EAGLE SUPPLY GROUP INC, 424B2, 1999-03-16

EAGLE SUPPLY GROUP INC
424B2, 1999-03-16
LUMBER, PLYWOOD, MILLWORK & WOOD PANELS

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<PAGE>
FILED PURSUANT TO RULE 424B(2)
REGISTRATION # 333-09951

PROSPECTUS

EAGLE SUPPLY GROUP, INC.

2,500,000 SHARES OF COMMON STOCK AND
2,500,000 REDEEMABLE COMMON STOCK PURCHASE WARRANTS

Eagle Supply Group, Inc. (the "Company") is offering hereby 2,500,000 shares
of Common Stock (the "Common Stock") and 2,500,000 Redeemable Common Stock
Purchase Warrants (the "Warrants") of the Company (hereinafter the "Public
Offering"). The shares of Common Stock and Warrants are being offered to the
public at the initial offering prices of $5.00 per share and $0.125 per warrant,
respectively. The Common Stock and the Warrants (collectively, the "Securities")
are being separately offered, not as units, and are separately transferable at
any time from the date of this Prospectus (the "Effective Date"). Each purchaser
of shares of the Company's Common Stock in the Public Offering will be entitled,
but not required, to purchase an equal number of Warrants. 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 $5.50
per share, subject to adjustment under certain circumstances, for a period of
five 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 NASDAQ SmallCap Market ("NASDAQ SmallCap") or 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 11, and "Underwriting." After completion of the Public
Offering, the Company's current officers and directors and their affiliates will
have voting control of approximately 67% of the outstanding shares of Common
Stock. The Company has advised the Underwriter that it may purchase, and the
Underwriter has advised the Company that it will permit such, up to 100,000
shares of the Common Stock and a like number of the Warrants offered hereby. See
"Principal Stockholders" and "Underwriting."

Simultaneously with the Public Offering, 300,000 shares of Common Stock
underlying Warrants held by certain individuals (hereinafter the "Selling
Securityholders" and "Selling Securityholders' Offering") are being offered for
resale from time to time. To permit such resale, the Company has included the
said Selling Securityholders' securities in the Company in the Registration
Statement of which this Prospectus forms a part and are to be offered by the
Selling Securityholders by a separate prospectus also included therein. The
Selling Securityholders may not sell or otherwise dispose of their shares of
Common Stock underlying their Warrants for a period of fifteen months from the
Effective Date without the Underwriter's prior written consent. The Company will
not receive any proceeds from sales of the shares of the Company's Common Stock
by the Selling Securityholders. See "Selling Securityholders."

Prior to the Public Offering, there has been no public market for the Common
Stock or the Warrants. The Company's Common Stock and the Warrants have been
approved for quotation under the symbols "EEGL" and "EEGLW", respectively, on
NASDAQ SmallCap and authorized for listing under the symbols "EGL" and "EGLW" on
the Boston Stock Exchange. There can be 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., JEH/Eagle Supply,
Inc. and MSI/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 11 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.

<TABLE>
<CAPTION>
UNDERWRITING
PRICE TO PUBLIC DISCOUNT(1) PROCEEDS TO COMPANY(2)
<S> <C> <C> <C>
Per Share............................................ $5.00 $0.45 $4.55
Per Warrant.......................................... $0.125 $0.01125 $0.11375
Total(3)............................................. $12,812,500 $1,153,125 $11,659,375
</TABLE>

(footnotes on following page)

[LOGO]

The date of this Prospectus is March 12, 1999
<PAGE>
(1) Does not include additional compensation in the form of (i) a
non-accountable expense allowance of $384,375 ($442,031 if the Underwriter's
overallotment option is exercised in full); (ii) warrants to purchase up to
250,000 shares of Common Stock and 250,000 warrants at an exercise price
equal to 165% of the initial public offering prices of the Common Stock and
Warrants, during the five year period commencing on the Effective Date (the
"Underwriter's Warrants"); and (iii) a financial advisory agreement for the
Underwriter to act as an investment banker for the Company at a fee of
$80,000 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 $796,000 (approximately 6.2% 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
forty-five (45) days of the Effective Date, to purchase up to 375,000
additional shares of Common Stock and 375,000 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 $14,734,375, $1,326,094 and $13,408,281,
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, Boca
Raton, Florida 33433-5541, on or about March 17, 1999.

The Company is not presently required to file, and has not filed, periodic
reports with the Securities and Exchange Commission (the "Commission").
Following consummation of the Public Offering, the Company intends to furnish to
its stockholders annual reports containing financial statements audited and
reported on by independent auditors and quarterly reports containing unaudited
financial information for each of the first three quarters of each fiscal year.
Stockholders will be able to obtain the most recent 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.

CERTAIN PERSONS PARTICIPATING IN THIS OFFERING MAY ENGAGE IN TRANSACTIONS
THAT STABILIZE, MAINTAIN, OR OTHERWISE AFFECT THE PRICES OF THE SHARES AND THE
WARRANTS, INCLUDING PURCHASES OF SHARES, WARRANTS, OR BOTH TO STABILIZE THEIR
RESPECTIVE MARKET PRICES, PURCHASES OF THE SHARES AND THE WARRANTS TO COVER SOME
OR ALL OF A SHORT POSITION THEREIN MAINTAINED BY THE UNDERWRITER, AND THE
IMPOSITION OF PENALTY BIDS. FOR A DESCRIPTION OF THESE ACTIVITIES, SEE
"UNDERWRITING."

ATTENTION CALIFORNIA RESIDENTS:

OFFERS AND SALES OF THE COMMON STOCK AND WARRANTS OF THE COMPANY MADE TO
CALIFORNIA RESIDENTS PURSUANT TO THIS PROSPECTUS ARE RESTRICTED TO INDIVIDUALS
WHO MEET SUITABILITY STANDARDS OF NOT LESS THAN $250,000 OF LIQUID NET WORTH
(NET WORTH EXCLUSIVE OF HOME, HOME FURNISHINGS AND AUTOMOBILES) PLUS $65,000
ANNUAL GROSS INCOME, OR $500,000 OF LIQUID NET WORTH (NET WORTH EXCLUSIVE OF
HOME, HOME FURNISHINGS AND AUTOMOBILES).

FOR NEW JERSEY RESIDENTS:

OFFERS AND SALES IN THIS OFFERING IN NEW JERSEY MAY ONLY BE MADE TO
ACCREDITED INVESTORS AS DEFINED IN RULE 501 UNDER THE SECURITIES ACT OF 1933, AS
AMENDED. UNDER RULE 501, TO BE AN ACCREDITED INVESTOR AN INDIVIDUAL MUST HAVE
(A) A NET WORTH OR JOINT NET WORTH WITH SUCH INDIVIDUAL'S SPOUSE OF MORE THAN
$1,000,000 OR (B) INCOME OF MORE THAN $200,000 IN EACH OF THE TWO MOST RECENT
YEARS OR JOINT INCOME WITH SUCH INDIVIDUAL'S SPOUSE OF MORE THAN $300,000 IN
EACH OF THOSE YEARS AND A REASONABLE EXPECTATION OF REACHING THE SAME INCOME
LEVEL IN THE CURRENT YEAR. OTHER STANDARDS APPLY TO INVESTORS WHO ARE NOT
INDIVIDUALS. THERE WILL BE NO SECONDARY SALES OF THE SECURITIES TO PERSONS IN
NEW JERSEY WHO ARE NOT ACCREDITED INVESTORS FOR 90 DAYS AFTER THE DATE OF THIS
OFFERING BY THE UNDERWRITER AND SELECTED DEALERS.

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<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 WARRANTS, (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 WOULD LIKE TO CAUTION READERS REGARDING CERTAIN FORWARD-LOOKING
STATEMENTS IN THE PROSPECTUS AND THE REGISTRATION STATEMENT OF WHICH THIS
PROSPECTUS IS A PART. STATEMENTS THAT ARE BASED ON MANAGEMENT'S PROJECTIONS,
ESTIMATES AND ASSUMPTIONS ARE FORWARD-LOOKING STATEMENTS. THE WORDS "BELIEVE,"
"EXPECT," "ANTICIPATE," AND SIMILAR EXPRESSIONS GENERALLY IDENTIFY
FORWARD-LOOKING STATEMENTS. WHILE THE COMPANY BELIEVES IN THE VERACITY OF ALL
STATEMENTS MADE HEREIN, FORWARD-LOOKING STATEMENTS ARE NECESSARILY BASED UPON A
NUMBER OF ESTIMATES AND ASSUMPTIONS THAT, WHILE CONSIDERED REASONABLE BY THE
COMPANY, ARE INHERENTLY SUBJECT TO SIGNIFICANT BUSINESS, ECONOMIC AND
COMPETITIVE UNCERTAINTIES AND CONTINGENCIES. MANY OF THESE UNCERTAINTIES AND
CONTINGENCIES CAN AFFECT THE COMPANY'S ACTUAL RESULTS AND COULD CAUSE ITS ACTUAL
RESULTS TO DIFFER MATERIALLY FROM THOSE EXPRESSED IN ANY FORWARD-LOOKING
STATEMENTS MADE BY, OR ON BEHALF OF, THE COMPANY. SOME OF THE FACTORS THAT COULD
CAUSE ACTUAL RESULTS OR FUTURE EVENTS TO DIFFER MATERIALLY INCLUDE THE COMPANY'S
INABILITY TO FIND SUITABLE ACQUISITION CANDIDATES ON TERMS COMMERCIALLY
REASONABLE TO THE COMPANY, INTERRUPTION OR CANCELLATION OF EXISTING SOURCES OF
SUPPLY, THE PRICING OF AND DEMAND FOR DISTRIBUTED PRODUCTS AND THE PRESENCE OF
COMPETITORS WITH GREATER FINANCIAL RESOURCES. PLEASE SEE "RISK FACTORS" FOR A
DESCRIPTION OF SOME, BUT NOT ALL, OF THESE UNCERTAINTIES AND CONTINGENCIES.

THE COMPANY

Eagle was acquired by TDA in 1973, and JEH Eagle was established by TDA to
acquire the business and substantially all of the assets of JEH Company, Inc.
("JEH Co."). That acquisition was consummated by TDA and JEH Eagle in July 1997.
The product lines, types of customers, vendors, business philosophies, internal
and external expansion plans, and experience of management of Eagle and JEH
Eagle are generally, substantially similar. Together, Eagle and JEH Eagle
operate a network of twenty-eight branches in eight states extending from
Florida to Colorado and back to Minnesota, Indiana and Virginia, specializing in
the wholesale distribution of roofing supplies and related products. MSI Eagle
was established by TDA to acquire the business and substantially all of the
assets of Masonry Supply, Inc. ("MSI Co."). That acquisition was consummated by
TDA and MSI Eagle in October 1998. The business philosophies, internal and
external expansion plans, and experience of management of MSI Eagle are
substantially similar to those of Eagle and JEH Eagle. MSI Eagle distributes
building supplies for residential development. The Company's management believes
that MSI Eagle's product lines are compatible with those of Eagle and JEH Eagle
as all three companies sell from their own warehouses via their own salesmen
with deliveries made by their own drivers and vehicles to the residential
construction industry. All three companies use warehouses and delivery vehicles
which are similar, and all sell to contractors and subcontractors as their
primary customers. Management also believes that the potential exists for the
enhancement of Eagle's and JEH Eagle's product lines by the addition of MSI
Eagle's product lines in certain locations currently being investigated by
management but which have yet to be

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<PAGE>
decided upon. MSI Eagle's four current distribution centers are located in the
Dallas/Fort Worth metropolitan area.

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 2,400 customers in Florida,
Alabama and the southern portions of Georgia and Mississippi, through its own
distribution facilities and 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. JEH Eagle sells to more
than 2,700 customers in Texas, Colorado, Indiana, Minnesota and Virginia through
its own distribution facilities and direct sales force. Products distributed by
JEH Eagle also include dry wall, plywood, vinyl siding and similar products used
in the roofing repair and construction industries. JEH Eagle has, on occasion,
established temporary distribution centers in response to storms which have
created a temporary market. MSI Eagle sells to more than 1,700 customers in the
Dallas/Fort Worth metropolitan area though its own distribution facilities and
direct sales force. Products distributed by MSI Eagle include cements, fireplace
components, certain block and brick, angle iron and related materials such as
insulation, solvents, fasteners, tools and equipment used in the residential
construction industry. Upon consummation of the Acquisitions, Eagle, JEH Eagle
and MSI Eagle will become wholly-owned subsidiaries of the Company and will
constitute the business operations of the Company until and unless the Company
consummates additional acquisitions. See "Risk Factors" and "Business."

During Eagle's fiscal years ended June 30, 1997 and 1998 and four-month
period ended October 31, 1998, Eagle had revenues of approximately $57,576,000,
$58,497,000 and $19,102,000, respectively, and net income (loss) of
approximately $192,000, $160,000 and $(143,000), respectively. During JEH Co.'s
fiscal year ended December 31, 1996, six month period ended June 30, 1997 and
fiscal year ended June 30, 1997 , JEH Co. had revenues of approximately
$74,893,000, $28,979,000 and $70,516,000, respectively, and net income (loss) of
approximately $171,000, ($1,179,000) and $(1,815,000), respectively. JEH Eagle,
during its fiscal year ended June 30, 1998 and four-month period ended October
31, 1998, had revenues of approximately $71,006,000 and $31,682,000,
respectively, and net income of approximately $608,000 and $1,306,000,
respectively. During MSI Co.'s fiscal years ended June 30, 1997 and 1998 and
four-month period ended October 31, 1998, MSI Co. had revenues of approximately
$9,101,000, $11,960,000 and $4,341,000, respectively, and net income of
approximately $487,000, $963,000 and $641,000, respectively. There can be no
assurance Eagle's, JEH Eagle's or MSI Eagle's revenues and net income will
continue to be achieved in the future and that they will not sustain losses. See
"Risk Factors" and "Business."

Based upon its management's experience in the industry, the Company believes
that the roofing supply, cement and masonry supply and related products
distribution industries are fragmented and have the potential for consolidation
in response to the competitive disadvantages faced by smaller distributors. The
Company believes that these industries are characterized by a large number of
relatively small local distribution companies, with the roofing supply and
related products industry having a few very large, multi-center and
multi-regional distributors and a large national multi-center distributor.
Distributors of the foregoing products 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 supply, cement and masonry
supply and related products markets and to effect cost savings and increased
profit opportunities through efficiencies of scale which can be applied to
companies that may be acquired in the foregoing industries. The Company intends
to provide

4
<PAGE>
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
Acquisitions, based upon its management's experience in these industries, 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
businesses of Eagle, JEH Eagle and MSI 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
approximately 24% 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 consummate the
acquisition of any companies, other than the Acquisitions, or additional equity
or debt financing on terms acceptable to the Company or at all.

Management intends to pursue expansion of Eagle's, JEH Eagle's and MSI
Eagle's operations by adding new distribution centers by internal growth. During
JEH Co.'s fiscal year ended December 31, 1996 and Eagle's, JEH Co.'s, JEH
Eagle's, MSI Co.'s and MSI Eagle's fiscal years ended June 30, 1997 and 1998 and
four-month period ended October 31, 1998, JEH Co., MSI Co., Eagle, JEH Eagle and
MSI Eagle opened four new distribution centers and are currently exploring the
possibility of opening several more distribution centers in current market areas
and in market areas adjacent to their existing distribution centers.

TDA is a holding company which operates four business enterprises, including
Eagle, JEH Eagle and MSI Eagle, and real estate investment companies. At the
current time, Eagle, JEH Eagle and MSI Eagle are wholly-owned by TDA, and their
revenues constitute a majority of TDA's consolidated revenues. After the
completion of the Public Offering and consummation of the Acquisitions, TDA will
own approximately 59% 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), Eagle, JEH Eagle and/or MSI Eagle. See "The Acquisitions," "Management,"
"Principal Stockholders" and "Certain Transactions."

In connection with the Acquisitions, TDA will be issued 3,000,000 shares of
the Company's Common Stock. As part of the Acquisitions, Eagle, JEH Eagle and
MSI Eagle combined will have a book value of no less than $1,000,000 and Eagle
will cancel, in the form of a non-cash dividend, all indebtedness of TDA to
Eagle, except for an approximately $495,000 receivable from TDA relating to and
offsetting a mortgage in the same amount on property previously owned by Eagle
and for which Eagle remains the primary obligor, with TDA contributing
sufficient cash to Eagle, JEH Eagle or MSI Eagle, within forty-five days after
the closing of the Public Offering and consummation of the Acquisitions, to
achieve that book value in the event of a deficiency. At October 31, 1998, TDA's
indebtedness to Eagle, excluding the foregoing receivable offsetting such
mortgage, was approximately $3,070,000. It is anticipated that no such
contribution will be required by TDA. The number of shares of the Company's
Common Stock to be issued to TDA in connection with the Acquisitions was
determined by negotiations among the Company, TDA and the Underwriter. Pursuant
to the agreements by which JEH Eagle and MSI Eagle acquired the business and
substantially all of the assets of JEH Co. and MSI Co., 300,000 and 250,000
shares of the Company's Common Stock will be issued to James E. Helzer, the
owner of JEH Co. and the President of the Company, Eagle and JEH Eagle, and Gary
L. Howard, the owner of MSI Co. and a Vice President of the Company,
respectively. The number of shares to be issued to Messrs. Helzer and Howard was
determined by negotiations between the respective parties at the times of the
acquisitions of the business and substantially all of the assets of JEH Co. by
JEH Eagle and of MSI Co. by MSI Eagle, respectively. The consideration to be
paid by the Company to TDA for the Acquisitions was determined by negotiations

5
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among the Company, TDA and the Underwriter without independent appraisal. The
Company, TDA, Eagle, JEH Eagle and MSI Eagle have made no allocation of the
consideration to be paid by the Company for each of Eagle, JEH Eagle and MSI
Eagle. See "The Acquisitions."

In the past, a subsidiary of TDA, 39 Acre Corp., has leased to Eagle several
of Eagle's distribution centers on a month-to-month basis pursuant to oral
agreements. Rent expense for these distribution centers was approximately
$782,000 and $279,000 for Eagle's fiscal year ended June 30, 1998 and four-month
period ended October 31, 1998, respectively. Upon completion of the Public
Offering and consummation of the Acquisitions, Eagle will enter into ten-year
leases for said distribution centers. Although the written leases are to be on
substantially similar economic terms as the past oral agreements, Eagle will
then be committed to pay rent for these distribution centers for ten years. The
Company believes that the rent and other terms of the written lease agreements
to be entered into between 39 Acre Corp. and Eagle are on at least as favorable
terms as Eagle would expect to negotiate with unaffiliated third parties.
Neither Eagle nor 39 Acre Corp. will be permitted to terminate the leases before
the end of their term without a breach or default by the other party. JEH Eagle
leases several of its distribution centers from James E. Helzer pursuant to
five-year leases expiring on June 30, 2002. Rent expense for these distribution
centers was approximately $492,000 and $162,000 for JEH Eagle's fiscal year
ended June 30, 1998 and four-month period ended October 31, 1998, respectively.
James E. Helzer currently has a five-year employment agreement with JEH Eagle
which provides him with annual compensation of $250,000. James E. Helzer serves
as Eagle's President and is compensated at the rate of $50,000 per year. James
E. Helzer is also entitled to receive 20% of Eagle's income before taxes in
excess of $600,000 per year. Mr. Helzer's agreement with Eagle is oral and can
be terminated by either party without notice or penalty. MSI Eagle leases its
executive offices and principal distribution center from Gary L. Howard pursuant
to a three-year lease expiring on October 22, 2001 at an annual base rental of
approximately $107,000. Rent expense for this office and distribution center was
approximately $192,000 and $64,000 for MSI Co.'s fiscal year ended June 30, 1998
and four-month period ended October 31, 1998, respectively. Gary L. Howard
currently has a five-year employment agreement with MSI Eagle which provides him
with an annual salary of $260,000 and pursuant to which he serves as MSI Eagle's
President. Mr. Howard also is a Vice President of the Company. Upon completion
of the Public Offering and consummation of the Acquisitions, the Company will
enter into (a) five-year employment agreements with its Chairman of the Board
and Chief Executive Officer, Douglas P. Fields, and its Executive Vice
President, Treasurer and Secretary, Frederick M. Friedman, pursuant to which
each of such persons, who are also executive officers and directors of TDA, will
receive a salary of $200,000 per year plus substantial additional benefits,
although neither of them have committed any specified amount of time to the
Company's affairs; and (b) a month to month administrative services agreement
with TDA requiring a $3,000 monthly payment to TDA. Similar agreements have
already been entered into between JEH Eagle and each of Messrs. Fields and
Friedman providing annual base salaries of $60,000 to each of Messrs. Fields and
Friedman, and JEH Eagle and TDA have already entered into an agreement pursuant
to which TDA provides certain services to JEH Eagle for a five-year term
expiring in June 2002 requiring a $3,000 monthly payment to TDA. The payments by
JEH Eagle to Messrs. Fields and Friedman and TDA shall commence upon completion
of the Public Offering and consummation of the Acquisitions. Furthermore, as
part of the Acquisitions, TDA will indemnify Eagle for any payments that Eagle
is required to make which are in excess of Eagle's obligations under Eagle's
leases for its Birmingham, Alabama, distribution center and its former Fort
Lauderdale, Florida, distribution center and relate to the mortgage or the
industrial revenue bonds for the Birmingham, Alabama, and Fort Lauderdale,
Florida, properties, respectively. See "Risk Factors--Transactions With And For
the Benefit of Affiliates" and "Certain Transactions."

From time to time throughout this Prospectus Eagle, JEH Eagle and MSI Eagle
are collectively referred to as the "Combined Entities."

The Company was incorporated under the laws of the State of Delaware on May
1, 1996, and its operations to date have included, among other things: raising
capital, negotiation of the Acquisitions and

6
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establishing a management team for the Company. Certain administrative services
are provided to the Company by TDA. The Company has funded itself since
inception by initial minimal borrowing from TDA, selling an aggregate of 300,000
shares of its Common Stock and 300,000 Warrants to twelve investors in June and
July 1996 for aggregate gross proceeds to the Company of $300,000 in a private
offering of the Company's securities (the "Private Placement"), borrowings from
TDA ($150,000) and two other private investors, Hi-Tel Group, Inc. ($100,000)
and Paul Schmidt ($50,000) which are also stockholders of the Company in
February 1998, and borrowings totalling $200,000 from TDA in August 1998 and
January 1999. 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."

As used herein, the term EBITDA generally reflects net income (loss)
increased by the effects of interest expense, federal income tax provisions,
depreciation and amortization expense. EBITDA can be used by management, along
with other measures of performance, to assess the Company's financial
performance. EBITDA should not be considered in isolation or as an alternative
to measures of operating performance or cash flows pursuant to generally
accepted accounting principles. EBITDA may not be comparable to similar measures
reported by other companies. See "Summary Financial Data."

7
<PAGE>
THE PUBLIC OFFERING

<TABLE>
<S> <C>
Securities Offered................ 2,500,000 shares of Common Stock and 2,500,000 Warrants.
Each Warrant entitles the holder to purchase one share
of Common Stock at a price of $5.50 during the five-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................. 5,950,000 shares(1)

After Offering.................... 8,450,000 shares(1)(2)

Use of Proceeds................... Repayment of indebtedness, finance acquisitions of
companies operating primarily in the roofing supplies
and related products industry, expand Eagle's, JEH
Eagle's and MSI Eagle's operations, and for working
capital purposes, including general corporate purposes
of the Company, Eagle, JEH Eagle and MSI 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 SmallCap Symbols: (3)
Common Stock.................... EEGL

Warrants........................ EEGLW

Boston Stock Exchange Symbols: (3)
Common Stock.................... EGL

Warrants........................ EGLW
</TABLE>

- ------------------------

(1) Includes 3,000,000, 300,000 and 250,000 shares of Common Stock to be issued
to TDA, James E. Helzer and Gary L. Howard, respectively. See "The
Acquisitions" and "Certain Transactions."

(2) Includes the 2,500,000 shares of Common Stock to be issued in the Public
Offering but does not include (i) 375,000 shares of Common Stock, 375,000
Warrants and 375,000 shares of Common Stock underlying such Warrants subject
to the Underwriter's Overallotment Options; (ii) 2,500,000 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) 500,000 shares of Common Stock issuable upon the exercise of
warrants to be issued to the Underwriter; and (v) 1,000,000 shares of Common
Stock reserved for issuance pursuant to the Company's stock option plan of
which 900,000 shares of Common Stock are reserved for options to be granted
upon completion of the Public Offering. See "The Acquisitions,"
"Management," "Certain Transactions," "Description of Securities,"
"Underwriting" and "Selling Securityholders."

(3) The existence of trading symbols do not imply that a liquid and active
market will be developed or sustained for the Company's Securities. See
"Risk Factors--Possible Suspension of the Company's Securities from NASDAQ
SmallCap and the Boston Stock Exchange."

8
<PAGE>
SUMMARY FINANCIAL DATA
<TABLE>
<CAPTION>
COMBINED(1)
-------------------------------------------------------------------------
YEAR ENDED JUNE 30,
-------------------------------------------------------------------------
1994 1995 1996 1997(7) 1998
------------ ------------ ------------ ------------ -------------
<S> <C> <C> <C> <C> <C>
STATEMENT OF OPERATIONS DATA:
Revenue........................................... $ 53,925,373 $ 50,483,469 $ 59,262,226 $ 57,575,712 $ 129,502,812
Gross Profit...................................... 10,658,013 9,739,568 12,576,870 11,471,124 27,975,391
Income from Operations............................ 743,378 833,114 2,689,290 907,970 3,016,155
Net Income (Loss)................................. 464,270 352,589 1,315,035 (179,252) 756,884

Basic Net Income Per Share........................
Diluted Net Income Per Share......................
Basic and Dilutive Weighted Average Number of
Shares Outstanding (2)..........................
OTHER FINANCIAL DATA:
EBITDA (3)........................................ $ 1,453,702 $ 1,388,531 $ 3,251,371 $ 1,153,554 $ 4,256,186
Net Cash Provided by (Used In) Operating
Activities...................................... $ 1,278,228 $ 165,963 $ 2,538,838 $ (766,978) $ (258,827)
Net Cash Used In Investing Activities............. $ (509,645) $ (240,755) $ (863,448) $ (215,640) $ (3,704,624)
Net Cash (Used In ) Provided By Financing
Activities...................................... $ (742,450) $ 315,284 $ (1,931,121) $ 1,575,357 $ 4,614,314

AS ADJUSTED/COMBINED(5)(6)
FOUR MONTHS -------------------------------
ENDED FOUR MONTHS
OCTOBER 31, YEAR ENDED ENDED
----------------------------- JUNE 30, OCTOBER 31,
1997 1998 1998 1998
------------- ------------- -------------- --------------
<S> <C> <C> <C> <C>
STATEMENT OF OPERATIONS DATA:
Revenue........................................... $ 44,205,473 $ 51,148,653 $ 141,462,904 $ 55,125,447
Gross Profit...................................... 9,836,370 11,711,073 32,561,164 13,312,047
Income from Operations............................ 1,581,092 2,648,684 3,638,525 3,076,073
Net Income (Loss)................................. 637,749 1,196,558 1,044,201 1,442,318
Basic Net Income Per Share........................ $ 0.14 $ 0.19
-------------- --------------
-------------- --------------
Diluted Net Income Per Share...................... $ 0.14 $ 0.19
-------------- --------------
-------------- --------------
Basic and Dilutive Weighted Average Number of
Shares Outstanding (2).......................... 7,409,203 7,431,594
-------------- --------------
-------------- --------------
OTHER FINANCIAL DATA:
EBITDA (3)........................................ $ 1,949,273 $ 3,114,584 $ 5,287,113 $ 3,654,052
Net Cash Provided by (Used In) Operating
Activities...................................... $ 1,491,223 $ 582,501
Net Cash Used In Investing Activities............. $ (2,114,267) $ (1,805,369)
Net Cash (Used In ) Provided By Financing
Activities...................................... $ (25,938) $ (127,541)
</TABLE>
<TABLE>
<CAPTION>
COMBINED(1) THE COMPANY
---------------------------------------------------------- OCTOBER 31,
1998
JUNE 30 -----------
----------------------------------------------------------
1994 1995 1996 1997 1998 HISTORICAL
---------- ---------- ---------- ---------- ---------- -----------
<S> <C> <C> <C> <C> <C> <C>
BALANCE SHEET DATA:
Working Capital (Deficiency).................... $4,511,035 $5,450,306 $4,527,568 $6,232,891 $17,081,190 $ (93,335)
Total Assets.................................... 12,947,453 14,709,463 15,778,742 15,853,837 49,478,412 395,559
Long Term Debt.................................. -- 6,290,453 5,678,243 7,195,163 25,294,523 --
Total Liabilities............................... 9,659,216 14,552,647 15,586,657 15,832,712 49,618,968 488,894
Shareholders' Equity (Deficiency)............... 3,562,237 156,816 192,085 21,125 (140,556) (93,335)

AS ADJUSTED/
COMBINED(4) COMBINED(5)
------------- ------------
<S> <C> <C>
BALANCE SHEET DATA:
Working Capital (Deficiency).................... $15,742,624 $21,993,624
Total Assets.................................... 60,047,395 65,873,395
Long Term Debt.................................. 27,574,887 23,224,887
Total Liabilities............................... 55,433,255 50,658,255
Shareholders' Equity (Deficiency)............... 4,614,140 15,215,140
</TABLE>

9
<PAGE>
- ------------------------

(1) Prior to the contemplated Acquisitions, the Company has had limited
operations. The historical financial data included in the statement of
operations data has been prepared on a basis which combines the Company
(organized May 1, 1996), Eagle Supply, Inc. ("Eagle"), and JEH/Eagle Supply,
Inc. ("JEH Eagle") (acquired on July 1, 1997) and MSI/Eagle Supply, Inc.
("MSI Eagle") (acquired on October 22, 1998) as four entities controlled by
TDA Industries, Inc. ("TDA"), because the separate financial data of the
Company would not be meaningful. Information with respect to the Company is
included from May 1, 1996 (inception), information for Eagle is included for
all periods presented, information with respect to JEH Eagle is included
from July 1, 1997 and information for MSI Eagle is included from October 22,
1998.

(2) Basic and Dilutive Net Income (loss) per 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, 3,000,000, 300,000 and 200,000
shares to be issued to TDA, James E. Helzer and Gary L. Howard,
respectively, in connection with the Acquisitions, 50,000 shares relating to
a $250,000 portion of a note in the principal amount of $2,046,000 that MSI
Co. has advised the Company it intends to exchange for shares of the Company
at the initial Public Offering price of $5.00 per share and transfer to Gary
L. Howard and 1,481,594 and 1,459,203 shares ("Additional Shares") in the
four months ended October 31, 1998 and year ended June 30, 1998,
respectively, for the shares assumed to be issued in the Public Offering,
the proceeds of which would be used to retire $4,625,000 of debt and replace
the capital in excess of the respective period's earnings which is
represented by the non-cash dividend to TDA from Eagle. The computation
excludes shares to be issued in connection with the Public Offering in
excess of the Additional Shares. The Underwriter's Warrant and options to be
granted upon the closing of the Public Offering pursuant to the Company's
Stock Option Plan are not dilutive and have not been included. See "Risk
Factors," "The Acquisitions," "Certain Transactions," and the Financial
Statements and the Notes thereto.

The following is a summary of shares included in Basic and Diluted Net
Income per Share:

<TABLE>
<CAPTION>
FOUR MONTHS
ENDED
OCTOBER 31, YEAR ENDED
1998 JUNE 30, 1998
--------------- -------------
<S> <C> <C>
Initial capitalization:
Founders shares issued to TDA................................................... 2,000,000 2,000,000
Founders shares issued to Mr. Andrews........................................... 100,000 100,000
Private Placement shares issued to private investors.............................. 300,000 300,000
Acquisition shares to be issued to TDA............................................ 3,000,000 3,000,000
Acquisition shares to be issued to James E. Helzer................................ 300,000 300,000
Acquisition shares to be issued to Gary L. Howard................................. 200,000 200,000
Conversion of MSI Co. note into shares of the Company............................. 50,000 50,000
Additional Shares................................................................. 1,481,594 1,459,203
--------------- -------------
7,431,594 7,409,203
--------------- -------------
--------------- -------------
</TABLE>

(3) As used herein, EBITDA reflects net income (loss) increased by the effects
of interest expense, income tax provisions, depreciation and amortization
expense. EBITDA is used by management, along with other measures of
performance, to assess the Company's financial performance. EBITDA should
not be considered in isolation or as an alternative to measures of operating
performance or cash flows pursuant to generally accepted accounting
principles. In addition, this measure of EBITDA may not be comparable to
similar measures reported by other companies.

(4) Reflects the consumation of the Acquisitions. 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) Reflects the Public Offering of 2,500,000 shares of Common Stock and
2,500,000 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, 50,000 shares relating to a $250,000 portion of a note in the
principal amount of $2,046,000 that MSI Co. has advised the Company it
intends to exchange for shares of Common Stock of the Company and the
consummation of the Acquisitions. 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.

(6) See "Unaudited Pro Forma Condensed Consolidated Statements of Operations".

(7) The loss for the year ended June 30, 1997 includes a write-off of
registration costs of $370,353 for an offering which was not consummated.

10
<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. Eagle has experienced substantial
revenue fluctuations in the past. For Eagle's fiscal years ended June 30, 1995,
1996, 1997 and 1998 and four-month periods ended October 31, 1997 and 1998, its
revenues were approximately $50,483,000, $59,262,000, $57,576,000, $58,498,000,
$17,391,000 and $19,102,000, respectively, and its net income (loss) for those
fiscal years and four-month periods were approximately $353,000, $1,315,000,
$192,000, $160,000, $3,000 and $(143,000), respectively. 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 market area. Also, Eagle
closed its distribution center in Fort Pierce, Florida, immediately after it was
opened in 1996, as operating prospects for that center were not anticipated to
be satisfactory to management. Furthermore, during Eagle's fiscal year ended
June 30, 1996, the damage caused by hurricanes increased business for Eagle's
distribution centers located in the Florida panhandle and in Alabama. Eagle's
revenues and net income decreased during Eagle's fiscal year ended June 30, 1997
from Eagle's fiscal year ended June 30, 1996 as a result of a decrease in
storm-related business; an increase in operating expenses as a percentage of
revenues because of the decline in revenues; and expenses related to new
distribution centers, among other factors. Eagle's loss in the four-month period
ended October 31, 1998 is as a result of increased operating expenses during
that period, principally payroll and related costs resulting from the hiring of
additional personnel needed to support increased sales from warehouse inventory.

Similarly, during JEH Co.'s fiscal year ended December 31, 1995, JEH Co.
sustained a net loss of approximately $123,000, while during JEH Co.'s fiscal
year ended December 31, 1996, JEH Co. reported net income of approximately
$171,000 upon revenues that were fairly constant in both said fiscal years.
These results are after payment of compensation to JEH Co.'s owner of
approximately $3,988,000 and $2,330,000 during JEH Co.'s fiscal years ended
December 31, 1995 and 1996, respectively. During JEH Co.'s six month period
ended June 30, 1997, JEH Co. had revenues and a loss of approximately
$28,979,000 and $1,179,000, respectively. JEH Co. and JEH Eagle had revenues of
approximately $71,006,000, $26,814,000 and $31,682,000 during JEH Eagle's fiscal
year ended June 30, 1998 and their four-month periods ended October 31, 1997 and
1998, respectively, and net income for that fiscal year and those four-month
periods were approximately $608,000, $635,000 and $1,306,000, respectively. The
increase in JEH Eagle's revenues and net income in the four-month period ended
October 31, 1998 is as a result of the storm-related business generated by JEH
Eagle's new distribution center in Minnesota which was opened in July 1998.

Revenues and operating income of both Eagle and JEH Eagle are impacted by
weather phenomena, such as hailstorms and hurricanes, which have the result of
increasing business at the time of the event of the weather phenomena and
shortly thereafter but have the effect frequently of resulting in a slowdown of
business thereafter. Similarly, weather phenomena can also have a negative
impact on Eagle's and JEH Eagle's customers which can cause certain of such
customers to become delinquent in their payments of their accounts with Eagle or
JEH Eagle. In the past, this has occurred with certain of JEH Co.'s customers.
See the Financial Statements of JEH Company, Inc. as of and at June 30, 1997,
Note K-Allowance for Doubtful Accounts at pages F-63 and F-64. JEH Co.'s
revenues have fluctuated more than Eagle's as a result of a conceptual
difference in strategy regarding the establishment of distribution centers. JEH
Co. entered into new markets following storms which had the tendency to show
more immediate growth in revenues that would help to defray start-up costs.
Eagle has historically entered new or existing markets based upon management's
evaluation of expected long term growth and, when a roofing distributor was
already operating in an existing market, if the area could support a new
distributor. Similarly, MSI Co. had

11
<PAGE>
expanded its operations by entering new market areas within the Dallas/Fort
Worth metropolitan area based upon management's evaluation of expected long-term
growth.

During the fiscal year ended June 30, 1997, the Company incurred a loss of
approximately $371,000, principally as a result of having no revenues or income
while incurring approximately $370,000 in registration expenses. During the
Company's fiscal year ended June 30, 1998, it had a net loss of approximately
$11,000.

There can be no assurance that, in the future, unforeseen developments,
increased competition, losses incurred by new businesses that may be acquired or
branches that may be opened, weather phenomena and other circumstances may not
have a material adverse affect on Eagle's and/or JEH Eagle's operations in their
current market areas of operations or areas into which Eagle's, JEH Eagle's or
the Company's operations may be expanded by acquisition or otherwise.
Additionally, there can be no assurance that in the future, unforeseen
developments, increased competition, losses incurred by new businesses that may
be acquired or centers that may be opened, losses incurred in the expansion of
MSI Eagle's product lines into certain of Eagle's and/or JEH Eagle's
distribution centers and other circumstances may not have a material adverse
effect on MSI Eagle's operations in the Dallas/Fort Worth metropolitan area or
areas into which MSI Eagle's operations may be expanded by acquisition or
otherwise. See "Management's Discussion and Analysis of Financial Condition and
Results of Operations" and "Business".

NON-ARMS LENGTH NEGOTIATIONS FOR PLANNED ACQUISITIONS; NO INDEPENDENT
APPRAISAL. Upon completion of the Public Offering, the Company is
simultaneously to acquire Eagle, JEH Eagle and MSI Eagle from TDA, and TDA is to
receive 3,000,000 shares of the Company's Common Stock in connection with said
acquisitions. The foregoing number of shares was negotiated and evaluated based
upon the assessments made by the parties to the negotiations without independent
appraisal. TDA currently controls the Company, owning all but 400,000 of the
Company's issued and outstanding shares of Common Stock. Messrs. Fields and
Friedman are officers, directors and the principal stockholders of TDA and are
also the Chief Executive Officer and Chairman of the Board and Executive Vice
President, Secretary, Treasurer and a Director, respectively, of the Company.
Messrs. Fields and Friedman may be deemed to be in control of TDA and, in turn,
the Company. As a result, their interests in the Company may conflict with their
interests in TDA with respect to the Acquisitions and other matters. Although
management of the Company believes that the terms and conditions of the
Acquisitions are fair and reasonable to the Company, that belief must be
assessed in light of the lack of an independent appraisal and the conflicted
positions of Messrs. Fields and Friedman. There can be no assurance as to the
correctness of management's foregoing belief. See "The Acquisitions."

AMORTIZATION OF GOODWILL. The Company's balance sheet immediately following
the consummation of the Public Offering and the Acquisitions will include an
amount designated as "goodwill" ("Excess Cost of Investment Over Net Assets
Acquired") that represents approximately 16% of assets and approximately 70% of
shareholders' equity. Goodwill arises when an acquirer pays more for a business
than the fair value of the tangible and separately measurable intangible net
assets. Generally accepted accounting principles ("GAAP") require that this and
all other intangible assets be amortized over the period benefited. Management
of the Company has determined that period to be no less than fifteen (15) years
from the acquisition of JEH Co. by JEH Eagle and forty (40) years for the
acquisition of MSI Co. by MSI Eagle. If management were not to give proper
effect to a shorter benefit period for the factors giving rise to a material
portion of goodwill, earnings of the Company reported in periods immediately
following the consummation of the Acquisitions would be overstated. In later
years, the Company would be burdened by a continuing charge against earnings
from amortization of goodwill without the associated benefit to income valued by
management in arriving at the amount of consideration paid for the acquisition
of a business. If the Company were to assign a shorter life to the goodwill,
earnings reported in periods immediately following the consummation of the
Acquisitions would be reduced. Earnings in later years, in any event, could be
significantly affected if management were to determine then that the remaining
balance of goodwill was impaired.

12
<PAGE>
Although no goodwill will arise as the result of the consummation of the
Acquisitions by the Company, goodwill did arise upon the consummation of the
acquisition of JEH Co. by JEH Eagle on July 1, 1997 and the acquisition of MSI
Co. by MSI Eagle on October 22, 1998. Management of the Company and each of JEH
Eagle and MSI Eagle has reviewed with its independent accountants the factors
and related future cash flows which it considered in arriving at the amount of
goodwill incurred by JEH Eagle and MSI Eagle in their acquisitions of JEH Co.
and MSI Co., respectively. Management of the Company and MSI Eagle has concluded
that the anticipated future cash flows associated with the goodwill recognized
in the acquisition of MSI Co. by MSI Eagle will continue indefinitely and that
there is no persuasive evidence that any material portion of such goodwill will
dissipate over a period shorter than forty (40) years. There can be no assurance
that this will continue to be so.

In concluding that a forty (40) year life for the amortization of the
goodwill associated with the acquisition of MSI Co. by MSI Eagle was reasonable,
management of the Company considered: a) the amount of goodwill in relation to
historical and pro forma historical cash flows (EBITDA); b) the historical
growth of the business acquired; c) the business strategy of the business
acquired; d) the potential benefits of combining the business acquired into a
larger wholesale building supply enterprise including potential benefits in
negotiating with vendors, providing customer service, attracting personnel,
obtaining financing, supporting costs of introducing new technology and
attracting acquisition candidates; e) the potential strategic use of this
combined larger wholesale building supply enterprise as a platform from which to
implement a strategy of internal expansion and additional acquisitions; f) the
experience of management in the wholesale distribution of roofing supplies and
related products industry since 1973; g) the goodwill amortization policies of
other companies in the industry; h) the depth and experience of management of
the Company and the Combined Entities; i) the business strategy of the Company;
and j) the affect of all of the above on potential future cash flows of the
Company. Management is not able to quantify the effect of any individual factor
it considered.

Management of the Company anticipates that, after the consummation of the
Acquisitions, it will evaluate the recoverability of goodwill in light of the
expectations of future non-discounted cash flows including consideration of the
factors listed above and any additional factors which may seem relevant to
management at such future date in light of the business of the Company at such
future date. If management of the Company concludes at such future date that a
portion or all of the goodwill is not recoverable, it will write-down and charge
earnings with any amount determined to be unrecoverable and/ or will take other
action consistent with GAAP. Management is unable to determine or to place a
weighting or numerical value on what factors would be relevant in its future
evaluation of goodwill for the purpose of determining or valuing the amount of
any such potential future write-down of goodwill, although the factors listed
above would all be considered as well as any others required by GAAP. Management
of the Company would consult with its independent accountants if it believes
that there has been a change in its evaluation of the recoverability of
goodwill. There can be no assurance that there will not be a change in
management's evaluation of the recoverability of goodwill in light of future
business events or conditions. See "Business--Strategy," Unaudited Pro Forma
Condensed Consolidated Balance Sheet and notes thereto, and the Financial
Statements and notes thereto.

REPAYMENT OF INDEBTEDNESS; SUCH FUNDS WILL NOT BE AVAILABLE FOR USE IN
BUSINESS OPERATIONS. Approximately $4,100,000 and $525,000 of the net proceeds
of this Public Offering, representing approximately 44.2% of such net proceeds,
will be used to reduce Eagle's, JEH Eagle's and MSI Eagle's borrowings under
their revolving credit facilities and to repay interim financial indebtedness,
including MSI Eagle's purchase money indebtedness, and interest thereon of the
Combined Entities and the Company, respectively. As a result, said net proceeds
will not be available for use in the business operations of the Company, Eagle,
JEH Eagle or MSI Eagle. See "Use of Proceeds" and "Management's 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. Such net proceeds are

13
<PAGE>
intended to be applied toward consummating acquisitions in accordance with the
Company's business strategy, to support Eagle's, JEH Eagle's and MSI 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, JEH Eagle and MSI 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 Acquisitions, 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
and/or JEH Eagle or to be served by the Company, Eagle and/or JEH Eagle as a
result of acquisitions or expansion efforts could have a material adverse effect
on the operations of the Company, Eagle and/or JEH Eagle.

THE WHOLESALE DISTRIBUTION OF CEMENT AND MASONRY SUPPLIES BUSINESS IS
SUBJECT TO ECONOMIC AND OTHER CHANGES. MSI Eagle has, during its several fiscal
years, experienced growth in revenues and has had net income. As MSI Eagle sells
principally to contractors, subcontractors and masons serving the residential
building market in the Dallas/Fort Worth metropolitan area, an economic downturn
in that market or in any additional markets in which it may operate in the
future as a result of expansion or acquisition could have a material adverse
effect on the operations of the Company and/or MSI Eagle.

DEPENDENCE UPON CERTAIN VENDORS; LACK OF WRITTEN LONG-TERM SUPPLY AGREEMENTS
WITH VENDORS. Eagle, JEH Eagle and MSI Eagle distribute products manufactured
by a number of major vendors. GAF Corporation ("GAF"), a supplier of residential
and commercial roofing materials, is Eagle's largest supplier, accounting for
approximately 23%, 23% and 18% of Eagle's product lines during Eagle's fiscal
years ended June 30, 1997 and 1998 and four-month period ended October 31, 1998,
respectively. During Eagle's fiscal years ended June 30, 1997 and 1998 and
four-month period ended October 31, 1998, three other vendors' products
accounted for an aggregate of approximately 32%, 22% and 21%, respectively, of
Eagle's product lines. Similarly, Atlas Roofing Corp., a supplier of roofing
materials, is JEH Eagle's largest supplier, accounting for approximately 22%,
15%, 15% and 14% of JEH Co.'s product lines during JEH Co.'s fiscal years ended
December 31, 1995 and 1996, JEH Eagle's fiscal year ended June 30, 1998 and
four-month period ended October 31, 1998, respectively. During JEH Co.'s fiscal
years ended December 31, 1995 and 1996 and JEH Eagle's fiscal year ended June
30, 1998, three other vendors' products accounted for an aggregate of
approximately 31%, 34% and 38%, respectively, of JEH Co.'s and JEH Eagle's
product lines. Included within the foregoing three vendors were GAF and Elk
Roofing Products ("Elk") which accounted for approximately 15% and 10% and 16%
and 10% of JEH Co.'s product lines during its fiscal years ended December 31,
1995 and 1996 and 16% and 13% and 17% and 13% of JEH Eagle's product lines
during its fiscal year ended June 30, 1998 and four-month period ended October
31, 1998, respectively. Texas Industries, Inc. ("TII"), a supplier of bagged
cements, is MSI Eagle's largest supplier, accounting for approximately 27% and
26% of MSI Eagle's (including its predecessor company, MSI Co.) product lines
during its fiscal year ended June 30, 1998 and four-month period ended

14
<PAGE>
October 31, 1998, respectively. During the foregoing periods, Lehigh Portland
Cement ("Lehigh"), another supplier of bagged cements, accounted for
approximately 17% and 22%, respectively, of MSI Eagle's (including its
predecessor company, MSI Co.) product lines. Eagle, JEH Eagle and MSI Eagle have
no written long-term supply agreements with any of their vendors. Management
believes that in the event of any interruption of product deliveries from any of
their vendors, Eagle, JEH Eagle and MSI 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
supply and masonry materials at acceptable prices or at all. See "Business."

COMPETITION IN THE WHOLESALE DISTRIBUTION OF ROOFING SUPPLIES AND RELATED
PRODUCTS INDUSTRY. Eagle and JEH Eagle currently face substantial competition
in the wholesale distribution of roofing supplies from relatively smaller
distributors but also face competition from retail distribution centers and from
a number of multi-regional and a national wholesale distributor of building
products including suppliers which are larger than Eagle and JEH Eagle combined
and have greater financial resources than Eagle and JEH Eagle combined. Eagle
and JEH Eagle combined currently compete 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 or JEH Eagle
will be able to continue to compete effectively with such competitors. During
Eagle's last three fiscal years Eagle has closed and/or sold certain
distribution centers as a result of such competition. To a substantially lesser
degree, Eagle and JEH Eagle also compete with larger, higher volume, discount
general building supply stores selling standardized products, sometimes at lower
prices. See "--No Assurance of Profitable Operations" and "Management's
Discussion and Analysis of Financial Condition and Results of Operations."

COMPETITION FOR POTENTIAL ACQUISITIONS. The Company anticipates that it may
experience competition from entities and individuals (including venture capital
partnerships and corporations, equity funds, blind pool companies, competing
wholesale roofing supply or other building materials distribution 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 the Combined
Entities 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 the Combined
Entities, 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 financial resources of the Combined Entities
will be limited in comparison to those of many of such competitors. Such
competition could result in the loss of an acquisition candidate or an increase
in the price the Company would be required to pay for such acquisitions. See
"Business."

NEED FOR ADDITIONAL FUTURE FINANCING; POSSIBLE ADDITIONAL DILUTION AND/OR
FINANCIAL RESTRICTIONS. The Company may require additional equity or debt
financing in order to consummate an acquisition or for additional working
capital if any of the Combined Entities suffer losses or if the Company
completes the acquisition of a business that subsequently suffers losses. Any
additional equity financing that may be obtained may dilute the voting power and
equity interests of the Company's stockholders. Any additional debt financing
that may be obtained may impair or restrict the Company's ability to declare
dividends or may impose financial restrictions on the Company's ability to make
acquisitions or implement the expansion efforts of the Combined Entities. There
can be no assurance that the Company will be able to obtain additional financing
on terms acceptable to the Company or at all. In the event additional financing
is unavailable to the Company, the Company may be materially adversely affected.
See "Use of Proceeds."

UNPROVEN BUSINESS STRATEGY OF THE COMPANY; ACQUISITIONS UNKNOWN. 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 industries and companies which manufacture products for or supply

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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, other than the Acquisitions, there
can be no assurance that any acquisitions, if successfully consummated, will be
successfully integrated into the operations of the Combined Entities, will
perform as expected, will not result in significant unexpected liabilities or
will ever contribute significant revenues or profits to any of the Combined
Entities. 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 Acquisitions, TDA will own approximately 59% 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 59% of the issued and
outstanding shares of Common Stock of the Company after the closing of the
Public Offering and consummation of the Acquisitions. 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
"Management," "Principal Stockholders" 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, and TDA
also furnishes certain services to JEH Eagle. Following completion of the Public
Offering and the consummation of the Acquisitions, TDA will provide the Company
with certain administrative services. Furthermore, a subsidiary of TDA, 39 Acre
Corp., and James E. Helzer, the President of the Company, Eagle and JEH Eagle,
lease approximately one-half of Eagle's and JEH Eagle's facilities to them,
respectively, and Gary L. Howard, a Vice President of the Company and President
of MSI Eagle, leases MSI Eagle's principle distribution facility, showroom and
executive offices to it. Conflicts of interest may arise in the future with
respect to such leases and possible renewal terms and conditions. The Company
does not intend to enter into any material transaction with TDA or its
affiliates in the future unless such transaction is fair and reasonable to the
Company and is approved by a majority of the independent members of the Board of
Directors of 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. The success of the Company and the Combined
Entities may depend upon the continued contributions of their officers. The
business of the Company could be adversely affected by the loss of the services
of Douglas P. Fields, the Chief Executive Officer and Chairman of the Boards of
Directors of the Company and each of the Combined Entities, Frederick M.
Friedman, the Executive Vice President, Secretary and Treasurer of the Company
and each of the Combined Entities, James E. Helzer, the President of the Company
and each of JEH Eagle and Eagle or, Gary L. Howard, a Vice President of the
Company and President of MSI Eagle. Although JEH Eagle has "key person" life
insurance on the life of James E. Helzer in the amount of $2,000,000 naming JEH
Eagle as beneficiary, MSI Eagle has "key person" life insurance on the life of
Gary L. Howard in the amount of $2,000,000 plus the amount outstanding pursuant
to MSI Eagle's note to MSI Co. naming MSI Eagle as beneficiary, and the Company
has "key person" life insurance in the amount of $1,000,000 on each of the

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lives of Messrs. Fields and Friedman, naming the Company as beneficiary, there
can be no assurance that the foregoing amounts will be adequate to compensate
JEH Eagle, MSI Eagle and/or the Company, in the event of the loss of any of
their lives. See "Management."

