utility, health, and operating permits from the
governmental authority or municipality having jurisdiction over the Property.
All engineering specifications with respect to the Property are within
applicable standards. The sanitary water supply, storm sewers, sanitary sewer
service, water lines, electrical and gas facilities are available to the
Property within the boundary lines of the Property, are sufficient to meet the
reasonable needs of the Property as it is intended to be used. None of the
Property is within a flood plain.
3. The Property is free and clear from all liens and security interests
except the lien and security interest created by the Mortgage and is not the
subject of any financing statement filed in any public office except for the
Mortgage.
4. The Property is free and clear from all leases.
5. No consent or approval of any regulatory body to the execution,
delivery, or performance of the Loan Documents is required by law, except as may
be specifically referred to therein.
6. The undersigned is aware of no suits, proceedings, or investigations
pending or threatened against or affecting the Borrower at law or in equity, or
before or by any governmental or administrative agency or instrumentality,
which, if adversely determined, would have a material adverse effect on the
Property.
7. There is no judgment, decree, or order of any court or governmental or
administrative agency or instrumentality which has been issued against the
Borrower and which has or may have any material adverse effort on the Property.
8. The execution and the delivery of the Loan Documents do not contravene
any law, order, decree, rule or regulation to which the Borrower or the Property
is subject.
9. The Borrower is solvent, is not bankrupt, is not contemplating nor has
recently contemplated bankruptcy, receivership, or reorganization (nor is there
any prospect of such), and there are no outstanding liens, suits, garnishments,
bankruptcies, or court actions which could render Borrower insolvent or
bankrupt.
<PAGE>
10. There has been no material adverse change, financial or otherwise, in
the condition of the Borrower or in any feature of the Loan, from that therefore
disclosed to Lender in writing or in other supporting data submitted therewith.
All payment and accounts with respect to the Property are current and are not in
default.
11. Unless otherwise specifically permitted in the Loan Documents, the
Borrower will not place any additional financing on the Property without the
prior written consent of Lender.
12. The execution and delivery by the Borrower of the Loan Documents will
not violate any indenture, agreement, or other instrument to which the Borrower
is a party or by which the Borrower or any of the Borrower's property is bound,
or be in conflict with, result in the breach of or constitute (with due notice
and/or lapse of time) a default under any such indenture, agreement, or other
instrument, or result in the creation or imposition of any lien, charge, or
encumbrance of any nature whatsoever upon any of the property or assets of the
Borrower, except as contemplated by the provisions of the Loan Documents, and no
action or approval with respect thereto by any third person (except as otherwise
specifically disclosed to Lender in the Loan Agreement and other supporting data
therewith) is required.
13. All documents necessary to authorize the Borrower to execute the Loan
Documents and to engage in any transaction or business in connection with which
the Loan is made have been duly authorized, executed, and filed with the
appropriate governmental authorities having jurisdiction over the Borrower and
the Property.
14. The Borrow hereby certifies that it has thoroughly reviewed the
provisions of the Note and the Mortgage and other Loan Documents executed and
delivered by the Borrower in connection with the Loan, that it has been advised
and represented by counsel of its own choice in said transaction and that it
understands and consents to the provisions of such instruments.
15. This affidavit is made by the undersigned for the purpose of inducing
the Lender to consummate and close the transactions contemplated by the Loan.
Executed and delivered this 20th day of April, 1994.
BORROWER:
EAGLE SUPPLY, INC.,
A Florida corporation
By: /s/Frederick Friedman, V.P.
----------------------------
Its: Vice President
STATE OF NEW YORK )
NY COUNTY )
I, the undersigned authority, a Notary Public in and for said County, in said
State, hereby certify that Frederick M. Friedman, whose name as Vice President
of Eagle Supple, Inc., a Florida corporation, is signed to the foregoing
BORROWER'S CLOSING AFFIDAVIT and who is known to me, acknowledged before me on
this day that, being informed of the contents of the BORROWER'S CLOSING
AFFIDAVIT, he, in his capacity as such officer and with full authority, executed
the same voluntarily for and as the act of said corporation on the day the same
bears date.
Given under my hand the 19th day of April, 1994.
/s/ Lucille Manno
-----------------------------
Notary Public
My Commission Expires 11/30/94
Lucille Manno
Notary Public, State of New York
No. 01MA4518395
Qualified in Suffolk County
Commission Expires 11/30/94
2
<PAGE>
EXHIBIT "A"
LEGAL DESCRIPTION OF PROPERTY
A parcel of land located in the Southwest 1/4 of the Northeast 1/4 of Section
27, Township 18 South, Range 3 West, Jefferson County, Alabama, more
particularly described as follows:
Commence at the Northwest corner of Section 27 , Township 18 South, Range 3 West
and run Easterly 2,084.08 feet along the North line of said section to a point
on the centerline of Oxmoor Road; thence right 91 (degrees) 47'45" and run
Southerly 469.97 feet along said centerline to a point of intersection with the
centerline extended of Snow Drive; thence left 91 (degrees) 47'45" and run
Easterly 1,418.92 feet along said centerline of Snow Drive to a point of
intersection with the centerline of a proposed 60-foot road right of way; thence
right 90 (degrees) 00'00" and run Southerly 695.54 feet along said centerline to
a point, said point being the point of beginning and the Southeast corner of a
tract of land conveyed to the United States Postal Service as recorded in Real
Volume 1524, page 419, in the Office of the Judge of Probate of Jefferson
County; thence continue Southerly along said centerline 272.23 feet to a point
on the centerline of a proposed 20 feet easement for drainage purposes; thence
right 90 (degrees) 00'00" and run Northerly 272.23 feet to a point on the South
line of said tract conveyed to the United States Postal Service; thence right 90
(degrees) 00'00" and run Easterly along the South line of said United States
Postal Service tract 450.51 feet to the point of beginning.
Situated in Jefferson County, Alabama.
3
Exhibit 10.5
SCHEDULE D
STATE OF FLORIDA ) MORTGAGE DEED - LONG FORM
)
ESCAMBIA COUNTY )
Know All Men by These Presents, That
H & R INVESTMENT COMPANY, an Alabama General partnership
for and in consideration of the sum of Four Hundred Eighty Thousand and
no/100--------DOLLARS, to it in hand paid by AmSouth Bank, N.A., a national
banking association a banking corporation under the Laws of Alabama, the receipt
whereof is hereby acknowledged, have granted, bargained and sold, and by those
presents do grant, bargain, sell, alien, remise, release, convey and confirm
unto the said AmSouth Bank, N.A., a national banking association, its successors
and assigns, forever, the following described real estate, situate, lying and
being in the County of Escambia, State of Florida, to-wit:
COMMENCE AT A CONCRETE MONUMENT AT THE SOUTHWEST CORNER OF BLOCK 7, AMENDED PLAT
OF BELL ACRES, A SUBDIVISION OF A PORTION OF SECTION 9, TOWNSHIP 2 SOUTH, RANGE
30 WEST, ESCAMBIA COUNTY, FLORIDA, ACCORDING TO THE PLAT RECORDED IN PLAT BOOK 2
AT PAGE 86 OF THE PUBLIC RECORDS OF SAID COUNTY; THENCE GO NORTH 15 DEGREES 42
MINUTES 24 SECONDS WEST ALONG THE WEST LINE OF SAID BLOCK 7 A DISTANCE OF
1431.02 FEET TO A CONCRETE MONUMENT AT THE NORTHWEST CORNER OF SAID BLOCK AND
THE SOUTH RIGHT OF WAY LINE OF MASSACHUSETTS AVENUE, THENCE GO NORTH 74 DEGREES
10 MINUTES 41 SECONDS EAST ALONG SAID SOUTH RIGHT OF WAY LINE A DISTANCE OF
385.40 FEET TO THE POINT OF BEGINNING; THENCE CONTINUE NORTH 74 DEGREES 10
MINUTES 41 SECONDS EAST A DISTANCE OF 248.91 FEET; THENCE TO SOUTH 15 DEGREES 44
MINUTES 37 SECONDS WEST A DISTANCE OF 283.25 FEET; THENCE GO NORTH 15 DEGREES 49
MINUTES 19 SECONDS WEST A DISTANCE OF 439.55 FEET TO A POINT OF CURVATURE;
THENCE GO NORTHEASTERLY ALONG A CURVE TO THE RIGHT HAVING A RADIUS OF 35.00 FEET
FOR AN ARC DISTANCE OF 54.98 FEET (CH.-49.50'; CH. BRG. =N29 (DEGREES) 10' 41"E)
TO THE POINT OF BEGINNING.
[Use of the terms "Mortgagor" and "Mortgagee" shall include singular or plural,
the masculine or the feminine, where appropriate, and shall also include, but
not be limited to, their heirs, assigns or successors in interest.)
TO HAVE AND TO HOLD the same, together with the tenements, hereditaments
and appurtenances thereunto belonging, and the rents and issue thereof, unto the
Mortgagee, its successors and assigns in fee simple, forever, the whole free
from all exemption and right of homestead.
And the said Mortgagor, for itself and its successors, its heirs, legal
representatives, successors and assigns, hereby convenant with the said
Mortgagee, its successors and assigns, that the said Mortgagor is indefeasibly
seized of said land in fee simple; that the said Mortgagor has full power and
lawful right to convey the same in fee simple as aforesaid; that it shall be
lawful for the said Mortgagee, its successors and assigns, at all times
peaceably and quietly to enter upon, hold, occupy and enjoy said land and every
part thereof; that the said land and every part thereof is free from all
encumbrances; that the said Mortgagor, its heirs, legal representatives,
successors and assigns, will make such further assurances to perfect the fee
simple title to said land in said Mortgagee, its successors and assigns, as may
reasonably be required; and that the said Mortgagor does hereby fully warrant
the title to said land, and every part thereof, and will defend the same against
the lawful claims of all persons whomsoever.
This instrument was prepared by:
AmSouth Bank, N.A.
P.O. Box 389; Gadsden, Alabama 35902
Address
<PAGE>
The foregoing conveyance is a mortgage to secure the payment of the
following obligations now in existence, or now being made or incurred, to-wit:
One promissory note in the principal sum of FOUR HUNDRED EIGHTY THOUSAND AND
NO/100 DOLLARS ($480,000.00) with interest from date at the rate of ten and
one-half percent (10.50%) per annum. Said principal and interest to be paid in
120 monthly installments the first 119 installments each in the sum of FOUR
THOUSAND, SEVEN HUNDRED EIGHTY-NINE and 43/100 DOLLARS ($4,789.43) with the
final installment in the sum of THREE HUNDRED SIXTY THOUSAND, FIVE HUNDRED
TWENTY-EIGHT AND 86/100 DOLLARS ($360,528.86). Each installment shall be due and
payable on the 27th day of each month with the first installment due on the 27th
day of March, 1987.
And also, to secure the payment of any and all notes, liabilities, and
obligations of the mortgagors, or either of them, to the mortgagee, its
successors or assigns, whether as maker, endorser, guarantor or otherwise, and
whether such notes, liabilities or obligations, or any of them, be now in
existence or accrue or raise hereafter, or be now owned or held by the
mortgagees, or be acquired hereafter, it being the intent and purpose of the
mortgagors to secure, by the mortgage, all notes, claims, demands, liabilities
and obligations which the mortgagee, its successors or assigns, may have, hold
or acquire at any time during the life of this mortgage against the mortgagors,
or either of them. Provided, that the total of all amounts secured hereby shall
not ceed at any one time the sum of FOUR HUNDRED EIGHTY THOUSAND AND
NO/100--------------DOLLARS, in the aggregate; and provided further that all
such notes, claims, demands or liabilities and obligations secured hereby be
incurred or arise or come into existence either on or prior to the date of this
mortgage, or on or before February 23, 1987 or after the date of this mortgage.
AND THE SAID MORTGAGOR, for itself and its successors, its heirs, legal
representatives, successors and assigns, does hereby covenant and agree:
1. To pay all and singular the principal, the interest and other sums of
money payable by virtue of the said above mentioned notes and other obligations
and this deed, each and every, promptly on the days respectively, the same
become due.
2. To pay all and singular the taxes, assessments, levies, liabilities,
obligations and encumbrances of every nature and kind now on said property, or
that hereafter may be levied or assessed thereupon, each and every of them; and
if the same, or any part thereof, be not promptly paid when due and payable,
said Mortgagee, its successors, heirs or assigns, may at any time pay the same,
without waiving or affecting the option to foreclose this mortgage by reason of
such default, or any right hereunder, and every payment so made shall bear
interest from the date thereof at the rate of 12.50 per cent, per annum, and all
such payments, with interest as aforesaid, shall be secured by the lien hereof.
3. To pay all and singular the costs, fees, charges and expenses, of every
nature and kind, including the cost of an abstract of title to the above
described lands found to be convenient or expedient in connection with any suit
for the foreclosure of this mortgage, and also including all costs and expenses
of the said suit, including a reasonable attorney's fee, to the attorney of the
complaintant foreclosing, which costs and fees shall be included in the lien of
this mortgage and in the sum decreed upon foreclosure, because of the failure on
the part of the said Mortgagor, its heirs, legal representatives, successors or
assigns, to perform, comply with and abide by all or any of the covenants,
conditions and stipulations of said promissory notes and other obligations, and
this mortgage, and in the foreclosure of this mortgage and in collecting the
amount secured hereby, each and every such payment shall bear interest from date
thereof until paid at the rate of 12.50 per cent, per annum, and such payments
with interest thereon as aforesaid, shall be secured by the lien hereof.
4. To permit, commit or suffer no waste, impairment or deterioration of
said property, or any part thereof.
5. To keep the buildings, now or hereafter on said land, insured against
fire and tornado in a sum not less than FOUR HUNDRED EIGHTY THOUSAND AND
NO/100--------------------DOLLARS, ($480,000.00) in a company or companies to be
designated by said Mortgagee, its successors or assigns, loss, if any, payable
to the Mortgagee, as its interest may appear, and in the event any sum of money
becomes payable under such policy or policies, the Mortgagee, its successors, or
assigns, shall have the option to receive and apply the same on account of the
indebtedness secured hereby, or to permit said Mortgagor to receive and use it,
or any part thereof, for the purpose of improving said land, without thereby
waiving or impairing any equity, lien or right under or by virtue of this
mortgage; and said Mortgagee, its successors or assigns, may place and pay for
such insurance, or any part thereof, without waiving or affecting the option to
foreclose, or any right hereunder, and each and every such payment shall bear
interest from date thereof until paid at the rate of 12.50 per cent, per annum,
and all such payments, with interest as aforesaid, shall be secured by the lien
hereof. The Mortgagee, its successors or assigns is empowered to adjust,
compromise, submit to arbitration and appraisement and collect, and apply to the
reduction of said indebtedness, any claim or loss arising under any insurance
policy covering said premises; and to that end the Mortgagee, its successors and
assigns, are irrevocably appointed the attorney in fact of the party of the
first part to execute and deliver such receipts, releases and other writings as
shall be requisite to accomplish such adjustment, compromise, arbitration,
appraisement or collection.
<PAGE>
6. That if any of the said installments of interest due or payable by the
terms of said promissory note or other obligations or other sum of money due or
payable by virtue of this instrument, be not promptly and fully paid when the
same become severally due and payable, without demand or notice, or if each and
every the stipulations, covenants, agreements and conditions of the said
promissory notes or other obligations, and of this deed, any or either, are not
duly and promptly performed, complied with and abided by, the said entire
aggregate sum mentioned in the said promissory notes and other obligations then
remaining unpaid, with interest accrued, shall become due and payable forthwith
or thereafter at the option of the Mortgagee, its successors or assigns, as
fully and completely as if said aggregate sum and accrued interest were
originally stipulated to be paid on such day, anything in the said promissory
notes or other obligations or herein, to the contrary notwithstanding.
7. It is further covenanted and agreed by said parties in the event of a
suit being instituted to foreclose this mortgage, the Mortgagee, its successors
or assigns, shall be entitled to apply at any time pending such foreclosure suit
to the Court having jurisdiction thereof for the appoint of a Receiver of all
and singular the mortgaged property, and of all the rents, income, profits,
issues and revenues thereof, from whatsoever source derived; and thereupon it is
hereby expressly covenanted and agreed that the Court shall forthwith appoint a
Receiver of said mortgaged property, all and singular, and of such rents,
income, profits, issues and revenues thereof, from whatsoever source derived;
with the usual powers and duties of Receivers inlike cases; and such appointment
shall be made by such Court as a matter of strict right to the Mortgagee, its
successors or assigns, and without reference to the adequacy or inadequacy of
the value of the property hereby mortgaged, or to the solvency or insolvency of
the Mortgagor, its heirs, legal representatives, successors or assigns and that
such rents, profits income, issues and revenues shall be applied by such
Receiver to the payment of the mortgage indebtedness, costs and charges,
according to the order of such Court.
8. To perform, comply with and abide by each and every the stipulations,
agreements, conditions and covenants in said promissory note and other
obligations and in this deed set forth.
IN WITNESS WHEREOF, they have hereunto set their hands and seals this 25th
day of February, A.D, 1987.
Signed, sealed and delivered H & R INVESTMENT COMPANY,
in the presence of: an Alabama General Partnership
/s/ Sheila Bishop J F Brown /S/ Henry Culp, Jr.
- -------------------------------- --------------------------------(Seal}
Henry Culp, Jr., General Partner
/s/ Sheila Bishop J F Brown /S/ J. Ralph Culp
- -------------------------------- --------------------------------(Seal}
J. Ralph Culp, General Partner
---------------
State of ALABAMA )
)
County of ETOWAH )
Before the subscriber, a Notary Public, personally appeared Henry Culp,
Jr., and J. Ralph Culp, as General Partners of H & R Investment Company, an
Alabama General Partnership to me well known, and known to me to be the
individuals described in and who executed the foregoing instrument and
acknowledged that they executed said instrument freely and voluntarily, for the
uses and purposes therein set forth.
Given under my hand and official seal, this 25th day of February A.D.
1987.
/S/ Kay Works
[SEAL] --------------------------------
Notary Public
My Commission expires 9-29-87
<PAGE>
CONTRACT FOR PURCHASE AND SALE
This Contract is made as of this 4th day of May, 1987, by and between H &
R INVESTMENT COMPANY, an Alabama general partnership composed of Henry J. Culp,
Jr., and J. Ralph Culp as its sole general partners ("Seller"), having its
address at Lake Rhea Road, Post Office Box 289, Attalla, Alabama 35954 and Eagle
Supply, Inc., a Florida corporation, having its principal office at 1301 4th
Avenue, Tampa, Florida 33675 ("Purchaser")
W I T N E S S E T H:
In consideration of the mutual covenants contained herein, and other good
and valuable consideration, the receipt and sufficiency of which are hereby
acknowledged, the parties hereby agree as follows:
Section 1. Purchase and Sale of Property
Subject to and in accordance with the terms and provisions of this
Contract, Seller agrees to sell and Purchaser agrees to purchase (i) all of that
tract or parcel of land located at 535 Massachusetts Avenue in the W Street
Industrial Park in Pensacola, Escambia County, Florida, more particularly
described in Schedule A attached hereto and made a part hereof (together with
any and all improvements, and plants, trees and shrubbery located thereon now
and through closing); (ii) the Yale overhead crane more particularly described
in Schedule A; and (iii) all other rights, licenses and easements appurtenant to
such properties and improvements (the crane and all of the foregoing land,
improvements and other items being hereafter collectively called the
"Property").
Section 2. Purchase Price.
The purchase price for the Property is Six Hundred Forty-Six Thousand
($646,000.00) Dollars.
Section 3. Representations.
Seller makes the following representations to Purchaser:
(a) There are no existing easements, rights of way or private restrictions
affecting the Property that will adversely affect or prohibit the use of the
Property for a warehouse and distribution facility except as otherwise disclosed
in the commitment for title insurance, the survey, the deed and the mortgage
delivered by Seller to Purchaser contemporaneously with this contract.
(b) Seller has full power and authority to enter into this Contract and to
perform the transactions contemplated hereby and to incur the obligations herein
contained.
(c) This Contract and the provisions hereof constitute legal and binding
obligations of Seller enforceable in accordance with the terms stated.
(d) Neither the execution and delivery of this Contract nor the
consummation of the transactions contemplated hereby nor compliance by Seller
with any of the provisions hereof will conflict with or result in a breach of or
default under any of the terms, conditions or provisions of any agreement or
instrument to which Seller or any of its partners is a party or by which Seller
or any of its partners is bound or of any law or governmental or administrative
regulation or restriction applicable to Seller or any of its partners.
(e) There are no actions, suits, claims, proceedings, litigation or
investigations pending or threatened against Seller or any of the Property, at
law or in equity, or in arbitration or
<PAGE>
before or by any federal, state, municipal or other governmental instrumentality
that relate to this Contract or any of the Property or that could, if continued,
adversely affect Seller's ability to sell the Property to Purchaser.
(f) Seller currently has, and at the time of closing will have, marketable
title to the Property free and clear of any and all liens, charges and
encumbrances of any kind or nature except as otherwise specified in this
Contract.
(g) There are no pending condemnations or similar proceedings affecting
the property and Seller has not received any notice, and has no knowledge, that
any such proceedings are contemplated or pending at the time of closing.
(h) No party other than Purchaser has any right or option to acquire the
Property or any portion thereof.
(i) There are no assessments which have been made against of which affect
the Property which have not heretofore been assessed and paid, except ad valorem
taxes for the year 1987 which are not yet due and payable. Taxes for the year of
closing shall be prorated pursuant to the provisions of Section 6(b) below.
(j) Seller is not aware of any proposed zoning of the Property.
(k) To the best of Seller's knowledge, (i) Seller has complied with all
applicable laws, ordinances, statutes, regulations, rules and restrictions
pertaining to and affecting the use, operation and development of the Property
(including, but not limited to, local building, health, environmental and zoning
ordinances and regulations and rules, and all other applicable rules and
regulations of all governmental authorities having jurisdiction), and (ii) there
are no violations of any of the foregoing that affect the Property.
(l) All payments for utilities supplied to the Property that are due and
payable prior to closing have been paid in full as of the date of this Contract.
All other utility expenses shall be prorated in accordance with paragraph (b) of
Section 6 of this Contract.
(m) All utilities that are required for the full and complete occupancy
and use of the Property, including, without limitation, electricity, sanitary
sewers, storm sewers and drainage, water, telephones and similar systems, have
been connected to the Property and are in good working order. All easements or
licenses encumbering the Property presently required in connection with such
utilities have been granted, and all charges therefor, including, but not
limited to, connection fees or "tie-in" charges now due and payable, have been
fully paid by Seller. Seller knows of no other or further easements, licenses or
charges that will be required in connection with such utilities.
(n) The Property is wholly located within the area in which the
improvements and the use are permitted. The Property is not located in any
conservation or historic district, or in an area that has been identified by the
Secretary of Housing and Urban Development as having special flood hazards.
(o) All access and ingress and egress to and from the Property is by
public streets and roads. Any permission, authorization or consent required to
make the existing curb cuts serving the Property has been obtained. All parking
facilities required in connection with the present use of the Property are
located entirely within the boundaries of the Property. Seller
-2-
<PAGE>
has no knowledge of any fact or facts that would require Purchaser to grant any
easement or license for the use thereof on account of the development of
adjacent or nearby real property.
(p) To the best of Seller's knowledge soil and subsurface conditions of
the Property are satisfactory for the use thereof as a warehouse and
distribution facility and the parking lot, sidewalks, storm drainage systems,
roofs, plumbing systems, HVAC systems, fire protections systems, electrical
systems, exterior siding and doors, landscaping, irrigation systems and all
structural components of the Property are in good condition and, where
applicable, good working order, ordinary wear and tear excepted.
(q) The Property has not been preferentially assessed for tax purposes as
being used for agricultural or timber purposes or as qualified open-space land,
so that no future tax assessments or impositions may be made against the
Property for years prior to 1987. In addition, the Property is not currently
benefitted by any special tax abatement or categorization.
(r) In connection with the operation and use of the Property, there are no
incinerators, septic tanks or cesspools on the Property, all waste in discharged
into a public sanitary sewer system, and no pollutants are discharged from the
Property, directly or indirectly, into any body of water, either by Seller or,
to the best of Seller's knowledge, any tenant of the Property.
(s) During Seller's ownership of the Property, the Property has not been
used for the storage, manufacture or disposal of hazardous or toxic substances
or wastes, as such terms are defined in applicable laws and regulations, and, to
the best of Seller's knowledge, the Property has not been used for such purposes
prior to Seller's ownership. No such hazardous or toxic substances are currently
used in connection with the operation of the Property, other than cleaning
agents, insecticides and similar substances customarily utilized by building
maintenance personnel. There is no ground water contamination on the Property or
potential of ground water contamination from neighboring property.
Section 4. Survey
Seller should pay the cost of the survey attached hereto as Schedule B and
incorporated herein by reference.
Section 5. Title and Objections to Title.
Seller shall pay all premiums and charges for an owner's policy of title
insurance in the full amount of the purchase price, insuring Purchaser's
marketable fee simple title to the Property, free from all liens and
encumbrances of any nature whatsoever, except the lien of the mortgage to be
assumed by Purchaser as hereinafter provided, real property taxes and
assessments for the year of closing and subsequent years, the Restrictive
Covenants as recorded in OR Book 2270, page 672-674, Public Records of Escambia
County, Florida and the easement and building setback line as shown on
subdivision plat recorded in Plat Book 13, page 42 of the Public Records of
Escambia County, Florida.
Section 6. Closing.
(a) Simultaneously with the execution of this Contract, Seller and
Purchaser are executing a Contract for the sale of assets of Seller's business
located on the Property. Such contract for the sale of assets is herein called
the "Asset Purchase Contract". Purchaser and Seller shall close the sale
contemplated by this Contract simultaneously with the closing of
-3-
<PAGE>
the Asset Purchase Contract at a location in Escambia County, Florida to be
determined by Purchaser on the date that this Contract and the Asset Purchase
Contract are executed by all parties thereto.
(b) The following items shall be adjusted and prorated between Seller and
Purchaser as of midnight preceding the date of closing:
(i) Ad valorem taxes and assessments for the year of closing. If the
amount of taxes for the year of closing has not been determined,
then the ad valorem taxes for the Property for the preceding
calendar year shall be used to calculate such prorations, with known
changes in valuation or millage being applied.
(ii) Interest due under the terms of the mortgage to be assumed as
hereafter provided.
All of the prorated items noted above shall be an adjustment to the amount of
the cash due from Purchaser at closing. In the event the actual amount of any
taxes or other costs should vary from estimates used at closing to prorate such
item or items by more than Five Hundred Dollars ($500.00), then the parties
shall reprorate such amounts based on the actual cost thereof within ten (10)
days following request by either party.
Seller shall notify the utility companies furnishing services to the
Property including without limitation, electricity, gas, telephone, water and
sewer, that the billing thereof to the Seller shall be discontinued on the day
of closing in which event, Purchaser shall make arrangements to have such
billings charged to Purchaser commencing with the day after closing and Seller
shall pay all charges billed with respect to such utilities for the period up to
and including the closing promptly after receipt of such bills.
Except for those items to be prorated as provided above and except for the
mortgage to be assumed by Purchaser as hereinafter provided, Seller shall pay at
or prior to closing all accounts payable that constitute or could constitute a
lien on the Property which are outstanding at or prior to closing and shall
satisfy or obtain a release of all other outstanding liens, obligations and
encumbrances affecting the Property.
(c) At or before closing Seller shall pay for the cost of recording any
corrective or curative documents needed to clear Seller's title to the Property,
the cost of the survey described in Section 4, the cost of documentary stamps
and surtax required to be affixed to or paid in connection with the deed, and
the premium for the title insurance policy. Purchaser shall pay for recording
the deed of conveyance. Each party shall pay its own attorneys' fees.
(d) At or before the closing, Seller shall deliver to Purchaser the
following documents (all of which shall be duly executed and acknowledged where
required):
(i) General Warranty Deed, conveying good and marketable title to
the Property.
(ii) Seller's affidavit in the form annexed hereto as Schedule C.
(iii) Seller's affidavit dated as of the closing, stating, under
penalty or perjury, Seller's United States taxpayer identification
number, and that Seller is not a "foreign person" as defined in
Section 1445(f)(3) of the Internal Revenue Code of 1954, as amended,
and otherwise in the form prescribed by the Internal Revenue
Service.
-4-
<PAGE>
(iv) Such other documents as shall be reasonably required by
Purchaser's attorneys or by any title insurance company as a
condition to insuring Purchaser's title to the Property free of
exceptions other than as provided herein.
(e) Simultaneously with Seller's tender of all documents, instruments and
other matters required at closing, Purchaser shall pay Seller the purchase price
in the following manner:
(i) Purchaser may assume Seller's existing mortgage to AmSouth Bank,
N.A., a national banking association, a copy of which is annexed hereto as
Schedule D, having an outstanding principal balance at closing of approximately
$480,000. It shall be a condition of such assumption that no other debts of
Seller shall be secured by such mortgage.
(ii) Purchaser shall pay the balance of the purchase price in cash
or by cashier's check or other current funds, subject to adjustment and
proration as described in the other provisions of this Contract.
Section 7. Attorneys' Fees.
Notwithstanding anything in this Contract to the contrary, in the event of
any dispute between the parties with respect to this Contract, the prevailing
party shall be entitled to receive from the other party the prevailing party's
attorneys fees, court costs and expenses, including all fees, costs and expenses
incurred out of court, in the trial court, in any appeals, and in bankruptcy or
administrative proceedings.
Section 8. Notices.
Wherever any notice is required or permitted hereunder, such notice shall
be in writing and shall be delivered in person or sent by U. S. registered or
certified mail, return receipt requested, postage prepaid, to the addresses set
out below or at such other addresses as may be specified by written notice
delivered in accordance herewith:
If to the Seller: H & R Investment Company
Post Office Box 289
Attalla, Alabama
Attention: Mr. Henry J. Culp, Jr.
With copy to: Mr. Jackson M. Payne
Leitman, Siegal, Payne & Campbell, P.C.
425 First Alabama Bank Building
417 N. 20th Street
Birmingham, Alabama 35203
If to Purchaser: Eagle Supply, Inc.
1301 4th Street
Tampa, Florida 33675
Attention: Mr. Robert L. Noojin
With copies to: Ms. Ruth Barnes Himes
Mr. Nathaniel L. Doliner
Post Office Box 3239
One Harbour Place
Tampa, Florida 33601
and
-5-
<PAGE>
Mr. Frederick M. Friedman
122 E. 42nd Street, Suite 606
New York, N.Y. 10168
Notice mailed as herein provided shall be deemed effectively given on the date
of receipt of such notice.
Section 9. Brokers.
Seller hereby represents that Seller has not discussed this Contract or
the subject matter thereof with any real estate broker, agent or salesman, so as
to create any legal right in any such broker, agent, or salesman to claim a real
estate commission or similar fee with respect to the purchase or sale of the
Property contemplated by this Contract. Seller hereby agrees to indemnify
Purchaser and hold Purchaser harmless from any and all claims for any real
estate commissions or similar fees arising out of or in any way connected with
any claimed agency relationship with the Seller and relating to the purchase and
sale of Property contemplated by this Contract. Purchaser hereby represents that
Purchaser has not discussed this Contract or the subject matter thereof with any
real estate broker, agent or salesman, so as to create any legal right in any
such broker, agent, or salesman to claim a real estate commission or similar fee
with respect to the purchase or sale of the Property contemplated by this
Contract. Purchaser hereby agrees to indemnify Seller and hold Seller harmless
from any and all claims for any real estate commissions or similar fees arising
out of or in any way connected with any claimed agency relationship with the
Purchaser and relating to the purchase and sale of Property contemplated by this
Contract.
Section 10. Miscellaneous.
(a) This contract shall be construed and interpreted under the laws of the
State of Florida.
(b) No failure of either party to exercise any right given hereunder or to
insist upon strict compliance by either party with its obligations hereunder
shall constitute a waiver of either party's rights to demand exact compliance
with the terms hereof.
(c) This Contract contains the entire agreement of the parties hereto. No
amendment or modification to this Contract shall be binding on any of the
parties to this Contract unless such amendment is in writing and signed by the
party to be bound.
(d) This Contract shall be binding upon and shall inure to the benefit of
the parties hereto and their respective successors, heirs, personal
representatives and assigns, and the provisions, representations and warranties
in this Contract shall survive the closing.
(e) Time is of the essence of this Contract.
(f) Possession of the Property shall be delivered by Seller to Purchaser
no later than the date of closing.
(g) The "Effective Date" of this Contract shall be the date this agreement
is signed by all parties.
(h) Anything in this Contract to the contrary notwithstanding, this
Contract and the Asset Purchase Contract are interdependent. Neither contract
shall be deemed to have closed until all conditions precedent to the closing of
both contracts have been satisfied.
(i) Seller has not breached and shall not breach any of its
representations, warranties or covenants set forth in the Mortgage Deed, dated
February 25, 1987, from Seller to AmSouth
-6-
<PAGE>
Bank, N.A., which is secured by the Property (the "Mortgage"). The original
principal amount secured by the Mortgage was $480,000.00 and the present balance
of the debt secured by the Mortgage is $478,955.46. Seller represents that the
Mortgage secures no other debts. Seller covenants that it shall neither (1)
increase the amount of the aforementioned debt nor (2) permit the Mortgage to
secure any other debts. Based on Seller's representations and covenants in this
Section 10(i), Purchaser represents that following closing of the sale and
purchase of the Property, Purchaser shall apply to assume the Mortgage and in
connection therewith, Purchaser shall furnish such information as AmSouth Bank,
N.A. may reasonably request to consider such application, and (3) Purchaser
shall hold Seller harmless as to the Mortgage with respect to liabilities
thereon accruing after the closing.
IN WITNESS WHEREOF, each of the parties hereto has signed and sealed this
Contract in quadruplicate on the day and year set forth below.
Signed, sealed and delivered SELLER:
in the presence of:
H & R INVESTMENT COMPANY,
an Alabama General Partnership
By: /S/ Henry Culp, Jr.
- -------------------------------- ----------------------------(SEAL)
As its general partner
and
By:/S/ J. Ralph Culp
- -------------------------------- ----------------------------(SEAL)
As to Both As its general partner
PURCHASER:
EAGLE SUPPLY, INC.
a Florida corporation
By:/S/ Robert L. Noojin
- -------------------------------- -----------------------------(SEAL)
Robert L. Noojin
As its President
- --------------------------------
(CORPORATE SEAL)
-7-
Exhibit 10.6
LEASE
THIS AGREEMENT is made this 1 day of May, 1984, by and between EAGLE
HOLDING, INC. (herein called "Landlord"), and Eagle Supply, Inc. (therein called
"Tenant").
W I T N E S S E T H:
In consideration of the rent to be paid by Tenant and in consideration of
the performance by Tenant of the covenants and agreements by it to be kept and
performed under this agreement, Landlord hereby demises, leases and lets to
Tenant and Tenant hires and takes from Landlord the property located in Broward
County, Florida, more particularly described on Schedule A annexed hereto and
made a part hereof by reference, upon the following terms, covenants and
conditions. The real property and the building hereby leased are herein
sometimes called "the premises."
1. Term. The term of this lease shall be for a period of fifteen (15) years
commencing on the date hereof.
2. Rental.
(a) Minimum Base Rental. Tenant covenants and agrees to pay minimum
base rent for the premises during the term of this lease in the aggregate amount
of One Million Four Hundred Fifty Thousand Dollars ($1,450,000.00), which sum
shall be payable in equal monthly installments of Eight Thousand Fifty-five and
55/100 ($8,055.55) each.
(b) Additional Rent. In addition to the amounts payable as minimum
base rents under subparagraph (a), Tenant shall pay Landlord as additional rent
an amount equal to the interest paid by Landlord on its debt service related to
the bond financing described in the Trust Indenture dated as of May 1, 1984
between Broward County and First National Bank of Florida (herein call the
"Trust Indenture"). Landlord shall advise Tenant on or before the tenth (10th)
day of each month of the amount paid by Landlord in the preceding month and
Tenant shall pay such additional rent for the land and buildings within ten (10)
days of Tenant's receipt of such notice from Landlord.
(c) Tenant shall also pay all sales or use taxes imposed by the State
of Florida or any other governmental unit upon all rental payments due under
this lease.
(d) All minimum base rental payments due from Tenant shall be payable
in currency of the United States of America on the first day of each month
during the term of this lease in advance, without demand, at the address
designated for the giving of notices to Landlord under this lease.
3. Taxes, Assessments and Utility Charges.
(a) Tenant shall pay, prior to delinquency, all real estate taxes and
other charges and assessments, general and special, foreseen and unforeseen,
that may be levied or assessed against the premises during the term of this
lease; provided, however, Tenant shall have the right, at its own cost, to
initiate and prosecute any proceeding permitted by law for contesting the
validity or amount of taxes assessed to our levied upon the premises and
required to be paid by the Tenant hereunder, if in connection therewith, Tenant
shall insure, by injunction or otherwise, that the premises shall not be sold
for non-payment of taxes as a result of or during such tax consent.
(b) Tenant shall pay all taxes, assessments and charges due, levied or
assessed against any personal property located on the premises.
<PAGE>
(c) Tenant shall pay all charges for utilities and services furnished
to the premises (whether determined by separate meter or otherwise), including
but not limited to, all charges for sewage disposal, janitorial services,
electricity, telephone, water and gas or other fuel furnished to or consumed
upon the premises, and for all garbage disposal and pick-up services furnished
to the premises.
4. Use and Appearance. Tenant shall use the premises only for its lawful
business purposes. Tenant agrees to abide by and conform to all zoning
regulations, building codes or other ordinances, laws, rules, and regulations
imposed by any governmental authority, or any other authority having
jurisdiction over the premises or Tenant's use thereof.
5. Maintenance and Repairs. During the term of this lease, Tenant shall, at
its own cost and expense, keep and maintain all portions of the premises in good
repair and condition, including, without limitation, the repair and replacement,
where needed, of all structural components, doors, windows, plate glass,
plumbing, air conditioning, heating and ventilating systems and equipment and
all other items.
6. Insurance.
(a) Tenant shall procure and maintain fire, windstorm, and extended
coverage insurance for the full replacement value of the building and permanent
improvements located on the premises, insuring Landlord and Tenant as their
interests may appear against any loss or damage by fire, flood, windstorm, or
other hazards and against loss or damage as a result of malicious mischief and
theft. At Landlord's request, Tenant shall also cause Landlord's mortgagee to be
an insured party under such policy or policies as and to the extent required by
the terms of such mortgage.
(b) Tenant may procure and maintain all insurance which it deems
necessary for its protection against loss or damage to any of its personal
property, leasehold improvements and trade fixtures on the premises.
(c) Tenant shall also procure and maintain in force at all times
during the term of this lease general liability insurance insuring Landlord and
Tenant (and naming them both in the policy) against any liability whatsoever
occasioned by any accident on or about the premises or any appurtenance thereto,
in minimum amounts of not less than $1,000,000.00 with respect to bodily injury
of any one person, $3,000,000.00 per occurrence for two or more persons' death
and bodily injury and $5,000,000.00 for property damage. Tenant shall also
provide and maintain all worker's compensation insurance required by the laws of
the State of Florida. Any or all of the insurance required hereunder may be
provided by blanket policies now or hereafter maintained by Landlord within
thirty (30) days of the commencement date of this lease and a renewal
certificate shall be furnished to Landlord no less than thirty (30) days prior
to the expiration of each policy coverage period during the term hereof.
(d) All insurance policies required to be carried by Tenant under this
lease shall be provided by financially responsible insurers qualified to do
business in Florida and of recognized standing and contain a clause that the
insurer will not cancel or change the insurance coverage without first giving
Landlord and the Lessor and Trustee described in the Trust Indenture issued in
connection with Landlord's bond financing, at least ten (10) days' prior written
notice.
-2-
<PAGE>
7. Trade Fixtures and Equipment. Tenant shall have the right to install on
the premises such equipment, fixtures and machinery as it sees fit, and title
thereto shall remain in Tenant and all such personal property and trade fixtures
or any kind and nature that may be located or placed on the premises by Tenant.
Tenant shall have the right to remove any such equipment, fixtures or machinery
at any time during the term of this lease provided Tenant repairs any damage
caused by such removal.
8. Acceptance of Premises and Assumption of Risk. Tenant has previously
occupied the premises and accepts the premises in its present condition, "as
is". Landlord expressly makes no representation or warranties as to the fitness
of the premises for any particular purpose. Further, neither Landlord nor the
Lessor or Trustee under the Trust Indenture shall be liable to Tenant or its
customers, licensees, agents, guests or employees or any other person on the
premises for any injury or damages to its, his or their persons or property by
any cause whatsoever, including but not limited to, construction defects, water,
rain, sleet, fire, storms, negligence and accidents, breakage, stoppage, or
leaks of gas, water, heating, sewer pipes, boilers, wiring or plumbing or any
other defect in, on or about the premises. Tenant expressly assumes all
liability of or on account of any such injury, loss or damage to persons or
property upon the premises during the term of this lease, including any
attorneys' fees incurred by Landlord as a result thereof.
9. Tenant's Improvements. Tenant may construct, install or otherwise make
any alterations or improvements to the premises that Tenant deems necessary or
desirable for its business without first obtaining Landlord's express written
consent thereto, providing no liens shall attach to the premises as a result
thereof and further provided that all permanent or structural alterations shall
be made in a manner consistent with all applicable laws, regulations and
ordinances relating thereto. It is expressly understood and agreed that Landlord
is not requiring Tenant to make any such alterations to the premises, and no
such work by Tenant shall be deemed an improvement in accordance with an
agreement between the parties, within the meaning of the Florida Mechanics' Law.
All contractors, subcontractors, mechanics, laborers, materialmen, and others
who perform any work, labor or services, or furnish any materials, or otherwise
participate in the improvement of the premises shall be and are hereby given
notice that Tenant is not authorized to subject Landlord's interest in the
premises to any claim for mechanics', laborers' and materialmen's liens, and all
persons dealing directly or indirectly with Tenant shall look solely to Tenant
for payment.
Any and all improvements constructed on the premises by Tenant shall be
deemed to be the property of Tenant at all times during the term of this lease;
provided, however, that upon expiration of this lease or upon its earlier
termination for any reason whatsoever, title to all such improvements remaining
on the premises shall vest in Landlord automatically without obligation on the
part of Landlord to make any payment in respect thereof.
10. Signs. Tenant may install or erect any signs on the premises and may
affix any sign to the building of which the premises are a part that Tenant
deems necessary, desirable or appropriate for the conduct of Tenant's business.
-3-
<PAGE>
11. Liens. Tenant covenants that no liens shall be permitted to attach to
the premises or to the Tenant's interest in the premises and Tenant agrees to
discharge any lien claimed or to transfer any lien claimed to a bond or such
other security as may be permitted by law within thirty (30) days of the filing
thereof. Tenant further covenants and agrees to indemnify and hold Landlord
harmless from and against any and all losses, any claims, liens, charges adverse
interests or other encumbrances of any sort against or upon the premises caused
or permitted, or alleged to have caused or permitted, by Tenant, or Tenant's
agents, employees, or invitees, including, but not limited to, Landlord's
attorneys' fees incurred out of court, at trial, on appeal or in bankruptcy
proceedings.
12. Access to Premises. Landlord and the Trustee and Lessor described in
the Trust indenture shall have the right to enter upon the premises from time to
time to inspect the condition and occupancy thereof, but this right shall be
exercised in a manner so as not to interfere with Tenant's use of the premises.
If Landlord deems any repairs required to be made by Tenant to be necessary,
Landlord may demand that Tenant make such repairs forthwith, and if Tenant
refuses or neglects to commence to make such repairs and to complete same within
thirty (30) days after written notice by Landlord, Landlord may make or cause
such repairs to be made at Tenant's expense and Landlord shall not be
responsible to Tenant for any loss or damage that may accrue to Tenant's stock
or business by reason thereof.
13. Payments by Landlord on Behalf of Tenant. If Tenant fails to pay any
taxes, assessments, or any other payments required to be paid by Tenant
hereunder (other than amounts payable as base rents under Section 2), Landlord
may, on behalf of Tenant, make any such payment or payments, and Tenant
covenants thereupon to reimburse and pay Landlord any amount so paid and
expended (with interest thereon at the maximum interest rate permitted to be
charged under Florida law from the date of the payment so made until paid by
Tenant) on the date on which the next installment of rent shall be payable.
14. Default. If Tenant shall fail to pay the rent due hereunder or any
impositions, burdens, or other payments or charges required by this lease,
within twenty (20) days of written demand therefor by Landlord or Trustee, or if
Tenant shall fail to commence to cure any other covenant or agreement herein
contained on Tenant's part to be kept and performed (and not involving the
payment of money) within thirty (30) days after Tenant's receipt of written
notice from Landlord or Trustee or if Tenant, having commenced to cure such
default not involving the payment of money as promptly and expeditiously as
possible, or if there is a default by Landlord under the Installment Purchase
Contract or the Mortgage and Security Agreement dated as of May 1, 1984, between
Broward County and Landlord, then Landlord may, at its election, immediately or
at any time thereafter, cancel this lease and enter into and upon the premises
and repossess the same and expel Tenant and those claiming under it and remove
its personal effects and thereupon this lease shall absolutely cease and
terminate; or Landlord may elect to relet the premises for Tenant's account,
holding Tenant liable in damages for any difference between the amount of rent
received from such reletting and all amounts due and payable under the terms of
this lease from and after Tenant's default.
-4-
<PAGE>
In any action, suit or proceeding to enforce, defend or interpret the terms
of this lease or to collect any amounts due hereunder, the prevailing party
shall be entitled to recover all costs and expenses incurred in enforcing,
defending or interpreting its rights hereunder, including, but not limited to,
all collection and court costs, and all attorneys' fees, whether incurred out of
court, at trial, on appeal, or in bankruptcy or administrative proceedings. The
remedies stated in this section shall be cumulative and in addition to any other
right or remedy available to Landlord under this lease or at law or in equity.
No waiver or assent, express or implied, to any breach of Tenant's
covenants hereunder shall be deemed a waiver of any succeeding or continuing
breach of the same covenants.
15. Casualty Damage. If, during the term of this lease, the premises should
be damaged by fire, windstorm, or other casualty, then if all proceeds of the
insurance described in Section 6 (a) are paid to Tenant, Tenant shall repair the
damage promptly and this lease shall not be affected in any manner. If the
insurance proceeds are not assigned and paid to Tenant for use in such
restoration or repair, then Tenant may elect (a) to terminate this lease and to
assign all its interest in such insurance proceeds to Landlord and its mortgagee
as their interest may appear or (b) not to terminate this lease, in which event
Tenant shall restore the premises to the extent of the proceeds paid to Tenant,
and Tenant shall be entitled to an abatement of rent [to be applied tot he next
accruing installment(s) due under Section 2 (a)] equal to the amount of
insurance proceeds paid to Landlord or its mortgagee.
16. Eminent Domain. If the whole of the Premises (or so much thereof as
shall render the premises unsuitable for the continued operation of Tenant's
business) shall be taken by a public authority under the power of eminent
domain, then this lease shall terminate from the day the possession of that part
shall be required for any public purpose, and the rent shall be paid up to that
day. If a lesser portion of the premises is so taken then this lease shall not
terminate, but the minimum base rent for the remainder of the term shall be
reduced in proportion to the amount of the area of the premises taken.
The parties agree that Tenant shall not be entitled to any damages by
reason of the taking of its leasehold, but it shall be entitled to prove and
collect for business interruption damages and for damages for fixtures and
leasehold improvements made by Tenant to the extent that such improvements and
fixtures that are replacements or substitutions of improvements and fixtures
existing on the date of this lease or subsequently installed by Landlord.
17. Assignment. Subject to Trustee's right to consent under Section 8.1 (b)
of the Installment Purchase Contract dated as of May 1, 1984, between Broward
County and Landlord, Tenant may assign, sublet, pledge or encumber this lease
and Tenant's interest in the premises, and if such assignee shall expressly
assume Tenant's obligations under Section 8.1 (a) of the Installment Purchase
Contract, then Tenant shall thereafter be released and relieved of all further
obligations and liabilities hereunder.
18. Notices. All written notices required under this lease shall be deemed
sufficiently given if mailed certified mail, postage prepaid, return receipt
requested, to the following addresses:
-5-
<PAGE>
If to Landlord:
Eagle Holding, Inc.
Post Office Box 75305
Tampa, Florida 33675
Attention: Mr. Robert L. Noojin
With a copy to:
Mr. Jay Cooper
Post Office Box 522777
7000 N.W. 74th Avenue
Miami, Florida 33148
and
Ms. Ruth Barnes Himes
Carlton, Fields, Ward, Emmanuel,
Smith & Cutler, P.A.
Post Office Box 3239
Tampa, Florida 33601
If to Tenant:
-------------
Eagle Supply, Inc.
Post Office Box 75305
Tampa, Florida 33675
Attention: Mr. Robert L. Noojin
With a copy to:
Mr. Jay Cooper
Post Office Box 522777
7000 N.W. 74th Avenue
Miami, Florida 33148
and
Ms. Ruth Barnes Himes
Carlton, Fields, Ward, Emmanuel,
Smith & Cutler, P.A.
Post Office Box 3239
Tampa, Florida 33601
or to such address as either party may designate to the
other in writing by proper notice.
19. Excuse of Tenant's Performance. Anything in this issue to the contrary
notwithstanding, provided such cause is not due to the willful act or neglect of
Tenant, Tenant shall not be deemed in default with respect to the performance of
any of the items, covenants and conditions of this lease if same shall be due to
any strike, lockout, civil commotion, warlike operation, invasion, rebellion,
hostilities, military or usurped power, sabotage, governmental regulations or
controls, inability to obtain any material, service or financing, through Act of
God or other cause beyond the control of Tenant.
20. Surrender. Upon the expiration of this lease or the termination of this
lease for any cause, Tenant will peaceably deliver upon the premises to Landlord
in good condition, usual wear and tear, condemnation and appropriation,
excepted.
21. Subordination. This lease is and shall be subordinate to any mortgage
that Landlord may now or hereafter place upon the premises provided any
mortgagee will agree that as long as Tenant is not in default under this lease,
the lease and Tenant's right [illegible] the premises shall not be disturbed.
Nothing herein contained, however, shall be deemed to require a nondisturbance
agreement as a condition of subordination from any mortgagee who enables
Landlord to finance the purchase or improvement of the premises through tax-free
bonds, if such nondisturbance requirement would disqualify Landlord from
-6-
<PAGE>
obtaining tax-free bond financing. Tenant covenants and agrees to execute,
acknowledge and deliver to Landlord, upon demand and without expense to
Landlord, any and all instruments that may be proper to confirm subordination of
this lease and Tenant's rights hereunder to the lien of each mortgage placed by
Landlord on the premises or to certify that the lease is in good standing or to
specify any defaults that Tenant may then claim or assert against Landlord.
Tenant shall give notice of any alleged default by Landlord under this
lease to Landlord's mortgagee, provided Tenant has actual knowledge of the
existence of the mortgage or mortgages held by such mortgagee provided Landlord
has given Tenant prior written notice of the address of the holder of any such
mortgagee(s). Such notice shall be in writing, signed by Tenant, in Tenant's
name, and shall specify in what manner a default exists. Such notice shall be a
condition precedent to any subsequent action of Tenant in respect to any such
alleged default by Landlord. In the event Landlord fails to cure such default
within thirty (30) days after notice of default is given, such mortgagee shall
have thirty (30) days after expiration of such period within which to remedy the
default. If such default cannot reasonably be remedied within the period allowed
to the mortgagee for such purpose, Tenant, at the request of the mortgagee, will
extend such period for an additional period (not to exceed ninety (90) days),
provided that the mortgagee has then commenced and is constantly prosecuting the
work of curing any such default in a diligent manner.
22. Effect of Landlord's Default. Tenant shall comply with all of the
obligations under this lease, including but not restricted to the obligation to
make rental payments, even in the event of default by Landlord in Landlord's
obligations under this lease.
23. Quiet Enjoyment. If Tenant shall pay the rents and all other sums of
money herein provided to be paid by Tenant and fully observe and perform the
covenants and agreements to be observed and performed by Tenant, Landlord
covenants and agrees that Tenant may and shall quietly and peaceably possess and
enjoy the premises during the full term of the lease without interruption or
interference by Landlord or any person claiming by, through or under Landlord.
24. Severability. Each covenant and agreement contained in this lease shall
be construed to be separate and independent from any other covenant or agreement
and the breach of any covenant or agreement by either party shall not discharge
or relieve the other party from any of its obligations hereunder. If any
provision of this lease is held to be invalid, such holding shall not invalidate
or affect any other provisions of this lease.
25. Miscellaneous. All of the covenants, provisions, terms, agreements and
conditions of this lease shall be construed as covenants running with the land
and shall inure to the benefit of, and shall be binding upon the successors and
assigns of the respective parties hereto as fully as upon the parties. The use
of the singular number herein shall include the plural and the use of any gender
shall include the applicable masculine, feminine or neuter genders,
respectively. This lease contains the entire agreement between the parties and
there are no promises, covenants, representations or inducements in addition to,
or at variance with any of its terms. This agreement shall not be modified or
amended except or written agreement signed by both Landlord and Tenant and shall
be construed in accordance with the laws of the State of Florida.
-7-
<PAGE>
IN WITNESS WHEREOF, the parties have executed this agreement the day and
year first above written.
Signed, sealed and delivered EAGLE HOLDING, INC.
in the presence of:
/s/ By: /s/ Robert L. Noojin
- -------------------------------- ---------------------------------
/s/ As its Vice President
- --------------------------------
As to Landlord
(CORPORATE SEAL)
Attest: /s/ Jim Alfano
-----------------------------
EAGLE SUPPLY, INC.
/s/ By: /s/ Robert L. Noojin
- -------------------------------- ---------------------------------
/s/ As its Exec V President
- --------------------------------
As to Tenant
(CORPORATE SEAL)
Attest: /s/ Jim Alfano
-----------------------------
STATE OF FLORIDA )
) SS.
COUNTY OF BROWARD )
I HEREBY CERTIFY that on this day personally appeared before me, an officer
duly authorized to administer oaths and take acknowledgments, Robert L. Noojin,
Vice President and Jim Alfano, Assistant Secretary of Eagle Supply Company to
me well known to be the person described in and who executed the foregoing
instrument, and acknowledged before me that he executed the same freely and
voluntarily for the purpose therein expressed.
WITNESS my hand and official seal at the aforesaid State and County this 7
day of May, 1984.
My Commission Expires:
/s/
-----------------------------------
NOTARY PUBLIC, STATE OF
FLORIDA AT LARGE
Notary Public, State of Florida at Large
My Commission Expires Sept 29, 1984
STATE OF FLORIDA )
) SS.
COUNTY OF BROWARD )
I HEREBY CERTIFY that on this day personally appeared before me, and
officer duly authorized to administer oaths and take acknowledgments, Robert L.
Noojin, Executive Vice President and Jim Alfano, Assistant Secretary of Eagle
Supply, Inc. to me well known to be the person described in and who executed the
foregoing instrument, and acknowledged before me that he executed the same
freely and voluntarily for the purpose therein expressed.
WITNESS my hand and official seal at the aforesaid State and County this 7
day of May, 1984.
My Commission Expires:
/s/
-----------------------------------
NOTARY PUBLIC, STATE OF
FLORIDA AT LARGE
Notary Public, State of Florida at Large
My Commission Expires Sept 29, 1984
-8-
<PAGE>
SCHEDULE "A"
portion of the West one-half (W-1/2) of Block 1, RESUBDIVISION OF MARLEE
INDUSTRIAL SITES, according to the plat thereof, recorded in Plat Book 51,
[Illegible], of the Public Records of Broward County, Florida, more
particularly, described as follows:
The South 625 feet (as measured along the East and West lines thereof) of
the East one-half (E-1/2) of the West one-half (W-1/2) of said Block 1,
less the West 30 feet thereof.
[Illegible] EXCEPT from fee simple title the following described parcel
described as follows:
{Illegible} Section of the South one-half (S-1/2) of the East one-half (E-1/2)
of the West half (W-1/2) of Block 1, RESUBDIVISION OF MARLEE INDUSTRIAL SITES,
as per [Illegible] recorded in Plat Book 51, Page 42, of the Public Records of
Broward County, Florida, being more particularly described as follows:
Commence on the East line of the Southeast one-fourth (SE-1/4) of Section
21, Township 50 South, Range 42 East, at a point 1284.07 feet South
01(degrees) 06' 28" East of the Northeast corner of the Southeast
one-fourth (SE-1/4) of said Section 21; thence South 87(degrees) 03' 45"
West 40.02 feet to the Southeast corner of said Block 1; thence South
87(degrees) 16' 07" West 621.81 feet along the South line of said Block 1
to the POINT OF BEGINNING; thence North 01(degrees) 04' 09" West 23.03
feet; thence South 89(degrees) 15' 01" West 15.63 feet to the beginning of
a curve, concave Northerly, having a radius of 4563.75 feet; thence
Northwesterly 258.89 feet along said curve, through a central angle of
03(degrees) 15' 01" to the end of this portion of said curve; thence North
87(degrees) 29' 58" West 6.68 feet to the East Right of Way line of
Southwest 11th Avenue; thence South 01(degrees) 03' 24" East 40.47 feet
along said East Right of Way line to the South line of said Block 1; thence
leaving said East Right of Way line, North 87(degrees) 16' 07" East 281.13
feet along the South line of said Block 1, to the POINT OF BEGINNING, AND
that certain tract of land five (5) feet in width lying North of and
adjacent to the foregoing description.
SCHEDULE "A"-1
<PAGE>
{Illegible} portion of the South one-half (S-1/2) of the East one-half (E-1/2)
of the West one-half (W-1/2) of Block 1, RESUBDIVISION OF MARLEE INDUSTRIAL
SITES, as per {Illegible} recorded in Plat Book 51, Page 42, of the Public
Records of Broward County, Florida, being more particularly described as
follows:
in width lying
a tract of land five (5) feet/North of and adjacent to the following
described {Illegible} property:
Commence on the East line of the Southeast one-fourth (SE-1/4) of Section
21, Township 50 South, Range 42 East, at a point 1284.07 feet South
01(degrees) 06' 28" East of the Northeast corner of the Southeast
one-fourth (SE-1/4) of said Section 21; thence South 87(degrees) 03' 45"
West 40.02 feet to the Southeast corner of said Block 1; thence South
87(degrees) 16' 07" West 621.81 feet along the South line of said Block 1
to the POINT OF BEGINNING; thence North 01(degrees) 04' 09" West 23.03
feet; thence South 89(degrees) 15' 01" West 15.63 feet to the beginning of
a curve, concave Northerly, having a radius of 4563.75 feet; thence
Northwesterly 258.89 feet along said curve, through a central angle of
03(degrees) 15' 01" to the end of this portion of said curve, thence North
87(degrees) 29' 58" West 6.68 feet to the East Right of Way line of
Southwest 11th Avenue; thence South 01(degrees) 03' 24" East 40.47 feet
along said East Right of Way line to the South line of said Block 1; thence
leaving said East Right of Way line, North 87(degrees) 16' 07" East 281.13
feet along the South line of said Block 1, to the POINT OF BEGINNING.
SCHEDULE "A"-2
<PAGE>
AMENDMENT TO LEASE
THIS AMENDMENT TO LEASE is made as of the 1st day of November, 1985, by and
between EAGLE HOLDING, INC. (herein called "Landlord"), and EAGLE SUPPLY, INC.
(herein called "Tenant").
WHEREAS, a Lease dated May 1, 1984 (the "Original Lease") was executed
between the parties hereto in connection with the issuance of $1,450,000 Broward
County, Florida Industrial Development Revenue Bond (Eagle Holding, Inc.
Project) (the "Series 1984 Bond") pursuant to which the Landlord leased the
premises described in Exhibit "A" to the Tenant;
WHEREAS, Landlord has requested Broward County to issue its $550,000
Industrial Development Revenue Bond, Series 1985 (Eagle Holding, Inc. Project)
(the "Series 1985 Bonds"); and
WHEREAS, it is a requirement of the issuance of the Series 1985 Bonds that
the Original Lease be amended to provide that Tenant will pay as Base Rent and
Additional Rent moneys necessary to pay principal of, interest on and premium,
if any, on the Series 1985 Bonds, together with any other payments in connection
therewith as provided under the Installment Purchase Contract dated as of May 1,
1984 between Broward County and the Landlord, as amended and supplemented from
time to time, and particularly as amended and supplemented by a First
Supplemental Installment Purchase Contract between such parties dated as of
November 1, 1985; NOW THEREFORE
In consideration of the increased amounts of rent to be paid by Tenant and
in consideration of the performance by Tenant of the covenants and agreements by
it to be kept and performed under this Amendment to Lease, and for other good
and valuable consideration Landlord and Tenant hereby agree to amend the
Original Lease as follows:
1. Term. The term of the Original Lease, as amended hereby (the "Lease")
shall continue until May 1, 1999.
2. Rental.
(a) Minimum Base Rental. In addition to the amounts of minimum base
rent specified in the Original Lease, Tenant covenants and agrees to pay
additional minimum base rent for the premises in the aggregate amount of Five
Hundred and Fifty Thousand Dollars ($550,000), which sum shall be payable in
quarterly installments in the amounts set forth on Schedule I hereto.
(b) Additional Rent. In addition to the amounts payable as minimum
base rents under the Original Lease and under subparagraph (a) hereof, and in
addition to the additional rents specified in the Original Lease, Tenant agrees
to pay Landlord as additional rent an amount equal to the interest paid by
Landlord on its debt service related to the Series 1985 Bonds described in the
First Supplemental Trust Indenture dated as of November 1, 1985, between Broward
County and First Florida Bank, N.A. (the "Supplemental Trust Indenture").
Landlord shall advise Tenant on or before the tenth (10th) day of each month of
the amount paid by Landlord in the preceding month and Tenant shall pay such
additional rent for the land and buildings within ten (10) days of Tenant's
receipt of such notice from Landlord.
-1-
<PAGE>
(c) Tenant shall also pay all sales or use taxes imposed by the State
of Florida or any other governmental unit upon all rental payments due under
this lease.
(d) All minimum base rental payments due from Tenant shall be payable
in currency of the United States of America on or before the dates Landlord is
required to make payments of principal on the Series 1985 Bonds pursuant to the
Supplemental Trust Indenture during the term of this lease in advance, without
demand, at the address designated for the giving of notices to Landlord under
this lease.
3. Amendment to Lease. This Amendment to Lease is supplemental to, and is
executed in accordance with, the provisions of the Original Lease. Save and
except as amended and supplemented by this Amendment to Lease, all provisions of
the Original Lease shall remain in full force and effect and shall be
applicable, equally and ratably, to the Series 1985 Bonds. The provisions of the
Original Lease, except to the extent amended and supplemented hereby with
respect to the Series 1985 Bonds. Bonds, are hereby incorporated by reference.
4. Miscellaneous. All of the covenants, provisions, terms, agreements and
conditions of this Lease shall be construed as covenants running with the land
and shall inure to the benefit of, and shall be binding upon the successors and
assigns of the respective parties hereto as fully as upon the parties. The use
of the singular number herein shall include the plural and the use of any gender
shall include the applicable masculine, feminine or neuter genders,
respectively. This Lease contains the entire agreement between the parties and
there are no promises, covenants, representations or inducements in addition to,
or at variance with any of its terms. This agreement shall not be modified or
amended except by written agreement signed by both Landlord and Tenant and shall
be construed in accordance with the laws of the State of Florida.
IN WITNESS WHEREOF, the parties have executed this agreement the day and
year first above written.
Signed, sealed and delivered EAGLE HOLDING, INC.
in the presence of:
By: /s/ Robert L. Noojin
-------------------------------------
/s/ Pamela J. Hatfield Vice President
- -----------------------------------
/s/ Patricia D. Wheeler
- ----------------------------------- (CORPORATE SEAL)
As to Landlord
Attest: /s/ Jim Alfano
---------------------------------
Assistant Secretary
-2-
<PAGE>
/s/ Pamela J. Hatfield
- -----------------------------------
EAGLE SUPPLY, INC.
/s/ Patricia D. Wheeler
- -----------------------------------
As to Tenant By: /s/ Robert L. Noojin
------------------------------------
Executive Vice President
(CORPORATE SEAL)
Attest: /s/ Jim Alfano
--------------------------------
Assistant Secretary
-3-
<PAGE>
NOTARY PUBLIC, State of Florida
My Commission Expires April 2, 1989
STATE OF FLORIDA )
) SS.
COUNTY OF HILLSBOROUGH )
I HEREBY CERTIFY that on this day personally appeared before me, an officer
duly authorized to administer oaths and take acknowledgments, Robert L. Noojin,
Vice President and Jim Alfano, Assistant Secretary of Eagle Holding, Inc., to me
well known to be the persons described in and who executed this foregoing
instrument, and acknowledged before me that they executed the same freely and
voluntarily for the purpose therein expressed.
WITNESS my hand and official seal at the aforesaid State and County this
25th day of November, 1985.
My Commission Expires:
/s/
----------------------------------------
NOTARY PUBLIC, STATE
OF FLORIDA AT LARGE
NOTARY PUBLIC, State of Florida
My Commission Expires April 2, 1989
STATE OF FLORIDA )
) SS.
COUNTY OF HILLSBOROUGH )
I HEREBY CERTIFY that on this day personally appeared before me, an officer
duly authorized to administer oaths and take acknowledgments, Robert L. Noojin,
Executive Vice President and Jim Alfano, Assistant Secretary of Eagle Supply,
Inc., to me well known to be the persons described in and who executed the
foregoing instrument, and acknowledged before me that they executed the same
freely and voluntarily for the purpose therein expressed.
WITNESS my hand and official seal at the aforesaid State and County this
the day of November, 1985.
My Commission Expires:
/s/
----------------------------------------
NOTARY PUBLIC, STATE
OF FLORIDA AT LARGE
NOTARY PUBLIC, State of Florida
My Commission Expires April 2, 1989
-4-
<PAGE>
EXHIBIT "A"
A portion of the West one-half (W-1/2) of Block 1, RESUBDIVISION OF MARLEE
INDUSTRIAL SITES, according to the plat thereof, recorded in Plat Book 51, Page
42, of the public records of Broward County, Florida, more particularly
described as follows:
The South 625 feet (as measured along the East and West lines thereof) of the
East one-half (E-1/2) of the West one-half (W-1/2) of said Block 1, less the
West 30 feet thereof.
Together with all improvements, fixtures and appurtenances located thereon and
therein which include, but are not limited to, the manufacturing warehouse
building containing approximately 18,000 sq. ft. with attached office wing
containing approximately 5,200 sq. ft. and a free standing metal fabricated
storage building on a concrete slab containing approximately 6,000 sq. ft.
The above described real property and personal property being herein sometimes
referred to as the "Premises."
ALSO the following construction easement parcel likewise being taken
incident to the Condemnation Case (the "Construction Easement"), said
Construction Easement being described as follows:
A portion of:
Section 21, Township 50 South, Range 42 East;
extending no more than 5.0 feet beyond the new Right of Way
line as located in Parcel 103.1, Section 86095-2406. (as
defined in the Condemnation Case)
For the purpose of typing in and harmonizing said property and the driveways,
walkways, etc., thereon with the construction to be undertaken by the Department
of Transportation of Florida in the road adjacent thereto.
This EASEMENT is granted upon the condition that the sloping and/or grading upon
the above land shall not extend beyond the limits outlined above and that all
grading or sloping shall conform to all existing structural improvements within
the limits designated, and all work will be performed in such manner that
existing structural improvements will not be damaged.
<PAGE>
This EASEMENT shall expire upon the completion of the construction of said road
project, but not later than March 31, 1989.
LESS AND EXCEPT from fee simple title the following described parcel which have
been taken pursuant to the eminent domain power of the State of Florida in the
matter of Division of Administration, State of Florida, Department of
Transportation, vs. Brunner and Lay, Inc., Case No. 83-14650-CN, Circuit Court
of the 17th Judicial Circuit in and for Broward County, Florida (the
"Condemnation Case"), said parcel being described as follows:
A portion of the South 1/2 of the East 1/2 of the West 1/2 of Block 1,
Resubdivision of Marlee Industrial Sites, as per plat, recorded in Plat Book 51,
Page 42 of the Public Records of Broward County, Florida, being more
particularly described as follows:
COMMENCE on the East line of the SE 1/4 of Section 21, Township 50 South, Range
42 East, at a point 1284.07 feet South 01 06' 28" East of the Northeast corner
of the SE 1/4 of said Section 21, thence South 87 03' 45" West 40.02 feet to the
Southeast corner of said Block 1; thence South 87 16' 07" West 621.81 feet along
the South line of said Block 1 to the POINT OF BEGINNING; thence North 01 04;
09" West 23.03 feet; thence South 89 15' 01" West 15.63 feet to the beginning of
a curve, concave Northerly, having a radius of 4563.75; thence Northwesterly
258.89 feet along said curve, through a central angle of 03 15' 01" to the end
of this portion of said curve; thence North 9 29' 58" West 6.68 feet to the East
R/W line of SW 11th Ave; thence South 01 03' 24" East 40.47 feet along said East
RW line to the South line of said Block 1; thence leaving said East R/W line,
North 87 16' 07" East 281.13 feet along the South line of said Block 1, to the
POINT OF BEGINNING.
-2-
<PAGE>
SCHEDULE I
PERIOD PRINCIPAL PERIOD PRINCIPAL
1 02/01/86 $0.00 36 11/01/94 $7,650.00
2 05/01/86 $0.00 37 02/01/95 $7,650.00
3 08/01/86 $4,890.00 38 05/01/95 $7,650.00
4 11/01/86 $4,890.00 39 08/01/95 $7,650.00
5 02/01/87 $4,890.00 40 11/01/95 $7,650.00
6 05/01/87 $4,890.00 41 02/01/96 $7,650.00
7 08/01/87 $4,890.00 42 05/01/96 $7,650.00
8 11/01/87 $4,890.00 43 08/01/96 $7,650.00
9 02/01/88 $4,890.00 44 11/01/96 $7,650.00
10 05/01/88 $4,890.00 45 02/01/97 $7,650.00
11 08/01/88 $4,890.00 46 05/01/97 $7,650.00
12 11/01/88 $4,890.00 47 08/01/97 $7,650.00
13 02/01/89 $4,890.00 48 11/01/97 $7,650.00
14 05/01/89 $4,890.00 49 02/01/98 $7,650.00
15 08/01/89 $4,890.00 50 05/01/98 $7,650.00
16 11/01/89 $4,890.00 51 08/01/98 $7,650.00
17 02/01/90 $4,890.00 52 11/01/98 $7,650.00
18 05/01/90 $4,890.00 53 02/01/99 $7,650.00
19 08/01/90 $4,890.00 54 05/01/99
20 11/01/90 $4,890.00 Balance
21 02/01/91 $4,890.00
22 05/01/91 $4,890.00
23 08/01/91 $4,890.00 Current date is 11-09-1985
24 11/01/91 $4,890.00 Current time: 14:34
25 02/01/92 $4,890.00 Debtfile: c: eagle.dbt
26 05/01/92 $4,890.00 Livermore Klein & Lott, P.A.
27 08/01/92 $7,650.00
28 11/01/92 $7,650.00
29 02/01/93 $7,650.00
30 05/01/93 $7,650.00
31 08/01/93 $7,650.00
32 11/01/93 $7,650.00
33 02/01/94 $7,650.00
34 05/01/94 $7,650.00
35 08/01/94 $7,650.00
-6-
<PAGE>
1.9
REQUEST AND AUTHORIZATION TO TRUSTEE
TO AUTHENTICATE AND DELIVER BONDS
Broward County, Florida (the "Issuer") does hereby authorize and request
First Florida Bank, N.A., formerly known as First National Bank of Florida,
Tampa, Florida, as Trustee (the "Trustee") under that certain Trust Indenture
dated as of May 1, 1984, as amended by the First Supplemental Trust Indenture
dated as of November 1, 1985 (collectively, the "Indenture") between the issuer
and the Trustee, securing payment of $550,000 aggregate principal amount of the
Issuer's Industrial Development Revenue Bonds, Series 1985 (Eagle Holding, Inc.
Project), dated November 1, 1985 (the "Bonds"), to authenticate the fully
executed Bonds submitted herewith and deliver the same to the purchaser thereof,
upon receipt by the Trustee on behalf of the Issuer, for application pursuant to
Article IV of the Indenture, of the purchase price for the Bonds, being
$550,000.
IN WITNESS WHEREOF, the issuer has caused this instrument to be executed by
its Chairman and its official seal to be impressed hereon, as of November 26,
1985.
-1-
<PAGE>
BROWARD COUNTY, FLORIDA
(SEAL)
/s/
----------------------------------------
Chairman,
Board of County Commissioners
-2-
<PAGE>
8/14/87
SUBLEASE AGREEMENT
THIS SUBLEASE AGREEMENT is made this 21st day of August, 1987, by and
between EAGLE SUPPLY, INC., a Florida corporation, with offices in Tampa,
Florida, (herein called "Eagle" or "Sublandlord"), and SOLAIR ENTERPRISES, INC.,
with an office located at 3380 S.W. 11th Avenue, Ft. Lauderdale, Florida 33315
(herein called "Subtenant").
W I T N E S S E T H:
A. Eagle Supply, Inc., leases certain property in Broward County, Florida,
from Eagle Holding, Inc., (herein called "Holding"), pursuant to a lease dated
May 1, 1984, (herein called the "Master Lease"). The land subject to the Master
Lease is more particularly described in Schedule "A" hereto and made a part
hereof by reference and is herein sometimes called the "Property."
B. The Property is improved by a warehouse building (herein called the
"Building") containing approximately 45,260 square feet of gross leaseable
building area.
C. Construction of the Building and other permanent improvements on the
Property were financed through tax-free industrial revenue bonds, and the terms
of the documents issued in connection with such bonds (herein collectively
called the "Bond Documents") govern and control the activities conducted on the
Property.
D. Subtenant wishes to sublease from Eagle that portion of the Building
outlined in red on Schedule "B" attached hereto and made a part hereof by
reference, which consists of approximately 22,087 square feet, together with the
exclusive right to use the portions of the Property outside the Building,
outlined in yellow on Schedule "B". The area so leased is herein called the
"Demised Premises."
For and in consideration of the benefits to be derived by each of the
parties from the execution of this Sublease Eagle and Subtenant agrees as
follows:
1. GRANT. Eagle does hereby demise and lease to Subtenant, and
Subtenant does hereby hire and Sublease from Eagle, the Demised Premises,
subject to all of the terms and conditions hereinafter stated.
2. TERM. The initial term of this Sublease shall be for five (5) years
commencing on September 1, 1987 and ending August 31, 1992. If Subtenant shall
perform all of its obligations under this Sublease within the applicable grace
periods for performance thereof, and if Subtenant shall not be in default
hereunder at the expiration of the initial term hereof, then Subtenant shall
have the option to extend the term of this Sublease for a period of five (5)
years expiring August 31, 1997. If Subtenant shall exercise its first option to
extend the term and if Subtenant shall perform all of its obligations under this
Sublease within the applicable grace periods for performance thereof, and if
Subtenant shall not be in default hereunder at the expiration of the first
extended term, then Subtenant shall have a second option to extend the term of
this Sublease for a period of five (5) years, expiring August 31, 2002.
Subtenant shall exercise the first such option by giving written
notice to Eagle of its election so to extend at least six (6) months prior to
the expiration of the initial term of this Sublease. Subtenant shall exercise
the second option by
<PAGE>
giving Eagle written notice of its election so to extend the term at least six
months prior to the expiration of the first extended term.
If Subtenant exercises such option (s) to extend the term, then except
where the contact clearly requires a contrary interpretation, any references in
this Sublease to "the term of this Sublease", shall be deemed to refer to the
term as so extended.
3. RENT.
A. Subtenant covenants and agrees to pay to Eagle, for the initial
term of this Sublease, rent (herein called "Base Rent") for the Demised Premises
in the aggregate amount of Four Hundred Twelve Thousand Five Hundred Sixty-Eight
and 16/100 Dollars ($412,568.16), payable in successive monthly installments as
follows:
(1) On November 1, 1987, and on the first day of each of the next
succeeding nine (9) calendar months thereafter, Subtenant shall pay
Eagle the sum of Five Thousand Nine Hundred Sixty-Two and 2/100
($5,962.02) Dollars.
(2) On September 1, 1988, and on the first day of each of the next
succeeding eleven (11) months thereafter, Subtenant shall pay Eagle
the sum of Six Thousand Nine Hundred Fifty-Five and 56/100 ($6,955.00)
Dollars.
(3) On September 1, 1989, and on the first day of each of the next
succeeding twenty-three (23) months thereafter, Subtenant shall pay
Eagle the sum of Seven Thousand Three Hundred Fifty-Three and 13/100
($7,353.13) Dollars.
(4) On September 1, 1991, and on the first day of each of the next
succeeding eleven (11) months thereafter, Subtenant shall pay Eagle
the sum of Seven Thousand Seven Hundred Fifty and 51/100 ($7,750.51)
Dollars; provided, however, that if Subtenant shall timely perform all
of its obligations under this Sublease during the initial term hereof,
then the base rent for the month of August, 1992, shall be paid from
the security deposit as described in Section 32 of this Sublease.
B. If Subtenant exercises its first option to extend the term of this
Sublease, then Subtenant covenants and agrees to pay Base Rent for the original
Demised Premises for first extended term in the amount of the greater of (i)
$465,030.74, or (ii) an amount calculated by multiplying $465,030.74 by a
fraction, the numerator of which is the CPI (as hereinafter defined) for the
calendar year 1991 and the denominator of which is the CPI for the calendar year
1986; provided, however, in no event shall the Base Rent for the Demised
Premises for the first extended term exceed Six Hundred Fifty-One Thousand
Forty-Three and 04/100 ($651,043.04) Dollars. Such amount shall be payable in
sixty (60) equal successive monthly installments commencing on September 1,
1992.
C. If Subtenant shall exercise its second option to extend the term,
then Subtenant covenants and agrees to pay Base Rent during the second extended
term in the amount of the greater of (i) the large amount calculated pursuant to
subsector 3(B) above, or (ii) an amount calculated by multiplying $465,030.74,
by a fraction, the numerator of which is the CPI for the calendar year 1996 and
the denominator of which is the CPI for the calendar year 1986; provided
however, in no event shall the Base Rent for the Demised Premises for the second
extended term exceed Eight Hundred Thirty-Seven Thousand Fifty-Five and 33/100
-2-
<PAGE>
($837,055.33) Dollars. Such amount shall be payable in sixty (60) equal
successive monthly installments commencing on September 1, 1997.
D. As used herein, "CPI" means the Consumer Price Index for all Urban
Consumers, ("CPI-U") U.S. Cities Average, All Items, (1967=100) issued by the
Bureau of Labor Statistics of the United States Department of Labor, or if such
index is no longer published, then the index that most closely approximates such
index.
E. In addition to the Base Rent described above, Subtenant shall pay all
other charges specific or required to be paid pursuant to other provisions of
this Sublease. (Such other charges are hereinafter collectively called
"Additional Rent").
The Additional Rent attributable to Subtenant's proportionate share of the
maintenance, taxes, and insurance costs incurred by Eagle and required to be
paid under the provisions of Sections 7, 8, 10 and 16, respectively shall be
paid in the following manner:
(1) Within thirty days following Eagle's receipt of the actual
invoices for the real estate taxes and assessments and the
insurance premiums, as the case may be, and at least once a year
as to the maintenance and repair costs, Eagle shall notify
Subtenant of the actual amount thereof. The statement shall be
accompanied, where appropriate, by a reasonable summary of
maintenance costs, and copies of the tax bills and insurance
premiums subject to contribution by Subtenant.
(2) Subtenant shall pay to Eagle the amount specified in each
such statement within ten (10) days of Subtenant's receipt of
each such statement without setoff, deduction or counterclaim.
(3) Each statement of actual cost shall be final and conclusive
between the parties, their successors and assigns, as to the
matters set forth therein if no o objection is raised with
respect thereto within sixty (60) days after submission of each
statement to Subtenant.