KEY PERSONNEL; CONFLICTS OF INTEREST IN ALLOCATION OF MANAGEMENT'S
TIME. Additionally, the employment agreements already entered into and to be
entered into with Messrs. Fields and Friedman do not and will not require either
of them to devote a specified amount of time to the Company's or the Combined
Entities' affairs. Each of Messrs. Fields, Friedman and Helzer have significant
business interests outside of the Company, including but not limited to TDA and
its subsidiaries, as to Messrs. Fields and Friedman. Accordingly, Messrs.
Fields, Friedman and Helzer 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."

NO ASSURANCE OF CONTINUATION OF CREDIT FACILITIES. Each of Eagle, JEH Eagle
and MSI Eagle has substantial credit facilities that are needed to finance its
operations. All such credit facilities are guaranteed by TDA. Upon completion of
the Public Offering and consummation of the Acquisitions, the Company will also
become a guarantor of such credit facilities. Assuming the required consents
from the lending institutions are obtained and the Public Offering and the
Acquisitions are completed and consummated, TDA has advised the Company that in
the event Eagle, JEH Eagle or MSI Eagle seek increased lines of credit, new
lines of credit or other changes in their respective credit facilities which
would give TDA the right to terminate or decline to grant a new guarantee, TDA
may seek compensation from the Company. Although no such compensation has been
agreed upon, such compensation, if paid, could be materially adverse to any and
all of the Combined Entities and could be a material benefit to TDA and certain
officers and directors of the Company, who are also officers, directors and
stockholders of TDA. In the event TDA were to exercise any such right to
terminate a guarantee or decline to grant a new guarantee, credit facilities may
no longer be available to Eagle, JEH Eagle and/or MSI Eagle or credit facilities
may be available only upon materially different terms and conditions including,
but not limited to, a reduced availability of funds, additional and/or higher
interest rates and charges and other more restrictive financial terms and
conditions. Any of the foregoing events could have a material adverse effect
upon the Company, Eagle, JEH Eagle and/or MSI Eagle. See "--Control by
Management and TDA," "-- Potential Conflicts of Interest," "--Transactions With
and For the Benefit of Affiliates," "--Substantial Potential Future Financial
Benefits to Prior Owners of Acquisition Candidates Now Affiliated with the
Company," "Management's Discussion and Analysis of Financial Condition and
Results of Operations," "The Acquisitions," "Management," "Principal
Stockholders" and "Certain Transactions."

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 have and will or may be deemed to benefit,
directly or indirectly, from the Company's and each of the Combined Entities'
transactions with TDA. James E. Helzer, the Company's President and the nominee
Vice Chairman of the Company's Board of Directors, previously owned JEH Co. and
has and will or may be deemed to benefit, directly from his and JEH Eagle's
transactions with the Company and JEH Eagle. Gary L. Howard, a Vice President of
the Company and President of MSI Eagle, previously owned MSI Co. and has and
will or may be deemed to have benefitted or to benefit from his and MSI Co.'s
transactions with MSI Eagle and/or the Company. See "The Acquisitions,"
"Management," "Principal Stockholders" and "Certain Transactions."

Eagle, JEH Eagle and MSI Eagle have revolving credit facilities, in the
amounts of $10,900,000, $20,000,000 and $9,075,000, respectively, guaranteed by
TDA. To the extent these credit facilities are reduced or repaid and the Company
also becomes a guarantor, TDA will derive an indirect benefit. During Eagle's
June 30, 1995 fiscal year, Eagle used its borrowings under this revolving credit
facility to repay approximately $2,326,000 of its indebtedness to TDA and to
advance approximately $3,309,000 to TDA. As part of the Acquisitions, Eagle, JEH
Eagle and MSI Eagle combined will have a book value of no less than

17
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$1,000,000 after Eagle cancels, in the form of a non-cash dividend, all
indebtedness of TDA to Eagle, except for an approximate $495,000 receivable from
TDA relating to and offsetting a mortgage in the same amount on property
previously owned by Eagle and for which Eagle remains the primary obligor, with
TDA contributing sufficient cash to Eagle, JEH Eagle or MSI Eagle, within
forty-five days after the closing of the Public Offering and consummation of the
Acquisitions, to achieve that book value in the event of a deficiency. At
October 31, 1998, the combined book value of Eagle, JEH Eagle and MSI Eagle was
approximately $5,773,000, which exceeded the $1,000,000 required book value by
approximately $1,703,000, assuming the cancellation by Eagle, in the form of a
non-cash dividend, of all indebtedness of TDA to Eagle at that date, excluding
the foregoing receivable offsetting such mortgage. At October 31, 1998, TDA's
indebtedness to Eagle, excluding the foregoing receivable offsetting such
mortgage, was approximately $3,070,000. To the extent TDA's indebtedness to
Eagle is so cancelled, TDA will directly, and Messrs. Fields and Friedman will
indirectly, derive a benefit. During Eagle's fiscal years ended June 30, 1997
and 1998, Eagle made dividend payments to TDA of $1,250,000 and $1,200,000,
respectively. JEH Eagle did not make any dividend payments to TDA during the
fiscal year ended June 30, 1998, and neither Eagle, JEH Eagle nor MSI Eagle made
any dividend payments to TDA during the four-month period ended October 31,
1998. After October 31, 1998, JEH Eagle made dividend payments to TDA at the
rate of $150,000 per month, and until completion of the Public Offering and
consummation of the Acquisitions, both Eagle and JEH Eagle may make dividend
payments to TDA. MSI Eagle is precluded from making dividend payments and
certain other distributions to TDA pursuant to the terms of its credit facility.
See "Management's Discussion and Analysis of Financial Condition and Results of
Operations," "The Acquisitions" 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 Acquisitions,
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 "The Acquisitions," "Business" and "Certain
Transactions".

Eagle is responsible, as mortgagor, to make payments due on the mortgage
underlying its Birmingham, Alabama, distribution center. That property is owned
by 39 Acre Corp., a wholly-owned subsidiary of TDA and is leased to Eagle. Such
mortgage requires a "balloon" payment in April 1999. 39 Acre Corp. intends to
obtain replacement financing when the "balloon" payment is due. There can be no
assurance that such financing will be available on acceptable terms. Eagle also
remains responsible, as leasee, for lease payments to another TDA subsidiary,
Eagle Holding, Inc., 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, property. Eagle has no obligation to make
payments on the industrial revenue bond and presently subleases this property to
an unrelated third party. In the event the unrelated third party sublessee fails
to perform its obligations under the sublease, Eagle is required to make rental
payments to Eagle Holding, Inc., and, in any event, will be required to make the
"balloon" payment. However, through October 31, 1998, Eagle had been making
pro-rata payments upon the "balloon" payment to Eagle Holding, Inc., and these
payments, together with anticipated sublessee rental payments, are currently
projected to fully fund the "balloon" payment. Upon completion of the Public
Offering and as part of the Acquisitions, TDA will 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 and relate to the mortgage or the
industrial revenue bonds for the Birmingham, Alabama and Fort Lauderdale,
Florida properties, respectively. In the event of the failure of Eagle, TDA
and/or TDA's subsidiary to perform Eagle's obligations under said mortgage and
lease, Eagle could be subject to substantial judgments that would have a
material adverse effect on Eagle and its financial condition.

The mortgage underlying Eagle's Birmingham, Alabama, distribution center
requires monthly payments of approximately $4,700 through April 1999 and a
"balloon" payment of approximately $440,000 on that date. The lease for Eagle's
former Fort Lauderdale, Florida, distribution center requires variable monthly
payments and a "balloon" payment of approximately $580,000 on May 1, 1999. See
"The Acquisitions" and "Certain Transactions."

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The Company believes that TDA's transactions with Eagle with regard to the
Birmingham, Alabama, and Fort Lauderdale, Florida, properties are on terms no
less favorable than Eagle could obtain from independent third parties.

Upon completion of the Public Offering and consummation of the Acquisitions,
TDA will provide office space and administrative services to the Company at
TDA's offices in New York City pursuant to a month-to-month administrative
services agreement to be entered into by the Company and TDA requiring $3,000 to
be paid monthly to TDA, and Messrs. Fields' and Friedman's employment agreements
with the Company and Eagle will become effective. Messrs. Fields and Friedman
have already entered into employment agreements with JEH Eagle which will remain
effective. TDA also provides certain services to JEH Eagle pursuant to a
five-year agreement requiring monthly payments to TDA of $3,000. The payments
required to be made to Messrs. Fields and Friedman and to TDA pursuant to their
respective agreements with JEH Eagle will commence upon completion of the Public
Offering and consummation of the Acquisitions. The aggregate annual compensation
to be paid to Messrs. Fields and Friedman by the Company, Eagle and JEH Eagle
will be $260,000 each, exclusive of benefits, bonuses and annual increases. The
aggregate annual compensation to be paid by the Company, Eagle and JEH Eagle to
James E. Helzer is and will be $300,000, exclusive of benefits, bonuses, annual
increases and 20% of Eagle's earnings before taxes in excess of $600,000 per
year. The aggregate annual compensation to be paid to Mr. Gary L. Howard by the
Company and MSI Eagle will be $260,000 exclusive of benefits, bonuses and annual
increases.

See "--Substantial Potential Future Financial Benefits to Prior Owners of
Acquisition Candidates Now Affiliated with the Company," "The Acquisitions,"
"Business," "Management" and "Certain Transactions".

SUBSTANTIAL POTENTIAL FUTURE FINANCIAL BENEFITS TO PRIOR OWNERS OF
ACQUISITION CANDIDATES NOW AFFILIATED WITH THE COMPANY. JEH EAGLE. In July
1997, JEH Eagle acquired the business and substantially all of the assets of JEH
Co., a Texas corporation, wholly owned by James E. Helzer, now the President of
the Company, Eagle and JEH Eagle. The purchase price, as adjusted, including
transaction expenses, was approximately $14,768,000, consisting of $13,878,000
in cash and a five-year, $864,852 principal amount note bearing interest at the
rate of 6% per year. The purchase price and the note are subject to further
adjustments under certain conditions. Certain, potentially substantial,
contingent payments, as additional future consideration to JEH Co., or its
designee, are to be paid by JEH Eagle that may result in substantial financial
benefits to James E. Helzer, and may materially and adversely effect the
financial condition and income of JEH Eagle and the Company. See "The
Acquisitions" and "Certain Transactions."

MSI EAGLE. In October 1998, MSI Eagle acquired substantially all of the
assets and the business of MSI Co., a Texas corporation, wholly-owned by Gary L.
Howard, now a Vice President of the Company and President of MSI Eagle. The
purchase price, as adjusted, including transaction expenses, was approximately
$8,538,000, consisting of $6,492,000 in cash and a $2,046,000 principal amount
five-year note bearing interest at the rate of 8% per year. All payments due on
the note are accelerated upon consummation of the Public Offering and are to be
paid within 120 days of such consummation. The purchase price and the note are
subject to further adjustments under certain conditions. Certain, potentially
substantial, contingent payments, as additional future consideration to MSI Co.,
or its designee, are to be paid by MSI Eagle that may result in substantial
financial benefits to MSI or its designee and may materially and adversely
effect the financial condition and income of MSI Eagle and the Company. See "The
Acquisitions" and "Certain Transactions."

DILUTION; DISPARITY OF PRICES PAID BY STOCKHOLDERS. As a result of the sale
of the Securities offered in the Public Offering and the consummation of the
Acquisitions, there will be immediate and substantial dilution to public
investors in that the pro forma net tangible book value per share of the
Company's Common Stock after the Public Offering and consummation of the
Acquisitions will be approximately $.50 per share, or approximately $4.50 (90%)
less than the $5.00 Public Offering price per share. All of the

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Company's present stockholders purchased their shares at a price substantially
less than the Public Offering price per share. As a result, investors in this
offering will bear most of the risk of economic loss. See "Dilution."

PRIOR ABSENCE OF WRITTEN LEASES WITH AFFILIATES; WRITTEN LEASES TO BE
ENTERED INTO. Several of Eagle's distribution centers are leased from a
subsidiary of TDA on a month-to-month basis without formal written lease
agreements. Upon completion of the Public Offering and consummation of the
Acquisitions, the subsidiary of TDA and Eagle intend to enter into written
leases for such distribution centers. Although the written leases are expected
to be on substantially equivalent economic terms as Eagle's prior oral
agreements, the written leases will be for ten-year terms. As a result, Eagle
will then be committed to pay rent for such distribution centers for ten years.
James E. Helzer has rented to JEH Eagle the premises for several of JEH Eagle's
distribution facilities pursuant to five-year leases at an approximate annual
base rental of $486,000 to JEH Eagle which the Company believes to be fair and
reasonable to JEH Eagle. Gary L. Howard has rented to MSI Eagle the premises for
MSI Eagle's executive offices and principle distribution center pursuant to a
three-year lease at an approximate annual base rental of $107,000 to MSI Eagle
which the Company believes to be fair and reasonable to MSI Eagle. See
"Business."

POSSIBLE SUSPENSION OF COMPANY'S SECURITIES FROM NASDAQ SMALLCAP AND THE
BOSTON STOCK EXCHANGE. The Company's Securities offered hereby have been
approved for quotation on NASDAQ SmallCap and authorized for listing on the
Boston Stock Exchange. However, there can be no assurance that the Company will
meet the criteria for continued quotation of its securities on NASDAQ SmallCap.
Such criteria include, among other things, (a) $2,000,000 in net tangible
assets, $35,000,000 in market capitalization or $500,000 in net income in an
issuer's last fiscal year or two of its last three fiscal years; (b) a public
float of 500,000 shares; (c) a $1,000,000 public float market value; (d) a $1.00
minimum bid price; (e) two market makers; and (f) at least 300 round lot
shareholders. The Boston Stock Exchange also has continued quotation criteria,
including, among other things, (a) $1,000,000 in total assets; (b) a public
float at 150,000 shares; (c) a $500,000 public float value; (d) 600 beneficial
stockholders within six months of an initial public offering; and (e) $500,000
in stockholders equity. If the Company is unable to meet the continued quotation
criteria of NASDAQ SmallCap and the Boston Stock Exchange and is suspended
therefrom, trading, if any, in the Company's securities could thereafter be
conducted in the over-the-counter market in the so-called "pink sheets" or, if
then available, the OTC Bulletin Board. In such an event, an investor would
likely find it more difficult to dispose of, or obtain accurate quotation of,
the Company's Securities.

RISKS OF LOW-PRICED SECURITIES. If the Company's Securities were to be
suspended or delisted from NASDAQ SmallCap, the Securities would be subject to
rules under the Securities Exchange Act of 1934 (the "Exchange Act") which
impose additional sales practice requirements on broker-dealers who sell such
securities to persons other than established clients and "accredited investors"
(for example, individuals with a net worth in excess of $1,000,000 or an annual
income exceeding $200,000 or $300,000 together with their spouses). For
transactions covered by such rules, a broker-dealer must make a special
suitability determination of the purchaser and have received the purchaser's
written consent to the transaction prior to the sale. Consequently, such rules
may affect the ability of broker-dealers to sell the Company's Securities and
the ability to sell any of the Company's Securities in any secondary market that
may develop for such Securities.

The Commission has enacted rules that define a "penny stock" to be any
equity security that has a price (as therein defined) of less than $5.00 per
share or an exercise price of less than $5.00 per share, subject to certain
exceptions, including securities listed on NASDAQ SmallCap or on designated
exchanges. For any transaction involving a penny stock, unless exempt, the rules
require the delivery, prior to any transaction in a penny stock, of a disclosure
statement prepared by the Commission relating to the penny stock market.
Disclosure also has to be made about the risks of investing in penny stocks in
both public offerings and in secondary trading, and about commissions payable to
both the broker-dealer and the registered representative, current quotations for
the securities and the rights and remedies available to

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an investor in cases of fraud in penny stock transactions. Finally, monthly
statements must be sent disclosing recent price information for the penny stocks
held in the account and information on the limited market in penny stocks. In
the event the Company's Securities are no longer listed on NASDAQ SmallCap or
are not otherwise exempt from the provisions of the Commission's "penny stock"
rules, such rules may also affect the ability of broker-dealers to sell the
Company's Securities and the ability to sell any of the Securities acquired
hereby in any secondary market that may develop.

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 who
has satisfied a one-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 two-year holding period. The
holders of approximately 300,000 shares of the Company's Common Stock, after
giving effect to the Public Offering and the Acquisitions, have agreed not to
sell, transfer, hypothecate or otherwise dispose of the shares of the Company's
Common Stock for a period of fifteen months from the date of this Prospectus
without the prior written consent of the Underwriter. The Underwriter does not
anticipate that it will release any of the foregoing stockholders except under
extraordinary circumstances that are presently not foreseeable. The holders of
5,650,000 shares of the Company's Common Stock, after giving effect to the
Public Offering and the Acquisitions, has agreed not to sell, transfer,
hypothecate or otherwise dispose of said shares of the Company's Common Stock
for a period of two years from the date of this Prospectus, without the
possibility of earlier release.

After giving effect to the Acquisitions, the Company will have 6,950,000
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 shares of Common Stock underlying
the Warrants are being registered under the Registration Statement of which this
Prospectus forms a part for sale by the Selling Securityholders.

Investors should be aware that sales of the Company's securities may have a
depressive effect on the price of the Company's securities in any market which
may develop for such securities. See "--Effect of Options, Warrants and
Registration Rights," "Shares Eligible for Future Sale" and "Selling
Securityholders."

EFFECT OF OPTIONS, WARRANTS AND REGISTRATION RIGHTS. For the respective
terms of the Underwriter's Warrant and Stock Warrants 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

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Underwriter's Warrant and Stock Warrants have demand and "piggyback"
registration rights with respect to their securities. Exercise of such
registration rights may involve substantial expense to the Company. See "The
Acquisitions," "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 business operations of the Company and the Combined Entities. 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. The Company
has agreed not to issue any shares of Preferred Stock until the third
anniversary date of this Prospectus without the Underwriter's written consent.
See "Description of Securities."

DIRECTORS' LIABILITY LIMITED. The Company's Certificate of Incorporation
provides that its directors will not be held liable to the Company or its
stockholders for monetary damages upon breach of a director's fiduciary duty
with certain exceptions. The exceptions include a breach of the director's duty
of loyalty, acts or omissions not in good faith or which involve intentional
misconduct or knowing violation of law, improper declarations of dividends, and
transactions from which the directors derived an improper personal benefit. See
"Management."

POTENTIAL ADVERSE EFFECT OF REDEMPTION OF WARRANTS. The Warrants are not
redeemable prior to the first anniversary date of this Prospectus without the
written consent of the Underwriter. 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."

22
<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 upon net tangible book value. 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 90% or $4.50 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 October 31, 1998, as
adjusted to give effect to the sale of 2,500,000 shares of Common Stock by the
Company in the Public Offering (at an initial public offering price of $5.00 per
share and after deducting the estimated underwriting discounts and estimated
offering expenses payable by the Company) and the consummation of the
Acquisitions:

<TABLE>
<S> <C> <C> <C>
Initial Public Offering price.......................................... $ 5.00 $ 5.00
---------
Net tangible book value per share before the Public Offering and the
Acquisitions(1)...................................................... $ (.04)
Increase per share attributable to new investors....................... 2.13
---------
Pro forma net tangible book value per share after the Public Offering
and before the Acquisitions.......................................... 2.09 2.09
---------
Dilution per share to new investors before the Acquisitions............ $ 2.91
---------
---------
Decrease per share attributable to the Acquisitions.................... (1.59)
---------
Pro forma net tangible book value per share after the Public Offering
and the Acquisitions................................................. .50
---------
Total dilution per share to new investors(2)........................... $ 4.50
---------
---------
</TABLE>

- ------------------------

(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 October 31, 1998 by the number of shares of Common Stock
then outstanding.

(2) Dilution per share is determined by subtracting pro forma net tangible book
value per share after the Public Offering and the Acquisitions from the
initial public offering price per share. The foregoing table also assumes no
exercise of the Underwriter's Warrant, the Warrants issued in the Private
Placement or options to purchase 900,000 shares of Common Stock to be
granted upon the closing of the Public Offering pursuant to the Company's
Stock Option Plan.

In the event the Underwriter exercises its Overallotment Option in full, the
pro forma net tangible book value per share after the Public Offering and the
Acquisitions would be $.67 which would result in dilution to new investors of
$4.33 per share.

23
<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 2,500,000 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
----------------------- --------------------------
<S> <C> <C> <C> <C> <C>
APPROXIMATE APPROXIMATE AVERAGE
----------------------- -------------------------- PRICE
NUMBER PERCENT AMOUNT PERCENT PER SHARE
---------- ----------- ------------- ----------- -----------
Existing stockholders(1)............................... 5,950,000 70% $ 1,550,210 11% $ .26
New investors.......................................... 2,500,000 30% 12,500,000 89% $ 5.00
---------- --- ------------- --- -----
Totals................................................. 8,450,000 100% $ 14,050,210 100% $ 1.66
---------- --- ------------- --- -----
---------- --- ------------- --- -----
</TABLE>

- ------------------------

(1) Includes 2,100,000 shares in connection with the Company's initial
capitalization, 300,000 issued as part of the Company's Private Placement,
3,000,000 shares of Common Stock to be issued to TDA in connection with the
Acquisitions, 300,000 shares of Common Stock to be issued to James E. Helzer
pursuant to the agreement by which JEH Eagle acquired the business and
substantially all of the assets of JEH Co., 200,000 shares to be issued to
Gary L. Howard pursuant to the agreement by which MSI Eagle acquired the
business and substantially all of the assets of MSI Co. and 50,000 shares
relating to a $250,000 portion of a note in the principal amount of
$2,046,000 that MSI Co. has advised the Company it intends to exchange for
shares of Common Stock of the Company at the initial offering price of $5.00
per share.

The foregoing table assumes no exercise of any Warrants or options to
purchase 900,000 shares of Common Stock to be granted upon the closing of the
Public Offering pursuant to the Company's Stock Option Plan.

24
<PAGE>
USE OF PROCEEDS

The net proceeds to the Company from the sale of 2,500,000 shares of Common
Stock and 2,500,000 Warrants offered hereby are estimated to be approximately
$10,479,000 ($12,170,000 if the Underwriter's Overallotment Option is exercised
in full) after deducting underwriting commissions and discounts and other
expenses of the Public Offering. The Company expects to use the net proceeds
over the next twelve to twenty-four months approximately as follows:

<TABLE>
<CAPTION>
APPROXIMATE
DOLLAR AMOUNT APPROXIMATE
OF NET PERCENTAGE OF
APPLICATION OF NET PROCEEDS PROCEEDS NET PROCEEDS
- ----------------------------------------------------------------------------------- -------------- ---------------
<S> <C> <C>
Finance the cash portion of potential acquisitions(1).............................. $ 2,500,000 24%
Additional Eagle, JEH Eagle and MSI Eagle distribution centers(2).................. $ 2,176,000 21%
Reduce Eagle's, JEH Eagle's and MSI Eagle's credit facilities and debt
balances(3)...................................................................... $ 4,100,000 39%
Capital Expenditures(4)............................................................ $ 700,000 7%
Repayment of Private Financing(5).................................................. $ 525,000 4%
Working Capital.................................................................... $ 478,000 5%
-------------- -----
Totals......................................................................... $ 10,479,000 100.0%
-------------- -----
-------------- -----
</TABLE>

- ------------------------

(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, JEH
Eagle's and MSI 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, JEH Eagle and MSI Eagle to establish approximately six new
distribution centers and will be used principally to carry accounts
receivable and purchase inventory. The foregoing allocation excludes the
purchase of trucks, forklifts and similar equipment identified in note (4).

(3) To be used to (i) prepay the unpaid principal and interest due
(approximately $1,470,000), at the time of such payment, to MSI Co. pursuant
to the five-year note issued by MSI Eagle in October 1998 to MSI Co. in
connection with MSI Eagle's acquisition of the business and substantially
all of the assets of MSI Co. then in the principal amount of $2,046,000,
subject to adjustment, bearing interest at the rate of 8% per year; and (ii)
reduce Eagle's and JEH Eagle's outstanding balances of borrowings under
their credit facilities by approximately $1,315,000 for each facility. At
October 31, 1998, Eagle had borrowed approximately $8,748,000 under its
credit facility. During Eagle's June 30, 1995 fiscal year, Eagle used its
borrowings under its credit facility to repay approximately $2,326,000 of
its indebtedness to TDA and to advance approximately $3,309,000 to TDA. The
remainder of the outstanding balance of the credit facility was used to fund
continuing operations. At October 31, 1998, JEH Eagle had borrowed
approximately $13,106,000 under its credit facility. The Eagle and JEH Eagle
borrowings that will be reduced under the credit facilities, currently bear
interest at the rate of 7.45% per year. Each of Eagle's and JEH Eagle's
credit facilities mature in October 2003. See "Management's Discussion and
Analysis of Financial Condition and Results of Operations--Liquidity and
Capital Resources" and "The Acquisitions."

(4) To be used for leasehold improvements for existing distribution centers and
to purchase, if necessary, trucks, forklifts and similar equipment to
support additional distribution centers for Eagle, JEH Eagle and MSI Eagle.

(5) To be used to repay approximately $525,000 in principal and interest on
borrowings of $300,000 made by the Company in February 1998 pursuant to
promissory notes issued to TDA ($150,000) and two other stockholders of the
Company, and on borrowings made by the Company in August 1998 and

25
<PAGE>
January 1999 pursuant to promissory notes issued to TDA each in the
principal amount of $100,000. The February 1998 notes bear interest at the
rate of 15% per year through June 30, 1998 and 6% per year after that date.
The February 1998 notes mature on the earlier of thirty months after
issuance or the closing of the Public Offering. The notes issued to TDA in
August 1998 and January 1999 bear interest at the rate of 6% per year and
mature on the earlier of two years after issuance or the closing of the
Public Offering. The proceeds from the issuance of the foregoing notes have
and are being used to pay certain expenses relating to the Public Offering,
legal fees and expenses in connection with seeking the listing of the
Company's securities on NASDAQ and the Acquisitions.

The Company currently estimates that the net proceeds of the Public Offering
will be sufficient to fund its planned operations, including the cash portion of
potential acquisitions, if any, and expansion efforts for approximately twelve
to twenty-four months from the date of this Prospectus. The net proceeds may be
sufficient for a greater or lesser period of time depending on the extent of the
Company's expansion efforts and on the number of acquisitions, if any, that the
Company consummates during the next twelve to twenty-four months and the portion
of the purchase price of such acquisitions paid in cash. In addition, the
Company may require additional financing prior to or following such period if
Eagle, JEH Eagle or MSI Eagle suffer losses or if the Company effects the
acquisition of a business that subsequently suffers losses. The Company has no
commitments or arrangements for any such additional financing, and there can be
no assurance that the Company will be able to obtain additional financing on
terms acceptable to the Company or at all. If required, the Company may seek to
finance the purchase price of acquisitions by purchase money indebtedness,
asset-based financing and/or issuances of its own securities; and to open
additional Eagle, JEH Eagle and MSI Eagle distribution centers by obtaining
short-term vendor inventory financing (inventory purchased on extended payment
terms), asset-based financing and/ or equipment leasing/financing. As each
potential acquisition will be individually negotiated, the Company is unable to
estimate the cash or other portions of a potential acquisition's purchase price.
In the event additional financing is unavailable to the Company, the Company may
be materially adversely affected.

The foregoing represents the Company's best estimate of its allocation of
the net proceeds of the Public Offering. Future events, as well as changes in
economic, regulatory or competitive conditions or the Company's business or
Eagle's, JEH Eagle's or MSI Eagle's business and the results of the Company's,
Eagle's, JEH Eagle's or MSI Eagle's activities may make shifts in the allocation
of funds within the described categories or to other purposes necessary or
desirable. In the event the Company is unable to fund the cash portion of
potential acquisitions with the net proceeds allocated above, Eagle, JEH Eagle
or MSI Eagle suffer losses or the Company completes an acquisition that
subsequently suffers losses, the Company may draw upon the net proceeds of the
Public Offering allocated to expand the number of Eagle's, JEH Eagle's or MSI
Eagle's distribution centers, purchase equipment to support that expansion
and/or working capital. The Company estimates that the net proceeds of the
Public Offering allocated to expand the number of Eagle's, JEH Eagle's and MSI
Eagle's distribution centers and to support that expansion will be sufficient to
establish approximately six new distribution centers at an average cost of
approximately $415,000 for each new distribution center. In the event the per
distribution center costs are greater than estimated, Eagle, JEH Eagle and MSI
Eagle may establish less than six new distribution centers, the Company may seek
vendor financing of inventory, asset-based financing and/or equipment
leasing/financing, or draw upon the net proceeds of the Public Offering
allocated to working capital. In the event the per distribution center costs are
less than estimated, a portion of the net proceeds of the Public Offering
allocated for such purposes will be reallocated to finance acquisitions or for
working capital. 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 Acquisitions, the Company does not currently have any
agreements, commitments or arrangements with respect to any proposed
acquisitions nor has it identified or negotiated with any potential acquisition
candidates, and there can be no assurance that any acquisitions will be
consummated. Except for the

26
<PAGE>
Acquisitions, the Company has no present intention to use the net proceeds of
the Public Offering to acquire assets from any of its affiliates.

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.

27
<PAGE>
CAPITALIZATION

The following table sets forth the capitalization of the Company as of October
31, 1998 (i) on an actual basis, (ii) on a combined basis, assuming the
consummation of the Acquisitions as of such date and (iii) as adjusted/combined
to give effect to the Public Offering of 2,500,000 shares of Common Stock and
2,500,000 Warrants at initial public offering prices of $5.00 per share and
$.125 per Warrant, the application of the net proceeds therefrom and assuming
consummation of the Acquisitions as of such date. The Acquisitions 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.

<TABLE>
<CAPTION>
OCTOBER 31, 1998
-------------------------------------------
<S> <C> <C> <C>
AS ADJUSTED/
ACTUAL COMBINED COMBINED
------------- ------------- -------------
Long-Term Debt.......................................................... $ -- $ 30,662,019 $ 26,312,019
Stockholders' Equity:
Preferred Stock, $.0001 par value; 2,500,000 shares authorized; no
shares issued and outstanding....................................... -- -- --
Common Stock, $.0001 par value; 25,000,000 shares authorized; 2,400,000
shares issued and outstanding (actual); 5,900,000 shares issued and
outstanding (combined)(1); 8,450,000 shares issued and outstanding (as
adjusted/combined)(2)(3).............................................. 240 590 845
Additional Paid-in Capital.............................................. 293,865 6,202,815 16,803,560
Deficit................................................................. (387,440) (1,093,768) (1,093,768)
------------- ------------- -------------
(93,335) 5,109,637 15,710,637
Due from TDA Industries, Inc. and Affiliated Companies.................. -- (495,497) (495,497)
------------- ------------- -------------
Total Stockholders' Equity (Deficit).................................... (93,335) 4,614,140 15,215,140
------------- ------------- -------------
Total Capitalization.................................................... $ (93,335) $ 35,276,159 $ 41,527,159
------------- ------------- -------------
------------- ------------- -------------
</TABLE>

- ------------------------

(1) Includes, in the combined column, 3,000,000, 300,000 and 200,000 shares of
Common Stock to be issued to TDA, James E. Helzer and Gary L. Howard,
respectively, simultaneously with the closing of the Public Offering and
consummation of the Acquisitions. See "Certain Transactions."

(2) Includes 2,500,000 shares of Common Stock to be issued in the Public
Offering and 50,000 shares of Common Stock relating to a $250,000 portion of
a note in the principal amount of $2,046,000 that MSI Co. has advised the
Company that it intends to exchange for shares of Common Stock of the
Company at the initial Public Offering price of $5.00 per share.

(3) Does not include (i) 375,000 shares of Common Stock and 375,000 Warrants and
375,000 shares of Common Stock underlying such Warrants subject to the
Underwriter's Overallotment Option; (ii) 2,500,000 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)
500,000 shares of Common Stock issuable upon the exercise of the
Underwriter's Warrants and Stock Warrants; and (v) 1,000,000 shares of
Common Stock reserved for issuance pursuant to the Company's Stock Option
Plan of which 900,000 shares of Common Stock are reserved for options to be
granted upon completion of the Public Offering. See "Management,"
"Description of Securities," "Underwriting," and "Selling Securityholders."

28
<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, Eagle, JEH Eagle and MSI Eagle
that would result from the completion of the Public Offering and the
Acquisitions 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 fourth month 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, Eagle, JEH Eagle and MSI 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
Public Offering and the Acquisitions 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 Public Offering and the
Acquisitions.

The Acquisitions will be accounted for as the combining of four entities
under common control similar to the pooling-of-interests method of accounting
with the net assets of Eagle, JEH Eagle and MSI Eagle recorded at historical
carryover values. The 3,000,000 shares of Common Stock to be issued to TDA will
be recorded at Eagle's, JEH Eagle's and MSI Eagle's historical book values at
the date of the Acquisitions. Accordingly, these transactions will not result in
any re-evaluation of the Company's, Eagle's, JEH Eagle's or MSI Eagle's assets
or the creation of additional goodwill. The 300,000 shares of the Company's
Common Stock to be issued to James E. Helzer and the 200,000 shares to be issued
to Gary L. Howard will be accounted for as additional purchase price in
connection with the acquisition by JEH Eagle of JEH Co. and MSI Eagle of MSI
Co., respectively, and such shares will be valued at the Public Offering price
of $5.00 per share.

29
<PAGE>
UNAUDITED PRO FORMA CONDENSED CONSOLIDATED BALANCE SHEET
OCTOBER 31, 1998
<TABLE>
<CAPTION>
(HISTORICAL)
----------------------------------------------------------
EAGLE JEH/EAGLE MSI/EAGLE
THE SUPPLY, SUPPLY, SUPPLY,
COMPANY INC. INC. INC. TOTAL
---------- ---------- ---------- ---------- ----------
<S> <C> <C> <C> <C> <C>
ASSETS
CURRENT ASSETS:
Cash......................................................... $ 35,298 $ 21,180 $ 107,777 $ 171,339 $ 335,594
Accounts and notes receivable--net........................... 9,570,879 14,412,093 1,544,292 25,527,264
Inventories.................................................. 5,548,986 8,782,595 1,180,861 15,512,442
Deferred tax asset........................................... 226,054 309,500 1,000 536,554
Due from related party....................................... 250,000 250,000
Other current assets......................................... 351,261 343,101 295,516 108,930 1,098,808
---------- ---------- ---------- ---------- ----------
Total current assets....................................... 386,559 15,710,200 24,157,481 3,006,422 43,260,662

IMPROVEMENTS AND EQUIPMENT--net................................ 1,607,406 3,522,196 665,823 5,795,425

EXCESS COST OF INVESTMENT OVER NET ASSETS ACQUIRED--net........ 2,682,604 5,486,126 8,168,730
DEFERRED FINANCING COSTS--net.................................. 212,892 109,686 322,578
---------- ---------- ---------- ---------- ----------
TOTAL ASSETS................................................... $ 386,559 $17,317,606 $30,575,173 $9,268,057 $57,547,395
---------- ---------- ---------- ---------- ----------
---------- ---------- ---------- ---------- ----------

LIABILITIES AND SHAREHOLDERS' EQUITY
CURRENT LIABILITIES:
Accounts payable............................................. $7,825,978 $9,793,367 $ 754,022 $18,373,367
Accrued expenses and other current liabilities............... $ 88,894 849,100 2,096,484 414,877 3,449,355
Due to related parties....................................... 150,446 250,000 400,446
Current portion of long-term debt............................ 600,000 1,216,590 1,270,542 3,087,132
Notes payable--shareholders.................................. 400,000 400,000
Loan payable--affiliated company............................. 1,400,000 1,400,000
Federal and state income taxes due to Parent................. (9,000) 2,488 390,250 24,000 407,738
---------- ---------- ---------- ---------- ----------
Total current liabilities.................................. 479,894 10,677,566 13,647,137 2,713,441 27,518,038

LONG-TERM DEBT................................................. 8,643,819 13,649,312 5,281,756 27,574,887
DUE TO TDA INDUSTRIES, INC..................................... 233,318 233,318
DEFERRED TAX LIABILITIES....................................... 91,812 15,200 107,012
---------- ---------- ---------- ---------- ----------
Total liabilities.......................................... 479,894 19,413,197 27,311,649 8,228,515 55,433,255
---------- ---------- ---------- ---------- ----------
SHAREHOLDERS' EQUITY (DEFICIENCY):
Preferred shares............................................. 0
Common shares................................................ 240 59,300 30 30 59,600
Additional paid-in capital..................................... 293,865 1,000,000 1,349,970 999,970 3,643,805
Retained earnings.............................................. (387,440) 410,590 1,913,524 39,542 1,976,216
---------- ---------- ---------- ---------- ----------
(93,335) 1,469,890 3,263,524 1,039,542 5,679,621
Less: Due From TDA Industries, Inc, and affiliated companies... (3,565,481) (3,565,481)
---------- ---------- ---------- ---------- ----------
Total shareholders' equity (deficiency).................... (93,335) (2,095,591) 3,263,524 1,039,542 2,114,140
---------- ---------- ---------- ---------- ----------
TOTAL LIABILITIES AND SHAREHOLDERS' EQUITY (DEFICIENCY)........ $ 386,559 $17,317,606 $30,575,173 $9,268,057 $57,547,395
---------- ---------- ---------- ---------- ----------
---------- ---------- ---------- ---------- ----------

AS ADJUSTED/
ADJUSTMENTS COMBINED ADJUSTMENTS COMBINED
----------- ---------- ----------- ------------
<S> <C> <C> <C> <C>
ASSET
CURRENT ASSETS:
Cash......................................................... $ 335,594 $5,826,000(5) $6,161,594
Accounts and notes receivable--net........................... 25,527,264 25,527,264
Inventories.................................................. 15,512,442 15,512,442
Deferred tax asset........................................... 536,554 536,554
Due from related party....................................... 250,000 250,000
Other current assets......................................... 1,098,808 1,098,808
----------- ---------- ----------- ------------
Total current assets....................................... 43,260,662 5,826,000 49,086,662
IMPROVEMENTS AND EQUIPMENT--net................................ 5,795,425 5,795,425
EXCESS COST OF INVESTMENT OVER NET ASSETS ACQUIRED--net........ $1,500,000(2) 10,668,730 10,668,730
1,000,000(3)
DEFERRED FINANCING COSTS--net.................................. 322,578 322,578
----------- ---------- ----------- ------------
TOTAL ASSETS................................................... $2,500,000 $60,047,395 $5,826,000 $65,873,395
----------- ---------- ----------- ------------
----------- ---------- ----------- ------------
LIABILITIES AND SHAR
CURRENT LIABILITIES:
Accounts payable............................................. $18,373,367 $18,373,367
Accrued expenses and other current liabilities............... 3,449,355 $ (25,000) 3,424,355
Due to related parties....................................... 400,446 400,446
Current portion of long-term debt............................ 3,087,132 3,087,132
Notes payable--shareholders.................................. 400,000 (400,000)(5) --
Loan payable--affiliated company............................. 1,400,000 1,400,000
Federal and state income taxes due to Parent................. 407,738 407,738
----------- ---------- ----------- ------------
Total current liabilities.................................. 27,518,038 (425,000) 27,093,038
(4,100,000)(5)
LONG-TERM DEBT................................................. 27,574,887 (250,000) 23,224,887
DUE TO TDA INDUSTRIES, INC..................................... 233,318 233,318
DEFERRED TAX LIABILITIES....................................... 107,012 107,012
----------- ---------- ----------- ------------
Total liabilities.......................................... 55,433,255 (4,775,000) 50,658,255
----------- ---------- ----------- ------------
SHAREHOLDERS' EQUITY (DEFICIENCY):
Preferred shares............................................. 0 0
250(5)
Common shares................................................ (59,010) (4) 590 5(6) 845

1,499,970(2)
999,980(3)
(300)(4) 10,350,750(5)
Additional paid-in capital..................................... 59,360(1) 6,202,815 249,995(6) 16,803,560
Retained earnings.............................................. (3,069,984)(1) (1,093,768) (1,093,768)
----------- ---------- ----------- ------------
(569,984) 5,109,637 10,601,000 15,710,637
Less: Due From TDA Industries, Inc, and affiliated companies... 3,069,984(1) (495,497) (495,497)
----------- ---------- ----------- ------------
Total shareholders' equity (deficiency).................... 2,500,000 4,614,140 10,601,000 15,215,140
----------- ---------- ----------- ------------
TOTAL LIABILITIES AND SHAREHOLDERS' EQUITY (DEFICIENCY)........ $2,500,000 $60,047,395 $5,826,000 $65,873,395
----------- ---------- ----------- ------------
----------- ---------- ----------- ------------
</TABLE>

See notes to Unaudited Pro Forma Condensed Consolidated Balance Sheet.

30
<PAGE>
NOTES TO UNAUDITED PRO FORMA CONDENSED CONSOLIDATED BALANCE SHEET

(1) Reflects the consummation of the Acquisitions. Upon the closing of the
Public Offering, Eagle, JEH Eagle and MSI Eagle combined will have no less
than $1,000,000 in book value. The Due from TDA Industries, Inc. and
Affiliated Companies account ("Inter-company Account") includes a receivable
for a $495,497 mortgage obligation on property previously owned by Eagle on
which Eagle remains the primary obligor. The mortgage obligation reflected
in Eagle's financial statements for financial reporting purposes is offset
by a corresponding increase in the Inter-company Account. The Inter-company
Account net of such mortgage obligation in the amount of $3,069,984 is the
amount that would cancel, in the form of a non-cash dividend, the entire Due
from TDA Industries, Inc. and Affiliated Companies, except for the
off-setting receivable. To the extent the non-cash dividend results in a
combined minimum equity for the Combined Entities of less than $1,000,000,
TDA has agreed to pay the difference, if any, in cash within forty-five days
after the closing of the Public Offering. Assuming the Acquisitions had
taken place on October 31, 1998, there would not have been any shortfall.
The actual amount of the non-cash dividend will vary based on the amount of
the Inter-company Account and the combined equity of the Combined Entities
on the date the Acquisitions actually occur. See "Risk Factors," "The
Acquisitions" and "Certain Transactions."

(2) Reflects the issuance of 300,000 shares of Common Stock to be issued to
James E. Helzer. Such shares will be accounted for as additional purchase
price in connection with the acquisition by JEH Eagle of JEH Co. and have
been valued at the public offering price of $5.00 per share.

(3) Reflects the issuance of 200,000 shares of Common Stock to be issued to Gary
L. Howard. Such shares will be accounted for as additional purchase price in
connection with the acquisition by MSI Eagle of MSI Co. and have been valued
at the public offering price of $5.00 per share.

(4) Reflects the issuance of 3,000,000 shares of Common Stock to be issued to
TDA upon consummation of the Acquisitions.

(5) Reflects the Public Offering of 2,500,000 shares of Common Stock at an
offering price of $5.00 per share and 2,500,000 Warrants at an offering
price of $.125 per Warrant including the application of cash toward the
aggregate offering expenses of approximately $2,461,625 and the planned
reduction of debt of $4,625,000. See "Use of Proceeds" and "Underwriting."

(6) Reflects 50,000 shares relating to a $250,000 portion of a note in the
principal amount of $2,046,000 that MSI Co. has advised the Company it
intends to exchange for shares of Common Stock of the Company and transfer
to Gary L. Howard.

31
<PAGE>
UNAUDITED PRO FORMA CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS
<TABLE>
<CAPTION>
FOUR MONTHS ENDED OCTOBER 31, 1998
-----------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C> <C>
EAGLE JEH/EAGLE
THE SUPPLY, SUPPLY, MSI/EAGLE
COMPANY(10) INC. INC. SUPPLY,INC. MSI CO.(11) TOTAL ADJUSTMENTS
------------- ---------- ----------- ----------- ----------- ---------- -----------
REVENUES........................... $ -- $19,101,951 3$1,682,018 $ 364,684 $3,976,794 $55,125,447
COST OF SALES...................... -- 15,034,455 24,194,001 209,124 2,375,820 41,813,400
------------- ---------- ----------- ----------- ----------- ----------
-- 4,067,496 7,488,017 155,560 1,600,974 13,312,047
------------- ---------- ----------- ----------- ----------- ----------
SELLING, GENERAL AND ADMINISTRATIVE
EXPENSES......................... -- 3,835,794 4,711,027 68,706 946,307 9,561,834 $ 173,000(1)
24,000(2)
(93,800)(6)
DEPRECIATION AND AMORTIZATION...... -- 203,746 191,835 4,858 40,490 440,929
AMORTIZATION OF EXCESS COST OF
INVESTMENTS OVER NET ASSETS
ACQUIRED......................... -- 22,701 3,764 2,588 29,053 20,000(3)
42,000(7)
AMORTIZATION OF DEFERRED FINANCING -- -- 19,354 604 19,958 7,000(7)
COSTS............................
------------- ---------- ----------- ----------- ----------- ---------- -----------
-- 4,039,540 4,944,917 77,932 989,385 10,051,774 172,200
------------- ---------- ----------- ----------- ----------- ---------- -----------
INCOME FROM OPERATIONS............. -- 27,956 2,543,100 77,628 611,589 3,260,273 (172,200)
------------- ---------- ----------- ----------- ----------- ---------- -----------
OTHER INCOME (EXPENSE):
Interest income.................. -- 7,309 11,729 19,038
Interest expense................. (7,350) (265,613) (474,115) (14,086) (10,629) (771,793) (157,000)(7)
------------- ---------- ----------- ----------- ----------- ---------- -----------
(7,350) (258,304) (462,386) (14,086) (10,629) (752,755) (157,000)
------------- ---------- ----------- ----------- ----------- ---------- -----------
(LOSS) INCOME BEFORE (BENEFIT) (7,350) (230,348) 2,080,714 63,542 600,960 2,507,518 (329,200)(8)
PROVISION FOR INCOME TAXES.......

(BENEFIT) PROVISION FOR INCOME (2,000) (87,000) 775,000 24,000 710,000 222,000
TAXES............................
(122,000)(8)
------------- ---------- ----------- ----------- ----------- ---------- -----------
NET (LOSS) INCOME.................. $ (5,350) $ (143,348) $1,305,714 $ 39,542 $ 600,960 $1,797,518 $(429,200)
------------- ---------- ----------- ----------- ----------- ---------- -----------
------------- ---------- ----------- ----------- ----------- ---------- -----------
Basic Net Income per Share (9).....
Diluted Net Income per Share (9)...
Basic and Dilutive Weighted Average
Number of Shares Outstanding
(9)..............................

AS ADJUSTED/
COMBINED ADJUSTMENTS COMBINED
---------- ----------- ------------
REVENUES........................... $55,125,447 $55,125,447
COST OF SALES...................... 41,813,400 41,813,400
---------- ------------
13,312,047 13,312,047
---------- ------------
SELLING, GENERAL AND ADMINISTRATIVE
EXPENSES......................... 9,665,034 $ 12,000(4) 9,677,034

DEPRECIATION AND AMORTIZATION...... 440,929 440,929
AMORTIZATION OF EXCESS COST OF
INVESTMENTS OVER NET ASSETS
ACQUIRED......................... 91,053 91,053

AMORTIZATION OF DEFERRED FINANCING 26,958 26,958
COSTS............................
---------- ----------- ------------
10,223,974 12,000 10,235,974
---------- ----------- ------------
INCOME FROM OPERATIONS............. 3,088,073 (12,000) 3,076,073
---------- ----------- ------------
OTHER INCOME (EXPENSE):
Interest income.................. 19,038 19,038
Interest expense................. (928,793) 130,000(5) (798,793)
---------- ----------- ------------
(909,755) 130,000 (779,755)
---------- ----------- ------------
(LOSS) INCOME BEFORE (BENEFIT) 2,178,318 118,000 2,296,318
PROVISION FOR INCOME TAXES.......
(BENEFIT) PROVISION FOR INCOME 810,000 44,000(8) 854,000
TAXES............................

---------- ----------- ------------
NET (LOSS) INCOME.................. $1,368,318 $ 74,000 $1,442,318
---------- ----------- ------------
---------- ----------- ------------
Basic Net Income per Share (9)..... $ 0.19
------------
------------
Diluted Net Income per Share (9)... $ 0.19
------------
------------
Basic and Dilutive Weighted Average 7,431,594
Number of Shares Outstanding
(9)..............................
------------
------------
</TABLE>

See notes to Unaudited Pro Forma Condensed Consolidated Statements of
Operations.

32
<PAGE>
UNAUDITED PRO FORMA CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS
<TABLE>
<CAPTION>
YEAR ENDED JUNE 30, 1998
-----------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C>
EAGLE JEH/EAGLE
THE SUPPLY, SUPPLY,
COMPANY(10) INC. INC. MSI CO.(11) TOTAL ADJUSTMENTS
------------- ---------- ----------- ----------- ----------- -----------
REVENUES.................................... $ -- $58,497,263 7$1,005,549 1$1,960,092 $141,462,904
COST OF SALES............................... -- 46,429,897 55,097,524 7,374,319 108,901,740
------------- ---------- ----------- ----------- -----------
-- 12,067,366 15,908,025 4,585,773 32,561,164
------------- ---------- ----------- ----------- -----------
SELLING, GENERAL AND ADMINISTRATIVE 437 10,741,092 13,028,890 3,392,046 27,162,465 $ 520,000(1)
EXPENSES..................................
72,000(2)
(465,200)(6)
DEPRECIATION AND AMORTIZATION............... -- 497,420 461,506 179,197 1,138,123
AMORTIZATION OF EXCESS COST OF INVESTMENT -- 171,829 8,360 180,189 62,000(3)
OVER NET ASSETS ACQUIRED..................
137,000(7)
AMORTIZATION OF DEFERRED FINANCING COSTS.... -- 58,062 58,062 22,000(7)
------------- ---------- ----------- ----------- ----------- -----------
437 11,238,512 13,720,287 3,579,603 28,538,839 347,800
------------- ---------- ----------- ----------- ----------- -----------
INCOME FROM OPERATIONS...................... (437) 828,854 2,187,738 1,006,170 4,022,325 (347,800)
------------- ---------- ----------- ----------- ----------- -----------
OTHER INCOME (EXPENSE):
Interest income........................... -- 25,314 25,900 51,214
Interest expense.......................... (17,625) (594,032) (1,249,828) (43,053) (1,904,538) (514,000)(7)
------------- ---------- ----------- ----------- ----------- -----------
(17,625) (568,718) (1,223,928) (43,053) (1,853,324) (514,000)
------------- ---------- ----------- ----------- ----------- -----------
(LOSS) INCOME BEFORE (BENEFIT) PROVISION FOR (18,062) 260,136 963,810 963,117 2,169,001 (861,800)
INCOME TAXES..............................
356,000(8)
(BENEFIT) PROVISION FOR INCOME TAXES........ (7,000) 100,000 356,000 449,000 (319,000)(8)
------------- ---------- ----------- ----------- ----------- -----------
NET (LOSS) INCOME........................... $ (11,062) $ 160,136 $ 607,810 $ 963,117 $ 1,720,001 $(898,800)
------------- ---------- ----------- ----------- ----------- -----------
------------- ---------- ----------- ----------- ----------- -----------
Basic Net Income per Share (9)..............
Diluted Net Income per Share (9)............
Basic and Dilutive Weighted Average Number
of Shares Outstanding (9).................

AS ADJUSTED/
COMBINED ADJUSTMENTS COMBINED
----------- ----------- ------------
REVENUES.................................... $141,462,904 1$41,462,904
COST OF SALES............................... 108,901,740 108,901,740
----------- ------------
32,561,164 32,561,164
----------- ------------
SELLING, GENERAL AND ADMINISTRATIVE 27,289,265 $ 36,000(4) 27,325,265
EXPENSES..................................

DEPRECIATION AND AMORTIZATION............... 1,138,123 1,138,123
AMORTIZATION OF EXCESS COST OF INVESTMENT 379,189 379,189
OVER NET ASSETS ACQUIRED..................