Subtenant shall have the right, within sixty (60) days after
Subtenant's receipt of Eagle's statement of maintenance costs, to inspect and
audit Eagle's books and records relating to the Building and the Demised
Premises to ascertain that the amounts described in Eagle's statement(s)
accurately reflect amounts subject to contribution by Subtenant under the
provisions of Section 7 and 10. Such inspection(s) and audit(s) shall be made
at Eagle's principal place of business (or at such other location at Eagle may
designate), and only after Subtenant gives Eagle at least five (5) days' notice
of its intention to make each such audit.
Subtenant shall not delay or withhold payment of any amount described
in this subsection or due under this Lease because of any dispute as to the
amount or computation thereof; provided, however, Eagle shall refund any
overpayment found to be owing to Subtenant upon the resolution of any such
dispute.
F. All Base Rent payments described in this Sublease shall be due and
payable on or before the first day of each month, in advance without setoff,
deduction, counterclaim or demand, except as herein expressly authorized in
Sections 26 and 32. All payments of Base Rent and Additional Rent shall be paid
to Eagle in legal tender of the United States of America at the address
designated for the giving of notices to Eagle, unless otherwise specified by
Eagle in a written notice.
-3-
<PAGE>
G. Subtenant shall pay to Eagle or the appropriate agency (if
authorized by the agency and confirmed to Eagle in the form required by the
agency to exculpate Eagle from liability therefor) any and all sales, excise and
other taxes (not including, however, Eagle's income taxes) levied, imposed or
assessed by the State of Florida or any political subdivision thereof or other
taxing authority upon all amounts payable under this Sublease and classified as
rent by the taxing authorities.
4. USE OF PREMISES. Subtenant shall use the Demised Premises as a
warehouse for storage and distribution of aviation products and other related
uses so long as such items shall constitute non-hazardous goods and materials.
Subtenant agrees not to use or permit the use of the Demised Premises in any
manner that would or could violate the insurance policy or policies carried by
Eagle or Holding or that will diminish their rights and coverage thereunder, or
that could or would constitute a use prohibited under the provisions of Schedule
D annexed hereto and made a part hereto by reference. In the event that
Subtenant's use of the Demised Premises causes an increase in the fire rate as
published by ISO or any insurance premiums for the Property or the Building,
then Subtenant covenants and agrees to pay any such increase (s) within ten (10)
days of Eagle's or Holding's demand therefor.
Subtenant may also store materials outside the Building in the outside
areas designated for storage; provided however, Subtenant shall at all times
comply with all regulations governing such storage imposed by all governmental
authorities having jurisdiction over the Property or the use thereof.
5. ASSIGNMENT AND SUBLETTING. Subtenant shall not assign, sublease,
mortgage or encumber this Sublease or the portions of the Demised Premises in
whole or in part, without the prior written consent of Eagle, holding and all
parties required to consent under the Bond Documents; provided however, in no
event shall such consent be deemed to be withheld unreasonably if the proposed
transfer or encumbrance would or may violate the terms of any of the Bond
Documents. Consent to any proposed assignment, sublease, mortgage or encumbrance
will not be unreasonably withheld by Eagle or Holding if all the parties
required to consent under the Bond Documents shall approve the proposed transfer
(or if such proposed transfer does not require the approval of the Trustee under
the Bond Documents); provided, however, if Eagle approves the assignment,
sublease, mortgage or encumbrance, the consent shall not constitute a waiver of
the necessity for such consent to any subsequent assignment, sublease, mortgage
or encumbrance. If this Sublease is assigned or subleased without the prior
written consent of Eagle, or if the Demised Premises or any part thereof shall
be sub-subleased or occupied by an occupant other than Subtenant, Eagle may,
after default by Subtenant, collect rent from the assignee, sub-subtenant or
occupant, and apply the net amount collected to the rent reserved herein, but no
such collection shall be deemed a waiver of this covenant not to transfer or
encumber Subtenant's interest in the Demised Premises without Eagle's prior
written consent, or the acceptance of such assignee, subtenant or occupant as a
replacement subtenant, or a release of Subtenant from further observance and
performance of all of the covenants and obligations of Subtenant described in
this Sublease. No assignment, sublease, mortgage or encumbrance by the
Subtenant, whether or not permitted or consented to as provided in this Section,
shall operate to release the Subtenant from any liability for rent or from any
of the conditions, obligations, agreements and covenants of this Sublease.
Anything herein to the contrary notwithstanding, no assignment
approved by Eagle under the provisions of this agreement (or permitted without
Eagle's consent by the other provisions of this Section 5) shall be effective
unless and until the assignee expressly assumes all of the Subtenant's
obligations under this Sublease as and to the same extent as if such assignee
-4-
<PAGE>
were the original Subtenant named in this Sublease. Such assumption shall be in
writing. No transfer shall be effective unless an executed copy of the
assignment or sublease shall be within thirty (30) days after the date of
execution thereof and assumption furnished to Eagle. In addition to the
foregoing, if Eagle approves any proposed subtenant, Eagle's consent to any
proposed sublease shall be further conditioned, inter alia upon the requirements
that the sublease shall expressly provide (i) that the sublease is, without
condition, subject to all of the limitations, terms and conditions of this
Sublease, and (ii) that the sublessee's rights shall not survive the earlier
termination of this Sublease or the Master Lease, whether effected by voluntary
cancellation by Eagle and Subtenant, or otherwise.
If at any time during the term of this Sublease the person or persons
who, on the date of this Sublease, owns or own a majority of Subtenant's voting
shares (or if any successor to Subtenant is a partnership and the person or
persons who owns or own a majority of the partnership's interest) ceases or
cease to own a majority of such shares or interest, as the case may be (whether
such sale occurs at one time or at intervals so that, in the aggregate, such a
transfer shall have occurred), or if this lease is transferred by merger,
consolidation, liquidation, assignment for the benefit of creditors or by
operation of law, then in any such event, such transfer shall be deemed to be an
assignment of this Sublease and Eagle may exercise any of its remedies as a
result of a default hereunder; provided, however, this section shall not be
applicable to ant transfer by Solair, Inc., to a wholly owned subsidiary
corporation or other entity controlled by Solair, Inc. or the parent of Solair,
Inc., nor shall this section apply to the transfer of Subtenant's stock to any
person, corporation or entity having a financial net worth, prior to such
transfer, at least equal to Subtenant.
Anything in this Subsection 5 to the contrary notwithstanding,
Subtenant may also assign this lease without Eagle's consent under the following
circumstance:
(a) to any corporation resulting from the merger or consolidation of
Subtenant or its Guarantor, if any, with or into another entity; or
(b) to a corporation or entity resulting from a sale of all or
substantially all of the capital stock of Subtenant or its Guarantor, if any; or
(c) to a corporation or entity that acquires all or substantially all
of the assets or stock of Subtenant or its Guarantor, if any;
provided the assignee or surviving corporation or entity shall, prior to such
consolidation, merger or acquisition, have a financial net worth at least equal
to Subtenant.
6. CONSTRUCTION TO BE PERFORMED BY EAGLE. Eagle shall, at its own cost
and expense, construct on the Property a chain link fence to separate the area
outlined in yellow on Schedule B from the remainder of the outside storage areas
on the Property.
7. REPAIRS. Subtenant shall be responsible for and shall maintain,
repair and replace, when necessary, at its own cost, the interior of the Demised
Premises, including the exterior and interior windows, screens, interior
ceilings, non-structural interior walls, fixtures, lighting, heating and exposed
electrical facilities and exposed plumbing, all air-conditioning equipment, all
doors and entrances (including truck loading doors), floor covering,
non-structural columns, and partitions within the Demise Premises; provided,
however, Subtenant shall not be required to make repairs for damages caused by
the negligence or willful act or omission of Eagle, Holding or other occupants
of any portion of the Building not subleased by Subtenant. All glass, both
interior and exterior of
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the Demised Premises shall be maintained at the sole risk of Subtenant and
Subtenant agrees to replace, at Subtenant's sole expense, any such glass broken
during the term of this Sublease.
Eagle shall make all other repairs to the Building and the Demised
Premises not included in Subtenant's obligations described above; provided,
however, Subtenant shall pay to Eagle (i) the total cost of all such repairs
made exclusively to the Demised Premises and (ii) Subtenant's proportionate
share of any repairs made to the Building as a whole which are required to
maintain the Building in the condition existing on the date of commencement of
this Sublease. Anything in the foregoing sentence to the contrary
notwithstanding, as long as Subtenant subleases only a portion of the Building,
Subtenant shall not be required to contribute to the cost of replacement of
structural portions of the Building, (such as roof, bearing walls and
foundation) nor to capital improvements which are required as a result of
changes in applicable building codes or regulations effected after the date of
this Sublease, nor for leasehold improvements to any portion of the Building
that is not subleased to Subtenant. Subtenant's proportionate share of the
maintenance and repair costs described above shall be calculated by multiplying
the cost of such repairs by a fraction, the numerator of which is the gross
leaseable area of the portion of the Demised Premises within the Building and
the denominator of which is the gross leaseable are of the Building.
Anything herein to the contrary notwithstanding, Subtenant shall pay
the entire amount of all costs incurred by Eagle in making any repairs or
replacements to the Demised Premises, the Building, or any portion of the
Property caused as a result of the negligence of Subtenant or Subtenant's
agents, employees or contractors, and if Subtenant subleases the remainder of
the Building pursuant to the provisions of Section 36, then, from and after
September 1, 1992, Subtenant shall pay the entire cost of all maintenance
repairs and replacements, interior and exterior, structural and non-structural,
foreseen and unforeseen that may be required or made to on the Property and the
Building during the term of this Sublease except for repairs required as a
result of defective construction performed by Eagle prior to September 1, 1992,
and except for repairs required because the Demised Premises failed to meet
building code standards in effect and applicable to the Property prior to
September 1, 1992.
If Eagle deems any repairs required to be made by Subtenant to be
necessary, Eagle may demand that the Subtenant make such repairs forthwith, and
if Subtenant refuses or neglects to commence such repairs and to complete same
within ten (10) days after written notice by Eagle, Eagle may, (without waiving
any rights it may have under the provisions of Section 20, and after giving
Subtenant at least twenty-four (24) hours notice of its intention to make such
repairs on Subtenant's behalf) make or cause such repairs to be made at
Subtenant's expense and Eagle shall not be responsible to Subtenant for any loss
or damage that may accrue to Subtenant's stock or business by reason thereof.
Subtenant shall pay Eagle all amounts incurred in making such repairs within ten
(10) days of Eagle's written demand therefor, together with interest at the
maximum rate permitted to be charged by private parties under the laws of the
State of Florida.
8. REAL ESTATE AND PERSONAL PROPERTY TAXES. Subtenant covenants and
agrees to pay to Eagle as Additional Rent Subtenant's proportionate share of all
real estate taxes and all general and special assessments, ordinary or
extraordinary, that may be levied against the Property or the Building during
the term of this Sublease; provided, however, in no event shall Subtenant be
required to pay any taxes attributable solely to any leasehold improvements made
to portions of the Building or
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the Property not subleased to Subtenant. Subtenant's proportionate share shall
be that portion of such taxes and assessments attributable to the Building and
subject to contribution which the gross leaseable area of the portion of the
Demised Premises in the Building bears to the gross leaseable area of the entire
Building. Subtenant's proportionate share of the real estate taxes and
assessments attributable to the Property (excluding the Building) shall be that
portion of such taxes and assessments subject to contribution that the area of
the Property subleased to Subtenant bears to the gross area of the Property;
provided, however, in no event shall Subtenant be required to contribute to or
pay its prorata share of, increases in the taxes and assessments levied against
the land which are attributable to increases in the assessed value of the
Property solely as a result of the sale of the Property during the term of this
Sublease. Eagle shall compute Subtenant's share of all such taxes and
assessments and shall send to Subtenant a written notice of such computation
each year. The computation of Subtenant's share shall be prorated, in the first
and last years of the term of this Sublease (and for the period, if any, during
which the entire Building or the entire Property is subleased to Subtenant, if
applicable), to correspond to the portion of each of such years during which
this Sublease is effective.
Subtenant shall also pay, prior to the time the same shall become
delinquent, all taxes imposed by any governmental authority on all inventory,
furniture, trade fixtures, personal property, equipment and leasehold
improvements owned by Subtenant or installed by Subtenant or by Eagle on behalf
of Subtenant on the Demised Premises.
9. ORDINANCES AND RESTRICTIONS. Subtenant acknowledges that the
Demised Premises are rented subject to zoning ordinances and restrictions,
encumbrances and limitations of record, and subject to any easements for public
utilities. Eagle represents that on the date of execution of this Sublease,
there are no easements or private encumbrances, restrictions or limitations on
the title to the Property except the encumbrances shown or disclosed in Schedule
C annexed hereto and made a part hereof by reference.
10. UTILITY CHARGES. Subtenant shall be solely responsible for and
shall promptly pay all charges for all utilities and services supplied to the
Demised Premises including, without limitation, all charges for garbage, refuse
and trash removal, and all charges for use and consumption of gas, electricity,
heat, air-conditioning or any other utilities or services furnished to the
Demised Premises, whether determined by separate meter or otherwise, and
Subtenant shall take all steps necessary to obtain separate meters and bills
therefor. In the event such utilities shall not be determined by separate
meters, then Subtenant shall pay to Eagle Subtenant's proportionate share
thereof within ten (10) days after Eagle's written demand therefor. Subtenant's
proportionate share shall be calculated in the same manner as specified in
Section 8 for the payment of real estate taxes or, at Eagle's sole option, Eagle
may allocate Subtenant's proportionate share on the basis of usage estimated by
the appropriate public utility or reflected by increases in consumption shown by
comparison of the utility bills prior to and after Subtenant's occupancy of the
Demised Premises.
11. ALTERATIONS. Subtenant shall make no alterations, additions or
improvements (including signs and insignia) in or to the Building or the
Property without obtaining the prior written consent of Eagle; provided,
however, Eagle agrees that its consent shall not be unreasonably withheld to the
installation of an identification sign of each of the exterior fence and the
Building if the size, design, location, materials and manner of installation
thereof are reasonably satisfactory to Eagle, and Eagle further agrees that
Subtenant may make interior, non-structural alterations and improvements to the
Demised Premises without Eagle's consent.
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Anything herein to the contrary notwithstanding, Subtenant shall have
the right to install on the Demised Premises such equipment, trade fixtures,
machinery, moveable partitions and interior non-structural alterations as it
sees fit, provided Subtenant maintains all such items in good condition and
repair. Title thereto shall remain in Subtenant. As long as Subtenant is not in
default under this Sublease beyond applicable grace periods for the performance
of its obligations, Subtenant shall have the right to remove any such equipment,
fixtures, machinery, moveable partitions and non-structural alterations at any
time during the term of this Sublease, provided Subtenant repairs all damage
caused by such removal.
All alterations, additions and improvements and such fixtures (other
than equipment, trade fixtures, machinery, and moveable partitions) which as a
matter of law have become a part of the realty, which may be made or installed
upon the Demised Premises and which in any manner are attached to the floors,
walls or ceilings, shall, upon the expiration or termination of this Sublease,
become the property of Eagle or Holding without any obligation to pay Subtenant
therefor; provided however, that Eagle may, at its option, require Subtenant to
remove from the Demised Premises, at Subtenant's sole cost and expense, all or
any portion of any item installed or constructed on the Demised Premises at the
expiration or termination of this Sublease. If Eagle requires any item or
alteration to be so removed, Subtenant shall pay all costs incurred to remove
the improvements and to restore the Demised Premises to the condition existing
prior to the installation of any such item or improvements. Subtenant also
agrees to remove all signs and personal insignia which may be displayed in or
about the Building or the Property at the expiration or termination of this
Sublease. Subtenant shall pay for the repair of any damage caused to the
Building or the Property by Subtenant's removal of any items pursuant to the
provisions of this Section.
Anything herein to the contrary notwithstanding, any property
whatsoever of Subtenant remaining on the Property or in the Building after
expiration of this Sublease (which is not required by Eagle or Holding to be
removed) shall then be and become the property of Eagle without any obligation
to pay Subtenant therefor.
12. LIENS. Neither Holding's nor Eagle's interest in the Demised
Premises shall be subject to liens for improvements made by Subtenant, and
Subtenant shall have no power or authority to create any lien or permit any lien
to attach to the Demised Premises or to the present estate, reversion or other
estate of Holding or Eagle in the Demised Premises or in the Building as a
result of improvements made by Subtenant or for any other cause of reason. All
materialmen, contractors, artisans, mechanics and laborers and other persons
contracting with Subtenant with respect to the Demised Premises or any part
thereof are hereby charged with notice that such liens are expressly prohibited
and that they must look solely to Subtenant to secure payment for any work done
or material furnished for improvements by Subtenant or for any other purpose
during the term of this Sublease. Subtenant further covenants that no other
liens shall be permitted to attach to the Demised Premises or to the Subtenant's
interest in the Demised Premises. Subtenant covenants and agrees to transfer and
claimed or asserted lien to a bond or such other security as may be permitted by
law within twenty (20) days of the assertion of any such lien or claim of lien.
If Subtenant fails so to transfer or discharge such lien, then Eagle may
discharge the lien or transfer the lien to bond or other security and Subtenant
shall pay Eagle all amounts so incurred by Eagle in effecting such transfer or
discharge, together with interest at the highest rate then permitted to be
charged by private parties under the laws of the State of Florida. Subtenant
shall advise all persons furnishing designs, labor, materials or services to the
Demised Premises in connection with Subtenant's improvements thereof of the
provisions of this of this Section. Subtenant also
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covenants and agrees to indemnify and hold Eagle, Holding and the Trustee under
the Trustee Indenture described in the Bond Documents and the Master Lease,
(herein called "the Trustee" and the "Trustee Indenture" respectively,) harmless
from and against any and all losses, damages, demands and expenses in connection
with or arising out any claims, liens, charges, adverse interests or other
encumbrances of any sort against or upon the Demised Premises caused or
permitted, or alleged to have been caused or permitted, by Subtenant, or
Subtenant's agents, employees, or invitees, including, but not limited to, all
attorneys' fees incurred out of court, at trial, on appeal or in bankruptcy
proceedings.
13. REGULATIONS. Subtenant shall promptly perform and comply with all
statutes, ordinances, rules, orders, regulations and requirements of the
federal, state and municipal governments, and of any and all of their
departments and bureaus having jurisdiction applicable to Subtenant's use of the
Building and the Property for the correction, prevention and abatement of
nuisances or other grievances in, upon or connected with such use during the
time of this Sublease, and Subtenant shall also promptly comply with and execute
all rules, orders and regulations of the Southeastern Underwriters Association
for the prevention of fires on the Demised Premises, at its sole cost and
expense.
If Subtenant subleases the remainder of the Building pursuant to the
provisions of Section 35, then from and after September 1, 1993, Subtenant shall
also, at Subtenant's sole expense, comply with all statutes, ordinances, rules,
orders, regulations and requirements of all authorities having jurisdiction
applicable to the Building and the Property and any improvements thereon.
14. LIABILITY INSURANCE. Subtenant shall maintain at all times from and
after the commencement of this Sublease, or any renewals or extensions thereof,
public liability insurance against all claims for personal injury, death or
property damage occurring in or about the Demised Premises, with minimum
combined single limits of liability in the amount of One Million ($1,000,000)
Dollars for bodily injury, personal injury, death and property damage. Subtenant
shall also maintain at all times during the term of this Sublease fire legal
liability insurance. Eagle, Holding and the Trustee shall be named as additional
insured parties in such policies. Subtenant shall also maintain contractual
liability insurance to insure Subtenant's performance of its obligations under
this Sublease. Subtenant shall increase the limits of all insurance required
hereunder at such intervals and in such amounts as may be reasonably required to
insure Eagle, Holding and the Trustee fully against any loss or expense arising
as a result of acts occurring on the Demised Premises or the negligent acts or
omissions of Subtenant and Subtenant's agents, servants, employees and
contractors on the Property or in the Building. All insurance required to be
maintained by Subtenant under this Sublease shall be obtained through policies
satisfactory in form to Eagle and shall be obtained from an insurance company or
companies authorized to do business in the State of Florida. The policies shall
contain a provision that prohibits cancellation or earlier termination of such
policies without first giving Eagle at least ten (10) days' written notice,
prior to the date of cancellation or termination. The cost of all premiums on
such policies shall be paid by Subtenant. Subtenant shall not obtain any other
insurance on the Property or the Building that would diminish the recovery by
Eagle or Holding or their mortgagees under their own policies insuring the
Building and the Property. The insurance policy or policies required to be
carried by Subtenant under this Sublease shall be delivered to Eagle within
fifteen (15) days of the commencement of this Sublease. Subtenant shall also
furnish Eagle with a renewal policy for each such policy at least ten (10) days
prior to the expiration date of each such policy.
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15. INDEMNITY. Subtenant shall indemnify and hold Eagle, Holding and the
Trustee harmless from all loss, damage, injuries, liabilities and expenses which
may arise or be claimed against Eagle, Holding and the Trustee for injuries,
death or damages to the person or property of any person, firm or corporation
occurring at any time from and after the date hereof in connection with this
Sublease and occurring on the Demised Premises or consequent upon or arising
from any negligent acts or omissions of Subtenant or Subtenant's agents,
servants, employees or contractors.
16. FIRE INSURANCE AND DAMAGE BY CASUALTY. Eagle represents that Eagle
currently maintains in full force and effect all insurance required under the
terms of the present mortgages and the Bond Documents and that Eagle will
continue to maintain such insurance during the term of this Sublease. Subtenant
shall pay to Eagle as Additional Rent Subtenant's proportionate share of all
premiums for fire, flood, casualty and extended coverage insurance maintained by
Eagle for the Building and the Property from time to time during the term of
this Sublease; provided, however, Subtenant shall not be required to pay any
portion of Eagle's insurance premiums that shall be attributable to construction
of additional facilities or buildings on the portions of the Property or the
Building not subleased to Subtenant. Subtenant's proportionate share shall be
calculated by multiplying such premium(s) by a fraction, the numerator of which
is the gross leaseable area of the portion of the Demised Premises within the
Building and the denominator of which is the gross leaseable area of the
Building.
If the Demised Premises, or any part thereof, shall at any time during the
term of this Sublease be destroyed or damaged by fire or other casualty normally
included in fire and extended coverage insurance, then, if such damage occurs
during the last year of the term of this Sublease, Eagle shall have the right to
terminate this Sublease as of the date of such casualty; provided, however, if
the damage occurs during the first six (6) months of the last year of the
initial term or during the first six (6) months of the last year of the first
extended term, then if Subtenant exercises its option to extend the term within
thirty (30) days after such casualty, Eagle shall not have the right to
terminate this lease. If this Sublease is not so terminated, then during the
period following such casualty and until the repairs are substantially
completed, the Base Rent payable under the provisions of Section 3 (and Section
35, if applicable) of this Sublease shall be reduced in the same proportion that
the gross leaseable area of the Demised Premises rendered untenantable by the
casualty bears to the gross leaseable area of the Demised Premises immediately
prior to the casualty, and to the extent of the insurance proceeds paid to Eagle
and permitted by the Trustee under the Bond Documents to be retained by Eagle,
Eagle shall repair the damage to the Demised Premises caused by such casualty.
If Subtenant shall not have leased the remainder of the Building pursuant to
Section 35 at the time of such casualty, Subtenant shall also be entitled to a
proportionate reduction in Additional Rent computed on the basis noted above.
If the damage to the Demised Premises (excluding Subtenant's tenant
improvements and other personal property) shall not be repaired or restored by
Eagle or Holding within one hundred eighty (180) days following such casualty,
then Subtenant shall have the right to cancel this Sublease as of the date of
such casualty.
17. PERSONAL PROPERTY. Subtenant expressly covenants and agrees that all
personal property placed or moved on the Demised Premises shall be at the risk
of Subtenant or the owner thereof, and neither Eagle, Holding nor the Trustee
shall be liable to Subtenant or any other person for any damages to such
personal property by any cause or person whatsoever.
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18. ASSUMPTION OF RISK. To the maximum extent permitted by law, subtenant
agrees to use and occupy the Demised Premises and to use all other portions of
the Property which it is permitted to use by the terms of this Sublease at its
own risk, and hereby (for itself and all persons claiming under, by or through
Subtenant) releases Eagle, Holding and the Trustee under the Trust Indenture and
their mortgages, agents, servants, contractors and employees, from all claims
and demands of every kind resulting from any accident, damage, or injury
occurring therein, unless solely due to such party's negligence or willful act
or omission. Subtenant expressly covenants and agrees that neither Eagle nor
Holding nor the Trustee shall be responsible or liable to Subtenant for defects
in workmanship or for improper design or construction of any alterations or
improvements approved by Eagle, Holding and the Trustee under the provisions of
Section 11 of this Sublease, or for any other loss or damage from any source
whatsoever, unless such injury, loss, or damage is due solely to the negligence
or willful act or omission of Eagle, Holding. Subtenant agrees that neither
Eagle, Holding nor Trustee shall be responsible or liable to Subtenant, or to
those claiming by, through or under Subtenant, for any loss or damage which may
be occasioned by, or through the acts or omissions of, persons occupying space
adjoining or connected to the Demised Premises or any part of the Property, or
for any loss or damage resulting to Subtenant, or to those claiming by, through
or under Subtenant, or its or their property, from the breaking, bursting,
stoppage or leaking of electrical cable and wires, air-conditioning units and
pipes, and water, gas, sewer or steam pipes or systems. Subtenant expressly
assumes all liability of or on account of any such injury, loss or damage and
will, at all times, indemnify and save Eagle (and, where required in connection
with the Trust Indenture, the Lessor and Trustee thereunder) harmless from and
against all liability, damage or expense caused by or growing out of any injury,
loss or damage to persons or property upon the Demised Premises during the term
of this Sublease, including any attorneys' fees incurred by Eagle as a result
thereof.
19. RIGHT OF ENTRY. Eagle, Holding, Mortgagees or any of their respective
agents shall have the right to enter the Demised Premises during all reasonable
hours (and at any time in case of emergency) to examine the same or to make such
repairs, additions or alterations that may be necessary or desirable for the
safety, comfort or preservation thereof, or to exhibit the Demised Premises to
prospective lenders and prospective tenants or subtenants of the Building.
Subtenant further agrees that Eagle, Holding, and their mortgagees or their
respective agents may put or keep upon the doors or windows of the Demised
Premises "For Rent" notices at any time within ninety (90) days before the
expiration of this Sublease. The rights of entry granted in this Section 19
shall also exist for the purpose of removing placards, signs, fixtures,
alterations or additions which do not conform to this Sublease.
20. DEFAULT. If Subtenant shall fail to pay the Base Rent or any Additional
Rent, or any impositions, burdens or other payments or charges required by this
Sublease within ten (10) days after Subtenant's receipt of Eagle's written
demand therefor, or if any other covenant or agreement herein contained on
Subtenant's part to be kept and performed shall not be kept or performed and if
the default is curable but Subtenant fails to commence to cure such default,
breach or non-performance of covenant or agreement not involving the payment of
money within twenty (20) days after Subtenant's receipt of written notice from
Eagle (or if, having commenced the cure, Subtenant fails to complete the cure
thereof with diligence and as expeditiously as possible), or if the Subtenant
shall be adjudicated a bankrupt or shall make an assignment for the benefit of
creditors or file a petition for reorganization or other proceeding in
bankruptcy or be deprived of its rights under this Sublease by a judgment or
decree of a court of competent jurisdiction in any involuntary proceeding at law
or in equity, then Eagle may, at its election,
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immediately or at any time thereafter, cancel this Sublease and enter into and
upon the Demised Premises and repossess the same and expel the Subtenant and
those claiming under it and remove Subtenant's personal effects, and thereupon
this Sublease shall absolutely cease and terminate, or Eagle may declare all
ascertainable rents due hereunder to be immediately due and payable and
thereupon all such payments due to the end of the term of this Sublease shall
thereupon be accelerated, or Eagle may elect to enter the Demised Premises and
re-let the same for Subtenant's account, holding Subtenant liable in damages for
all expenses incurred in any such re-letting and for any difference between the
amount of rent received from such re-letting and all amounts due and payable
under the terms of this Sublease.
In any action, suit or proceeding to enforce its rights or to interpret the
terms of this Sublease or to collect any amounts due hereunder, Eagle shall be
entitled to reimbursement for all costs and expenses reasonable incurred in
enforcing, defending or interpreting its rights hereunder, including, but not
limited to, all collection and court costs, and all attorneys' fees, whether
incurred out of court, in the trial court, on appeal or in bankruptcy or
administrative proceedings. The remedies stated in this Section 20 shall be
cumulative and in addition to each other and to any right or remedy available to
Eagle at law or in equity.
Eagle's acceptance of rent shall not constitute a waiver of any breach of
this Sublease by Subtenant, except as to payment of the rent so accepted, unless
such breach shall be waived in writing by Eagle. No waiver or assent, express or
implied, to any breach of Subtenant's covenants hereunder shall be deemed a
waiver of any succeeding breach of the same covenants or a waiver or breach of
any other covenant under this Sublease.
The rights and remedies given to Eagle in this Sublease are distinct,
separate and cumulative remedies, and the exercise of any of them shall not be
deemed to exclude Eagle's right to exercise any and all of the others, or other
rights available to Eagle at law or in equity.
21. PEACEFUL POSSESSION. Subject to the terms, conditions and covenants of
this Sublease, and to the terms and restrictions of the provisions of the Bond
Documents, Eagle agrees that Subtenant shall and may peaceably have, hold and
enjoy the Demised Premises for the term of this Sublease without hindrance or
molestation by Eagle or anyone claiming by, through or under Eagle. The
provisions of this Section are in lieu of any implied covenants of title and
quiet enjoyment.
22. SUBORDINATION AND ESTOPPEL CERTIFICATES. This Sublease is and shall be
subject and subordinate to the Master Lease and to any mortgage executed by
Holding or Eagle which may now or hereafter affect the Property or the Building.
Subtenant, upon demand at any time or times, shall execute, acknowledge and
deliver to Eagle, without expense to Eagle, any and all instruments that may be
necessary or proper to confirm the subordination of this Sublease and
Subtenant's rights hereunder to the lien of any such mortgage or mortgages as
aforesaid, or to certify the fact that this Sublease is in good standing or to
specify any defaults which Subtenant may then claim or assert against Eagle. A
failure by Subtenant to execute and return such instrument to Eagle within ten
(10) days of Subtenant's receipt of request therefor shall, at Eagle's option,
be a default under this Sublease.
Subtenant shall give notice of any alleged default by Eagle under this
Sublease to any such mortgagee of whom Subtenant has actual knowledge, provided,
Eagle or Holding has given Subtenant prior written notice of the address of the
holder of any such mortgage(s). Such notice shall be in writing, signed by
Subtenant, in Subtenant's name, and shall specify in what manner a default
exists. Such notice shall be a condition precedent to
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any subsequent action of Subtenant in respect to any such alleged default by
Eagle. In the event Eagle fails to cure such default within thirty (30) days
after notice of default is given, such mortgagee shall have thirty (30) days
after expiration of such period within which to remedy the default. If such
default cannot reasonably be remedied within the period allowed to the mortgagee
for such purpose, Subtenant, at the request of the mortgagee, will extend such
period for an additional period (not to exceed ninety (90) days), provided that
the mortgagee has then commenced and is constantly prosecuting the work of
curing any such default in a diligent manner.
23. PERSONAL LIABILITY. Notwithstanding anything to the contrary provided
in this Sublease, it is specifically understood and agreed, such agreement being
a primary consideration for the execution of this Sublease by Eagle, that except
for a breach of the covenant of quiet enjoyment described in Section 21 as a
result of default under and foreclosure of the mortgage given under the Bond
Documents, there shall be absolutely no personal liability in excess of Fifty
Thousand Dollars ($50,000) on the part of Eagle or its successors in interest
with respect to any of the terms, covenants and conditions of this Sublease, and
Subtenant shall look solely to the interest of Eagle or its successors in
interest in the Property for the covenants and conditions of this Sublease to be
performed by Eagle, and no other property or estates of Eagle shall be subject
to levy, execution or other enforcement procedures for the satisfaction of
Subtenant's remedies except to the extent of any deficiency not exceeding Fifty
Thousand Dollars ($50,000) existing after levy or execution upon Eagle's
interest in the Property. In addition, with respect to any provision of this
Sublease which provides or implies that Eagle shall not unreasonably withhold or
delay any consent or any approval, Subtenant shall not be entitled to make, nor
shall Subtenant make any claim for (and Subtenant hereby waives any claim for)
money damages as a result of any claim by Subtenant that Eagle has unreasonably
withheld or unreasonably delayed any consent or approval, but Subtenant's sole
remedy shall be an action or proceeding to enforce any such provision, or for
specific performance, injunction or declaratory judgment.
24. SUCCESSORS AND ASSIGNS. This Sublease and all provisions, covenants and
conditions hereof shall be binding upon and inure to the benefit of the
successors and authorized assigns of the parties hereto, except that no person,
firm, corporation or court officer holding under or through Subtenant in
violation of any of the terms, provisions or conditions of this Sublease shall
have any right, interest or equity in or to this Sublease or the Demised
Premises.
25. FORCE MAJEURE. Eagle, Holding and the Trustee and Subtenant shall each
be excused for the period of any delay in the performance of any of the
obligations of any of them hereunder when prevented from so doing by a cause or
causes beyond their control which shall include, without limitation, all labor
disputes, civil commotions, war, war-like operations, invasion, rebellion,
hostilities, military or usurped power, sabotage, governmental regulations or
controls, fire or other casualty, inability to obtain any material, service or
financing or acts of God.
26. EMINENT DOMAIN. If the whole or any part of the Building shall be taken
by a public authority under the power of eminent domain, then the term of this
Sublease shall cease on the part so taken from the day of the possession of that
part shall be required for any public purpose by the condemning authority, and
the Base Rent and Additional Rent shall be paid up to that day. If such portion
of the Demised Premises is taken as to destroy the usefulness of the Demised
Premises for the purpose for which the same were subleased, Subtenant shall have
the right either to terminate this Sublease and declare the same null and void
or to continue in the possession of the remainder under the terms
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<PAGE>
herein provided. If Subtenant shall fail to terminate this Sublease as aforesaid
within thirty (30) days after the notice of taking, such failure shall be
regarded as a waiver of its right to terminate, whereupon this Sublease shall
continue for the then balance of the term, but Base Rent and Additional Rent
shall be reduced from and after the date that possession is required by the
condemning authority in the same proportion that the gross leaseable area of the
Demised Premises within the Building so taken bears to the gross leaseable area
of the Building subleased to Subtenant prior to such taking. If Subtenant fails
so to terminate this Sublease, then to the extent of the amount paid to Eagle by
the condemning authority (and permitted to be retained by Eagle by the Trustee
under the Bond Documents), Eagle shall repair and restore the Demised Premises
remaining after such taking to a condition as nearly as possible comparable to
the conditions existing prior to such taking.
The parties acknowledge and agree that in the event of such taking,
Subtenant shall be entitled to claim or recover any damages as a result of the
taking of its estate in the Property or the Building and Holding shall be
entitled to the entire award made or paid by the condemning authority.
27. SUBLANDLORD'S LIEN. All personal property, furniture, trade fixtures,
equipment and improvements of the Subtenant (excluding inventory held and sold
in the ordinary course of business) situated upon the Demised Premises during
the term of this Sublease shall be and are hereby bound for the payment of the
Base Rent and Additional Rent and for the fulfillment of all covenants of this
Sublease, and a lien is hereby created thereon in favor of Eagle for the full
and prompt payment of such amounts and fulfillment of said covenants. The lien
hereby created shall be in addition to any statutory landlord's lien. In order
to confirm the lien created by this Section, Subtenant hereby grants to Eagle a
security interest in all personal property, furniture, trade fixtures, equipment
and improvements installed in, affixed to or kept on the Demised Premises as
security for Subtenant's full and complete performance of each and every one of
Subtenant's obligations hereunder. Subtenant further agrees to execute such
other forms, security agreements and documents as Eagle may request to confirm
Eagle's lien hereunder. Upon Subtenant's default in any obligation hereunder,
then, in addition to the remedies stated in Section 20 of this Sublease,
Subtenant hereby expressly agrees that Eagle may exercise, with respect to such
personal property, furniture, trade fixtures, equipment and improvements, any
and all rights Eagle may have at the time of such default as a secured party
under the Uniform Commercial Code of the State of Florida (Chapter 679 of the
Florida Statues on the date hereof). Anything herein to the contrary
notwithstanding, Eagle's Sublandlord's lien on such trade fixtures and equipment
is and shall be subject and subordinate to the lien of any chattel mortgage or
security agreement (or retained title contract) existing on the date hereof or
hereafter given to secure repayment of any loan granted to Subtenant or its
parent.
28. NOTICES. All notices required under this Sublease shall be deemed
sufficiently given if same are in writing and delivered in person or if mailed
certified mail, postage prepaid, return receipt requested, to the following
addresses:
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<PAGE>
If to Eagle: P.O. Box 75305
Tampa, Florida 33675
Attention: Mr. Robert L. Noojin
with copies to: Mr. Nathaniel Doliner
Ms. Ruth Barnes Himes
Carlton, Fields, Ward, Emmanuel,
Smith, Cutler and Kent, P.A.
If to Subtenant: At the premises.
or to such other address or party in the United States of America as either
party may designate to the other in writing by proper notice. Notices shall be
deemed given on the date of receipt thereof by the party to whom such notice is
addressed or, if delivery is refused, on the date of attempted delivery thereof.
29. SURRENDER. Upon the termination of this Sublease for any cause,
Subtenant will peaceably deliver to Eagle or Eagle's agent all keys to the
Demised Premises and possession thereof in the same condition as existed on the
date such premises were delivered to Subtenant, subject only to ordinary wear
and tear.
30. TIME OF ESSENCE. Time is of the essence of this Sublease and of all of
the covenants stated herein to be performed by Subtenant and Eagle.
31. RECORDING. This Sublease shall not be recorded without the prior
written consent of Eagle and Holding which consent may be withheld at the sole
discretion and election of either Eagle or Holding.
32. SECURITY DEPOSIT. Subtenant, contemporaneously with the execution of
this Sublease, has deposited with Eagle the sum of Sixteen Thousand Two Hundred
Seventy-Six and 07/100 ($16,276.07) Dollars receipt of which is hereby
acknowledged by Eagle, as security for the full and faithful performance by
Subtenant of all the terms, covenants and conditions of this Sublease upon
Subtenant's part to be performed. Eagle shall have the right, but not the
obligation, to apply any part of the deposit to cure any default of Subtenant
(including non-payment of rent), and if Eagle does so, Subtenant shall, upon
demand, deposit with Eagle the amount so applied so that Eagle shall have the
full deposit on hand at all times during the term of this Sublease. Subtenant's
failure to pay to Eagle, within ten (10) days after Eagle's demand therefor, the
amount(s) so applied by Eagle to cure any default(s) shall constitute a breach
of this Sublease and a default hereunder. No interest shall be paid by Eagle to
Subtenant on such security deposit.
If Subtenant shall timely and faithfully perform all of its obligations
under this Sublease during the initial term hereof, then such portion of the
security deposit as may be required to pay the Base Rent for the last month of
the initial term (August, 1992), shall be credited to Subtenant's account. The
balance of the security deposit held by Sublandlord shall be returned to
Subtenant after the time fixed as the expiration of the term hereof, provided
Subtenant has fully and faithfully carried out all of the terms, covenants and
conditions on Subtenant's part to be performed.
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<PAGE>
In the event of a sale or transfer of Eagle's interest in this Sublease,
Eagle shall have the right to transfer the security deposit to the purchaser or
transferee, and Eagle shall thereafter be released from liability for the return
of such security deposit and Subtenant shall look to the new sublandlord solely
for the return of the security deposit. The foregoing provision shall apply to
every transfer or assignment made of the security deposit to a new sublandlord.
The security deposited under this Sublease shall not be mortgaged, assigned or
encumbered by Subtenant without the prior written consent of Eagle and may be
commingled with other funds of Eagle.
33. SPECIAL CONTINGENCIES AND CONDITIONS. Subtenant expressly covenants and
agrees that this Sublease is and shall be subject and subordinate to all of the
terms, covenants, provisions and restrictions contained in the Master Lease and
the Bond Documents and Subtenant shall not do any act nor make any use of the
Demised Premises that is or may be prohibited under the terms of the Master
Lease or the Bond Documents. All portions of the Bond Documents required to be
observed by Subtenant or that may affect this Sublease and the parties' rights
hereunder are hereby incorporated by reference herein as and to the same extent
as if such provisions were expressly stated herein. In the event of any conflict
between the provisions of this Sublease and the provisions of the Bond
Documents, the Bond Documents shall be deemed to supersede and control.
SUBTENANT AND EAGLE EXPRESSLY COVENANT AND ACKNOWLEDGE THAT THIS SUBLEASE
IS AND SHALL BE SUBJECT TO THE APPROVAL OF THE TRUSTEE AND ALL OTHER PARTIES
DESIGNATED IN THE BOND DOCUMENTS.
(a) Subtenant expressly covenants and acknowledges that Subtenant shall be
bound by the obligations, agreements and covenants of Holding and Eagle in the
provisions of the documents pursuant to which the bonds were issued and the
Property was sold by the Issuer of the Bonds (herein called "the Issuer") to
Holding (the "Bond Documents") concerning (i) liability insurance required, (ii)
access to the Demised Premises and inspection by the Issuer, (iii) all covenants
regarding indemnification of the Issuer, (iv) the release from liability of the
Issuer or disclaimers of the Issuer and indemnification therefor, and (v) all
maintenance and modifications of the Demised Premises, including but not limited
to, the obligation to keep the Demised Premises in safe operating condition and
in good repair and to make, from time to time, all necessary repairs thereto and
replacements thereof, and (B) Subtenant shall not use the Demised Premises in
any manner that would result in the occurring of, or provide a basis for the
occurrence of, an event that would require mandatory redemption of the bonds
under the provisions of the Bond Documents.
(b) Subtenant further agrees to furnish to the Issuer of the Bonds, a
description of Subtenant's proposed use of the Property and the Building;
including but not limited to, the number of jobs to be created, the economic
benefit to the Issuer, the impact on the environment that Subtenant's use of the
Property and the Building will have, special needs of public resources and such
other information as may be necessary for the County Administrator or his
designee to approve this Sublease.
In the event the Master Lease is terminated or expires for any reason
whatsoever, whether by voluntary agreement of Eagle and Holding or otherwise,
then this Sublease shall also expire or terminate on such date if Holding or the
Trustee elects that it shall so terminate.
34. REPRESENTATIONS AND COVENANTS BY THE SUBTENANT. Pursuant to and as
required under the Bond Documents, Subtenant makes the representations
enumerated and required in Schedule D of this Sublease.
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<PAGE>
35. OPTION TO SUBLEASE REMAINING SPACE. Subject to the conditions stated in
Section 44 of this Sublease, if Subtenant shall perform all of its obligations
under this Sublease within the grace periods for performance thereof, then if
Subtenant exercises its first option to extend the term of this Sublease
pursuant to the provisions of Section 2, Subtenant shall have an option to
sublease all (but not less than all) of the remaining space in the Building not
herein demised (consisting of an additional 23,264 leaseable square feet)
commencing at the expiration of the initial term of this Sublease upon the
following conditions:
A. Subtenant shall exercise such option as follows:
(i) Subtenant shall notify Eagle in writing of its election to
Sublease the additional space (herein called the "Additional
Space") simultaneously with its notice of election to extend the
term of this Sublease for the first extended term, and
(ii) Simultaneously with such notice, Subtenant shall pay Eagle
the sum of Twenty-three Thousand Two Hundred Sixty-four and
No/100 Dollars ($23,264.00) as consideration for vacating the
Additional Space, and
(iii) Subtenant shall furnish to Eagle the financial statements
(and guaranty, if required) described in Section 44.
Failure to furnish all of the above shall render any attempted
exercise of the option ineffective.
B. If Subtenant so exercises its option to sublease the Additional
Space, then Subtenant covenants and agrees to pay as Base Rent for the
Additional Space for the first five (5) years thereafter (the first
extended term of this Sublease) the greater of the following:
(i) Four Hundred Eighty-Nine Thousand, Eight Hundred Eleven and
88/100 Dollars ($489,811.88) or
(ii) An amount calculated by multiplying Four Hundred Eighty-Nine
Thousand, Eight Hundred Eleven and 88/100 Dollars ($489,811.88)
by a fraction, the numerator of which is the C.P.I. for the
calendar year 1991 and the denominator of which is the C.P.I. for
the calendar year 1986; provided, however, in no event shall the
Base Rent for the Additional Space during such five year period
exceed $685,736.64. Such amount shall be payable in sixty (60)
equal successive monthly installments commencing on September 1,
1992.
C. In the event Subtenant exercises its right to Sublease the
Additional Space, then if Subtenant exercises the section option to
extend the term of this Sublease, such option shall be deemed to apply
to the Additional Space as well as to the original Demised Premises;
provided, however, during the second extended term of this Sublease
(as defined in Section 2) Subtenant covenants and agrees to pay as
Base Rent for the Additional Space the greater of the following:
(i) Four Hundred Eighty-Nine Thousand, Eight Hundred Eleven and
88/100 Dollars ($489,811.88) or
(ii) An amount calculated by multiplying Four Hundred Eighty-Nine
Thousand, Eight Hundred Eleven and 88/100 Dollars ($489,811.88)
by a fraction, the numerator of which is the C.P.I. for the
calendar year 1996 and the denominator of which is the C.P.I. for
the calendar year 1986; provided, however, in no
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<PAGE>
event shall the Base Rent for the Additional Space during such
five year period exceed $881,661.38. Such amount shall be payable
in sixty (60) equal successive monthly installments commencing on
September 1, 1997.
D. Following the exercise of Subtenant's option to Sublease the
Additional Space, all references in this Sublease (except in
subsections A, B & C of Section 3) to the "Demised Premises" shall
also be deemed to refer to the Additional Space, except where the
context clearly requires a different interpretation.
36. REAL ESTATE BROKERS. Each of Eagle and Subtenant represents to the
other that it has not dealt with any real estate or other broker or agent except
Steve Wasserman of Lehrer & Company (herein called "Lehrer") and Rauch, Weaver,
Millsaps & Co., (herein called "Rauch") in connection with the execution or
grant of this Sublease. Eagle shall pay Lehrer its compensation and commission
pursuant to a separate agreement and Lehrer shall pay Rauch all compensation due
to Rauch. Each of the parties shall indemnify and hold the other parties
harmless from any claims by any other brokers for a commission or other
compensation arising or claimed as a result of any acts of the indemnifying
party in connection with this Sublease.
37. APPLICABLE LAW. The validity, enforcement and construction of this
Sublease shall be governed by the laws of the State of Florida.
38. HEADINGS. The headings in this Sublease are solely for convenience of
reference and shall not affect its interpretation.
39. COUNTERPARTS. This Sublease may be executed in as many counterparts as
may be deemed necessary or convenient, all of which taken together shall
constitute one and the same instrument, and either of the parties hereto may
execute this Agreement by signing any such counterpart.
40. SEVERABILITY. IF any section or provision of this Sublease or
application thereof to any person or circumstances to any extent shall be
invalid, the remainder of this Sublease or the application of such provision to
persons or circumstances other than those as to which it is held invalid shall
not be affected thereby and each other provision and application of this
Sublease shall be valid and enforced to the fullest extent permitted by law.
Each covenant and agreement contained in this lease shall be construed to be
separate and independent from every other covenant or agreement and the breach
of any covenant or agreement by either party shall not discharge or relieve the
other party from any of its obligations hereunder.
Subtenant shall comply with all of its obligations under this Sublease,
including but not restricted to, the obligation to make rental payments, even in
the event of default by Eagle in Eagle's obligations under this Sublease.
41. PLURALITY AND GENDER. Use of pronouns in any form wherever they appear
in this Sublease shall be read as masculine or feminine or neuter, as
appropriate, and either singular or plural wherever the context and facts
permit, or require such construction.
42. NO PARTNERSHIP. Eagle shall in no event be construed, held or become in
any way or for any purpose a partner, associate or joint venturer of Subtenant
or any party associated with Subtenant in the conduct of its business or
otherwise.
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<PAGE>
43. ENTIRE AGREEMENT. This Sublease contains the entire Agreement between
the parties hereto and supersedes all previous negotiations leading thereto, and
it may be modified only by an agreement satisfactory to Holding and the Trustee.
Such agreement shall be in writing and executed by Eagle and Subtenant. No
surrender of the Demised Premises, or of the remainder of the term of this
Sublease, shall be valid unless accepted by Eagle in writing.
44. INDUCEMENT. Subtenant has submitted two financial statements, copies of
which are attached hereto as composite Schedule E and incorporated herein by
reference, to Eagle as evidence of Subtenant's ability to perform its financial
obligations under this Sublease, Subtenant represents and warrants that the
facts and conditions shown in such statements are true and correct and Subtenant
acknowledges that the information contained in such statements is a material
inducement to Eagle to execute this Sublease and to submit this Sublease to the
Trustee and the Mortgagee without the requirement of a guaranty by Subtenant's
corporate parent. Accordingly, if Subtenant has failed to disclose any material
facts or circumstances, which, if same had been disclosed in Subtenant's
financial statements described above, would have resulted in a material adverse
effect upon the financial conditions of the Subtenant and which would appear to
impair the Subtenant's ability to pay the rent hereunder, then Eagle shall have
the right to demand and to receive an unconditional guaranty by Subtenant's
parent, Banner Industries, Inc., of Subtenant's obligations under this Sublease.
Such guaranty shall be substantially in the form annexed hereto as Schedule F.
If Subtenant's parent fails to furnish such guaranty to Eagle within thirty (30)
days after Eagle's notice to Subtenant of the requirement of the guaranty,
Eagle, at its sole option shall have the right to cancel and terminate this
Sublease. For purposes of this Section 44, whether Subtenant's ability to pay
Base Rent and Additional Rent has been impaired shall be determined by preparing
a Statement of Changes in Financial Position for the fiscal year of the
inaccurately submitted financial statements, which statement shall be prepared
in accordance with generally accepted accounting principles, and shall take into
effect the material facts and circumstances not previously disclosed. If the
statement so prepared reflects a materially adverse change from the financial
statements originally submitted and such change reflects the inability of
Subtenant to pay the Base Rent and the Additional Rent hereunder, then it is
agreed that Subtenant's parent, Banner Industries, Inc., shall be required to
guarantee Subtenant's performance of this Sublease.
In addition to the statements shown in Schedule E, if Subtenant exercises
the option for Additional Space described in Section 35, Subtenant shall submit
a financial statement for the fiscal year of Subtenant preceding the exercise of
such option. Such financial statement shall be prepared in accordance with
generally accepted accounting principles and shall include, inter alia, a
Statement of Changes in Financial Position. Such statement shall also show a net
worth of the Subtenant that is not substantially less than the net worth shown
in the financial statements of Subtenant annexed hereto as Schedule E. If the
financial statement so submitted shows an inability to pay the increased rent
caused as a result of Subtenant's exercise of the Option for Additional Space,
then as a condition to the exercise of such option, Eagle may require a
guarantee of Subtenant's obligations under this Sublease by Subtenant's parent
company, Banner Industries, Inc., (provided Subtenant's parent company then has
a net worth of not less than that shown by Subtenant in Schedule E). If neither
Subtenant nor Banner Industries, Inc., has the financial condition stated above,
Eagle shall have the right to terminate and cancel the option to acquire
Additional Space described in Section 35 within thirty (30) days after Eagle's
receipt of the last such statement, and if Eagle exercises such right to cancel
the option for Additional Space, the provisions of Section 35 shall be null and
void.
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<PAGE>
IN WITNESS WHEREOF, the parties have executed this Sublease Agreement as of
the day and year first above written.
WITNESSES: EAGLE SUPPLY, INC.
/s/ By: /s/
- ------------------------- -------------------------
As its Vice President
/s/
- ------------------------- (Corporate Seal)
As to Eagle
/s/ SOLAIR ENTERPRISES, INC.
- -------------------------
/s/ By: /s/
- ------------------------- -------------------------
As to Subtenant As its President
The undersigned hereby join in this Sublease for purposes of confirming the
agreements and representations described in Section 36 thereof.
/s/ LEHRER & COMPANY
- -------------------------
/s/ By: /s/
- ------------------------- -------------------------
As to Broker As its Vice President
/s/ RAUCH, WEAVER, MILLSAPS & CO.
- -------------------------
/s/ By: /s/
- ------------------------- -------------------------
As to Co-Broker As its Vice President
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<PAGE>
FIRST AMENDMENT TO SUBLEASE AGREEMENT
This agreement is made this 24th day of January, 1992, by and between Eagle
Supply, Inc., a Florida corporation ("Eagle") and Solair, Inc. (formerly Solair
Enterprises, Inc., a wholly owned subsidiary of Banner Aerospace., a 47.2% owned
affiliate of Fairchild, Inc. (formerly Banner Industries, Inc.) ("Solair").
BACKGROUND
Eagle and Solair are parties to a sublease (the "Sublease") dated August
21, 1987 covering property in Broward County, Florida, more particularly
described in the Sublease. Under the terms of the Sublease, Solair subleased
from Eagle approximately 22,087 square feet of a Building (as defined in the
Sublease) containing an aggregate of approximately 45,351 square feet of total
building area, together with certain outside service and storage areas
appurtenant thereto. The initial term of the Sublease expires on August 31,
1992, but Solair has two options to extend the term of the Sublease. Each
option, if exercised, will extend the term of the Sublease for a period of five
(5) years from the date the Sublease would otherwise expire. If Solair exercises
its first option to extend the term, Solair also has an option to sublease the
space currently occupied by Eagle in the remainder of the Building during the
extended term (s).
Solair desires to occupy the remainder of the Building prior to the
expiration of the initial term of the Sublease. As an inducement to Eagle to
vacate the space currently occupied by Eagle prior to the expiration of the
initial term of the Sublease, Solair has agreed to exercise its first option to
extend the term prior to the time it is required to do so pursuant to the
Sublease. Eagle has agreed to accommodate Solair's request if Solair subleases
the entire Building for a period commencing February 1, 1992 and expiring no
earlier than August 31, 1997, subject to all terms and provisions stated in the
Sublease that are not inconsistent with the express provisions of this
agreement, and if Solair complies with the terms and conditions hereafter
stated.
AGREEMENT
In consideration of the benefits to be derived by each of the parties
hereto from the provisions of this agreement, Eagle and Solair hereby amend the
Sublease in the following particulars:
1. Solair hereby exercises its first option to extend the term of the Sublease
during the period from September 1, 1992 through and including August 31,
1997. Solair also hereby exercises its option under Section 35 of the
Sublease to sublease the Additional Space (as defined in the Sublease)
during the period from September 1, 1992 through and including August 31,
1997.
<PAGE>
2. Solair hereby subleases the Additional Space from Eagle for the period from
the date Eagle vacates the Additional Space through and including August
31, 1992, for the rent hereafter stated, and subject to all terms and
provisions stated in the Sublease that are not inconsistent with the
express provisions of this agreement.
3. In consideration of the benefits to be derived by each of the parties
hereto from the provisions of this agreement and the payment by Solair to
Eagle on or before June 30, 1992 of the vaction fee of $23,264 described in
the Sublease, Eagle hereby agrees to vacate the Additional Space on or
before February 1, 1992.
4. Commencing on the date that Eagle vacates the Additional Space, Solair
shall have a non-exclusive easement for ingress and egress to the Building
across the driveway and road crosshatched in blue on Schedule A-1 attached
hereto and made a part hereof (the "Common Road"). Eagle agrees that Solair
may, at Solair's sole cost and expense, construct a security fence along
the southern boundary of the Common Road (within the boundaries of the area
outlined in red on Schedule A-1) (the "Security Fence") after Eagle vacates
the Additional Space. If Solair does not elect to construct the Security
Fence, then, if Eagle subsequently sells or leases the property immediately
north of the Common Road to a third party, Eagle will construct the
Security Fence. Solair shall reimburse Eagle for one-half (1/2) of the cost
of the Security Fence within ten (10) days of Eagle's demand therefor. Any
fences constructed on either side of the roadway across which the Common
Road traverses shall be constructed to permit large trucks to enter each of
the parcels of property abutting the Common Road.
5. During the period from the date Eagle vacates and tenders possession of the
Additional Space to Solair through and including August 31, 1992, Solair
shall pay rent for the Additional Space in the amount of $57,144.69. Such
rent shall be payable in equal, successive, monthly installments of
$8,163.53 each (the "Interim Additional Space Rent"). If Eagle shall fail
to vacate the Additional Space on or before February 1, 1992, then Solair
shall be entitled to deduct from the Interim Additional Space Rent the
amount of Two Hundred Sixty Eight and 28/100 Dollars ($268.28) for each day
after February 1, 1992 that Eagle continues to occupy the Additional Space.
6. The provisions of subsection 3 (B) of the Sublease concerning payment of
Base Rent (as defined in the Sublease) during the first extended term are
hereby deleted and the following language is substituted in lieu thereof:
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<PAGE>
"B. For the period from September 1, 1992 through and including August 31,
1997, Solair shall pay Base Rent in the following amounts:
(i) For the period from September 1, 1992 through and including
August 31, 1995, Solair covenants and agrees to pay to Eagle Base
Rent in the aggregate amount of five hundred seventy-two
thousand, nine hundred five and 44/100 dollars ($572,905.44),
payable in equal, successive, monthly installments of fifteen
thousand, nine hundred fourteen and 04/100 dollars ($15,914.04)
each.
(ii) For the period from September 1, 1995 through August 31,
1996,Solair covenants and agrees to pay to Eagle Base Rent in the
aggregate amount of two hundred two thousand, three hundred six
and 19/100 dollars ($202, 306.19), payable in equal, successive,
monthly installments of sixteen thousand, eight hundred fifty
eight and 85/100 dollars ($16,858.85) each.
(iii) For the period from September 1, 1996 through August 31, 1997,
Solair covenants and agrees to pay to Eagle Base Rent in the
amount of two hundred thirteen thousand, six hundred forty-three
and 94/100 dollars ($213,643.94), payable in equal, successive,
monthly installments of seventeen thousand, eight hundred three
and 66/100 ($17,803.66) each."
The provisions of Section 35 (B) are deleted in their entirety.
7. Anything in the Sublease to the contrary notwithstanding, from and after
February 1, 1992, (or the date Eagle vacates and tenders possession of the
Additional Space to Solair), Solair shall pay the entire amount of all
Additional Rent (as defined in the Sublease) including, without limitation,
all of Eagle's charges for maintenance, taxes, and insurance, which has
been previously pro-rated and calculated on the basis of the area in the
Building occupied by Solair.
8. If, following the possession of the Additional Space by Solair, it is
determined, (i) that hazardous materials were discharged on the Additional
Space prior to the date that Eagle vacated the Additional Space and (ii)
that remedial action is required by the appropriate governmental
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<PAGE>
authorities, then, to the extent such contamination or discharge was caused
by Eagle, Eagle shall be responsible for such remediation work and shall
indemnify and hold Solair harmless from all costs and expenses relating to
or arising out of the required remediation of any such discharge caused by
Eagle.
For purposes of this section, the term "hazardous materials" shall be
construed to include any hazardous, toxic, ignitable, reactive or corrosive
substance, material or waste, which is or becomes regulated by any local
governmental authority within the State of Florida, the State of Florida,
or the United States Government. The term "hazardous materials" includes,
without limitation,any material or substance which is or contains a)
petrolium oil or its by-products; b) asbestos; c) polychlorinated byphenols
(PCB's); or d) that which isdesignated as a "hazardous substance",
"hazardous waiste", or "extremely hazardous waste", pursuant to Federal,
State or Local law. The term "discharge" shall be construed to include any
spillage, contamination, leakage, discharge, release or escape of any
hazardous materials affecting the Additional Space, and caused by Eagle
prior to the date Eagle vacates the Additional Space, whether sudden or
gradual, accidental or anticipated, or of any other nature or manner, which
violates applicable governmental requirements.
9. Except as herein expressly changed, the Sublease is hereby ratified and
shall remain unmodified and in full force and effect.
IN WITNESS WHEREOF, the parties have executed this agreement as of the date
and year first above written.
Executed in the presence of: Eagle Supply, Inc.
By: /s/ Steven R. Skrotsky
- ---------------------------- -------------------------------------
Name: Name: Steven R. Skrotsky
-----------------------------------
/s/ Laura S. Wisniewski As Its: Vice President
- ----------------------------
Laura S. Wisniewski
Solair, Inc.
/s/ Linda G. Beck By: /s/ Michael Veinberg
- ---------------------------- -------------------------------------
Name: Linda G. Beck Name: Michael Veinberg
-----------------------------------
/s/ Lisa Flint As Its: Vice President
- ----------------------------
Lisa Flint
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<PAGE>
[This page indicates the property certificate]
Exhibit 10.7
EXECUTION COPY
EAGLE SUPPLY, INC., AS BORROWER
================================================================================
LOAN AND SECURITY AGREEMENT
Dated as of December 23, 1994
$7,500,000
================================================================================
- --------------------------------------------------------------------------------
BARCLAYS BUSINESS CREDIT, INC., AS LENDER
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TABLE OF CONTENTS Page
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SECTION 1. CREDIT FACILITY ...................................................1
1.1 Revolving Credit Loans 1
SECTION 2. INTEREST, FEES AND CHARGES ........................................2
2.1 Interest ............................................................2
2.2 Closing Fee .........................................................3
2.3 Collateral Monitoring Fee ...........................................3
2.4 Unused Availability Fee .............................................3
2.5 Audit and Appraisal Fees ............................................3
2.6 Capital Adequacy Charge .............................................3
2.7 Reimbursement of Expenses ...........................................4
2.8 Bank Charges ........................................................5
2.9 Collection Charges ..................................................5
SECTION 3. LOAN ADMINISTRATION ...............................................5
3.1 Manner of Borrowing Revolving Credit Loans ..........................5
3.2 Payments ............................................................7
3.3 Mandatory Prepayments ...............................................8
3.4 Application of Payments and Collections .............................8
3.5 All Loans to Constitute One Obligation ..............................8
3.6 Loan Account ........................................................9
3.7 Statements of Account ...............................................9
SECTION 4. TERM AND TERMINATION ..............................................9
4.1 Term of Agreement ...................................................9
4.2 Termination .........................................................9
SECTION 5. SECURITY INTERESTS ...............................................10
5.1 Security Interest in Collateral ....................................10
5.2 Lien Perfection; Further Assurances ................................11
5.3 Lien on Equipment ..................................................11
SECTION 6. COLLATERAL ADMINISTRATION ........................................11
6.1 Location of Collateral .............................................11
6.2 Insurance of Collateral ............................................11
6.3 Protection of Collateral ...........................................12
6.4 Administration of Accounts .........................................12
6.5 Administration of Inventory ........................................14
6.6 Records and Schedules of Equipment .................................14
6.7 Payment of Charges .................................................14
SECTION 7. REPRESENTATIONS AND WARRANTIES ...................................14
7.1 General Representations and Warranties .............................14
7.2 Continuous Nature of Representations and Warranties ................19
7.3 Survival of Representations and Warranties .........................20
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SECTION 8. COVENANTS AND CONTINUING AGREEMENTS ..............................20
8.1 Affirmative Covenants ..............................................20
8.2 Negative Covenants .................................................22
SECTION 9. CONDITIONS PRECEDENT .............................................25
9.1 Documentation ......................................................25
9.2 No Default .........................................................25
9.3 Other Loan Documents ...............................................25
9.4 Adjusted Availability ..............................................25
9.5 No Litigation ......................................................26
SECTION 10. EVENTS OF DEFAULT; RIGHTS AND REMEDIES ON DEFAULT ...............26
10.1 Events of Default ..................................................26
10.2 Acceleration of the Obligations ....................................28
10.3 Other Remedies .....................................................28
10.4 Remedies Cumulative; No Waiver .....................................29
SECTION 11. MISCELLANEOUS ...................................................30
11.1 Power of Attorney ..................................................30
11.2 Indemnity ..........................................................31
11.3 Modification of Agreement; Sale of Interest ........................31
11.4 Severability .......................................................31
11.5 Successors and Assigns .............................................31
11.6 Cumulative Effect; Conflict of Terms ...............................31
11.7 Execution in Counterparts ..........................................32
11.8 Notice .............................................................32
11.9 Lender's Consent ...................................................33
11.10 Credit Inquiries ...................................................33
11.11 Time of Essence ....................................................33
11.12 Entire Agreement ...................................................33
11.13 Interpretation .....................................................33
11.14 GOVERNING LAW; CONSENT TO FORUM ....................................33
11.15 WAIVERS BY BORROWER ................................................34
11.16 Parties to Act in a Commercially Reasonable Manner .................35
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LOAN AND SECURITY AGREEMENT
THIS LOAN AND SECURITY AGREEMENT is made as of this 23rd day of December,
1994, by and between BARCLAYS BUSINESS CREDIT, INC. ("Lender"), a Connecticut
corporation with an office at 12 East 49th Street, New York, New York 10017, and
EAGLE SUPPLY, INC. ("Borrower"), a Florida corporation with its executive office
and principal place of business at 1301 N. 13th Street, Tampa, Florida 33605.
Capitalized terms used in this Agreement have the meanings assigned to them in
Appendix A, General Definitions. Accounting terms not otherwise specifically
defined herein shall be construed in accordance with GAAP consistently applied.
SECTION 1. CREDIT FACILITY
Subject to the terms and conditions of, and in reliance upon the
representations and warranties made in, this Agreement and the other Loan
Documents, Lender agrees to make a Total Credit Facility of up to Seven Million
Five Hundred Thousand Dollars ($7,500,000) available upon Borrower's request
therefor, as follows:
1.1 Revolving Credit Loans.
1.1.1 Loans and Reserves. Lender agrees, for so long as no Default or
Event of Default exists, to make Revolving Credit Loans to Borrower from time to
time, as requested by Borrower in the manner set forth in subsection 3.1.1
hereof, up to a maximum principal amount at any time outstanding equal to the
Borrowing Base at such time less reserves, if any. Lender shall have the right
to establish reserves in such amounts, and with respect to such matters, as
Lender shall deem necessary or appropriate, against the amount of Revolving
Credit Loans which Borrower may otherwise request under this subsection 1.1.1,
including, without limitation, with respect to (i) price adjustments, damages,
unearned discounts, returned products or other matters for which credit
memoranda are issued in the ordinary course of Borrower's business; (ii)
shrinkage, spoilage and obsolescence of Inventory; (iii) slow moving Inventory,
(iv) other sums chargeable against Borrower's Loan Account as Revolving Credit
Loans under any section of this Agreement; (v) amounts owing by Borrower to any
Person to the extent secured by a Lien (other than a Permitted Lien) on, or
trust over, any Collateral of Borrower; and (vi) such other matters, events,
conditions or contingencies as to which Lender, in its sole credit judgment,
determines reserves should be established from time to time hereunder.
1.1.2 Overadvances. Lender may in its sole discretion make Revolving
Credit Loans to Borrower as requested by Borrower in accordance with the terms
of subsection 3.1.1 hereof at a time when the unpaid balance of Revolving Credit
Loans exceeds, or would exceed with the making of any such Revolving Credit
Loan, the borrowing Base (any such loan being herein referred to individually as
an "Overadvance" and collectively as "Overadvances"). All Overadvances shall be
repaid on demand, shall be secured by all of the Collateral and shall bear
interest as provided in this Agreement for Base Rate Loans.
1.1.3 Use of Proceeds. The Revolving Credit Loans shall be used
initially for (a) the satisfaction of existing Indebtedness of Borrower to the
Parent and (b) the extension of
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a certain loan to the Parent in the approximate principal amount of $1,965,000,
and thereafter for Borrower's general operating capital needs in a manner
consistent with the provisions of this Agreement and all applicable laws.
SECTION 2. INTEREST, FEES AND CHARGES
2.1 Interest.
2.1.1 Rates of Interest. At Borrower's election, interest shall accrue
on the principal amount of the Revolving Credit Loans outstanding at the end of
each day (1) in the case of Base Rate Loans, at a fluctuating rate per annum
equal to the Base Rate plus the Applicable Interest Rate Margin with respect to
Base Rate Loans and (b) in the case of LIBOR Rate Loans, at the LIBOR Rate plus
the Applicable Interest Rate Margin with respect to LIBOR Rate Loans. In the
case of Base Rate Loans, the rate of interest shall increase or decrease by an
amount equal to any increase or decrease in the Base Rate, effective as of the
opening of business on the day that any such change in the Base Rate occurs.
2.1.2 Default Rate of Interest. Upon and after the occurrence of an
Event of Default, and during the continuation thereof, the principal amount of
all Loans shall bear interest at a rate per annum equal to two percent (2%)
above the Base Rate plus the Applicable Interest Rate Margin with respect to
Base Rate Loans.
2.1.3 Computation of Interest and Fees. Interest, fees and collection
charges hereunder shall be calculated daily and shall be computed on the actual
number of days elapsed over a year consisting of three hundred and sixty (360)
days.
2.1.4 Maximum Interest. In no event whatsoever shall the aggregate of
all amounts deemed interest hereunder and charged or collected pursuant to the
terms of this Agreement exceed the highest rate permissible under any law which
a court of competent jurisdiction shall, in a final determination, deem
applicable hereto. If any provisions of this Agreement are in contravention of
any such law, such provisions shall be deemed amended to conform thereto.
2.1.5 Minimum Interest. Subject to the terms of subsection 2.1.4, in
the event that payments of interest on the Loans received by Lender during the
period from the Closing Date through the first anniversary thereof, or during
any annual period thereafter, are less then the sum of $240,000, in the
aggregate, with respect to any such period, without taking into account payments
of additional interest made pursuant to subsection 2.1.2, if any, during such
period, then Borrower shall pay to Lender on the first day of the month
following such period, and, without duplication, on the last day of the Original
Term (or on the last day of the Renewal Term then in effect, if applicable), an
amount equal to the excess of $240,000 over the sum of the aggregate payments of
interest received during such period.
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2.2 Closing Fee. Borrower shall pay to Lender a closing fee of Eighteen
Thousand Seven Hundred and Fifty Dollars ($18,750), which shall be fully earned
and nonrefundable on the Closing Date and shall be paid concurrently with the
initial Loan hereunder.
2.3 Collateral Monitoring Fee. Borrower shall pay to Lender each month, in
arrears, on the first day of the following month, a collateral monitoring fee of
$1,000, which fee shall be pro-rated for any month during which this Agreement
is in effect for less than a full month.
2.4 Unused Availability Fee. Borrower shall pay to Lender an unused
availability fee, which shall be payable in arrears on the last day of each
calendar month hereafter. The unused availability fee shall equal one-quarter of
one percent (1/4 of 1%) per annum on the average daily amount during each month
by which the Borrowing Base in effect on such day exceeds the aggregate amount
of Revolving Credit Loans outstanding as of the close of business on such day;
such fee shall be pro-rated for any month during which this Agreement is in
effect for less than a full month.
2.5 Audit and Appraisal Fees. Borrower shall pay to Lender audit and
appraisal fees from time to time in connection with Lender's periodic audits and
appraisals of Borrower's books and records and such other matters as Lender
shall deem appropriate, plus all out-of-pocket expenses incurred by Lender in
connection with such audits and appraisals. Such audit and appraisal fees shall
be calculated at the rate of $500 for each member of Borrower's field
examination staff engaged in any such audit and appraisal for each day during
which such examination is being conducted and, absent the occurrence and
continuance of an Event of Default, such audits and appraisals shall be
conducted not more than three (3) times during each twelve (12) month period,
commencing from the Closing Date. Audit fees shall be payable on the first day
of the month following the date of issuance by Lender of a request for payment
thereof to Borrower. Upon Borrower's request, Lender shall provide to Borrower
in reasonable detail the back-up in support of any out-of-pocket expenses
referred to herein.
2.6 Capital Adequacy Charge. If Lender shall have determined that the
adoption of any law, rule or regulation regarding capital adequacy, or any
change therein or in the interpretation or application thereof, or compliance by
Lender with any request or directive regarding capital adequacy (whether or not
having the force of law) from any central bank or governmental authority (each
such law, rule, regulation, request or directive a "Capital Adequacy Rule"),
does or shall have the effect of reducing the rate of return on Lender's capital
as a consequence of its obligations hereunder to a level below that which Lender
could have achieved but for such adoption, change or compliance (taking into
consideration Lender's policies with respect to capital adequacy) by a material
amount, then from time to time, after submission by Lender to Borrower of a
written demand therefor (a "Capital Adequacy Demand"), the Borrower shall pay to
Lender such additional amount or amounts (each a "Capital Adequacy Amount", it
being understood that Capital Adequacy Amount may include an increase in the
Applicable Interest Rate Margin) as will compensate Lender for such reduction. A
certificate of Lender claiming entitlement to payment as set forth above shall
be conclusive in the absence of manifest error. Such certificate shall set forth
the nature of the occurrence giving rise to such reduction, the additional
Capital Adequacy Amount or Amounts to be paid to Lender, and the method by which
such Capital Adequacy Amounts were determined. In determining such Capital
Adequacy Amount, Lender may use any reasonable averaging and attribution method.
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2.6.1 Termination of Agreement following Capital Adequacy Demand. At
its option, borrower may elect to terminate this Agreement following its receipt
of a Capital Adequacy Demand, provided Borrower gives Lender notice of such
election not more than thirty (30) days following its receipt of such Capital
Adequacy Demand, and provided, further, that so long as the effective date of
such termination and the payment and satisfaction in full of all Obligations
occurs within one hundred and eighty (180) days form the date of such notice,
Borrower shall not be obligated to pay any of the charges described in
subsection 4.2.3, it being understood, however, that until such effective date
of termination and the payment and satisfaction in full of all Obligations,
Borrower shall continue to be obligated to pay Lender for each Capital Adequacy
Amount theretofore requested by Lender pursuant to a Capital Adequacy Demand.
2.6.2 Subsequent Change in Capital Adequacy Rules. In the event that
any Capital Adequacy Rule, the adoption or change in or compliance by Lender
with which shall have resulted in a Capital Adequacy Demand, shall be revised
subsequent to the date of such Capital Adequacy Demand, such that, in Lender's
determination, its rate of return on capital shall be improved to a level more
favorable than the rate of return which, as a result of the initial change in
such Capital Adequacy Rule, precipitated such Capital Adequacy Demand, then, in
such event, effective promptly following such determination, provided Borrower
shall not have theretofore given to Lender a notice of election to terminate in
accordance with subsection 2.6.1: (i) in the case of a Capital Adequacy Demand
to increase the Applicable Interest Rate Margin, Lender shall reduce the
Applicable Interest Rate Margin by a percentage; and (ii) in the case of a
Capital Adequacy Demand for payment of a fee or other charge, Lender shall
rebate to Borrower a portion of such payment, in each case which Lender shall
determine to be reasonably commensurate with the improvement in Lender's rate of
return on capital caused by the subsequent revision to the Capital Adequacy
Rule. Notwithstanding anything herein above to the contrary, Lender shall have
no obligation whatsoever to make any such adjustment to the Borrower, at any
time on or after: (i) the occurrence and continuance of an Event of Default;
(ii) the date of Borrower's notice of election to terminate in accordance with
subsection 2.6.1; or (iii) the effective date of termination of this Agreement.
2.7 Reimbursement of Expenses. If, at any time or times regardless of
whether or not an Event of Default then exists, Lender or any Participating
Lender incurs reasonable legal or reasonable accounting expenses or any other
reasonable costs or reasonable out-of-pocket expenses in connection with (i) the
negotiation and preparation of this Agreement or any of the other Loan
Documents, any amendment of or modification of this Agreement or any of the
other Loan Documents; (ii) the administration of this Agreement or any of the
other Loan Documents and the transactions contemplated hereby and thereby; (iii)
any litigation, contest, dispute, suite, proceeding or action (whether
instituted by Lender, Borrower or any other Person ) in any way relating to the
Collateral, this Agreement or any of the other Loan Documents or Borrower's
affairs; (iv) any attempt to enforce any rights of Lender or any Participating
Lender against Borrower or any other Person which may be obligated to Lender by
virtue of this Agreement or any of the other Loan Documents, including, without
limitation, the Account Debtors; or (v) any attempt to inspect, verify, protect,
preserve, restore, collect, sell, liquidate or otherwise dispose of or realize
upon the Collateral; then all such reasonable legal and reasonable accounting
expenses and other reasonable costs and reasonable out of pocket expenses of
Lender shall be charged to Borrower. All amounts chargeable to Borrower under
this Section 2.7 shall be Obligations secured by all of the Collateral, shall be
payable on demand to Lender or to such
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Participating Lender, as the case may be, and shall bear interest from the date
such demand is made until paid in full at the rate applicable to Base Rate Loans
from time to time. Borrower shall also reimburse Lender for reasonable expenses
incurred by the Lender in its administration of the Collateral to the extent and
in the manner provided in Section 6 hereof.
2.8 Bank Charges. Borrower shall pay to Lender, on demand, any and all
fees, costs or expenses which Lender or any Participating Lender pays to a bank
or other similar institution (including, without limitation, any fees paid by
the Lender to any Participating Lender) arising out of or in connection with (i)
the forwarding to Borrower or any other Person on behalf of Borrower, by Lender
or any Participating Lender, proceeds of Loans and (ii) the depositing for
collection, by Lender or any Participating Lender, of any check or item of
payment received or delivered to Lender or any Participating Lender on account
of the Obligations.
2.9 collection Charges. If items of payment are received by Lender at a
time when there are no Loans outstanding, such items of payment shall be subject
to a collection charge equal to two (2) days' interest on the amount thereof at
the rate then applicable to Base Rate Loans, which collection charges shall be
payable on the first Business Day of each month.
SECTION 3. LOAN ADMINISTRATION
3.1 Manner of Borrowing Revolving Credit Loans. Borrowings under the Credit
Facility established pursuant to Section 1.1 hereof shall be as follows:
3.1.1 Loans Requests. A request for a Revolving Credit Loan shall be
made, or shall be deemed to be made, in the following manner: (i) Borrower shall
give Lender same day notice, no later than 11:00 A.M. (New York City time) of
such day, of its intention to borrow a Base Rate Loan, and at least five (5)
Business Days' prior notice of its intention to borrow a LIBOR Rate Loan, in
which notice Borrower shall specify the amount of the proposed borrowing and the
proposed borrowing date; provided, however, that no such request may be made at
a time when there exists a Default or an Event of Default and (ii) the becoming
due of any amount required to be paid under this Agreement, whether as interest
or for any other Obligation, shall be deemed irrevocably to be a request for a
Revolving Credit Loan on the due date in the amount required to pay such
interest or other Obligation. As an accommodation to Borrower, Lender may permit
telephone requests for Loans and electronic transmittal of instructions,
authorizations, agreements or reports to Lender by Borrower. Unless Borrower
specifically directs Lender in writing not to accept or act upon telephonic or
electronic communications from Borrower, Lender shall have no liability to
Borrower for any loss or damage suffered by Borrower as a result of Lender's
honoring any requests, executions of any instructions, authorizations or
agreements or reliance on any reports communicated to it telephonically or
electronically and purporting to have been sent to Lender by Borrower, and
Lender shall have no duty to verify the origin of any such communication or the
authority of the person sending it. Each notice of borrowing shall be
irrevocable by and binding on Borrower, and if such notice requests the
borrowing of a LIBOR Rate Loan, such notice shall state the Interest Period with
respect thereto. Borrower, at its option, may choose Base Rate Loans or LIBOR
Rate Loans, provided that any LIBOR Rate Loan shall be in a minimum amount of
$1,000,000, and
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provided, further, that the right of Borrower to choose any LIBOR Rate Loan is
subject to the provisions of subsection 3.1.4.
3.1.2 Disbursement. Borrower hereby irrevocably authorizes Lender to
disburse the proceeds of each Revolving Credit Loan requested, or deemed to be
requested, pursuant to this subsection 3.1.2 as follows: (i) the proceeds of
each Revolving Credit Loan requested under subsection 3.1.1(i) shall be
disbursed by Lender in lawful money of the United States of America in
immediately available funds, in the case of the initial borrowing, in accordance
with the terms of the written disbursement letter from Borrower, and in the case
of each subsequent borrowing, by wire transfer to such bank account as may be
agreed upon by Borrower and Lender from time to time or elsewhere if pursuant to
a written direction from Borrower; and (ii) the proceeds of each Revolving
Credit Loan requested under subsection 3.1.1(ii) shall be disbursed by Lender by
way of direct payment of the relevant interest or other Obligation.