AMORTIZATION OF DEFERRED FINANCING COSTS.... 80,062 -- 80,062
----------- ----------- ------------
28,886,639 36,000 28,922,639
----------- ----------- ------------
INCOME FROM OPERATIONS...................... 3,674,525 (36,000) 3,638,525
----------- ----------- ------------
OTHER INCOME (EXPENSE):
Interest income........................... 51,214 51,214
Interest expense.......................... (2,418,538) 390,000(5) (2,028,538)
----------- ----------- ------------
(2,367,324) 390,000 (1,977,324)
----------- ----------- ------------
(LOSS) INCOME BEFORE (BENEFIT) PROVISION FOR 1,307,201 354,000 1,661,201
INCOME TAXES..............................

(BENEFIT) PROVISION FOR INCOME TAXES........ 486,000 131,000(8) 617,000
----------- ----------- ------------
NET (LOSS) INCOME........................... $ 821,201 $ 223,000 $1,044,201
----------- ----------- ------------
----------- ----------- ------------
Basic Net Income per Share (9).............. $ 0.14
------------
------------
Diluted Net Income per Share (9)............ $ 0.14
------------
------------
Basic and Dilutive Weighted Average Number 7,409,203
of Shares Outstanding (9).................
------------
------------
</TABLE>

See notes to Unaudited Pro Forma Condensed Consolidated Statements of
Operations.

33
<PAGE>
UNAUDITED PRO FORMA CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS

<TABLE>
<S> <C>
(1) To reflect the compensation payable pursuant to employment agreements with Messrs. Fields and Friedman which
commence upon closing of the Public Offering and consummation of the Acquisitions. See "Management" and
"Certain Transactions."
(2) To reflect amounts payable pursuant to the administrative and strategic services agreements with TDA for
office space, administrative, financial and strategic consulting services, which commence upon completion of
the Public Offering and consummation of the Acquisitions.
(3) Reflects amortization over a 15 year period of the excess cost of investment over net assets acquired
("goodwill") and the additional purchase price resulting from the issuance of 300,000 shares to James E.
Helzer in connection with the acquisition by JEH Eagle of JEH Co. and amortization over a 40 year period for
the additional goodwill and purchase price resulting from the issuance of 200,000 shares to Gary L. Howard
in connection with the acquisition by MSI Eagle of MSI Co. See "Risk Factors--Amortization of Goodwill,"
"The Acquisitions" and "Certain Transactions."
(4) Reflects the amount payable in connection with the Underwriter's financial consulting agreement.
(5) Reflects the reduction in interest expense in connection with the assumed retirement of $4,525,000 long-term
debt. See "Use of Proceeds."
(6) Reflects the compensation differential between Gary L. Howard's aggregate salary and S corporation
distributions during the period prior to the sale of MSI Co. to MSI Eagle and the contractual amount of Mr.
Howard's compensation subsequent thereto. This adjustment is the result of changed circumstances that exist
following the sale of MSI Co. to MSI Eagle. Mr. Howard's duties and responsibilities will not diminish with
the result that other costs will be incurred that would offset the pro forma adjustment to compensation
expenses. Management believes that this adjustment is necessary for investors to more realistically access
the impact of the contemplated acquisition. See "Certain Transactions."
(7) Reflects amortization of goodwill over a 40 year period created by the acquisition of MSI Co. by MSI Eagle;
the interest expense differential between the interest cost associated with the debt incurred to fund the
acquisition and provide post acquisition working capital compared to the historical interest expense
incurred by MSI Co. for working capital lines of credit and the amortization of deferred financing costs.
See "Risk Factors--Amortization of Goodwill" and "The Acquisitions."
(8) To reflect income taxes relating to the foregoing adjustments and, with respect to the year ended June 30,
1998 and the period July 1, 1998 to October 21, 1998, a pro forma tax provision relating to the operations
of MSI Co. (predecessor) during the period it was taxed as an S corporation.
(9) Basic and Dilutive Income per 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, 3,000,000, 300,000 and 200,000 shares to be issued to
TDA, James E. Helzer and Gary L. Howard, respectively, in connection with the Acquisitions, 50,000 shares of
Common Stock relating to a $250,000 portion of a note in the principal amount of $2,046,000 that MSI Co. has
advised the Company that it intends to exchange for shares of Common Stock of the Company and 1,481,594 and
1,459,203 shares ("Additional Shares") in the four months ended October 31, 1998 and year ended June 30,
1998, respectively, for the shares assumed to be issued in the Public Offering, the proceeds of which would
be used to retire $4,525,000 of debt and replace the capital in excess of the respective period's earnings
which is represented by the non-cash dividend to TDA from Eagle. The computations exclude shares to be
issued in connection with the Public Offering in excess of the Additional Shares and the 300,000 Warrants
issued in the Private Placement because they are not dilutive. The Underwriter's Warrant and options to be
granted upon the closing of the Public Offering pursuant to the Company's Stock Option Plan are not dilutive
and have not been included. See "Risk Factors," "The Acquisitions," "Certain Transactions," and the
Financial Statements and the Notes thereto.
(10) The Company was formed on May 1, 1996 and has had limited operations through October 31, 1998.
(11) Reflects the operations of MSI Co. for the year ended June 30, 1998 and the period July 1, 1998 to October
21, 1998 prior to its acquisition by MSI Eagle on October 22, 1998.
</TABLE>

34
<PAGE>
SELECTED FINANCIAL INFORMATION

Prior to the contemplated Acquisitions, the Company has had limited
operations. The historical selected financial information included in the
statement of operations has been prepared on a basis which combines the Company
(organized on May 1, 1996), Eagle Supply, Inc. ("Eagle"), JEH/Eagle Supply, Inc.
("JEH Eagle") (acquired on July 1, 1997) and MSI Eagle Supply, Inc. ("MSI
Eagle") (acquired on October 22, 1998) as four entities controlled by TDA
Industries, Inc. ("TDA") because the separate financial data of the Company
would not be meaningful. Information with respect to the Company is included
from May 1, 1996 (inception), information for Eagle is included for all periods
presented, information with respect to JEH Eagle is included from July 1, 1997
and information with respect to MSI Eagle is included from October 22, 1998.

The selected financial information presented below should be read in
conjunction with the consolidated financial statements and the notes thereto,
the unaudited financial statements and the notes thereto and the unaudited pro
forma condensed consolidated financial statements included elsewhere herein. The
historical information contained in the table at and for the fiscal years ended
June 30, 1998, 1997 and 1996 has been derived from audited financial statements
and is qualified in its entirety by, and should be read in connection with, the
audited financial statements (and the notes thereto) appearing elsewhere in this
Prospectus. The historical information at and for the fiscal years ended June
30, 1995 and 1994 have been derived from audited financial statements which are
not included in this Prospectus. The historical information at and for the four
months ended October 31, 1998 and 1997 have been derived from unaudited
financial statements which, in the opinion of management, include all
adjustments (consisting solely of normal recurring adjustments) necessary for a
fair presentation of the financial condition and results of operations. The
unaudited financial statements are included elsewhere in this Prospectus. The
results of interim periods are not necessarily indicative of the results to be
obtained in a full fiscal year. The selected financial information as
adjusted/combined is derived from the Unaudited 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 and the Notes thereto.

35
<PAGE>
SELECTED FINANCIAL INFORMATION
<TABLE>
<CAPTION>
COMBINED(1)
--------------------------------------------------------------------------
YEAR ENDED JUNE 30,
--------------------------------------------------------------------------
1994 1995 1996 1997(7) 1998
------------ ------------ ------------ ------------- -------------
<S> <C> <C> <C> <C> <C>
STATEMENT OF OPERATIONS DATA:
Revenue........................................ $ 53,925,373 $ 50,483,469 $ 59,262,226 $ 57,575,712 $ 129,502,812
Gross Profit................................... 10,658,013 9,739,568 12,576,870 11,471,124 27,975,391
Income from Operations......................... 743,378 833,114 2,689,290 907,970 3,016,155
Net Income (Loss).............................. 464,270 352,589 1,315,035 (179,252) 756,884
Basic Net Income Per Share.....................
Diluted Net Income Per Share...................
Basic and Dilutive Weighted Average Number of
Shares Outstanding (2).......................
OTHER FINANCIAL DATA:
EBITDA (3)..................................... $ 1,453,702 $ 1,388,531 $ 3,251,371 $ 1,153,554 $ 4,256,186
Net Cash Provided by (Used In) Operating
Activities................................... $ 1,278,228 $ 165,963 $ 2,538,838 $ (766,978) $ (258,827)
Net Cash Used In Investing Activities.......... $ (509,645) $ (240,755) $ (863,448) $ (215,640) $ (3,704,624)
Net Cash (Used In ) Provided By Financing
Activities................................... $ (742,450) $ 315,284 $ (1,931,121) $ 1,575,357 $ 4,614,314

AS ADJUSTED/ COMBINED(5)(6)

FOUR MONTHS -------------------------------
ENDED FOUR MONTHS
OCTOBER 31, YEAR ENDED ENDED
--------------------------- JUNE 30, OCTOBER 31,
1997 1998 1998 1998
------------ ------------ -------------- --------------
<S> <C> <C> <C> <C>
STATEMENT OF OPERATIONS DATA:
Revenue........................................ $ 44,205,473 $ 51,148,653 $ 141,462,904 $ 55,125,447
Gross Profit................................... 9,836,370 11,711,073 32,561,164 13,312,047
Income from Operations......................... 1,581,092 2,648,684 3,638,525 3,076,073
Net Income (Loss).............................. 637,749 1,196,558 1,044,201 1,442,318
Basic Net Income Per Share..................... $ 0.14 $ 0.19
-------------- --------------
-------------- --------------
Diluted Net Income Per Share................... $ 0.14 $ 0.19
-------------- --------------
-------------- --------------
Basic and Dilutive Weighted Average Number of
Shares Outstanding (2)....................... 7,409,203 7,431,594
-------------- --------------
-------------- --------------
OTHER FINANCIAL DATA:
EBITDA (3)..................................... $ 1,949,273 $ 3,114,584 $ 5,287,113 $ 3,654,052
Net Cash Provided by (Used In) Operating
Activities................................... $ 1,491,223 $ 582,501
Net Cash Used In Investing Activities.......... $ (2,114,267) $ (1,805,369)
Net Cash (Used In ) Provided By Financing
Activities................................... $ (25,938) $ (127,541)
</TABLE>
<TABLE>
<CAPTION>
COMBINED(1) THE COMPANY
---------------------------------------------------------- OCTOBER 31,
1998
JUNE 30 -----------
----------------------------------------------------------
1994 1995 1996 1997 1998 HISTORICAL
---------- ---------- ---------- ---------- ---------- -----------
<S> <C> <C> <C> <C> <C> <C>
BALANCE SHEET DATA:
Working Capital (Deficiency).................... $4,511,035 $5,450,306 $4,527,568 $6,232,891 $17,081,190 $ (93,335)
Total Assets.................................... 12,947,453 14,709,463 15,778,742 15,853,837 49,478,412 395,559
Long Term Debt.................................. -- 6,290,453 5,678,243 7,195,163 25,294,523 --
Total Liabilities............................... 9,659,216 14,552,647 15,586,657 15,832,712 49,618,968 488,894
Shareholders' Equity (Deficiency)............... 3,562,237 156,816 192,085 21,125 (140,556) (93,335)

36
<PAGE>
- ------------------------

(1) Prior to the contemplated Acquisitions, the Company has had limited
operations. The historical financial data included in the statement of
operations data has been prepared on a basis which combines the Company
(organized May 1, 1996), Eagle Supply, Inc. ("Eagle"), JEH/Eagle Supply,
Inc. ("JEH Eagle") (acquired on July 1, 1997) and MSI/Eagle Supply, Inc.
("MSI Eagle") (acquired on October 22, 1998) as four entities controlled by
TDA Industries, Inc. ("TDA"), because the separate financial data of the
Company would not be meaningful. Information with respect to the Company is
included from May 1, 1996 (inception), information for Eagle is included for
all periods presented, information with respect to JEH Eagle is included
from July 1, 1997 and information for MSI Eagle is included from October 22,
1998.

(2) Basic and Dilutive Net Income per 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, 3,000,000, 300,000 and 200,000
shares to be issued to TDA, James E. Helzer and Gary L. Howard,
respectively, in connection with the Acquisitions, 50,000 shares relating to
a $250,000 portion of a note in the principal amount of $2,046,000 that MSI
Co. has advised the Company it intends to exchange for shares of the
Company's Common Stock valued at the initial Public Offering price of $5.00
per share and transfer to Gary L. Howard and 1,481,594 and 1,459,203 shares
("Additional Shares") in the four months ended October 31, 1998 and year
ended June 30, 1998, respectively, for the shares assumed to be issued in
the Public Offering, the proceeds of which would be used to retire
$4,525,000 of debt and replace the capital in excess of the respective
period's earnings which is represented by the non-cash dividend to TDA from
Eagle. The computation excludes shares to be issued in connection with the
Public Offering in excess of the Additional Shares. The Underwriter's
Warrant and options to be granted upon the closing of the Public Offering
pursuant to the Company's Stock Option Plan are not dilutive and have not
been included. See "Risk Factors," "The Acquisitions," "Certain
Transactions," and the Financial Statements and the Notes thereto.

The following is a summary of shares included in Basic and Diluted Net
Income per Share:

<TABLE>
<CAPTION>
FOUR MONTHS
ENDED
OCTOBER 31, YEAR ENDED
1998 JUNE 30, 1998
--------------- -------------
<S> <C> <C>
Initial capitalization:
Founders shares issued to TDA................................................... 2,000,000 2,000,000
Founders shares issued to Steven R. Andrews..................................... 100,000 100,000
Private Placement shares issued to private investors.............................. 300,000 300,000
Acquisition shares to be issued to TDA............................................ 3,000,000 3,000,000
Acquisition shares to be issued to James E. Helzer................................ 300,000 300,000
Acquisition shares to be issued to Gary L. Howard................................. 200,000 200,000
Conversion of MSI Co. note into shares of the Company............................. 50,000 50,000
Additional Shares................................................................. 1,481,594 1,459,203
--------------- -------------
7,431,594 7,409,203
--------------- -------------
--------------- -------------
</TABLE>

(3) As used herein, EBITDA reflects net income (loss) increased by the effects
of interest expense, income tax provisions, depreciation and amortization
expense. EBITDA is used by management, along with other measures of
performance, to assess the Company's financial performance. EBITDA should
not be considered in isolation or as an alternative to measures of operating
performance or cash flows pursuant to generally accepted accounting
principles. In addition, the measure of EBITDA may not be comparable to
similar measures reported by other companies.

(5) Reflects the Public Offering of 2,500,000 shares of Common Stock and
2,500,000 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, 50,000 shares relating to a $250,000 portion of a note in the
principal amount of $2,046,000 that MSI Co. has advised the Company it
intends to exchange for shares of the Company's Common Stock valued at the
initial Public Offering price of $5.00 per share and the consummation of the
Acquisitions. 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.

(6) See Unaudited Pro Forma Condensed Consolidated Statements of Operations.

(7) The loss for the year ended June 30, 1997 includes a write-off of
registration costs of $370,353 for an offering which was not consumated.

37
<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.

Prior to the contemplated Acquisitions, the Company has had limited
operations and activities consisting of seeking an underwriter, negotiating the
terms of the Acquisitions, negotiating and consummating a private placement for
the sale of common stock and warrants and a sale of promissory notes, seeking a
listing of the Company's securities on NASDAQ, and preparing and filing its
registration statement including ancillary documents and amendments. All
comparisons in Results of Operations and Liquidity and Capital Resources for
periods subsequent to July 1, 1997 relate to the combined activities of the
Company, Eagle and JEH Eagle, subsequent to JEH Eagle's acquisition of JEH Co.
which was effective as of July 1, 1997, as three entities under common control.
The comparisons in Results of Operations and Liquidity and Capital Resources for
the four-month period ended October 31, 1998 include the activities of MSI Eagle
subsequent to its acquisition of MSI Co. which was effective October 22, 1998.
All comparisons for any periods prior to July 1, 1997 relate to the combined
operations of the Company and Eagle only. The separate financial information for
the Company is not meaningful. The discussion and analysis included under the
caption Predecessor Companies relates primarily to the operations of JEH Co. and
MSI Co. prior to being acquired by JEH Eagle and MSI Eagle, respectively.

INTRODUCTION

The Company was organized on 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 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.

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. JEH Co. was founded in 1982 by James E. Helzer and the
business and substantially all of the assets of JEH Co. were purchased by JEH
Eagle in July of 1997. JEH Eagle distributes roofing supplies, drywall and
plywood to roofing contractors, builders and developers engaged primarily in the
construction industry. MSI Co. was founded in 1979 by Gary L. Howard and the
business and substantially all of the assets of MSI Co. were purchased by MSI
Eagle in October of 1998. MSI Eagle distributes masonry supplies and related
products to building contractors, sub-contractors and masons primarily engaged
in residential and commercial construction. Eagle, JEH Eagle and MSI Eagle rely
on their own direct sales forces and distribution facilities to generate sales.
Historically, Eagle, JEH Eagle and MSI Eagle have entered into arrangements with
customers on a basis permitting either party to the arrangement to have the
right to terminate the arrangement at any time prior to performance without
liability or penalty. Upon consummation of the Acquisitions, Eagle, JEH Eagle
and MSI Eagle will become wholly-owned subsidiaries of the Company and will
constitute the only business operations of the Company until and unless the
Company consummates additional acquisitions.

The Company has funded itself since inception by (i) 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; (ii) issuing
$300,000 in principal amount of its promissory notes to TDA ($150,000) and two
other stockholders, Hi-Tel Group, Inc. ($100,000) and Paul Schmidt ($50,000);
(iii) issuing

38
<PAGE>
$200,000 in principal amount of its promissory notes to TDA; and (iv) incidental
other borrowings from TDA.

COMPARISON OF TRENDS OF EAGLE, JEH CO. AND JEH EAGLE

REVENUES

Although both Eagle and JEH Eagle rely heavily on repeat business, they have
differing strategies on entering into new markets. Eagle has historically
entered into new, or grew in existing markets, based solely upon management's
evaluation of where it believed growth was expected and whether these areas
could support another roofing distributor whereas JEH Co. historically entered
into new markets on the heels of storms and, therefore, JEH Co.'s new
distribution centers had the tendency to show more immediate growth in revenues
which would help defray startup costs. As storm-related revenues subside,
management of JEH Co. would evaluate whether or not the area could support the
distribution center based upon future growth expectations whereas Eagle's new
distributions centers were gradually opened as new and permanent centers.

This conceptual difference has the tendency to cause more fluctuation in JEH
Eagle's revenues than in Eagle's as shown in the numbers presented. Although it
is the Company's belief that both entities have a solid core of repeat business
that will continue to sustain growth from existing operating centers, the
Company anticipates most of Eagle's and JEH Eagle's future growth to come from
the opening of new distribution centers and the introduction of new product
lines into existing distribution centers. Generally, as a percentage of the
combined revenues of Eagle and JEH Co. in non-storm related periods, Eagle and
JEH Co. contributed approximately 45% and 55%, respectively, of such combined
revenues. Prior to July 1998, neither Eagle nor JEH Eagle have had the benefit
of significant storms to increase revenues, but when they occur, JEH Eagle
should benefit to a greater degree than Eagle because of the likelihood of
storms of more intensity and frequency occurring in JEH Eagle's market areas.
However, in July 1998 JEH Eagle opened a storm-related distribution center in
Minnesota.

The following is a comparison of accounts receivable turnover levels for
Eagle, JEH Eagle and JEH Eagle's predecessor, JEH Co. Eagle's accounts
receivable turnover ratios have remained within a fairly narrow range while JEH
Eagle's and JEH Co.'s accounts receivable turnover ratios show a declining trend
through the fiscal year 1998 and the four-month period ended October 31, 1998
compared to the 1997 four-month period. This declining trend may be attributed
to increased revenues in 1994, 1995 and 1996 from storm related business in the
Texas markets, the continued growth in the Colorado markets and the expansion
into the Indiana market followed by a subsequent slow-down in business due to
the "El Nino" weather patterns and the recent paucity of significant storms
which resulted in the business of certain customers slowing dramatically. As
result of these factors, JEH Co. began to experience difficulty in collecting
its receivables during the end of its 1996 year and the six month period ending
June 30, 1997.

39
<PAGE>

<TABLE>
<CAPTION>
ACCOUNTS RECEIVABLE
PERIOD TURNOVER RATIO*
----------------------------------- ---------------------
<S> <C> <C>
Eagle
Four Months October 31,
1998 5.43
1997 5.56
Fiscal Year June 30,
1998 6.05
1997 6.39
1996 6.52
1995 6.27
1994 5.97
JEH Eagle and JEH Co.
Four Months October 31,
1998 6.62
1997 8.64
Fiscal Year June 30,
1998 6.33
Six Months June 30,
1997 6.72
1996 7.58
Calendar Year
1996 9.09
1995 11.24
1994 12.38
</TABLE>

- ------------------------

* Computation is based on each period's credit sales divided by average
accounts receivable.

40
<PAGE>
GROSS PROFIT MARGINS

Although both Eagle and JEH Eagle operate in similar industries, more of JEH
Co.'s historical revenues have come from sales of residential roofing
(approximately 81% on average) than sales of commercial roofing (approximately
6% on average) or other products (approximately 13% on average). Eagle's
historical revenues have come from sales of residential roofing (approximately
57% on average), sales of commercial roofing (approximately 30% on average) and
other products (approximately 13% on average). Revenues generated from
residential sales generally produce higher gross profit margins than commercial
sales which are generally shipped directly to the customer from the vendor. For
this reason, JEH Co.'s historical gross profit margins on average are
approximately two percentage points higher than Eagle's gross profit margin,
approximately 22.4% and 22.6%, respectively. The Company expects that in the
future it will be able to consolidate Eagle's and JEH Eagle's purchasing power
and therefore be able to buy product more favorably.

The following is a comparison of inventory turnover levels for Eagle, JEH
Eagle and JEH Co. Eagle's inventory turnover ratios have been adjusted for
purposes of this analysis to the lower of first-in, first-out ("FIFO") cost or
market and all of the ratios exclude the impact of purchases made from vendors
for direct shipment. As can be seen from the following comparison, Eagle's
inventory turnover ratios have remained within a narrower range than the
inventory turnover ratios of JEH Eagle and JEH Co. Whereas Eagle maintains
fairly steady levels of inventory, the JEH Eagle and JEH Co. inventory levels
fluctuate significantly in anticipation of storm related business. At June 30,
1997 and 1996, JEH Co.'s inventory levels had been increased in anticipation of
storms that did not materialize, which resulted in a decline in inventory
turnover ratios. During the four-month period ended October 31, 1998, JEH Eagle
reduced its inventory levels, which resulted in an increase in its inventory
turnover ratio.

<TABLE>
<CAPTION>
INVENTORY
PERIOD TURNOVER RATIO*
-------------------------------- ---------------------
<S> <C> <C>
Eagle
Four Months October 31,
1998 5.35
1997 6.31
Fiscal Year June 30,
1998 5.94
1997 6.25
1996 7.04
1995 6.96
1994 6.19
JEH Eagle and JEH Co.
Four Months October 31,
1998 8.18
1997 6.57
Fiscal Year June 30,
1998 6.00
Six Months June 30,
1997 4.90
1996 6.38
Calendar Year
1996 7.80
1995 9.07
1994 9.38
</TABLE>

- ------------------------

* Computation is based on each period's out of stock sales divided by average
inventory.

41
<PAGE>
RESULTS OF OPERATIONS

FOUR-MONTH PERIOD ENDED OCTOBER 31, 1998 COMPARED TO
FOUR-MONTH PERIOD ENDED OCTOBER 31, 1997

Revenues of the Company during the four-month period ended October 31, 1998
increased by approximately $6,943,000 (15.7%) compared to the 1997 four-month
period. Sales of Eagle during the 1998 four-month period were approximately
$19,102,000, an increase of approximately $1,711,000 (9.8%) from the comparable
1997 four-month period. This increase may be attributed to a general improvement
in market conditions. Sales of JEH Eagle during the 1998 four-month period were
approximately $31,682,000, an increase of approximately $4,868,000 (18.2%) from
the comparable 1997 four-month period. This increase may be primarily attributed
to sales generated as a result of the opening in July 1998 of a storm-related
branch in Minnesota ($6,159,000) offset by decreased revenues at other branches
due to the continued paucity of hail storms in the southwest. Included in
revenues in the 1998 four-month period are sales of MSI Eagle for the period
October 22, 1998 (date of the acquisition of the business and substantially all
of the net assets of MSI Co. by MSI Eagle) through October 31, 1998 in the
amount of approximately $365,000

Cost of goods sold increased between the 1998 and 1997 four-month periods at
a lesser rate than the increase in revenues between these four-month periods.
Accordingly, cost of goods sold as a percentage of revenues decreased to 77.1%
in the four-month period ended October 31, 1998 from 77.7% in the four-month
period ended October 31, 1997, and gross profit as a percentage of revenues
increased to 22.9% in the four-month period ended October 31, 1998 from 22.3% in
the four-month period ended October 31, 1997. This increase in gross profit
margin may be attributed primarily to the relative increase in the 1998
four-month period in sales to customers out of warehouse inventory which carry a
higher gross profit margin than direct sales shipments to customers from
vendors. Whereas a significant amount of the sales to Eagle's customers are
direct shipments from vendors, almost all of the sales to customers of JEH Eagle
are out of warehouse inventory. The Company's management is unable to predict if
sales to customers out of warehouse inventory is a trend that will continue in
the future.

Operating expenses of the Company increased by approximately $807,000 (9.8%)
between the 1998 and 1997 four-month periods. Of this amount, JEH Eagle's
operating expenses increased by approximately $169,000 (3.5%) in the 1998
four-month period from the 1997 four-month period. This increase is due
primarily to the expenses attributable to the opening and operations of the
storm-related branch in Minnesota (approximately $440,000) offset by the
benefits derived from cost-cutting measures. During the fiscal year 1998,
management of JEH Eagle evaluated its accounts receivable and determined that no
further deterioration of the customer accounts specifically reserved in 1997 had
occurred, and, accordingly, no specific increase in the provision for doubtful
accounts was required beyond the normal level which has ranged between .8% and
1.4% of sales. During fiscal 1998, collections of customer accounts receivable
specifically reserved in fiscal 1997 were not material. Eagle's operating
expenses increased by approximately $560,000 (16.1%) in the 1998 four-month
period from the 1997 four-month period. This increase is due primarily to an
increase in depreciation expense of approximately $49,000 on equipment purchased
and put in service during the fiscal year ended June 30, 1998, an increase in
the allowance for doubtful accounts receivable of approximately $104,000 due
primarily to a general slowdown in the collection of accounts receivable, and an
increase in payroll and related costs of approximately $425,000 due primarily to
the additional manpower needed to service the increased sales out of warehouse
inventory. Included in operating expenses in the 1998 four-month period are
operating expenses of MSI Eagle for the period October 22, 1998 through October
31, 1998 in the amount of approximately $78,000. Operating expenses as a
percentage of revenues were 17.7% in the 1998 period compared to 18.7% in the
1997 period.

Interest expense increased by approximately $186,000 (32.3%) between the
1998 and 1997 four-month periods. This increase is due to the interest expense
incurred on higher average outstanding balances under the Eagle credit facility
($58,000) and the JEH Eagle credit facility ($81,000), on JEH Eagle's
capitalized

42
<PAGE>
lease obligations ($26,000), on the MSI Eagle credit facility and other
long-term debt ($14,000) used primarily to fund its acquisition in October 22,
1998 of MSI Co. and on short-term borrowings by the Company ($7,000).

FISCAL YEAR ENDED JUNE 30, 1998 COMPARED TO
FISCAL YEAR ENDED JUNE 30, 1997

Revenues of the Company during the fiscal year ended June 30, 1998 increased
by approximately $71,927,000 (124.9%) compared to the 1997 fiscal year. This
increase is due almost entirely to the acquisition of JEH Co. in July 1997 by
JEH Eagle. Sales of JEH Eagle during the fiscal year ended June 30, 1998 were
approximately $71,006,000. Excluding the sales of JEH Eagle, revenues of the
Company would have been approximately $58,497,000 in the fiscal year ended June
30, 1998, an increase of approximately $922,000 (1.6%) from the comparable 1997
fiscal year. This increase was comprised of an increase of approximately
$3,195,000 in sales to customers out of warehouse inventory offset by a decrease
in direct sales shipments to customers from vendors of approximately $2,273,000.
Sales of both Eagle and JEH Eagle during the fiscal year ended June 30, 1998
were adversely effected by the "El Nino" weather patterns. Unusually heavy and
record rainfall in the southeast and the paucity of hail storms in the southwest
negatively impacted sales of Eagle and JEH Eagle, respectively, whereas
hurricanes and intense rainstorms accompanied by strong winds, which can cause
significant roof damage, did not occur in any significant amount in the
Company's market areas.

At June 30, 1998, all of the Company's twenty-seven distribution centers had
been in operation for at least one year. No distribution centers were closed
during the fiscal year 1998.

Cost of goods sold increased between the fiscal years 1998 and 1997 at a
lesser rate than the increase in revenues between these fiscal years.
Accordingly, cost of goods sold as a percentage of revenues decreased to 78.4%
in the fiscal year 1998 from 80.1% in the fiscal year 1997, and gross profit as
a percentage of revenues increased to 21.6% in the fiscal year 1998 from 19.9%
in the fiscal year 1997. This increase in gross profit margin may be attributed
primarily to the relative increase in fiscal year 1998 sales to customers out of
warehouse inventory which carry a higher gross profit margin than direct sales
shipments to customers from vendors. Whereas a significant amount of the sales
to Eagle's customers are direct shipments from vendors, almost all of the sales
to customers of JEH Eagle are out of warehouse inventory.

Operating expenses of the Company increased by approximately $14,396,000
(136.3%) between the fiscal years 1998 and 1997. This increase is due almost
entirely to the acquisition of JEH Co. in July 1997 by JEH Eagle. Operating
expenses of JEH Eagle during the fiscal year 1998 were approximately
$13,720,000, including approximately $172,000 of amortization of cost of
investment over net assets acquired (goodwill) and approximately $58,000 of
amortization of deferred financing costs attributable to the acquisition. During
the fiscal year 1998, management of JEH Eagle evaluated its accounts receivable
and determined that no further deterioration of the customer accounts
specifically reserved in 1997 had occurred, and, accordingly, no specific
increase in the provision for doubtful accounts was required beyond the normal
level which has ranged between .8% and 1.4% of sales. During fiscal 1998,
collections of customer accounts receivable specifically reserved in fiscal 1997
were not material. Excluding the operating expenses of JEH Eagle, operating
expenses of the Company would have been approximately $11,239,000 in the fiscal
year 1998, an increase of approximately $676,000 (6.4%) from the fiscal year
1997. This increase is due primarily to the increase in data processing expenses
of approximately $251,000 due to an upgrading, in March 1997, of Eagle's data
processing hardware and software, and an increase in payroll costs of
approximately $441,000 due primarily to the additional manpower needed to
service the increased sales out of warehouse inventory. Operating expenses as a
percentage of revenues were 19.3% in the fiscal year 1998 compared to 18.3% in
the fiscal year 1997.

43
<PAGE>
Excess cost of investment over net assets acquired (goodwill) is being
amortized on a straight-line method over fifteen years. The Company's management
routinely evaluates the recoverability of goodwill based upon expectations of
future non-discounted cash flows. Management evaluated the remaining useful life
of goodwill in light of anticipated future operations, management's experience
operating in this industry since 1973, and an analysis of the goodwill
amortization policies of other companies in this industry and determined that a
fifteen-year amortization period was appropriate for the goodwill that arose as
a result of the acquisition of JEH Co. by JEH Eagle. See "Risk
Factors--Amortization of Goodwill."

Interest expense increased by approximately $1,262,000 (218.8%) between the
fiscal years 1998 and 1997. This increase is due principally to the interest
expense incurred by JEH Eagle of approximately $1,250,000 on its credit facility
used primarily to fund its acquisition in July 1997 of JEH Co. Excluding the
interest expense of JEH Eagle, interest expense of the Company would have been
approximately $612,000 in fiscal 1998, an increase of approximately $13,000
(2.2%) from fiscal 1997. This increase is due to the increase in interest
expense on short-term borrowings by the Company (approximately $18,000) offset
by the reduction in interest expense on borrowings under Eagle's credit facility
(approximately $5,000).

FISCAL YEAR ENDED JUNE 30, 1997 COMPARED TO
FISCAL YEAR ENDED JUNE 30, 1996

Revenues of the Company during the fiscal year ended June 30, 1997 decreased
by approximately $1,687,000 (2.8%) compared to the 1996 fiscal year. This
decrease was primarily due to the decrease in revenues derived from storm
related business in fiscal 1996 from Hurricane Opal (approximately $6,495,000),
and a decrease in revenues from distribution centers that did not benefit from
Hurricane Opal (approximately $578,000). That decrease in revenues was the
result of a decline in general business conditions. This decrease in revenues
was partially offset by additional revenues generated in fiscal 1997 from
distribution centers opened in fiscal 1996 (approximately $5,386,000).

At June 30, 1997, all of the Company's fifteen distribution centers had been
in operation for at least one year. No distribution centers were closed during
this fiscal year.

Cost of goods sold decreased between the fiscal years 1997 and 1996 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 80.1%
in the fiscal year 1997 from 78.8% in the fiscal year 1996, and gross profit as
a percentage of revenues decreased to 19.9% in the fiscal year 1997 from 21.2%
in the fiscal year 1996. This decrease in gross profit margin may be attributed
primarily to the decrease in fiscal 1997 in sales generated at distribution
centers which benefitted from storm related business and 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 $675,000 (6.8%) between the
fiscal years 1997 and 1996. Operating expenses in fiscal 1997 includes
approximately $546,000 of operating expenses attributable to distribution
centers opened in fiscal 1996. Operating expenses as a percentage of revenues
were 18.3% in the fiscal year 1997 compared to 16.7% in the fiscal year 1996.

Other expenses of approximately $370,000 in fiscal 1997 represents
registration costs and expenses incurred by the Company in connection with the
filing in 1996 of its registration statement for an initial public offering of
its securities.

FISCAL YEAR ENDED JUNE 30, 1996 COMPARED TO
FISCAL YEAR ENDED JUNE 30, 1995

Revenues of the Company during the fiscal year ended June 30, 1996 increased
by approximately $8,779,000 (17.4%) compared to the 1995 fiscal year. This
increase was primarily due to revenues in the

44
<PAGE>
aggregate amount of approximately $4,057,000 generated from new distribution
centers opened during fiscal 1996, improvement in business in market areas
served by distribution centers opened for at least one year (approximately
$1,487,000), and additional business resulting from Hurricane Opal of
approximately $7,842,000 as hurricanes as well as intense rainstorms accompanied
by strong winds can cause significant roof damage, offset by a decline in
revenues of approximately $4,608,000 generated in the 1995 fiscal year from a
distribution center that was sold as of June 30, 1995.

At June 30, 1996, the Company had ten distribution centers opened for at
least one year. The Company's revenues during the fiscal year ended June 30,
1996 from distribution centers opened for at least one year increased by
approximately $9,329,000 (20.3%) from the fiscal year ended June 30, 1995. This
increase in such revenues may be attributed to an improvement in business in
general and the additional business that resulted from the hurricane damage in
Florida in the late summer and fall of 1995.

Cost of goods sold increased between the fiscal years 1996 and 1995 at a
lesser rate than the increase in revenues between these fiscal years.
Accordingly, cost of goods sold as a percentage of revenues decreased to 78.8%
in the fiscal year 1996 from 80.7% in the fiscal year 1995, and, accordingly,
gross profit as a percentage of revenues increased to 21.2% in the fiscal year
1996 from 19.3% in the fiscal year 1995. This increase in gross profit margin
may be attributed primarily to the increase in fiscal 1996 in sales to customers
out of warehouse inventory which carry a higher gross profit margin than direct
sales shipments to customers from vendors. The Company's management is unable to
determine if the increase in revenues during the fiscal year ended June 30,
1996, as compared to its fiscal year ended June 30, 1995, was the result of unit
price increases to any significant extent as opposed to increased sales volume.

Operating expenses increased by approximately $981,000 (11%) between the
fiscal years 1996 and 1995 at a lesser rate than the increase in revenues
between these fiscal years. Operating expenses in fiscal 1995 includes
approximately $1,064,000 of operating expenses attributable to the distribution
centers that was sold as of June 30, 1995; and fiscal 1996 includes
approximately $1,007,000 of start-up costs and expenses attributable to new
distribution centers operations, and increased operating expenses in the
aggregate amount of approximately $1,039,000 comprised primarily of payroll and
related costs and transportation expenses directly related to the increase in
business in fiscal 1996. Operating expenses as a percentage of revenues were
16.7% in the fiscal year 1996 compared to 17.6% in the fiscal year 1995.

Interest expense increased by approximately $316,000 between fiscal 1996 and
1995. Interest expense in fiscal 1995 is for less than a full year since
borrowings under Eagle's revolving credit facility commenced in December 1994.
See "--Liquidity and Capital Resources."

PREDECESSOR COMPANIES

The following discussion and analysis should be read in conjunction with the
JEH Eagle and the JEH Co. Financial Statements and notes thereto and the MSI
Eagle and the MSI Co. Financial Statements and notes thereto appearing elsewhere
in this Prospectus. JEH Eagle acquired JEH Co. effective July 1, 1997 and MSI
Eagle acquired MSI Co. effective October 22, 1998.

JEH EAGLE FISCAL YEAR ENDED JUNE 30, 1998 COMPARED TO
JEH CO. FISCAL YEAR ENDED JUNE 30, 1997

Revenues during the fiscal year ended June 30, 1998 increased by
approximately $9,000 (less than 1%) compared to the 1997 fiscal year. The "El
Nino" weather patterns and the paucity of significant storms in JEH Eagle's
market areas adversely effected sales of JEH Eagle during the fiscal year ended
June 30, 1998.

Cost of goods sold increased between the fiscal years 1998 and 1997 at a
greater rate than the increase in revenues between these fiscal years.
Accordingly, cost of goods sold as a percentage of revenues increased to 77.6%
in the fiscal year 1998 from 77.1% in the fiscal year 1997, and gross profit as
a percentage of revenues decreased to 22.4% in the fiscal year 1998 from 22.9%
in the fiscal year 1997.

45
<PAGE>
Operating expenses decreased by approximately $3,549,000 (20.6%) between the
fiscal years 1998 and 1997. This decrease is due primarily to the reduction in
the compensation of the owner of JEH Co. (approximately $2,084,000) since the
acquisition of JEH Co. in July 1997 by JEH Eagle. Prior to the acquisition, JEH
Co. was a subchapter S corporation, and the compensation of its owner was
discretionary. Additionally, adverse economic conditions and a general slowdown
in the collection of accounts receivable necessitated an addition to the
allowance for doubtful accounts receivable (approximately $1,644,000) in fiscal
1997, a substantial portion of which was allocated specifically to two accounts.
During fiscal 1998, collections of customer accounts receivable specifically
reserved in fiscal 1997 were not material. Offsetting the decrease in operating
expenses between the fiscal years 1998 and 1997 are approximately $172,000 of
amortization of cost of investment over net assets acquired (goodwill) and
approximately $58,000 of amortization of deferred financing costs incurred in
fiscal 1998 and attributable to the acquisition of JEH Co. by JEH Eagle in July
1997. Operating expenses as a percentage of revenues were 19.3% in the fiscal
year 1998 compared to 24.3% in the fiscal year 1997.

Excess cost of investment over net assets acquired (goodwill) is being
amortized on a straight-line method over fifteen years. The Company's management
routinely evaluates the recoverability of goodwill based upon expectations of
future non-discounted cash flows. Management evaluated the remaining useful life
of goodwill in light of anticipated future operations, management's experience
operating in this industry since 1973, and an analysis of the goodwill
amortization policies of other companies in this industry and determined that a
fifteen-year amortization period was appropriate for the goodwill that arose as
a result of the acquisition of JEH Co. by JEH Eagle. See "Risk
Factors--Amortization of Goodwill."

Interest expense increased by approximately $407,000 (48.3%) between fiscal
1998 and 1997. This increase is due principally to the increase in interest
expense resulting from the increase in JEH Eagle's long-term debt used primarily
to fund its acquisition of JEH Co. in July 1997.

JEH CO. SIX MONTH PERIOD ENDED JUNE 30, 1997 COMPARED TO
JEH CO. SIX MONTH PERIOD ENDED JUNE 30, 1996

Revenues of JEH Co. during the six-month period ended June 30, 1997
decreased by approximately $3,882,000 (11.8%) compared to the six-month period
ended June 30, 1996. This decrease may be primarily attributed to a reduction in
revenues in its Texas markets (approximately $9,111,000) due to the adverse
effects of the "El Nino" weather patterns and the paucity of significant storms
in its market areas, offset by the continued growth in its Colorado markets
(approximately $3,314,000) and its Indianapolis, Indiana, market (approximately
$1,884,000).

Cost of goods sold decreased between the 1997 and 1996 six-month periods at
a greater rate than the decrease in revenues between these six-month periods.
Accordingly, cost of goods sold as a percentage of revenues decreased to 73.7%
in the 1997 six-month period from 78.4% in the 1996 six-month period, and,
accordingly, gross profit as a percentage of revenues increased to 26.3% in the
1997 six-month period from 21.6% in the 1996 six-month period.

Operating expenses increased by approximately $2,445,000 (41.5%) between the
1997 and 1996 six-month periods at a greater rate than the increase in revenues
between these periods. This increase is primarily due to an increase in the
provision for doubtful accounts of approximately $2,055,000 due to the
deterioration of certain customer accounts receivable. Management of JEH Co. has
historically based its provision for doubtful accounts on an evaluation of the
levels of its trade accounts receivable, the aging and collection history of
such receivables, and the business conditions in each market area in which JEH
Co. operated. In establishing its estimates of the levels of the provisions for
doubtful accounts required for each reporting period, management also estimated
the value of the collateral and/or the personal guarantees received from certain
customers with past-due balances. The majority of the provision for doubtful
accounts relates to specific customers with past-due balances. During the latter
part of calendar

46
<PAGE>
1996, certain customer accounts began to age, and JEH Co. began to experience
more difficulty in collecting its receivables. Accordingly, JEH Co. increased
its provision for doubtful accounts and related allowance for doubtful accounts
to $844,235 and $321,718, respectively, in calendar 1996 from $334,372 and
$181,336, respectively, in 1995. Additionally, write-offs of its customer
accounts increased to $703,853 in 1996 from $334,372 in 1995. JEH Co. realized
increased revenues from its customers in 1996 from business related to storms in
certain of its market areas; however, no such storms occurred in the spring of
1997 in any of JEH Co.'s market areas. As a result, the business of certain of
JEH Co.'s customers slowed dramatically and receivables continued to
deteriorate. As a result of the foregoing circumstances, which changed during
the six-month period ended June 30, 1997 as compared to the latter part of
calendar 1996, the level and age of certain customers' accounts had worsened
significantly from prior periods, and other customers who have historically been
current began to pay late and their accounts began to age as well. Accordingly,
management performed a critical assessment of the quality of its receivables and
current business conditions and determined that an increase in the allowance for
doubtful accounts of $2,383,218 at June 30, 1997 was appropriate, a substantial
portion of which was allocated specifically to two accounts. Other increases in
operating expenses during the 1997 six-month period included commissions
(approximately $265,000) and increased payroll and related costs (approximately
$97,000). Operating expenses as a percentage of revenues were 28.7% in the 1997
six-month period compared to 17.9% in the 1996 six-month period.

Interest expense increased by approximately $76,000 between the 1997 and
1996 six-month periods. This increase is due principally to increased borrowing
incurred by JEH Co. used primarily to fund its growth in current markets and
expansion into new markets.

JEH CO. YEAR ENDED DECEMBER 31, 1996 COMPARED TO
JEH CO. YEAR ENDED DECEMBER 31, 1995

Revenues of JEH Co. during the year ended December 31, 1996 increased by
approximately $1,072,000 (1.5%) compared to the year ended December 31, 1995.
This increase may be primarily attributed to JEH Co.'s expansion into the
Indianapolis, Indiana, market (approximately $3,488,000) and JEH Co.'s continued
growth in its Colorado markets (approximately $4,371,000), offset by a decline
in revenues in its Texas markets (approximately $6,787,000). The decline in the
Texas markets may be attributed to the slow-down in business generated from the
significant storms experienced in 1995 and the lack of any significant storms in
1996.

Cost of goods sold increased between the 1996 and 1995 years at a greater
rate than the increase in revenues between these years. Accordingly, cost of
goods sold as a percentage of revenues increased to 79% in 1996 from 77.8% in
1995, and, accordingly, gross profit as a percentage of revenues decreased to
21% in 1996 from 22.2% in 1995. This decrease in gross profit margins may be
directly attributable to the decrease in storm related revenues which tend to
carry higher gross profit margins.

Operating expenses decreased by approximately $1,166,000 (7.3%) between the
1996 and 1995 years at a greater rate than the decrease in revenues between
these years. This decrease is primarily due to a reduction in the compensation
of the owner of JEH Co. (approximately $1,659,000), offset by increased expenses
attributable to the expansion into the Indianapolis, Indiana, market
(approximately $370,000), and an increase in the provision for doubtful accounts
(approximately $291,000) due to the deterioration of certain customer accounts
receivable. Operating expenses as a percentage of revenues were 19.8% in 1996
compared to 21.7% in 1995.

Interest expense increased by approximately $217,000 between the 1996 and
1995 years. This increase is due principally to increased borrowing by JEH Co.
to fund its growth in current markets and expansion into new markets.

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MSI CO. (JULY 1, 1998 THROUGH OCTOBER 21, 1998) AND
MSI EAGLE (OCTOBER 22, 1998 THROUGH OCTOBER 31, 1998)
FOUR-MONTH PERIOD ENDED OCTOBER 31, 1998 COMPARED TO MSI CO.
FOUR-MONTH PERIOD ENDED OCTOBER 31, 1997

Revenues during the four-month period ended October 31, 1998 increased by
approximately $185,000 (4.5%) compared to the four-month period ended October
31, 1997. This increase may be primarily attributed to the continued growth in
the market areas served by MSI Eagle and its predecessor, MSI Co.

Cost of goods sold increased between the 1998 and 1997 four-month periods at
a lesser rate than the increase in revenues between these four-month periods.
Accordingly, cost of goods sold as a percentage of revenues decreased to 59.5%
in the 1998 period from 63% in the 1997 period, and gross profit as a percentage
of revenues increased to 40.5% in the 1998 period from 37% in the 1997 period.
This increase may be primarily attributed to more aggressive pricing in the 1998
period.

Operating expenses increased by approximately $50,000 (5.0%) between the
1998 and 1997 four-month periods. This increase is due primarily to the increase
in the compensation of the owner of MSI Co. (approximately $30,000). Prior to
the acquisition in October 1998, MSI Co. was a subchapter S corporation, and the
compensation of its owner was discretionary. Operating expenses as a percentage
of revenues were 24.2% in the 1998 period compared to 24% in the 1997 period.

Interest expense increased by approximately $9,000 (58.1%) between the
fiscal 1998 and 1997 four-month periods. This increase is due principally to the
interest expense incurred on MSI Eagle's long-term debt used to fund its
acquisition of MSI Co. on October 22, 1998.

MSI CO. FISCAL YEAR ENDED JUNE 30, 1998 COMPARED TO
MSI CO. FISCAL YEAR ENDED JUNE 30, 1997

Revenues during the fiscal year ended June 30, 1998 increased by
approximately $2,859,000 (31.4%) compared to the 1997 fiscal year. This increase
may be attributed primarily to the sales generated from a masonry supply
business acquired in May 1997 (approximately $1,328,000) and the continued
growth in the market areas served by MSI Co.

Cost of goods sold increased between the fiscal years 1998 and 1997 at a
greater rate than the increase in revenues between these fiscal years.
Accordingly, cost of goods sold as a percentage of revenues increased to 61.7%
in the fiscal year 1998 from 61.1% in the fiscal year 1997, and gross profit as
a percentage of revenues decreased to 38.3% in the fiscal year 1998 from 38.9%
in the fiscal year 1997.

Operating expenses increased by approximately $595,000 (20%) between the
fiscal years 1998 and 1997. This increase is due primarily to the increase in
expenses attributable to the May 1977 acquisition (approximately $233,000) and
an increase in the compensation of the owner of MSI Co. (approximately
$203,000). Prior to its acquisition in October 1998, MSI Co. was a subchapter S
corporation, and the compensation of its owner was discretionary. Operating
expenses as a percentage of revenues were 29.9% in the fiscal year 1998 compared
to 32.7% in the fiscal year 1997.

Interest expense increased by approximately $12,000 (39.8%) between the
fiscal years 1998 and 1997. This increase is due principally to the increase in
MSI Co.'s debt used primarily to fund the acquisition in May 1997.

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MSI CO. FISCAL YEAR ENDED JUNE 30, 1997 COMPARED TO
MSI CO. FISCAL YEAR ENDED JUNE 30, 1996

Revenues during the fiscal year ended June 30, 1997 increased by
approximately $660,000 (7.8%) compared to the 1996 fiscal year. This increase
may be attributed in part to the sales generated from a masonry supply business
acquired in May 1997 (approximately $118,000) and the continued growth in the
market areas served by MSI Co.

Cost of goods sold increased between the fiscal years 1997 and 1996 at a
lesser rate than the increase in revenues between these fiscal years.
Accordingly, cost of goods sold as a percentage of revenues decreased to 61.1%
in the fiscal year 1997 from 61.4% in the fiscal year 1996, and gross profit as
a percentage of revenues increased to 38.9% in the fiscal year 1997 from 38.6%
in the fiscal year 1996.

Operating expenses increased by approximately $296,000 (11.1%) between the
fiscal years 1997 and 1996. This increase is due partially to the increase in
the compensation of the owner of MSI Co. (approximately $50,000). Prior to the
acquisition in October 1998, MSI Co. was a subchapter S corporation, and the
compensation of its owner was discretionary. Additionally, adverse economic
conditions and a general slowdown in the collection of accounts receivable
necessitated an addition to the allowance for doubtful accounts receivable
(approximately $72,000) in fiscal 1997. Also contributing to the increase in
operating expenses in fiscal 1997 were costs attributable to the May 1997
acquisition ($24,000), payroll costs ($24,000), office expenses ($19,000), rent
($27,000) and repairs and maintenance ($28,000). Operating expenses as a
percentage of revenues were 32.7% in the fiscal year 1997 compared to 31.8% in
the fiscal year 1996.

Interest expense decreased by approximately $15,000 (32.1%) between the
fiscal years 1997 and 1996. This decrease is due principally to the decrease in
average debt outstanding in fiscal 1997.

MSI CO. FISCAL YEAR ENDED JUNE 30, 1996 COMPARED TO
MSI CO. FISCAL YEAR ENDED JUNE 30, 1995

Revenues during the fiscal year ended June 30, 1996 increased by
approximately $206,000 (2.4%) compared to the 1995 fiscal year. This increase
may be attributed primarily to the continued growth in the market areas served
by MSI Co.

Operating expenses increased by approximately $86,000 (3.1%) between the
fiscal years 1996 and 1995. This decrease is due to the decrease in the
compensation of the owner of MSI Co. (approximately $99,000). Prior to the
acquisition in October 1998, MSI Co. was a subchapter S corporation, and the
compensation of its owner was discretionary. Operating expenses as a percentage
of revenues were 31.8% in the fiscal year 1996 compared to 33.5% in the fiscal
year 1995.

Interest expense increased by approximately $10,000 (28.2%) between the
fiscal years 1996 and 1995. This increase is due principally to the interest
expense on debt incurred in fiscal 1996 to fund the purchase of equipment needed
for continued growth and expansion.

LIQUIDITY AND CAPITAL RESOURCES

The Company has historically financed its operations through operating cash
flow, support from TDA or affiliates of TDA and the proceeds from the Company's
June 1996 private placement and February 1998, August 1998 and January 1999
issuances of promissory notes.

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The Company's working capital was approximately $15,743,000 at October 31,
1998 (including approximately $293,000 of working capital of MSI Eagle) compared
to $17,081,000 at June 30, 1998. At October 31, 1998, the Company's current
ratio was 1.57 to 1 compared to 1.71 to 1 at June 30, 1998.