3.1.3 Authorization. Borrower hereby irrevocably authorizes Lender, in
Lender's sole discretion, to advance to Borrower, and to charge to Borrower's
Loan Account hereunder as a Revolving Credit Loan, a sum sufficient to pay all
interest accrued on the Obligations during the immediately preceding month and
to pay all costs, fees and expenses at any time owed by Borrower to Lender
hereunder.
3.1.4 Notice of Continuation and Notice of Conversion.
(a) Subject to the provisions of subsection 3.1.4(c), Borrower may
elect to maintain any borrowing consisting of LIBOR Rate Loans, or any portion
thereof, as a LIBOR Rate Loan by selecting a new Interest Period for such
borrowing, which new Interest Period shall commence on the last day of the then
existing Interest Period. Each selection of a new Interest Period (a
"Continuation") shall be made on five (5) Business Days' prior notice, given by
Borrower to Lender not later than 10:30 A.M. (New York City time) on the fifth
Business Day preceding the date of any proposed Continuation. If the Borrower
elects to maintain more than one borrowing consisting of LIBOR Rate Loans by
combining such borrowings into one borrowing and selecting a new Interest Period
pursuant to this subsection, each of the borrowings so combined shall consist of
Loans having Interest Periods ending on the same date. If the Borrower shall
fail to select anew Interest Period for any borrowing consisting of LIBOR Rate
Loans in accordance with this subsection, such LIBOR Rate Loans will
automatically convert into Base Rate Loans.
(b) Subject to the provisions of subsection 3.1.4(c), Borrower may, on
five (5) Business Days' prior notice given to Lender, convert the entire amount
of or a portion of all Loans of the same Type into Loans of another Type (a
"Conversion"), provided, that no Default or Event of Default shall have occurred
and be continuing, and provided, further, that any Conversion of any LIBOR Rate
Loans into Base Rate Loans may only be made on the last day of the Interest
Period for such LIBOR Rate Loans, and upon Conversion of any Base Rate Loans
into LIBOR Rate Loans, Borrower shall pay accrued interest to the date of
Conversion on the principal amount converted on the first day of the following
month. Each such notice shall be given not later than 10:30 A.M. (new York City
time) on the fifth Business day preceding the date of any proposed Conversion.
Each Conversion shall be in an aggregate
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amount of not less than $1,000,000. Borrower may elect to convert the entire
amount of or a portion of all Loans of the same Type comprising more than one
borrowing into Loans of another Type by combining such borrowings into one
borrowing consisting of Loans of such other Type; provided, however, that if the
borrowings so combined consist of LIBOR Rate Loans, such LIBOR Rate Loans
shall have Interest Periods ending on the same date.
(c) Notwithstanding anything contained in clauses (a) and (b) above to
the contrary:
(i) if Lender is unable to determine the LIBOR Rate for LIBOR
Rate Loans comprising any requested borrowing, Continuation of Conversion, the
right of Borrower to select or maintain LIBOR Rate Loans for such borrowing or
any subsequent borrowing shall be suspended until Lender shall notify Borrower
that the circumstances causing such suspension no longer exist, and each Loans
comprising such requested borrowing, Continuation or Conversion shall be
automatically converted into a Base Rate Loan; and
(ii) there shall not be outstanding at any one time more than an
aggregate of five (5) LIBOR Rate Loans.
(d) Each notice of Continuation or Conversion shall be irrevocable and
binding on Borrower. In the case of (i) any borrowing of a Loan, Continuation or
Conversion that the related notice of borrowing, notice of Continuation or
notice of Conversion specifies is to be comprised of LIBOR Rate Loans, or (ii)
any payment of principal of, or Conversion or Continuation of, any LIBOR Rate
Loan made other then on the last day of the Interest Period for such Loan as a
result of a payment, prepayment, Conversion or Continuation of such Loan or
acceleration of the maturity of any of the Obligations pursuant to Section 10
hereof, or for any other reason, then in any such case, upon Lender's demand,
Borrower shall pay to Lender and indemnify Lender from and against (i) any loss,
cost or expense incurred by Lender as a result of any failure to fulfill, on or
before the date for such borrowing, Continuation or Conversion, the applicable
conditions set forth in Section 9 hereof, and (ii) any additional losses, costs
or expenses which Lender may reasonably incur as a result of such payment,
including, without limitation in each such case, any loss (excluding loss of
anticipated profits), cost or expense incurred by reason of the liquidation or
redeployment of deposits or other funds acquired by Lender to fund the LIBOR
Rate Loans to be made as part of such borrowing, Continuation or Conversion.
3.2 Payments. Except where evidenced by notes or other instruments issued
or made by Borrower to Lender specifically containing payment provisions which
are in conflict with this Section 3.2 (in which event the conflicting provisions
of said notes or other instruments shall govern and control), the Obligations
shall be payable as follows:
3.2.1 Principal. Principal payable on account of Revolving Credit
Loans shall be payable by Borrower to Lender immediately upon the earliest of
(i) the receipt by Lender or Borrower of any proceeds of any of the Collateral,
to the extent of said proceeds, (ii) the occurrence of an Event of Default in
consequence of which Lender elects to accelerate the maturity and payment of the
Obligations, or (iii) termination of this Agreement pursuant to
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Section 4 hereof; provided, however, that if an Overadvance shall exist at any
time, Borrower shall, on demand, repay the Overadvance.
3.2.2 Interest. Interest accrued on all Loans shall be due on the
earliest of (i) the first calendar day of each month (for the immediately
preceding month), computed through the last calendar day of the preceding month,
(ii) the occurrence of an Event of Default in consequence of which Lender elects
to accelerate the maturity and payment of the Obligations, or (iii) termination
of this Agreement pursuant to Section 4 hereof.
3.2.3 Costs, Fees and Charges. Costs, fees and charges payable
pursuant to this Agreement shall be payable by Borrower as and when provided in
Section 2 hereof, to Lender or to any other Person designated by Lender in
writing.
3.2.4 Other Obligations. The balance of the Obligations requiring the
payment of month, if any, shall be payable by Borrower to Lender as and when
provided in this Agreement, the Other Agreements or the Security Documents, or
on demand, whichever is later.
3.3 Mandatory Prepayments. If Borrower sells any of the Collateral or if
any of the Collateral is lost or destroyed, Borrower shall pay to Lender, unless
otherwise agreed to by Lender, or as otherwise expressly authorized by this
Agreement, as and when received by the Borrower and as a mandatory prepayment of
the outstanding Revolving Credit Loans, until paid and satisfied in full, a sum
equal to the proceeds (including insurance proceeds) received by Borrower from
such sale, loss or destruction.
3.4 Application of Payments and Collections. All items of payment received
by Lender by 12:00 noon, New York City time, on any Business Day shall be deemed
received on that Business Day. All items of payment received after 12:00 noon,
New York City time, on any Business Day shall be deemed received on the
following Business Day. For the purpose of computing interest hereunder, all
items of payments received by Lender shall be deemed applied by Lender on
account of the Obligations (subject to final payment of such items) on the
second Business Day after receipt by Lender of good funds in Lender's account
located in Chicago, Illinois, or such other account as to which Lender may
advise Borrower in writing. Borrower irrevocably waives the right to direct the
application of any and all payments and collections at any time or times
hereafter received by Lender from or on behalf of Borrower, and Borrower does
hereby irrevocably agree that Lender shall have the continuing exclusive right
to apply and reapply any and all such payments and collections received at any
time or times hereafter by Lender or its agent against the Obligations, in such
manner as Lender may deem advisable, notwithstanding any entry by Borrower upon
any of its books and records. If as the result of collections of Accounts as
authorized by subsection 6.4.6 hereof a credit balance exists in the Loan
Account, such credit balance shall not accrue interest in favor of Borrower, but
shall be available to Borrower at any time or times for so long as no Default or
Event of Default exists.
3.5 All Loans to Constitute One Obligation. The Loans shall constitute one
general Obligation of Borrower, and shall be secured by Lender's Lien upon all
of the Collateral.
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3.6 Loan Account. Lender shall enter all Loans as debits to the Loan
Account and shall also record in the Loan Account all payments made by Borrower
on any Obligations and all proceeds of Collateral which are paid to Lender, and
may record therein, in accordance with customary accounting practice, other
debits and credits, including interest and all charges and expenses properly
chargeable to Borrower.
3.7 Statements of Account. Lender will account to Borrower monthly with a
statement of Loans, charges and payments made pursuant to this Agreement, and
such account rendered by Lender shall be deemed final, binding and conclusive
upon Borrower unless Lender is notified by Borrower in writing to the contrary
within thirty (30) Days of the date such accounting is mailed to Borrower. Such
notice shall only be deemed an objection to those items specifically objected to
therein.
SECTION 4. TERM AND TERMINATION
4.1 Term of Agreement. Subject to Lender's right to cease making Loans to
Borrower upon or after the occurrence of any Default or Event of Default, this
Agreement shall be in effect for a period of four (4) years from the date
hereof, through and including December 23, 1998 (the "Original Term"), and this
Agreement shall automatically renew itself for one (1) year periods thereafter
(the "Renewal Terms"), unless (a) the party which elects not to renew this
Agreement gives at least one hundred and eighty (180) Days written notice
thereof to the other party prior to the expiration of the Original Term (or the
then current Renewal Term, as the case may be) or (b) this Agreement shall be
sooner terminated as provided in Section 4.2 hereof.
4.2 Termination.
4.2.1 Termination by Lender. Lender may terminate this Agreement
without notice at any time on or after the occurrence of an Event of Default.
4.2.2 Termination by Borrower. Upon at least ninety (90) Days prior
written notice to Lender, Borrower may, at its option, terminate this Agreement;
provided, however, no such termination shall be effective until Borrower has
paid all of the Obligations in immediately available funds. Any notice of
termination given by Borrower shall be irrevocable unless Lender otherwise
agrees in writing, and Lender shall have no obligation to make any Loans on or
after the termination date stated in such notice. Borrower may elect to
terminate this Agreement in its entirety only. No section of this Agreement or
Type of Loan available hereunder may be terminated singly.
4.2.3 Termination Charges. At the effective date of any termination of
this Agreement by Borrower pursuant to subsection 4.2.2 hereof, Borrower shall
pay to Lender (in addition to the then outstanding principal, accrued interest
and other charges owing under the terms of this Agreement and any of the other
Loan Documents) as liquidated damages for the loss of the bargain and not as a
penalty, an amount equal to three percent (3%) of the Total Credit Facility if
termination occurs during the period from December 23, 1994 through and
including December 22, 1995, one percent (1%) of the Total Credit Facility if
termination
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occurs during the period from December 23, 1995 through and including December
22, 1996, and one-half of one percent (1/2 of 1%) of the Total Credit Facility
if termination occurs during the period from December 23, 1996 through
and including December 22, 1998 or during any subsequent Renewal Term.
Notwithstanding anything herein above to the contrary, no termination charge
shall be payable under any of the following circumstances: (a) if termination of
this Agreement occurs pursuant to and in accordance with the terms of subsection
2.6.1; (b) if termination of this Agreement occurs on the last day of the
Original Term or on the last day of any Renewal Term; or (c) if (1) termination
of this Agreement occurs pursuant to and in accordance with the terms of
subsection 4.2.2 hereof, (2) Borrower has obtained and delivered to Lender a
copy of a signed, written commitment for alternative financing, the proceeds of
which will be used to pay all of the Obligations in immediately available funds
and (3) the payment of the Obligations occurs no later than five (5) Days after
the date specified in the notice Borrower is required to give pursuant to such
subsection.
4.2.4 Effect of Termination. All of the Obligations shall be
immediately due and payable upon the termination date sated in any notice of
termination of this Agreement. All undertakings, agreements, covenants,
warranties and representations of Borrower contained in the Loan Documents shall
survive any such termination, and Lender shall retain its Liens in the
Collateral and all of its rights and remedies under the Loan Document
notwithstanding such termination until Borrower has paid the Obligations to
Lender, in full, in immediately available funds, together with the applicable
termination charge, if any. Notwithstanding the payment in full of the
Obligations, Lender shall not be required to terminate its security interests in
the Collateral unless, with respect to any loss or damage Lender may incur as a
result of dishonored checks or other items of payment received by Lender from
Borrower or any Account Debtor and applied to the Obligations, Lender shall, at
its option, (i) have received a written agreement executed by Borrower and by
any Person whose loans or other advances to Borrower are used in whole or in
part to satisfy the Obligations, indemnifying Lender from any such loss or
damage; or (ii) have retained such monetary reserves and Liens on the Collateral
for such period of time as Lender, in its reasonable discretion, may deem
necessary to protect Lender from any such loss or damage.
SECTION 5. SECURITY INTERESTS
5.1 Security Interest in Collateral. To secure the prompt payment and
performance to Lender of the Obligations, Borrower hereby grants to Lender a
continuing Lien upon all of the following Property and interests in such
Property of Borrower, whether nor owned or existing or hereafter created,
acquired or arising and wheresoever located, provided, however, that Collateral
shall not include, and Lender shall not have a Lien on, accounts receivable,
intercompany receivables or notes receivable owing to Borrower by any of its
Affiliates, except to the extent that any such account receivable, intercompany
receivable or note receivable constitutes proceeds of Inventory or General
Intangibles:
(i) Accounts;
(ii) Inventory;
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(iii) General Intangibles;
(iv) All monies, checks, notes and instruments of any kind, now or at
any time or times hereafter, in the possession or under the control of
Lender or a bailee or Affiliate of Lender;
(v) All accessions to, substitutions for and all replacements,
products and cash and non-cash proceeds of (i) through (iv) above,
including, without limitation, proceeds of and unearned premiums with
respect to insurance policies insuring any of the Collateral; and
(vi) All books and records (including, without limitation, customer
lists, credit files, computer programs, print-outs, and other computer
materials and records) of Borrower pertaining to any of (i) through
(v) above.
5.2 Lien Perfection; Further Assurances. Borrower shall execute such UCC-1
financing statements as are required by the Code and such other instruments,
assignments or documents as are necessary to perfect Lender's Lien upon any of
the Collateral and shall take such other action as may be required to perfect or
to continue the perfection of Lender's Lien upon the Collateral. Unless
prohibited by applicable law, Borrower hereby authorizes Lender to execute and
file any such financing statement on Borrower's behalf. The parties agree that a
carbon, photographic or other reproduction of this Agreement shall be sufficient
as a financing statement and may be filed in any appropriate office in lieu
thereof. At Lender's request, Borrower shall also promptly execute or cause to
be executed and shall deliver to Lender any and all documents, instruments and
agreements deemed necessary by Lender to give effect to or carry out the terms
or intent of the Loan Documents.
5.3 Lien on Equipment. At no time prior to the date upon which this
Agreement shall have been terminated and all Obligations shall have been paid
and satisfied in full shall Borrower pledge, grant or assign, or suffer or
otherwise permit to exist any Lien, other than Permitted Liens, on its Equipment
(including without limitation any motor vehicles, trucks, trailers, tractors,
fork lifts and other types and kinds of Equipment which constitute rolling
stock), other than Equipment acquired with proceeds of loans, advances or other
extensions of credit, the indebtedness in respect of which constitutes Permitted
Purchase Money Indebtedness.
SECTION 6. COLLATERAL ADMINISTRATION
6.1 Location of Collateral. All Collateral, other than Inventory in
transit, will at all times be kept by Borrower and its Subsidiaries at one or
more of the business locations set forth in Exhibit B hereto and shall not,
without the prior written approval of Lender, be moved therefrom except, prior
to an Event of Default and Lender's acceleration of the maturity of the
Obligations in consequence thereof, for sales of Inventory in the ordinary
course of business.
6.2 Insurance of Collateral. Borrower shall maintain and pay for insurance
upon all Collateral wherever located and with respect to Borrower's business,
covering casualty, hazard,
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public liability and such other risks in such amounts and with such insurance
companies as are reasonably satisfactory to Lender. Borrower shall deliver the
originals or copies of such policies to Lender with lender's loss payable
endorsements, in form satisfactory to Lender, naming Lender as sole loss payee,
assignee or additional insured, as appropriate. Each policy of insurance or
endorsement shall contain a clause requiring the insurer to give not less than
(30) days prior written notice to Lender in the event of cancellation of the
policy for any reason whatsoever and a clause specifying that the interest of
Lender shall not be impaired or invalidated by any act or neglect of Borrower
or the owner of the Property or by the occupation of the premises for purposes
more hazardous than are permitted by said policy. If Borrower fails to provide
and pay for such insurance, Lender may, at its option, but shall not be required
to, procure the same and charge the Borrower therefor. Borrower agrees to
deliver to Lender, promptly as rendered, true copies of all reports made in any
reporting forms to insurance companies.
6.3 Protection of Collateral. All expenses of protecting, storing,
warehousing, insuring, handling, maintaining and shipping the Collateral, any
and all excise, property, sales, and use taxes imposed by any state, federal or
local authority on any of the Collateral or in respect of the sale thereof shall
be borne and paid by Borrower. If Borrower fails to promptly pay any portion
thereof when due, Lender may, at its option, but shall not be required to, pay
the same and charge Borrower therefor. Lender shall not be liable or responsible
in any way for the safekeeping of any of the Collateral or for any loss or
damage thereto (except for reasonable care in the custody thereof while any
Collateral is in Lender's actual possession) or for any diminution in the value
thereof, or for any act or default of any warehouseman, carrier, forwarding
agency or other person whomsoever, but the same shall be at Borrower's sole
risk.
6.4 Administration of Accounts.
6.4.1 Records, Schedules and Assignments of Accounts. Borrower shall
keep accurate and complete records of its Accounts and all payments and
collections thereof and shall submit to Lender on such period basis as Lender
shall request a sales and collections report for the preceding period, in form
satisfactory to Lender. On or before the fifteenth day of each month from and
after the date hereof, Borrower shall deliver to Lender, in form acceptable to
Lender, a detailed aged trial balance of all Accounts existing as of the last
day of the preceding month, specifying the names, addresses, face value, dates
of invoices and due dates for each Account Debtor obligated on an Account so
listed ("Schedule of Accounts"), and, upon Lender's request therefor, copies of
proof of delivery and the original copy of all documents, including, without
limitation, repayment histories and present status reports relating to the
Accounts so scheduled and such other matters and information relating to the
status of then existing Accounts as Lender shall reasonably request. In
addition, if Accounts in an aggregate face amount in excess of Two Hundred Fifty
Thousand Dollars ($250,000) become ineligible because they fall within one of
the specified categories of ineligibility set forth in the definition of
Eligible Accounts or otherwise established by Lender, Borrower shall notify
Lender of such occurrence on the first Business Day following such occurrence
and the Borrowing Base shall thereupon be adjusted to reflect such occurrence.
If requested by Lender, Borrower shall execute and deliver to Lender formal
written assignments of all of its Accounts weekly or daily, which shall include
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all Accounts that have been created since the date of the last assignment,
together with copies of invoices or invoice registers related thereto.
6.4.2 Discounts, Allowances, Disputes. If Borrower grants any
discounts, allowances or credits that are not shown on the face of the invoice
for the Account involved, Borrower shall report such discounts, allowances or
credits, as the case may be, to Lender as part of the next required Schedule of
Accounts. If any amounts due and owing in excess of One Hundred Thousand Dollars
($100,000) are in dispute between Borrower and any Account Debtor, Borrower
shall provide Lender with written notice thereof at the time of submission of
the next Schedule of Accounts, explaining in detail the reason for the dispute,
all claims related thereto and the amount in controversy. Upon and after the
occurrence of an Event of Default which continues without cure for a period of
fifteen (15) Days, Lender shall have the right to settle or adjust all disputes
and claims directly with the Account Debtor and to compromise the amount or
extend the time for payment of the Accounts upon such terms and conditions as
Lender may deem advisable, and to charge the deficiencies, costs and expenses
thereof, including attorney's fees, to Borrower.
6.4.3 Taxes. If an Account includes a charge for any tax payable to
any governmental taxing authority, Lender is authorized, in its sole discretion,
to pay the amount thereof to the proper taxing Authority for the account of
Borrower and to charge Borrower therefor; provided, however, that Lender shall
not be liable for any taxes to any governmental taxing authority that may be due
by Borrower.
6.4.4 Account Verification. Whether or not a Default or an Event of
Default has occurred, any of Lender's officers, employees or agents shall have
the right, at any time or times hereafter, in the name of Lender, any designee
of Lender or Borrower, to verify the validity, amount or any other matter
relating to any Accounts by mail, telephone, telegraph or otherwise. Borrower
shall cooperate fully with Lender in an effort to facilitate and promptly
conclude any such verification process.
6.4.5 Maintenance of Dominion Account. Borrower shall maintain a
Dominion Account pursuant to a tripartite arrangement among Borrower, Lender and
a bank or banks as may be selected by Borrower and acceptable to Lender. Such
arrangement shall include such terms and conditions as are acceptable to Lender.
All funds deposited in the Dominion Account shall immediately become the
property of Lender, and Borrower shall obtain the agreement by such banks in
favor of Lender to waive any offset rights against the funds so deposited.
Lender assumes no responsibility for such arrangement, including, without
limitation, any claim of accord and satisfaction or release with respect to
deposits accepted by any bank thereunder.
6.4.6 Collection of Account; Proceeds of Collateral. To expedite
collection, Borrower shall endeavor in the first instance to make collection of
its Accounts for Lender. All remittances received by Borrower on account of
Accounts, together with the proceeds of any other Collateral, shall be held as
Lender's property by Borrower as trustee of an express trust for Lender's
benefit, and Borrower shall immediately deposit same in kind in the Dominion
Account, except as otherwise permitted in this Agreement. Lender retains the
right at all times after the occurrence of a Default or an Event of Default to
notify account Debtors that Accounts
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have been assigned to Lender and to collect Accounts directly in its own name
and to charge the collection costs and expenses, including reasonable attorneys'
fees to Borrower.
6.5 Administration of Inventory.
6.5.1 Records and Reports of Inventory. Borrower shall keep accurate
and complete records of its Inventory. Borrower shall furnish to Lender
Inventory reports in form and detail satisfactory to Lender at such times as
Lender may request, but at least once each month, not later than the twentieth
day of such month. Borrower shall conduct a physical inventory no less
frequently than annually and shall provide to Lender a report based on each such
physical inventory promptly thereafter, together with such supporting
information as Lender shall request.
6.5.2 Returns of Inventory. If at any time or times hereafter any
Account Debtor returns any Inventory to Borrower, the shipment of which
generated an Account on which such Account Debtor is obligated in excess of
Fifty Thousand Dollars ($50,000), Borrower shall immediately notify Lender of
the same, specifying the reason for such return and the location, condition and
intended disposition of the returned Inventory.
6.6 Records and Schedules of Equipment. Borrower shall keep accurate
records, itemizing and describing the kind, type, quality, quantity and value of
its Equipment, and shall furnish Lender with a current schedule containing the
foregoing information on at least an annual basis and more often if requested by
Lender. Immediately on request therefor by Lender, Borrower shall deliver to
Lender any and all evidence of ownership, if any, of any of the Equipment.
6.7 Payment of Charges. All amounts chargeable to Borrower under Section 6
hereof shall be Obligations secured by all of the Collateral, shall be payable
on demand and shall bear interest from the date such advance was made until paid
in full at the rate applicable to Base Rate Loans from time to time.
SECTION 7. REPRESENTATIONS AND WARRANTIES
7.1 General Representations and Warranties. To induce Lender to enter into
this Agreement and to make advances hereunder, Borrower warrants, represents and
covenants to Lender that:
7.1.1 Organization and Qualification. Each of Borrower and its
Subsidiaries is a corporation duly organized, validly existing and in good
standing under the laws of the jurisdiction of its incorporation. Each of
Borrower and its Subsidiaries is duly qualified and is authorized to do business
and is in good standing as a foreign corporation in each state or jurisdiction
listed on Exhibit C hereto and in all other states and jurisdictions where the
character of its business or the nature of its activities make such
qualification necessary.
7.1.2 Corporate Power and Authority. Each of Borrower and its
Subsidiaries is duly authorized and empowered to enter into, execute, deliver
and perform this Agreement
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and each of the other Loan Documents to which it is a party. The execution,
delivery and performance of this agreement and each of the other Loan Documents
have been duly authorized by all necessary corporate action and do not and will
not (i) require any consent or approval of the shareholders of Borrower or any
of its Subsidiaries; (ii) contravene Borrower's or any of its Subsidiaries'
charter, articles or certificate of incorporation or bylaws; (iii) violate, or
cause Borrower or any of its Subsidiaries to be in default under, any provision
of any law, rule, regulation, order, writ, judgment, injunction, decree,
determination or award in effect having applicability to Borrower or any of its
Subsidiaries; (iv) result in a breach of or constitute a default under any
indenture or loan or credit agreement or any other agreement, lease or
instrument to which borrower or any of its Subsidiaries is a party or by which
it or its Properties may be bound or affected; or (v) result in, or require, the
creation or imposition of any Lien (other than Permitted Liens) upon or with
respect to any of the Properties now owned or hereafter acquired by Borrower or
any of its Subsidiaries.
7.1.3 Legally Enforceable Agreement. This Agreement is, and each of
the other Loan Documents when delivered under this Agreement will be, a legal,
valid and binding obligation of each of Borrower and its Subsidiaries
enforceable against it in accordance with its respective terms.
7.1.4 Capital Structure. Exhibit D hereto states (i) the correct name
of each of the Subsidiaries of Borrower, its jurisdiction of incorporation and
the percentage of its Voting Stock owned by Borrower, (ii) the name of each of
Borrower's corporate or joint venture Affiliates and the nature of the
affiliation, (iii) the number, nature and holder of all outstanding Securities
of Borrower and each Subsidiary of Borrower and (iv) the number of authorized,
issued and treasury shares of Borrower and each Subsidiary of Borrower. Borrower
has good title to all of the shares it purports to own of the stock of each of
its Subsidiaries, free and clear in each case of any Lien other than Permitted
Liens. All such shares have been duly issued and are fully paid and
non-assessable. There are no outstanding options to purchase, or any rights or
warrants to subscribe for, or any commitments or agreements to issue or sell, or
any Securities or obligations convertible into, or any powers of attorney
relating to, shares of the capital stock of Borrower or any of its Subsidiaries.
There are no outstanding agreements or instruments binding upon any of
Borrower's shareholders relating to the ownership of its shares of capital
stock.
7.1.5 Corporate Names. Neither Borrower nor any of its Subsidiaries
has been known as or used any corporate, fictitious or trade names except those
listed on Exhibit E hereto. Except as set forth on Exhibit E, neither Borrower
nor any of its Subsidiaries has been the surviving corporation of a merger or
consolidation or acquired all or substantially all of the assets of any Person.
7.1.6 Business Locations; Agent for Process. Each of Borrower's and
its Subsidiaries' executive office and other places of business are as listed on
Exhibit B hereto. During the preceding one (1) year period, neither Borrower nor
any of its Subsidiaries has had an office, place of business or agent for
service of process other than as listed on Exhibit B. Except as shown on Exhibit
B, no Inventory is stored with a bailee, warehouseman or similar party, nor is
any Inventory consigned to any Person.
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7.1.7 Title to Properties; Priority of Liens. Each of Borrower and its
Subsidiaries has good, indefeasible and marketable title to and fee simple
ownership of, or valid and subsisting leasehold interests in, all of its real
property, and good title to all of the Collateral and all of its other Property,
in each case, free and clear of all Liens except Permitted Liens. Borrower has
paid or discharged all lawful claims which, if unpaid, might become a Lien
against any of Borrower's Properties that is not a Permitted Lien. The Liens
granted to Lender under Section 5 hereof are first priority Liens, subject only
to Permitted Liens.
7.18 Accounts. Lender may rely, in determining which Accounts are
Eligible Accounts, on all statements and representations made by Borrower with
respect to any Account or Accounts. Unless otherwise indicated in writing to
Lender, with respect to each Account:
(i) It is genuine and in all respects what it purports to be, and it
is not evidenced by a judgment;
(ii) It arises out of a completed, bona fide sale and delivery of
goods or rendition of services by Borrower in the ordinary course of
its business and in accordance with the terms and conditions of all
purchase orders, contracts or other documents relating thereto and
forming a part of the contract between Borrower and the Account
Debtor;
(iii) It is for a liquidated amount maturing as stated in duplicate
invoice covering such sale or rendition of services, a copy of which
has been furnished or is available to Lender;
(iv) Such Account, and Lender's security interest therein, is not, and
will not (by voluntary act or omission of the Borrower) be in the
future, subject to any offset, Lien, deduction, defense, dispute,
counterclaim or any other adverse condition known to Borrower (or with
respect to which Borrower should reasonably have had such knowledge),
except for a dispute resulting in returned goods where such dispute is
deemed by Lender to be immaterial, and each such Account is absolutely
owing to Borrower and is not contingent in any respect or for any
reason;
(v) Borrower has made no agreement with any Account Debtor thereunder
for any extension, compromise, settlement or modification of any such
Account or any deduction therefrom, except discounts or allowances
which are granted by Borrower in the ordinary course of its business
for prompt payment and which are reflected in the calculation of the
net amount of each respective invoice related thereto and are
reflected in Schedules of Accounts submitted to Lender pursuant to
Section 6.4 hereof;
(iv) There are no facts, events or occurrences which in any way impair
the validity or enforceability of any Accounts or tend to reduce the
amount payable thereunder from the face amount of the invoice and
statements delivered to Lender with respect thereto;
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(vii) To the best of Borrower's knowledge, the Account Debtor
thereunder (i) had the capacity to contract at the time any contract
or other document giving rise to the Account was executed and (ii)
such Account Debtor is Solvent; and
(viii) To the best of Borrower's knowledge, there are no proceedings
or actions which are threatened or pending against any Account Debtor
thereunder which might result in any material adverse change in such
Account Debtor's financial condition or the collectibility of such
account.
7.1.9 Equipment. The equipment is in good operating condition and
repair, and all necessary replacements of and repairs thereto shall be made so
that the value and operating efficiency of the Equipment shall be maintained and
preserved, reasonable wear and tear excepted.
7.1.10 Financial Statements; Fiscal Year. The balance sheet of
Borrower as of June 30, 1994, and the related statements of operations and
retained earnings and of cash flows for the fiscal year ended on such date have
been prepared in accordance with GAAP, and present fairly the financial position
of Borrower at such date for such period and the results of Borrower's
operations for such periods. Since June 30, 1994, through the Closing Date,
there has been no material change in the condition, financial or otherwise, of
Borrower and no change in the aggregate value of Equipment of Borrower, except
changes in the ordinary course of business, none of which individually or in the
aggregate has been materially adverse. The fiscal year of Borrower and each of
its Subsidiaries ends of June 30th of each year.
7.1.11 Full Disclosure. The financial statements referred to in
subsection 7.1.10 hereof do not, nor does this Agreement or any other written
statement of Borrower to Lender, contain any untrue statement of a material fact
or omit a material fact necessary to make the statements contained therein or
herein not misleading. There is no fact which Borrower has failed to disclose to
Lender in writing which materially affects adversely or, so far as Borrower can
now foresee, will materially affect adversely the Property, business, prospects,
profits or condition (financial or otherwise) of Borrower or any of its
Subsidiaries or the ability of Borrower or its Subsidiaries to perform this
Agreement or the other Loan Documents.
7.1.12 Solvent Financial Condition. Each of the Borrower and its
Subsidiaries is now, and, after giving effect to the Loans to be made, at all
times will be, Solvent.
7.1.13 Surety Obligations. Neither Borrower nor any of its
Subsidiaries is obligated as surety or indemnitor under any surety or similar
bond or other contract nor has Borrower or any of its Subsidiaries issued or
entered into any agreement to assure payment, performance or completion of
performance of any undertaking or obligation of any other Person.
7.1.14 Taxes. Borrower's federal tax identification number is
59-022800. The federal tax identification number of each of Borrower's
Subsidiaries is shown on Exhibit F hereto. Borrower and each of its Subsidiaries
has filed all federal, state and local tax returns and other reports it is
required by law to file and has paid, or made provision for the payment of, all
taxes, assessments, fees, levies and other governmental charges upon it, its
income and
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Property as and when such taxes, assessment, fees, levies and charges are due
and payable, unless and to the extent any thereof are being actively contested
in good faith and by appropriate proceeding, and Borrower maintains reasonable
reserves on its books therefor. The provision for taxes on the books of Borrower
and its Subsidiaries is adequate for all years not closed by applicable
statutes, and for its current fiscal year.
7.1.15 Brokers. There are no claims for brokerage commissions,
finder's fees or investment banking fees in connection with the transactions
contemplated by this Agreement.
7.1.16 Patents, Trademarks, Copyrights and Licenses. Each of Borrower
and its Subsidiaries owns or possesses all the patents, trademarks, service
marks, trade names, copyrights and licenses necessary for the present and
planned future conduct of its business without any known conflict with the
rights of others. All such patents, trademarks, service marks, tradenames,
copyrights, licenses and other similar rights are listed on Exhibit G hereto.
7.1.17 Governmental Consents. Each of Borrower and its Subsidiaries
has, and is in good standing with respect to, all governmental consents,
approvals, licenses, authorizations, permits, certificates, inspections and
franchises necessary to continue to conduct its business as heretofore or
proposed to be conducted by it and to own or lease and operate its Property as
now owned or leased and operated by it.
7.1.18 Compliance with Laws. Each of Borrower and its Subsidiaries has
duly complied with, and its Property, business operations and leaseholds are in
compliance in all material respects with, the provisions of all federal, state
and local laws, rules and regulations applicable to Borrower or such Subsidiary,
as applicable, its Property or the conduct of its business, and there have been
no citations, notices or orders of noncompliance issued to Borrower or any of
its Subsidiaries under any such law, rule or regulation. Each of Borrower and
its Subsidiaries has established and maintains an adequate monitoring system to
insure that it remains in compliance with all federal, state and local laws,
rules and regulations applicable to it. No Inventory has been produced in
violation of the Fair Labor Standards Act (29 U.S.C. ss.ss. 201 et seq.), as
amended.
7.1.19 Restrictions. Neither Borrower nor any of its Subsidiaries is a
party or subject to any contract, agreement or charter or other corporate
restriction which materially and adversely affects its business or the use or
ownership of any of its property. Neither Borrower nor any of its Subsidiaries
is a party or subject to any contract or agreement which restricts its right or
ability to incur Indebtedness, other than as set forth on Exhibit H hereto, none
of which prohibit the execution of or compliance with this agreement or the
other Loan Documents by Borrower or any of its Subsidiaries, as applicable.
7.1.20 Litigation. Except as set forth on Exhibit I hereto, and in the
notes to Borrower's June 30, 1994 financial statements, there are no actions
suits, proceedings or investigations pending, or, to the knowledge of Borrower,
threatened, against or affecting Borrower or any of its Subsidiaries, or the
business, operations, Property, prospects, profits or condition of Borrower or
any of its Subsidiaries. Neither Borrower nor any of its Subsidiaries
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is in default with respect to any order, writ, injunction, judgment, decree or
rule of any court, governmental authority or arbitration board or tribunal.
7.1.21 No Defaults. No event has occurred and no condition exists
which would, upon or after the execution and delivery of this Agreement or
Borrower's performance hereunder, constitute a Default or an Event of Default.
Neither Borrower nor any of its Subsidiaries is in default, and no event has
occurred and no condition exists which constitutes, or which with the passage of
time or the giving of notice or both would constitute, a default in the payment
of any Indebtedness to any Person for Money Borrowed.
7.1.22 Leases. Exhibit J hereto is a complete listing of all
capitalized leases of Borrower and its Subsidiaries, and Exhibit K hereto is a
complete listing of all operating leases of Borrower and its Subsidiaries. Each
of Borrower and its Subsidiaries is in full compliance with all of the terms of
each of its respective capitalized and operating leases.
7.1.23 Pension Plans. Except as disclosed on Exhibit L hereto, neither
Borrower nor any of its Subsidiaries has any Plan. Borrower and each of its
Subsidiaries is in full compliance with the requirements of ERISA and the
regulations promulgated thereunder with respect to each Plan. No fact or
situation that could result in a material adverse change in the financial
condition of Borrower or any of its Subsidiaries exists in connection with any
Plan. Neither Borrower nor any of its Subsidiaries has any withdrawal liability
in connection with a Multiemployer Plan.
7.1.24 Trade Relations. There exists no actual or threatened
termination, cancellation or limitation of, or any modification or change in,
the business relationship between Borrower or any of its Subsidiaries and any
customer or any group of customers whose purchase individually or in the
aggregate are material to the business of Borrower or any of its Subsidiaries,
or with any material supplier, and there exists no present condition or state of
facts or circumstances which would materially affect adversely Borrower or any
of its Subsidiaries or prevent Borrower or any of its Subsidiaries from
conducting such business after the consummation of the transaction contemplated
by this Agreement in substantially the same manner in which it has heretofore
been conducted.
7.1.25 Labor Relations. Except as described on Exhibit M hereto,
neither Borrower nor any of its Subsidiaries is a party to any collective
bargaining agreement. There are no material grievances, disputes or
controversies with any union or any other organization of Borrower's or any of
its Subsidiaries' employees, or threats of strikes, work stoppages or any
asserted pending demands for collective bargaining by any union or organization.
7.2 Continuous Nature of Representations and Warranties. Each
representation and warranty contained in this Agreement and in the other Loan
Documents shall be continuous in nature and shall remain accurate, complete and
not misleading at all times during the term of this agreement, except for
changes in the nature of Borrower's or its Subsidiaries' business or operations
that would render the information in any exhibit attached hereto either
inaccurate, incomplete or misleading, so long as Lender has consented to such
changes or such changes are expressly permitted by this Agreement.
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7.3 Survival of Representations and Warranties. All representations and
warranties of Borrower contained in this Agreement or any of the other Loan
Documents shall survive the execution, delivery and acceptance thereof by Lender
and the parties thereto and the closing of the transactions described therein or
related thereto.
SECTION 8. COVENANTS AND CONTINUING AGREEMENTS
8.1 Affirmative Covenants. During the term of this Agreement, and
thereafter for so long as there are any Obligations to Lender, Borrower
covenants that, unless otherwise consented to by Lender in writing, it shall:
8.1.1 Visit and Inspections. Permit representatives of Lender, from
time to time, as often as may be reasonably requested, but only during normal
business hours, to visit and inspect the Property of Borrower and each of its
Subsidiaries, inspect, audit and make extracts from its books and records, and
discuss with its officers, its employees and its independent accountants,
Borrower's and each of its Subsidiaries' business, assets, liabilities,
financial condition, business prospects and results of operations.
8.1.2 Financial Statements. Keep, and cause each Subsidiary to keep,
adequate records and books of account with respect to its business activities in
which proper entries are made in accordance with sound financial and business
practices, in a manner consistent with the information previously provided to
Lender, reflecting all its financial transactions and cause to be prepared and
furnished to Lender the following:
(i) not later than one hundred and twenty (120) Days after the close
of each fiscal year of Borrower, unqualified audited financial statements of
Borrower and its Subsidiaries as of the end of such year, on a Consolidated and
consolidating basis, certified by a firm of independent certified public
accountants of recognized standing selected by Borrower but acceptable to Lender
(except for a qualification with respect to (A) the reasonableness of fees,
charges or credits between or among Borrower, parent or any Affiliates or (B)
changes in accounting principles with which the accountants concur);
(ii) not later than forty-five (45) Days after the end of each fiscal
month hereafter (other than the first and last fiscal month of each fiscal year,
as to which Borrower shall have no obligation to deliver to Lender financial
statements as at and for the end of such fiscal months), unaudited interim
financial statements of Borrower and its Subsidiaries as of the end of such
month and of the portion of Borrower's fiscal year then elapsed, on a
Consolidated and consolidating basis, certified by the chief financial officer
of Borrower as fairly presenting the Consolidated financial position and results
of operations of Borrower and its Subsidiaries for such month and period subject
only to changes from audit and year-end adjustments and except that such
statements need not contain notes;
(iii) promptly after the sending or filing thereof, as the case may
be, copies of any proxy statements, financial statements or reports which
Borrower has made available to its public shareholders and copies of any
regular, periodic and special reports or registration
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statements which Borrower files with the Securities and Exchange Commission or
any governmental authority which may be substituted therefor, or any national
securities exchange;
(iv) promptly after the filing thereof, copies of any annual report to
be filed with ERISA in connection with each Plan;
(v) such other data and information (financial and otherwise) as Lender,
from time to time, may reasonably request, bearing upon or related to the
Collateral or Borrower's and each of its Subsidiaries' financial condition or
results of operations.
Concurrently with the delivery of the financial statements described
in clause (i) of this subjection 8.1.2, Borrower shall forward to Lender a copy
of the accountants' letter, if any, to Borrower's management that is prepared in
connection with such financial statements and also shall cause to be prepared
and shall furnish to Lender a certificate of the aforesaid certified public
accountants certifying to Lender that, based upon their examination of the
financial statements of Borrower and its Subsidiaries performed in connection
with their examination of said financial statements, they are not aware of any
Default or Event of Default, or, if they are aware of such Default or Event of
Default, specifying the nature thereof, and acknowledging, in a manner
satisfactory to Lender, that they are aware that Lender is relying on such
financial statements in making its decisions with respect to the Loans.
Concurrently with the delivery of the financial statements described in clauses
(i) and (ii) of this subsection 8.1.2, or more frequently if requested by
Lender, Borrower shall cause to be prepared and furnished to Lender a compliance
certificate in the form of Exhibit N hereto executed by the chief financial
officer of Borrower.
8.1.3 Landlord and Storage Agreements. Provide Lender with copies of
all agreements between Borrower or any of its Subsidiaries and any landlord or
warehouseman which owns any premises at which any Inventory may, from time to
time, be kept.
8.1.4 Subordinations. Provide Lender with a debtor subordination
agreement or other instrument, in form and substance satisfactory to Lender
executed by Borrower and in the case of such agreement executed by any Person
who is an officer, director or Affiliate of the Person to whom Borrower is or
hereafter becomes indebted for Subordinated Debt, subordinating in right of
payment and performance of the Obligations.
8.1.5 Guarantor Financial Statements. Deliver or cause to be delivered
to Lender financial statements for each Guarantor in form and substance
satisfactory to Lender at such intervals and covering such time periods as
Lender may request. Without limiting the generality of the foregoing, Borrower
shall deliver to Lender, or cause the Parent to deliver to Lender:
(i) no later than one hundred and twenty (120) days after the close of
each fiscal year of the Parent, unqualified audited financial statement of the
Parent and its Subsidiaries as of the end of such year, on a Consolidated and
consolidating basis; and
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(ii) not later than forty-five (45) days after the end of each fiscal
quarter hereafter, unaudited interim financial statement of the Parent and its
Subsidiaries as of the end of such quarter and of the portion of the Parent's
fiscal year then elapsed, on a Consolidated and consolidating basis, certified
by the chief financial officer of the Parent as fairly presenting the
Consolidated financial position and results of operations of the Parent and its
Subsidiaries for such quarter and period subject only to changes from audit and
year-end adjustments and except that such statements need not contain notes;
8.1.6 Projections. No later than ten (10) days prior to the end of
each fiscal year of Borrower, deliver to Lender Projections of the financial
conditions and results of operation of Borrower for the next succeeding fiscal
year, such Projections to be prepared on a month-to-month basis.
8.1.7 Notices. Promptly notify Lender in writing of the occurrence of
any event or the existence of any fact which renders any representation or
warranty in this Agreement or in any of the other Loan Documents inaccurate,
incomplete or misleading.
8.2 Negative Covenants. During the term of this Agreement, and thereafter
for so long as there are any Obligations to Lender, Borrower covenants that,
unless Lender has first consented thereto in writing, it will not:
8.2.1 Mergers; Consolidations; Acquisitions. Merge or consolidate, or
permit any Subsidiary of Borrower to merge or consolidate, with any Person; nor
acquire, nor permit any of its Subsidiaries to acquire, all or any substantial
part of the Property of any Person, unless Borrower has given Lender at least
thirty (30) days prior notice of any such acquisition.
8.2.2 Loans. Make, or permit any Subsidiary of Borrower to make, any
loans or other advances of money (other than for salary, travel advances,
advances against commissions and other similar advances in the ordinary course
of business) to any Person in excess of $1,000,000, in the aggregate outstanding
at any one time during any fiscal year of the Borrower, other than loans and
advances made by Borrower or by any Subsidiary of Borrower to the Parent or to
any other Affiliate.
8.2.3 Total Indebtedness. Create, incur, assume, or suffer to exist,
or permit any Subsidiary of Borrower to create, incur or suffer to exist, any
Indebtedness, except:
(i) Obligations owing to Lender;
(ii) Indebtedness of any Subsidiary of Borrower to Borrower;
(iii) accounts payable to trade creditors and obligations and
accruals for current operating expenses (other than for Money Borrowed) which
are not aged more than one hundred twenty (120) days from billing date or more
than thirty (30) days from due date, in each case incurred in the ordinary
course of business and paid within such time period, unless the same are being
actively contested in good faith and by appropriate and lawful proceedings; and
Borrower or such Subsidiary shall have set aside such reserves, if any, with
respect thereto
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as are required by GAAP and deemed adequate by Borrower or such Subsidiary and
its independent accountants;
(iv) Obligations to pay Rentals permitted by subsection 8.2.9;
(v) Permitted Purchase Money Indebtedness;
(vi) contingent liabilities arising out of (A) guarantees
permitted under subsection 8.2.6 or as otherwise permitted in this Agreement,
(B) endorsements of checks and other negotiable instruments for deposit or
collection in the ordinary course of business and (C) payments under lease
agreements, employment agreements and other agreements entered into in the
ordinary course of business upon fair and reasonable terms;
(vii) Indebtedness owing by Borrower or any Subsidiary of
Borrower to the Parent or to any other Affiliate in respect of intercompany
advances or charges, provided such advances or charges are made and incurred in
the ordinary course of business pursuant to and consistent with prior practices;
(viii) Indebtedness which is secured exclusively by real
Property; and
(ix) Indebtedness not included in paragraphs (i) through (viii)
above, or not otherwise specifically permitted under this Agreement, which does
not exceed at any time, in the aggregate, the sum of Two Million Dollars
($2,000,000).
8.2.4 Affiliate Transactions. Enter into, or be a party to, or permit
any Subsidiary of Borrower to enter into or be a party to, any transaction with
any Affiliate of Borrower, except: (i) in the ordinary course of Borrower's or
such Subsidiary's business and on terms no less favorable to Borrower or such
Subsidiary than Borrower or such Subsidiary could obtain in a comparable arm's
length transaction with a Person not an Affiliate of Borrower or such
Subsidiary; (ii) as otherwise specifically permitted in this Agreement, in the
other Loan Documents or in any waiver of the terms of this Covenant agreed to in
writing by Lender (which waiver will not be unreasonably withheld or delayed)
and (iii) for charges, credits, advances, distributions, allocations, accruals
and/or payments of intercompany management fees, rent, interest and other
intercompany transactions by and between Borrower or any Subsidiary of Borrower,
on the one hand, and an Affiliate of Borrower, on the other hand, in fact or in
substance not inconsistent with past practices of Borrower or such Subsidiary
and such Affiliate.
8.2.5 Limitation on Liens. Create or suffer to exist, or permit any
Subsidiary of Borrower to create or suffer to exist, any Lien upon any of its
Property (exclusive of real Property) income or profits, whether now owned or
hereafter acquired, except:
(i) Liens at any time granted in favor of Lender;
(ii) Liens for taxes (excluding any Lien imposed pursuant to any
of the provisions of ERISA) not yet due, or being contested in the manner
described in
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subsection 7.1.14 hereto, but only if in Lender's judgment such Lien does not
adversely affect Lender's rights or the priority of Lender's Lien in the
Collateral;
(iii) Liens arising in the ordinary course of Borrower's business
by operation of law or regulation, but only if payment in respect of any such
Lien is not at the time required and such Liens do not, in the aggregate,
materially detract from the value of the Property (exclusive of real Property)
of Borrower or materially impair the use thereof in the operation of Borrower's
business;
(iv) Purchase Money Liens securing Permitted Purchase Money
Indebtedness;
(v) Liens securing Indebtedness of one of Borrower's Subsidiaries
to Borrower or to another such Subsidiary;
(vi) such other Liens as appear on Exhibit O hereto; and
(vii) such other Liens as Lender may hereafter approve in
writing.
8.2.6 Guarantees. Guaranty, indemnify, or otherwise agree to become
liable for the payment or performance by any other Person of any Indebtedness or
other liabilities or obligations of such Person, except:
(i) as otherwise described under subsection 8.2.3 (vi)(B); and
(ii) for the guaranty by Borrower of an Affiliate's payment or
performance obligations arising under any instrument or agreement in respect of
Indebtedness for which such Affiliate is liable and which Indebtedness is
secured by a mortgage or deed of trust in favor of the holder of such
Indebtedness against real Property the title to or ownership of which is in such
Affiliate, provided, that, (A) Borrower is the tenant-in-possession of such real
Property and (B) the maximum liability of Borrower under all such guarantees
does not exceed $2,500,000 in the aggregate at any one time outstanding.
8.2.7 Disposition of Assets. Sell or otherwise dispose of any of, or
permit any Subsidiary of Borrower to sell or otherwise dispose of any of, its
Property (exclusive of real Property), including any disposition of Property
(exclusive of real property), as part of a sale and leaseback transaction, to or
in favor of any Person, except, in each case, for so long as no Event of Default
exists hereunder: (i) sales of Inventory and sales of other Property which does
not constitute Collateral, in each case in the ordinary course of business; (ii)
a transfer of Property to Borrower by a Subsidiary of Borrower; (iii) transfers
of Property (other than Collateral) by Borrower to (A) any Affiliate, including
the Parent, in satisfaction of indebtedness and (B) the Parent as a dividend, so
long as, in each case, such transfer is made in the ordinary course of business
or pursuant to and consistent with prior practices or (iv) other dispositions
expressly authorized by this Agreement.
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8.2.8 Bill-and-Hold Sales, Etc. Make a sale to any customer on a
bill-and-hold, guaranteed sale, sale and return, sale on approval or consignment
basis, or any sale on a repurchase or return basis.
8.2.9 Leases. Become, or permit any of its Subsidiaries to become, a
lessee under any operating lease (other than a lease under which Borrower or any
of its Subsidiaries is lessor) of Property if the aggregate Rentals payable
during any current or future period of twelve (12) consecutive months under the
lease in question and all other leases under which Borrower or any of its
Subsidiaries is then lessee would exceed One Million Five Hundred Thousand
Dollars ($1,500,000); provided, however, that not more than an additional
aggregate sum of Five Hundred Thousand Dollars ($500,000) may be payable during
any current or future period of twelve (12) consecutive months for Rentals
payable (a) under operating leases and (b) pursuant to Capitalized Lease
Obligations, in each case entered into or incurred, as the case may be, on or
after the Closing Date with respect to Property consisting of Equipment. The
term "Rentals" means, as of the date of determination, all payments which
the lessee is required to make by the terms of any lease, exclusive of occupancy
costs.
SECTION 9. CONDITIONS PRECEDENT
Notwithstanding any other provision of this Agreement or any of the other
Loan Documents, and without affecting in any manner the rights of Lender under
the other sections of this Agreement, Lender shall not be required to make any
Loan under this Agreement unless and until each of the following conditions has
been and continues to be satisfied:
9.1 Documentation. Lender shall have received, inform and substance
satisfactory to Lender and its counsel, a duly executed copy of this Agreement
and the other Loan Documents, together with such additional documents,
instruments, opinions and certificates as Lender and its counsel shall require
in connection therewith from time to time, all in form and substance
satisfactory to Lender and its counsel.
9.2 No Default. No Default or Event of Default shall exist.
9.3 Other Loan Documents. Each of the conditions precedent set forth in the
other Loan Documents and in the commitment letter dated December 8, 1994 to
Borrower from Lender, under Section D thereof, captioned "Conditions of Funding"
(the terms of which Section being incorporated herein by reference thereto),
shall have been satisfied or waived by Lender in writing.
9.4 Adjusted Availability. Lender shall have determined that immediately
after giving effect to(i) the making of the initial Loans requested to be made
on the Closing Date and (ii) the payment or reimbursement by Borrower of Lender
for all fees and costs incurred or payable in connection with the transactions
contemplated hereby and due on the Closing Date, Adjusted Availability shall not
be less than Eight Hundred Thousand Dollars ($800,000), where Adjusted
Availability shall mean the excess, if any, of Availability over that portion,
if any, of Borrower's
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trade accounts payable outstanding on the Closing Date which remains unpaid
beyond the due date of the relevant account payable.
9.5 No Litigation. No action, proceeding, investigation, regulation or
legislation shall have been instituted, threatened or proposed before any court,
governmental agency or legislative body to enjoin, restrain or prohibit, or to
obtain damages in respect of, or which is related to or arises out of , this
Agreement or the consummation of the transactions contemplated hereby.
SECTION 10. EVENTS OF DEFAULT; RIGHTS AND REMEDIES ON DEFAULT
10.1 Events of Default. The occurrence of one or more of the following
events shall constitute an "Event of Default":
10.1.1 Payment of Obligations. Borrower shall: (i) fail to make any
payment of interest, fees, expenses or other Obligations (except those described
in clause (ii) hereof) payable under this Agreement on the due date thereof (in
each case whether due at stated maturity, on demand, upon acceleration or
otherwise) and such failure shall continue without cure for three (3) days; or
(ii) fail to make any payment of principal under this Agreement on the due date
thereof (whether due at stated maturity, on demand, upon acceleration or
otherwise).
10.1.2 Misrepresentations. Any representation, warranty or other
statement made or furnished to Lender by or on behalf of Borrower, any
Subsidiary of Borrower or Guarantor in this Agreement, any of the other Loan
Documents or any instrument, certificate or financial statement furnished in
compliance with or in reference thereto proves to have been false or misleading
in any material respect when made or furnished or when reaffirmed pursuant to
Section 7.2 hereof.
10.1.3 Breach of Specific Covenants. Borrower shall fail or neglect to
perform, keep or observe any covenant contained in Sections 5.2, 6.1, 6.4,
8.1.1, 8.1.2 or 8.2 hereof (other than subsection 8.2.5, but only to the extent
set forth in subsection 10.1.4), on the date that Borrower is required to
perform, keep or observe such covenant.
10.1.4 Breach of other Covenants. Borrower shall fail or neglect to
perform, keep or observe (i) any covenant contained in subsection 8.2.5 (ii) or
(iii), to the extent any Lien referred to therein and which Borrower has
suffered to exist has been created or arises without Borrower's knowledge or
consent or (ii) any other covenant contained in this Agreement (other than a
covenant which is dealt with specifically elsewhere in Section 10.1 hereof) and
in either case the breach of such covenant is not cured to Lender's satisfaction
within twenty (20) days after the sooner to occur of Borrower's receipt of
notice of such breach from Lender or the date on which such failure or neglect
first becomes known to any officer of Borrower.
10.1.5 Default Under Security Documents/Other Agreements. Any event of
default shall occur under, or Borrower shall default in the performance or
observance of any term, covenant, condition or agreement contained in, any of
the Security Documents or the Other Agreements and such default shall continue
beyond any applicable grace period.
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10.1.6 Other Defaults. Thee shall occur any default or event of
default on the part of Borrower under any agreement, document or instrument to
which Borrower is a party or by which Borrower or any of its Property is bound,
creating or relating to any Indebtedness (other than the Obligations) if
the payment or maturity of such Indebtedness is accelerated in consequence of
such event of default or demand for payment of such Indebtedness is made.
10.1.7 Uninsured Losses. Any loss, theft, damage or destruction of any
of the Collateral not fully covered (subject to such deductibles as Lender shall
have permitted) by insurance shall have occurred, and such loss, theft, damage
or destruction shall have a material adverse effect on Borrower's financial
condition, Property or business prospects.
10.1.8 Adverse Changes. There shall occur any material adverse change
in the financial condition, Property or business prospects of Borrower.
10.1.9 Insolvency and Related Proceedings. Borrower or any Guarantor
shall cease to be Solvent or shall suffer the appointment of a receiver,
trustee, custodian or similar fiduciary, or shall make an assignment for the
benefit of creditors, or any petition for an order for relief shall be filed by
or against Borrower, any Subsidiary of Borrower or any Guarantor under the
Bankruptcy Code (if against Borrower, any Subsidiary of Borrower or any
Guarantor under the Bankruptcy Code (if against Borrower, any Subsidiary of
Borrower or any Guarantor, the continuation of such proceeding for more than
sixty (60) days), or Borrower or any Guarantor shall make any offer of
settlement, extension or composition to their respective unsecured creditors
generally.
10.1.10 Business Disruption. There shall occur a cessation of a
substantial part of the business of Borrower or any Subsidiary of Borrower for a
period which significantly affects Borrower's or such Subsidiary's capacity to
continue its business, on a profitable basis; or Borrower or any Subsidiary of
Borrower shall suffer the loss or revocation of any license or permit now held
or hereafter acquired by Borrower or such Subsidiary which is necessary to the
continued or lawful operation of its business; or Borrower or any Subsidiary
shall be enjoined, restrained or in any way prevented by court, governmental or
administrative order from conducting all or any material part of its business
affairs.
10.1.11 Change of Ownership; etc. The Parent or the shareholders of
Parent as of the Closing Date shall cease to own or control, beneficially and of
record, all of the issued and outstanding capital stock of Borrower, or Douglas
P. Fields shall cease to own or control beneficially, at least fifteen percent
(15%) of the issued and outstanding capital stock of the Parent or Borrower, or
Frederick M. Friedman shall cease to own or control beneficially, at least
fifteen percent (15%) of the issued and outstanding capital stock of the Parent
or Borrower, or both Douglas P. Fields and Frederick M. Friedman shall cease to
be actively engaged in the senior management of Borrower's business affairs or
upon any sale or transfer permitted hereunder by the Parent of the issued and
outstanding capital stock of Borrower, the Parent shall fail to then deliver to
Lender writing executed by the Parent confirming the continuing effectiveness of
the Guaranty Agreement executed by it in favor of the Lender, which writing
shall contain a reaffirmation by the Parent of its continuing liability under
the Guaranty Agreement in accordance with its terms.
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10.1.12 ERISA. A Reportable Event shall occur which Lender, in its
sole discretion, shall determine in good faith constitutes grounds for the
termination by the Pension Benefit Guaranty Corporation of any Plan or for the
appointment by the appropriate United States district court of a trustee for any
Plan, or if any Plan shall be terminated or any such trustee shall be requested
or appointed, or if Borrower, any Subsidiary of Borrower or any Guarantor is in
"default" (as defined in Section 4219(c)(5) of ERISA) with respect to payments
to a Multiemployer Plan resulting from Borrower's, such Subsidiary's or such
Guarantor's complete or partial withdrawal from such Plan.
10.1.13 Challenge to Agreement. Borrower, any Subsidiary of Borrower
or any Guarantor, or any Affiliate of any of them, shall challenge or contest in
any action, suit or proceeding the validity or enforceability of this Agreement,
or any of the other Loan Documents, the legality or enforceability of any of the
Obligations or the perfection or priority of any Lien granted to Lender.
10.1.14 Repudiation of or Default Under Guaranty Agreement. Any
Guarantor shall revoke or attempt to revoke the Guaranty Agreement signed by
such Guarantor, or shall repudiate such Guarantor's liability thereunder or
shall be in default under the terms thereof.
10.1.15 Criminal Forfeiture. Borrower, an Subsidiary of Borrower or
any Guarantor shall be criminally indicted or convicted under any law that could
lead to a forfeiture of any Property of Borrower, any Subsidiary of Borrower or
any Guarantor.
10.1.16 Judgments. Any money judgment, writ of attachment or similar
process, singly, or in the aggregate, in each case in excess of $150,000, is
filed against Borrower, any Subsidiary of Borrower or any Guarantor, or any of
their respective Property and such judgment, writ of attachment or similar
process is not satisfied, bonded to the satisfaction of Lender or stayed, in
each case within 45 days of such filing.
10.2 Acceleration of the Obligations. Without in any way limiting the right
of Lender to demand payment of any portion of the Obligations payable on demand
in accordance with Section 3.2 hereof, upon or at any time after the occurrence
of an Event of Default, all or any portion of the Obligations shall, at the
option of Lender and without presentment, demand protest or further notice by
Lender, become at once due and payable, and Borrower shall forthwith pay to
Lender the full amount of such Obligations, provided, that upon the occurrence
of an Event of Default specified in subsection 10.1.9 hereof, all of the
Obligations shall become automatically due and payable without declaration,
notice or demand by Lender.
10.3. Other Remedies. Upon and after the occurrence of an Event of Default.
Lender shall have and may exercise from time to time the following rights and
remedies:
10.3.1 All of the rights and remedies of a secured party under the
Code or under other applicable law, and all other legal and equitable rights to
which Lender may be entitled, all of which rights and remedies shall be
cumulative and shall be in addition to any
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others rights or remedies contained in this Agreement or any of the other Loan
Documents, and none of which shall be exclusive.
10.3.2 The right to take immediate possession of the Collateral, and
to (i) require Borrower to assemble the Collateral, at Borrower's expense, and
make it available to Lender at a place designated by Lender which is reasonably
convenient to both parties, and (ii) enter any premises where any of the
Collateral shall be located and to keep and store the Collateral on said
premises until sold (and if said premises be the Property of Borrower, Borrower
agrees not to charge for the storage thereof).
10.3.3 The right to sell or otherwise dispose of all or any Collateral
in its then condition, or after any further manufacturing or processing thereof,
at public or private sale or sales, with such notice as may be required by law,
in lots or in bulk, for cash or on credit, all as Lender, in its sole
discretion, may deem advisable. Borrower agrees that ten (10) days written
notice to Borrower of any public or private sale or other disposition of
Collateral shall be reasonable notice thereof, and such sale shall be at such
locations as Lender may designate in said notice. Lender shall have the right to
conduct such sales on Borrower's premises, without charge therefor, and such
sales may be adjourned from time to time in accordance with applicable law.
Lender shall have the right to sell, lease or otherwise dispose of the
Collateral, or any part thereof, for cash, credit or any combination thereof,
and Lender may purchase all or any part of the Collateral at public or, if
permitted by law, private sale and, in lieu of actual payment of such purchase
price, may set off the amount of such price against the Obligations. The
proceeds realized from the sale of any Collateral may be applied, after allowing
two (2) Business Days for collection, first to the costs, expenses and
attorneys' fees incurred by Lender in collecting the Obligations, in enforcing
the rights of Lender under the Loan Documents and in collecting, retaking,
completing, protecting, removing, storing, advertising for sale, selling and
delivering any Collateral; second to the interest due upon any of the
Obligations; and third, to the principal of the Obligations. If any deficiency
shall arise, Borrower shall remain liable to Lender therefor.
10.3.4 Lender is hereby granted a license or other right to use,
without charge, Borrower's labels, patents, copyrights, rights of use of any
name, trade secrets, tradenames, trademarks and advertising matter, or any
Property of a similar nature, as it pertains to the Collateral, in advertising
for sale and selling any Collateral, and Borrower's rights under all licenses
and all franchise agreements shall inure to Lender's benefit.
10.4 Remedies Cumulative; No Waiver. All covenants, conditions, provisions,
warranties, guaranties, indemnities, and other undertakings of Borrower
contained in this Agreement and the other Loan Documents, or in any document
referred to herein or contained in any agreement supplementary hereto or in any
schedule or in any Guaranty Agreement given to Lender or contained in any other
agreement between Lender and Borrower, heretofore, concurrently, or hereafter
entered into, shall be deemed cumulative to and not in derogation or
substitution of any of the terms, covenants, conditions, or agreements of
Borrower herein contained. The failure or delay of Lender to require strict
performance by Borrower of any provision of this Agreement or to exercise or
enforce any rights, Liens, powers, or remedies hereunder or under any of the
aforesaid agreements or other documents or security or Collateral
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shall not operate as a waiver of such performance, Liens, rights, powers and
remedies, but all such requirements, Liens, rights, powers, and remedies shall
continue in full force and effect until all Loans and all other Obligations
owing or to become owing from Borrower to Lender shall have been fully
satisfied. None of the undertakings, agreements, warranties, covenants and
representations of Borrower contained in the Agreement or any of the other Loan
Documents and no Event of Default by Borrower under this Agreement or any other
Loan Documents shall be deemed to have been suspended or waived by Lender,
unless such suspension or waiver is by an instrument in writing specifying such
suspension or waiver and is signed by a duly authorized representative of Lender
and directed to Borrower.
SECTION 11. MISCELLANEOUS
11.1 Power of Attorney. Borrower hereby irrevocably designates, makes,
constitutes and appoints Lender (and all Persons designated by Lender) as
Borrower's true and lawful attorney (and agent-in-fact), solely for the purposes
set forth below, and Lender, or Lender's agent, may, without notice to Borrower
and in either Borrower's or Lender's name, but at the cost and expense of
Borrower:
11.1.1 At such time or times upon or after the occurrence of a Default
or an Event of Default as Lender or said agent, in its sole discretion, may
determine, endorse Borrower's name on any checks, notes, acceptances, drafts,
money orders or any other evidence of payment or proceeds of the Collateral
which come into the possession of Lender or under Lender's control.
11.1.2 At such time or times upon or after the occurrence of an Event
of Default as Lender or its agent in its sole discretion may determine: (i)
demand payment of the Accounts from the Account Debtors, enforce payment of the
Accounts by legal proceedings or otherwise, and generally exercise all of
Borrower's rights and remedies with respect to the collection of the Accounts;
(ii) settle, adjust, compromise, discharge or release any of the Accounts or
other Collateral or any legal proceedings brought to collect any of the Accounts
or other Collateral; (iii) sell or assign any of the Accounts and other
Collateral upon such terms, for such amounts and at such time or times as Lender
deems advisable; (iv) take control, in any manner, of any item of payment or
proceeds relating to any Collateral; (v) prepare, file and sign Borrower's name
to a proof of claim in bankruptcy or similar document against any Account Debtor
or to any notice of lien, assignment or satisfaction of lien or similar document
in connection with any of the Collateral; (vi) receive, open and dispose of all
mail addressed to Borrower and to notify postal authorities to change the
address for delivery thereof to such address as Lender may designate; (vii)
endorse the name of Borrower upon any of the items of payment or proceeds
relating to any Collateral and deposit the same to the account of Lender on
account of the Obligations; (viii) endorse the name of Borrower upon any chattel
paper, document, instrument, invoice, freight bill, bill of lading or similar
document or agreement relating to the Accounts, Inventory and any other
Collateral; (ix) use Borrower's stationary and sign the name of Borrower to
verifications of the Accounts and notices thereof to Account Debtors; (x) use
the information recorded on or contained in any data processing equipment and
computer hardware and software relating to the Accounts, Inventory, and any
other Collateral;
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(xi) make and adjust claims under policies of insurance, and (xii) do all other
acts and things necessary, in Lender's determination, to fulfill Borrower's
obligations under this Agreement.
11.2 Indemnity. Borrower hereby agrees to indemnify Lender and hold Lender
harmless from and against any liability, loss, damage, suit, action or
proceeding ever suffered or incurred by Lender (including reasonable attorneys
fees and legal expenses) as the result of Borrower's failure to observe, perform
or discharge Borrower's duties hereunder. In addition, Borrower shall defend
Lender against and save it harmless from all claims of any Person with respect
to the Collateral. Without limiting the generality of the foregoing, these
indemnities shall extend to any claims asserted against Lender by any Person
under any Environmental Laws or similar laws by reason of Borrower's or any
other Person's failure to comply with laws applicable to solid or hazardous
waste materials or other toxic substances. Notwithstanding any contrary
provision in this Agreement, the obligation of Borrower under this Section 11.2
shall survive the payments in full of the Obligations and the termination of
this Agreement.
11.3 Modification of Agreement; Sale of Interest. This Agreement may not be
modified, altered or amended except by an agreement in writing signed by
Borrower and Lender. Borrower may not sell, assign or transfer any interest in
this Agreement, any of the other Loan Documents, or any of the Obligations, or
any portion thereof, including, without limitation, Borrower's rights, title,
interests, remedies, powers, and duties hereunder or thereunder. Borrower hereby
consents to Lender's participation, sale, assignment, transfer or other
disposition, at any time or times hereafter, of this Agreement and any of the
other Loan Documents, or of any portion hereof or thereof, including, without
limitation, Lender's rights, title, interests, remedies, powers, and duties
hereunder or thereunder. In the case of an assignment, the assignee shall have,
to the extent of such assignment, the same rights, benefits and obligations as
it would if it were "Lender" hereunder, and Lender shall be relieved of all
obligations hereunder upon any such assignments. Borrower agrees that it will
use its best efforts to assist and cooperate with Lender in any manner
reasonably requested by Lender to effect the sale of participation in or
assignments of any of the Loan Documents or any portion thereof or interest
therein, including, without limitation, assisting in the preparation of
appropriate disclosure documents. Borrower further agrees that Lender may
disclose credit information regarding Borrower and its Subsidiaries to any
potential participant or assignee.
11.4 Severability. Wherever possible, each provision of this Agreement
shall be interpreted in such manner as to be effective and valid under
applicable law, but if any provision of this Agreement shall be prohibited by or
invalid under applicable law, such provision shall be ineffective only to the
extent of such prohibition or invalidity, without invalidating the remainder of
such provision or the remaining provisions of this Agreement.
11.5 Successors and Assigns. This Agreement, the Other Agreements and the
Security Documents shall be binding upon and inure to the benefit of the
successors and assigns of Borrower and Lender, permitted under Section 11.3
hereof.
11.6 Cumulative Effect; Conflict of terms. The provisions of the Other
Agreements and the Security Documents are hereby made coextensive with the
provisions of this Agreement. Except as otherwise provided in Section 3.2 hereof
and except as otherwise provided in any of
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the other Loan Documents by specific reference to the applicable provision of
this Agreement, if any provision contained in this Agreement is in direct
conflict with, or inconsistent with, any provision in any of the other Loan
Documents, the provision contained in this Agreement shall govern and control.
11.7 Execution in Counterparts. The Agreement may be executed in any number
of counterparts and by different parties hereto in separate counterparts, each
of which when so executed and delivered shall be deemed to be an original and
all of which counterparts taken together shall constitute but one and the same
instrument.
11.8 Notice. Except as otherwise provided herein, all notices, requests and
demands to or upon a party hereto, to be effective, shall be in writing and
shall be sent by certified or registered mail, return receipt requested, by
personal delivery against receipt, by overnight courier or by facsimile and,
unless otherwise expressly provided herein, shall be deemed to have been validly
served, given or delivered immediately when delivered against receipt, five (5)
days after deposit in the mail, postage prepaid, or one (1) Business Day after
deposit with an overnight courier or in the case of facsimile notice, when sent,
addressed as follows:
If to Lender: Barclays Business Credit, Inc.
200 Glastonbury Boulevard
Glastonbury, Connecticut 06033
Attention: Mr. Howard Handman, SVP
Facsimile No.: 203-657-7759
With a copy to: Lowenthal, Landau, Fischer & Bring, P.C.
250 Park Avenue
New York, New York 10177
Attention: Robert Stein, Esq.
Facsimile No.: 212-986-0604
If to Borrower: Eagle Supply, Inc.
1301 N. 13th Street
Tampa, Florida 33605
Attention: Lewis G. Marshall
Facsimile No.: 813-248-3195
With a copy to: TDA Industries, Inc.
122 East 42nd Street
New York, New York 10168
Attention: Mr. Frederick M. Friedman
Facsimile No.: 212-972-0326
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and a copy to: Carlton, Fields, Ward, Emmanuel, Smith & Cutler, P.A.
One Harbour Place
777 South Harbour Island Drive
Tampa, Florida 33602
Attention: Thomas Snow, Esq.
Facsimile No.: 813-229-4133
or to such other address as each party may designate for itself by notice given
in accordance with this Section 11.8, provided, however, that any notice,
request or demand to or upon Lender pursuant to subsection 3.1.1 or 4.2.2 hereof
shall not be effective until received by Lender.
11.9 Lender's Consent. Whenever Lender's consent is required to be obtained
under this Agreement, any of the other Agreements or any of the Security
Documents as a condition to any action, inaction condition or event, Lender
shall be authorized to give or withhold such consent in its sole and absolute
discretion and to condition its consent upon the giving of additional collateral
security for the Obligations, the payment of money or any other matter.
11.10 Credit Inquiries. Borrower hereby authorizes and permits Lender to
respond to usual and customary credit inquiries from third parties concerning
Borrower or any of its Subsidiaries.
11.11 Time of Essence. Time is of the essence of this Agreement, the Other
Agreements and the Security Documents.
11.12 Entire Agreement. This Agreement and the other Loan Documents,
together with all other instruments, agreements and certificates executed by the
parties in connection therewith or with reference thereto, embody the entire
understanding and agreement between the parties hereto and thereto with respect
to the subject matter hereof and thereof and supersede all prior agreements,
understandings and inducements, whether express or implied, oral or written.
11.13 Interpretation. No provision of this Agreement or any of the other
Loan Documents shall be construed against or interpreted to the disadvantage of
any party hereto by any court or other governmental or judicial authority by
reason of such party having or being deemed to have structured or dictated such
provision.
11.14 GOVERNING LAW; CONSENT TO FORUM. THIS AGREEMENT HAS BEEN NEGOTIATED,
EXECUTED AND DELIVERED AT AND SHALL BE DEEMED TO HAVE BEEN MADE IN NEW YORK, NEW
YORK. THIS AGREEMENT SHALL BE GOVERNED BY AND CONSTRUED IN ACCORDANCE WITH THE
LAWS OF THE STATE OF NEW YORK; PROVIDED, HOWEVER, THAT IF ANY OF THE COLLATERAL
SHALL BE LOCATED IN ANY JURISDICTION OTHER THAN NEW YORK, THE LAWS OF SUCH
JURISDICTION SHALL GOVERN THE METHOD, MANNER AND PROCEDURE FOR FORECLOSURE OF
LENDER'S LIEN UPON SUCH COLLATERAL AND THE ENFORCEMENT OF LENDER'S OTHER
REMEDIES IN RESPECT OF SUCH COLLATERAL TO THE EXTENT THAT THE LAWS OF SUCH
JURISDICTION ARE DIFFERENT FROM OR INCONSISTENT WITH THE LAWS OF NEW YORK. AS
PART
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OF THE CONSIDERATION FOR NEW VALUE RECEIVED, AND REGARDLESS OF ANY PRESENT OR
FUTURE DOMICILE OR PRINCIPAL PLACE OF BUSINESS OF BORROWER OR LENDER, BORROWER
HEREBY CONSENTS AND AGREES THAT THE SUPREME COURT OF THE STATE OF NEW YORK,
SITTING IN NEW YORK COUNTY, OR, AT LENDER'S OPTION, THE UNITED STATES DISTRICT
COURT FOR THE SOUTHERN DISTRICT OF NEW YORK, SHALL HAVE EXCLUSIVE JURISDICTION
TO HEAR AND DETERMINE ANY CLAIMS OR DISPUTES BETWEEN BORROWER AND LENDER
PERTAINING TO THIS AGREEMENT OR TO ANY MATTER ARISING OUT OF OR RELATED TO THIS
AGREEMENT. BORROWER EXPRESSLY SUBMITS AND CONSENTS IN ADVANCE TO SUCH
JURISDICTION IN ANY ACTION OR SUIT COMMENCED IN ANY SUCH COURT, AND BORROWER
HEREBY WAIVES ANY OBJECTION WHICH BORROWER MAY HAVE BASED UPON LACK OF PERSONAL
JURISDICTION, IMPROPER VENUE OR FORUM NON CONVENIENS AND HEREBY CONSENTS TO THE
GRANTING OF SUCH LEGAL OR EQUITABLE RELIEF AS IS DEEMED APPROPRIATE BY SUCH
COURT. BORROWER HEREBY WAIVES PERSONAL SERVICE OF THE SUMMONS, COMPLAINT AND
OTHER PROCESS ISSUED IN ANY SUCH ACTION OR SUIT AND AGREES THAT SERVICE OF SUCH
SUMMONS, COMPLAINT AND OTHER PROCESS MAY BE MADE BY REGISTERED OR CERTIFIED MAIL
ADDRESSED TO BORROWER AT THE ADDRESS SET FORTH IN THIS AGREEMENT AND THAT
SERVICE SO MADE SHALL BE DEEMED COMPLETED UPON THE EARLIER OF BORROWER'S ACTUAL
RECEIPT THEREOF OR FIVE (5) DAYS AFTER DEPOSIT IN THE U.S. MAILS, PROPER POSTAGE
PREPAID. NOTHING IN THIS AGREEMENT SHALL BE DEEMED OR OPERATE TO AFFECT THE
RIGHT OF LENDER TO SERVE LEGAL PROCESS IN ANY OTHER MANNER PERMITTED BY LAW, OR
TO PRECLUDE THE ENFORCEMENT BY LENDER OF ANY JUDGMENT OR ORDER OBTAINED IN SUCH
FORUM OR THE TAKING OF ANY ACTION UNDER THIS AGREEMENT TO ENFORCE SAME IN ANY
OTHER APPROPRIATE FORUM OR JURISDICTION.
11.15 WAIVERS BY BORROWER. BORROWER WAIVES (i) THE RIGHT TO TRIAL BY JURY
(WHICH LENDER HEREBY ALSO WAIVES) IN ANY ACTION, SUIT, PROCEEDING OR
COUNTERCLAIM OF ANY KIND ARISING OUT OF OR RELATED TO ANY OF THE LOAN DOCUMENTS,
THE OBLIGATIONS OR THE COLLATERAL; (ii) PRESENTMENT, DEMAND AND PROTEST AND
NOTICE OF PRESENTMENT, PROTEST, DEFAULT, NON PAYMENT, MATURITY, RELEASE,
COMPROMISE, SETTLEMENT, EXTENSION OR RENEWAL OF ANY OR ALL COMMERCIAL PAPER,
ACCOUNTS, CONTRACT RIGHTS, DOCUMENTS, INSTRUMENTS, CHATTEL PAPER AND GUARANTIES
AT ANY TIME HELD BY LENDER ON WHICH BORROWER MAY IN ANY WAY BE LIABLE AND HEREBY
RATIFIES AND CONFIRMS WHATEVER LENDER MAY DO IN THIS REGARD; (iii) NOTICE PRIOR
TO TAKING POSSESSION OR CONTROL OF THE COLLATERAL OR ANY BOND OR SECURITY WHICH
MIGHT BE REQUIRED BY ANY COURT PRIOR TO ALLOWING LENDER TO EXERCISE ANY OF
LENDER'S REMEDIES; (iv) THE BENEFIT OF ALL VALUATION, APPRAISEMENT AND EXEMPTION
LAWS; AND (v) NOTICE OF ACCEPTANCE HEREOF. BORROWER ACKNOWLEDGES THAT THE
FOREGOING WAIVERS ARE A MATERIAL INDUCEMENT TO LENDER'S ENTERING INTO THIS
AGREEMENT AND THAT
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LENDER IS RELYING UPON THE FOREGOING WAIVERS IN ITS FUTURE DEALINGS WITH
BORROWER. BORROWER WARRANTS AND REPRESENTS THAT IT HAS REVIEWED THE FOREGOING
WAIVERS WITH ITS LEGAL COUNSEL AND HAS KNOWINGLY AND VOLUNTARILY WAIVED ITS JURY
TRIAL RIGHTS FOLLOWING CONSULTATION WITH LEGAL COUNSEL. IN THE EVENT OF
LITIGATION, THIS AGREEMENT MAY BE FILED AS A WRITTEN CONSENT TO A TRIAL BY THE
COURT.
11.16 Parties to Act in a Commercially Reasonable Manner. Each party hereto
agrees to act at all times in its dealings with the other party hereto in a
commercially reasonable manner.
IN WITNESS WHEREOF, this Agreement has been duly executed in New York, New
York on the day and year specified at the beginning of this Agreement.
ATTEST EAGLE SUPPLY, INC.
("Borrower")
/s/ By /s/ Douglas P. Fields
- --------------- --------------------------
Secretary Title Chief Executive Officer
-----------------------
[CORPORATE SEAL]
Accepted in New York, New York
BARCLAYS BUSINESS CREDIT, INC.