During the four-month period ended October 31, 1998, cash flows provided by
operating activities approximated $583,000. Such amount consisted primarily of
net income of $1,197,000, depreciation and amortization of $447,000, allowance
for doubtful accounts of $352,000, decreased levels of inventories of $1,066,000
and increased levels of accrued expenses and other current liabilities of
$333,000, offset by increased levels of accounts and notes receivables of
$1,341,000 and other assets of $117,000, decreased levels of trade accounts
payable of $835,000 and federal and state taxes due to Parent of $385,000,
offset by increased levels of deferred income taxes of $133,000. During the
fiscal year ended June 30, 1998, cash flows used in operating activities
approximated $259,000. Such amount consisted primarily of net income of
$757,000, depreciation and amortization of $1,189,000, allowance for doubtful
accounts of $528,000, decreased levels of other assets of $843,000, increased
levels of trade accounts payable of $3,241,000, accrued expenses and other
current liabilities of $752,000 and federal and state taxes due to Parent of
$652,000, offset by a net gain on sales of equipment of $26,000, increased
levels of accounts and notes receivable of $6,754,000, inventories of $1,261,000
and deferred income taxes of $179,000.

During the four-month period ended October 31, 1998, cash flows used in
investing activities approximated $1,805,000. Such amount consisted primarily of
capital expenditures of $285,000 and payment for the purchase of the net assets
of MSI Co. of $1,520,000. During the fiscal year ended June 30, 1998, cash flows
used in investing activities approximated $3,705,000. Such amount consisted
primarily of capital expenditures of $2,122,000 and payment for the purchase of
the net assets of JEH Co. of $1,659,000, offset by proceeds from the sale of
equipment of $77,000.

Capital expenditures approximated $296,000, $2,122,000 and $286,000 during
the fiscal years ended June 30, 1997 and 1998 and four-month period ended
October 31, 1998, respectively. Management of the Company presently anticipates
such expenditures in the next twelve months of not less than $2,000,000, of
which approximately $1,600,000 will be financed and used for the purchase of
trucks and forklifts for the Company's currently existing operations, in
anticipation of increased business and to upgrade its vehicles to compete better
in its market areas. Management's anticipation of increased business is based on
sales expected to be generated by the opening of new distribution centers, the
locations of which have not yet been decided.

During the four-month period ended October 31, 1998, cash flows used in
financing activities approximated $128,000. Such amount consisted primarily of
principal borrowings on long-term debt of $49,515,000, proceeds from the
issuance of notes payable--shareholder of $1,100,000 and loans payable--
affiliated companies of $1,400,000, an increase in due to Parent and affiliated
companies of $58,000 and a capital contribution from the Parent of $1,000,000,
offset by an increase in deferred registration costs of $128,000 and principal
reductions on long-term debt of $53,073,000. During the fiscal year ended June
30, 1998, cash flows provided by financing activities approximated $4,614,000.
Such amount consisted primarily of principal borrowings on long-term debt of
$139,493,000, proceeds from the issuance of notes payable--shareholders of
$300,000 and a capital contribution from the Parent of $1,350,000, offset by
principal reductions on long-term debt of $134,037,000, an increase in deferred
registration costs of $223,000, a decrease in due to Parent and affiliated
companies of $1,069,000 and dividends paid to Parent of $1,200,000.

During Eagle's fiscal years ended June 30, 1997 and June 30, 1998, Eagle
made dividend payments of $1,250,000 and $1,200,000, respectively, to TDA. JEH
Eagle did not make any dividend payments to TDA during the fiscal year ended
June 30, 1998, and neither Eagle, JEH Eagle nor MSI Eagle made any dividend
payments to TDA during the four-month period ended October 31, 1998. After
October 31, 1998, JEH Eagle has made dividend payments to TDA at the rate of
$150,000 per month, and until completion of the Public Offering and consummation
of the Acquisitions, both Eagle and JEH Eagle may make

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dividend payments to TDA. MSI Eagle is precluded from making dividend payments
and certain other distributions to TDA pursuant to the terms of its credit
facility.

As Eagle has historically made dividend payments to TDA, dividend payments
Eagle may make to TDA subsequent to October 31, 1998 are not anticipated to vary
Eagle's cash sufficiency from its historical levels and, as the dividend
payments to TDA will cease upon the closing of the Public Offering and
consummation of the Acquisitions, it is anticipated that Eagle's available funds
from operations will be increased. It is anticipated that the increase in
available funds will be partially offset by the salaries to be paid to Messrs.
Fields and Friedman in the aggregate annual amount of $520,000 and the aggregate
annual amount of $72,000 payable to TDA pursuant to the respective employment
and services agreements of each of Messrs. Fields and Friedman and of TDA with
the Company and JEH Eagle. Eagle and JEH Eagle (as subsidiaries of the Company)
may make dividend payments to the Company following the closing of the Public
Offering and consummation of the Acquisitions, subject to Eagle's and JEH
Eagle's respective management's evaluations of working capital needs. MSI Eagle
is precluded from making dividend payments and certain other distributions
pursuant to the terms of its credit facility. See "Management" and "Certain
Transactions."

During the fiscal years ended June 30, 1997 and June 30, 1998, TDA allocated
to Eagle the sum of $50,000 for accounting and auditing fees. Upon the closing
of the Public Offering and consummation of the Acquisitions all such accounting
and auditing fees will be incurred directly by Eagle. See "Certain
Transactions."

Although a portion of the net proceeds of the Public Offering are to be used
for inventory purchases for new distribution centers, the Company does not
presently intend to increase the inventory levels at Eagle's present
distribution centers with such proceeds. See "Use of Proceeds."

The Company believes that its existing sources of liquidity, including its
present availability under its revolving credit facilities and its current cash
flows, will be adequate to sustain its normal operations and to satisfy its
current working capital and capital expenditure requirements for the next
eighteen to twenty-four months.

In July 1997, JEH Eagle acquired the business and substantially all of the
assets of JEH Co., a Texas corporation, wholly-owned by James E. Helzer, now the
President of the Company, Eagle and JEH Eagle. The purchase price, as adjusted,
including transaction expenses, was $14,768,000, consisting of $13,878,000 in
cash, net of $250,000 due from JEH Co., and a five-year $864,852 principal
amount note bearing interest at the rate of 6% per year. The purchase price and
the note are subject to further adjustments under certain conditions. Certain,
potentially substantial, contingent payments, as additional future consideration
to JEH Co., or its designee, are to be paid by JEH Eagle. See "The
Acquisitions."

James E. Helzer and E.G. Helzer serve as Eagle's President and Senior Vice
President-Operations of Eagle, respectively, and are compensated at the rate of
$50,000 and $25,000 per year, respectively. Pursuant to their arrangements with
Eagle, James E. Helzer and E.G. Helzer are also entitled to receive 20% and 6%,
respectively, of Eagle's income before taxes in excess of $600,000 per year.
James E. Helzer and E.G. Helzer are employed as President and Senior Vice
President-Operations, respectively, of the Company and Eagle pursuant to oral
agreements that can be terminated by either party without notice or penalty. See
"Management."

Of the $13,878,000 initial cash payment portion of the $14,768,000 JEH Co.
tentative purchase price, including transaction expenses, approximately
$12,500,000 was supplied pursuant to a credit facility and approximately
$1,350,000 was contributed to JEH Eagle by TDA as equity capital. In connection
with the acquisition of JEH Co.'s business and assets, JEH Eagle paid TDA a
financing fee of $150,000.

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$8,538,000, consisting of $6,492,000 in cash and a $2,046,000 principal amount
five-year note bearing interest at the rate of 8% per year. All payments due on
the note are accelerated upon consummation of the Public Offering and are to be
paid within 120 days of such consummation. The note is secured by substantially
all of the assets of MSI Eagle with that security agreement subordinate to the
rights of MSI Eagle's credit facility lending institution. The purchase price
and the note are subject to further adjustments under certain conditions.
Certain, potentially substantial, contingent payments, as additional future
consideration to MSI Co., or its designee, are to be paid by MSI Eagle. See "The
Acquisitions"

Gary L. Howard serves as MSI Eagle's President at a salary of $260,000 per
year pursuant to an employment agreement terminating in June 2003. He also
serves as the Company's Vice President at no additional salary. See
"Management."

Of the $6,492,000 cash payment portion of the approximate $8,538,000
tentative purchase price for the business and substantially all of the assets of
MSI Co., including transaction expenses, approximately $4,250,000 was supplied
pursuant to a credit facility, $1,000,000 was invested by TDA into MSI Eagle as
an equity investment and $1,000,000 was lent to MSI Eagle by TDA pursuant to a
six (6%) percent two-year note in that principal amount payable in full in
October 2000. TDA has agreed with MSI Eagle's credit facility lending
institution to defer the interest payable on such note until its maturity.

CREDIT FACILITIES

Eagle is a party to a loan agreement (the "Eagle Facility") which is due in
October 2003 and provides for secured borrowing consisting of a revolving credit
loan in the amount of $10 million and an equipment loan in the amount of
$900,000. The Eagle Facility is collateralized by certain of Eagle's tangible
and intangible current assets and certain of Eagle's automotive equipment,
approximating $15,656,000 and $628,000, respectively, at October 31, 1998, and
is guaranteed by TDA. The initial borrowing, in December 1994, in the amount of
approximately $4.6 million, was advanced to TDA partially in payment of
intercompany debt. At June 30, 1998 and October 31, 1998, Eagle's borrowings
under its revolving credit loan were $9,012,417 and $7,979,322, respectively,
and its borrowings under its equipment loan were $710,000 and $769,000 at those
dates, respectively. The borrowings under the revolving credit loan are based on
a formula relating to certain levels of receivables and inventory. Except for
the equipment loan, interest only is payable monthly and is based on a floating
rate equal to the lender's prime rate plus one-half percent or Libor plus two
and one-half percent, at Eagle's option. The principal amount of the equipment
loan is payable in equal consecutive monthly installments based upon a 75 month
amortization schedule with any remaining principal amount due upon the earlier
of August 1, 2004 or the end of the Eagle Facility's initial or renewal term.

In order to pay a substantial portion of the purchase price for the
acquisition of JEH Co.'s business and to provide working capital for JEH Eagle,
JEH Eagle in July 1997 entered into a loan agreement for a credit facility of up
to $20,000,000 (the "JEH Facility") guaranteed by TDA and collateralized by
substantially all of the assets of JEH Eagle. The JEH Facility, as amended,
consists of a $3,000,000 term loan, a $2,475,000 equipment loan and, the
balance, a revolving credit loan. The principal amount of the term loan is
payable in 48 equal monthly installments of $62,500. The term loan is due on the
earlier of August 1, 2001 or the loan agreement's termination. The outstanding
balance of the term loan at October 31, 1998 was $2,062,500. The term loan bears
interest at Libor plus three and one-quarter percent or the lender's prime rate
plus one and one-half percent, as JEH Eagle may elect. The principal amount of
the equipment loan is payable in equal consecutive monthly installments of
$26,000 based upon a 76 month amortization schedule with any remaining principal
amount due upon the earlier of August 1, 2004 or the end of the loan agreement's
initial or renewal term. The outstanding balance of the equipment loan at
October 31, 1998 was approximately $1,807,000. The equipment loan bears interest
at Libor plus two and one-half percent or the lender's prime rate plus one-half
percent, as JEH Eagle may elect. The principal amount of the revolving credit
loan is payable upon the earlier of the loan agreement's termination or other
stated events. The outstanding balance on the revolving credit loan at October
31, 1998 was

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approximately $9,237,000. The revolving credit loan bears interest at Libor plus
two and one-half percent or the lender's prime rate plus one-half percent, as
JEH Eagle may elect. All interest payments under the foregoing loans are payable
monthly in arrears. The maximum amount borrowable under the JEH Facility is
determined by a Borrowing Base as defined in the JEH Facility. The JEH Facility
is due in October 2003. During the fiscal year ended June 30, 1998, JEH Eagle
entered into equipment leases (trucks) that its auditors deemed to be
capitalized leases instead of operating leases resulting in a breach of the JEH
Facility's restrictions on capitalized lease obligations. JEH Eagle advised the
lending institution of same, which waived its rights with respect to the default
resulting from the breach, and the JEH Facility was amended to increase the
amount of the capitalized lease obligations that JEH Eagle could incur, thereby
eliminating the breach.

In order to pay a substantial portion of the purchase price for the
acquisition of MSI Co.'s business and assets and to provide working capital to
MSI Eagle, MSI Eagle in October 1998 entered into a loan agreement for a credit
facility of up to $9,075,000 (the "MSI Facility") guaranteed by TDA and
collateralized by substantially all of the assets of MSI Eagle. The MSI Facility
consists of a $3,075,000 term loan and the balance as a revolving credit loan.
The principal amount of the term loan is payable in 83 equal monthly
installments of $37,000 commencing on December 1, 1998 with the remaining unpaid
balance payable with the 84th installment. The term loan is due upon the earlier
of December 1, 2005 or the end of the loan agreement's initial or renewal term.
The term loan bears interest at Libor plus three and one-quarter percent or the
lender's prime rate plus one and one-quarter percent, as MSI Eagle may elect.
The principal amount of the revolving credit loan is payable upon the earlier of
the loan agreement's termination or other stated events. The revolving credit
loan bears interest at Libor plus two and one-half percent or the lender's prime
rate plus one-half percent, as MSI Eagle may elect. All interest payments under
the foregoing loans are payable monthly in arrears. The maximum amount
borrowable under the MSI Facility is determined by a borrowing base as defined
in the MSI Facility. The MSI Facility is due in October 2003.

TDA is a guarantor of the Eagle Facility, JEH Facility and MSI Facility.
Upon completion of the Public Offering and consummation of the Acquisitions, the
Company will also become a guarantor of said facilities. See "The Acquisitions."

IMPACT OF INFLATION

General inflation in the economy has driven the operating expenses of many
businesses higher, and, accordingly, each of the Combined Entities have
increased salaries and bore higher prices for supplies, goods and services. The
Combined Entities continuously seek methods of reducing costs and streamlining
operations while maximizing efficiency through improved internal operating
procedures and controls. While each of the Combined Entities is subject to
inflation as described above, the Company, Eagle, JEH Eagle and MSI Eagle
believe that inflation currently does not have a material effect on Eagle's, JEH
Eagle's or MSI Eagle's operating results, but there can be no assurance that
this will continue to be so in the future.

YEAR 2000 COMPLIANCE

The Year 2000 ("Y2K") Compliance issue is the result of computer programs
being written using two digits rather than four to define the applicable year.
Computer programs that have time-sensitive software may recognize a date using
"00" as the year 1900, rather than year 2000. This could result in a system
failure or miscalculations causing disruptions of operations, including, among
other things, a temporary inability to process transactions, send invoices, or
engage in similar normal business activities.

In 1997, systems were identified and purchased that would meet, at that
time, Eagle's requirements and be Y2K compliant in regard to the maintenance and
management of its operating system and distribution software package. Eagle then
commenced the upgrade of its hardware and the conversion to

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new software programs that are Y2K compliant. Additionally, Eagle's and JEH
Eagle's management have started to integrate and centralize certain of Eagle's
and JEH Eagle's administrative functions, including data processing, and it is
anticipated that MSI Eagle's administrative functions, including data
processing, also will be integrated and centralized with the administrative
functions of Eagle and JEH Eagle. Additionally, JEH Eagle and MSI Eagle will be
utilizing and adopting Eagle's upgraded data processing equipment and new
software programs. As their hardware and software vendors have certified that
their products are Y2K compliant, management of Eagle, JEH Eagle and MSI Eagle
have determined that the Y2K compliance issue will not pose significant
operational problems for their computer systems. The Company's and the Combined
Entities' desktop systems are running products which management believes are
compliant except for minor issues.

The Combined Entities are in the process of initiating formal communications
with all of their significant suppliers and large customers to determine the
extent to which the Combined Entities may be vulnerable to those third parties'
failure to remediate their own Y2K compliance issues. There can be no guarantee
that the systems of other companies on which the Combined Entities' systems rely
will be timely converted and would not have an adverse effect on the Combined
Entities.

Management of the Combined Entities believes that all significant testing
for all potential Y2K issues will be completed during the second quarter of
1999. However, unforeseen difficulties may arise which could adversely affect
the ability to complete any necessary system modifications correctly, completely
and/ or on time. In addition, there can be no assurances that customers,
suppliers and/or service providers on which the Combined Entities rely will
resolve their Y2K issues accurately, thoroughly and/or on time. Contingency
plans are being considered and will be in place by the third quarter of 1999 in
the event that the Company and the Combined Entities are at risk in regard to
suppliers, customers or their own internal hardware and software.

Based on management's assessment of the cost of addressing Y2K compliance
issues, such cost is not currently expected to have a material adverse impact on
the Company's financial position. The total cost of the project is estimated at
$300,000 and is being expensed over the three-year term of the operating lease
for the new equipment and software which is Y2K compliant. The estimated cost of
the project and the date on which the Company believes it will complete the Year
2000 modifications and testing processes are based on management's best
estimates, which were derived utilizing numerous assumptions of future events,
including the continued availability of certain resources, third party
modification plans and other factors. However, there can be no assurance that
these estimates will be achieved, and actual results could differ materially
from those anticipated. Failure to complete the Y2K project by the year 2000
could have a material adverse affect on future operating results and financial
condition of the Company.

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THE ACQUISITIONS

IN GENERAL

Simultaneously with the closing of the Public Offering, the Company will
acquire Eagle, JEH Eagle and MSI Eagle from TDA, and TDA will receive 3,000,000
shares of the Company's Common Stock. The Underwriter and the Company have
agreed that at the consummation of the Acquisitions, the Combined Entities have
a book value of $1,000,000 and that TDA will receive 3,000,000 shares of the
Company's Common Stock. The Company, TDA, Eagle, JEH Eagle and MSI Eagle have
not allocated the consideration for Eagle, JEH Eagle or MSI Eagle. The foregoing
number of shares of the Company's Common Stock to be issued to TDA was
determined by negotiations among the Company, TDA and the Underwriter. Factors
considered in said negotiations included but were not limited to (a) the
historical results of the Combined Entities, (b) their future business
prospects, (c) their position in their industry principally on a combined basis,
(d) the breadth of their product lines, (e) their customer bases, (f) the
experience of their management and personnel, (g) the locations of their
distribution facilities, and (h) their net worth.

The 3,000,000 shares of the Company's Common Stock that TDA is to receive in
connection with the Acquisitions was negotiated and evaluated based on the
assessments made by the parties to the negotiations of the relative interests
that would be held in the Company after the consummation of the Public Offering
and the Acquisitions. There was no specific value assigned to the shares of
Common Stock to be issued to TDA for the Acquisitions. Management of TDA weighed
the relative merits of maintaining the Combined Entities as privately and
wholly-owned by TDA while the Combined Entities would seek to implement their
internal expansion and acquisition growth strategies or, alternatively, of
transferring the Combined Entities to the Company which, as a public company,
could provide potential advantages in implementing the Combined Entities'
internal expansion and acquisition growth strategies but would leave TDA with an
ownership position of less than 100% through its stock ownership in the Company.
In agreeing to transfer 3,000,000 shares of Common Stock of the Company to TDA
for the Combined Entities, the Company determined that the amount of ownership
interest of the Company to be transferred to TDA in connection with the
consummation of the Acquisitions, in light of all of the terms and provisions of
the Acquisitions transaction, was beneficial to the Company and would provide a
sound basis for implementing the Company's business plan.

Additionally, as part of the Acquisitions, TDA guarantees that the Combined
Entities will have a book value of no less than $1,000,000 after Eagle cancels,
in the form of a non-cash dividend, all indebtedness of TDA to Eagle, except for
an approximately $495,000 receivable from TDA relating to and offsetting a
mortgage in the same amount on the Birmingham, Alabama property previously owned
by Eagle and for which Eagle remains the primary obligor, with TDA contributing
cash sufficient to achieve that book value in the event of a deficiency. At
October 31, 1998, the combined book value of the Combined Entities was
approximately $5,773,000, which exceeded the required $1,000,000 combined book
value by approximately $1,703,000 after assuming cancellation by Eagle, in the
form of a non-cash dividend, of all indebtedness of TDA to Eagle, at that date,
excluding the foregoing receivable offsetting such mortgage. Any payment to
Eagle, JEH Eagle or MSI Eagle by TDA to satisfy the $1,000,000 combined book
value requirement set forth above will be paid to Eagle, JEH Eagle or MSI Eagle
by TDA within forty-five days of the closing of the Public Offering and
consummation of the Acquisitions. At October 31, 1998, TDA's indebtedness to
Eagle, excluding the foregoing receivable offsetting such mortgage, was
approximately $3,070,000. Upon consummation of the Acquisitions, Eagle, JEH
Eagle and MSI Eagle will become wholly-owned subsidiaries of the Company and
will constitute the only business operations and sources of revenue of the
Company until such time, if any, as the Company consummates additional
acquisitions.

300,000 and 200,000 shares of the Company's Common Stock to be issued to
Messrs. Helzer and Howard were determined by negotiations between JEH Eagle and
JEH Co. and MSI Eagle and MSI Co. at the times of JEH Eagle's and MSI Eagle's
acquisitions of the business and substantially all of the assets of JEH Co. and
MSI Co., respectfully. See the discussions below regarding the acquisitions of
JEH Co. and MSI Co.

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TDA is a guarantor of the Eagle Facility, JEH Facility and MSI Facility.
Upon completion of the Public Offering and consummation of the Acquisitions, the
Company will also become a guarantor of said facilities. See "Management's
Discussion and Analysis of Financial Condition and Results of Operations--
Liquidity and Capital Resources" and the discussions below regarding "Eagle
Related Party Transactions" and the acquisitions of JEH Co. and MSI Co.

TDA has advised the Company that in the event Eagle, JEH Eagle or MSI Eagle
seek increased lines of credit, new lines of credit or other changes in any
credit facility which would give TDA the right to terminate or decline to grant
a new guarantee, TDA may seek compensation from the Company. No such
compensation has been agreed upon, could be material to the Company, Eagle, JEH
Eagle and/or MSI Eagle and result in a material benefit to TDA and certain
officers and directors of TDA. In the event TDA were to exercise any such right
to terminate a guarantee or decline to grant a new guarantee, credit facilities
may no longer be available to Eagle, JEH Eagle and/or MSI Eagle or credit
facilities may be available only upon materially different terms and conditions
including, but not limited to, a reduced availability of funds, additional
and/or higher interest rates and charges and other more restrictive financial
terms and conditions. Any of the foregoing events could have a material adverse
effect upon the Company, Eagle, JEH Eagle and/or MSI Eagle.

EAGLE RELATED PARTY TRANSACTIONS

TDA, through a wholly-owned subsidiary, 39 Acre Corp., 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 $782,000 and $790,000 during its fiscal years
ended June 30, 1997 and 1998, respectively. Upon successful completion of the
Public Offering and the consummation of the Acquisitions, Eagle and TDA intend
to enter into ten-year leases for said premises on economic terms substantially
similar to current arrangements. However, the leases will now be written on a
long-term, ten-year basis, and it is anticipated that TDA will derive a profit
therefrom. The Company believes that the rent and other terms of the written
lease agreements to be entered into between 39 Acre Corp. and Eagle are on at
least as favorable terms as Eagle would expect to negotiate with unaffiliated
third parties. Neither Eagle nor 39 Acre Corp. will be permitted to terminate
the leases before the end of the term without a breach or default by the other
party.

Eagle had purchased the premises for its Birmingham, Alabama, distribution
center from an unrelated third party in April 1994, for a purchase price of
$735,000, with part of the purchase price financed with a purchase money
mortgage and a 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 in April 1999. The mortgage and promissory
note for the Birmingham, Alabama, premises bears interest at the lending bank's
fluctuating prevailing prime rate. Prior to June 30, 1994, Eagle transferred
this property to TDA in partial repayment of intercompany debt, and TDA then
transferred the property to a wholly-owned subsidiary. At the time of the
transfer of the Birmingham, Alabama property by Eagle to TDA, the net book value
of the property (including improvement's made by Eagle) was approximately
$763,000, that sum being TDA's purchase price. The amount of the intercompany
debt that was satisfied in fiscal 1994 by the transfer of the Birmingham,
Alabama, property from Eagle to TDA was approximately $216,000. TDA also assumed
the mortgage on these premises in the approximate principal amount of $547,000
at the time of the transfer. In fiscal 1995, the approximate amount of $90,000
of leasehold improvements on a property in Jacksonville, Florida, was
transferred from Eagle to TDA in satisfaction of intercompany debt in an amount
equal to the net book value of the improvements. The Jacksonville, Florida,
property had been leased by Eagle from 39 Acre Corp. and operated as a
distribution center until the sale by Eagle of the business operated from this
distribution center in June 1995 to a third party not affiliated with the
Company. 39 Acre Corp. is the TDA subsidiary to which the Birmingham, Alabama,
property and the improvements on the Jacksonville, Florida, property were
ultimately transferred. Eagle remains liable for the payments under the
Birmingham, Alabama mortgage and, in the event of a default under the mortgage
by 39 Acre Corp., Eagle could be held liable for the monthly and "balloon"
mortgage

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payments in addition to its rental payments. Eagle's rental payments to 39 Acre
Corp. for the Birmingham, Alabama, property have exceeded the mortgage payments
for this property and have not required Eagle to pay any sums in excess of its
rental payments.

Eagle also remains responsible to Eagle Holding, Inc., a TDA subsidiary,
pursuant to a lease for Eagle's former Fort Lauderdale, Florida, distribution
center expiring on May 1, 1999, which requires annual rental payments and 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 $240,000,
which amount is approximately equal to Eagle's lease obligation. The payments by
Eagle have included through October 31, 1998 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.

Upon completion of the Public Offering and consummation of the Acquisitions,
TDA will indemnify Eagle for any payments that Eagle is required to make which
are in excess of Eagle's obligations under the Birmingham, Alabama, and Fort
Lauderdale, Florida, leases and relate to the mortgage or the industrial revenue
bonds for the Birmingham, Alabama and Fort Lauderdale, Florida, properties,
respectively.

THE 1997 ACQUISITION OF JEH CO.

In July 1997 JEH Eagle acquired the business and substantially all of the
assets of JEH Co., a Texas corporation, wholly-owned by James E. Helzer, now the
President of the Company, Eagle and JEH Eagle. The purchase price, as adjusted,
including transaction expenses, was approximately $14,768,000, consisting of
$13,878,000 in cash, net of $250,000 due from JEH Co., and a five-year $864,852
principal amount note bearing interest at the rate of 6% per year. The purchase
price and the note are subject to further adjustments under certain conditions.
The first $250,000 of the adjustments was to be paid in cash by JEH Co. to JEH
Eagle but, as other adjustments to the purchase price are anticipated, JEH Eagle
elected to postpone the $250,000 payment from JEH Co. until other adjustments to
the purchase price are resolved, and the $250,000 payment has been established
as a receivable due on demand from JEH Co. Certain, potentially substantial,
contingent payments, as additional future consideration to JEH Co., or its
designee, are to be paid by JEH Eagle. JEH Co. is to receive a percentage of the
EBITDA or the modified EBITDA (as defined) of the business acquired (the "JEH
EBITDA") on a per year non-cumulative basis for each of JEH Eagle's fiscal years
ending on June 30 of 1998 through 2002 (the "JEH Applicable Period"). If the JEH
EBITDA reaches $3,000,000, $4,000,000 and $5,000,000 in the foregoing fiscal
years, JEH Co. or its designee is to receive 35%, 40% and 50%, respectively, of
that fiscal year's JEH EBITDA in excess of those levels, respectively. In
addition to the foregoing percentages of JEH EBITDA, if the JEH EBITDA (plus
$50,000 of Mr. Helzer's compensation under his employment agreement) (x) for any
fiscal year in the JEH Applicable Period is not less than $4,400,000, JEH Eagle
is to pay JEH Co. or its designee $1,000,000, provided that the aggregate
amounts of such payments is not to exceed $2,000,000; and (y) in the aggregate
during the JEH Applicable Period is not less than $20,000,000, JEH Eagle is to
pay JEH Co. or its designee the sum of $1,350,000 plus the amount of the
difference, if any, between $2,000,000 and the amount to be paid under (x).
Additionally, with respect to certain Total Accounts Receivable Reserves, as
defined (the "JEH Reserves") which were established at the date of the
Acquisition, if JEH Eagle reduces the amount of the JEH Reserves, in any fiscal
year during the JEH Applicable Period, JEH Co. or its designee is to be paid
100% of the reduction until the JEH Reserves are not less than $2,500,000 and
50% of the reduction in the JEH Reserves below $2,300,000 down to $600,000. Both
of the immediately foregoing percentage payments to JEH Co. or its designee are
subject to adjustment in certain events. Additionally, if this Public Offering
is completed prior to June 30, 2002 and in the event certain JEH EBITDA levels
are reached for JEH Eagle during the period from July 1, 1997 through the date
of consummation of this Public Offering, JEH Co. or its designee will be
entitled to receive (i) $1,000,000 or (ii) $1,350,000 (either in cash or in
shares of the Company's Common Stock valued at its public offering price) if the
JEH EBITDA level is (i) less than $3,800,000 per year but not less than
$3,600,000 per year, or (ii) not less than $3,800,000 per year, respectively.
The Company will issue 300,000 shares of its Common Stock and not pay the
foregoing

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amounts to James E. Helzer in fulfillment of the obligation set forth in the
immediately preceding sentence, even if the JEH EBITDA does not reach the
required levels.

THE 1998 ACQUISITION OF MSI CO.

In October 1998, MSI Eagle acquired the business and substantially all of
the assets of MSI Co., a Texas corporation, wholly-owned by Gary L. Howard, now
a Vice President of the Company and President of MSI Eagle. The purchase price,
as adjusted, including transaction expenses, was approximately $8,538,000,
consisting of $6,492,000 in cash and a $2,046,000 principal amount five-year
note bearing interest at the rate of 8% per year. All payments due on the note
are accelerated upon consummation of the Public Offering and are to be paid
within 120 days of such consummation. At MSI Co.'s option, upon consummation of
the Public Offering, it may exchange up to $2,000,000 of the principal amount of
the note into shares of the Company's Common Stock valued at the public offering
price. MSI Co. has advised the Company that it intends to convert $250,000 of
the principal amount of the note for shares of the Company's Common Stock and
transfer said shares or its right to receive said shares to Gary L. Howard. The
note is secured by substantially all of the assets of MSI Eagle with that
security agreement subordinate to the rights of MSI Eagle's credit facility
lending institution. The purchase price and the note are subject to further
adjustments under certain conditions. Certain, potentially substantial,
contingent payments, as additional future consideration to MSI Co., or its
designee, are to be paid by MSI Eagle. MSI Co. is to receive a percentage of the
EBITA or the modified EBITA (as defined) of the business acquired (the "MSI
EBITA") on a per year non-cumulative basis for each of MSI Eagle's fiscal years
ending on June 30 of 1999 through 2003. If the MSI EBITA reaches $2,000,000 and
$2,750,000 in the foregoing fiscal years, MSI Co. or its designee is to receive
25% and 35%, respectively, of that fiscal year's MSI EBITA in excess of those
levels, respectively. Additionally, if the Public Offering is completed prior to
October 22, 2003 and in the event certain MSI EBITA levels are reached for MSI
Eagle, MSI Co. or its designee will be entitled to receive (i) $1,000,000 or
(ii) $750,000 (either in cash or in shares of the Company's Common Stock valued
at its public offering price) if the MSI EBITA level is (i) not less than
$2,000,000 per year or (ii) less than $2,000,000 but not less than $1,500,000
per year, respectively. The Company will issue 200,000 shares of its Common
Stock, and not pay the foregoing amounts, to Gary L. Howard as MSI Co.'s
designee, in fulfillment of the obligation set forth in the immediately
preceding sentence, even if the MSI EBITA does not reach the required levels.

Of the $6,492,000 cash payment portion of the approximate $8,538,000
tentative purchase price for the business and substantially all of the assets of
MSI Co., approximately $4,250,000 was supplied pursuant to the MSI Facility,
$1,000,000 was invested by TDA into MSI Eagle as an equity investment and
$1,000,000 was lent to MSI Eagle by TDA pursuant to a six (6%) percent two-year
note in that principal amount payable in full in October 2000. TDA has agreed
with MSI Eagle's credit facility lending institution to defer the interest
payable on such note until its maturity.

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EMPLOYMENT AGREEMENTS AND ARRANGEMENTS

The Company and Eagle have entered into employment agreements with Messrs.
Fields and Friedman, to become effective upon closing of the Public Offering and
consummation of the Acquisitions, 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.

JEH Eagle has entered into agreements with Messrs. Fields and Friedman
pursuant to which they act as Chairman of the Board of Directors and Chief
Executive Officer, and Executive Vice President, Chief Financial Officer,
Treasurer, Secretary and a Director of JEH Eagle, respectively, for a five-year
period which commenced in July 1997, at annual compensation of $60,000 each,
subject to annual increases and bonuses as may be determined by JEH Eagle's
Board of Directors. The compensation payable to Messrs. Fields and Friedman
under their employment agreements shall commence upon the closing of the Public
Offering and consummation of the Acquisitions.

Pursuant to the foregoing 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 agreements require the Company, Eagle, and JEH
Eagle to provide their beneficiaries and each of them, respectively, with twelve
months salary in the event of death or disability and indemnify Messrs. Fields
and Friedman to the full extent permitted under the Delaware General Corporation
Law. Their agreements do not require either Messrs. Fields or Friedman to commit
a specific amount of their time to the affairs of the Company, Eagle, and JEH
Eagle. However, Messrs. Fields and Friedman will devote no less time than they
deem reasonably necessary to carry out their duties to the Company, Eagle, JEH
Eagle and MSI Eagle.

The Company's and JEH Eagle's agreements with Messrs. Fields and Friedman
contain provisions for payments of salary and benefits following a change of
control (as defined) of the Company or JEH Eagle, the failure to reappoint
either of them to his position, a salary reduction or the Company's or JEH
Eagle's failure to perform its obligation under their respective agreements. In
general, under such circumstances, each of Messrs. Fields and Friedman would be
entitled to a cash payment equivalent to his salary for the remaining term of
his agreement, and continued life, health and disability insurance benefits for
a period of two years.

JEH Eagle entered into agreements with James E. Helzer and E.G. Helzer
pursuant to which they serve as President and Senior Vice President--Operations
of JEH Eagle, respectively, which commenced in July 1997, at compensation rates
of $250,000 and $125,000 per year, respectively, subject to annual review by JEH
Eagle's Board of Directors. James E. Helzer and E.G. Helzer also serve as
Eagle's President and Senior Vice President-Operations and are compensated at
the rates of $50,000 and $25,000 per year, respectively, and are also entitled
to receive 20% and 6%, respectively, of Eagle's income before taxes in excess of
$600,000 per year. Messrs. Helzers are employed by the Company and Eagle
pursuant to oral agreements that can be terminated by either party without
notice or penalty.

OTHER RELATED PARTY TRANSACTIONS IN CONNECTION WITH THE ACQUISITIONS

James E. Helzer had rented to JEH Co. and continues to rent to JEH Eagle,
pursuant to five-year written leases, the premises for JEH Eagle's executive
office and several distribution centers at aggregate annual rentals of
approximately $485,000. Rental payments to Mr. Helzer for the executive offices
and several distribution centers he leases to JEH Eagle aggregated $492,000 and
$162,000 for JEH Eagle's fiscal year ended June 30, 1998 and its four-month
period ended October 31, 1998, respectively.

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TDA and JEH Eagle have entered into an agreement pursuant to which TDA
provides JEH Eagle with certain services including (i) managerial, (ii)
strategic planning, (iii) banking negotiation, (iv) investor relations, and (v)
advisory services relating to acquisitions for a five-year term which commenced
in July 1997. The monthly fee, the payment of which is to commence upon the
closing of the Public Offering and the consummation of the Acquisitions, for the
foregoing services is $3,000.

Gary L. Howard had rented to MSI Co. and continues to rent to MSI Eagle,
pursuant to a three-year written lease, the premises for MSI Eagle's executive
offices and principal distribution center at an approximate annual base rental
of $107,000. Rental payments to Mr. Howard were approximately $192,000 for MSI
Co.'s fiscal year ended June 30, 1998 and $64,000 for its four-month period
ended October 31, 1998. The Company believes that the lease rental amount is
fair and reasonable to MSI Eagle and is not in excess of what MSI Eagle would be
required to pay independent third parties for comparable facilities.

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BUSINESS

INTRODUCTION

The Company was 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
Acquisitions of Eagle, JEH Eagle and MSI Eagle. Eagle was founded in Florida in
1905. Eagle is a wholesale distributor of a complete line of roofing supplies
and related products through its own sales force and distribution facilities to
roofing supply and related products contractors and sub-contractors in the
geographic areas where Eagle has distribution centers. Such contractors and
sub-contractors are engaged in commercial and residential roofing repair and the
construction of new residential and commercial properties. JEH Co. was founded
in 1982 and its business and substantially all of its assets were purchased by
JEH Eagle in July of 1997. Similar to Eagle, JEH Eagle is a wholesale
distributor of roofing supplies and related products within the geographic areas
of its distribution facilities using similar sales methods. JEH Eagle also
distributes drywall, plywood, vinyl siding and similar products to contractors,
builders, and developers primarily engaged in the construction industry. MSI Co.
was founded in 1979, and its business and substantially all of its assets were
purchased by MSI Eagle in October of 1998. MSI Eagle is a wholesale distributor
of cement, masonry supplies and related products to building contractors and
subcontractors through its own sales force and distribution centers. Such
contractors and subcontractors are engaged in residential and commercial
construction. Upon consummation of the Acquisitions, Eagle, JEH Eagle and MSI
Eagle will become wholly-owned subsidiaries of the Company and will constitute
the only 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 years ended June 30, 1997 and 1998, Eagle had revenues
of approximately $57,576,000 and $58,498,000, respectively, and a net income of
approximately $192,000 and $160,000, respectively. For the four-month period
ended October 31, 1998, Eagle had revenues and a net loss of approximately
$19,102,000 and $143,000, respectively.

During JEH Co.'s fiscal year ended December 31, 1996 and six-month period
ended June 30, 1997, JEH Co. had revenues of approximately $74,893,000 and
$28,979,000, respectively, and net income of approximately $171,000 and a net
loss of approximately $1,179,000, respectively. During JEH Eagle's fiscal year
ended June 30, 1998, and four-month period ended October 31, 1998, it had
revenues of approximately $71,006,000 and $31,682,000 and net income of
approximately $608,000 and $1,306,000, respectively.

During MSI Co.'s fiscal years ended June 30, 1997 and 1998 and four-month
period ended October 31, 1998, MSI Co. had revenues of approximately $9,101,000,
$11,960,000, and $4,341,000, respectively, and net income of approximately
$487,000, $963,000, and $641,000, respectively.

The Company's activities to date have been limited primarily to its initial
organization, negotiating the terms and conditions of the Public Offering, its
listing on NASDAQ SmallCap, the Acquisitions and obtaining 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

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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 distributor. Roofing supplies
and related 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 consolidation in those industries that offers
significant opportunities for expansion oriented distributors, such as the
Company. The Company believes that there are opportunities for a company which
has the capability to source and distribute products effectively to serve the
roofing supplies and related products markets and to effect cost savings and
increased profit opportunities through efficiencies of scale which can be
applied to companies acquired in the roofing supplies and related products
industry.

The Company plans to seek acquisition candidates primarily in the roofing
supplies and related products industry throughout the United States, with
greater emphasis on the Southeastern, Midwestern and Western regions and less
emphasis on the Northeastern region of the United States. However, the Company
may consider acquisition candidates in any of the foregoing regions of the
United States if an exceptional opportunity arises. Initial acquisition
candidates will be sought in the roofing supply industry, and the factors that
the Company may consider in reviewing a potential acquisition candidate include,
but are not limited to, the following: (i) geographical locations; (ii)
operations contiguous to current areas of operations; (iii) members of its
management; (iv) economic viability; (v) the experience of management; (vi)
revenues; (vii) historical profitability; (viii) balance sheet quality; (ix)
product lines carried; (x) type of customers; (xi) qualities of fleet; (xii)
size and number of locations; and (xiii) vendors. As the characteristics of
potential acquisition candidates can vary widely, the Company is unable to
indicate the weight to be given to the foregoing and other factors, and the
foregoing factors should not be considered to be set forth in the Company's
order of priority. Acquisition candidates will be sought by members of the
management team and the officers of the Company, Eagle, JEH Eagle and MSI Eagle.
Additionally, potential acquisition candidates may be made known to the Company
from various sources such as business brokers, venture capitalists, members of
the financial community, vendors, others who may present unsolicited proposals
and through industry associations. In certain circumstances, the Company may
agree to pay a finder's fee for services provided by persons who are not
currently executive officers of the Company, Eagle, JEH Eagle or MSI Eagle, or
executive officers or directors of TDA which include, but are not limited to,
Messrs. Fields and Friedman, which submit acquisition candidates to the Company
that are subsequently acquired by the Company. However, in the event an
acquisition candidate is submitted to and acquired by the Company by a director
of the Company, Eagle, JEH Eagle or MSI Eagle who is not an executive officer of
the Company, Eagle, JEH Eagle or MSI Eagle, the Company anticipates that it may
pay any such person a finder's fee the same as if such person were an
independent third party. Any such finder's fee will be paid at the then
prevailing market rates as determined by the Company's executive officers and be
subject to approval by the Company's Board of Directors if such a fee is to be
paid to an affiliate of the Company. No such finder's fee will be paid to TDA or
persons who are officers or directors of TDA. Purchase prices for the Company's
potential acquisition candidates will be determined by negotiations conducted by
the Company's management with the prospective sellers. The Company's management
will conduct a review of a potential acquisition candidate's business operations
and historical financial information in connection with the negotiating process.
The Company intends to attempt to make such acquisitions at an amount related to
the candidate's book value. However, the Company may pay a sum in excess of a
candidate's book value if the Company's assessment of the candidate's product
lines, geographic market area, competitive position in that market, customer mix
(commercial or residential), the fair market value of its assets or perceived
potential future profit warrants such a premium.

The Company anticipates that it will be able to enhance the profit potential
of acquired companies by combining their operations with the operations of
Eagle, JEH Eagle and MSI Eagle. It is anticipated that acquired companies should
be able to take advantage of (as well as, by becoming affiliated with Eagle, JEH
Eagle and/or MSI Eagle, enhance) Eagle's, JEH Eagle's and/or MSI Eagle's ability
to obtain volume

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discounts and other favorable terms (many of which are dependent on the volume
of purchases) from vendors, enabling the acquired companies to obtain better
purchasing terms and thereby offer more competitive pricing to customers as a
result of Eagle's, JEH Eagle's and MSI Eagle's practice of negotiating prices
and terms from vendors on a company-wide or multi-center basis. Additionally, it
is anticipated that acquired companies should also be able to take advantage of
Eagle's centralized administrative and data processing systems which provide
real-time management information systems and centralized administrative
functions, thereby relieving acquired companies of some record keeping and
administrative functions and enabling them to reduce personnel and overhead
expenses. Also, acquired companies should be able to use Eagle's centralized
administrative and data processing systems, among other things, to monitor
inventory levels and sales by distribution center, allowing each distribution
center manager to better assure that his center has sufficient and balanced
product inventory to meet the customer needs in that market area. JEH Eagle and
Eagle have begun to integrate their computer systems with the objective to fully
integrate their systems by the end of March 1999 to allow for certain
administrative, purchasing, billing, collection, credit control and other
similar functions to be combined at one location. It is anticipated that a
similar integration of MSI Eagle's computer system with that of Eagle and JEH
Eagle will occur by the end of the 1999 calendar year. The Company anticipates
that any future acquisitions will have their similar administrative and other
functions integrated with this combined facility. The operations of acquired
companies may be enhanced by expanding the product lines that they carry, if
they carry fewer product lines than Eagle, JEH Eagle or MSI Eagle currently
carry. Acquired companies may also be able to draw upon the industry experience
of Eagle's, JEH Eagle's or MSI Eagle's management to improve their product
knowledge, training of branch managers and sales personnel, and ability to
service customers. The Company intends to provide expansion capital, if
necessary, and administrative and management services to acquired companies.

The Company considers suitable acquisition candidates to be privately-owned
companies having a history of profitable operations or for which profitable
potential is perceived by the Company's management. Additionally, as roofing and
related products distributors are overwhelmingly relationship based, suitable
acquisition candidates should have key managerial personnel willing to continue
their employment after the acquisition and a stable sales force that the
Company's management anticipates to remain substantially in place after the
acquisition. Suitable acquisition candidates may also include the assets and
sites of entities which may not be currently profitable or which may be
underperforming but located in a geographical market area that the Company's
management believes to have profitable potential when restructured and placed
under new management. The Company has no present intention to make any
acquisitions from any of its affiliates other than the Acquisitions.

In formulating its acquisition strategy, the Company has relied upon the
experience of management in the wholesale distribution of roofing supplies and
related products industry. The majority of distribution center managers have
been associated with Eagle, JEH Eagle or MSI Eagle for more than ten years.
James E. Helzer, the President of the Company, Eagle and JEH Eagle, founded JEH
Co. in 1982 and was its owner and chief executive officer until substantially
all of its business and assets were acquired by JEH Eagle. E.G. Helzer, Senior
Vice President-Operations of the Company, Eagle and JEH Eagle was associated
with JEH Co. since its inception in 1982. In 1982, JEH Co. commenced operations
and by the time of its acquisition by JEH Eagle in July 1997, it had eleven
distribution centers. Gary L. Howard, a Vice President of the Company and the
President of MSI Eagle, founded MSI Co. in 1979 and was its owner and chief
executive officer until its business and substantially all of its assets were
acquired by MSI Eagle. In 1979, MSI Co. commenced operations and by the time of
its acquisition by MSI Eagle in October 1998, it had four distribution centers.
Douglas P. Fields and Frederick M. Friedman, executive officers and directors of
the Company, Eagle, JEH Eagle and MSI Eagle have been executive officers and
directors of Eagle for approximately twenty-five years. In 1973, at the time
Eagle was acquired by TDA, it had one distribution center. Eagle now has sixteen
distribution centers.

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<PAGE>
The Combined Entities have an aggregate of approximately 49 managerial
employees. It is planned that the managerial staffs of the Combined Entities,
other members of their staffs and the Company's executive officers, other than
Messrs. Fields and Friedman, will principally provide administrative and
management services to any acquired companies with Messrs. Fields and Friedman
providing oversight of such management and administrative assistance and
expertise in evaluating, negotiating and financing acquisitions. Messrs. Fields
and Friedman each have more than twenty-five years experience in the management
of acquisition oriented companies. Under their management, TDA acquired the
businesses of Eagle, JEH Eagle, MSI Eagle, a distributor of flooring products, a
tennis facility, a number of distributors of plumbing, heating, electrical and
hardware supplies, a manufacturer of electrical products, a number of other
companies and various real estate. James E. Helzer, an executive officer of the
Company, Eagle and JEH Eagle founded JEH Co. and developed it into a roofing
supply distributor with twelve distribution centers in five states. Gary L.
Howard, a Vice President of the Company and President of MSI Eagle, founded MSI
Co. and developed it into a building supply distributor with four distribution
centers. Although Messrs. Fields and Friedman have not agreed to devote any
specified amount of time to the Company and the Combined Entities, they intend
to devote such time as is necessary to perform the foregoing services. Gary L.
Howard has agreed to devote all of his business time to MSI Eagle and the
Company. James E. Helzer has agreed to devote a substantial amount of his time
to the Company, Eagle and JEH Eagle. See "Management".

Although the Company has not specifically identified any probable
acquisition candidates and does not currently have any agreements, arrangements
or commitments with respect to any proposed acquisition in place, other than the
Acquisitions, 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, JEH Eagle and/or MSI 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

Management intends to pursue expansion of the operations of the Combined
Entities by adding new distribution centers with the proceeds of the Public
Offering and by internal growth. During the 1998 calendar year, the Combined
Entities have opened two new distribution centers.

The Company has allocated approximately $2,176,000 from the net proceeds of
the Public Offering to establish six new distribution centers and approximately
$700,000 to make leasehold improvements to existing distribution centers and to
purchase equipment (trucks, forklifts and similar items) to support the planned
six additional distribution centers which are intended to be opened within
twenty-four months following the completion of the Public Offering and
consummation of the Acquisitions. The Company presently anticipates that the six
additional distribution centers will be leased from third parties not affiliated
with the Company, Eagle, JEH Eagle or MSI Eagle. There can be no assurance that
any or all of such new distribution centers will be opened within such
twenty-four month period, that they will not be leased from affiliates of the
Company or the Combined Entities or that they will be opened at all.

BUSINESS

Eagle and JEH Eagle are wholesale distributors of a complete line of roofing
supplies and related products through their own sales forces to roofing supply
and related products contractors and sub-contractors in the geographic areas
where they have distribution centers. Such contractors and sub-

64
<PAGE>
contractors are engaged in commercial and residential roofing repair and the
construction of new residential and commercial properties.

Eagle also distributes sheet metal products used in the roofing repair and
construction industries. JEH Eagle also distributes drywall, plywood and related
products and, solely in Colorado, vinyl siding to the construction industry. In
general, products distributed by Eagle and JEH 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, sheet metal of the type
used in the roofing industry, drywall and plywood. Sales to retail customers are
made principally in Colorado but are believed by the Company to be very small in
dollar volume.

The following chart indicates the approximate percentage of the indicated
product categories sold by Eagle and JEH Eagle (JEH Co. prior to July 1, 1997)
for the periods indicated:

<TABLE>
<CAPTION>
RESIDENTIAL COMMERCIAL
ROOFING ROOFING SHEET METAL DRYWALL AND PLYWOOD
------------- ------------- ------------- ---------------------
<S> <C> <C> <C> <C>
EAGLE
FISCAL YEAR ENDED JUNE 30,
1996................................................. 57% 31% 12% N/A
1997................................................. 55% 32% 13% N/A
1998................................................. 60% 27% 12% 1%

JEH EAGLE
(JEH CO. PRIOR TO JULY 1, 1997)
FISCAL YEAR ENDED DECEMBER 31,
1996................................................. 81% 5% N/A 14%
1997................................................. 79% 6% N/A 15%
Six Months Ended June 30, 1997....................... 79% 6% N/A 15%
Fiscal Year Ended June 30, 1998...................... 85% 5% N/A 10%
</TABLE>

MSI Eagle is a wholesale distributor of a complete line of cements and
masonry supplies and related products through its own direct sales force to
building and masonry contractors and sub-contractors in the Dallas/Fort Worth
metropolitan area. In general, products distributed by MSI Eagle include cement,
cement mixtures and similar "bag" products (lime, sand, etc.), angle iron,
cinder blocks, cultured stones and bricks, fireplace and pool construction
materials, and equipment, tools and accessory products for use in residential
and commercial construction.

The following chart indicates the approximate percentage of total revenues
that were provided by the indicated product categories sold by MSI Co. for the
periods indicated.

<TABLE>
<CAPTION>
BLOCKS/STONE SWIMMING POOL
BAGGED/BULK AND FIREPLACE AND ALL OTHER
PRODUCTS BRICKS ANGLE IRON PRODUCTS PRODUCTS
--------------- --------------- ------------- ------------- ---------------
<S> <C> <C> <C> <C> <C>
FISCAL YEAR ENDED JUNE 30
1996............................................. 58% 14% 8% 8% 12%
1997............................................. 61% 13% 8% 5% 13%
1998............................................. 65% 12% 9% 1% 13%
</TABLE>

Eagle has grown from nine distribution centers at June 30, 1991, including
locations in Florida (seven) and Alabama (two), to its current level of sixteen
distribution centers including locations in Florida (eleven), Alabama (four) and
Mississippi (one). Eagle has pursued its expansion activities by opening new
distribution centers. Similarly, JEH Co. grew from six distribution centers in
1990, including locations in Texas (five) and Colorado (one) to twelve
distribution centers, including locations in Texas (five), Colorado (four),
Indiana (one), Minnesota (one) and Virginia (one). MSI Co. grew from its sole
distribution center in 1979 to four distribution centers. JEH Co. in the past
and JEH Eagle now, occasionally, establish

65
<PAGE>
temporary distribution centers in response to storms which have created
temporary markets. After opening a new distribution center, the initial 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, the policy of the Combined Entities
is to continue to assess each distribution center's performance and
profitability. As a result of this ongoing assessment, the Combined Entities
have on occasion sold or closed certain distribution centers.

OPERATING STRATEGY

Key elements of the current operating strategy of the Combined Entities are
as follows:

PURCHASING ECONOMIES. Eagle, JEH Eagle, MSI Eagle and, where possible, the
Combined Entities negotiate with 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 the
Combined Entities are 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 vendors.

CENTRALIZING MANAGEMENT INFORMATION SYSTEMS AND ADMINISTRATION. Eagle
maintains centralized computer and data processing systems to support decision
making throughout its organization including what management believes to be an
in-depth credit analysis of its customers. Distribution centers are equipped
with on-line, real time management information systems. Eagle's management
information systems enable management to perform, control and monitor accounts
receivable, inventory levels, order entry, invoicing, sales and profitability by
distribution center. Each Eagle 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. Following JEH Eagle's acquisition
of JEH Co.'s distribution centers in July of 1997, Eagle and JEH Eagle began to
integrate their computer, data processing and management information systems,
and it is anticipated that by the end of March 1999, Eagle and JEH Eagle will be
functioning on the same computer hardware and software systems. It is
anticipated that by the end of the 1999 calendar year MSI Eagle will have
integrated its computer, data processing and management information systems with
that of Eagle and JEH Eagle. See "--Strategy."

DECENTRALIZING OPERATIONS. The Combined Entities have a decentralized
operating philosophy to maximize responsiveness to customers' varied needs and
to give distribution center managers a sense of responsibility for the
performance of their own operations and the Combined Entities as a whole. While
Eagle and JEH Eagle negotiate purchase prices and terms for many products from
many vendors on a joint or multi-center basis and each uses central management
information systems to achieve economies of scale, each Eagle and JEH Eagle
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 annual budget. Further, each
Eagle and JEH Eagle 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. Management of MSI
Eagle's operations are not as decentralized as that at Eagle and JEH Eagle,
although management anticipates that, in the event that MSI Eagle increases the
number of its distribution centers, either by acquisition or internal expansion,
more decision making will be made by distribution center managers. Although MSI
Eagle's distribution center managers do not have full responsibility for all
items affecting profit and loss, such as purchases of products at the
distribution

66
<PAGE>
centers that they manage, they receive annual bonuses based on the profitability
of their respective distribution centers.

PRINCIPAL PRODUCTS

EAGLE AND JEH EAGLE

Eagle and JEH Eagle distribute 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. These products are sold principally by Eagle and
include aluminum, copper, galvanized and stainless sheet metal.

DRYWALL/PLYWOOD PRODUCTS. These products are sold principally by JEH Eagle
and include sheet rock and plywood.

Eagle and JEH Eagle also sell accessory products related to each of the
foregoing, including, but not limited to, roofing equipment, power and hand
tools and fasteners.

MSI EAGLE

MSI Eagle distributes a variety of cement and masonry supplies and related
products and accessories for use in the residential and commercial building and
masonry industries.

CONCRETE AND MASONRY PRODUCTS. Portland cement for use in housing
foundations, laying pavements, walkways and other similar uses. Masonry cement
for use in brick and stone masonry. Cement is principally sold by bags of
varying weight (approximately 10 pounds to 95 pounds) and is sold in a variety
of mixtures such as concrete mixes (portland cement, sand and gravel), sand
mixes (portland cement and sand), mortar mixes (masonry mortar cement and
masonry sand) and grout (cement and sand). Also sold are sand, gravel,
underwater cement, concrete and asphalt "patching" compounds.

ANGLE IRON. Iron forged at a ninety degree angle which is cut to customer's
specification for use as support above windows and doorways.

BRICKS AND STONES. Bricks, used bricks, firewall bricks, "cultured"
(man-made) stones in a variety of colors and shapes, cinder blocks, glass
blocks.

FIREPLACE PRODUCTS. Fireboxes, dampers, flues, facings, insulations,
fireplace tools and accessories.

SWIMMING POOL PRODUCTS. Cements and molds used in pool construction.

MSI Eagle also sells a variety of products related to the foregoing,
including cement mixers, rulers, levels, trowels, and other tools, cleaning
solvents, patching compounds, supports and fasteners.

VENDORS

Each of the Combined Entities distribute products manufactured by a number
of major vendors. GAF is Eagle's largest supplier, accounting for approximately
23%, 23%, and 18% of Eagle's product lines during its fiscal years ended June
30, 1997 and 1998 and four-month period ended October 31, 1998, respectively.
During the foregoing periods, three other vendors' products accounted for an
aggregate of approximately 32%, 22%, and 21%, respectively, of Eagle's product
lines. Atlas Roofing Corp., a supplier of residential and commercial roofing
materials, is JEH Eagle's largest supplier, accounting for approximately 22%,
15%, 15% and 14% of JEH Co.'s product lines during its fiscal years ended
December 31, 1995 and 1996, JEH Eagle's product lines during its fiscal year
ended June 30, 1998 and four-month period

67
<PAGE>
ended October 31, 1998, respectively. During the foregoing periods, three other
vendors' products accounted for an aggregate of approximately 31%, 34%, 35% and
38%, respectively, of JEH Co.'s and JEH Eagle's product lines. Included within
the foregoing three vendors were GAF and Elk which accounted for approximately
15% and 10% and 16% and 10% of JEH Co.'s product lines during its fiscal years
ended December 31, 1995 and 1996, respectively, and 16% and 13%, 17% and 13% of
JEH Eagle's product lines during its fiscal year ended June 30, 1998 and
four-month period ended October 31, 1998, respectively. TII is MSI Eagle's
largest supplier, accounting for approximately 27% and 26% of MSI Eagle's
(including its predecessor company, MSI Co.) product lines during its fiscal
year ended June 30, 1998 and four-month period ended October 31, 1998,
respectively. During the foregoing periods, Lehigh accounted for approximately
17% and 22%, respectively, of MSI Eagle's (including its predecessor company,
MSI Co.) product lines. None of the Combined Entities have written long-term
supply agreements with any vendors. Management believes that in the event of any
interruption of product deliveries from any suppliers, they will be able to
secure suitable replacement suppliers on acceptable terms. There can be no
assurance that they will be able to secure suitable replacement suppliers on
acceptable terms or at all.

CUSTOMERS, SALES AND MARKETING

The Combined Entities sell and distribute roofing, cements and masonry
supplies and related products to approximately 6,800 customers engaged in
commercial and residential roofing repair and the construction of new residences
and commercial properties from distribution centers in eight states. Practically
all of their customers purchase products pursuant to short-term credit
arrangements. Sales efforts are primarily directed through their salespersons
assigned to their distribution centers including "inside" counter persons who
serve walk-in and call-in customers and "outside" salespersons calling upon
past, current and potential customers with MSI Eagle placing a greater emphasis
on its outside sales force, viewing selling inside its distribution centers as
only incidental to the "inside" personnel's other job responsibilities.
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 customers. None of the
Combined Entities have written long-term supply agreements with any of their
customers. No Eagle customer accounted for more than 3% of Eagle's sales during
either its fiscal year ended June 30, 1998 or four-month period ended October
31, 1998. No JEH Co. or JEH Eagle customer accounted for more than 4% of JEH
Co.'s or JEH Eagle's sales during either its fiscal year ended June 30, 1998 or
four month period ended Ocotber 31, 1998. No MSI Co. customer accounted for more
than 4% of MSI Co.'s sales during either its fiscal year ended June 30, 1998 or
four-month period ended October 31, 1998.

COMPETITION

Each of the Combined Entities faces substantial competition in the wholesale
distribution of roofing, cement and masonry supplies from relatively smaller
distributors, retail distribution centers and as to Eagle and JEH Eagle from a
number of multi-regional and national wholesale distributors of building
products, including suppliers of roofing products which are larger than the
Combined Entities, including American Builders & Contractors Supply Co., Inc.,
Cameron Ashley Building Products, Inc., Allied Building Products and Bradco
Supply Corporation, each of which has greater financial resources than the
Combined Entities. Each of the Combined Entities currently competes in its
wholesale distribution business on the basis of competitive pricing, breadth of
product line, prompt delivery, service, providing discounts for prompt payment
and on the abilities of its personnel. To a substantially lesser degree, Eagle
and JEH Eagle also compete with larger high volume discount general building
supply stores selling standardized lower priced products, sometimes at lower
prices, but not carrying the breadth of product lines or offering the same
service as provided by full service wholesale distributors such as they are.
Each of the Combined Entities competes with its competitors on the basis of
product delivery, credit extension, customer service and breadth of product
line.

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<PAGE>
The Company anticipates that it may experience competition from entities and
individuals (including venture capital partnerships and corporations, equity
funds, blind pool companies, competing wholesale roofing supply distribution
centers, 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 the
Combined Entities in connection with identifying and effecting acquisitions of
the type sought by the Company. The Company's and the Combined Entities'
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

The businesses of the Combined Entities are conducted on the basis of
short-term orders and prompt delivery schedules precluding any substantial
backlog.

EMPLOYEES

At October 31, 1998, the Combined Entities employed approximately 444
full-time employees, including eight executives, 49 managerial employees, 94
salespersons (including 35 "inside" salespersons), 206 warehouse persons,
drivers and helpers, and 87 clerical and administrative persons. Eagle, JEH
Eagle and MSI Eagle have experienced difficulties in retaining drivers and
helpers because of the tight job market in their respective market areas and the
need for drivers to be certified by the departments of motor vehicles and pass
other testing standards, but suitable replacements have been readily available
without economic impact. None of the Combined Entities is subject to any
collective bargaining agreement, and each believes that its relationship with
its employees is good.

The Company has no employees. The Company's management currently consists of
five officers, including two officers, Douglas P. Fields and Frederick M.
Friedman, neither of whom are required to commit a specific amount of their time
to the affairs of the Company. Each of Messrs. Fields and Friedman have
significant business interests outside of the Company, including but not limited
to TDA and its subsidiaries. Messrs. Fields and Friedman currently devote
substantially all of their business time to TDA and its subsidiaries, with
approximately 5% to 10% of that time being devoted to the Combined Entities.
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 "The Acquisitions," "Management" and "Certain
Transactions."

FACILITIES

EAGLE

Eagle leases approximately 15,000 square feet of executive office space
located at 1451 Channelside Drive, Tampa, Florida 33629 from 39 Acre Corp., a
wholly-owned subsidiary of TDA, at an approximate annual rental of $120,000.
Approximately 7,500 square feet of such space is subleased by Eagle to an
unrelated third party tenant. See "Certain Transactions."

69
<PAGE>
The following tables list the locations of Eagle's showroom and distribution
centers.

<TABLE>
<CAPTION>
LOCATIONS OWNED BY AND LEASED FROM A WHOLLY-OWNED TDA SUBSIDIARY
- ------------------------------------------------------------------------------------------------------------------
<S> <C> <C>
APPROXIMATE APPROXIMATE BASE
CITY AND STATE SQUARE FOOTAGE ANNUAL RENTAL
- ------------------------------------------------------------------------------- --------------- ----------------
Tampa, Florida................................................................. 69,000 $ 149,000
St. Petersburg, Florida........................................................ 25,000 $ 73,000
Holiday, Florida............................................................... 16,000 $ 47,000
Fort Myers, Florida............................................................ 16,000 $ 47,000
Lakeland, Florida.............................................................. 20,000 $ 80,000
Pensacola, Florida............................................................. 26,000 $ 80,000
Birmingham, Alabama............................................................ 39,000 $ 117,000(1)
Mobile, Alabama................................................................ 24,000 $ 77,000
</TABLE>

- ------------------------

(1) See "Certain Transactions."

As part of the foregoing leasing arrangements between Eagle and 39 Acre
Corp., additional undeveloped land is leased to Eagle from the TDA subsidiary.
That undeveloped land is used for storage or reserved for future use. The
locations and approximate acreage of the undeveloped land are as follows: Tampa
(one); St. Petersburg (two); Holiday (three); Ft. Myers (one and a third);
Pensacola (two and a half); and Birmingham (one).

As Eagle has been a wholly-owned subsidiary of TDA since 1973, generally
there has been no need for Eagle to enter into written leases with 39 Acre
Corp., which owns Eagle's foregoing distribution centers. All of the foregoing
current distribution centers of Eagle leased from 39 Acre Corp. have been leased
pursuant to oral agreements. Eagle has not entered into any written leases for
the foregoing premises. Upon the closing of the Public Offering and consummation
of the Acquisitions, Eagle will enter into written ten-year leases with 39 Acre
Corp. which will provide for base annual rentals substantially similar to those
set forth above for the first five years of such leases with provisions for
increases in rent based upon the consumer price index at the beginning of the
sixth year of such ten-year leases and with provisions for five-year renewal
options, increases in rent based upon the consumer price index, and lease terms,
additional rental and other charges customarily included in such leases,
including provisions requiring Eagle to insure and maintain and pay real estate
taxes on the premises as is currently required. The Company believes that the
rent and other terms of the written lease agreements to be entered into between
39 Acre Corp. and Eagle are on at least as favorable terms as Eagle would expect
to negotiate with unaffiliated third parties. Neither Eagle nor 39 Acre Corp.
will be permitted to terminate the leases before the end of their term without a
breach or default by the other party. See "The Acquisitions" and "Certain
Transactions."

At the time Eagle opened its former Fort Lauderdale, Florida, distribution
center, in the early part of the 1980s, TDA established a subsidiary, Eagle
Holding, Inc., to acquire that facility which was financed by the issuance of an
industrial revenue bond. The financial institution providing the industrial
revenue bond required a written lease between the TDA subsidiary and Eagle as a
precondition to the issuance of that bond. The term of Eagle's lease for the
Fort Lauderdale, Florida, premises continues through May 1, 1999 even though
Eagle has vacated those premises. Eagle's monthly lease payment for the Fort
Lauderdale, Florida, premises is approximately $20,000. Upon completion of the
Public Offering and consummation of the Acquisitions, TDA will indemnify Eagle
for any payments that Eagle is required to make which are in excess of Eagle's
obligations under the foregoing lease. The Fort Lauderdale, Florida, premises
has been sublet to an entity not otherwise affiliated with Eagle or TDA for a
term expiring on May 1, 1999. See "The Acquisitions" and "Certain Transactions."

70
<PAGE>

<TABLE>
<CAPTION>
LOCATIONS LEASED FROM THIRD PARTIES
- ------------------------------------------------------------------------------------------------------------------
<S> <C> <C>
APPROXIMATE APPROXIMATE BASE
CITY AND STATE SQUARE FOOTAGE ANNUAL RENTAL
- ------------------------------------------------------------------------------- --------------- ----------------
Clearwater, Florida............................................................ 6,000 $ 23,000(1)
Montgomery, Alabama............................................................ 24,000 $ 90,000(2)
Panama City, Florida........................................................... 21,600 $ 63,000(3)
Fort Walton Beach, Florida..................................................... 8,000 $ 36,000(4)
Crystal River, Florida......................................................... 12,600 $ 42,000(5)
Tallahassee, Florida........................................................... 15,000 $ 45,000(6)
Gulfport, Mississippi.......................................................... 13,000 $ 32,000(7)
Decatur, Alabama............................................................... 12,300 $ 87,000(8)
</TABLE>

- ------------------------

(1) The lease for the Clearwater, Florida, premises expires on or about June 30,
1999 and provides for a five-year renewal option with increased renewal term
rental payments based upon the Consumer Price Index ("CPI"), but not to
exceed 5%. Pursuant to this lease, Eagle is required to pay all municipal,
county and state taxes , maintain and carry comprehensive public liability
insurance on the premises.

(2) The lease for the Montgomery, Alabama, premises expires on June 1, 2003.
This lease provides for a three-year renewal option and grants Eagle a
purchase option. Pursuant to this lease, Eagle is required to maintain
liability, fire, casualty and other types of insurance coverage on the
premises.

(3) The lease for the Panama City, Florida, premises expires on or about
February 15, 2001 and provides for a five-year renewal option at an
increased rental based upon the CPI. Pursuant to this lease, Eagle is
required to maintain the premises and provide fire, windstorm and other
insurance. Additionally, Eagle is required to pay all sales and use taxes
imposed upon the rental payments for the premises. Eagle has the right of
first refusal to purchase these premises in certain events.

(4) The lease for the Fort Walton Beach, Florida, premises is on a
month-to-month basis and provides for a five-year renewal option at
increased rent based upon the CPI along with applicable sales and use taxes.
Eagle is also required to maintain liability insurance on the premises.

(5) The lease for the Crystal River, Florida, premises is on a month-to-month
basis. Eagle is also required to maintain the premises, pay certain taxes
(sales, use, rent, receipts) and pay public liability insurance premiums.

(6) The lease for the Tallahassee, Florida, premises expires on July 31, 1999
and provides for two five-year renewal options with the base rental
escalating at the rate of three percent per year during option years and a
right of first refusal to purchase the premises. This lease requires Eagle
to pay any real estate and sales taxes, maintain the premises and provide
liability insurance.

(7) The lease for the Gulfport, Mississippi, premises expires on May 31, 2003.
This lease requires Eagle to maintain liability insurance on the premises,
maintain the premises and pay any real estate and personal property taxes.

(8) The lease for the Decatur, Alabama, premises expires on August 31, 2000.
This lease requires Eagle to maintain liability insurance on the premises.

JEH EAGLE

JEH Eagle leases approximately 8,000 and 10,000 square feet of executive
office and showroom space located at 2500 U.S. Highway 287, Mansfield, Texas
76063 and 8221 E. 96th Avenue, Henderson, Colorado 80640, respectively, from
James E. Helzer, the President of the Company, Eagle and JEH Eagle. The annual
aggregate rental for the foregoing premises is combined with the rentals of
relevant distribution centers discussed below. See "Certain Transactions."

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<PAGE>
The following tables list the locations of JEH Eagle's distribution centers.

<TABLE>
<CAPTION>
LOCATIONS OWNED BY AND LEASED FROM JAMES E. HELZER
- -----------------------------------------------------------------------------------------------------------------
<S> <C> <C>
APPROXIMATE APPROXIMATE BASE
CITY AND STATE SQUARE FOOTAGE ANNUAL RENTAL
- ------------------------------------------------------------------------------- -------------- ----------------
Henderson, Colorado............................................................ 100,000 $ 108,000
Colorado Springs, Colorado..................................................... 3,000 $ 19,000
Mansfield, Texas............................................................... 53,800 $ 213,000
Colleyville, Texas............................................................. 7,000 $ 42,000
Frisco, Texas.................................................................. 17,000 $ 60,000
Mesquite, Texas................................................................ 10,000 $ 43,000
</TABLE>

The foregoing premises are leased to JEH Eagle from James E. Helzer pursuant
to five-year leases expiring in June 2002 providing the indicated base annual
rentals with provisions for five percent (5%) increases effective July 2000.
Except for the Frisco, Texas, premises, said leases grant JEH Eagle two five-
year renewal options providing for five percent (5%) increases in the base
annual rent during certain renewal years. Additional rental and other charges
for the foregoing leases include provision for JEH Eagle to insure and maintain
and pay all taxes on the premises. JEH Eagle also has a right of first refusal
to purchase the foregoing premises. The Company believes that such leases are on
terms no less favorable than JEH Eagle could have obtained from independent
third parties.

As part of the foregoing leases, additional undeveloped land is leased to
JEH Eagle from James E. Helzer. That undeveloped land is used for storage or
reserved for future use. The locations and approximate acreage of the
undeveloped land is as follows: Henderson (six), Colorado Springs (three),
Mansfield (twelve and a half), Colleyville (one and a half), Frisco (two and a
half) and Mesquite (two).

<TABLE>
<CAPTION>
LOCATIONS LEASED FROM THIRD PARTIES
- ------------------------------------------------------------------------------------------------------------------
<S> <C> <C>
APPROXIMATE APPROXIMATE BASE
CITY AND STATE SQUARE FOOTAGE ANNUAL RENTAL
- ------------------------------------------------------------------------------- --------------- ----------------
Eagle, Colorado................................................................ 10,000 $ 72,000(1)
Fort Collins, Colorado......................................................... 9,000 $ 32,000(2)
Indianapolis, Indiana.......................................................... 15,000 $ 66,000(3)
Eagan, Minnesota............................................................... 31,200 $ 110,000(4)
Austin, Texas.................................................................. 56,000 $ 96,000(5)
Norfolk, Virginia.............................................................. 19,000 $ 55,000(6)
</TABLE>

As part of the foregoing leases, additional undeveloped land is leased to
JEH Eagle from third parties. That undeveloped land is used for storage or
reserved for future use. The location and approximate acreage of the undeveloped
land is as follows; Eagle (two), Fort Collins (one and a half), Indianapolis
(two) and Austin (six).

- ------------------------

(1) The lease for the Eagle, Colorado, premises expires in April 1999 but may be
terminated by JEH Eagle on thirty days notice and provides for two two-year
renewal options. Pursuant to this lease, JEH Eagle is required to pay all
utility bills and assessments and maintain and carry comprehensive public
liability insurance on the premises.

(2) The lease for the Fort Collins, Colorado, premises is on a month-to-month
basis. JEH Eagle is required to pay its proportionate share of taxes,
insurance and maintenance charges for these premises and maintain the
portion of the premises it occupies.

(3) The lease for the Indianapolis, Indiana, premises expires in March 2002 and
requires JEH Eagle to pay real estate taxes and carry comprehensive public
liability insurance on the premises.

72
<PAGE>
(4) The lease for the Eagan, Minnesota, premises expires in June 2000 and
requires JEH Eagle to pay real estate taxes, maintenance charges and carry
comprehensive public liability and other insurance on the premises.

(5) The lease for the Austin, Texas, premises expired and continues on a
month-to-month basis and requires JEH Eagle to pay all real estate taxes and
carry comprehensive public liability insurance on the premises.

(6) The lease for the Norfolk, Virginia, premises is on a month-to-month basis.
JEH Eagle is also required to pay all real estate taxes and assessments and
maintain and carry comprehensive public liability insurance on the premises.

MSI EAGLE

MSI Eagle leases approximately 30,000 square feet of executive office,
showroom and warehouse space, and approximately four acres of outdoor storage
space in Mansfield, Texas from Gary L. Howard and his spouse at an annual base
rental of approximately $107,000 pursuant to a lease expiring in October 2001.
MSI Eagle has the right to two, three-year renewals at a base annual rental five
percent over the prior term. Additional rental and other charges for the
foregoing lease include provisions for MSI Eagle to insure and maintain and pay
taxes on the premises. MSI Eagle has a right of first refusal to purchase the
foregoing premises. The Company believes that the foregoing lease is on terms no
less favorable than MSI Eagle could have obtained from an independent third
party. See "Certain Transactions."

The following table lists the locations of MSI Eagle's other distribution
centers, all of which are leased from independent third parties and are located
in the Dallas/Fort Worth metropolitan area of Texas.

<TABLE>
<CAPTION>
APPROXIMATE APPROXIMATE BASE
CITY SQUARE FOOTAGE ANNUAL RENTAL
- ------------------------------------------------------------------------------- --------------- ----------------
<S> <C> <C>
Mesquite....................................................................... 10,000 $ 30,000(1)
Plano.......................................................................... 20,000 $ 44,000(2)
Southlake...................................................................... 9,000 $ 42,000(3)
</TABLE>

- ------------------------

(1) The lease for the Mesquite premises expires in May 2000. The lease for the
Mesquite premises provides for successive three-year renewal options.
Pursuant to this lease, MSI Eagle is required to pay taxes on the property,
maintain and carry comprehensive public liability insurance, pay all utility
charges and maintain the premises.

(2) The lease for the Plano premises expires in May 1999. Pursuant to this
lease, MSI Eagle is required to maintain and carry comprehensive public
liability insurance.

(3) The lease for the Southlake premises expires in December 2001. Pursuant to
this lease, MSI Eagle is required to pay taxes on the property and maintain
and carry comprehensive public liability insurance and maintain the
premises.

COMPANY

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 Acquisitions. 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, Eagle, JEH Eagle nor MSI Eagle are subject to any
material legal proceedings.

73
<PAGE>
MANAGEMENT

DIRECTORS AND EXECUTIVE OFFICERS

The directors, executive officers and director nominees of the Company are
as follows:

<TABLE>
<CAPTION>
NAME AGE POSITION
- ------------------------------------------ --- ---------------------------------------------------------------
<S> <C> <C>
Douglas P. Fields(1)...................... 56 Chairman of the Board and Chief Executive Officer
James E. Helzer(1)........................ 59 President and Director Nominee, Vice Chairman Nominee of the
Board of Directors(4)
Frederick M. Friedman(1).................. 58 Executive Vice President, Treasurer, Secretary and a Director
E.G. Helzer............................... 48 Senior Vice President-Operations
Gary L. Howard............................ 44 Vice President--Masonry Products
Steven R. Andrews(2)(4)................... 44 Vice President--Legal and a Director
Paul D. Finkelstein(2)(3)................. 56 Director
George Skakel III(2)(3)................... 48 Director
John E. Smircina(1)(3)(4)................. 66 Director Nominee
</TABLE>

Upon the successful completion of the Public Offering and consummation of
the Acquisitions, the Company will establish Executive and Compensation
Committees of the Company's Board of Directors as indicated above. The majority
of the members of the Compensation Committee will be independent directors. The
Company has established an Audit Committee and a majority of the members of that
committee are independent directors. Mr. Andrews is a member of the Audit
Committee and reports to it.

- ------------------------

(1) Upon successful completion of the Public Offering and consummation of the
Acquisitions, said persons are anticipated to become members of the
Executive Committee of the Company's Board of Directors.

(2) Members of the Audit Committee of the Company's Board of Directors. Mr.
Finkelstein is Chairman of the Audit Committee.

(3) Upon successful completion of the Public Offering and consummation of the
Acquisitions, said persons are anticipated to become members of the
Compensation Committee of the Company's Board of Directors.

(4) Upon successful completion of the Public Offering and consummation of the
Acquisitions, said person is anticipated to become the Company's Vice
President-Legal and/or a member of the Company's Board of Directors, as the
case may be.

Management of the Company believes that Messrs. Andrews, Finkelstein,
Smircina and Skakel may be considered to be independent directors of the
Company.

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") (which was a subsidiary of TDA until it was
sold by TDA on June 12, 1998) and Northeastern Plastics, Inc. ("NPI") (which was
a subsidiary of TDA until August 1996 when it was acquired by Acqueren, Inc.
("AI") of which Mr. Fields was Chief Executive Officer until TDA sold its
interest in AI in August 1998). Since July 1997 and October 1998, Mr. Fields has
held the positions of Chairman of the Board and Chief Executive Officer

74
<PAGE>
of JEH Eagle and MSI Eagle, respectively. TDA is a holding company whose
operating subsidiaries are engaged primarily in the wholesale distribution of
building supplies (Eagle, JEH Eagle and MSI Eagle), the operation of an indoor
tennis facility and the management of real estate. Upon successful completion of
the Public Offering and consummation of the Acquisitions, 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 (which was a subsidiary of TDA until
it was sold by TDA on June 12, 1998) and NPI (which was a subsidiary of TDA
until August 1996 when it was acquired by AI in which Mr. Friedman held similar
positions until TDA's interest in AI was sold in August 1998). Since July 1997
and October 1998, Mr. Friedman has held the same positions with JEH Eagle and
MSI Eagle, respectively. Upon successful completion of the Public Offering and
consummation of the Acquisitions, it is anticipated that Mr. Friedman will
devote no less time to the Company's affairs than he deems reasonably necessary
to discharge his duties to the Company. Mr. Friedman received a B.S. degree in
Economics from The Wharton School of the University of Pennsylvania in 1962.

James E. Helzer has been the President of JEH Eagle since July 1997 and
President of the Company and Eagle since December 1997. From 1982 until July
1997, Mr. James E. Helzer was the owner and Chief Executive Officer of JEH Co.

E.G. Helzer has been the Senior Vice President-Operations of JEH Eagle,
Eagle and the Company since July 1997, December 1997 and December 1997,
respectively. From 1994 until July 1997, Mr. E.G. Helzer was the Vice President
of Operations and Colorado Manager of JEH Co. From 1982 until 1994, he was JEH
Co.'s Manager Production and Service. E.G. Helzer is the brother of James E.
Helzer.

Gary L. Howard has been the Vice President-Masonry Products of the Company
since December 1998 and President of MSI Eagle since October 1998. For more than
the last five years, Gary L. Howard was the owner and chief executive officer of
MSI Co.

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.
Mr. Andrews has agreed to serve as the Company's Vice President-Legal upon the
consummation of the Public Offering and the Acquisitions. In his capacity as the
Company's Vice President-Legal, Mr. Andrews has entered into an agreement with
the Company requiring him to review the Company's and its officers' and
directors' compliance with their obligations under federal and state securities
laws. Mr. Andrews will be required to report his findings to the Audit Committee
of the Company's Board of Directors, of which he will be a member, on a periodic
basis. The Company's agreement with Mr. Andrews does not require him to devote
any minimum amount of time to the foregoing obligations and provides him with
compensation of $1,000 per month.

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 and that corporation's Chief Executive Officer since
July 1996. 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.

75
<PAGE>
George Skakel III has been a private investor for more than the past five
years. Mr. Skakel received a B.S. degree in Economics from the University of
Delaware in 1973 and a master's degree in Business Administration from the
Harvard University Graduate School of Business Administration in 1978.

John E. Smircina had been a partner in the law firm of Wade, Hughes and
Smircina, P.C. from April 1993 until July 1996. Since July 1996, Mr. Smircina
has been a sole practitioner. For more than the past five years, Mr. Smircina
has been a Director of TDA, and he was a director of AI from February 1996 until
TDA sold its interest in AI in August 1998. 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.

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 Company's independent
directors will be responsible for reviewing and approving all material related
party transactions including potential conflicts of interest and ensuring
stockholder approval is obtained when they believe it is necessary.

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.

Pursuant to Section 141(c)(1) of the Delaware Corporation Law, as applicable
to corporations formed in that state prior to July 1, 1996, the following powers
are reserved to a Delaware corporation's Board of Directors: amending a
corporation's certificate of incorporation (except that a committee may, to the
extent authorized in the resolution or resolutions providing for the issuance of
shares of stock adopted by the board of directors, fix the designations and any
of the preferences or rights of such shares relating to dividends, redemption,
dissolution, any distribution of assets of the corporation or the conversion
into, or the exchange of such shares for, shares of any other class or classes
or any other series of the same or any other class or classes of stock of a
corporation or fix the number of shares of any series of stock or authorize the
increase or decrease of the shares of any series), adopting an agreement of
merger or consolidation, recommending to the stockholders the sale, lease or
exchange of all or substantially all of a corporation's property and assets,
recommending to the stockholders a dissolution of a corporation or a revocation
of a dissolution, or amending the bylaws of a corporation; and, unless a
resolution, the bylaws or the certificate of incorporation expressly so
provides, the declaration of a dividend, the issuance of stock or adoption of a
certificate of ownership and merger.

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,
in 1976 consented to a final judgment 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

76
<PAGE>
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.

In order to secure the Company's NASDAQ listing, the Company has agreed with
NASDAQ: (i) to establish Audit and Compensation Committees, each with a majority
of independent directors; (ii) to have independent Company director oversight of
material related party transactions including potential conflicts of interest
and to have independent directors determine when shareholder approval is to be
obtained for any such transactions; (iii) that neither Messrs. Fields, Friedman
nor TDA will (a) receive finders fees in connection with any acquisition by the
Company or (b) dispose of any of the Company's shares of Common Stock for a
two-year period from NASDAQ listing; (iv) to create the position of "Vice
President--Legal" who will report to the Company's Audit Committee and who will
be removed or re-elected only by the vote of the Company's stockholders; (v)
that purchasers of shares of the Company's Common Stock in the Public Offering
will be entitled, but not required, to purchase an equal number of Warrants;
(vi) to repeat the information set forth in the immediately preceding paragraph
in the Company's first five annual reports; and (vii) that two years after the
Company's Securities are listed on NASDAQ, the Audit Committee is to certify
that the foregoing requirements have been complied with by the Company.

KEY PERSON LIFE INSURANCE

JEH Eagle maintains a "key person" life insurance policy in the amount of
$2,000,000 on the life of James E. Helzer, the President of the Company, Eagle
and JEH Eagle, naming JEH Eagle beneficiary of such policy. MSI Eagle has "key
person" life insurance on the life of Gary L. Howard, a Vice President of the
Company and President of MSI Eagle, in the amount of $2,000,000 plus the amount
outstanding pursuant to MSI Eagle's outstanding note to MSI Co., naming MSI
Eagle beneficiary of such policy. The Company maintains "key person" life
insurance policies in the amount of $1,000,000 on each of the lives of Douglas
P. Fields, its Chairman of the Board and Chief Executive Officer, and Frederick
M. Friedman, its Executive Vice President, Chief Financial Officer, Treasurer,
Secretary and a Director of the Company.

EXECUTIVE COMPENSATION

The following table sets forth certain summary information with respect to
the compensation paid by the Company, Eagle, JEH Eagle or MSI Eagle for services
rendered in all capacities to each of these entities during each of their last
two fiscal years by those persons indicated. Neither the Company, Eagle, JEH
Eagle nor MSI 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

<TABLE>
<CAPTION>
FISCAL YEAR
NAME AND ENDED
PRINCIPAL POSITION JUNE 30, SALARY BONUS
- --------------------------------------------------------------------------------- ------------- ---------- -----------
<S> <C> <C> <C>
Douglas P. Fields................................................................ 1998 $ 0 $ 0
Chief Executive Officer of the Company, Eagle, JEH Eagle and MSI Eagle 1997 $ 0 $ 0
James E. Helzer.................................................................. 1998 $ 275,000 $ 0
President of the Company, Eagle and JEH Eagle 1997 (1) (1)
E.G. Helzer...................................................................... 1998 $ 137,500 $ 0
Senior Vice President of the Company, Eagle and JEH Eagle 1997 (1) (1)
</TABLE>

- ------------------------

(1) Neither of Messrs. Helzer was associated with the Company, Eagle or JEH
Eagle prior to the commencement of their latest completed fiscal year.

77
<PAGE>
EMPLOYMENT AGREEMENTS AND ARRANGEMENTS

The Company, Eagle, JEH Eagle and MSI Eagle have entered into agreements
with five persons who are anticipated to receive cash compensation in excess of
$100,000 per year.

JEH Eagle has entered into agreements with Messrs. Fields and Friedman,
pursuant to which they act as Chairman of the Board of Directors and Chief
Executive Officer, and Executive Vice President, Chief Financial Officer,
Treasurer, Secretary and a Director of JEH Eagle, respectively, for a five-year
period which commenced in July 1997, at annual salaries of $60,000 each, subject
to annual increases and bonuses as may be determined by JEH Eagle's Board of
Directors. The compensation payable to Messrs. Fields and Friedman under their
employment agreements shall commence upon the closing of the Public Offering and
consummation of the Acquisitions.

Pursuant to the foregoing 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 agreements require Eagle and JEH Eagle to
provide their beneficiaries and each of them, respectively, with twelve months
salary in the event of death or disability and indemnify Messrs. Fields and
Friedman to the full extent permitted under the Delaware General Corporation
Law. Their agreements do not require either Messrs. Fields or Friedman to commit
a specific amount of their time to the affairs of Eagle or JEH Eagle. Messrs.
Fields and Friedman will devote no less time than they deem reasonably necessary
to carry out their duties to the Company, Eagle, JEH Eagle and MSI Eagle.

The Company's and JEH Eagle's agreements with Messrs. Fields and Friedman
contain provisions for payments of salary and benefits following a change of
control (as defined) of the Company or JEH Eagle, the failure to reappoint
either of them to his position, a salary reduction or the Company's or JEH
Eagle's failure to perform its obligations under their respective agreements. In
general, under such circumstances, each of Messrs. Fields and Friedman would be
entitled to a cash payment equivalent to his salary for the remaining term of
his agreement, and continued life, health and disability insurance benefits for
a period of two years.

JEH Eagle has also entered into agreements with Messrs. James E. Helzer and
E.G. Helzer pursuant to which they serve as President and Senior Vice
President--Operations, respectively, of JEH Eagle for terms of five and three
years, respectively, which commenced in July 1997, at compensation rates of
$250,000 and $125,000 per year, respectively, subject to annual review by JEH
Eagle's Board of Directors. Additionally, in December 1997, James E. Helzer
accepted the positions of President of the Company and Eagle, and E.G. Helzer
accepted the positions of Senior Vice President--Operations of the Company and
Eagle. As a result, James E. Helzer's rate of compensation was increased by
$50,000 to $300,000 per year and he is required to devote approximately 80% of
his working time to the Company, Eagle and JEH Eagle; and E.G. Helzer's rate of
compensation was increased by $25,000 to $150,000 per year. Additionally, James
E. Helzer and E.G. Helzer are entitled to receive 20% and 6%, respectively, of
Eagle's earnings before taxes in excess of $600,000 per year. James E. Helzer
and E.G. Helzer are employed as President and Senior Vice President-Operations,
respectively, of the Company and Eagle pursuant to oral agreements that can be
terminated by either party without notice or penalty. James E. Helzer will
continue as the President of JEH Eagle and will become Vice Chairman of the
Company's Board of Directors upon closing of the Public Offering and
consummation of the Acquisitions. See "The Acquisitions" and "Certain
Transactions."

78
<PAGE>
James E. Helzer, as the sole shareholder and chief executive officer of JEH
Co., received compensation from JEH Co. of approximately $2,330,000 and $120,000
for JEH Co.'s fiscal year ended December 31, 1996 and six-month period ended
June 30, 1997, respectively.

MSI Eagle has entered into an agreement with Gary L. Howard pursuant to
which he serves as an executive officer of MSI Eagle, currently President, for a
term ending on June 30, 2003, at an annual salary of $260,000, subject to annual
review by MSI Eagle's Board of Directors. Additionally, as of November 1998,
Gary L. Howard has accepted the position of Vice President-- Masonry Products,
of the Company. Gary L. Howard, as the sole shareholder and chief executive
officer of MSI Co., received compensation from MSI Co. of approximately $522,000
and $725,000 for MSI Co.'s fiscal years ended June 30, 1997 and 1998,
respectively.

Steven R. Andrews has agreed to become the Company's Vice President--Legal.
Upon closing of the Public Offering and consummation of the Acquisitions. Mr.
Andrews will be compensated at the rate of $1,000 per month. The Company's
agreement with Mr. Andrews is oral and can be terminated by either party without
notice or penalty.

Upon the closing of the Public Offering and consummation of the
Acquisitions, pursuant to the Company's Stock Option Plan, the Company intends
to grant to each of Messrs. Douglas P. Fields, Frederick M. Friedman, James H.
Helzer, E.G. Helzer, Steven R. Andrews and Gary L. Howard options exercisable to
purchase 25,000, 25,000, 120,000, 50,000, 100,000 and 100,000 shares of Common
Stock, respectively. 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.

Following the completion of the Public Offering and consummation of the
Acquisitions, it is anticipated that Messrs. Fields, Friedman, Helzer, Howard
and Andrews will hold the positions set forth opposite their names for the
corporations indicated below:

<TABLE>
<CAPTION>
NAME THE COMPANY EAGLE JEH EAGLE MSI EAGLE
- ---------------------- ---------------------- ---------------------- ---------------------- ----------------------
<S> <C> <C> <C> <C>
Douglas P. Fields..... Chairman of the Board Chairman of the Board Chairman of the Board Chairman of the Board
and Chief Executive and Chief Executive and Chief Executive and Chief Executive
Officer Officer Officer Officer

James E. Helzer....... President and Vice President and Director President and Director Director
Chairman of the Board
of Directors
Frederick M.
Friedman.............. Executive Vice Executive Vice Executive Vice Executive Vice
President, Treasurer, President, Treasurer, President, Treasurer, President, Treasurer,
Secretary and Director Secretary and Director Secretary and Director Secretary and Director

E.G. Helzer........... Senior Vice President- Senior Vice President- Senior Vice President- --
Operations Operations Operations
Gary L. Howard........ Vice President-- -- -- President
Masonry Products
Steven R. Andrews..... Vice President-- Legal -- -- --
and Director
</TABLE>

79
<PAGE>
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
Acquisitions, all non-officer directors, except for Mr. Smircina (a director
nominee), 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 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. In December 1998, the Board of Directors
and the stockholders terminated the 1996 Stock Option Plan and adopted and
approved, as the case may be, the Company's 1998 Stock Option Plan (the "Stock
Option Plan"). The 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 Stock Option Plan is 1,000,000 shares. Upon the closing of the
Public Offering and consummation of the Acquisitions, the Company intends to
grant options exercisable into 900,000 shares of Common Stock to various of its
employees, including options to purchase an aggregate of 420,000 shares which
will be issued to Messrs. Fields, Friedman, James E. Helzer, E.G. Helzer, Gary
L. Howard and Steven R. Andrews. 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
Acquisitions, Messrs. Finkelstein 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 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 Stock Option Plan is to be administered by the Board of Directors or a
committee appointed by 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
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 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

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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 Stock Option Plan may be established by the
Board of Directors or a committee of the Board of Directors, in its sole
discretion; provided, however, that the maximum term of each Incentive Stock
Option granted pursuant to the 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 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 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 Acquisitions;
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
Acquisitions 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 Acquisitions.

<TABLE>
<CAPTION>
NAMES OF EXECUTIVE OFFICERS, SHARES SUBJECT PER SHARE
DIRECTORS AND DIRECTOR NOMINEES TO OPTIONS EXERCISE PRICE
- ----------------------------------------------------------------------------------- -------------- ---------------
<S> <C> <C>
Douglas P. Fields(1)............................................................... 25,000 $ 5.00
Frederick M. Friedman(1)........................................................... 25,000 $ 5.00
James E. Helzer(1)................................................................. 120,000 $ 5.00
E.G. Helzer(1)..................................................................... 50,000 $ 5.00
Gary L. Howard..................................................................... 100,000 $ 5.00
Steven R. Andrews(1)............................................................... 100,000 $ 5.00
Paul D. Finkelstein(2)............................................................. 10,000 $ 5.00
George Skakel III(2)............................................................... 10,000 $ 5.00
All Executive Officers, Directors and Director Nominees as a group (9 persons)..... 440,000 $ 5.00
</TABLE>

- ------------------------

(1) All of the options to be granted to Messrs. Fields, Friedman, James E.
Helzer, E.G. Helzer, Gary L. Howard and Steven R. Andrews will vest at a
rate of 20% per year from the closing date of the Public Offering with the
initial 20% vesting on the first anniversary of such closing date, limited,
however, such that the total amount of all options granted to each of them
and vesting in any single year does not exceed $100,000 at the exercise
price.

(2) The options to be granted to Messrs. Finkelstein and Skakel will vest one
year from the closing date of the Public Offering.

OTHER COMPENSATION

Eagle, JEH Eagle and MSI Eagle provide basic health, major medical and life
insurance for its employees, including its executive officers. Eagle and JEH
Eagle have also adopted 401(k) Retirement Savings Plans for eligible employees,
as described below. No other retirement, pension or similar program has been
adopted by the Company, Eagle, JEH Eagle or MSI Eagle. These and other benefits
may be adopted by the Company for its employees or the employees of its
subsidiaries in the future.

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In July 1992 and January 1998, Eagle and JEH Eagle adopted 401(k) Retirement
Savings Plans for employees of Eagle and JEH Eagle, respectively (the "401(k)
Plan"). Eligible employees include all employees of Eagle and JEH 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 and JEH Eagle may contribute discretionary
matching contributions equal to a determined percentage of the employees'
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 and JEH 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.

A $9,000 contribution to the 401(k) Plan was made by Eagle during its fiscal
year ended June 30, 1997. No contributions were made to the 401(k) Plan by Eagle
or JEH Eagle during the fiscal year ended June 30, 1998. Amounts to be
contributed in the future are at the discretion of Eagle's and JEH Eagle's
Boards 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 Robert L. Noojin and Dennis
J. Paliaga.

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PRINCIPAL STOCKHOLDERS

The following table sets forth, as of the date of this Prospectus, after
giving effect to the Acquisitions as if they had occurred on that date, certain
information concerning beneficial ownership of shares of Common Stock with
respect to (i) each person known to the Company to own 5% or more of the
outstanding shares of Common Stock, (ii) each executive officer, director and
director nominees of the Company, and (iii) all officers, directors and director
nominees of the Company as a group:

<TABLE>
<CAPTION>
AMOUNT AND NATURE APPROXIMATE PERCENTAGE OF APPROXIMATE PERCENTAGE OF
OF BENEFICIAL COMMON STOCK OWNED COMMON STOCK OWNED
OWNERSHIP BEFORE PUBLIC OFFERING AFTER PUBLIC OFFERING(6)
---------------------- --------------------------- ---------------------------
<S> <C> <C> <C>
TDA Industries, Inc.(1).............. 5,000,000(2) 84.0% 59.2%
Douglas P. Fields(1)................. 5,000,000(2)(3) 84.0% 59.2%
Frederick M. Friedman(1)............. 5,000,000(2)(3) 84.0% 59.2%
James E. Helzer(1)................... 300,000(3)(4) 5.0% 3.6%
Gary L. Howard (1)(5)................ 250,000(3) 4.2% 3.0%
E.G. Helzer(1)....................... 0(3) 0% 0%
Steven R. Andrews(1)................. 100,000(3) 1.7% 1.2%
Paul D. Finkelstein(1)............... 0(3) 0% 0%
John E. Smircina(1).................. 5,000,000(2) 84.0% 59.2%
George Skakel III(1)................. 0(3) 0% 0%
All executive officers, directors and
director-nominees as a group (9
persons)........................... 5,650,000(2)(3) 95.0% 66.9%
</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
Messrs. Helzer is 2500 U.S. Highway 287, Mansfield, Texas 76063. The address
for Mr. Howard is 2090 Highway 157 N., Mansfield, Texas 76063. The address
for Mr. Andrews is 822 North Monroe Street, Tallahassee, Florida 32303. 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 3,000,000 shares of Common Stock to be issued to TDA upon
consummation of the Acquisitions. Does not include any securities of the
Company that are being offered hereby that may be purchased by TDA. 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. See "The Acquisitions," "Management" and "Certain
Transactions."

(3) Does not include options granted under the Company's Stock Option Plan. See
"Management."

(4) Includes 300,000 shares of Common Stock to be issued to James E. Helzer
pursuant to the agreement by which JEH Eagle acquired the business and
substantially all of the assets of JEH Co.

(5) Includes 250,000 shares of Common Stock to be issued to Gary L. Howard
pursuant to the agreement by which MSI Eagle acquired the business and
substantially all of the assets of MSI Co. and the exchange of $250,000 of
the principal amount of MSI Eagle's note payable to MSI Co. for 50,000
shares of the Company's Common Stock, all of which shares are to be issued
upon the closing of the Public Offering and consummation of the
Acquisitions. See "The Acquisitions" and "Certain Transactions."

(6) All approximate percentages after the Public Offering give effect to the
issuance of the foregoing 3,000,000, 300,000 and 250,000 shares of the
Company's Common Stock to TDA, James E. Helzer and Gary L. Howard,
respectively. See "The Acquisitions" and "Certain Transactions."

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<PAGE>
CERTAIN TRANSACTIONS

Simultaneously with the closing of the Public Offering, the Company will
consummate the Acquisitions. The consideration to be paid by the Company to TDA
for the Acquisitions was determined by negotiations among the Company, TDA and
the Underwriter, without independent appraisal. Upon consummation of the
Acquisitions, Eagle, JEH Eagle and MSI Eagle will become wholly-owned
subsidiaries of the Company and will constitute the only business operations and
sources of revenue of the Company until such time, if any, as the Company
consummates additional acquisitions. The Company, TDA, Eagle, JEH Eagle and MSI
Eagle have not allocated the consideration for Eagle, JEH Eagle or MSI Eagle.
See "The Acquisitions."

TDA is a holding company which operates four business enterprises, including
Eagle, JEH Eagle, MSI Eagle and real estate investment companies. At the date of
this Prospectus, Eagle, JEH Eagle and MSI Eagle are wholly-owned by TDA. See
"Principal Stockholders." For TDA's fiscal year ended June 30, 1997, Eagle's
revenues constituted a majority of TDA's revenues and for TDA's fiscal year
ended June 30, 1998, the revenues of Eagle and JEH Eagle constituted a majority
of TDA's revenues.

In 1994, Eagle entered into the Eagle Facility, then in the amount of
$7,500,000, which has been increased to $10,900,000 and is now due in October
2003 and is guaranteed by TDA. Eagle's obligations under the Eagle Facility are
collateralized by certain tangible and intangible current assets and certain
automotive equipment of Eagle with borrowings under the revolving credit loan of
the Eagle Facility based on a formula relating to certain levels of receivables
and inventory, as defined therein. By June 30, 1995, Eagle used its borrowings
under the Eagle Facility to repay $2,325,533 of its indebtedness to TDA and to
advance $3,308,681 to TDA. At June 30, 1998 and October 31, 1998, Eagle's
borrowings under the Eagle Facility were approximately $9,722,000 and
$8,748,000, respectively. The Eagle 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 "Management's
Discussion and Analysis of Financial Condition and Results of
Operations--Liquidity and Capital Resources."

During its fiscal years ended June 30, 1997 and 1998, Eagle made dividend
payments to TDA of $1,250,000 and $1,200,000, respectively. JEH Eagle did not
make any dividend payments to TDA during the fiscal year ended June 30, 1998 and
none of Eagle, JEH Eagle nor MSI Eagle made any dividend payments to TDA during
the four-month period ended October 31, 1998. After October 31, 1998, JEH Eagle
has been making dividend payments to TDA at the rate of $150,000 per month, and
until completion of the Public Offering and consummation of the Acquisitions,
both Eagle and JEH Eagle may make dividend payments to TDA. During each of
Eagle's last three fiscal years, Eagle was allocated by TDA the amounts of
$50,000 for accounting and auditing fees. Upon the closing of the Public
Offering and consummation of the Acquisitions, all such dividends will cease and
such accounting and auditing fees will be incurred directly by Eagle. See the
Financial Statements and the Notes thereto.

In or about May 1996, the Company sold 2,000,000 shares of its Common Stock
to TDA and 100,000 shares of its Common Stock to Steven R. Andrews for the
aggregate sum of $210. TDA and Mr. Andrews were the Company's founding
stockholders and are also the principal stockholder and a Director of the
Company, respectively. In connection with the Acquisitions, TDA will be issued
3,000,000 shares of the Company's Common Stock.

In February 1998, Eagle Holding, Inc., a TDA subsidiary, lent Eagle $400,000
repayable on demand but without interest, which amount was repaid in full prior
to June 30, 1998. In October 1998, Eagle Holding, Inc. again lent Eagle $400,000
repayable on demand but without interest. Also in October 1998, TDA lent Eagle
$1,000,000 repayable on demand without interest. The loans were made to enhance
Eagle's working capital. Management anticipates that these loans will be paid in
full prior to the closing of the Public Offering and consummation of the
Acquisitions.

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<PAGE>
See "The Acquisitions--Eagle Related Party Transactions" for further
information concerning transactions among Eagle and its affiliates.

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. See "Selling Securityholders."

In July 1997, JEH Eagle acquired the business and substantially all of the
assets of JEH Co., a Texas corporation, wholly-owned by James E. Helzer, now the
President of the Company, Eagle and JEH Eagle. The purchase price, as adjusted,
including transaction expenses, was approximately $14,768,000, consisting of
$13,878,000 in cash, net of $250,000 due from JEH Co., and a five-year $864,852
principal amount note bearing interest at the rate of 6% per year. The purchase
price and the note are subject to further adjustments under certain conditions.
Certain, potentially substantial, contingent payments, as additional future
consideration to JEH Co., or its designee, are to be paid by JEH Eagle. See "The
Acquisitions-- The 1997 Acquisition of JEH Co."

JEH Eagle has entered into agreements with James E. Helzer and E.G. Helzer
pursuant to which they serve as President and Senior Vice President-Operations,
respectively, of JEH Eagle for terms of five and three years, respectively,
which commenced in July 1997, at compensation rates of $250,000 and $125,000 per
year, respectively, subject to annual review by JEH Eagle's Board of Directors.
James E. Helzer and E.G. Helzer also serve as Eagle's President and Senior Vice
President-Operations at salaries of $50,000 and $25,000 per year, respectively,
and are also entitled to receive 20% and 6%, respectively, of Eagle's income
before taxes in excess of $600,000 per year. Messrs. Helzers are employed by the
Company and Eagle pursuant to oral agreements that can be terminated by either
party without notice or penalty. See "The Acquisitions" and "Management."