("Lender")
By /s/ Peter Provenzale
-----------------------------
Title SVP
-----------------------------
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APPENDIX A
GENERAL DEFINITIONS
When used in the Loan and Security Agreement dated as of December 23, 1994,
by and between Barclays Business Credit, Inc. and Eagle Supply, Inc., the
following terms shall have the following meanings (terms defined in the singular
to have the same meaning when used in the plural and vice versa):
Account Debtor - any Person who is or may become obligated under or on
account of an Account.
Accounts - all accounts, contract rights, chattel paper, instruments and
documents, whether now owned or hereafter created or acquired by Borrower or in
which Borrower now has or hereafter acquires any interest, other than accounts
receivable, intercompany receivables or notes receivable owing to Borrower by
any of its Affiliates, except to the extent that any such account receivable,
intercompany receivable or note receivable constitutes proceeds of Inventory or
General Intangibles.
Adjusted Availability - as defined in Section 9.4 of the Agreement.
Affiliate - a Person (other than a Subsidiary): (i) which directly or
indirectly through one or more intermediaries controls, or is controlled by, or
is under common control with, a Person; or (ii) which beneficially owns or holds
5% or more of any class of the Voting Stock of a Person; or (iii) 5% or more of
the Voting Stock (or in the case of a Person which is not a corporation, 5% or
more of the equity interest) of which is beneficially owned or held by a Person
or a Subsidiary of a Person.
Agreement - The Loan and Security Agreement referred to in the first
sentence or this Appendix A, all Exhibits thereto and this Appendix A.
Applicable Interest Rate Margin - one percent (1%) with respect to Base
Rate Loans and three and one-quarter percent (3 1/4 %) with respect to LIBOR
Rate Loans, in each case at all times other than (i) during the period (a)
commencing fifteen (15) days after Lender's receipt of the financial statements
Borrower is required to deliver pursuant to subsection 8.1.2 (i) of the
Agreement with respect to its fiscal year ended June 30, 1995 and (b) ending
June 30, 1996, provided that the Applicable Interest Rate Reduction Conditions
shall have been met, in which case the Applicable Interest Rate Margin during
such period shall be three-quarters of one percent (3/4 of 1%) with respect to
Base Rate Loans and three percent (3%) with respect to LIBOR Rate Loans and (ii)
during the period (a) commencing fifteen (15) days after Lender's
<PAGE>
receipt of the financial statements Borrower is required to deliver pursuant to
such subsection 8.1.2 (i) with respect to its fiscal year ended June 30, 1996
and (b) ending on the last day of the Original Term (or the last day of the
Renewal Term then in effect, if applicable), provided that the Applicable
Interest Rate Reduction Conditions shall have been met both for the fiscal year
ending June 30, 1995, and for the fiscal year ending June 30, 1996, in which
case the Applicable Interest Rate Margin during such period shall be
three-quarters of one percent (3/4 of 1%) with respect to Base Rate Loans and
three percent (3%) with respect to LIBOR Rate Loans.
Applicable Interest Rate Reduction Conditions - (i) on the date upon which
Lender shall have received the financial statements Borrower is required to
deliver pursuant to subsection 8.1.2 (i) of the Agreement with respect to its
fiscal year ended June 30, 1995 or June 30, 1996, as the case may by, no Default
or Event of Default shall have occurred and then be continuing, (ii) such
financial statements shall indicate that, as at and for the fiscal year ended
June 30, 1995, Borrower shall have maintained a Tangible Net Worth of not less
than $1,000,000 and shall have achieved a Cash Flow of not less than $300,000,
(iii) such financial statements shall indicate that, as at and for the fiscal
year ended June 30, 1996, Borrower shall have maintained a Tangible Net Worth of
not less than $1,000,000 and shall have achieved a Cash Flow of not less than
$300,000 and (iv) such financial statements or a reconciling schedule shall
reflect in reasonable detail the calculations made in determining the net worth
and cash flow levels set forth in clause (ii) and clause (iii) hereof, as
applicable.
Applicable Inventory Sublimit - an amount equal to $3,000,000 or, during
any consecutive twelve (12) month period, for not more than two periods
consisting of three consecutive calendar months each (which periods may be
consecutive), as may be designated by Borrower upon notice to Lender, given at
least five (5) days prior to the commencement of any such period, an amount
equal to $4,000,000.
Availability - the amount of money which Borrower is entitled to borrow
from time to time as Revolving Credit Loans, such amount being the difference
derived when the sum of the principal amount of Revolving Credit Loans then
outstanding (including any amounts which Lender may have paid for the account of
Borrower pursuant to any of the Loan Documents and which have not been
reimbursed by Borrower) is subtracted from the Borrowing Base. If the amount
outstanding is equal to or greater than the Borrowing Base, Availability is zero
(0).
Bank - Shawmut Bank.
Base Rate - the rate of interest announced or quoted by Bank from time to
time as its prime rate for commercial loans, whether or not such rate is the
lowest rate charged by Bank to its most preferred borrowers; and, if such prime
rate for commercial loans is discontinued by Bank as a standard, a comparable
reference rate designated by Bank as a substitute therefor shall be the Base
Rate.
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Base Rate Loans - those Revolving Credit Loans which bear interest based on
the Base Rate.
Borrowing Base - as at any date of determination thereof, an amount equal
to the lesser of:
(i) Seven Million Five Hundred Thousand Dollars ($7,500,000), or
(ii) an amount equal to:
(a) up to eighty percent (80%) of the net amount of Eligible Accounts
outstanding at such date;
PLUS
(b) the lesser of (1) the Applicable Inventory Sublimit or (2) up to
sixty percent (60%) of the value of Eligible Inventory calculated
on the basis of the lower of cost or market, with cost or
Eligible Inventory calculated on a first-in, first-out basis;
MINUS
(c) an amount equal to the sum of (1) One Million Dollars
($1,000,000) and (2) any amounts which Lender shall have paid
pursuant to any of the Loan Documents for the account of Borrower
and which have not been reimbursed by Borrower.
For purposes hereof, the net amount of Eligible Accounts at any time shall
be the face amount of such Eligible Accounts less any and all returns, rebates,
discounts (which may, at Lender's option, be calculated on shortest terms),
credits, allowances or excise taxes of any nature at any time issued, owing,
claimed by Account Debtors, granted, outstanding or payable in connection with
such Accounts at such time.
Business Day - any day excluding Saturday, Sunday and any day which is a
legal holiday under the laws of the State of New York or is a day on which
banking institutions located in such state are closed.
Capital Adequacy Amount, Capital Adequacy Demand and Capital Adequacy Rules
- - each as defined in Section 2.6 of the Agreement.
Capitalized Lease Obligation - any Indebtedness represented by obligations
under a lease that is required to be capitalized for financial reporting
purposes in accordance with GAAP.
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Cash Flow - with respect to any fiscal year, an amount equal to income (or
loss) before federal income tax provision (or benefit), inclusive of
intercompany charges (or credits) between Borrower and any Affiliate, as shown
on the financial statements of Borrower required to be delivered pursuant to
subsection 8.1.2 (i) of the Agreement, plus (i) depreciation and amortization
expenses which were deducted in determining such income (or loss) for such
fiscal year and (ii) loss arising from the sale of Property which was deducted
in determining such income (or loss) for such fiscal year, minus (a) gain
arising from the sale of Property which was included in determining such income
(or loss) for such fiscal year, (b) capital expenditures (net of Indebtedness
incurred to finance such expenditures) for such fiscal year, (c) dividends paid
in cash during such fiscal year and (d) scheduled principal payments made during
such fiscal year in respect of Indebtedness, all as determined in accordance
with GAAP.
Closing Date - the date on which all of the conditions precedent in Section
9 of the Agreement are satisfied and the initial Loan is made under the
Agreement.
Code - the Uniform Commercial Code as adopted and in force in the State of
New York as from time to time in effect.
Collateral - all of the Property and interests in Property described in
Section 5 of the Agreement, and all other Property and interests in Property
that now or hereafter secure the payment and performance of any of the
Obligations.
Consolidated - the consolidation in accordance with GAAP of the accounts or
other items as to which such term applies.
Continuation - as defined in subsection 3.1.4 of the Agreement.
Conversion - as defined in subsection 3.1.4 of the Agreement.
Current Assets - at any date means the amount at which all of the current
assets of a Person would be properly classified as current assets shown on a
balance sheet at such date in accordance with GAAP.
Default - an event or condition the occurrence of which would, with the
lapse of time or the giving of notice, or both, become an Event of Default.
Default Rate - as defined in subsection 2.1.2 of the Agreement.
Dominion Account - a special blocked account owned and established by
Borrower pursuant to the Agreement at a bank selected by Borrower, but
acceptable to Lender in its reasonable discretion, and over which Lender shall
have sole and exclusive access and control for withdrawal purposes.
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Eligible Account - an Account arising in the ordinary course of Borrower's
business from the sale of goods or rendition of services which Lender, in its
sole credit judgment, deems to be an Eligible Account. Without limiting the
generality of the foregoing, no Account shall be an Eligible Account if:
(i) it arises out of a sale made by Borrower to a Subsidiary or an
Affiliate of Borrower or to a Person controlled by an Affiliate of
Borrower; or
(ii) it is unpaid for more than sixty (60) days after the original due date
calculated pursuant to the payment terms reflected on the invoice; or
(iii) fifty percent (50%) or more of the Accounts from the Account Debtor
are not deemed Eligible Accounts hereunder; or
(iv) the total unpaid Accounts of the Account Debtor exceed twelve and
one-half percent (12 1/2%) of the net amount of all Eligible Accounts,
to the extent of such excess; or
(v) any covenant, representation or warranty contained in the Agreement
with respect to such Account has been breached; or
(vi) the Account Debtor is also Borrower's creditor or supplier, or the
Account Debtor has disputed liability with respect to such Account, or
the Account Debtor has made any claim with respect to any other
Account due from such Account Debtor to Borrower, or the Account
otherwise is or may become subject to any right of setoff by the
Account Debtor; or
(vii) the Account Debtor has commenced a voluntary case under the federal
bankruptcy laws, as now constituted or hereafter amended, or made an
assignment for the benefit of creditors, or a decree or order for
relief has been entered by a court having jurisdiction in the premises
in respect of the Account Debtor in an involuntary case under the
federal bankruptcy laws, as now constituted or hereafter amended, or
any other petition or other application for relief under the federal
bankruptcy laws has been filed against the Account Debtor, or if the
Account Debtor has failed, suspended business, ceased to be Solvent,
or consented to or suffered a receiver, trustee, liquidator or
custodian to be appointed for it or for all or a significant portion
of its assets or affairs; or
(viii) it arises from a sale to an Account Debtor outside the United
States, unless the sale is on letter of credit, guaranty or acceptance
terms, in each case acceptable to Lender in its sole discretion; or
-5-
<PAGE>
(ix) it arises from a sale to the Account Debtor on a bill-and-hold,
guaranteed sale, sale-or-return, sale-on-approval, consignment or any
other repurchase or return basis; or
(x) Lender believes, in its reasonable judgment, that collection of such
Account is insecure or that payment thereof is doubtful or will be
delayed by reason of the Account Debtor's financial condition; or
(xi) the Account Debtor is the United States of America or any department,
agency or instrumentality thereof, unless Borrower assigns its right
to payment of such Account to Lender, in a manner satisfactory to
Lender, so as to comply with the Assignment of Claims Act of 1940, as
amended (31 U.S.C. ss.203 et seq., as amended); or
(xii) the Account is subject to a Lien other than a Permitted Lien; or
(xiii) the goods giving rise to such Account have not been delivered to and
accepted by the Account Debtor or the services giving rise to such
Account have not been performed by Borrower and accepted by the
Account Debtor or the Account otherwise does not represent a final
sale; or
(xiv) the total unpaid Accounts of the Account Debtor exceed a credit limit
determined by Lender, in its reasonable discretion, to the extent such
Account exceeds such limit; or
(xv) the Account is evidenced by chattel paper or an instrument of any
kind, or has been reduced to judgment; or
(xvi) Borrower has made any agreement with the Account Debtor for any
deduction therefrom, except for discounts or allowances which are made
in the ordinary course of business for prompt payment and which
discounts or allowances are reflected in the calculation of the face
value of each invoice related to such Account; or
(xvii) Borrower has made an agreement with the Account Debtor to extend the
time of payment thereof.
Eligible Inventory - such Inventory of Borrower (other than packaging
materials and supplies) which Lender, in its sole credit judgment, deems to be
Eligible Inventory. Without limiting the generality of the foregoing, no
Inventory shall be Eligible Inventory if:
(i) it does not consist of finished goods that are, in Lender's opinion,
readily marketable in their current form; or
-6-
<PAGE>
(ii) it is not in good, new and saleable condition; or
(iii) it is obsolete or unmerchantable, or remains unsold and on the
Borrower's books and records for more than one year; or
(iv) it does not meet all standards imposed by any governmental agency or
authority; or
(v) it does not conform in all respects to the warranties and
representations set forth in the Agreement; or
(vi) it is not at all times subject to Lender's duly perfected, first
priority Lien and no other Lien except a Permitted Lien; or
(vii) it is not situated at a location in compliance with the Agreement or
is in transit.
Environmental Laws - all federal, state and local laws, rules, regulations,
ordinances, programs, permits, guidances, orders and consent decrees relating to
health, safety and environmental matters.
Equipment - all machinery, apparatus, equipment, fittings, furniture,
fixtures, motor vehicles and other tangible personal Property (other than
Inventory) of every kind and description owned or used in Borrower's operations
or in which Borrower has an interest, whether now owned or hereafter acquired by
Borrower and wherever located, and all parts, accessories, and special tools and
all increases and accessions thereto and substitutions and replacements
therefor.
ERISA - the Employment Retirement Income Security Act of 1974, as amended,
and all rules and regulations from time to time promulgated thereunder.
Event of Default - as defined in Section 10.1 of the Agreement.
GAAP - generally accepted accounting principles in the United States of
America in effect from time to time.
General Intangibles - all personal Property of Borrower other than goods,
Accounts, chattel paper, documents, instruments and money, whether now owned or
hereafter created or acquired by Borrower.
Guarantor - any Person who may hereafter guarantee payment or performance
of the whole or any part of the Obligations pursuant to a Guaranty Agreement.
-7-
<PAGE>
Guaranty Agreement - a Guaranty Agreement executed by a Guarantor in form
and substance satisfactory to Lender.
Indebtedness - as applied to a Person means, without duplication:
(i) all items which in accordance with GAAP would be included in
determining total liabilities as shown on the liability side of a
balance sheet of such Person as at the date as of which Indebtedness
is to be determined,
(ii) all obligations of other Persons which such Person has guaranteed,
(iii) all reimbursement obligations in connection with letters of credit or
letter of credit guaranties issued for the account of such Person, and
(iv) in the case of Borrower (without duplication), the Obligations.
Interest Period - for any LIBOR Rate Loan the period commencing on the date
of the borrowing thereof and ending on the last day of the period selected by
Borrower pursuant to the provisions contained herein. The duration of each such
Interest Period shall be for 30, 60 or 90 days, in each case as Borrower may
select, pursuant to an appropriate notice of borrowing, notice of Continuation
or notice of Conversion; provided, however, that Borrower may not select any
Interest Period that ends after the last day of the Original Term, or if the
Agreement is renewed in accordance with the terms of Section 4.1, the last day
of the Renewal Term then in effect. Whenever the last day of any Interest Period
would otherwise occur on a day other than a Business Day, the last day of such
Interest Period shall be extended so as to occur on the next succeeding Business
Day; provided, however, if such extension would cause the last day of such
Interest Period to occur during the next following calendar month, the last day
of such Interest Period shall occur on the next preceding Business Day.
Inventory - all of Borrower's inventory, whether now owned or hereafter
acquired, including, but not limited to, all goods intended for sale or lease by
Borrower, or for display or demonstration; all work in process; all raw
materials and other materials and supplies of every nature and description used
or which might be used in connection with the manufacture, printing, packing,
shipping, advertising, selling, leasing or furnishing of such goods or otherwise
used or consumed in Borrower's business; and all documents evidencing, and
General Intangibles relating to, any of the foregoing, whether now owned or
hereafter acquired by Borrower.
LIBOR Rate - shall mean, with respect to the Interest Period applicable to
the borrowing of a LIBOR Rate Loan, the rate obtained (rounded upwards to the
nearest 1/100 of 1%) by dividing (i) the rate of interest per annum offered to
the Bank in the London interbank foreign currency deposits market as of
approximately 9:00 A.M. (New York City time) two (2) Business Days prior to the
commencement of such Interest Period for U.S. dollar deposits of amounts in
-8-
<PAGE>
immediately available funds comparable to the principal amount of the LIBOR Rate
Loan for which the LIBOR Rate is being determined with maturities comparable to
the Interest Period for which such LIBOR Rate will apply, by (ii) a percentage
equal to 1 minus the stated reserve (expressed as a decimal), if any, required
to be maintained against "Eurocurrency liabilities" as specified in Regulation D
of the Board of Governors of the Federal Reserve System as from time to time
shall be in effect (or against any other category of liabilities, which includes
deposits, by reference to which the interest rate on LIBOR Rate Loans is
determined or any category of extensions of credit on other assets, which
includes loans by a non-U.S. office of Bank or Lender to U.S. residents). In the
absence of manifest error, each determination by Lender of the applicable LIBOR
Rate shall be deemed conclusive.
LIBOR Rate Loans - those Revolving Credit Loans which bear interest based
on the LIBOR Rate.
Lien - any interest in Property securing an obligation owed to, or a claim
by, a Person other than the owner of the Property, whether such interest is
based on common law, statute or contract. The term "Lien" shall also include
reservations, exceptions, encroachments, easements, rights-of-way, covenants,
conditions, restrictions, leases and other title exceptions and encumbrances
affecting Property. For the purpose(s) of the Agreement, Borrower shall be
deemed to be the owner of any Property which it has acquired or holds subject to
a conditional sale agreement or other arrangement pursuant to which title to the
Property has been retained by or vested in some other Person for security
purposes.
Loan Account - the loan account established on the books of Lender pursuant
to Section 3.6 of the Agreement.
Loan Documents - the Agreement, the Other Agreements and the Security
Documents.
Loans - the Revolving Credit Loans and all other loans and advances of any
kind made by Lender pursuant to the Agreement.
Money Borrowed - means (i) Indebtedness arising from the lending of money
by any Person to Borrower; (ii) Indebtedness, whether or not in any such case
arising from the lending by any Person of money to Borrower, (A) which is
represented by notes payable or drafts accepted that evidence extensions of
credit, (B) which constitutes obligations evidenced by bonds, debentures, notes
or similar instruments, or (C) upon which interest charges are customarily paid
(other than accounts payable) or that was issued or assumed as full or partial
payment for Property; (iii) reimbursement obligations with respect to letters of
credit or guaranties of letters of credit and (iv) Indebtedness of Borrower
under any guaranty of obligations that would constitute Indebtedness for Money
Borrowed under clauses (i) and (ii) hereof, if owed directly by Borrower.
Multiemployer Plan - has the meaning set forth in Section 4001(a)(3) of
ERISA.
-9-
<PAGE>
Obligations - all Loans and all other advances, liabilities, obligations,
covenants and duties, together with all interest, fees, costs, expenses and
other charges thereon, owing, arising, due or payable from Borrower to Lender of
any kind or nature, present or future, whether or not evidenced by any note,
guaranty or other instrument, whether arising under the Agreement or any of the
other Loan Documents or otherwise, whether direct or indirect (including those
acquired by assignment), absolute or contingent, primary or secondary, due or to
become due, now existing or hereafter arising and however acquired.
Original Term - as defined in Section 4.1 of the Agreement.
Other Agreements - any and all agreements, instruments and documents (other
than the Agreement and the Security Documents), heretofore, now or hereafter
executed or delivered by Borrower, any Subsidiary of Borrower or any other third
party to Lender in respect of the transactions contemplated by the Agreement.
Overadvance - The amount, if any, by which the outstanding principal amount
of the Loans exceeds the Borrowing Base.
Parent - TDA Industries, Inc., a New York corporation and the owner,
beneficially and of record, of one hundred percent (100%) of the issued and
outstanding shares of capital stock of Borrower.
Participating Lender - each Person who shall be granted the right by Lender
to participate in any of the Loans described in the Agreement and who shall have
entered into a participation agreement in form and substance satisfactory to
Lender.
Permitted Liens - any Lien of a kind specified in clauses (i) through
(viii) of subsection 8.2.5 of the Agreement.
Permitted Purchase Money Indebtedness - Purchase Money Indebtedness of
Borrower incurred after the date hereof which is secured by a Purchase Money
Lien and which, when aggregated with the principal amount of all other such
Purchase Money Indebtedness of Borrower at the time outstanding, does not exceed
One Million Dollars ($1,000,000).
Person - an individual, partnership, corporation, limited liability
company, joint stock company, land trust, business trust, or unincorporated
organization, or a government or agency or political subdivision thereof.
Plan - an employee benefit plan now or hereafter maintained for employees
of Borrower that is covered by Title IV of ERISA.
Projections - Borrower's forecasted Consolidated and consolidating (a)
balance sheets, (b) profit and loss statements, (c) cash flow statements, and
(d) capitalization statements, all prepared on a
-10-
<PAGE>
consistent basis with Borrower's historical financial statements, together with
appropriate supporting details and a statement of underlying assumptions.
Property - any interest in any kind of property or asset, whether real,
personal or mixed, or tangible or intangible.
Purchase Money Indebtedness - means and includes (i) indebtedness (other
than the Obligations) for the payment of all or any part of the purchase price
of any real Property or Equipment, (ii) any Indebtedness (other than the
Obligations) incurred at the time of or within ten (10) days prior to or after
the acquisition of any real Property or Equipment for the purpose of financing
all or any part of the purchase price thereof, and (iii) any renewals,
extensions or refinancings thereof, but not any increases in the principal
amounts thereof outstanding at the time.
Purchase Money Lien - a Lien upon fixed assets which secures Purchase Money
Indebtedness, but only if such Lien shall at all times be confined solely to the
fixed assets the purchase price of which was financed through the incurrence of
the Purchase Money Indebtedness secured by such Lien.
Rentals - as defined in subsection 8.2.9 of the Agreement.
Renewal Terms - as defined in Section 4.1 of the Agreement.
Reportable Event - any of the events set forth in Section 4043(b) of ERISA.
Revolving Credit Loan - a Loan made by Lender as provided in Section 1.1 of
the Agreement.
Schedule of Accounts - as defined in subsection 6.4.1 of the Agreement.
Security - shall have the same meaning as in Section 2(1) of the Securities
Act of 1933, as amended.
Security Documents - each Guaranty Agreement and all other instruments and
agreements now or at any time hereafter securing the whole or any part of the
Obligations.
Solvent - as to any Person, if such Person (i) owns Property whose fair
saleable value is greater than the amount required to pay all of such Person's
Indebtedness (including contingent debts), (ii) is able to pay all of its
Indebtedness as such Indebtedness matures and (iii) has capital sufficient to
carry on its business and transactions and all business and transactions in
which it is about to engage.
Subordinated Debt - Indebtedness of Borrower which by its terms, or by the
terms of the agreement pursuant to which such Indebtedness is issued, is
subordinated to the Obligations in a manner satisfactory to Lender.
-11-
<PAGE>
Subsidiary - any corporation of which a Person owns, directly or indirectly
through one or more intermediaries, more than 50% of the Voting Stock at the
time of determination.
Tangible Net Worth - at the end of a fiscal year, an amount equal to (i)
shareholder's equity of Borrower as shown on the financial statements of
Borrower required to be delivered pursuant to subsection of 8.1.2 (i) of the
Agreement plus (i) Subordinated debt and (ii) minus (a) all intangible assets,
(b) prepaid assets and (c) intercompany amounts due to Borrower from Affiliates,
all as determined in accordance with GAAP.
Total Credit Facility - Seven Million Five Hundred Thousand Dollars
($7,500,000).
Type - with respect to any Revolving Credit Loan, whether such Revolving
Credit Loan is a Base Rate Loan or a LIBOR Rate Loan.
Voting Stock - Securities of any class or classes of a corporation the
holders of which are ordinarily, in the absence of contingencies, entitled to
elect a majority of the corporate directors (or Persons performing similar
functions).
Other Terms - All other terms contained in the Agreement shall have, when
the context so indicates, the meanings provided for by the Code to the extent
the same are used or defined therein.
Certain Matters of Construction - The terms "herein", "hereof" and
"hereunder" and other words of similar import refer to the Agreement as a whole
and not to any particular section, paragraph or subsection. Any pronoun used
shall be deemed to cover all genders. The section titles, table of contents and
list of exhibits appear as a matter of convenience only and shall not affect the
interpretation of the Agreement. All references to statutes and related
regulations shall include any amendments of same and any successor statutes and
regulations. All references to any of the Loan Documents shall include any and
all modifications thereto and any and all extensions or renewals thereof.
-12-
<PAGE>
LIST OF EXHIBITS
Exhibit A Intentionally Omitted
Exhibit B Borrower's and each Subsidiaries' Business Locations
Exhibit C Jurisdictions in which Borrower and each Subsidiary is Authorized
to do Business
Exhibit D Capital Structure of Borrower
Exhibit E Corporate Names
Exhibit F Tax Identification Numbers of Subsidiaries
Exhibit G Patents, Trademarks, Copyrights and Licenses
Exhibit H Contracts Restricting Borrower's Right to Incur Debts
Exhibit I Litigation
Exhibit J Capitalized Leases
Exhibit K Operating Leases
Exhibit L Pension Plans
Exhibit M Labor Contracts
Exhibit N Compliance Certificate
Exhibit O Permitted Liens
<PAGE>
EXHIBIT A
There is no Exhibit A. It has been intentionally omitted.
<PAGE>
EXHIBIT B
BUSINESS LOCATIONS
1. Borrower currently has the following business locations, and no others:
Chief executive Office: 1301 N. 13th Street
Tampa, Florida 33605
Other Locations: See Attached Schedule
2. Borrower maintains its books and records relating to Accounts and General
Intangibles at:
1301 N. 13th Street
Tampa, Florida 33605
3. Borrower has had no office, place of business or agent for process located
in any country other than as set forth above, except:
None
4. Each Subsidiary currently has the following business locations, and no
others:
Chief Executive Office: N/A
Other Locations: N/A
5. Each Subsidiary maintains its books and records relating to Accounts and
General Intangibles at:
N/A
6. Each Subsidiary has had no office, place of business or agent for process
located in any country other than set forth above, except:
N/A
7. The following bailees, warehouseman, similar parties and consignees hold
inventory of Borrower or one of its Subsidiaries:
================================================================================
Name and Address Nature of Amount of Owner of
Of Party Relationship Inventory Inventory
- --------------------------------------------------------------------------------
None None None None
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
================================================================================
<PAGE>
Business Locations
Tampa Birmingham
1301 N. 13th Street 289 Snow Drive
Tampa, FL 33605 Birmingham, AL 35209
Mailing address: P.O. Box 75305,Tampa,FL
33675 Mobile
1250-C Armour Avenue
Mobile, AL 36617
St Petersburg Panama City
3201 39th Avenue North 733 Mulberry Avenue
St. Petersburg, FL 33714 Panama City, FL 32401
Jacksonville Montgomery (Opened May, 1994)
5034 Phillips Highway 321 Northeast Bypass
Jacksonville, FL 32207 Building 12 Bay 5
Montgomery, AL 36117
Holiday
3151 Grand Blvd. Gulfport (Opened August, 1994)
Holiday, FL 34690 3737 25th Avenue (Hway 49 South)
Gulfport, MS 39501
Ft. Myers
3065 Cranford Avenue South Dade(Sold March, 1994)
Ft. Myers, FL 33916 13060 SW 85th Avenue Road
Miami, FL 33156
Pensacola
535 Massachusetts Avenue Pompano (Sold March, 1994)
Pensacola, FL 32505 1951 Hammondville Road
Pompano, Beach, FL 33069
Agents for process Service
Florida Alabama
- ------- -------
Mr. Nat Doliner, Esq. Ms. Joan C. Ragsdale
Carlton, Fields, Ward, Sirote & Permutt
Emmanuel, Smith & Cutler, P.A. 2222 Arlington Avenue, S.
One Harbour Place P.O. Box 55727
P.O. Box 3239 Birmingham, AL 35255-5727
Tampa, FL 33601
Mississippi
-----------
CT Corporation System
118 N. Congress Street
Jackson, MS 39201
<PAGE>
EXHIBIT C
JURISDICTIONS IN WHICH BORROWER
AND ITS SUBSIDIARIES
ARE AUTHORIZED TO DO BUSINESS
Name of Entity Jurisdictions
-------------- -------------
Eagle Supply, Inc. State of Florida
State of Alabama
State of Mississippi
<PAGE>
EXHIBIT D
CAPITAL STRUCTURE
1. The classes and number of authorized shares of Borrower and each Subsidiary
and the record owner of such shares are as follows:
Borrower:
- ---------
================================================================================
Class Number of Shares Number of Shares
of Issued and Record Authorized But
Stock Outstanding Owners Unissued
- --------------------------------------------------------------------------------
Common 593 Shares TDA Industries, Inc. 907 Shares
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
================================================================================
Subsidiaries:
- -------------
================================================================================
Class Number of Shares Number of Shares
of Issued and Record Authorized But
Stock Outstanding Owners Unissued
- --------------------------------------------------------------------------------
None None None None
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
================================================================================
2. The number, nature and holder of all other outstanding Securities of
Borrower and each Subsidiary are as follows:
N/A
<PAGE>
3. The correct name and jurisdiction of incorporation of each Subsidiary of
Borrower and the percentage of its issued and outstanding shares owned by
Borrower are as follows:
================================================================================
Jurisdiction of Percentage of Shares
Name Incorporation Owned by Borrower
- --------------------------------------------------------------------------------
None None None
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
================================================================================
4. The name of each of Borrower's corporate or joint venture Affiliates and
the nature of the affiliation are as follows:
a. TDA Industries, Inc. (Parent)
b. Wholly-owned Subsidiaries of TDA Industries, Inc.:
Cooper Distributors, Inc.
Northeastern Plastics, Inc.
Pemberton Services Corp.
TDA Data Services, Inc.
39 Acre Corp.
Eagle Holding, Inc.
Cooper Holding, Inc.
NPI Electric (Asia), Inc.
NPI Electric (China), Inc.
Midtown Tennis Club, Inc.
c. Joint Ventures:
N.W. 74th Avenue Associates
(50% owned by Cooper Holding, Inc.)
Shanghai Super Electronic Component Co., Ltd.
(40% owned by NPI Electric (Asia), Inc.)
d. Shareholders of TDA Industries, Inc.:
Douglas P. Fields
Frederick M. Friedman
DARST Associates Limited Partnership
Pemberton Services Corp. Profit Sharing Trust
Pemberton Services Corp. Profit Sharing Trust II
Note:
TDA Industries, Inc. has a total of 729,930 Common Shares, $.20 par value per
share, outstanding. Gerald Gelles is the owner of 10,678 of such Common Shares,
and he is the General Partner of DARST Associates Limited Partnership.
<PAGE>
EXHIBIT E
CORPORATE NAMES
1. Borrower's correct corporate name, as registered with the Secretary of the
State of Florida, is:
Eagle Supply, Inc.
2. In the conduct of its business, Borrower has used the following names:
Eagle Supply, Inc.
3. Each Subsidiaries' correct corporate name, as registered with the Secretary
of State of the State of its incorporation, is:
N/A
4. In the conduct of its business, each Subsidiary has used the following
names:
N/A
<PAGE>
EXHIBIT F
TAX IDENTIFICATION NUMBERS OF SUBSIDIARIES
Subsidiary Number
---------- ------
None
<PAGE>
EXHIBIT G
PATENTS, TRADEMARKS, COPYRIGHTS AND LICENSES
1. Borrower's and its Subsidiaries' patents:
================================================================================
Federal
Status in Registration Registration
Patent Owner Patent Office Number Date
- --------------------------------------------------------------------------------
None None None None None
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
================================================================================
2. Borrower's and its Subsidiaries' trademarks:
================================================================================
Status in Federal
Trademark Registration Registration
Trademark Owner Office Number Date
- --------------------------------------------------------------------------------
None None None None None
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
================================================================================
3. Borrower's and its Subsidiaries' copyrights:
================================================================================
Status in Federal
Copyright Registration Registration
Copyrights Owner Office Number Date
- --------------------------------------------------------------------------------
None None None None None
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
================================================================================
4. Borrower's and it Subsidiaries' licenses (other than routine business
licenses, authorizing them to transact business in local jurisdictions):
================================================================================
Name of License Nature of License Licensor Term of License
- --------------------------------------------------------------------------------
None None None None
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
================================================================================
<PAGE>
EXHIBIT H
RESTRICTIONS
Loan Agreement dated as of August 22, 1989 between TDA Industries, Inc. and
Barnett Bank of Tampa, N. A.(successor to First Florida Bank, N.A.), as amended
November 13, 1992.
Note:
The outstanding principal amount of indebtedness under this Loan Agreement, as
amended, will be paid in full from the proceeds of the Revolving Credit Loan.
<PAGE>
EXHIBIT I
LITIGATION
1. Actions, suits, proceedings and investigations pending against Borrower or
any Subsidiary:
================================================================================
Title of Nature of Complaining Jurisdiction or
Action Action Parties Tribunal
- --------------------------------------------------------------------------------
Federal Roofing Co. Vs Defective Federal Roofing Co. Etowah County, AL
Eagle Supply, Inc Product
- --------------------------------------------------------------------------------
Jeff Granoff Vs Defective Jeff Granoff Dade County, FL
Eagle Supply, Inc. Product
- --------------------------------------------------------------------------------
D&J Industries, Inc. Vs Defective D&J Industries, Inc. Monroe County, FL
Eagle Supply, Inc. Product
- --------------------------------------------------------------------------------
2. The only threatened actions, suits, proceedings or investigations of which
Borrower or any Subsidiary is aware are as follows:
None
<PAGE>
EXHIBIT J
CAPITALIZED LEASES
Borrower and its Subsidiaries have the following capitalized leases:
================================================================================
Lessee Lessor Term of Lease Property Covered
- --------------------------------------------------------------------------------
None None None None
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
================================================================================
<PAGE>
EXHIBIT K
OPERATING LEASES
Borrower and its Subsidiaries have the following operating leases:
================================================================================
Lessee Lessor Term of Lease Property Covered
- --------------------------------------------------------------------------------
Eagle Supply, Inc. Branton Enterprises, Inc. Expires 1250-C Armour Ave
4/15/95 Mobile, AL
- --------------------------------------------------------------------------------
Eagle Supply, Inc. J.D. Realty Expires 733 Mulberry Ave.
3/31/96 Panama City, FL
- --------------------------------------------------------------------------------
Eagle Supply, Inc. Aronov Realty Expires 321 Northeast Bypass
Management, Inc. 3/31/96 Building 12 Bay 5
Montgomery, AL
- --------------------------------------------------------------------------------
Eagle Supply, Inc. Coca Cola Bottling Co. Expires 3737 25th Avenue
5/31/96 Gulfport, MS
================================================================================
<PAGE>
EXHIBIT L
PENSION PLANS
Borrower and its Subsidiaries have the following Plans:
================================================================================
Party Type of Plan
- --------------------------------------------------------------------------------
Borrower
- --------------------------------------------------------------------------------
Eagle Supply, Inc. Sec. 401K
- --------------------------------------------------------------------------------
(Subsidiaries)
- --------------------------------------------------------------------------------
None
================================================================================
<PAGE>
EXHIBIT M
COLLECTIVE BARGAINING AGREEMENTS; LABOR CONTROVERSIES
1. Borrower and its Subsidiaries are parties to the following collective
bargaining agreements:
================================================================================
Type of Agreement Parties Terms of Agreement
- --------------------------------------------------------------------------------
None None None
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
================================================================================
2. Material grievances, disputes of controversies with employees are as
follows:
================================================================================
Parties Involved Nature of Grievance, Dispute
or Controversy
- --------------------------------------------------------------------------------
None None
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
================================================================================
3. Threatened strikes, work stoppages and asserted pending demands for
collective bargaining are as follows:
================================================================================
Parties Involved Nature of Matter
- --------------------------------------------------------------------------------
None None
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
================================================================================
<PAGE>
EXHIBIT N
COMPLIANCE CERTIFICATE
[Letterhead of Borrower]
___________________, 19__
___________________
___________________
___________________
___________________
The undersigned, the chief financial officer of Eagle Supply, Inc. a
Florida corporation ("Borrower"), gives this certificate to Barclays Business
Credit, Inc. ("Lender") in accordance with the requirements of Section 8.1.2 of
that certain Loan and Security Agreement dated December __, 1994, between
Borrower and Lender ("Loan Agreement"). Capitalized terms used in this
Certificate, unless otherwise defined herein, shall have the meanings ascribed
to them in the Loan Agreement.
1. No Default exists on the date hereof, other than:_______________________
_____[if none, so state]; and
2. No Event of Default exists on the date hereof, other than ______________
_______[if none, so state].
Very truly yours,
________________________
Chief Financial Officer
<PAGE>
EXHIBIT O
PERMITTED LIENS
================================================================================
Secured Party Nature of Lien
- --------------------------------------------------------------------------------
None None
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
================================================================================
<PAGE>
EXECUTION COPY
THIS GUARANTY AGREEMENT, dated as of December 23, 1994 (this "Guaranty"),
made by TDA INDUSTRIES, INC., a New York Corporation having an address at 122
East 42nd Street, New York, New York 10168 (the "Guarantor"), in favor of
BARCLAYS BUSINESS CREDIT, INC., as Lender, pursuant to the Loan and Security
Agreement described below. Terms which are capitalized herein and not otherwise
defined shall have the meanings given to such terms in such Loan and Security
Agreement.
WHEREAS, concurrently herewith, EAGLE SUPPLY, INC. (the "Borrower") is
entering into that certain Loan and Security Agreement dated as of December 23,
1994 (as such agreement may be hereafter amended, modified, supplemented or
restated from time to time, the "Loan and Security Agreement") with BARCLAYS
BUSINESS CREDIT, INC. (the "Lender"), pursuant to which the Lender has agreed to
make certain credit accommodations to the Borrower, subject to the terms and
conditions of the Loan and Security Agreement; and
WHEREAS, the Guarantor is the owner, beneficially and of record, of all of
the issued and outstanding shares of capital stock of the Borrower and has
received and will continue to receive certain benefits from the credit
accommodations hereinabove described and is therefore willing to guaranty the
prompt payment and performance of the Obligations, on the terms set forth in
this Guaranty; and
WHEREAS, it is a condition precedent to the making of such credit
accommodations that the Guarantor shall have executed this Guaranty in favor of
the Lender;
NOW, THEREFORE, in consideration of the premises and to induce the Lender
to enter into the Loan and Security Agreement and for other good and valuable
consideration, the receipt and sufficiency of which are hereby acknowledged, the
Guarantor hereby agrees with the Lender as follows:
SECTION 1. Guaranty. The Guarantor hereby unconditionally guarantees the
punctual payment and performance when due, whether at stated maturity, by
acceleration or otherwise, of all Obligations and agrees to pay all costs and
expenses (including reasonable attorneys' fees and related expenses) incurred by
the Lender in enforcing its rights under this Guaranty. Notwithstanding anything
to the contrary in this Guaranty, the amount of the Guarantor's liability for
the Obligations guaranteed hereunder shall in no event exceed the highest amount
which may be guaranteed hereunder without this Guaranty or the Guarantor's
obligations hereunder being deemed a fraudulent conveyance under any applicable
statute providing for the avoidance of conveyances or obligations as
constructively fraudulent transfers. The maximum amount of the Guarantor's
contingent liability for the Obligations guaranteed hereunder shall be presumed
to be the aggregate amount of all obligations, absent proof that if the amount
of such liability were equal to the amount of such Obligations, this Guaranty or
the Guarantor' obligations hereunder would constitute such a fraudulent
conveyance.