In order to pay a substantial portion of the purchase price for the
acquisition of JEH Co.'s business and to provide working capital to JEH Eagle,
JEH Eagle in July 1997 entered into a loan agreement for a credit facility of up
to $20,000,000 (the "JEH Facility") guaranteed by TDA and collateralized by
substantially all of the assets of JEH Eagle. Of the $13,878,000 initial cash
payment portion of the $14,768,000 JEH Co. tentative purchase price, including
transaction expenses, approximately $12,500,000 was supplied pursuant to the JEH
Facility and approximately $1,350,000 was contributed to JEH Eagle by TDA as
equity capital. In connection with the acquisition of JEH Co., JEH Eagle paid
TDA a financing fee of $150,000. See "Management's Discussion and Analysis of
Financial Condition and Results of Operations."

James E. Helzer had rented to JEH Co. and continues to rent to JEH Eagle,
pursuant to five-year written leases, the premises for several of JEH Eagle's
distribution centers and JEH Eagle's executive offices at aggregate annual
rentals of approximately $485,000. Rental payments to Mr. Helzer for the several
distribution facilities he leases to JEH Eagle aggregated $402,000 and $492,000
for JEH Co.'s fiscal year ended December 31, 1996 and JEH Eagle's fiscal year
ended June 30, 1998, respectively, and $162,000 for JEH Eagle's four-month
period ended October 31, 1998. The Company believes that the amounts of these
rental payments are fair and reasonable to JEH Eagle and are not in excess of
what JEH Eagle would be required to pay independent third parties for comparable
facilities. See "The Acquisitions" and "Business."

During its fiscal year ended December 31, 1996 and six-month period ended
June 30, 1997, JEH Co. had substantial indebtedness to James E. Helzer for funds
advanced by him to JEH Co. As part of JEH Eagle's purchase of the business and
substantially all of the assets of JEH Co., JEH Eagle did not assume this
liability to Mr. Helzer.

During its fiscal year ended December 31, 1996 and six month period ended
June 30, 1997, JEH Co. made sales aggregating approximately $985,000 and
$327,000 to Classic Roofs and Indy Roofing Service, respectively, two entities
owned by Jay James Helzer, the son of James E. Helzer. During its fiscal year

85
<PAGE>
ended June 30, 1998 and the four-month period ended October 31, 1998, JEH Eagle
made sales aggregating approximately $1,018,000 and $211,000, respectively, to
the foregoing two entities. Management of the Company believes that such sales
by JEH Eagle to the two entities owned by the son of James E. Helzer were made
on terms no less favorable to JEH Eagle than sales made to independent third
parties.

TDA and JEH Eagle have entered into an agreement pursuant to which TDA
provides JEH Eagle with certain services including (i) managerial, (ii)
strategic planning, (iii) banking negotiation, (iv) investor relations, and (v)
advisory services relating to acquisitions for a five-year term which commenced
in July 1997. The monthly fee, the payment of which is to commence upon the
closing of the Public Offering and the consummation of the Acquisitions, for the
foregoing services is $3,000.

In February of 1998, the Company sold an aggregate of $300,000 in principal
amount of its promissory notes to three of its stockholders, including TDA, for
aggregate gross proceeds of $300,000. TDA purchased $150,000 of said notes and
Hi-Tel Group, Inc. and Paul Schmidt purchased $100,000 and $50,000 of said
notes, respectively. Said notes bear interest at the rate of 15% per year
through June 30, 1998 and 6% per year after that date. The notes mature on the
earlier of thirty months after issuance or the closing of the Public Offering.
In August 1998 and January 1999, TDA lent the Company an aggregate of $200,000
pursuant to two-year 6% notes which are required to be prepaid if the Public
Offering is consummated. The Company intends to repay said notes in full with
the net proceeds of this Public Offering.

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Upon completion of the Public Offering and consummation of the Acquisitions,
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.

Upon completion of the Public Offering and consummation of the Acquisitions,
Messrs. Fields' and Friedman's employment agreements with the Company and Eagle
will become effective. Their employment agreements with JEH Eagle have already
become effective. The aggregate annual compensation to be paid to Messrs. Fields
and Friedman by the Company, Eagle and JEH Eagle will be $260,000 each,
exclusive of benefits, bonuses and annual increases. See "The Acquisitions" and
"Management."

The foregoing transactions that Eagle, JEH Eagle and MSI Eagle have 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, JEH Eagle's and MSI Eagle's transactions with TDA. TDA
is a holding company which, among other things, owns Eagle, JEH Eagle, MSI
Eagle, an indoor tennis facility, and owns and manages commercial and
undeveloped real estate. TDA and/or certain of its subsidiaries derive funds
from all of the foregoing sources, including dividend and lease payments from
Eagle. These sources pay TDA's operating expenses, including the payment of
salaries and benefits to Messrs. Fields and Friedman. See "Management."

The foregoing transactions that Eagle and JEH Eagle have engaged in with
James E. Helzer have benefitted or may be deemed to have benefitted Mr. Helzer,
directly or indirectly. James E. Helzer is the President of the Company, Eagle
and JEH Eagle. The foregoing transactions that MSI Eagle have engaged in with
Gary L. Howard have benefitted or may be deemed to have benefitted Mr. Howard.
Mr. Howard is a Vice President of the Company and the President of MSI Eagle.
See "The Acquisitions" and "Management."

Messrs. Fields and Friedman are also officers, directors and principal
stockholders of TDA, and Mr. Smircina is a director of TDA, and, consequently,
they will be able, through TDA, to direct the election of the Company's
directors, effect significant corporate events and generally direct the affairs
of the Company. The Company does not intend to enter into any material
transactions, loans or forgiveness of loans with any affiliates, except as
contemplated or disclosed in this Prospectus, unless such transaction is fair
and reasonable to the Company and is on terms no less favorable than could be
obtained from unaffiliated third parties. Additionally, any such event must be
approved by a majority of the Company's directors who do not have an interest in
such a transaction and who have had access, at the Company's expense, to
independent legal counsel. See "Management."

Each of TDA and Messrs. Fields and Friedman may be deemed to be a "promoter"
of the Company as such term is defined under the federal securities laws.

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DESCRIPTION OF SECURITIES

COMMON STOCK

The Company is authorized to issue up to 25,000,000 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 shares of the Company's 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.
Upon completion of the Public Offering and consummation of the Acquisitions,
TDA, James E. Helzer and Gary L. Howard will be issued 3,000,000, 300,000 and
250,000 shares of the Company's Common Stock, respectively.

PREFERRED STOCK

The Company is authorized to issue 2,500,000 shares of Preferred Stock, par
value $.0001 per share ("Preferred Stock"). The Board of Directors of the
Company, without further stockholder action, may issue shares of Preferred Stock
in any number of series and may establish as to each such series the designation
and number of shares to be issued and the relative rights and preferences of the
shares of each series, including provisions regarding voting powers, redemption,
dividend rights, rights upon liquidation and conversion rights. The issuance of
shares of Preferred Stock by the Board of Directors could adversely affect the
rights of holders of Common Stock by, among other matters, establishing
preferential dividends, liquidation rights and voting power. The Company has not
issued any shares of Preferred Stock and has no present intention to issue
shares of Preferred Stock. The issuance thereof could discourage or defeat
efforts to acquire control of the Company through acquisition of shares of
Common Stock. The Company has agreed not to issue any shares of Preferred Stock
until the third anniversary of the date of this Prospectus without the
Underwriter's written consent.

REDEEMABLE COMMON STOCK PURCHASE WARRANTS

The Company has authorized the issuance of up to 2,875,000 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 the Private
Placement.

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 $5.50 per share during the period
commencing on the date of this Prospectus and ending on the fifth anniversary of
such date, except for the 300,000 Warrants sold as part of the Private

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Placement which expire on the third anniversary of such date (and which have an
exercise price of $5.00 per share). The exercise prices are subject to
adjustment in certain circumstances as defined herein.

EXERCISE

Each holder of a Warrant may exercise such Warrant, in whole or in part, by
surrendering the certificate evidencing such Warrant, with the form of election
to purchase attached to such certificate properly completed and executed,
together with payment of the exercise price and any required transfer taxes, to
the Company. No Warrants may be exercised unless at the time of exercise there
is a current prospectus encompassing the shares of Common Stock issuable upon
the exercise of such Warrants under an effective registration statement. The
Company will endeavor to maintain an effective registration statement, including
such current prospectus, so long as any of the exercisable Warrants remain
outstanding. While it is the Company's intention to comply with this intention,
there can be no assurance that it will be able to do so.

The exercise price and any required transfer taxes will be payable in cash
or by certified or official bank check payable to the Company. If fewer than all
of the Warrants evidenced by a warrant certificate are exercised, a new
certificate will be issued for the remaining number of Warrants. Certificates
evidencing the Warrants may be exchanged for new certificates of different
denominations by presenting the Warrant certificate at the offices of the
Company's Warrant Agent.

ADJUSTMENTS

The exercise price and the number of shares of Common Stock purchasable upon
exercise of the Warrants are subject to adjustment upon the occurrence of
certain events including stock dividends, reclassifications, reorganizations,
consolidations, mergers, and certain issuances 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, the 3,000,000,
300,000 and 250,000 shares of the Company's Common Stock to be issued to TDA,
Mr. Helzer and Mr. Howard, respectively, any issuances of the Company's
securities in connection with the Private Placement, 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
Acquisitions 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 then current market price of a share of Common Stock of the
Company.

Warrantholders do not have voting or any other rights of stockholders of the
Company and are not entitled to dividends, if any.

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REDEMPTION OF WARRANTS

If the market price of the Common Stock shall have averaged at least $10.00
per share for a period of thirty consecutive trading days at any time after the
date of this Prospectus, the Company may redeem the Warrants by paying holders
$.25 per Warrant, provided that notice of such redemption is mailed not later
than 10 days after the end of such period and prescribes a redemption date at
least thirty days thereafter. For these purposes, the market price of the Common
Stock shall mean the closing per share bid price, as reported by the NASDAQ
SmallCap, so long as the Common Stock is quoted on the NASDAQ SmallCap, and if
the Common Stock is listed on a national securities exchange or on the
NASDAQ-NMS system, shall be determined by the closing sales price on the primary
exchange on which the Common Stock is traded or the NASDAQ-NMS if such shares
are not listed on an exchange. Warrantholders 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 a registration statement effective and current
under the Securities Act and the "Blue Sky" laws then applicable to the holders
of the warrants.

WARRANT AGREEMENT

Upon the closing of the Public Offering and consummation of the
Acquisitions, 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 Warrantholders.

UNDERWRITER'S WARRANT AND STOCK WARRANTS

The Company has agreed to grant the Underwriter a Warrant and Stock Warrants
entitling the holders thereof to purchase an aggregate of 500,000 shares of the
Company's Common Stock. See "Underwriting."

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's, Eagle's, JEH Eagle's and MSI Eagle's
business operations.

TRANSFER AGENT AND WARRANT AGENT

The Transfer Agent for the Company's Common Stock and the Warrant Agent for
the Company's Warrants is Continental Stock Transfer & Trust Company, New York,
New York.

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SHARES ELIGIBLE FOR FUTURE SALE

Upon completion of the Public Offering and consummation of the Acquisitions,
the Company will have 8,450,000 shares of Common Stock outstanding (8,825,000
shares if the Underwriter's 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 aggregate of 3,550,000 shares of Common Stock to be issued to TDA, James E.
Helzer and Gary L. Howard 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 one year, 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 two years is
entitled to sell such shares under Rule 144 without regard to any of the
limitations described above. Rule 144(d)(1) states as follows: "GENERAL RULE. A
minimum of one year must elapse between the later of the date of the acquisition
of the securities from the issuer or from an affiliate of the issuer, and any
resale of such securities in reliance on this rule for the account of either the
acquiror or any subsequent holder of those securities. If the acquiror takes the
securities by purchase, the one-year period shall not begin until the full
purchase price or other consideration is paid or given by the person acquiring
the securities from the issuer or from an affiliate of the issuer."

The holders of 300,000 shares of the Company's Common Stock have agreed not
to sell, for a period of fifteen months from the date of this Prospectus, any
shares of the Company's Common Stock without the prior written consent of the
Underwriter. The Underwriter does not anticipate that it will release any of the
foregoing stockholders except under extraordinary circumstances that are
presently not forseeable. TDA, the holder of 5,000,000 shares of the Company's
Common Stock (including the 3,000,000 shares of the Company's Common Stock to be
issued in connection with the Acquisitions), James E. Helzer and Gary L. Howard
(who are to be issued an aggregate of 550,000 shares of the Company's Common
Stock) and, Messrs. Fields and Friedman have agreed, for a period of two years
from the date of this Prospectus, not to dispose of any shares of the Company's
Common Stock without the possibility of earlier release.

Furthermore, in connection with the Public Offering, the Underwriter has
been granted warrants to purchase up to 250,000 shares of Common Stock and up to
250,000 Warrants to purchase up to an additional 250,000 shares of Common Stock.
The holders thereof have the right to require the Company to register said
Underwriter's Warrants and/or the underlying securities under certain
circumstances. In addition, the holders of said warrants have the right to
"piggy-back" said Underwriter's 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. See "Underwriting."

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.

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UNDERWRITING

Subject to the terms and conditions of the Underwriting Agreement, Barron
Chase Securities, Inc. (the "Underwriter") has agreed to purchase from the
Company an aggregate of 2,500,000 Shares and 2,500,000 Warrants (collectively,
the "Securities"). 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 (other than those covered by the
Overallotment Option described below).

Each purchaser of shares of the Company's Common stock in the Public
Offering will be entitled, but not required, to purchase an equal number of
warrants.

The Company has been advised by the Underwriter that the Underwriter
proposes to offer the Securities to the public at the offering prices set forth
on the cover page of this Prospectus. The Underwriter has advised the Company
that the Underwriter proposes to offer the Securities through members of the
National Association of Securities Dealers, Inc. ("NASD"), and may allow
concessions, in its discretion, to certain selected dealers who are members of
the NASD and who agree to sell the Securities in conformity with the NASD's
Conduct Rules. Such concessions will 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 45 days from the Effective Date, to purchase up to an additional
375,000 Shares and an additional 375,000 Warrants at the respective public
offering prices less the Underwriting Discounts 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 this Prospectus.

Officers and directors of the Company may introduce the Underwriter to
persons to consider the Public Offering and to purchase Securities either
through the Underwriter or through participating dealers. In this connection, no
Securities have been reserved for those purchases and officers and directors
will not receive any commissions or any other compensation.

The Company has advised the Underwriter that it may purchase, and the
Underwriter has advised the Company that it will permit such, up to 100,000
shares of the Common Stock and a like number of the Warrants offered hereby.

The Company has agreed to pay to the Underwriter a commission of nine
percent (9%) of the gross proceeds of the Public Offering (the "Underwriting
Discount"), including the gross proceeds from the sale of the Overallotment
Option, if exercised. In addition, the Company has agreed to pay to the
Underwriter the Non-Accountable Expense Allowance of three percent (3%) of the
gross proceeds of the Public Offering, including proceeds from any Securities
purchased pursuant to the Overallotment Option. The Company has paid to the
Underwriter a $50,000 advance in respect of the Non-Accountable Expense
Allowance. The Underwriter's expenses in excess of the Non-Accountable Expense
Allowance will be paid 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. The Underwriter has informed the Company that it does not
expect sales to discretionary accounts to exceed five percent (5%) of the total
number of Securities offered by the Company hereby.

The Company has agreed to engage the Underwriter as a financial advisor at a
fee of $80,000, 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 transaction which the Underwriter has introduced in writing
to the Company during a period of five years after the Closing (including
mergers,

92
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acquisitions, joint ventures and any other business transaction for the Company
introduced in writing by the Underwriter), and which is consummated after the
Closing (including an acquisition of assets or stock for which it pays, in whole
or in part, with shares or other securities of the Company), or if the Company
retains the services of the Underwriter in connection with any such transaction
(an "Introduced Consummated 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, 4% of the next million of such value,
3% of the next million of such value, 2% of the next million of such value, and
1% of the next million dollars of such value and of all such value above
$4,000,000.

Prior to the Public Offering, there has been no public market for the shares
of Common Stock or the Warrants. Consequently, the initial public offering
prices 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 prices were the history of, and the prospects for, the Company's
business, an assessment of the Company's management, the Company's past and
present operations, its development and the general condition of the securities
market at the time of the Public Offering. The initial public offering prices do
not necessarily bear any relationship to the Company's assets, 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 Shares or the Warrants will develop after
the Closing, or if a public market in fact develops, that such public market
will be sustained, or that the Shares or the Warrants can be resold at any time
at the offering or any other price. See "Risk Factors."

At the Closing, the Company will issue to the Underwriter and/or persons
related to the Underwriter, for nominal consideration, the Common Stock
Underwriter Warrants to purchase up to 250,000 shares of Common Stock (the
"Underlying Shares") and the Warrant Underwriter Warrants to purchase up to
250,000 Warrants (the "Underlying Warrants"). The Common Stock Underwriter
Warrants, the Warrant Underwriter Warrants and the Underlying Warrants are
sometimes referred to in this Prospectus as the "Underwriter Warrants." The
Common Stock Underwriter Warrants and the Warrant Underwriter Warrants will be
exercisable for a five-year period commencing on the Effective Date. The initial
exercise price of each Common Stock Underwriter Warrant shall be $8.25 per
Underlying Share (165% of the public offering price). The initial exercise price
of each Warrant Underwriter Warrant shall be $.20625 per Underlying Warrant
(165% of the public offering price). Each Underlying Warrant will be exercisable
for a five-year period commencing on the Effective Date to purchase one share of
Common Stock at an exercise price of $8.25 per share of Common Stock. The
Underwriter Warrants will be restricted from sale, transfer, assignment or
hypothecation for a period of twelve months from the Effective Date by the
holder, 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 Common Stock Underwriter Warrants and the Warrant Underwriter 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 Warrants contain net issuance
provisions permitting the holders thereof to elect to exercise the Underwriter
Warrants in whole or in part and 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 provision has the effect of requiring the Company to issue shares of
Common Stock without a corresponding increase in capital. A net exercise of the
Underwriter Warrants will have the same dilutive effect on the interests of the
Company's stockholders as will a cash exercise. The Underwriter Warrants do not
entitle the holders thereof to any rights as a stockholder of the Company until
such Underwriter Warrants are exercised and shares of Common Stock are purchased
thereunder.

The Underwriter 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

93
<PAGE>
with the Commission, the holders shall have the right, for seven (7) years from
the Effective Date, to include in such registration statement or offering
statement the Underwriter 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 Warrants
during the period commencing one year from the Effective Date and expiring four
years thereafter, the Company will, under certain circumstances, register the
Underwriter Warrants and/or any of the securities issuable upon their exercise.

In order to facilitate the offering of the Common Stock and Warrants, the
Underwriter may engage in transactions that stabilize, maintain or otherwise
affect the price of the Common Stock and Warrants. Specifically, the Underwriter
may overallot in connection with the Public Offering, creating a short position
in the Common Stock and Warrants for its own account. In addition, to cover
overallotments or to stabilize the price of the Common Stock and Warrant, the
Underwriter may bid for, and purchase, shares of Common Stock and Warrants in
the open market. Finally, the Underwriter may reclaim selling concessions
allowed to a dealer for distributing the Common Stock and Warrants in the Public
Offering, if the Underwriter repurchases previously distributed Common Stock or
Warrants in transactions to cover the Underwriter's short position in
stabilization transactions or otherwise. Any of these activities may stabilize
or maintain the market price of the Common Stock and Warrants above independent
market levels. The Underwriter is not required to engage in these activities,
and may end any of these activities at any time.

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 filed by the Company with the Commission under the
Securities Act (together with all amendments and exhibits thereto, the
"Registration Statement") and this Prospectus. The Underwriter has in turn
agreed to indemnify the Company against any costs or liabilities by reason of
misstatements or omissions to state material facts in connection with the
statements made in the Registration Statement and this Prospectus, based on
information relating to the Underwriter and furnished in writing by the
Underwriter. To the extent that these provisions may purport to provide
exculpation from possible liabilities arising under the federal securities laws,
in the opinion of the Commission, such indemnification is contrary to public
policy and therefore unenforceable.

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 which are filed as exhibits to the Registration
Statement. See "Additional Information."

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<PAGE>
SELLING SECURITYHOLDERS

Concurrently with the Public Offering, 300,000 shares of Common Stock
underlying Warrants sold in the Company's Private Placement have been registered
for immediate resale. The Company will not receive any proceeds from sales of
the shares of the Company's Common Stock by the Selling Securityholders. To the
best of the Company's knowledge, none of the holders of such securities or their
affiliates has ever held any position or office with the Company or had any
other material relationship with the Company. The holders of such securities
have agreed not to sell, transfer, hypothecate or otherwise dispose of, for a
period of fifteen months from the date of this Prospectus, an aggregate of
300,000 shares of Common Stock and 300,000 Warrants and the 300,000 shares of
Common Stock underlying said Warrants without the prior written consent of the
Underwriter.

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LEGAL MATTERS

The validity of the issuance of the securities offered in the Public
Offering will be passed upon for the Company by Gusrae, Kaplan & Bruno, New
York, New York. Gusrae, Kaplan & Bruno has in the past and may in the future
represent the Underwriter in matters unrelated to the Public Offering. Certain
legal matters in connection with the Public Offering will be passed upon for the
Underwriter by David A. Carter, P.A., Boca Raton, Florida.

EXPERTS

The balance sheets of the Company as of June 30, 1998 and 1997 and the
related consolidated statements of operations, shareholders' equity (deficiency)
and cash flows for the years ended June 30, 1998 and 1997 and the period May 1,
1996 (inception) to June 30, 1996 appearing in this Prospectus and Registration
Statement have been audited by Deloitte & Touche LLP, independent auditors, as
set forth in their report thereon appearing elsewhere 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, 1998 and 1997 and
the related consolidated statements of operations, shareholder's equity and cash
flows for each of the three years in the period ended June 30, 1998 appearing in
this Prospectus and Registration Statement have been audited by Deloitte &
Touche LLP, independent auditors, as set forth in their report thereon appearing
elsewhere 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 sheet of JEH/Eagle Supply, Inc. as of June 30, 1998 and the
related consolidated statement of operations, shareholder's equity and cash
flows for the year ended June 30, 1998 appearing in this Prospectus and
Registration Statement have been audited by Deloitte & Touche LLP, independent
auditors, as set forth in their report thereon appearing elsewhere 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 the JEH Company for the six months ended June 30, 1997
and years ended December 31, 1996 and 1995 and the related statements of
operations, retained earnings and cash flows for the six months ended June 30,
1997 and each of the years in the two year period ended December 31, 1996
appearing in this Prospectus and Registration Statement have been audited by
Waters, Murray & Associates, independent auditors, as set forth in their report
thereon appearing elsewhere 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 Masonry Supply, Inc. as of October 21, 1998, June 30,
1998 and 1997 and the related consolidated statements of operations, equity and
cash flows for the period July 1, 1998 to October 21, 1998 and the three years
ended June 30, 1998 appearing in this Prospectus and Registration Statement have
been audited by Waters, Murray & Associates, independent auditors, as set forth
in their reports thereon appearing elsewhere herein and have been so included in
reliance upon the reports of such firm given upon their authority as experts in
accounting and auditing.

ADDITIONAL INFORMATION

The Company has filed with the Washington, D.C. office of the Commission a
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

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<PAGE>
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. The
Commission maintains a website that contains reports, proxies and information
statements and other information regarding issuers that file electronically with
the Commission. The Commission's website is located at http://www.sec.gov.

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INDEX TO FINANCIAL STATEMENTS

EAGLE SUPPLY GROUP, INC.

INDEPENDENT AUDITORS' REPORT.............................................................................. F-4

Balance Sheets at June 30, 1998 and 1997.................................................................. F-5

Statements of Operations for the Years Ended June 30, 1998 and 1997 and the period May 1, 1996 (inception)
to June 30, 1996........................................................................................ F-6

Statements of Shareholders' (Deficiency) Equity for the Years Ended June 30, 1998 and 1997 and the period
May 1, 1996 (inception) to June 30, 1996................................................................ F-7

Statements of Cash Flows for the Years Ended June 30, 1998 and 1997 and the period May 1, 1996 (inception)
to June 30, 1996........................................................................................ F-8

Notes to Financial Statements for the Years Ended June 30, 1998 and 1997 and the period May 1, 1996
(inception) to June 30, 1996............................................................................ F-9

Unaudited Balance Sheet at October 31, 1998............................................................... F-13

Unaudited Statements of Operations and Deficiency for the Four Months Ended October 31, 1998 and 1997..... F-14

Unaudited Statements of Cash Flows for the Four Months Ended October 31, 1998 and 1997.................... F-15

Notes to Unaudited Financial Statements for the Four Months Ended October 31, 1998 and 1997............... F-16

EAGLE SUPPLY, INC.

INDEPENDENT AUDITORS' REPORT.............................................................................. F-20

Balance Sheets at June 30, 1998 and 1997.................................................................. F-21

Statements of Operations for the Years Ended June 30, 1998, 1997 and 1996................................. F-22

Statements of Shareholder's (Deficiency) Equity for the Years Ended June 30, 1998, 1997 and 1996.......... F-23

Statements of Cash Flows for the Years Ended June 30, 1998, 1997 and 1996................................. F-24

Notes to Financial Statements for the Years Ended June 30, 1998, 1997 and 1996............................ F-25

Unaudited Balance Sheet at October 31, 1998............................................................... F-32

Unaudited Statements of Operations and Retained Earnings for the Four Months Ended October 31, 1998 and
1997.................................................................................................... F-33

Unaudited Statements of Cash Flows for the Four Months Ended October 31, 1998 and 1997.................... F-34

Notes to Unaudited Financial Statements for the Four Months Ended October 31, 1998 and 1997............... F-35

JEH/EAGLE SUPPLY, INC.

INDEPENDENT AUDITORS' REPORT.............................................................................. F-37

Balance Sheet at June 30, 1998............................................................................ F-38
</TABLE>

F-1
<PAGE>
<TABLE>
<CAPTION>
PAGE
---------
<S> <C>
Statement of Operations for the Year Ended June 30, 1998.................................................. F-39

Statement of Shareholder's Equity for the Year Ended June 30, 1998........................................ F-40

Statement of Cash Flows for the Year Ended June 30, 1998.................................................. F-41

Notes to Financial Statements for the Year Ended June 30, 1998............................................ F-42

Unaudited Balance Sheet at October 31, 1998............................................................... F-49

Unaudited Statements of Cash Flows for the Four Months Ended October 31, 1998 and 1997.................... F-51

Notes to Unaudited Financial Statements for the Four Months Ended October 31, 1998 and 1997............... F-52

JEH COMPANY, INC.

INDEPENDENT AUDITORS' REPORT.............................................................................. F-54

Balance Sheet at June 30, 1997............................................................................ F-55

Statements of Operations and Retained Earnings for the Six Months Ended June 30, 1997 and Unaudited June
30, 1996................................................................................................ F-56

Statements of Cash Flows for the Six Months Ended June 30, 1997 and Unaudited June 30, 1996............... F-57

Notes to Financial Statements for the Six Months Ended June 30, 1997 and Unaudited June 30, 1996.......... F-58

INDEPENDENT AUDITORS' REPORT.............................................................................. F-65

Balance Sheet at December 31, 1996........................................................................ F-66

Statements of Operations and Retained Earnings for the Years Ended December 31, 1996 and 1995............. F-67

Statements of Cash Flows for the Years Ended December 31, 1996 and 1995................................... F-68

Notes to Financial Statements for the Years Ended December 31, 1996 and 1995.............................. F-69

MASONRY SUPPLY, INC.

INDEPENDENT AUDITORS' REPORT.............................................................................. F-76

Balance Sheet at October 21, 1998......................................................................... F-77

Statements of Operations and Retained Earnings for the Periods July 1, 1998 through October 21, 1998 and
Unaudited July 1, 1997 through October 31, 1997......................................................... F-78

Statements of Cash Flows for the Periods July 1, 1998 through October 21, 1998 and Unaudited July 1, 1997
through October 31, 1997................................................................................ F-79

Notes to Financial Statements for the Periods July 1, 1998 through October 21, 1998 and Unaudited July 1,
1997 through October 31, 1997........................................................................... F-80

INDEPENDENT AUDITORS' REPORT.............................................................................. F-85

Balance Sheets at June 30, 1998 and 1997.................................................................. F-86
</TABLE>

F-2
<PAGE>
<TABLE>
<CAPTION>
PAGE
---------
<S> <C>
Statements of Operations and Retained Earnings for the Years Ended June 30, 1998, 1997 and 1996........... F-87

Statements of Cash Flows for the Years Ended June 30, 1998, 1997 and 1996................................. F-88

Notes to Financial Statements for the Years Ended June 30, 1998, 1997 and 1996............................ F-89

MSI/EAGLE SUPPLY, INC.

Unaudited Balance Sheet at October 31, 1998............................................................... F-94

Unaudited Statement of Operations and Retained Earnings for the Period October 22, 1998 to October 31,
1998.................................................................................................... F-95

Unaudited Statement of Cash Flows for the Period October 22, 1998 to October 31, 1998..................... F-96

Notes to Unaudited Financial Statements for the Period October 22, 1998 to October 31, 1998............... F-97
</TABLE>

F-3
<PAGE>
INDEPENDENT AUDITORS' REPORT

To the Board of Directors and Shareholders of
Eagle Supply Group, Inc.

We have audited the accompanying balance sheets of Eagle Supply Group, Inc.
(the "Company"), a majority-owned subsidiary of TDA Industries, Inc., as of June
30, 1998 and 1997, and the related statements of operations, shareholders'
(deficiency) equity and cash flows for the years ended June 30, 1998 and 1997
and the period May 1, 1996 (inception) to June 30, 1996. These financial
statements are the responsibility of the Company's management. Our
responsibility is to express an opinion on these financial statements based on
our 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 Group, Inc. as of June 30, 1998
and 1997, and the results of its operations and its cash flows for the years
ended June 30, 1998 and 1997 and the period May 1, 1996 (inception) to June 30,
1996, in conformity with generally accepted accounting principles.

Deloitte & Touche, LLP

September 18, 1998
New York, New York

F-4
<PAGE>
EAGLE SUPPLY GROUP, INC.
(A MAJORITY-OWNED SUBSIDIARY OF TDA INDUSTRIES, INC.)

BALANCE SHEET

JUNE 30, 1998 AND 1997

<TABLE>
<CAPTION>
1998 1997
---------- -----------
<S> <C> <C>
ASSETS

CURRENT ASSETS:
Cash................................................................................... $ 51,027 $ 5,366
Federal and state taxes due from parent................................................ 7,000 --
Deferred registration costs (Note 6)................................................... 223,488 --
---------- -----------
$ 281,515 $ 5,366
---------- -----------
---------- -----------

LIABILITIES AND SHAREHOLDERS' DEFICIENCY

CURRENT LIABILITIES:
Accrued expenses and other current liabilities......................................... $ 69,500 $ 82,289
Notes payable--shareholders (Note 5)................................................... 300,000 --
---------- -----------
Total current liabilities............................................................ 369,500 82,289
---------- -----------

COMMITMENTS AND CONTINGENCIES (Notes 3 and 6)

SHAREHOLDERS' DEFICIENCY (Note 4):
Preferred shares, $.0001 par value per share, 2,500,000 shares authorized, none issued
and outstanding...................................................................... -- --
Common shares, $.0001 par value per share, 25,000,000 shares authorized, 2,400,000
issued and outstanding............................................................... 240 240
Additional paid-in capital............................................................. 293,865 293,865
Deficit................................................................................ (382,090) (371,028)
---------- -----------
Total shareholders' deficiency....................................................... (87,985) (76,923)
---------- -----------
$ 281,515 $ 5,366
---------- -----------
---------- -----------
</TABLE>

See notes to financial statements.

F-5
<PAGE>
EAGLE SUPPLY GROUP, INC.
(A MAJORITY-OWNED SUBSIDIARY OF TDA INDUSTRIES, INC.)

STATEMENTS OF OPERATIONS

YEARS ENDED JUNE 30, 1998 AND 1997 AND THE PERIOD
MAY 1, 1996 (INCEPTION) TO JUNE 30, 1996

<TABLE>
<CAPTION>
1998 1997 1996
---------- ----------- ----------
<S> <C> <C> <C>
ADMINISTRATIVE EXPENSES...................................................... $ 437 $ 675 $ --
---------- ----------- ----------
LOSS FROM OPERATIONS......................................................... (437) (675) --
---------- ----------- ----------
OTHER EXPENSES:
Interest expense........................................................... (17,625) -- --
Registration costs......................................................... -- (370,353) --
---------- ----------- ----------
(17,625) (370,353) --
---------- ----------- ----------
LOSS BEFORE BENEFIT FOR INCOME TAXES......................................... (18,062) (371,028)
BENEFIT FOR INCOME TAXES..................................................... (7,000) -- --
---------- ----------- ----------
NET LOSS..................................................................... $ (11,062) $ (371,028) $ --
---------- ----------- ----------
---------- ----------- ----------
</TABLE>

See notes to financial statements.

F-6
<PAGE>
EAGLE SUPPLY GROUP, INC.
(A MAJORITY-OWNED SUBSIDIARY OF TDA INDUSTRIES, INC.)

STATEMENTS OF SHAREHOLDERS' (DEFICIENCY) EQUITY

YEARS ENDED JUNE 30, 1998 AND 1997 AND THE PERIOD
MAY 1, 1996 (INCEPTION) TO JUNE 30, 1996

<TABLE>
<CAPTION>
COMMON SHARES ADDITIONAL
----------------------- PAID-IN
SHARES AMOUNT CAPITAL DEFICIENCY TOTAL
---------- ----------- ---------- ----------- -----------
<S> <C> <C> <C> <C> <C>
Initial capitalization............................. 2,100,000 $ 210 $ -- $ -- $ 210
Proceeds from private placement, net of related
expenses......................................... 300,000 30 293,865 -- 293,895
---------- ----- ---------- ----------- -----------
BALANCE, JUNE 30, 1996............................... 2,400,000 240 293,865 -- 294,105
Net loss........................................... -- -- -- (371,028) (371,028)
---------- ----- ---------- ----------- -----------
BALANCE, JUNE 30, 1997............................... 2,400,000 240 293,865 (371,028) (76,923)
Net loss........................................... -- -- -- (11,062) (11,062)
---------- ----- ---------- ----------- -----------
BALANCE, JUNE 30, 1998............................... 2,400,000 $ 240 $ 293,865 $ (382,090) $ (87,985)
---------- ----- ---------- ----------- -----------
---------- ----- ---------- ----------- -----------
</TABLE>

See notes to financial statements.

F-7
<PAGE>
EAGLE SUPPLY GROUP, INC.
(A MAJORITY-OWNED SUBSIDIARY OF TDA INDUSTRIES, INC.)

STATEMENTS OF CASH FLOWS

YEARS ENDED JUNE 30, 1998 AND 1997 AND THE PERIOD
MAY 1, 1996 (INCEPTION) TO JUNE 30, 1996

<TABLE>
<CAPTION>
1998 1997 1996
---------- ----------- ----------
<S> <C> <C> <C>
CASH FLOWS FROM OPERATING ACTIVITIES:
Net loss................................................................... $ (11,062) $ (371,028) $ --
Adjustments to reconcile net loss to net cash used in operating activities:
Changes in operating assets and liabilities:
(Decrease) increase in accrued expenses and other current
liabilities.......................................................... (12,789) 82,289 --
Increase in federal and state taxes due from Parent.................... (7,000) -- --
---------- ----------- ----------
Net cash used in operating activities................................ (30,851) (288,739) --
---------- ----------- ----------

CASH FLOWS FROM FINANCING ACTIVITIES:
Proceeds from issuance of notes payable--shareholders...................... 300,000 -- --
Increase in deferred registration costs.................................... (223,488) -- --
(Repayments) proceeds of loan payable to shareholder....................... -- (6,105) 6,105
Proceeds from initial capitalization....................................... -- -- 210
Proceeds from private placement............................................ -- -- 300,000
Decrease (increase) in stock subscriptions receivable...................... -- 56,250 (56,250)
Costs associated with private placement.................................... -- -- (6,105)
---------- ----------- ----------
Net cash provided by financing activities............................ 76,512 50,145 243,960
---------- ----------- ----------

NET INCREASE (DECREASE) IN CASH.............................................. 45,661 (238,594) 243,960

CASH, BEGINNING OF YEAR/PERIOD............................................... 5,366 243,960 --
---------- ----------- ----------

CASH, END OF YEAR/PERIOD..................................................... $ 51,027 $ 5,366 $ 243,960
---------- ----------- ----------
---------- ----------- ----------
</TABLE>

See notes to financial statements.

F-8
<PAGE>
EAGLE SUPPLY GROUP, INC.
(A MAJORITY-OWNED SUBSIDIARY OF TDA INDUSTRIES, INC.)

NOTES TO FINANCIAL STATEMENTS

YEARS ENDED JUNE 30, 1998 AND 1997 AND PERIOD
MAY 1, 1996 (INCEPTION) TO JUNE 30, 1996

1. BASIS OF PRESENTATION AND SIGNIFICANT ACCOUNTING POLICIES

BUSINESS DESCRIPTION--Eagle Supply Group, Inc. (the "Company") is a
majority-owned subsidiary of TDA Industries, Inc. ("TDA" or the "Parent") and
was organized to acquire, integrate and operate seasoned, privately-held
companies which distribute products to or manufacture products for the building/
construction industry.

The Company is dependent on its ability to raise funds through debt or
equity financing in order to meet its obligations and accomplish its acquisition
objectives.

TDA has incurred certain administrative expenses in connection with the
Company's limited activities. Such expenses have not been charged to the Company
and management believes that the aggregate of such expenses is not significant
to the Company's results of operations or financial condition.

ACQUISITIONS--Upon completion of the Offering described in Note 6, the
Company will acquire all of the issued and outstanding common shares of Eagle
Supply, Inc. ("Eagle"), JEH/Eagle Supply, Inc. ("JEH Eagle") and MSI/Eagle
Supply, Inc. ("MSI Eagle") (the "Acquisitions") from TDA for consideration
consisting of 3,000,000 of the Company's common shares. The Acquisitions will be
accounted for as the combining of four entities under common control, similar to
a pooling of interests, with the net assets of Eagle, JEH Eagle and MSI Eagle
recorded at historical carryover values. The 3,000,000 common shares of the
Company to be issued to TDA will be recorded at Eagle's, JEH Eagle's and MSI
Eagle's historical net book values at the date of acquisition. Accordingly, this
transaction will not result in any revaluation of Eagle's, JEH Eagle's or MSI
Eagle's assets or the creation of any goodwill. Upon the consummation of the
Acquisitions, Eagle, JEH Eagle and MSI Eagle will become wholly-owned
subsidiaries of the Company and will constitute the sole business operations of
the Company until such time, if any, as the Company consummates additional
acquisitions. As a result of the Acquisitions, the financial statements of the
Company, Eagle, JEH Eagle and MSI Eagle will be combined. The financial
statements of Eagle will be included in the consolidated financial statements
for all periods presented, the financial statements of JEH Eagle will be
included in the consolidated financial statements for periods subsequent to the
acquisition of JEH Company, Inc. by JEH Eagle on July 1, 1997 and the financial
statements of MSI Eagle will be included in the consolidated financial
statements for periods subsequent to the acquisition of Masonry Supply, Inc. by
MSI Eagle on October 22, 1998. Eagle, JEH Eagle and MSI Eagle operate in a
single industry segment.

INCOME TAXES--The Company is included in the consolidated Federal and state
income tax returns of its Parent. Income taxes are calculated on a separate
return filing basis.

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-9
<PAGE>
EAGLE SUPPLY GROUP, INC.
(A MAJORITY-OWNED SUBSIDIARY OF TDA INDUSTRIES, INC.)

NOTES TO FINANCIAL STATEMENTS (CONTINUED)

YEARS ENDED JUNE 30, 1998 AND 1997 AND PERIOD
MAY 1, 1996 (INCEPTION) TO JUNE 30, 1996

2. TRANSACTIONS WITH PARENT AND AFFILIATED COMPANIES

During the period ended June 30, 1996, TDA advanced $6,105 to the Company
which was used by the Company to pay certain costs and expenses related to its
private placement in June 1996 described in Note 6. This advance was repaid to
TDA in July 1996.

3. 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
described in Note 6 and consummation of the Acquisitions described in Note 1.
The administrative services agreement will be on a month-to-month basis, and the
fee payable by the Company to TDA for such services will be $3,000 per month.
Further, TDA and JEH Eagle have entered into an agreement pursuant to which TDA
provides JEH Eagle with certain management services. This agreement is for a
period of five years and commenced in July 1997. The fee payable to TDA for such
services, to commence upon the completion of the Offering and the consummation
of the Acquisitions, is $3,000 per month.

Eagle operates a substantial portion of its business from facilities which
it leases from a subsidiary of TDA on a month-to-month basis. Upon completion of
the Offering and the consummation of the Acquisitions, Eagle and TDA intend to
enter into ten-year leases for such facilities.

The Chief Executive Officer and Chairman of the Board of Directors of the
Company is an officer and a director of TDA, Eagle, JEH Eagle and MSI Eagle.
Additionally, the Executive Vice President, Secretary, Treasurer and a director
of the Company is an officer and a director of TDA, Eagle, JEH Eagle and MSI
Eagle. A director nominee of the Company is also a director of TDA.

The Company and Eagle have entered into employment agreements with their
Chief Executive Officer and their Executive Vice President, Secretary and
Treasurer, to become effective upon closing of the Offering and consummation of
the Acquisitions, for a five-year period at annual salaries of $200,000 each,
subject to annual increases and bonuses as may be determined by the Board of
Directors. Further, in July 1997, JEH Eagle entered into five-year employment
agreements with such officers at annual salaries of $60,000 each. The payment of
such salaries by JEH Eagle shall commence upon completion of the Offering and
the consummation of the Acquisitions. The employment agreements provide for,
among other things, continued payments of salary and benefits, under certain
conditions.

4. SHAREHOLDERS' (DEFICIENCY) EQUITY

INITIAL CAPITALIZATION--In May 1996, the Company approved the issuance of
2,000,000 of its common shares to TDA (a founding shareholder) for a
subscription price of $200 and 100,000 common shares to another founding
shareholder and director for a subscription price of $10.

On December 12, 1997 the Company increased its authorized number of shares
from 17,000,000 to 27,500,000. The number of preferred shares was increased from
2,000,000 to 2,500,000 and the number of common shares was increased from
15,000,000 to 25,000,000. There was no change in the par value per share.

F-10
<PAGE>
EAGLE SUPPLY GROUP, INC.
(A MAJORITY-OWNED SUBSIDIARY OF TDA INDUSTRIES, INC.)

NOTES TO FINANCIAL STATEMENTS (CONTINUED)

YEARS ENDED JUNE 30, 1998 AND 1997 AND PERIOD
MAY 1, 1996 (INCEPTION) TO JUNE 30, 1996

4. SHAREHOLDERS' (DEFICIENCY) EQUITY (CONTINUED)
PREFERRED SHARES--The preferred shares 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 shareholders, 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.

COMMON SHARES--Holders of common shares are entitled to one vote for each
share held of record on each matter submitted to a vote of shareholders. There
is no cumulative voting for election of directors. Subject to the prior rights
of any series of preferred shares which may from time to time be outstanding,
holders of common shares 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 shares, if any.
Holders of common shares have no pre-emptive rights and have no rights to
convert their common shares into any other securities.

WARRANTS--Each warrant (Note 5) entitles the registered holder to purchase
one common share 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 shares is then in effect
and the common shares are qualified for sale or exempt from qualification under
applicable state securities laws. The warrants that will be included in the
Offering are exercisable at $5.50 per share, are transferable separately from
the common shares and are exercisable for five years from the date of the
Offering (Note 6).

STOCK OPTION PLAN--In December 1998, the Board of Directors adopted and
shareholders approved the Company's Stock Option Plan (the "Stock Option Plan").
The 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 common shares
for which options may be granted under the Stock Option Plan is 1,000,000 common
shares. Upon the closing of the Offering, the Company intends to grant options
exercisable into 900,000 common shares to various of its employees and certain
of its officers and directors. 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 common shares 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.

5. PRIVATE PLACEMENTS

In June 1996, the Company sold an aggregate of 300,000 common shares and
300,000 warrants to private investors for aggregate gross proceeds of $300,000.

In February 1998, the Company borrowed an aggregate of $300,000 pursuant to
promissory notes issued to TDA ($150,000) and two other shareholders of the
Company. The promissory notes provide for interest at the rate of 15% per annum
through June 30, 1998 and 6% per annum thereafter. The promissory notes mature
on the earlier of August 9, 2000 or upon the closing of the Offering described
below.

F-11
<PAGE>
EAGLE SUPPLY GROUP, INC.
(A MAJORITY-OWNED SUBSIDIARY OF TDA INDUSTRIES, INC.)

NOTES TO FINANCIAL STATEMENTS (CONTINUED)

YEARS ENDED JUNE 30, 1998 AND 1997 AND PERIOD
MAY 1, 1996 (INCEPTION) TO JUNE 30, 1996

5. PRIVATE PLACEMENTS (CONTINUED)
In August 1998, the Company borrowed an additional $100,000 pursuant to a
promissory note issued to TDA. This promissory note provides for interest at the
rate of 6% per annum payable at maturity on the earlier of August 9, 2000 or
upon the closing of the Offering described below.

The proceeds from the issuance in February 1998 and in August 1998 of the
promissory notes are being used to pay certain costs and expenses related to the
Offering.

6. INITIAL PUBLIC OFFERING

In April 1996, the Company signed a letter of intent with an underwriter for
an initial public offering. This offering was not consummated, and the
registration expenses incurred by the Company in connection with the filing of
its registration statement for that offering were expensed in fiscal 1997.

In September 1997, as amended, the Company signed a new letter of intent
with the same underwriter for an initial public offering (the "Offering"). The
Company intends to sell 2,500,000 common shares, par value $.0001 per share, of
the Company and 2,500,000 redeemable common share purchase warrants in the
Offering.

The costs incurred in connection with the Offering will be offset against
the proceeds at the closing.

*****

F-12
<PAGE>
EAGLE SUPPLY GROUP, INC.
(A MAJORITY-OWNED SUBSIDIARY OF TDA INDUSTRIES, INC.)

UNAUDITED BALANCE SHEET

OCTOBER 31, 1998

<TABLE>
<S> <C>
ASSETS

CURRENT ASSETS:
Cash........................................................................... $ 35,298
Federal and state taxes due from parent........................................ 9,000
Deferred registration costs (Note 6)........................................... 351,261
---------
$ 395,559
---------
---------

LIABILITIES AND SHAREHOLDERS' DEFICIENCY

CURRENT LIABILITIES:
Accrued expenses and other current liabilities................................. $ 88,894
Notes payable--shareholders (Note 5)........................................... 400,000
---------
Total current liabilities.................................................. 488,894
---------

COMMITMENTS AND CONTINGENCIES (Notes 3 and 6)

SHAREHOLDERS' DEFICIENCY (Note 4):
Preferred shares, $.0001 par value per share, 2,500,000 shares authorized, none
issued and outstanding....................................................... --
Common shares, $.0001 par value per share, 25,000,000 shares authorized,
2,400,000 issued and outstanding............................................. 240
Additional paid-in capital..................................................... 293,865
Deficit........................................................................ (387,440)
---------
Total shareholders' deficiency............................................. (93,335)
---------
$ 395,559
---------
---------
</TABLE>

See notes to unaudited financial statements.

F-13
<PAGE>
EAGLE SUPPLY GROUP, INC.
(A MAJORITY-OWNED SUBSIDIARY OF TDA INDUSTRIES, INC.)

UNAUDITED STATEMENTS OF OPERATIONS AND DEFICIENCY

FOUR MONTHS ENDED OCTOBER 31, 1998 AND 1997

<TABLE>
<CAPTION>
1998 1997
----------- -----------
<S> <C> <C>
INTEREST EXPENSE........................................................................ $ 7,350 $ --
----------- -----------
LOSS BEFORE BENEFIT FOR INCOME TAXES.................................................... (7,350) --
BENEFIT FOR INCOME TAXES................................................................ (2,000) --
----------- -----------
NET LOSS................................................................................ (5,350) --
DEFICIENCY, BEGINNING OF PERIOD......................................................... (382,090) (371,028)
----------- -----------
DEFICIENCY, END OF PERIOD............................................................... $ (387,440) $ (371,028)
----------- -----------
----------- -----------
</TABLE>

See notes to unaudited financial statements.

F-14
<PAGE>
EAGLE SUPPLY GROUP, INC.
(A MAJORITY-OWNED SUBSIDIARY OF TDA INDUSTRIES, INC.)

UNAUDITED STATEMENTS OF CASH FLOWS

FOUR MONTHS ENDED OCTOBER 31, 1998 AND 1997

<TABLE>
<CAPTION>
1998 1997
----------- ----------
<S> <C> <C>
CASH FLOWS FROM OPERATING ACTIVITIES:
Net loss............................................................................... $ (5,350) $ --
Adjustments to reconcile net loss to net cash provided by operating activities:
Changes in operating assets and liabilities:
Increase in federal and state taxes due from Parent................................ (2,000) --
Increase in accrued expenses and other current liabilities......................... 19,394 36,695
----------- ----------
Net cash provided by operating activities........................................ 12,044 36,695
----------- ----------
CASH FLOWS FROM FINANCING ACTIVITIES:
Increase in deferred registration costs................................................ (127,773) (37,992)
Proceeds from issuance of note payable--shareholder.................................... 100,000 --
----------- ----------
Net cash used in financing activities............................................ (27,773) (37,992)
----------- ----------
NET DECREASE IN CASH..................................................................... (15,729) (1,297)
CASH, BEGINNING OF PERIOD................................................................ 51,027 5,366
----------- ----------
CASH, END OF PERIOD...................................................................... $ 35,298 $ 4,069
----------- ----------
----------- ----------
</TABLE>

See notes to unaudited financial statements.

F-15
<PAGE>
EAGLE SUPPLY GROUP, INC.
(A MAJORITY-OWNED SUBSIDIARY OF TDA INDUSTRIES, INC.)

NOTES TO UNAUDITED FINANCIAL STATEMENTS

FOUR MONTHS ENDED OCTOBER 31, 1998 AND 1997

1. BASIS OF FINANCIAL STATEMENT PRESENTATION

The financial statements of Eagle Supply Group, Inc. (the "Company"), a
majority-owned subsidiary of TDA Industries, Inc. ("TDA" or the "Parent") 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 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 of the
Company for the fiscal years ended June 30, 1998 and 1997 and notes thereto
included elsewhere in this Prospectus. Operating results for the interim period
are not necessarily indicative of results for the entire year.

The Company is dependent on its ability to raise funds through debt or
equity financing in order to meet its obligations and accomplish its acquisition
objectives.

2. ACQUISITIONS

Upon completion of the Offering described in Note 6, the Company will
acquire all of the issued and outstanding common shares of Eagle Supply, Inc.
("Eagle"), JEH/Eagle Supply, Inc. ("JEH Eagle") and MSI/Eagle Supply, Inc. ("MSI
Eagle") (the "Acquisitions") from TDA for consideration consisting of 3,000,000
of the Company's common shares. The Acquisitions will be accounted for as the
combining of four entities under common control, similar to a pooling of
interests, with the net assets of Eagle, JEH Eagle and MSI Eagle recorded at
historical carryover values. The 3,000,000 common shares of the Company to be
issued to TDA will be recorded at Eagle's, JEH Eagle's and MSI Eagle's
historical net book values at the date of acquisition. Accordingly, this
transaction will not result in any revaluation of Eagle's, JEH Eagle's or MSI
Eagle's assets or the creation of any goodwill. Upon the consummation of the
Acquisitions, Eagle, JEH Eagle and MSI Eagle will become wholly-owned
subsidiaries of the Company and will constitute the sole business operations of
the Company until such time, if any, as the Company consummates additional
acquisitions. As a result of the Acquisitions, the financial statements of the
Company, Eagle, JEH Eagle and MSI Eagle will be combined. The financial
statements of Eagle will be included in the consolidated financial statements
for all periods presented, the financial statements of JEH Eagle will be
included in the consolidated financial statements for periods subsequent to the
acquisition of JEH Company, Inc. by JEH Eagle on July 1, 1997 and the financial
statements of MSI Eagle will be included in the consolidated financial
statements for periods subsequent to the acquisition of Masonry Supply, Inc. by
MSI Eagle on October 22, 1998. Eagle, JEH Eagle and MSI Eagle operate in a
single industry segment.

3. CONTEMPLATED TRANSACTIONS WITH RELATED PARTIES

F-16
<PAGE>
EAGLE SUPPLY GROUP, INC.
(A MAJORITY-OWNED SUBSIDIARY OF TDA INDUSTRIES, INC.)

NOTES TO UNAUDITED FINANCIAL STATEMENTS (CONTINUED)

FOUR MONTHS ENDED OCTOBER 31, 1998 AND 1997

3. CONTEMPLATED TRANSACTIONS WITH RELATED PARTIES (CONTINUED)
Company to TDA for such services will be $3,000 per month. Further, TDA and JEH
Eagle have entered into an agreement pursuant to which TDA provides JEH Eagle
with certain management services. This agreement is for a period of five years
and commenced in July 1997. The fee payable to TDA for such services, to
commence upon the completion of the Offering and the consummation of the
Acquisitions, is $3,000 per month.

4. SHAREHOLDERS' DEFICIENCY

PREFERRED SHARES--The preferred shares 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 shareholders, 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.

F-17
<PAGE>
EAGLE SUPPLY GROUP, INC.
(A MAJORITY-OWNED SUBSIDIARY OF TDA INDUSTRIES, INC.)

NOTES TO UNAUDITED FINANCIAL STATEMENTS (CONTINUED)

FOUR MONTHS ENDED OCTOBER 31, 1998 AND 1997

4. SHAREHOLDERS' DEFICIENCY (CONTINUED)
dividends and liquidation preferences on the preferred shares, if any. Holders
of common shares have no pre-emptive rights and have no rights to convert their
common shares into any other securities.

5. PRIVATE PLACEMENTS

In June 1996, the Company sold an aggregate of 300,000 common shares and
300,000 warrants to private investors for aggregate gross proceeds of $300,000.

In August 1998, the Company borrowed an additional $100,000 pursuant to a
promissory note issued to TDA. This promissory note provides for interest at the
rate of 6% per annum payable at maturity on the earlier of August 9, 2000 or
upon the closing of the Offering described below.

The proceeds from the issuance in February 1998 and in August 1998 of the
promissory notes are being used to pay certain costs and expenses related to the
Offering.

F-18
<PAGE>
EAGLE SUPPLY GROUP, INC.
(A MAJORITY-OWNED SUBSIDIARY OF TDA INDUSTRIES, INC.)

NOTES TO UNAUDITED FINANCIAL STATEMENTS (CONTINUED)

FOUR MONTHS ENDED OCTOBER 31, 1998 AND 1997

6. INITIAL PUBLIC OFFERING

In April 1996, the Company signed a letter of intent with an underwriter for
an initial public offering. This offering was not consummated, and the
registration costs incurred by the Company in connection with the filing of its
registration statement for that offering were expensed in fiscal 1997.

The costs incurred in connection with the Offering will be offset against
the proceeds at the closing.

*****

F-19
<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,
1998 and 1997, and the related statements of operations, shareholder's
(deficiency) equity and cash flows for each of the three years in the period
ended June 30, 1998. 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.

In our opinion, such financial statements present fairly, in all material
respects, the financial position of Eagle Supply, Inc. as of June 30, 1998 and
1997 and the results of its operations and its cash flows for each of the three
years in the period ended June 30, 1998, in conformity with generally accepted
accounting principles.

Deloitte & Touche, LLP

September 9, 1998
Tampa, Florida

F-20
<PAGE>
EAGLE SUPPLY, INC.
(A WHOLLY-OWNED SUBSIDIARY OF TDA INDUSTRIES, INC.)

BALANCE SHEETS

JUNE 30, 1998 AND 1997

<TABLE>
<CAPTION>
1998 1997
------------- -------------
<S> <C> <C>
ASSETS
CURRENT ASSETS:
Cash and cash equivalents........................................................ $ 603,276 $ 1,029,774
Accounts and notes receivable--trade (net of allowance for doubtful
accounts--1998--$427,000; 1997--$450,000) (Note 3)............................. 8,701,013 8,530,600
Inventories (Note 3)............................................................. 6,209,753 4,505,534
Deferred tax asset (Note 5)...................................................... 182,934 188,558
Other current assets............................................................. 347,508 539,696
------------- -------------
Total current assets........................................................... 16,044,484 14,794,162

IMPROVEMENTS AND EQUIPMENT (net of accumulated depreciation and amortization)
(Notes 2 and 4).................................................................. 1,686,522 1,054,309
------------- -------------
$ 17,731,006 $ 15,848,471
------------- -------------
------------- -------------

LIABILITIES AND SHAREHOLDER'S (DEFICIENCY) EQUITY

CURRENT LIABILITIES:
Accounts payable................................................................. $ 8,330,052 $ 7,763,779
Accrued expenses and other current liabilities................................... 858,941 569,569
Current portion of long-term debt (Note 3)....................................... 600,065 11,000
Federal and state income taxes due to Parent..................................... 240,000 140,000
------------- -------------
Total current liabilities...................................................... 10,029,058 8,484,348

LONG-TERM DEBT (Note 3)............................................................ 9,622,417 7,195,163

DEFERRED TAX LIABILITY (Note 5).................................................... 89,912 70,912
------------- -------------
Total liabilities.............................................................. 19,741,387 15,750,423
------------- -------------

COMMITMENTS AND CONTINGENCIES (Notes 4, 6 and 8)

SHAREHOLDER'S (DEFICIENCY) 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................................................................ 553,938 1,593,802
------------- -------------
1,613,238 2,653,102
Less: Due from Parent and affiliated companies (Note 4)........................ (3,623,619) (2,555,054)
------------- -------------
Total shareholder's (deficiency) equity........................................ (2,010,381) 98,048
------------- -------------
$ 17,731,006 $ 15,848,471
------------- -------------
------------- -------------
</TABLE>

See notes to financial statements.

F-21
<PAGE>
EAGLE SUPPLY, INC.
(A WHOLLY-OWNED SUBSIDIARY OF TDA INDUSTRIES, INC.)

STATEMENTS OF OPERATIONS

YEARS ENDED JUNE 30, 1998, 1997 AND 1996

<TABLE>
<CAPTION>
1998 1997 1996
------------- ------------- -------------
<S> <C> <C> <C>
REVENUES............................................................ $ 58,497,263 $ 57,575,712 $ 59,262,226
COST OF SALES....................................................... 46,429,897 46,104,588 46,685,356
------------- ------------- -------------
12,067,366 11,471,124 12,576,870
------------- ------------- -------------
OPERATING EXPENSES (including a provision for doubtful accounts of
$245,736, $299,433 and $203,133 in 1998, 1997 and 1996,
respectively (Notes 4, 6, 7 and 9)................................ 10,741,092 9,968,759 9,348,749
DEPRECIATION........................................................ 497,420 593,720 538,831
------------- ------------- -------------
11,238,512 10,562,479 9,887,580
------------- ------------- -------------

INCOME FROM OPERATIONS.............................................. 828,854 908,645 2,689,290
OTHER INCOME (EXPENSE):
Interest income................................................... 25,314 22,217 23,250
Interest expense (Note 3)......................................... (594,032) (599,086) (604,505)
------------- ------------- -------------
(568,718) (576,869) (581,255)
------------- ------------- -------------

INCOME BEFORE PROVISION FOR INCOME TAXES............................ 260,136 331,776 2,108,035
PROVISION FOR INCOME TAXES (Note 5)................................. 100,000 140,000 793,000
------------- ------------- -------------
NET INCOME.......................................................... $ 160,136 $ 191,776 $ 1,315,035
------------- ------------- -------------
------------- ------------- -------------
</TABLE>

See notes to financial statements.

F-22
<PAGE>
EAGLE SUPPLY, INC.

(A WHOLLY-OWNED SUBSIDIARY OF TDA INDUSTRIES, INC.)

STATEMENTS OF SHAREHOLDER'S EQUITY (DEFICIENCY)

YEARS ENDED JUNE 30, 1998, 1997 AND 1996

<TABLE>
<CAPTION>
DUE FROM
COMMON SHARES ADDITIONAL PARENT AND
---------------------- PAID-IN RETAINED AFFILIATED
SHARES AMOUNT CAPITAL EARNINGS TOTAL COMPANIES TOTAL
----------- --------- ------------ ------------- ------------- ------------- -------------
<S> <C> <C> <C> <C> <C> <C> <C>
BALANCE, JULY 1,
1995........................ 593 $ 59,300 $ 1,000,000 $ 2,433,991 $ 3,493,291 $ (3,872,579) $ (379,288)
Net income.................. -- -- -- 1,315,035 1,315,035 -- 1,315,035
Due from Parent and
affiliated companies--
net....................... -- -- -- -- -- 59,233 59,233
Dividend paid to Parent..... -- -- -- (1,097,000) (1,097,000) -- (1,097,000)
--- --------- ------------ ------------- ------------- ------------- -------------
BALANCE, JUNE 30, 1996........ 593 59,300 1,000,000 2,652,026 3,711,326 (3,813,346) (102,020)
Net income.................. -- -- -- 191,776 191,776 -- 191,776
Due from Parent and
affiliated companies--
net....................... -- -- -- -- -- 1,258,292 1,258,292
Dividend paid to Parent..... -- -- -- (1,250,000) (1,250,000) -- (1,250,000)
--- --------- ------------ ------------- ------------- ------------- -------------
BALANCE, JUNE 30, 1997........ 593 59,300 1,000,000 1,593,802 2,653,102 (2,555,054) 98,048
Net income.................. -- -- -- 160,136 160,136 -- 150,136
Due from Parent and
affiliated companies--
net....................... -- -- -- -- -- (1,068,565) (1,068,565)
Dividend paid to Parent..... -- -- -- (1,200,000) (1,200,000) -- (1,200,000)
--- --------- ------------ ------------- ------------- ------------- -------------
BALANCE, JUNE 30, 1998........ 593 $ 59,300 $ 1,000,000 $ 553,938 $ 1,613,238 $ (3,623,619) $ (2,010,381)
--- --------- ------------ ------------- ------------- ------------- -------------
--- --------- ------------ ------------- ------------- ------------- -------------
</TABLE>

See notes to financial statements.

F-23
<PAGE>
EAGLE SUPPLY, INC.
(A WHOLLY-OWNED SUBSIDIARY OF TDA INDUSTRIES, INC.)

STATEMENTS OF CASH FLOWS

YEARS ENDED JUNE 30, 1998, 1997 AND 1996

<TABLE>
<CAPTION>
1998 1997 1996
-------------- -------------- --------------
<S> <C> <C> <C>
CASH FLOWS FROM OPERATING ACTIVITIES:
Net income..................................................... $ 160,136 $ 191,776 $ 1,315,035
Adjustments to reconcile net income to net cash (used in)
provided by operating activities:
Depreciation and amortization................................ 497,420 593,720 538,831
Deferred income taxes........................................ 24,624 (14,457) 84,017
Decrease in allowance for doubtful accounts.................. (22,206) (15,550) (286,215)
(Gain) loss on sale of equipment............................. (6,740) 710 (975)
Changes in assets and liabilities:
(Increase) decrease in accounts and notes receivable....... (148,207) (223,219) 755,529
(Increase) decrease in inventories......................... (1,704,219) 320,368 (1,306,440)
Decrease (increase) in other current assets................ 192,188 (3,965) (210,264)
Increase (decrease) in accounts payable.................... 566,273 (430,033) 739,801
Increase (decrease) in accrued expenses and other current
liabilities.............................................. 289,372 (244,589) 331,519
Increase (decrease) in federal and state taxes due to
Parent................................................... 100,000 (653,000) 578,000
-------------- -------------- --------------
Net cash (used in) provided by operating activities...... (51,359) (478,239) 2,538,838
-------------- -------------- --------------
CASH FLOWS FROM INVESTING ACTIVITIES:
Capital expenditures........................................... (1,169,479) (296,071) (900,498)
Proceeds from sale of equipment................................ 46,586 80,431 37,050
-------------- -------------- --------------
Net cash used in investing activities.................... (1,122,893) (215,640) (863,448)
-------------- -------------- --------------
CASH FLOWS FROM FINANCING ACTIVITIES:
Principal borrowings on long-term debt......................... 67,701,574 64,165,367 62,358,731
Principal reductions on long-term debt......................... (64,685,255) (62,648,447) (63,496,045)
(Increase) decrease in due from Parent and affiliated
companies--net............................................... (1,068,565) 1,258,292 59,233
Dividend paid to Parent........................................ (1,200,000) (1,250,000) (1,097,000)
-------------- -------------- --------------
Net cash provided by (used in) financing activities...... 747,754 1,525,212 (2,175,081)
-------------- -------------- --------------
NET (DECREASE) INCREASE IN CASH AND CASH EQUIVALENTS............. (426,498) 831,333 (499,691)
CASH AND CASH EQUIVALENTS, BEGINNING OF YEAR..................... 1,029,774 198,441 698,132
-------------- -------------- --------------
CASH AND CASH EQUIVALENTS, END OF YEAR........................... $ 603,276 $ 1,029,774 $ 198,441
-------------- -------------- --------------
SUPPLEMENTAL DISCLOSURE OF CASH FLOW INFORMATION:
Cash paid during the year for interest......................... $ 594,032 $ 599,086 $ 604,505
-------------- -------------- --------------
-------------- -------------- --------------
Income taxes paid to Parent.................................... $ -- $ -- $ 793,000
-------------- -------------- --------------
-------------- -------------- --------------
</TABLE>

See notes to financial statements.

F-24
<PAGE>
EAGLE SUPPLY, INC.
(A WHOLLY-OWNED SUBSIDIARY OF TDA INDUSTRIES, INC.)

NOTES TO FINANCIAL STATEMENTS

YEARS ENDED JUNE 30, 1998, 1997 AND 1996

1. SIGNIFICANT ACCOUNTING POLICIES

BUSINESS DESCRIPTION--The Company is a wholly-owned subsidiary of TDA
Industries, Inc. (the "Parent", "TDA") and is engaged in the wholesale
distribution of roofing supplies and related products utilized primarily in the
construction industry in 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 $520,000, $511,000 and $510,000 for
fiscal 1998, 1997 and 1996, respectively, and income before provision for income
taxes would have increased by approximately $9,000 and $1,000 in fiscal 1998 and
1997, respectively, and decreased by approximately $17,000 in fiscal 1996.

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 and State
income tax returns 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.

LONG-LIVED ASSETS--Financial Accounting Standards Board Statement Number
121, "Accounting for the Impairment of Long-Lived Assets and for Long-Lived
Assets to be Disposed Of" requires that they be stated at the lower of the
expected net realizable value or cost. The carrying value of long-lived assets
is periodically reviewed to determine whether impairment exists. The review is
based on comparing the carrying amount of the asset to the undiscounted
estimated cash flows over the remaining useful lives. No impairment is indicated
as of June 30, 1998. The Company has adopted this statement and the impact has
not been significant.

FAIR VALUE OF FINANCIAL INSTRUMENTS--The following disclosure of the
estimated fair value of financial instruments is made in accordance with the
requirements of Statement of Financial Accounting Standards No. 107, DISCLOSURES
ABOUT FAIR VALUE OF FINANCIAL INSTRUMENTS. The estimated fair value amounts have
been determined by the Company using available market in interpreting market
data to develop the estimates of fair value. Accordingly, the estimates
presented herein are not necessarily indicative of the amounts that the Company
could realize in a current market exchange. The use of different market
assumptions and/or estimation methodologies may have a material effect on the
estimated fair value amounts.

CASH AND CASH EQUIVALENTS, ACCOUNTS AND NOTES RECEIVABLE, ACCOUNTS PAYABLE
AND ACCRUED EXPENSES-- The carrying amounts of these items are a reasonable
estimate of their fair value.

F-25
<PAGE>
EAGLE SUPPLY, INC.
(A WHOLLY-OWNED SUBSIDIARY OF TDA INDUSTRIES, INC.)

NOTES TO FINANCIAL STATEMENTS (CONTINUED)

YEARS ENDED JUNE 30, 1998, 1997 AND 1996

1. SIGNIFICANT ACCOUNTING POLICIES (CONTINUED)
LONG-TERM DEBT--Interest rates that are currently available to the Company
for issuance of debt with similar terms and remaining maturities are used to
estimate fair value for debt issues for which no market quotes are available.
The carrying amount of this item is a reasonable estimate of fair value.

The fair value estimates presented herein are based on pertinent information
available to management as of June 30, 1998. Although management is not aware of
any factors that would significantly affect the estimated fair value amounts,
such amounts have not been comprehensively revalued for purposes of these
financial statements since that date, and current estimates of fair value may
differ significantly from the amounts presented herein.

CONCENTRATION OF CREDIT RISK--The financial instruments, which potentially
subject the Company to concentration of credit risk, consist principally of
accounts receivable. The Company grants credit to customers based on an
evaluation of the customer's financial condition and in certain instances
obtains collateral in the form of liens on both business and personal assets of
its customers. Exposure to losses on receivables is principally dependent on
each customer's financial condition. The Company controls its exposure to credit
risks through credit approvals, credit limits and monitoring procedures and
establishes allowances for anticipated losses.

2. IMPROVEMENTS AND EQUIPMENT

The major classes of improvements and equipment are as follows:

<TABLE>
<CAPTION>
JUNE 30, ESTIMATED
-------------------------- USEFUL
1998 1997 LIVES
------------ ------------ -----------
<S> <C> <C> <C>
Automotive equipment.................................................... $ 2,624,701 $ 1,953,036 5 years
Furniture, fixtures and equipment....................................... 1,506,798 2,155,812 5-7 years
Leasehold improvements.................................................. 602,848 597,890 10 years
------------ ------------
4,734,347 4,706,738
Less: Accumulated depreciation and amortization......................... 3,047,825 3,652,429
------------ ------------
$ 1,686,522 $ 1,054,309
------------ ------------
------------ ------------
</TABLE>

F-26
<PAGE>
EAGLE SUPPLY, INC.
(A WHOLLY-OWNED SUBSIDIARY OF TDA INDUSTRIES, INC.)

NOTES TO FINANCIAL STATEMENTS (CONTINUED)

YEARS ENDED JUNE 30, 1998, 1997 AND 1996

3. LONG-TERM DEBT

Long-term debt consists of the following:

<TABLE>
<CAPTION>
JUNE 30,
--------------------------
<S> <C> <C>
1998 1997
------------ ------------
Revolving credit loan (A)............................................................. $ 9,012,417 $ 6,693,236
Equipment loan (A).................................................................... 710,000 --
Variable rate mortgage (8 1/2% at June 30, 1998), payable in monthly installments
through 1999 (B).................................................................... 500,065 512,927
------------ ------------
10,222,482 7,206,163
Less: Current portion of long-term debt............................................... 600,065 11,000
------------ ------------
$ 9,622,417 $ 7,195,163
------------ ------------
------------ ------------
</TABLE>

- ------------------------

(A) The Company is a party to a loan agreement (last amended December 11, 1998)
which provides for a credit facility in the aggregate amount of $10,900,000,
guaranteed by the Company's Parent. The credit facility consists of a $10
million revolving credit loan and a $900,000 equipment loan. The initial
term of the credit facility matures on October 22, 2003. Obligations under
the credit facility are collateralized by certain current assets of the
Company (aggregating approximately $16,063,000 at June 30, 1998).

Borrowings under the revolving credit loan 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-half percent, or at the London interbank offered rate, plus two and
one-half percent, at the option of the Company.

The equipment loan is payable in equal monthly installments, based on a
seventy-five month amortization schedule, each in the amount of $11,000,
with a balloon payment due on the earlier of August 1, 2004 or at the end of
the loan agreement's initial or renewal term. The equipment loan bears
interest at the lender's prime rate, plus one-half percent, or at the London
interbank offered rate, plus two and one-half percent, at the option of the
Company.

(B) 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 each 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 this mortgage.

4. TRANSACTIONS WITH PARENT AND AFFILIATED COMPANIES

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 issued to acquire and develop
the Fort Lauderdale property. The Company has no direct obligation on the
industrial revenue bond, which

F-27
<PAGE>
EAGLE SUPPLY, INC.
(A WHOLLY-OWNED SUBSIDIARY OF TDA INDUSTRIES, INC.)

NOTES TO FINANCIAL STATEMENTS (CONTINUED)

YEARS ENDED JUNE 30, 1998, 1997 AND 1996

4. TRANSACTIONS WITH PARENT AND AFFILIATED COMPANIES (CONTINUED)
obligation is reflected in the financial statements of a real estate subsidiary
of the Parent. The lease expires on May 1, 1999. These premises have been
subleased to an unrelated third party at an annual rental in excess of the
Company's annual lease obligation. The payments by the Company have included,
through June 30, 1998, a ratable share of the balloon payment.

The Company operates a substantial portion of its business from facilities
which it has been leasing from a subsidiary of its Parent on a month to month
basis. Upon consummation of the Offering described in Note 8, the Company
intends to enter into long-term leases for these facilities. Rent expense for
these facilities, net of sublease income of approximately $200,000, including
taxes and other occupancy costs, aggregated approximately $790,000, $782,000 and
$709,000 in fiscal 1998, 1997 and 1996, respectively.

The approximate future minimum rental commitments under these leases, net of
sublease income of approximately $200,000, are as follows:

<TABLE>
<CAPTION>
YEAR ENDING
JUNE 30, AMOUNT
------------ ------------
<S> <C>
1999................................................................................................ $ 870,000
2000................................................................................................ 885,000
2001................................................................................................ 885,000
2002................................................................................................ 885,000
2003................................................................................................ 885,000
Thereafter.......................................................................................... 4,440,000
------------
$ 8,850,000
------------
------------
</TABLE>

Except for audit fees and accounting services which are provided by the
Parent, the Company's financial statements include all costs of doing business.
Fees of $50,000 have been charged to the Company by its Parent in each of fiscal
1998, 1997 and 1996. Such fees represent audit fees and accounting services
incurred on behalf of the Company. Management believes that the allocation of
such costs is fair and reasonable.

During fiscal 1998, a subsidiary of TDA made a loan to the Company in the
amount of $400,000 as a short-term working capital advance. This loan was repaid
in full prior to June 30, 1998 and was non-interest bearing.

During fiscal 1997, the Company loaned various amounts for varying periods
to a former subsidiary of its Parent. The highest balance outstanding at any
time during fiscal 1997 was $300,000. Such amounts were repaid prior to June 30,
1997 with interest computed at the rate of 9 1/4% per annum. No such loans were
made during fiscal 1998.

F-28
<PAGE>
EAGLE SUPPLY, INC.
(A WHOLLY-OWNED SUBSIDIARY OF TDA INDUSTRIES, INC.)

NOTES TO FINANCIAL STATEMENTS (CONTINUED)

YEARS ENDED JUNE 30, 1998, 1997 AND 1996

4. TRANSACTIONS WITH PARENT AND AFFILIATED COMPANIES (CONTINUED)
The following is a reconciliation of the activity in the Due from Parent and
Affiliated Companies account for the periods presented:

<TABLE>
<CAPTION>
YEAR ENDED JUNE 30,
-----------------------------------------
<S> <C> <C> <C>
1998 1997 1996
------------ ------------- ------------
Balance, beginning of year............................................. $ 2,555,054 $ 3,813,346 $ 3,872,579
Fees for auditing and accounting services............................ (50,000) (50,000) (50,000)
Interest expense paid to Parent...................................... -- (30,484) --
Cash advances--net................................................... 1,118,565 (1,177,808) (9,233)
------------ ------------- ------------
Balance, end of year................................................... $ 3,623,619 $ 2,555,054 $ 3,813,346
------------ ------------- ------------
------------ ------------- ------------
</TABLE>

The Due from Parent and Affiliated Companies account represents a
non-interest bearing advance account with the Company's Parent and certain other
subsidiaries of the Parent. The interest related to the long-term debt incurred
to fund the activity in this account is based on a floating rate equal to the
lender's prime rate, plus one-half percent, or at the London interbank offered
rate, plus two and one-half percent, at the option of the Company.

In connection with the Offering described in Note 8, the Company intends to
cancel, in the form of a non-cash dividend, all of TDA's indebtedness to the
Company except for $500,065 relating to and offsetting a mortgage in the same
amount (at June 30, 1998) on property previously owned by the Company and for
which the Company remains the primary obligor (Note 3B).

5. INCOME TAXES

Components of the provision for income taxes are as follows:

<TABLE>
<CAPTION>
YEAR ENDED JUNE 30,
----------------------------------
<S> <C> <C> <C>
1998 1997 1996
---------- ---------- ----------
Current:
Federal.................................................................... $ 64,376 $ 134,457 $ 609,000
State and local............................................................ 11,000 20,000 99,983
Deferred..................................................................... 24,624 (14,457) 84,017
---------- ---------- ----------
$ 100,000 $ 140,000 $ 793,000
---------- ---------- ----------
---------- ---------- ----------
</TABLE>

A reconciliation of income taxes at the Federal statutory rate to amounts
provided, is as follows:

<TABLE>
<CAPTION>
YEAR ENDED JUNE 30,
----------------------------------
<S> <C> <C> <C>
1998 1997 1996
---------- ---------- ----------
Tax provision at statutory rate.............................................. $ 88,446 $ 112,804 $ 716,732
State and local income taxes................................................. 7,000 13,000 60,000
Other........................................................................ 4,554 14,196 16,268
---------- ---------- ----------
$ 100,000 $ 140,000 $ 793,000
---------- ---------- ----------
---------- ---------- ----------
</TABLE>

F-29
<PAGE>
EAGLE SUPPLY, INC.
(A WHOLLY-OWNED SUBSIDIARY OF TDA INDUSTRIES, INC.)

NOTES TO FINANCIAL STATEMENTS (CONTINUED)

YEARS ENDED JUNE 30, 1998, 1997 AND 1996

5. INCOME TAXES (CONTINUED)
Temporary differences which give rise to deferred tax assets and liabilities
are as follows:

<TABLE>
<CAPTION>
JUNE 30,
----------------------
<S> <C> <C>
1998 1997
---------- ----------
Deferred Tax Assets:
Provision for doubtful accounts......................................................... $ 162,414 $ 170,852
Inventory capitalization................................................................ 20,520 17,706
---------- ----------
182,934 188,558

Deferred Tax Liability:
Depreciation............................................................................ (89,912) (70,912)
---------- ----------
Net deferred tax asset.................................................................... $ 93,022 $ 117,646
---------- ----------
---------- ----------
</TABLE>

6. COMMITMENTS AND CONTINGENCIES

The Company is committed to unrelated parties for long-term leases for
property, automotive and data processing equipment. The leases expire on various
dates through 2006. Certain of the leases for property include renewal options
and provide for the payment of taxes and other occupancy costs.

The approximate future minimum rental commitments under these unrelated
leases are as follows:

<TABLE>
<CAPTION>
YEAR ENDING
JUNE 30, AMOUNT
------------ ------------
<S> <C>
1999................................................................................................ $ 919,000
2000................................................................................................ 695,000
2001................................................................................................ 512,000
2002................................................................................................ 230,000
2003................................................................................................ 148,000
Thereafter.......................................................................................... 151,000
------------
$ 2,655,000
------------
------------
</TABLE>

Rent expense for the property and equipment under these leases amounted to
approximately $911,000, $853,000 and $371,000 in fiscal 1998, 1997 and 1996,
respectively, and includes certain occupancy costs.

During the fiscal years ended June 30, 1998, 1997 and 1996, the Company
purchased approximately 23%, 23% and 21% in each of fiscal 1998, 1997 and 1996
of its product lines from one supplier. Since similar products are available to
the Company from other suppliers, the loss of this supplier would not have a
material adverse effect on the business of the Company.

The Company has a 401(k) plan covering eligible employees (the "Plan"). The
Plan provides for contributions at the Company's discretion. A Company
contribution in the amount of $9,000 was made to the Plan in fiscal 1997. No
Company contribution was made to the Plan in fiscal 1998 or 1996.

F-30
<PAGE>
EAGLE SUPPLY, INC.
(A WHOLLY-OWNED SUBSIDIARY OF TDA INDUSTRIES, INC.)

NOTES TO FINANCIAL STATEMENTS (CONTINUED)

YEARS ENDED JUNE 30, 1998, 1997 AND 1996

7. BRANCH OPENING AND CLOSING COSTS

During fiscal 1997, the Company opened two new branches. The Company's
result of operations in fiscal 1997 include start-up costs and operating losses
of approximately $273,000 attributable to these two branches; and additional
expenses in the amount of approximately $80,000 attributable to the operations
of branches disposed of in prior fiscal years.

During fiscal 1996, the Company opened four new branches, one of which was
closed prior to the end of the fiscal year, and commenced the distribution of a
new product line. The Company's results of operations in fiscal 1996 include
start-up costs and operating losses of approximately $290,000 attributable to
these four branches and the introduction of the new product line; and additional
expenses in the amount of approximately $32,000 attributable to the operations
of branches disposed of in prior fiscal years.

8. TRANSACTION WITH RELATED PARTIES

Effective January 1, 1998, pursuant to oral agreements that can be
terminated by either party without notice or penalty, the Company's President
and Senior Vice President--Operations began receiving salaries of $50,000 and
$25,000 per year, respectively. Pursuant to the foregoing agreements, these
individuals also are entitled to receive 20% and 6%, respectively, of the
Company's income before taxes in excess of $600,000 per year.

In September 1997, as amended, Eagle Supply Group, Inc. ("Eagle"), a
majority-owned subsidiary of the Parent, signed a letter of intent with an
underwriter for an initial public offering (the "Offering").

Upon closing of the Offering, Eagle will acquire all of the issued and
outstanding capital stock of the Company from its Parent. The acquisition will
be accounted for as the combining of two entities under common control, similar
to a pooling of interests, and will not result in any revaluation of the
Company's assets or the creation of goodwill. Upon the consummation of the
acquisition, the Company will become a wholly-owned subsidiary of Eagle.

9. ALLOWANCE FOR DOUBTFUL ACCOUNTS

<TABLE>
<CAPTION>
BALANCE AT
YEAR ENDING BEGINNING BALANCE AT
JUNE 30, OF YEAR PROVISION WRITEOFFS END OF YEAR
------------ ---------- ---------- ----------- -----------
<S> <C> <C> <C> <C>
1996........................................................... $ 751,376 $ 203,133 $ (489,348) $ 465,161
1997........................................................... $ 465,161 $ 299,433 $ (314,983) $ 449,611
1998........................................................... $ 449,611 $ 245,736 $ (267,942) $ 427,405
</TABLE>

F-31
<PAGE>
EAGLE SUPPLY, INC.

(A WHOLLY-OWNED SUBSIDIARY OF TDA INDUSTRIES, INC.)

UNAUDITED BALANCE SHEET

OCTOBER 31, 1998

<TABLE>
<S> <C>
ASSETS

CURRENT ASSETS:
Cash and cash equivalents.................................................... $ 21,180
Accounts and notes receivable--trade (net of allowance for doubtful accounts
of $536,000) (Note 2)...................................................... 9,570,879
Inventories (Note 2)......................................................... 5,548,986
Deferred tax asset........................................................... 226,054
Other current assets......................................................... 343,101
----------
Total current assets....................................................... 15,710,200

IMPROVEMENTS AND EQUIPMENT (net of accumulated depreciation and amortization)
(Note 2)..................................................................... 1,607,406
----------
$17,317,606
----------
----------
LIABILITIES AND SHAREHOLDER'S DEFICIENCY

CURRENT LIABILITIES:
Accounts payable............................................................. $7,825,978
Accrued expenses and other current liabilities............................... 849,100
Current portion of long-term debt (Note 2)................................... 600,000
Loans payable--affiliated companies (Note 3)................................. 1,400,000
Federal and state income taxes due to Parent................................. 2,488
----------
Total current liabilities.................................................. 10,677,566

LONG-TERM DEBT (Note 2)........................................................ 8,643,819

DEFERRED TAX LIABILITY......................................................... 91,812
----------
Total liabilities.......................................................... 19,413,197
----------
COMMITMENTS AND CONTINGENCIES (Note 4)

SHAREHOLDER'S DEFICIENCY:
Common shares, $100 par value per share, 1,500 shares authorized, 593 issued
and outstanding............................................................ 59,300
Additional paid-in capital................................................... 1,000,000
Retained earnings............................................................ 410,590
----------
1,469,890
Less: Due from Parent and affiliated companies (Note 3).................... (3,565,481)
----------
Total shareholder's deficiency............................................. (2,095,591)
----------
$17,317,606
----------
----------
</TABLE>

See notes to unaudited financial statements.

F-32
<PAGE>
EAGLE SUPPLY, INC.

(A WHOLLY-OWNED SUBSIDIARY OF TDA INDUSTRIES, INC.)

UNAUDITED STATEMENTS OF OPERATIONS AND RETAINED EARNINGS

FOUR MONTHS ENDED OCTOBER 31, 1998 AND 1997

<TABLE>
<CAPTION>
1998 1997
------------- -------------
<S> <C> <C>
REVENUES........................................................................... $ 19,101,951 $ 17,391,142
COST OF SALES...................................................................... 15,034,455 13,707,012
------------- -------------
4,067,496 3,684,130
------------- -------------
OPERATING EXPENSES (including a provision for doubtful accounts of $147,482 and
$73,190 in 1998 and 1997, respectively).......................................... 3,835,794 3,325,460
DEPRECIATION....................................................................... 203,746 154,303
------------- -------------
4,039,540 3,479,763
------------- -------------
INCOME FROM OPERATIONS............................................................. 27,956 204,367
------------- -------------
OTHER INCOME (EXPENSE):
Interest income.................................................................. 7,309 9,698
Interest expense................................................................. (265,613) (207,852)
------------- -------------
(258,304) (198,154)
------------- -------------
(LOSS) INCOME BEFORE (BENEFIT) PROVISION FOR INCOME TAXES.......................... (230,348) 6,213
(BENEFIT) PROVISION FOR INCOME TAXES............................................... (87,000) 3,000
------------- -------------
NET (LOSS) INCOME.................................................................. (143,348) 3,213
RETAINED EARNINGS, BEGINNING OF PERIOD............................................. 553,938 1,593,802
DIVIDEND PAID TO PARENT............................................................ -- (300,000)
------------- -------------
RETAINED EARNINGS, END OF PERIOD................................................... $ 410,590 $ 1,297,015
------------- -------------
------------- -------------
</TABLE>

See notes to unaudited financial statements.

F-33
<PAGE>
EAGLE SUPPLY, INC.
(A WHOLLY-OWNED SUBSIDIARY OF TDA INDUSTRIES, INC.)

UNAUDITED STATEMENTS OF CASH FLOWS

FOUR MONTHS ENDED OCTOBER 31, 1998 AND 1997

<TABLE>
<CAPTION>
1998 1997
-------------- --------------
<S> <C> <C>
CASH FLOWS FROM OPERATING ACTIVITIES:
Net (loss) income............................................................... $ (143,348) $ 3,213
Adjustments to reconcile net (loss) income to net cash used in operating
activities:
Depreciation.................................................................. 203,746 154,303
Deferred income taxes......................................................... (41,220) 14,331
Increase (decrease) in allowance for doubtful accounts........................ 108,474 (37,714)
Changes in operating assets and liabilities:
(Increase) decrease in accounts receivable.................................. (978,340) 536,971
Decrease in inventories..................................................... 660,767 217,975
Decrease in other current assets............................................ 4,407 35,941
Decrease in accounts payable................................................ (504,074) (843,847)
Decrease in accrued expenses and other current liabilities.................. (9,841) (109,399)
(Decrease) increase in federal and state income taxes due to Parent......... (237,512) 3,000
-------------- --------------
Net cash used in operating activities..................................... (936,941) (25,226)
-------------- --------------
CASH FLOWS FROM INVESTING ACTIVITIES:
Capital expenditures............................................................ (124,630) (136,523)
-------------- --------------
Net cash used in investing activities..................................... (124,630) (136,523)
-------------- --------------
CASH FLOWS FROM FINANCING ACTIVITIES:
Principal borrowings on long-term debt.......................................... 20,459,697 21,339,051
Principal reductions on long-term debt.......................................... (21,438,360) (21,301,701)
Proceeds from loans payable -affiliated companies............................... 1,400,000 400,000
Decrease (increase) in due from Parent and affiliated companies--net............ 58,138 (987,700)
Dividend paid to Parent......................................................... -- (300,000)
-------------- --------------
Net cash provided by (used in) financing activities....................... 479,475 (850,350)
-------------- --------------
NET DECREASE IN CASH.............................................................. (582,096) (1,012,099)
CASH, BEGINNING OF PERIOD......................................................... 603,276 1,029,774
-------------- --------------
CASH, END OF PERIOD............................................................... $ 21,180 $ 17,675
-------------- --------------
-------------- --------------
SUPPLEMENTAL DISCLOSURE OF CASH FLOW INFORMATION:
Cash paid during the period for interest........................................ $ 265,613 $ 207,852
-------------- --------------
-------------- --------------
Income taxes paid to Parent..................................................... $ 150,512 $ --
-------------- --------------
-------------- --------------
</TABLE>

See notes to unaudited financial statements.

F-34
<PAGE>
EAGLE SUPPLY, INC.

(A WHOLLY-OWNED SUBSIDIARY OF TDA INDUSTRIES, INC.)

NOTES TO UNAUDITED FINANCIAL STATEMENTS

FOUR MONTHS ENDED OCTOBER 31, 1998 AND 1997

1. BASIS OF FINANCIAL STATEMENT PRESENTATION

The financial statements of Eagle Supply, Inc. (the "Company"), a
wholly-owned subsidiary of TDA Industries, Inc. ("TDA" or the "Parent") 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 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 of the
Company for the fiscal years ended June 30, 1998 and 1997 and notes thereto
included elsewhere in this Prospectus. Operating results for the interim period
are not necessarily indicative of results for the entire year.

2. LONG-TERM DEBT

At October 31, 1998, long-term debt consists of the following:

<TABLE>
<S> <C>
Revolving credit loan (A)....................................... $7,979,322
Equipment loan (A).............................................. 769,000
Variable rate mortgage (8 1/2% at October 31, 1998), payable in
monthly installments through 1999 (B)......................... 495,497
---------
9,243,819
Less: Current portion of long-term debt......................... 600,000
---------
$8,643,819
---------
---------
</TABLE>

- ------------------------

(A) The Company is a party to a loan agreement (last amended December 11,
1998) which provides for a credit facility in the aggregate amount of
$10,900,000, guaranteed by the Company's Parent. The credit facility
consists of a $10 million revolving credit loan and a $900,000 equipment
loan. The initial term of the credit facility matures on October 22,
2003. Obligations under the credit facility are collateralized by certain
current assets of the Company (aggregating approximately $16,284,000 at
October 31, 1998).

Borrowings under the revolving credit loan 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-half percent, or at the London interbank offered
rate, plus two and one-half percent, at the option of the Company.

The equipment loan is payable in equal monthly installments, based on a
seventy-five month amortization schedule, each in the amount of $11,000,
with a balloon payment due on the earlier of August 1, 2004 or at the end
of the loan agreement's initial or renewal term. The equipment loan bears
interest at the lender's prime rate, plus one-half percent, or at the
London interbank offered rate, plus two and one-half percent, at the
option of the Company.

F-35
<PAGE>
EAGLE SUPPLY, INC.

(A WHOLLY-OWNED SUBSIDIARY OF TDA INDUSTRIES, INC.)

NOTES TO UNAUDITED FINANCIAL STATEMENTS (CONTINUED)

FOUR MONTHS ENDED OCTOBER 31, 1998 AND 1997

2. LONG-TERM DEBT (CONTINUED)
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 this mortgage.

3. TRANSACTIONS WITH PARENT AND AFFILIATED COMPANIES

During the four-month period ended October 31, 1998, TDA and a subsidiary of
TDA made loans to the Company in the aggregate amount of $1,400,000 as
short-term working capital advances. These loans are non-interest bearing and
are due on demand. These loans are expected to be repaid from cash flow
generated from operations and/or additional borrowings under the Company's
Revolving Credit Facility.

The following is a reconciliation of the activity in the Due from Parent and
Affiliated Companies account for the four-month period ended October 31, 1998:

<TABLE>
<S> <C>
Balance, beginning of period.................................... $3,623,619
Fees for auditing and accounting services..................... (16,667)
Cash advances--net............................................ (41,471)
---------
Balance, end of period.......................................... $3,565,481
---------
---------
</TABLE>

The Due from Parent and Affiliated Companies account represents a
non-interest bearing advance account with the Company's Parent and certain other
subsidiaries of the Parent. The interest rate related to the long-term debt
incurred to fund the activity in this account is based on a floating rate equal
to the lender's prime rate, plus one-half percent, or at the London interbank
offered rate, plus two and one-half percent, at the option of the Company.

In connection with the Offering described in Note 4, the Company intends to
cancel, in the form of a non-cash dividend, all of TDA's indebtedness to the
Company except for $495,497 relating to and offsetting a mortgage in the same
amount (at October 31, 1998) on property previously owned by the Company and for
which the Company remains the primary obligor (Note 2B).

4. TRANSACTION WITH RELATED PARTIES

* * * * *

F-36
<PAGE>
INDEPENDENT AUDITORS' REPORT

To the Board of Directors and Shareholder
of JEH/Eagle Supply, Inc.

We have audited the accompanying balance sheet of JEH/Eagle Supply, Inc.
(the "Company"), a wholly-owned subsidiary of TDA Industries, Inc., as of June
30, 1998, and the related statement of operations, shareholder's equity and cash
flows for the year ended June 30, 1998. These financial statements are the
responsibility of the Company's management. Our responsibility is to express an
opinion on these financial statements based on our audit.

We conducted our audit in accordance with generally accepted auditing
standards. Those standards require that we plan and perform the audit to obtain
reasonable assurance about whether the financial statements are free of material
misstatement. An audit includes examining, on a test basis, evidence supporting
the amounts and disclosures in the financial statements. An audit also includes
assessing the accounting principles used and significant estimates made by
management, as well as evaluating the overall financial statement presentation.
We believe that our audit provides a reasonable basis for our opinion.

In our opinion, such financial statements present fairly, in all material
respects, the financial position of JEH/Eagle Supply, Inc. as of June 30, 1998
and the results of its operations and its cash flows for the year ended June 30,
1998, in conformity with generally accepted accounting principles.

Deloitte & Touche, LLP

September 11, 1998 (December 11, 1998 as to Note 4A)
Dallas, Texas

F-37
<PAGE>
JEH/EAGLE SUPPLY, INC.
(A WHOLLY-OWNED SUBSIDIARY OF TDA INDUSTRIES, INC.)

BALANCE SHEET

JUNE 30, 1998

<TABLE>
<S> <C>
ASSETS
CURRENT ASSETS:
Cash......................................................................... $1,031,700
Accounts and notes receivable--trade (net of allowance for doubtful
accounts--$550,000) (Note 9)............................................... 14,322,376
Inventories.................................................................. 8,966,462
Deferred tax asset (Note 6).................................................. 218,500
Due from related party (Note 2).............................................. 250,000
Other current assets......................................................... 185,486
----------
Total current assets....................................................... 24,974,524
IMPROVEMENTS AND EQUIPMENT (net of accumulated depreciation
and amortization) (Note 3)................................................... 3,553,816
EXCESS COST OF INVESTMENT OVER NET ASSETS ACQUIRED
(net of accumulated amortization of $171,829) (Note 2)....................... 2,705,305
DEFERRED FINANCING COSTS....................................................... 232,246
----------
$31,465,891
----------
----------
LIABILITIES AND SHAREHOLDER'S EQUITY
CURRENT LIABILITIES:
Accounts payable............................................................. $10,151,568
Accrued expenses and other current liabilities............................... 1,816,677
Due to related party (Note 5)................................................ 143,197
Current portion of long-term debt (Note 4)................................... 1,150,033
Federal and state income taxes due to Parent................................. 559,300
----------
Total current liabilities.................................................. 13,820,775
LONG-TERM DEBT (Note 4)........................................................ 15,672,106
DEFERRED TAX LIABILITY (Note 6)................................................ 15,200
----------
Total liabilities.......................................................... 29,508,081
----------
COMMITMENTS AND CONTINGENCIES (Notes 2, 5, 7 and 8)
SHAREHOLDER'S EQUITY:
Common shares, $.01 par value per share, 3,000 shares authorized,
issued and outstanding..................................................... 30
Additional paid-in capital................................................... 1,349,970
Retained earnings............................................................ 607,810
----------
Total shareholder's equity................................................. 1,957,810
----------
$31,465,891
----------
----------
</TABLE>

See notes to financial statements.

F-38
<PAGE>
JEH/EAGLE SUPPLY, INC.
(A WHOLLY-OWNED SUBSIDIARY OF TDA INDUSTRIES, INC.)

STATEMENT OF OPERATIONS

YEAR ENDED JUNE 30, 1998

<TABLE>
<S> <C>
REVENUES....................................................................... $71,005,549
COST OF SALES.................................................................. 55,097,524
----------
15,908,025
----------
OPERATING EXPENSES (including a provision for doubtful accounts of $966,376)
(Notes 7 and 9).............................................................. 13,028,890
DEPRECIATION................................................................... 461,506
AMORTIZATION OF EXCESS COST OF INVESTMENT OVER NET ASSETS ACQUIRED............. 171,829
AMORTIZATION OF DEFERRED FINANCING COSTS....................................... 58,062
----------
13,720,287
----------
INCOME FROM OPERATIONS......................................................... 2,187,738
OTHER INCOME (EXPENSE):
Interest income.............................................................. 25,900
Interest expense............................................................. (1,249,828)
----------
(1,223,928)
----------
INCOME BEFORE PROVISION FOR INCOME TAXES....................................... 963,810
PROVISION FOR INCOME TAXES (Note 6)............................................ 356,000
----------
NET INCOME..................................................................... $ 607,810
----------
----------
</TABLE>

See notes to financial statements.

F-39
<PAGE>
JEH/EAGLE SUPPLY, INC.
(A WHOLLY-OWNED SUBSIDIARY OF TDA INDUSTRIES, INC.)

STATEMENT OF SHAREHOLDER'S EQUITY

YEAR ENDED JUNE 30, 1998

<TABLE>
<CAPTION>
COMMON SHARES ADDITIONAL
------------------------ PAID-IN RETAINED
SHARES AMOUNT CAPITAL EARNINGS TOTAL
----------- ----------- ------------ ------------ ------------
<S> <C> <C> <C> <C> <C>
Initial capitalization............................... 3,000 $ 30 $ 1,349,970 $ -- $ 1,350,000
Net income........................................... -- -- -- 607,810 607,810
----- --- ------------ ------------ ------------
BALANCE, JUNE 30, 1998............................... 3,000 $ 30 $ 1,349,970 $ 607,810 $ 1,957,810
----- --- ------------ ------------ ------------
----- --- ------------ ------------ ------------
</TABLE>

See notes to financial statements.

F-40
<PAGE>
JEH/EAGLE SUPPLY, INC.
(A WHOLLY-OWNED SUBSIDIARY OF TDA INDUSTRIES, INC.)

STATEMENT OF CASH FLOWS

YEAR ENDED JUNE 30, 1998

<TABLE>
<S> <C>
CASH FLOWS FROM OPERATING ACTIVITIES:
Net income................................................................... $ 607,810
Adjustments to reconcile net income to net cash used in operating activities:
Depreciation and amortization.............................................. 691,397
Deferred income taxes...................................................... (203,300)
Increase in allowance for doubtful accounts................................ 550,000
Gain on sale of equipment.................................................. (19,421)
Changes in assets and liabilities:
Increase in accounts and notes receivable................................ (6,606,260)
Decrease in inventories.................................................. 442,840
Decrease in other current assets......................................... 650,457
Increase in accounts payable............................................. 2,675,000
Increase in accrued expenses and other current liabilities............... 475,560
Increase in federal and state taxes due to Parent........................ 559,300
-----------
Net cash used in operating activities.................................. (176,617)
-----------
CASH FLOWS FROM INVESTING ACTIVITIES:
Capital expenditures......................................................... (952,918)
Proceeds from sale of equipment.............................................. 30,200
Payment for purchase of net assets from JEH Co. (See below and Note 2)....... (1,659,013)
-----------
Net cash used in investing activities.................................. (2,581,731)
-----------
CASH FLOWS FROM FINANCING ACTIVITIES:
Principal borrowings on long-term debt....................................... 71,791,454
Principal reductions on long-term debt....................................... (69,351,406)
Capital contribution from Parent............................................. 1,350,000
-----------
Net cash provided by financing activities.............................. 3,790,048
-----------
NET INCREASE IN CASH........................................................... 1,031,700
CASH, BEGINNING OF YEAR........................................................ --
-----------
CASH, END OF YEAR.............................................................. $ 1,031,700
-----------
-----------
SUPPLEMENTAL DISCLOSURE OF CASH FLOW INFORMATION:
Cash paid during the year for interest....................................... $ 1,249,828
-----------
-----------
SUPPLEMENTAL DISCLOSURE OF INVESTING AND NONCASH FINANCING ACTIVITIES:
Acquisition of JEH Co.:
Fair value of assets acquired.............................................. $23,734,747
Liabilities assumed........................................................ (8,960,882)
Due from related party..................................................... 250,000
Note issued to seller...................................................... (864,852)
Bank debt incurred......................................................... (12,500,000)
-----------
Cash paid.................................................................... $ 1,659,013
-----------
-----------
Capital leases for equipment................................................. $ 1,017,239
-----------
-----------
</TABLE>

See notes to financial statements.

F-41
<PAGE>
JEH/EAGLE SUPPLY, INC.
(A WHOLLY-OWNED SUBSIDIARY OF TDA INDUSTRIES, INC.)

NOTES TO FINANCIAL STATEMENTS

YEAR ENDED JUNE 30, 1998

1. SIGNIFICANT ACCOUNTING POLICIES

BUSINESS DESCRIPTION--The Company is a wholly-owned subsidiary of TDA
Industries, Inc. ("TDA" or the "Parent") and is engaged in the wholesale
distribution of roofing supplies and related products utilized primarily in the
construction industry in Texas, Colorado, Indiana, Virginia and Minnesota. 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 first-in, first-out (FIFO) method.

DEPRECIATION AND AMORTIZATION--Depreciation and amortization of improvements
and equipment are provided principally by straight-line methods at various rates
calculated to extinguish the carrying values of the respective assets over their
estimated useful lives.

EXCESS COST OF INVESTMENT OVER NET ASSETS ACQUIRED--Excess cost of
investment over net assets acquired ("goodwill") is being amortized on a
straight-line method over 15 years. Management evaluates the on-going value and
future benefits of goodwill based upon expectations of future non discounted
cash flows. Should management determine that impairment has occurred, goodwill
would be reduced by the excess, if any, of the carrying value of goodwill over
management's estimate of the anticipated non discounted future net cash flows.

DEFERRED FINANCING COSTS--Deferred financing costs are related to the
acquisition financing obtained in connection with the acquisition described in
Note 2 and are being amortized on a straight-line method over the term of the
related debt obligations described in Note 4A.

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.

FAIR VALUE OF FINANCIAL INSTRUMENTS--The following disclosure of the
estimated fair value of financial instruments is made in accordance with the
requirements of Statement of Financial Accounting Standards No. 107, DISCLOSURES
ABOUT FAIR VALUE OF FINANCIAL INSTRUMENTS. The estimated fair value amounts have
been determined by the Company using available market information and
appropriate valuation methodologies. However, considerable judgment is required
in interpreting market data to develop the estimates of fair value. Accordingly,
the estimates presented herein are not necessarily indicative of the amounts
that the Company could realize in a current market exchange. The use of
different market assumptions and/or estimation methodologies may have a material
effect on the estimated fair value amounts.

CASH, ACCOUNTS AND NOTES RECEIVABLE, ACCOUNTS PAYABLE AND ACCRUED
EXPENSES--The carrying amounts of these items are a reasonable estimate of their
fair value.

LONG-TERM DEBT--Interest rates that are currently available to the Company
for issuance of debt with similar terms and remaining maturities are used to
estimate fair value for debt issues for which no market quotes are available.
The carrying amount of this item is a reasonable estimate of fair value, except
for a

F-42
<PAGE>
JEH/EAGLE SUPPLY, INC.
(A WHOLLY-OWNED SUBSIDIARY OF TDA INDUSTRIES, INC.)

NOTES TO FINANCIAL STATEMENTS (CONTINUED)

YEAR ENDED JUNE 30, 1998

1. SIGNIFICANT ACCOUNTING POLICIES (CONTINUED)
6% note due July 2002. Such note has a carrying value of $864,852 and an
estimated fair market value of $775,000.