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SECTION 2. Guaranty Absolute. The Guarantor guarantees that the Obligations
will be paid and performed strictly in accordance with the terms of the Loan and
Security Agreement or any other agreement evidencing or governing the
Obligations regardless of any law, regulation or order now or hereafter in
effect in any jurisdiction affecting any of such terms or the rights of the
Lender with respect thereto. The liability of the Guarantor under this Guaranty
shall be absolute and unconditional irrespective of:
(a) any lack of validity or enforceability of the Loan and Security
Agreement, any other Loan Document, or any other agreement or instrument
relating to the Obligations;
(b) any change in the time, manner or place or payment of, or in any other
term of, all or any of the Obligations, or any amendment or waiver of any term
of or any consent to departure from the Loan and Security Agreement, any other
Loan Document, or any other agreement or instrument related to the Obligations;
(c) any exchange, release, non-perfection or impairment of any collateral,
or any release, amendment or waiver of any term of, or consent to departure
from, any other guaranty for all or any of the Obligations;
(d) any failure on the part of the Lender or any other Person to exercise,
or any delay in exercising, any right under the Loan and Security Agreement or
any other agreement or instrument relating to the Obligations; or,
(e) any other circumstance which might otherwise constitute a defense
available to, or a discharge of, the Borrower or a guarantor with respect to the
Obligations (including, without limitation, all defenses based on suretyship or
impairment of collateral, and all defenses which the Borrower may assert on the
underlying debt, including failure of consideration, breach of warranty fraud,
payment, statute of frauds, bankruptcy, lack of legal capacity, statute of
limitations, lender liability, accord and satisfaction, and usury) or which
might otherwise constitute a defense to this Guaranty and the obligations of the
Guarantor under this Guaranty.
The Guarantor hereby agrees that if the Borrower or any other guarantor of the
Obligations is the subject of a bankruptcy proceeding under Title 11 of the
United States Code, it will not assert the pendency of such proceeding or any
order entered therein as a defense to (i) the timely payment of the Obligations
or the Guarantor's obligations hereunder, or (ii) its guaranty of any interest
on any portion of the Obligations which accrues after the commencement of any
such proceeding (or, if interest on any portion of the Obligations ceases to
accrue by operation of law by reason of the commencement of said proceeding,
such interest as would have accrued on such portion of the Obligations if said
proceedings had not been commenced). This Guaranty shall continue to be
effective or be reinstated, as the case may be, if at any time any payment of
any of the obligations is rescinded or must otherwise be returned by the Lender
upon the insolvency, bankruptcy or reorganization of the Borrower or otherwise,
all as though such payment had not been made.
SECTION 3. Waiver. The Guarantor hereby waives promptness, diligence,
notice of acceptance and any other notice with respect to any of the Obligations
and this Guaranty (including, without limitation, any notice required under
Section 9-504 of the Uniform Commercial Code) and any requirement that the
Lender protect, secure, perfect or insure any
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security interest or lien or any property subject thereto or exhaust any right
to take any action against the Borrower or any other Person or any Collateral.
The Guarantor further waives any and all right to assert any defense, set-off,
counterclaim or cross-claim of any nature whatsoever with respect to this
Guaranty or the obligations of the Guarantor under this Guaranty or otherwise
with respect to the Obligations, or the obligations of other Person or party
(including, without limitation, the Borrower) relating to the Obligations or
this Guaranty, in any action or proceeding brought by the Lender to collect the
Obligations or any portion thereof, or to enforce the obligations of the
Guarantor under this Guaranty. The Guarantor acknowledges that no oral or other
agreements, understandings, representations or warranties exist with respect to
this Guaranty or with respect to the obligations of the Guarantor under this
Guaranty, except as specifically set forth in this Guaranty.
SECTION 4. Subrogation. So long as any Obligations remain outstanding and
unpaid, the Guarantor hereby irrevocably waives, to the fullest extent permitted
by law, any and all claims, rights or remedies which it may now have or
hereafter acquire against the Borrower that arise hereunder or from the
performance by it hereunder including, without limitation, any claims, rights or
remedies of subrogation, reimbursement, exoneration, contribution,
indemnification or participation in any claims, rights or remedies of the Lender
against the Borrower or in any security which the Lender now has or hereafter
acquires, whether or not such claims, rights or remedies arise in equity, under
contract, by statute, under common law or otherwise.
SECTION 5. Subordination of Other Obligations. Any indebtedness, liability
or obligation of the Borrower now or hereafter held by or owing to the
Guarantor, howsoever created, arising or acquired (collectively, the
"Subordinated Obligations") is hereby subordinated in right of payment to the
prior payment and satisfaction in full of the Obligations, and any payment on
such Subordinated Obligations collected or received by the Guarantor after an
Event of Default has occurred and is continuing shall be held in trust for the
Lender and shall forthwith be paid over to the Lender, to be credited and
applied against the Obligations, but without affecting, impairing or limiting in
any manner the liability of the Guarantor under any other provision of this
Guaranty. Any notes now or hereafter evidencing any Subordinated Obligations
shall be marked with a legend that the same are subject to this provision and,
if the Lender so requests, a copy of each such note shall be delivered to the
Lender.
SECTION 6. Representatives and Warranties. The Guarantor hereby represents
and warrants as follows:
(a) Due Organization, Etc. The Guarantor is a corporation duly organized,
validly existing and in good standing under the laws of the State of New York
and has all requisite power and authority to own or lease and operate its
properties and to carry on its business as now conducted and as proposed to be
conducted. The Guarantor is duly qualified or licensed to do business as a
foreign corporation or other entity in good standing in all jurisdictions in
which it owns or leases property or in which the conduct of its business
requires it to so qualify or be licensed.
(b) Due Authorization and Execution, Etc. The execution, delivery and
performance by the Guarantor of this Guaranty are within the Guarantor's
corporate powers, have been duly authorized by all necessary corporate action
and do not and will not (i) require any consent or approval of the stockholders
or any creditors of the Guarantor, (ii) contravene
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(A) the Guarantor's charter or by-laws, or (B) any law, rule, regulation, order,
writ, judgment, injunction, decree, determination or award or any contractual
restriction binding on or affecting the Guarantor or any of its properties,
(iii) result in or require the creation or imposition of any mortgage, deed of
trust, pledge, lien, security interest or other charge or encumbrance of any
nature (other than pursuant hereto) upon or with respect to any of the
Guarantor's properties, and (iv) result in a breach or violation of any
agreement, instrument or document to which the Guarantor is a party or by which
it or its property may be bound. The Guarantor is not in default under any such
law, rule, regulation, order, writ, judgment, injunction, decree, determination
or award or any such contractual restriction, which default would have a
material adverse effect on the business, condition (financial or otherwise),
operations, properties, performance or prospects of the Guarantor.
(c) Government Consents. No authorization, consent, approval or other
action by, and no notice to or filing with, any governmental authority or
regulatory body is required for the due execution, delivery or performance by
the Guarantor of this Guaranty.
(d) Legal, Valid and Binding Nature. This Guaranty is the legal, valid and
binding obligation of the Guarantor enforceable against the Guarantor in
accordance with its terms.
(e) Guarantor's Relationship to the Borrower. The Lender's agreement to
make loans to the Borrower is of substantial and material benefit to the
Guarantor, and the Guarantor has reviewed and approved copies of the Loan and
Security Agreement, the other Loan Documents and the other documents executed or
delivered in connection with the Loan and Security Agreement. The Guarantor is
fully informed of the remedies the Lender may pursue upon the occurrence of a
Default under the Loan and Security Agreement or such other documents.
(f) Solvency. The fair value of the property of the Guarantor exceeds the
total amount of liabilities (including, without limitation, contingent
liabilities) of the Guarantor; the present fair saleable value of the assets of
the Guarantor exceeds the amount that will be required to pay the probable
liability of the Guarantor on its existing debts as they become absolute and
matured; the Guarantor is able to realize upon its assets and pay its debts and
other liabilities, contingent obligations and other commitments as they mature
in the normal course of business; the Guarantor does not intend to, and does not
believe that it will, incur debts or liabilities beyond the Guarantor's ability
to pay as such debts and liabilities mature; and the Guarantor is not engaged in
business or a transaction, and is not about to engage in business or a
transaction, for which the property remaining with the Guarantor would
constitute unreasonably small capital after giving due consideration to the
prevailing practice in the industry in which the Guarantor is engaged. In
computing the amount of contingent liabilities at any time, it is intended that
such liabilities will computed at the amount which, in light of all facts and
circumstances existing at such time, represents the amount that can reasonably
be expected to become an actual or matured liability.
(g) Absence of Litigation. There are no actions, suits, investigations,
litigation or proceedings pending or, to the knowledge of the Guarantor,
threatened against or affecting the Guarantor or any of its subsidiaries or the
properties of the Guarantor or any such subsidiary before any court, arbitrator
or governmental department, commission, board, bureau, agency or
instrumentality, domestic or foreign, or which purports to affect any part of
the transactions
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contemplated hereby or by the Loan and Security Agreement or the legality,
validity or enforceability of this Guaranty.
(h) Absence of Liens. There are no Liens of any nature whatsoever on any
properties or assets of the Guarantor, except Liens incurred in the ordinary
course of its business.
(i) No Burdensome Agreements. The Guarantor is not a party to any
indenture, loan or credit agreement or any lease or other agreement or
instrument or subject to any charter or corporate restriction that would have a
material adverse effect on the business, condition (financial or otherwise),
operations, properties, performance or prospects of the Guarantor or on the
ability of the Guarantor to carry out its obligations under this Guaranty.
(j) Payment of Taxes. The Guarantor has filed all tax returns (federal,
state, local and foreign) required to be filed and paid all taxes shown thereon
to be due, including interest and penalties, except for such taxes as are being
contested in good faith and by proper proceedings and with respect to which
appropriate reserves are being maintained by the Guarantor.
SECTION 7. Amendments, Etc. No amendment or waiver of any provision of this
Guaranty or consent to any departure by the Guarantor therefrom shall in any
event be effective unless the same shall be in writing and signed by the Lender,
and then such waiver or consent shall be effective only in the specific instance
and for the specific purpose for which given.
SECTION 8. Addresses for Notices. All notices and other communications
provided for hereunder shall be in writing (including by telecopier) and, if to
the Guarantor, mailed or delivered to it at its address specified on the first
page of this Guaranty, if to the Lender, mailed or delivered to it at the
address specified in the Loan and Security Agreement, or as to each party at
such other address as shall be designated by such party in a written notice to
the other party, in each case, together with a copy of each such notice to the
attorney for each of the Guarantor and the Lender, respectively, as set forth in
Section 11.8 of the Loan and Security Agreement (and delivered in the manner
described therein). All such notices and other communications shall, if mailed,
be effective when deposited in the mail addressed as aforesaid.
SECTION 9. No Waiver; Remedies. No failure on the part of the Lender to
exercise, and no delay in exercising, any right hereunder shall operate as a
waiver thereof. No single or partial exercise of any right hereunder shall
preclude any other or further exercise thereof or the exercise of any other
right. The remedies herein provided are cumulative and not exclusive or any
remedies provided by law.
SECTION 10. Right to Setoff. The Lender is hereby authorized at any time
and from time-to-time, to the fullest extent permitted by law, to set off and
apply any and all deposits (general or special, time or demand, provisional or
final) at any time held and other indebtedness at any time owing by the Lender
to or for the credit or the account of the Guarantor against any and all of the
obligations of the Guarantor now or hereafter existing under this Guaranty,
irrespective of whether or not the Lender shall have made any demand under this
Guaranty. The Lender agrees promptly to notify the Guarantor after any such
setoff and application, provided that the failure to give such notice shall not
affect the validity of such
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setoff and application. The rights of the Lender
under this Section are in addition to the other rights and remedies (including,
without limitation, other rights of setoff) which the Lender may have.
SECTION 11. Continuing Guaranty; Assignments. This Guaranty is a continuing
guaranty and shall (a) remain in full force and effect until the indefeasible
payment in full of the Obligations and all other amounts payable under this
Guaranty, (b) be binding upon the Guarantor and its successors and assigns, and
(c) inure to the benefit of and be enforceable by the Lender and its successors,
transfers and assigns. Without limiting the generality of the foregoing clause
(c), the Lender may assign or otherwise transfer any of the Obligations to any
other Person, and such other Person shall thereupon become vested with all the
rights in respect thereof granted to the Lender herein or otherwise.
SECTION 12. GOVERNING LAW. THIS GUARANTY SHALL BE GOVERNED BY AND CONSTRUED
IN ACCORDANCE WITH THE INTERNAL SUBSTANTIVE LAWS OF THE STATE OF NEW YORK
WITHOUT GIVING EFFECT TO CONFLICTS OF LAW PRINCIPLES THEREOF.
SECTION 13. CONSENT TO JURISDICTION.
(a) THE GUARANTOR HEREBY IRREVOCABLY SUBMITS TO THE JURISDICTION OF ANY NEW
YORK STATE OR FEDERAL COURT SITTING IN NEW YORK CITY IN ANY ACTION OR PROCEEDING
ARISING OUT OF OR RELATING TO THIS GUARANTY, AND THE GUARANTOR HEREBY
IRREVOCABLY AGREES THAT ALL CLAIMS IN RESPECT OF SUCH ACTION OR PROCEEDING MAY
BE HEARD AND DETERMINED IN SUCH NEW YORK STATE OR FEDERAL COURT. THE GUARANTOR
HEREBY IRREVOCABLY WAIVES, TO THE FULLEST EXTENT IT MAY EFFECTIVELY DO SO, ANY
OBJECTION TO THE LAYING OF VENUE OR ANY DEFENSE OF AN INCONVENIENT FORUM WHICH
IT MAY NOW OR HEREAFTER HAVE TO THE BRINGING OF SUCH ACTION OR PROCEEDING. THE
GUARANTOR IRREVOCABLY CONSENTS TO THE SERVICE OF ANY AND ALL PROCESS IN ANY SUCH
ACTION OR PROCEEDING BY THE MAILING OF COPIES OF SUCH PROCESS TO THE GUARANTOR
AT ITS ADDRESS SPECIFIED ON THE FIRST PAGE OF THIS GUARANTY. THE GUARANTOR
AGREES THAT A FINAL JUDGMENT IN ANY SUCH ACTION OR PROCEEDING SHALL BE
CONCLUSIVE AND MAY BE ENFORCED IN OTHER JURISDICTIONS BY SUIT ON THE JUDGEMENT
OR IN ANY OTHER MANNER PROVIDED BY LAW.
(b) NOTHING IN THIS SECTION SHALL AFFECT THE RIGHT OF THE LENDER TO SERVE
LEGAL PROCESS IN ANY OTHER MANNER PERMITTED BY LAW OR AFFECT THE RIGHT OF THE
LENDER TO BRING ANY ACTION OR PROCEEDING AGAINST THE GUARANTOR OR ITS PROPERTY
IN THE COURTS OF ANY OTHER JURISDICTIONS.
SECTION 14. JURY TRIAL WAIVER. THE GUARANTOR AND THE LENDER HEREBY WAIVE
ANY RIGHT TO TRIAL BY JURY IN ANY ACTION OR PROCEEDING IN ANY COURT RELATING TO,
IN CONNECTION WITH OR ARISING UNDER THIS GUARANTY OR THE LOAN AND SECURITY
AGREEMENT.
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SECTION 15. Entire Agreement. This Guaranty represents the entire
understanding and agreement between the Guarantor, on the one hand, and the
Lender, on the other hand, with respect to the subject matter contained herein,
and there are no other existing agreements or understandings, whether oral or
written, between or among such parties as to such subject matter.
IN WITNESS WHEREOF, the Guarantor has caused this Guaranty to be executed
by its duly authorized officer as of the date first above written.
TDA INDUSTRIES, INC.
By:/s/ Douglas P. Fields
------------------------
Name: Douglas P. Fields
Title: President
Accepted:
BARCLAYS BUSINESS CREDIT, INC.
By:/s/ Peter Provenzale
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Name:
Title: SVP
Exhibit 10.9
1996 STOCK OPTION PLAN
OF
EAGLE SUPPLY GROUP, INC.
1. PURPOSES OF THE PLAN. This stock option plan (the "Plan") is designed
to provide an incentive to employees (including directors and officers who are
employees) and to consultants and directors who are not employees of Eagle
Supply Group, Inc., a Delaware corporation (the "Company"), or any of its
Subsidiaries (as defined in Paragraph 19), and to offer an additional inducement
in obtaining the services of such persons. The Plan provides for the grant of
"incentive stock options" ("ISOs") within the meaning of Section 422 of the
Internal Revenue Code of 1986, as amended (the "Code"), and nonqualified stock
options which do not qualify as ISOs ("NQSOs"), but the Company makes no
representation or warranty, express or implied, as to the qualification of any
option as an "incentive stock option" under the Code.
2. STOCK SUBJECT TO THE PLAN. Subject to the provisions of Paragraph 12,
the aggregate number of shares of common stock, $.0001 par value per share, of
the Company ("Common Stock") for which options may be granted under the Plan
shall not exceed 1,000,000. Such shares of Common Stock may, in the discretion
of the Board of Directors of the Company (the "Board of Directors"), consist
either in whole or in part of authorized but unissued shares of Common Stock or
shares of Common Stock held in the treasury of the Company. Subject to the
provisions of Paragraph 13, any shares of Common Stock subject to an option
which for any reason expires, is canceled or is terminated unexercised or which
ceases for any reason to be exercisable shall again become available for the
granting of options under the Plan. The Company shall at all times during the
term of the Plan reserve and keep available such number of shares of Common
Stock as will be sufficient to satisfy the requirements of the Plan.
3. ADMINISTRATION OF THE PLAN. The Plan shall be administered by the Board
of Directors or a committee of the Board of Directors consisting of not less
than two directors (collectively, the "Committee"). A majority of the members of
the Committee shall constitute a quorum, and the acts of a majority of the
members present at any meeting at which a quorum is present, and any acts
approved in writing by all members without a meeting, shall be the acts of the
Committee.
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Subject to the express provisions of the Plan, the Committee shall have
the authority, in its sole discretion, to determine the employees who shall be
granted Employee Options and the consultants who shall be granted Consultant
Options and the Non-Employee Directors who shall be granted Non-Employee
Director Options (all as defined in Paragraph 19); the times when options shall
be granted; whether an Employee Option shall be an ISO or a NQSO; the number of
shares of Common Stock to be subject to each option; the term of each option;
the date each option shall become exercisable; whether an option shall be
exercisable in whole, in part or in installments and, if in installments, the
number of shares of Common Stock to be subject to each installment, whether the
installments shall be cumulative, the date each installment shall become
exercisable and the term of each installment; whether to accelerate the date of
exercise of any option or installment; whether shares of Common Stock may be
issued upon the exercise of an option as partly paid and, if so, the dates when
future installments of the exercise price shall become due and the amounts of
such installments; the exercise price of each option; the form of payment of the
exercise price, whether to restrict the sale or other disposition of the shares
of Common Stock acquired upon the exercise of an option and, if so, whether to
waive any such restriction; whether to subject the exercise of all or any
portion of an option to the fulfillment of contingencies as specified in the
contract referred to in Paragraph 11 (the "Contract"), including without
limitation, contingencies relating to entering into a covenant not to compete
with the Company, any of its Subsidiaries or a Parent (as defined in Paragraph
19), to financial objectives for the Company, any of its Subsidiaries or a
Parent, a division of any of the foregoing, a product line or other category,
and/or the period of continued employment of the optionee with the Company, any
of its Subsidiaries or a Parent, and to determine whether such contingencies
have been met; whether an optionee is Disabled (as defined in Paragraph 19); the
amount, if any, necessary to satisfy the Company's obligation to withhold taxes
or other amounts; the fair market value of a share of Common Stock; to construe
the respective Contracts and the Plan; with the consent of the optionee, to
cancel or modify an option, provided, that the modified provision is permitted
to be included in an option granted under the Plan on the date of the
modification, and further, provided, that in the case of a modification (within
the meaning of Section 424(h) of the Code) of an ISO, such option as modified
would be permitted to be granted on the date of such modification under the
terms of the Plan; to prescribe, amend and rescind rules and regulations
relating to the Plan; and to make all other determinations necessary or
advisable for administering the Plan. Any controversy or claim arising out of or
relating to the Plan, any option granted under the Plan or any Contract shall be
determined unilaterally by the Committee in its sole discretion. The
determinations of the Committee on the matters referred to in this Paragraph 3
shall be conclusive and binding on the parties.
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No member or former member of the Committee shall be liable for any
action, failure to act or determination made in good faith with respect to the
Plan or any option hereunder. In addition, the Company shall indemnify and hold
harmless each member and former member of the Committee and their respective
successors, assigns, heirs and personal representatives from and against any
liability, loss, claim, damage and expense (including without limitation
attorneys' fees and expenses) incurred in connection therewith by reason of any
action, failure to act or determination made in good faith under or in
connection with the Plan or any option hereunder to the fullest extent permitted
with respect to directors under the Company's certificate of incorporation,
by-laws or applicable law.
4. ELIGIBILITY. The Committee may from time to time, in its sole
discretion, consistent with the purposes of the Plan, grant (a) Employee Options
to employees (including officers and directors who are employees) of the Company
or any of its Subsidiaries, (b) Consultant Options to consultants to the Company
or any of its Subsidiaries, and (c) Non-Employee Director Options to
Non-Employee Directors. Such options granted shall cover such number of shares
of Common Stock as the Committee may determine, in its sole discretion;
provided, however, that the maximum number of shares subject to Employee Options
that may be granted to any individual during any calendar year under the Plan
(the "162(m) Maximum") shall not exceed 250,000 shares; and further, provided,
that the aggregate market value (determined at the time the option is granted in
accordance with Paragraph 5) of the shares of Common Stock for which any
eligible employee may be granted ISOs under the Plan or any other plan of the
Company, or of a Parent or a Subsidiary of the Company, which are exercisable
for the first time by such optionee during any calendar year shall not exceed
$100,000. Such limitation shall be applied by taking ISOs into account in the
order in which they were granted. Any option (or the portion thereof) granted in
excess of such amount shall be treated as a NQSO.
5. EXERCISE PRICE. The exercise price of the shares of Common Stock under
each option shall be determined by the Committee in its sole discretion;
provided, however, that the exercise price of an ISO shall not be less than the
fair market value of the Common Stock subject to such option on the date of
grant; and further, provided, that if, at the time an ISO is granted, the
optionee owns (or is deemed to own under Section 424(d) of the Code) stock
possessing more than 10% of the total combined voting power of all classes of
stock of the Company, of any of its Subsidiaries or of a Parent, the exercise
price of such ISO shall not be less than 110% of the fair market value of the
Common Stock subject to such ISO on the date of grant.
The fair market value of a share of Common Stock on any day shall be (a)
if the principal market for the Common Stock is a national securities exchange,
the average of the highest and lowest
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sales prices per share of Common Stock on such day as reported by such exchange
or on a composite tape reflecting transactions on such exchange, (b) if the
principal market for the Common Stock is not a national securities exchange and
the Common Stock is quoted on The Nasdaq Stock Market ("Nasdaq"), and (i) if
actual sales price information is available with respect to the Common Stock,
the average of the highest and lowest sales prices per share of Common Stock on
such day on Nasdaq, or (ii) if such information is not available, the average of
the highest bid and lowest asked prices per share of Common Stock on such day on
Nasdaq, or (c) if the principal market for the Common Stock is not a national
securities exchange and the Common Stock is not quoted on Nasdaq, the average of
the highest bid and lowest asked prices per share of Common Stock on such day as
reported on the OTC Bulletin Board Service or by National Quotation Bureau,
Incorporated or a comparable service; provided, however, that if clauses (a),
(b) and (c) of this Paragraph are all inapplicable, or if no trades have been
made or no quotes are available for such day, the fair market value of the
Common Stock shall be determined by the Board by any method consistent with
applicable regulations adopted by the Treasury Department relating to stock
options.
6. TERM. The term of each option granted pursuant to the Plan shall be
such term as is established by the Committee, in its sole discretion; provided,
however, that the term of each ISO granted pursuant to the Plan shall be for a
period not exceeding 10 years from the date of grant thereof, and further,
provided, that if, at the time an ISO is granted, the optionee owns (or is
deemed to own under Section 424(d) of the Code) stock possessing more than 10%
of the total combined voting power of all classes of stock of the Company, of
any of its Subsidiaries or of a Parent, the term of the ISO shall be for a
period not exceeding five years from the date of grant. Options shall be subject
to earlier termination as hereinafter provided.
7. EXERCISE. An option (or any part or installment thereof), to the extent
then exercisable, shall be exercised by giving written notice to the Company at
its principal office stating which option is being exercised, specifying the
number of shares of Common Stock as to which such option is being exercised and
accompanied by payment in full of the aggregate exercise price therefor (or the
amount due on exercise if the Contract permits installment payments) (a) in cash
or by certified check or (b) if the applicable Contract permits, with previously
acquired shares of Common Stock having an aggregate fair market value on the
date of exercise (determined in accordance with Paragraph 5) equal to the
aggregate exercise price of all options being exercised, or with any combination
of cash, certified check or shares of Common Stock.
The Committee may, in its sole discretion, permit payment of the exercise
price of an option by delivery by the optionee of a properly executed notice,
together with a copy of his irrevocable
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instructions to a broker acceptable to the Committee to deliver promptly to the
Company the amount of sale or loan proceeds sufficient to pay such exercise
price. In connection therewith, the Company may enter into agreements for
coordinated procedures with one or more brokerage firms.
A person entitled to receive Common Stock upon the exercise of an option
shall not have the rights of a stockholder with respect to such shares of Common
Stock until the date of issuance of a stock certificate to him for such shares;
provided, however, that until such stock certificate is issued, any optionee
using previously acquired shares of Common Stock in payment of an option
exercise price shall continue to have the rights of a stockholder with respect
to such previously acquired shares.
In no case may a fraction of a share of Common Stock be purchased or
issued under the Plan.
8. TERMINATION OF RELATIONSHIP. Except as may otherwise be expressly
provided in the applicable Contract, any holder of an Employee Option or
Consultant Option whose relationship with the Company, its Parent and
Subsidiaries as an employee or a consultant has terminated for any reason (other
than the death or Disability of the Optionee) may exercise such option, to the
extent exercisable on the date of such termination, at any time within three
months after the date of termination, but not thereafter and in no event after
the date the option would otherwise have expired; provided, however, that if
such relationship is terminated either (a) for cause, or (b) without the consent
of the Company, such option shall terminate immediately.
For the purposes of the Plan, an employment relationship shall be deemed
to exist between an individual and a corporation if, at the time of the
determination, the individual was an employee of such corporation for purposes
of Section 422(a) of the Code. As a result, an individual on military, sick
leave or other bona fide leave of absence shall continue to be considered an
employee for purposes of the Plan during such leave if the period of the leave
does not exceed 90 days, or, if longer, so long as the individual's right to
reemployment with the Company (or a related corporation) is guaranteed either by
statute or by contract. If the period of leave exceeds 90 days and the
individual's right to reemployment is not guaranteed by statute or by contract,
the employment relationship shall be deemed to have terminated on the 91st day
of such leave.
Except as may otherwise be expressly provided in the applicable Contract,
Employee Options and Consultant Options granted under the Plan shall not be
affected by any change in the status of the optionee so long as the optionee
continues to be an employee of, or a consultant to, the Company, or any of the
Subsidiaries or a Parent (regardless of having changed from one to the other or
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having been transferred from one corporation to another).
Except as may otherwise be expressly provided in the applicable Contract,
the holder of a Non-Employee Director Option whose directorship with the Company
has terminated for any reason other than his death or Disability may exercise
such option, to the extent exercisable on the date of such termination, at any
time within three months after the date of termination, but not thereafter and
in no event after the date the option would otherwise have expired; provided,
however, that if his directorship shall be terminated for cause, such option
shall terminate immediately.
Nothing in the Plan or in any option granted under the Plan shall confer
on any optionee any right to continue in the employ of, or as a consultant to,
the Company, any of its Subsidiaries or a Parent, or as a director of the
Company, or interfere in any way with any right of the Company, any of its
Subsidiaries or a Parent to terminate the optionee's relationship at any time
for any reason whatsoever without liability to the Company, any of its
Subsidiaries or a Parent.
9. DEATH OR DISABILITY OF AN OPTIONEE. Except as may otherwise be
expressly provided in the applicable Contract, if an optionee dies (a) while he
is an employee of, or consultant to, the Company, any of its Subsidiaries or a
Parent, (b) within three months after the termination of such relationship
(unless such termination was for cause or without the consent of the Company) or
(c) within one year following the termination of such relationship by reason of
his Disability, his Employee Option or Consultant Option may be exercised, to
the extent exercisable on the date of his death, by his Legal Representative (as
defined in Paragraph 19) at any time within one year after death, but not
thereafter and in no event after the date the option would otherwise have
expired.
Except as may otherwise be expressly provided in the applicable Contract,
any optionee whose relationship as an employee of, or consultant to, the
Company, its Parent and Subsidiaries has terminated by reason of such optionee's
Disability may exercise his Employee Option or Consultant Option, to the extent
exercisable upon the effective date of such termination, at any time within one
year after such date, but not thereafter and in no event after the date the
option would otherwise have expired.
Except as may otherwise be expressly provided in the applicable Contract,
if an optionee dies (a) while he is a director of the Company, (b) within three
months after the termination of his directorship with the Company (unless such
termination was for cause) or (c) within one year after the termination
following the termination of his directorship by reason of Disability, his
Non-Employee Director Options may be exercised, to the extent exercisable on the
date of his death, by his Legal Representative at any
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time within one year after death, but not thereafter and in no event after the
date the option would otherwise have expired. Except as may otherwise be
expressly provided in the applicable Contract, an optionee whose directorship
with the Company has terminated by reason of Disability, may exercise his
Non-Employee Director Options, to the extent exercisable on the effective date
of such termination, at any time within one year after such date, but not
thereafter and in no event after the date the option would otherwise have
expired.
10. COMPLIANCE WITH SECURITIES LAWS. The Committee may require, in its
sole discretion, as a condition to the exercise of any option that either (a) a
Registration Statement under the Securities Act of 1933, as amended (the
"Securities Act"), with respect to the shares of Common Stock to be issued upon
such exercise shall be effective and current at the time of exercise, or (b)
there is an exemption from registration under the Securities Act for the
issuance of the shares of Common Stock upon such exercise. Nothing herein shall
be construed as requiring the Company to register shares subject to any option
under the Securities Act or to keep any Registration Statement effective or
current.
The Committee may require, in its sole discretion, as a condition to the
exercise of any option that the optionee execute and deliver to the Company his
representations and warranties, in form, substance and scope satisfactory to the
Committee, which the Committee determines are necessary or convenient to
facilitate the perfection of an exemption from the registration requirements of
the Securities Act, applicable state securities laws or other legal requirement,
including without limitation that (a) the shares of Common Stock to be issued
upon the exercise of the option are being acquired by the optionee for his own
account, for investment only and not with a view to the resale or distribution
thereof, and (b) any subsequent resale or distribution of shares of Common Stock
by such optionee will be made only pursuant to (i) a Registration Statement
under the Securities Act which is effective and current with respect to the
shares of Common Stock being sold, or (ii) a specific exemption from the
registration requirements of the Securities Act, but in claiming such exemption,
the optionee shall prior to any offer of sale or sale of such shares of Common
Stock provide the Company with a favorable written opinion of counsel
satisfactory to the Company, in form, substance and scope satisfactory to the
Company, as to the applicability of such exemption to the proposed sale or
distribution.
In addition, if at any time the Committee shall determine, in its sole
discretion, that the listing or qualification of the shares of Common Stock
subject to such option on any securities exchange, Nasdaq or under any
applicable law, or the consent or approval of any governmental agency or
regulatory body, is necessary or desirable as a condition to, or in connection
with,
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the granting of an option or the issue of shares of Common Stock thereunder,
such option may not be exercised in whole or in part unless such listing,
qualification, consent or approval shall have been effected or obtained free of
any conditions not acceptable to the Committee.
11. STOCK OPTION CONTRACTS. Each option shall be evidenced by an
appropriate Contract which shall be duly executed by the Company and the
optionee, and shall contain such terms, provisions and conditions not
inconsistent herewith as may be determined by the Committee.
12. ADJUSTMENTS UPON CHANGES IN COMMON STOCK. Notwithstanding any other
provision of the Plan, in the event of a stock dividend, recapitalization,
merger in which the Company is the surviving corporation, split-up, combination
or exchange of shares or the like which results in a change in the number or
kind of shares of Common Stock which is outstanding immediately prior to such
event, the aggregate number and kind of shares subject to the Plan, the
aggregate number and kind of shares subject to each outstanding option and the
exercise price thereof, and the 162(m) Maximum shall be appropriately adjusted
in the same manner as the number and kind of shares of a stockholder of the
Company who owned the same number and kind of shares immediately prior to such
event, and the exercise price of the options shall be adjusted so that the
aggregate exercise price of each outstanding unexercised option remains the
same. Notwithstanding the foregoing, such adjustment may provide for the
elimination of fractional shares which might otherwise be subject to options
without payment therefor. Such adjustments shall be made by the Board of
Directors, whose determination shall be conclusive and binding on all parties.
In the event of (a) the liquidation or dissolution of the Company, or (b)
a merger in which the Company is not the surviving corporation or a
consolidation, any outstanding options shall terminate upon the earliest of any
such event, unless other provision is made therefor in the transaction.
13. AMENDMENTS AND TERMINATION OF THE PLAN. The Plan was adopted by the
Board of Directors on August 8, 1996. No option may be granted under the Plan
after August 8, 2006. The Board of Directors, without further approval of the
Company's stockholders, may at any time suspend or terminate the Plan, in whole
or in part, or amend it from time to time in such respects as it may deem
advisable, including, without limitation, in order that ISOs granted hereunder
meet the requirements for "incentive stock options" under the Code, to comply
with the provisions of Rule 16b- 3 of the Securities Exchange Act of 1934,
Section 162(m) of the Code, or any change in applicable law, regulations,
rulings or interpretations of administrative agencies; provided, however, that
no amendment shall be effective without the requisite prior or subsequent
stockholder approval which would (a) except as contem-
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plated in Paragraph 12, increase the maximum number of shares of Common Stock
for which options may be granted under the Plan or the 162(m) Maximum, (b) to
the extent required by Rule 16b-3, materially increase the benefits accruing to
participants under the Plan or (c) change the eligibility requirements to
receive options hereunder. No termination, suspension or amendment of the Plan
shall, without the consent of the holder of an existing and outstanding option
affected thereby, adversely affect his rights under such option. The power of
the Committee to construe and administer any options granted under the Plan
prior to the termination or suspension of the Plan nevertheless shall continue
after such termination or during such suspension.
14. NON-TRANSFERABILITY OF OPTIONS. No option granted under the Plan shall
be transferable otherwise than by will or the laws of descent and distribution,
and options may be exercised, during the lifetime of the optionee, only by the
optionee or his Legal Representatives. Except to the extent provided above,
options may not be assigned, transferred, pledged, hypothecated or disposed of
in any way (whether by operation of law or otherwise) and shall not be subject
to execution, attachment or similar process, and any such attempted assignment,
transfer, pledge, hypothecation or disposition shall be null and void ab initio
and of no force or effect.
15. WITHHOLDING TAXES. The Company may withhold (a) cash, (b) subject to
any limitations under Rule 16b-3, shares of Common Stock to be issued with
respect thereto having an aggregate fair market value on the exercise date
(determined in accordance with Paragraph 5), or (c) any combination thereof, in
an amount equal to the amount which the Committee determines is necessary to
satisfy the Company's obligation to withhold Federal, state and local income
taxes or other amounts incurred by reason of the grant or exercise of an option,
its disposition, or the disposition of the underlying shares of Common Stock.
Alternatively, the Company may require the holder to pay to the Company such
amount, in cash, promptly upon demand. The Company shall not be required to
issue any shares of Common Stock pursuant to any such option until all required
payments have been made.
16. LEGENDS; PAYMENT OF EXPENSES. The Company may endorse such legend or
legends upon the certificates for shares of Common Stock issued upon exercise of
an option under the Plan and may issue such "stop transfer" instructions to its
transfer agent in respect of such shares as it determines, in its discretion, to
be necessary or appropriate to (a) prevent a violation of, or to perfect an
exemption from, the registration requirements of the Securities Act and any
applicable state securities laws, (b) implement the provisions of the Plan or
any agreement between the Company and the optionee with respect to such shares
of Common Stock, or (c) permit the Company to determine the occurrence of a
"disqualifying disposition", as described in Section 421(b) of the
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Code, of the shares of Common Stock issued or transferred upon the exercise of
an ISO granted under the Plan.
The Company shall pay all issuance taxes with respect to the issuance of
shares of Common Stock upon the exercise of an option granted under the Plan, as
well as all fees and expenses incurred by the Company in connection with such
issuance.
17. USE OF PROCEEDS. The cash proceeds from the sale of shares of Common
Stock pursuant to the exercise of options under the Plan shall be added to the
general funds of the Company and used for such corporate purposes as the Board
of Directors may determine.
18. SUBSTITUTIONS AND ASSUMPTIONS OF OPTIONS OF CERTAIN CONSTITUENT
CORPORATIONS. Anything in this Plan to the contrary notwithstanding, the Board
of Directors may, without further approval by the stockholders, substitute new
options for prior options of a Constituent Corporation (as defined in Paragraph
19) or assume the prior options of such Constituent Corporation.
19. DEFINITIONS. For purposes of the Plan, the following terms shall be
defined as set forth below:
(a) "Constituent Corporation" shall mean any corporation which
engages with the Company, any of its Subsidiaries or a Parent in a transaction
to which Section 424(a) of the Code applies (or would apply if the option
assumed or substituted were an ISO), or any Parent or any Subsidiary of such
corporation.
(b) "Consultant Option" shall mean a NQSO granted pursuant to the
Plan to a person who, at the time of grant, is a consultant to the Company or a
Subsidiary of the Company, and at such time is neither a common law employee of
the Company or any of its Subsidiaries nor a director of the Company.
(c) "Disability" shall mean a permanent and total disability within
the meaning of Section 22(e)(3) of the Code.
(d) "Employee Option" shall mean an option granted pursuant to the
Plan to an individual who, at the time of grant, is an employee of the Company
or any of its Subsidiaries.
(e) "Legal Representative" shall mean the executor, administrator or
other person who at the time is entitled by law to exercise the rights of a
deceased or incapacitated optionee with respect to an option granted under the
Plan.
(f) "Non-Employee Director" shall mean a person who is a director of
the Company, but is not a common law employee of the Company, any of its
Subsidiaries or a Parent.
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(g) "Non-Employee Director Option" shall mean a NQSO granted
pursuant to the Plan to a person who, at the time of the grant, is a
Non-Employee Director.
(h) "Parent" shall have the same definition as "parent corporation"
in Section 424(e) of the Code.
(i) "Subsidiary" shall have the same definition as "subsidiary
corporation" in Section 424(f) of the Code.
20. GOVERNING LAW; CONSTRUCTION. The Plan, such options as may be granted
hereunder and all related matters shall be governed by, and construed in
accordance with, the laws of the State of Delaware, without regard to conflict
of law provisions.
Neither the Plan nor any Contracts shall be construed or interpreted with
any presumption against the Company by reason of the Company causing the Plan or
Contract to be drafted. Whenever from the context it appears appropriate, any
term stated in either the singular or plural shall include the singular and
plural, and any term stated in the masculine, feminine or neuter gender shall
include the masculine, feminine and neuter.
21. PARTIAL INVALIDITY. The invalidity, illegality or unenforceability of
any provision in the Plan or any Contract shall not affect the validity,
legality or enforceability of any other provision, all of which shall be valid,
legal and enforceable to the fullest extent permitted by applicable law.
22. STOCKHOLDER APPROVAL. The Plan shall be subject to approval by the
affirmative vote of a majority of the shares present in person or by proxy and
entitled to vote thereon at the next duly held meeting of the Company's
stockholders at which a quorum is present. No options granted hereunder may be
exercised prior to such approval; provided, however, that the date of grant of
any option shall be determined as if the Plan had not been subject to such
approval. Notwithstanding the foregoing, if the Plan is not approved by a vote
of the stockholders of the Company on or before August 12, 1997, the Plan and
any options granted hereunder shall terminate.
11
Exhibit 23.2
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 August 8, 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
August 9, 1996
<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 September 6, 1995 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
August 9, 1996