2. ACQUISITION

On July 8, 1997, effective as of July 1, 1997, the Company acquired the
business and substantially all of the assets of JEH Co., engaged in the
wholesale distribution of roofing supplies and related products utilized
primarily in the construction industry. The purchase price, as adjusted, was
$14,767,852 consisting of $13,878,000 in cash, net of $250,000 due from JEH Co.,
and a five-year, 6% per annum note in the principal amount of $864,852. The
purchase price and the note are subject to further adjustment under certain
conditions. The first $250,000 of the adjustments was to be paid in cash by JEH
Co. to the Company but, as other adjustments to the purchase price are
anticipated, the Company elected to postpone the $250,000 payment from JEH Co.
until other adjustments to the purchase price are resolved, and the $250,000
payment has been established as a receivable due on demand from JEH Co. Further,
the Company is obligated for potentially substantial additional payments if,
among other factors, the business of the Company attains certain levels of
income, as defined, during the five-year period ending June 30, 2002. More
specifically, JEH Co. or its designee is to receive a percentage of the EBITDA
or the modified EBITDA (as defined) of the Company (the "JEH EBITDA") on a per
year, non-cumulative basis for each of the Company's fiscal years ending on June
30 of 1998 through 2002 (the "Applicable Period"). If the JEH EBITDA reaches
$3,000,000, $4,000,000 and $5,000,000 in the foregoing fiscal years, JEH Co. or
its designee is to receive 35%, 40% and 50%, respectively, of that fiscal year's
JEH EBITDA in excess of those levels, respectively. If the JEH EBITDA (plus
$50,000 attributable to an employment agreement) (x) for any fiscal year in the
Applicable Period is not less than $4,400,000, the Company is to pay JEH Co. or
its designee $1,000,000, provided that the aggregate amount of such payments is
not to exceed $2,000,000; and (y) in the aggregate during the Applicable Period
is not less than $20,000,000, the Company is to pay JEH Co. or its designee the
sum of $1,350,000 plus the amount of the difference, if any, between $2,000,000
and the amount paid under (x). Additionally, with respect to certain Total
Accounts Receivable Reserves, as defined (the "JEH Reserves"), which were
established at date of acquisition, if the Company reduces the amount of the JEH
Reserves in any fiscal year during the Applicable Period, JEH Co. or its
designee is to be paid 100% of the reduction until the JEH Reserves are not less
than $2,500,000

F-43
<PAGE>
JEH/EAGLE SUPPLY, INC.
(A WHOLLY-OWNED SUBSIDIARY OF TDA INDUSTRIES, INC.)

NOTES TO FINANCIAL STATEMENTS (CONTINUED)

YEAR ENDED JUNE 30, 1998

2. ACQUISITION (CONTINUED)
and 50% of the reduction in the JEH Reserves below $2,300,000 down to $600,000.
Both of the immediately foregoing percentage payments to JEH Co. or its designee
are subject to adjustment in certain instances. Additionally, if the Offering
described in Note 8 is consummated prior to June 30, 2002 and in the event
certain JEH EBITDA levels are reached for the Company during the period July 1,
1997 through the date of consummation of the Offering, JEH Co. or its designee
will be entitled to receive $1,000,000 or $1,350,000 (either in cash or in
common shares of Eagle Supply Group, Inc. valued at the public offering price)
depending upon the JEH EBITDA level. Upon consummation of the Offering and the
sale of the Company as described in Note 8, Eagle Supply Group, Inc. will issue
300,000 of its common shares in fulfillment of the obligation set forth in the
immediately preceding sentence, even if the JEH EBITDA does not reach the
required levels.

The foregoing transaction was accounted for as a purchase and, accordingly,
the results of the operations acquired from JEH Co. have been included in the
statement of operations from the effective date of the acquisition. This
transaction gave rise to approximately $2,877,000 of goodwill which is being
amortized over a forty-year period. Any additional payments to which JEH Co. or
its designee will be entitled will be accounted for as additional goodwill which
will be amortized over the then remaining forty-year period.

3. IMPROVEMENTS AND EQUIPMENT

The major classes of improvements and equipment at June 30, 1998 are as
follows:

<TABLE>
<CAPTION>
ESTIMATED
USEFUL LIVES
-------------------------
<S> <C> <C>
Automotive equipment................................ $2,088,508 5 years
Assets acquired under capitalized leases............ 1,017,239 The lesser of 2-6 years
or the lease term
Furniture, fixtures and equipment................... 469,389 5-7 years
Leasehold improvements.............................. 438,936 10 years
------------

4,014,072
Less: Accumulated depreciation and amortization..... 460,256
------------
$3,553,816
------------
------------
</TABLE>

F-44
<PAGE>
JEH/EAGLE SUPPLY, INC.
(A WHOLLY-OWNED SUBSIDIARY OF TDA INDUSTRIES, INC.)

NOTES TO FINANCIAL STATEMENTS (CONTINUED)

YEAR ENDED JUNE 30, 1998

4. LONG-TERM DEBT

At June 30, 1998, long-term debt consists of the following:

<TABLE>
<S> <C>
Revolving credit loan (A)...................................... $10,785,793
Term loan (A).................................................. 2,312,500
Equipment loan (A)............................................. 1,899,500
6% promissory note due July 2002 (Note 2)...................... 864,852
Capitalized equipment lease obligations (B).................... 959,494
----------
16,822,139
Less: Current portion of long-term debt........................ 1,150,033
----------
$15,672,106
----------
----------
</TABLE>

- ------------------------

(A) In order to finance the purchase of substantially all of the assets and
business of JEH Co. and to provide for working capital needs, the Company
entered into a loan agreement, last amended on December 11, 1998, for a
credit facility in the aggregate amount of $20 million which is
collateralized by substantially all of the tangible and intangible assets of
the Company. The credit facility has an initial maturity of October 22, 2003
and consists of a $3,000,000 term loan, a $2,475,000 equipment loan, and the
balance in the form of a revolving credit loan. The term loan is payable in
48 equal monthly installments, each in the amount of $62,500; the equipment
loan is payable in equal monthly installments, based on a seventy-six month
amortization schedule, each in the amount of $20,500, with a balloon payment
due on the earlier of August 1, 2004 or the end of the loan agreement's
initial or renewal term. The equipment and revolving credit loans bear
interest at the lender's prime rate, plus one-half percent, or at the London
interbank offered rate, plus two and one-half percent, at the option of the
Company. The term loan bears interest at the lender's prime rate, plus one
and one-half percent, or at the London interbank offered rate, plus three
and one-quarter percent, at the option of the Company. The credit facility
has been guaranteed by the Parent.

(B) Future minimum lease payments for capitalized equipment lease obligations at
June 30, 1998 are as follows:

<TABLE>
<CAPTION>
YEAR ENDING JUNE 30, AMOUNT
- -------------------------------------------------------------------------------- ------------
<S> <C>
1999............................................................................ $ 277,425
2000............................................................................ 349,755
2001............................................................................ 213,843
2002............................................................................ 185,799
2003............................................................................ 131,179
------------
1,158,001
Less: Interest.................................................................. 198,507
------------
Present value of net minimum payments........................................... $ 959,494
------------
------------
</TABLE>

F-45
<PAGE>
JEH/EAGLE SUPPLY, INC.
(A WHOLLY-OWNED SUBSIDIARY OF TDA INDUSTRIES, INC.)

NOTES TO FINANCIAL STATEMENTS (CONTINUED)

YEAR ENDED JUNE 30, 1998

4. LONG-TERM DEBT (CONTINUED)
The aggregate future maturities of long-term debt, excluding capitalized
equipment lease obligations, are as follows:

<TABLE>
<CAPTION>
YEAR ENDING JUNE 30, AMOUNT
- ------------------------------------------------------------------------------- -------------
<S> <C>
1999........................................................................... $ 953,500
2000........................................................................... 1,062,000
2001........................................................................... 1,062,000
2002........................................................................... 446,000
2003........................................................................... 11,962,645
Thereafter..................................................................... 376,500
-------------
$ 15,862,645
-------------
-------------
</TABLE>

5. TRANSACTIONS WITH RELATED PARTIES

JEH Eagle paid $150,000 to its Parent for arranging the acquisition
financing to acquire JEH Co.'s business. Such amount is included in deferred
financing costs and is being amortized over the term of the credit facility.

During the fiscal year ended June 30, 1998, the Company received payments on
behalf of JEH Co. in the aggregate amount of $143,197. Such payments are shown
as Due to Related Party at June 30, 1998.

The Company has entered into an agreement pursuant to which its Parent
provides the Company with certain services including (i) managerial, (ii)
strategic planning, (iii) banking negotiations, (iv) investor relations, and (v)
advisory services relating to acquisitions for a five-year term which commenced
in July 1997. The monthly fee, the payment of which is to commence upon the
closing of the Offering and the consummation of the acquisition described in
Note 8, for the foregoing services is $3,000.

The Company leases several of its distribution center facilities and its
executive offices from the President of the Company pursuant to five-year
written leases at annual rentals aggregating approximately $492,000. Rental
payments for these facilities and executive offices aggregated approximately
$485,000 during the year ended June 30, 1998.

During the year ended June 30, 1998, the Company made sales aggregating
$1,018,219 to two entities owned by the son of the Company's President.
Management believes that such sales were made on terms no less favorable than
sales made to independent third parties.

F-46
<PAGE>
JEH/EAGLE SUPPLY, INC.
(A WHOLLY-OWNED SUBSIDIARY OF TDA INDUSTRIES, INC.)

NOTES TO FINANCIAL STATEMENTS (CONTINUED)

YEAR ENDED JUNE 30, 1998

6. INCOME TAXES

Components of the provision for income taxes for the year ended June 30,
1998 are as follows:

<TABLE>
<S> <C>
Current:
Federal......................................................... $ 484,300
State and local................................................. 75,000
Deferred.......................................................... (203,300)
---------
$ 356,000
---------
---------
</TABLE>

A reconciliation of income taxes at the Federal statutory rate to amounts
provided is as follows:

<TABLE>
<S> <C>
Tax provision at statutory rate................................... $ 328,000
State and local income taxes...................................... 50,000
Other--net........................................................ (22,000)
---------
$ 356,000
---------
---------
</TABLE>

Temporary differences which give rise to deferred tax assets and liabilities
are as follows:

<TABLE>
<S> <C>
Deferred Tax Assets:
Provision for doubtful accounts................................. $ 209,000
Inventory capitalization........................................ 9,500
---------
218,500
Deferred Tax Liability:
Depreciation.................................................... (15,200)
---------
Net deferred tax asset............................................ $ 203,300
---------
---------
</TABLE>

7. COMMITMENTS AND CONTINGENCIES

The approximate future minimum rental commitments under these unrelated
leases are as follows:

<TABLE>
<CAPTION>
YEAR ENDING JUNE 30, AMOUNT
- ---------------------------------------------------------------------------------- ----------
<S> <C>
1999.............................................................................. $ 480,000
2000.............................................................................. 198,000
2001.............................................................................. 143,000
2002.............................................................................. 81,000
2003.............................................................................. 8,000
----------
$ 910,000
----------
----------
</TABLE>

F-47
<PAGE>
JEH/EAGLE SUPPLY, INC.
(A WHOLLY-OWNED SUBSIDIARY OF TDA INDUSTRIES, INC.)

NOTES TO FINANCIAL STATEMENTS (CONTINUED)

YEAR ENDED JUNE 30, 1998

7. COMMITMENTS AND CONTINGENCIES (CONTINUED)
Rent expense for the property and equipment under these leases amounted to
approximately $462,000 in fiscal 1998 and includes certain occupancy costs.

During the fiscal year ended June 30, 1998, the Company purchased
approximately 15% of its product lines from one supplier. Since similar products
are available to the Company from other suppliers, the loss of this supplier
would not have a material adverse effect on the business of the Company.

The Company has a 401(k) plan covering eligible employees (the "Plan"). The
Plan provides for contributions at the Company's discretion. No Company
contribution was made to the Plan in fiscal 1998.

8. CONTEMPLATED TRANSACTION WITH RELATED PARTY

9. ALLOWANCE FOR DOUBTFUL ACCOUNTS

<TABLE>
<CAPTION>
BALANCE AT
BEGINNING BALANCE AT
YEAR ENDING JUNE 30, OF YEAR PROVISION WRITEOFFS END OF YEAR
- ------------------------------------------- ------------- ---------- ----------- -----------
<S> <C> <C> <C> <C>
1998....................................... $ -- $ 966,376 $ (416,376) $ 550,000
----- ---------- ----------- -----------
----- ---------- ----------- -----------
</TABLE>

* * * * * *

F-48
<PAGE>
JEH/EAGLE SUPPLY, INC.
(A WHOLLY-OWNED SUBSIDIARY OF TDA INDUSTRIES, INC.)

UNAUDITED BALANCE SHEET

OCTOBER 31, 1998

<TABLE>
<S> <C>
ASSETS
CURRENT ASSETS:
Cash......................................................................... $ 107,777
Accounts and notes receivable--trade (net of allowance for doubtful accounts
of $789,000) (Note 2)...................................................... 14,412,093
Inventories (Note 2)......................................................... 8,782,595
Deferred tax asset........................................................... 309,500
Due from related party....................................................... 250,000
Other current assets......................................................... 295,516
----------
Total current assets....................................................... 24,157,481
IMPROVEMENTS AND EQUIPMENT (net of accumulated depreciation and
amortization)................................................................ 3,522,196
EXCESS COST OF INVESTMENT OVER NET ASSETS ACQUIRED (net of accumulated
amortization of $194,530).................................................... 2,682,604
DEFERRED FINANCING COSTS....................................................... 212,892
----------
$30,575,173
----------
----------
LIABILITIES AND SHAREHOLDER'S EQUITY
CURRENT LIABILITIES:
Accounts payable............................................................. $9,793,367
Accrued expenses and other current liabilities............................... 2,096,484
Due to related party......................................................... 150,446
Current portion of long-term debt (Note 2)................................... 1,216,590
Federal and state income taxes due to Parent................................. 390,250
----------
Total current liabilities.................................................. 13,647,137
LONG-TERM DEBT (Note 2)........................................................ 13,649,312
DEFERRED TAX LIABILITY......................................................... 15,200
----------
Total liabilities.......................................................... 27,311,649
----------
COMMITMENTS AND CONTINGENCIES (Note 3)
SHAREHOLDER'S EQUITY:
Common shares, $.01 par value per share, 3,000 shares authorized, issued and
outstanding................................................................ 30
Additional paid-in capital................................................... 1,349,970
Retained earnings............................................................ 1,913,524
----------
Total shareholder's equity................................................. 3,263,524
----------
$30,575,173
----------
----------
</TABLE>

See notes to unaudited financial statements.

F-49
<PAGE>
JEH/EAGLE SUPPLY, INC.
(A WHOLLY-OWNED SUBSIDIARY OF TDA INDUSTRIES, INC.)

UNAUDITED STATEMENTS OF OPERATIONS AND RETAINED EARNINGS

FOUR MONTHS ENDED OCTOBER 31, 1998 AND 1997

<TABLE>
<CAPTION>
1998 1997
------------- -------------
<S> <C> <C>
REVENUES........................................................................... $ 31,682,018 $ 26,814,331
COST OF SALES...................................................................... 24,194,001 20,662,091
------------- -------------
7,488,017 6,152,240
------------- -------------
OPERATING EXPENSES (including a provision for doubtful accounts of $237,323 and
$198,549 in 1998 and 1997, respectively)......................................... 4,711,027 4,582,527
DEPRECIATION....................................................................... 191,835 109,516
AMORTIZATION OF EXCESS COST OF INVESTMENT OVER NET ASSETS ACQUIRED................. 22,701 64,118
AMORTIZATION OF DEFERRED FINANCING COSTS........................................... 19,354 19,354
------------- -------------
4,944,917 4,775,515
------------- -------------
INCOME FROM OPERATIONS............................................................. 2,543,100 1,376,725
------------- -------------
OTHER INCOME (EXPENSE):
Interest income.................................................................. 11,729 11,192
Interest expense................................................................. (474,115) (367,381)
------------- -------------
(462,386) (356,189)
------------- -------------
INCOME BEFORE PROVISION FOR INCOME TAXES........................................... 2,080,714 1,020,536
PROVISION FOR INCOME TAXES......................................................... 775,000 386,000
------------- -------------
NET INCOME......................................................................... 1,305,714 634,536
RETAINED EARNINGS, BEGINNING OF PERIOD............................................. 607,810 --
------------- -------------
RETAINED EARNINGS, END OF PERIOD................................................... $ 1,913,524 $ 634,536
------------- -------------
------------- -------------
</TABLE>

See notes to unaudited financial statements.

F-50
<PAGE>
JEH/EAGLE SUPPLY, INC.

(A WHOLLY-OWNED SUBSIDIARY OF TDA INDUSTRIES, INC.)

UNAUDITED STATEMENTS OF CASH FLOWS

FOUR MONTHS ENDED OCTOBER 31, 1998 AND 1997

<TABLE>
<CAPTION>
1998 1997
-------------- --------------
<S> <C> <C>
CASH FLOWS FROM OPERATING ACTIVITIES:
Net income...................................................................... $ 1,305,714 $ 634,536
Adjustments to reconcile net income to net cash provided by operating
activities:
Depreciation and amortization................................................. 233,890 192,988
Deferred income taxes......................................................... (91,000) (72,029)
Increase in allowance for doubtful accounts................................... 239,475 198,549
Changes in operating assets and liabilities:
Increase in accounts receivable............................................. (329,192) (2,277,854)
Decrease (increase) in inventories.......................................... 183,867 (58,535)
(Increase) decrease in other current assets................................. (110,030) 535,662
(Decrease) increase in accounts payable..................................... (358,201) 1,673,050
Increase in accrued expenses and other current liabilities.................. 287,056 195,358
(Decrease) increase in federal and state income taxes due to Parent......... (169,050) 458,029
-------------- --------------
Net cash provided by operating activities................................. 1,192,529 1,479,754
-------------- --------------
CASH FLOWS FROM INVESTING ACTIVITIES:
Capital expenditures............................................................ (160,215) (318,731)
Payment for purchase of net assets from JEH Co.................................. -- (1,659,013)
-------------- --------------
Net cash used in investing activities..................................... (160,215) (1,977,744)
-------------- --------------
CASH FLOWS FROM FINANCING ACTIVITIES:
Principal borrowings on long-term debt.......................................... 28,965,316 28,889,067
Principal reductions on long-term debt.......................................... (30,921,553) (29,376,663)
Capital contribution from Parent................................................ -- 1,350,000
-------------- --------------
Net cash (used in) provided by financing activities....................... (1,956,237) 862,404
-------------- --------------
NET (DECREASE) INCREASE IN CASH................................................... (923,923) 364,414
CASH, BEGINNING OF PERIOD......................................................... 1,031,700 --
-------------- --------------
CASH, END OF PERIOD............................................................... $ 107,777 $ 364,414
-------------- --------------
SUPPLEMENTAL DISCLOSURE OF CASH FLOW INFORMATION:
Cash paid during the period for interest........................................ $ 474,115 $ 367,381
-------------- --------------
Income taxes paid to Parent..................................................... $ 735,050 $ --
-------------- --------------
SUPPLEMENTAL DISCLOSURE OF NONCASH INVESTING ACTIVITIES:
Acquisition of JEH Co.:
Fair value of assets acquired................................................. $ -- $ 23,734,747
Liabilities assumed........................................................... -- (8,960,882)
Due from related party........................................................ -- 250,000
Note issued to seller......................................................... -- (864,852)
Bank debt incurred............................................................ -- (12,500,000)
-------------- --------------
Cash paid....................................................................... $ -- $ 1,659,013
-------------- --------------
</TABLE>

See notes to unaudited financial statements.

F-51
<PAGE>
JEH/EAGLE SUPPLY, INC.
(A WHOLLY-OWNED SUBSIDIARY OF TDA INDUSTRIES, INC.)

NOTES TO UNAUDITED FINANCIAL STATEMENTS

FOUR MONTHS ENDED OCTOBER 31, 1998 AND 1997

1. BASIS OF FINANCIAL STATEMENT PRESENTATION

The financial statements of JEH/Eagle Supply, Inc. (the "Company"), a
wholly-owned subsidiary of TDA Industries, Inc. ("TDA" or the "Parent") 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 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 of the
Company for the fiscal year ended June 30, 1998 and notes thereto included
elsewhere in this Prospectus. Operating results for the interim period are not
necessarily indicative of results for the entire year.

2. LONG-TERM DEBT

At October 31, 1998, long-term debt consists of the following:

<TABLE>
<S> <C>
Revolving credit loan (A)...................................... $9,236,561
Term loan (A).................................................. 2,062,500
Equipment loan (A)............................................. 1,806,500
6% promissory note due July 2002............................... 864,852
Capitalized equipment lease obligations........................ 895,489
----------
14,865,902
Less: Current portion of long-term debt........................ 1,216,590
----------
$13,649,312
----------
----------
</TABLE>

(A) In order to finance the purchase of substantially all of the assets and
business of JEH Co. and to provide for working capital needs, the Company
entered into a loan agreement, last amended on December 11, 1998, for a
credit facility in the aggregate amount of $20 million which is
collateralized by substantially all of the tangible and intangible assets of
the Company. The credit facility has an initial maturity of October 22, 2003
and consists of a $3,000,000 term loan, a $2,475,000 equipment loan, and the
balance in the form of a revolving credit loan. The term loan is payable in
48 equal monthly installments, each in the amount of $62,500; the equipment
loan is payable in equal monthly installments, based on a seventy-six month
amortization schedule, each in the amount of $26,000, with a balloon payment
due on the earlier of August 1, 2004 or the end of the loan agreement's
initial or renewal term. The equipment and revolving credit loans bear
interest at the lender's prime rate, plus one-half percent, or at the London
interbank offered rate, plus two and one-half percent, at the option of the
Company. The term loan bears interest at the lender's prime rate, plus one
and one-half percent, or at the London interbank offered rate, plus three
and one-quarter percent, at the option of the Company. The credit facility
has been guaranteed by the Parent.

3. CONTEMPLATED TRANSACTION WITH RELATED PARTY

F-52
<PAGE>
JEH/EAGLE SUPPLY, INC.
(A WHOLLY-OWNED SUBSIDIARY OF TDA INDUSTRIES, INC.)

NOTES TO UNAUDITED FINANCIAL STATEMENTS (CONTINUED)

FOUR MONTHS ENDED OCTOBER 31, 1998 AND 1997

3. CONTEMPLATED TRANSACTION WITH RELATED PARTY (CONTINUED)
Upon closing of the Offering, Eagle will acquire all of the issued and
outstanding capital stock of the Company from its Parent. The acquisition will
be accounted for as the combining of two entities under common control, similar
to a pooling of interests, and will not result in any revaluation of the
Company's assets or the creation of goodwill. Upon the consummation of the
acquisition, the Company will become a wholly-owned subsidiary of Eagle.

*****

F-53
<PAGE>
INDEPENDENT AUDITORS' REPORT

To the Board of Directors and Shareholder of
JEH Company, Inc.

We have audited the accompanying balance sheet of JEH Company, Inc. (a Texas
corporation) as of June 30, 1997, and the related statement of operations and
retained earnings and cash flows for the six months then ended. These financial
statements are the responsibility of the Company's management. Our
responsibility is to express an opinion on these financial statements based on
our audit.

In our opinion, the financial statements referred to above present fairly,
in all material respects, the financial position of JEH Company, Inc. as of June
30, 1997, and the results of its operations and its cash flows for the six
months then ended in conformity with generally accepted accounting principles.

Waters, Murray & Associates
August 20, 1997
Mansfield, Texas

F-54
<PAGE>
JEH COMPANY, INC.

BALANCE SHEET

JUNE 30, 1997

<TABLE>
<S> <C>
ASSETS
CURRENT ASSETS
Cash and cash equivalents.................................................... $ 284,428
Accounts receivable-trade, net of allowance for doubtful accounts of
$2,554,056 (Notes G and K)................................................. 8,127,463
Accounts receivable--related party (Note B).................................. 138,654
Inventories (Notes A and G).................................................. 9,409,302
Other receivables............................................................ 664,696
----------
Total current assets....................................................... 18,624,543
FIXED ASSETS--net of accumulated depreciation (Notes A,D, F and G)............. 2,114,523
OTHER ASSETS (Note E).......................................................... 1,029,648
----------
TOTAL ASSETS................................................................... $21,768,714
----------
----------

LIABILITIES & SHAREHOLDER'S EQUITY
CURRENT LIABILITIES
Accounts payable............................................................. $7,575,628
Accrued expenses............................................................. 1,476,133
Current portion of long-term debt (Note G)................................... 8,450,642
Obligation under capital leases-current portion.............................. 19,299
----------
Total current liabilities.................................................. 17,521,702
----------
LONG-TERM LIABILITIES
Note payable to shareholder (Note B)......................................... 3,486,991
----------
Total long-term liabilities................................................ 3,486,991
----------
TOTAL LIABILITIES.............................................................. 21,008,693
----------

COMMITMENTS AND CONTINGENCIES (Note H)

SHAREHOLDER'S EQUITY
Common shares, $1 par value, 100,000 shares authorized, 1,000 issued and
outstanding................................................................ 1,000
Additional paid in capital................................................... 126,967
Retained earnings............................................................ 632,054
----------
Total shareholder's equity................................................. 760,021
----------
TOTAL LIABILITIES & SHAREHOLDER'S EQUITY....................................... $21,768,714
----------
----------
</TABLE>

See accompanying notes and auditor's report

F-55
<PAGE>
JEH COMPANY, INC.

STATEMENTS OF OPERATIONS AND RETAINED EARNINGS

SIX MONTHS ENDED JUNE 30, 1997 AND UNAUDITED JUNE 30, 1996

<TABLE>
<CAPTION>
1997 1996
------------- -------------
<S> <C> <C>
Net sales.......................................................................... $ 28,978,685 $ 32,860,284
Cost of sales...................................................................... 21,354,749 25,775,974
------------- -------------
Gross profit..................................................................... 7,623,936 7,084,310

SELLING, GENERAL AND ADMINISTRATIVE EXPENSES....................................... 8,331,690 5,887,103
------------- -------------
(Loss) income from operations.................................................... (707,754) 1,197,207
------------- -------------
OTHER INCOME (EXPENSE)
Other income..................................................................... 1,384 6,166
Interest expense................................................................. (472,926) (396,858)
------------- -------------
(471,542) (390,692)
------------- -------------
Net (loss) income.................................................................. (1,179,296) 806,515

RETAINED EARNINGS:
Beginning of period.............................................................. 1,811,350 1,640,461
------------- -------------
End of period.................................................................... $ 632,054 $ 2,446,976
------------- -------------
------------- -------------
</TABLE>

See accompanying notes and auditor's report

F-56
<PAGE>
JEH COMPANY, INC.

STATEMENTS OF CASH FLOWS

SIX MONTHS ENDED JUNE 30, 1997 AND UNAUDITED JUNE 30, 1996

<TABLE>
<CAPTION>
1997 1996
-------------- --------------
<S> <C> <C>
CASH FLOWS FROM OPERATING ACTIVITIES:
Net (loss) income............................................................... $ (1,179,296) $ 806,515
Adjustments to reconcile net (loss) income to cash provided by (used in)
operating activities:
Depreciation and amortization................................................. 277,387 307,471
Gain on sale of assets........................................................ (16,278) (27,570)
Changes in assets and liabilities
Accounts receivable......................................................... 983,397 (2,438,493)
Inventory................................................................... (1,400,333) (1,847,217)
Accounts payable and accrued expenses....................................... 2,814,718 2,799,223
Other assets................................................................ (622,337) 102,860
Related party receivable.................................................... 8,652 (72,453)
-------------- --------------
Total adjustments......................................................... 2,045,206 (1,176,179)
-------------- --------------
Net cash provided by (used in) operating activities........................... 865,910 (369,664)
-------------- --------------
CASH FLOWS FROM INVESTING ACTIVITIES:
Capital expenditures............................................................ (435,860) (55,450)
Proceeds from sale of assets.................................................... 42,839 84,200
Increase in other non-current assets............................................ (56,655) (85,572)
-------------- --------------
Net cash used in investing activities......................................... (449,676) (56,822)
-------------- --------------
CASH FLOWS FROM FINANCING ACTIVITIES:
Principal borrowings on long-term debt.......................................... 16,848,841 16,217,940
Principal reductions on long-term debt.......................................... (15,943,456) (14,870,984)
Principal borrowings on capital leases.......................................... 8,713 --
Principal reductions on capital leases.......................................... (5,431) (12,245)
Principal reductions on note payable to shareholder............................. (1,238,414) (1,656,448)
-------------- --------------
Net cash used in financing activities......................................... (329,747) (321,737)
-------------- --------------
NET INCREASE (DECREASE) IN CASH AND CASH EQUIVALENTS.............................. 86,487 (748,223)
CASH AND CASH EQUIVALENTS, BEGINNING OF PERIOD.................................... 197,941 1,038,229
-------------- --------------
-------------- --------------
CASH AND CASH EQUIVALENTS, END OF PERIOD.......................................... $ 284,428 $ 290,006
-------------- --------------
-------------- --------------
SUPPLEMENTAL INFORMATION
Cash paid for interest expense.................................................. $ 472,926 $ 396,858
-------------- --------------
-------------- --------------
</TABLE>

See accompanying notes and auditor's report

F-57
<PAGE>
JEH COMPANY, INC.
NOTES TO FINANCIAL STATEMENTS

SIX MONTHS ENDED JUNE 30, 1997 AND UNAUDITED JUNE 30, 1996

NOTE A--SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES

This summary of significant accounting policies of JEH Company, Inc. (the
Company), is presented to assist in understanding the Company's financial
statements. The financial statements and notes are representations of the
Company's management, who is responsible for their integrity and objectivity.
These accounting policies conform to generally accepted accounting principles
and have been consistently applied in the preparation of the financial
statements.

The statements of operations and retained earnings and cash flows for the
six months ended June 30, 1996 are unaudited. In the opinion of management, all
adjustments, consisting of normal recurring adjustments, necessary for the fair
presentation of results of operations and cash flows have been included. These
unaudited 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 of the
Company for the years ended December 31, 1996 and 1995 and the notes thereto
included elsewhere in this Prospectus. Operating results for the interim periods
are not necessarily indicative of results for the entire year.

ORGANIZATION

The Company, a Texas corporation, was incorporated in May 1982. The Company
is engaged primarily in the sale of building materials to roofing contractors.
The Company's home office and primary outlet is in Mansfield, Texas, with other
locations in Texas, Colorado, Virginia, Indiana and Iowa. The accompanying
financial statements are prepared utilizing the accrual method of accounting
whereby revenue is recognized when earned and expenses are recognized when
incurred.

CASH AND CASH EQUIVALENTS

For the purposes of the statement of cash flows, the Company considers all
highly liquid instruments purchased with a maturity of three months or less to
be cash equivalents.

INVENTORIES

Inventories, which consist primarily of roofing materials, are stated at the
lower of cost or market. Cost is determined using the first-in, first-out (FIFO)
method.

FAIR VALUE OF FINANCIAL INSTRUMENTS

The following disclosure of the estimated fair value of financial
instruments is made in accordance with the requirements of Statement of
Financial Accounting Standards No. 107, "Disclosures About Fair Value of
Financial Instruments". The estimated fair value amounts have been determined by
the companies, using available market information and appropriate valuation
methodologies. However, considerable judgment is required in interpreting market
data to develop the estimates of fair value. Accordingly, the estimates
presented herein are not necessarily indicative of the amounts that the
companies could realize in a current market exchange. The use of different
market assumptions and/or estimation methodologies may have a material effect on
the estimated fair value amounts.

CASH AND CASH EQUIVALENTS, ACCOUNTS RECEIVABLE, ACCOUNTS PAYABLE AND ACCRUED
EXPENSES--The carrying amounts of these items are a reasonable estimate of their
fair value.

F-58
<PAGE>
JEH COMPANY, INC.
NOTES TO FINANCIAL STATEMENTS (CONTINUED)

SIX MONTHS ENDED JUNE 30, 1997 AND UNAUDITED JUNE 30, 1996

NOTE A--SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (CONTINUED)
LONG-TERM DEBT--Interest rates that are currently available to the Company
for issuance of debt with similar terms and remaining maturities are used to
estimate fair value for debt issues for which no market quotes are available.
The carrying amount of this item is a reasonable estimate of fair value.

The fair value estimates presented herein are based on pertinent information
available to management as of June 30, 1997. Although management is not aware of
any factors that would significantly affect the estimated fair value amounts,
such amounts have not been comprehensively revalued for purposes of these
financial statements since that date, and current estimates of fair value may
differ significantly from the amounts presented herein.

FIXED ASSETS

Transportation equipment, furniture and fixtures, and equipment are carried
at cost. Expenditures for renewals and betterments are capitalized and
maintenance and repairs are expensed as incurred. Depreciation is computed using
the straight-line method over the useful life of the depreciable asset.
Leasehold improvements are carried at cost and are amortized using the
straight-line method over the estimated useful life of the related asset.

INCOME TAXES

In July 1990, the Company elected to be taxed under the provisions of
Subchapter S of the Internal Revenue Code. Accordingly, the Company does not pay
Federal corporate income taxes on its taxable income. Instead, the shareholder
is liable for individual income taxes on the Company's taxable income. Although
the income recognition timing differences originating before attaining S
corporation status will reverse, they will not generate a tax liability at the
Company level so long as S corporation status is maintained.

USE OF ESTIMATES

The preparation of financial statements in conformity with generally
accepted accounting principles requires management to make estimates and
assumptions that affect certain reported amounts and disclosures. Accordingly,
actual results could differ from those estimates.

RECLASSIFICATIONS

Certain amounts for the six months ended June 30, 1996 have been
reclassified to conform to the June 30, 1997 presentation. The reclassifications
have no effect on the results of operations for the six months ended June 30,
1996.

NOTE B--RELATED PARTY TRANSACTIONS

The Company leases its office facilities in Mansfield, Frisco, Mesquite and
Colleyville, Texas, and in Colorado Springs and Henderson, Colorado, from the
Company's shareholder. No long-term lease agreements exist for these sites.
Facility rent paid during the six-month periods ended June 30, 1997 and 1996
amounted to approximately $228,000 and $223,000, respectively.

The Company's financial statements include all costs of doing business.

F-59
<PAGE>
JEH COMPANY, INC.
NOTES TO FINANCIAL STATEMENTS (CONTINUED)

SIX MONTHS ENDED JUNE 30, 1997 AND UNAUDITED JUNE 30, 1996

NOTE B--RELATED PARTY TRANSACTIONS (CONTINUED)
The Company transacts business with other companies which are either owned
by the Company's shareholder, or owned by relatives of the Company's
shareholder.

A summary of these transactions in the six-month period ended June 30, 1997
is as follows:

<TABLE>
<CAPTION>
RELATED
TOTAL SALES RECEIVABLES
----------- ------------
<S> <C> <C>
$ 326,824 $ 138,654
----------- ------------
----------- ------------
</TABLE>

The following is a reconciliation of the activity in the note payable to
shareholder account for the six months ended June 30, 1997:

<TABLE>
<S> <C> <C>
Balance, beginning of period......................... $4,725,405
Principal reductions............................... (1,238,414)
----------
----------
Balance, end of period............................... $3,486,991
----------
----------
</TABLE>

The note payable to shareholder is due on demand. At June 30, 1997, the
interest rate in the note payable to shareholder was 9.75% per annum.

Compensation paid to the Company's sole shareholder during the six-month
periods ended June 30, 1997 and 1996 was approximately $120,000 and $116,000,
respectively.

Related companies participate with the Company in its employee benefit
programs; costs associated with the related companies are reimbursed to the
Company. (See Note I).

NOTE C--CONCENTRATION OF CREDIT RISK

Financial instruments that potentially subject the Company to credit risk
consist principally of trade receivables. The Company sells primarily to
customers in Texas and Colorado.

F-60
<PAGE>
JEH COMPANY, INC.
NOTES TO FINANCIAL STATEMENTS (CONTINUED)

SIX MONTHS ENDED JUNE 30, 1997 AND UNAUDITED JUNE 30, 1996

NOTE C--CONCENTRATION OF CREDIT RISK (CONTINUED)
A summary of these transactions for the six-month period ended June 30, 1997
is as follows:

<TABLE>
<S> <C>
TOTAL SALES:
Texas.......................................................... $17,895,853
Colorado....................................................... 9,161,018
Indiana........................................................ 1,888,289
Virginia....................................................... 33,525
----------
$28,978,685
----------
----------
ACCOUNTS RECEIVABLE--NET:
Texas.......................................................... $5,625,048
Colorado....................................................... 4,501,130
Indiana........................................................ 660,470
Virginia....................................................... 33,525
----------
10,820,173
Less: Related party............................................ (138,654)
Less: Allowance for doubtful accounts.......................... (2,554,056)
----------
$8,127,463
----------
----------
</TABLE>

NOTE D--FIXED ASSETS

Fixed assets, which are stated at cost, at June 30, 1997 consist of the
following:

<TABLE>
<CAPTION>
ESTIMATED
USEFUL
LIVES
----------------
<S> <C> <C>
Transportation equipment.................................... $ 2,994,473 5 to 7 years
Furniture & fixtures........................................ 140,716 5 to 7 years
Leasehold improvements...................................... 578,991 5 to 31.5 years
Equipment................................................... 996,755 5 to 10 years
-------------
4,710,935
Less: Accumulated depreciation.............................. (2,596,412)
-------------
$ 2,114,523
-------------
-------------
</TABLE>

F-61
<PAGE>
JEH COMPANY, INC.
NOTES TO FINANCIAL STATEMENTS (CONTINUED)

SIX MONTHS ENDED JUNE 30, 1997 AND UNAUDITED JUNE 30, 1996

NOTE E--OTHER ASSETS

The Company's other assets at June 30, 1997 consist of the following:

<TABLE>
<S> <C>
Cash surrender value of life insurance.......................... $ 808,400
Notes receivable................................................ 189,252
Deposits and prepayments........................................ 31,996
---------
$1,029,648
---------
---------
</TABLE>

The above Cash Surrender Value of Insurance represents the cash value of
several insurance policies carried on the life of the Company's shareholder. The
combined face values of the policies are $10,064,007 of which the Company is the
owner and primary beneficiary.

NOTE F--CAPITAL LEASES

Certain equipment is being held under a number of noncancelable capital
leases with terms ranging from thirty-six to sixty months. These assets are
stated on the balance sheet with equipment and amounted to $29,630. Accumulated
depreciation on these assets amounted to $27,157.

NOTE G--LONG-TERM DEBT

The Company's long-term debt at June 30, 1997 consists of the following:

<TABLE>
<S> <C>
$7,500,000 revolving line of credit to bank, secured by
inventory and accounts receivable; interest payable at 8.25%
per annum; matures in June, 1997, repaid on July 8, 1997...... $7,500,000
Equipment note payable to bank, payable monthly with interest at
9.5% per annum through July, 1997; collateralized by
equipment..................................................... 323,149
Equipment note payable to bank, payable monthly with interest at
9% per annum through July, 1999; collateralized by
equipment..................................................... 366,659
Equipment note payable to bank, payable monthly with interest at
7% per annum through July, 1997; collateralized by
equipment..................................................... 260,834
---------
8,450,642
Less: Current portion........................................... 8,450,642
---------
Long-term portion............................................... $ --
---------
---------
</TABLE>

NOTE H--LEASE COMMITMENTS

The Company leases certain office and warehouse facilities under
noncancelable operating leases which expire on various dates through 2002. Total
rent expense to unrelated third parties for the six-month

F-62
<PAGE>
JEH COMPANY, INC.
NOTES TO FINANCIAL STATEMENTS (CONTINUED)

SIX MONTHS ENDED JUNE 30, 1997 AND UNAUDITED JUNE 30, 1996

NOTE H--LEASE COMMITMENTS (CONTINUED)
periods ended June 30, 1997 and 1996 was approximately $106,000 and $175,000,
respectively. Future minimum annual rentals are as follows:

<TABLE>
<CAPTION>
YEAR ENDING DECEMBER 31,
- ----------------------------------------------------------------------------------
<S> <C>
1997.......................................................................... $ 269,000
1998.......................................................................... 134,000
1999.......................................................................... 67,000
2001.......................................................................... 67,000
2002.......................................................................... 17,000
----------
$ 554,000
----------
----------
</TABLE>

NOTE I--DEFINED CONTRIBUTION PLAN

Employees of the Company are eligible to be participants in the retirement
plan of JEH Company, Inc. The plan is a non-qualified defined contribution plan
to which the Company contributes an amount equal to 50% of the employee's
contribution up to a total company contribution of $50 per month on after tax
basis. The Company contributed approximately $3,900 and $4,100 in 1997 and 1996,
respectively.

NOTE J--SUBSEQUENT EVENT

In early July 1997, the Company sold its roofing business including most of
its operating assets in exchange for $14,850,000 and the buyer assumed most of
its trade payables and accrued liabilities. A summary of the transaction, which
was effective as of July 1, 1997, is as follows:

<TABLE>
<S> <C> <C>
Total operating assets sold........................ $20,771,000
Debt assumed by purchaser.......................... (8,816,000)
----------
Net assets sold.................................. $11,955,000
----------
----------
Sale price
Cash............................................. $13,850,000
Five-year note................................... 1,000,000
----------
$14,850,000
----------
----------
</TABLE>

In connection with the closing of this transaction, the Company repaid its
notes payable and capital lease obligations to other than related parties
(approximately $8,560,000).

NOTE K--ALLOWANCE FOR DOUBTFUL ACCOUNTS

<TABLE>
<CAPTION>
BALANCE AT
PERIOD ENDED BEGINNING RECOVERIES/ BALANCE AT
JUNE 30, OF PERIOD PROVISION (WRITE-OFFS) END OF PERIOD
- --------------- ---------- ------------ ----------- -------------
<S> <C> <C> <C> <C>
1996........... $ 181,336 $ 328,060 $ 8,634 $ 518,030
1997........... $ 321,718 $ 2,383,218 $ (150,880) $ 2,554,056
</TABLE>

F-63
<PAGE>
JEH COMPANY, INC.
NOTES TO FINANCIAL STATEMENTS (CONTINUED)

SIX MONTHS ENDED JUNE 30, 1997 AND UNAUDITED JUNE 30, 1996

NOTE K--ALLOWANCE FOR DOUBTFUL ACCOUNTS (CONTINUED)
Management of the Company has historically based its provision for doubtful
accounts on an evaluation of levels of its trade accounts receivable, the ageing
and collection history of such receivables, and the business conditions in each
market area in which the Company operates. In establishing its estimates of the
level of the provision for doubtful accounts required for each reporting period,
management also estimates the value of the collateral and/or the personal
guarantees received from certain customers with past-due balances. The majority
of the allowance for doubtful accounts relates to specific customers with
past-due balances. During the latter part of calendar 1996, certain customer
accounts began to age, and the Company began to experience more difficulty in
collecting its receivables. Accordingly, the Company increased its provision for
doubtful accounts and related allowance for doubtful accounts to $844,235 and
$321,718, respectively, in calendar 1996 from $344,372 and $181,336,
respectively, in 1995. Additionally, write-offs of its customer accounts
increased to $703,853 in 1996 from $334,372 in 1995. The Company realized
increased revenues from its customers in 1996 from business related to storms in
certain of its market areas; however, no such storms occurred in the spring of
1997 in any of the Company's market areas. As a result, the business of certain
of the Company's customers slowed dramatically and receivables continued to
deteriorate. As a result of the foregoing circumstances which changed during the
six-month period ended June 30, 1997 as compared to the latter part of calendar
1996, the level and age of certain customers' accounts had worsened
significantly from prior periods, and other customers who have historically been
current began to pay late and their accounts began to age as well. Accordingly,
management performed a critical assessment of the quality of its receivables and
current business conditions and determined that an increase in the allowance for
doubtful accounts of $2,383,218 at June 30, 1997 was appropriate.

*****

F-64
<PAGE>
INDEPENDENT AUDITORS' REPORT

To the Board of Directors and Shareholder of
JEH Company, Inc.

We have audited the accompanying balance sheet of JEH Company, Inc. (a Texas
corporation) as of December 31, 1996, and the related statements of operations
and retained earnings and cash flows for each of the two years in the period
ended December 31, 1996. These financial statements are the responsibility of
the Company's management. Our responsibility is to express an opinion on these
financial statements based on our audits.

In our opinion, the financial statements referred to above present fairly,
in all material respects, the financial position of JEH Company, Inc. as of
December 31, 1996, and the results of its operations and its cash flows for each
of the two years in the period ended December 31, 1996 in conformity with
generally accepted accounting principles.

Waters, Murray & Associates
August 20, 1997
Mansfield, Texas

F-65
<PAGE>
JEH COMPANY, INC.

BALANCE SHEET

DECEMBER 31, 1996

<TABLE>
<S> <C>
ASSETS
CURRENT ASSETS
Cash and cash equivalents.................................................... $ 197,943
Accounts receivable-trade, net of allowance for doubtful accounts of $321,718
(Notes C and G)............................................................ 9,128,164
Accounts receivable--related party (Note B).................................. 130,002
Inventories (Notes A and G).................................................. 8,008,969
Other receivables............................................................ 42,359
----------
Total current assets....................................................... 17,507,437

FIXED ASSETS--NET OF ACCUMULATED DEPRECIATION (NOTES A,D, F AND G)............. 1,982,610

OTHER ASSETS (NOTE E).......................................................... 972,993
----------
TOTAL ASSETS................................................................... $20,463,040
----------
----------
LIABILITIES & SHAREHOLDER'S EQUITY
CURRENT LIABILITIES
Accounts payable............................................................. $8,114,195
Accrued expenses............................................................. 912,071
Current portion of long-term debt (Note G)................................... 4,380,179
Obligation under capital leases-current portion (Note F)..................... 9,942
----------
Total current liabilities.................................................. 13,416,387
----------
LONG-TERM LIABILITIES
Long-term debt less current portion (Note G)................................. 375,856
Obligation under capital leases (Note F)..................................... 6,075
Note payable to shareholder (Note B)......................................... 4,725,405
----------
Total long-term liabilities................................................ 5,107,336
----------
TOTAL LIABILITIES.............................................................. 18,523,723
----------
COMMITMENTS AND CONTINGENCIES (NOTE H)

SHAREHOLDER'S EQUITY
Common shares, $1 par value, 100,000 shares authorized, 1,000 issued and
outstanding................................................................ 1,000
Additional paid in capital................................................... 126,967
Retained earnings............................................................ 1,811,350
----------
Total shareholder's equity................................................... 1,939,317
----------
TOTAL LIABILITIES & SHAREHOLDER'S EQUITY....................................... $20,463,040
----------
----------
</TABLE>

See accompanying notes and auditor's report

F-66
<PAGE>
JEH COMPANY, INC.

STATEMENTS OF OPERATIONS AND RETAINED EARNINGS

YEARS ENDED DECEMBER 31, 1996 AND 1995

<TABLE>
<CAPTION>
1996 1995
------------- -------------
<S> <C> <C>
NET SALES.......................................................................... $ 74,893,485 $ 73,821,881
COST OF SALES...................................................................... 59,142,964 57,422,141
------------- -------------
Gross profit..................................................................... 15,750,521 16,399,740
SELLING, GENERAL AND ADMINISTRATIVE EXPENSES....................................... 14,818,402 15,984,277
------------- -------------
Income from operations........................................................... 932,119 415,463
------------- -------------
OTHER INCOME (EXPENSE)
Interest income.................................................................. 5,218 11,049
Interest expense................................................................. (766,448) (549,681)
------------- -------------
(761,230) (538,632)
------------- -------------
Net income (loss)................................................................ 170,889 (123,169)
RETAINED EARNINGS:
At beginning of year............................................................. 1,640,461 1,763,630
------------- -------------
At end of year................................................................... $ 1,811,350 $ 1,640,461
------------- -------------
------------- -------------
</TABLE>

See accompanying notes and auditor's report

F-67
<PAGE>
JEH COMPANY, INC.

STATEMENTS OF CASH FLOWS

YEARS ENDED DECEMBER 31, 1996 AND 1995

<TABLE>
<CAPTION>
1996 1995
-------------- --------------
<S> <C> <C>
CASH FLOWS FROM OPERATING ACTIVITIES:
Net income (loss)............................................................... $ 170,889 $ (123,169)
Adjustments to reconcile net income (loss) to cash used in operating activities:
Depreciation and amortization................................................. 613,169 642,595
Gain on sale of assets........................................................ (32,968) (35,913)
Changes in assets and liabilities
Accounts receivable......................................................... (1,924,680) (1,554,563)
Inventory................................................................... (856,580) (1,640,702)
Accounts payable and accrued expenses....................................... 1,681,862 (108,235)
Other assets................................................................ 292,269 (59,733)
Related party receivable.................................................... 3,474 135,178
-------------- --------------
Total adjustments........................................................... (223,454) (2,621,373)
-------------- --------------
Net cash used in operating activities......................................... (52,565) (2,744,542)
-------------- --------------

CASH FLOWS FROM INVESTING ACTIVITIES:
Capital expenditures............................................................ (155,803) (575,982)
Proceeds from sale of assets.................................................... 127,936 114,250
Decrease in notes receivable-related party...................................... -- 523,137
-------------- --------------
Net cash (used in) provided by investing activities........................... (27,867) 61,405
-------------- --------------

CASH FLOWS FROM FINANCING ACTIVITIES:
Principal borrowings on long-term debt.......................................... 38,970,564 29,252,866
Principal reductions on long-term debt.......................................... (39,813,917) (28,298,968)
Principal reductions on capital leases.......................................... (19,019) (44,537)
Principal reductions on note payable to shareholder............................. (3,095,847) (3,084,854)
Borrowings under note payable to shareholder.................................... 3,198,365 5,412,180
-------------- --------------
Net cash (used in) provided by financing activities........................... (759,854) 3,236,687
-------------- --------------

NET (DECREASE) INCREASE IN CASH AND CASH EQUIVALENTS.............................. (840,286) 553,550

CASH AND CASH EQUIVALENTS, BEGINNING OF YEAR...................................... 1,038,229 484,679

CASH AND CASH EQUIVALENTS, END OF YEAR............................................ $ 197,943 $ 1,038,229
-------------- --------------
-------------- --------------

SUPPLEMENTAL INFORMATION:
Cash paid for interest expense.................................................. $ 766,448 $ 549,681
-------------- --------------
-------------- --------------
</TABLE>

See accompanying notes and auditor's report

F-68
<PAGE>
JEH COMPANY, INC.

NOTES TO FINANCIAL STATEMENTS

YEARS ENDED DECEMBER 31, 1996 AND 1995

NOTE A--SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES

ORGANIZATION

The Company, a Texas corporation, was incorporated in May 1982. The Company
is engaged primarily in the sale of building materials to roofing contractors.
The Company's home office and primary outlet is in Mansfield, Texas, with other
locations in Texas, Colorado, Virginia, Indiana and Iowa. In 1995, the Company
also had locations in Oklahoma and Kansas. The accompanying financial statements
are prepared utilizing the accrual method of accounting whereby revenue is
recognized when earned and expenses are recognized when incurred.

CASH AND CASH EQUIVALENTS

For the purposes of the statement of cash flows, the Company considers all
highly liquid instruments purchased with a maturity of three months or less to
be cash equivalents.

INVENTORIES

Inventories, which consist primarily of roofing materials, are stated at the
lower of cost or market. Cost is determined using the first-in, first-out (FIFO)
method.

FAIR VALUE OF FINANCIAL INSTRUMENTS

CASH AND CASH EQUIVALENTS, ACCOUNTS RECEIVABLE, ACCOUNTS PAYABLE AND ACCRUED
EXPENSES--The carrying amounts of these items are a reasonable estimate of their
fair value.

The fair value estimates presented herein are based on pertinent information
available to management as of December 31, 1996. Although management is not
aware of any factors that would significantly affect the estimated fair value
amounts, such amounts have not been comprehensively revalued for

F-69
<PAGE>
JEH COMPANY, INC.

NOTES TO FINANCIAL STATEMENTS (CONTINUED)

YEARS ENDED DECEMBER 31, 1996 AND 1995

NOTE A--SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (CONTINUED)
purposes of these financial statements since that date, and current estimates of
fair value may differ significantly from the amounts presented herein.

FIXED ASSETS

INCOME TAXES

USE OF ESTIMATES

RECLASSIFICATIONS

Certain amounts for the year ended December 31, 1995 have been reclassified
to conform to the December 31, 1996 presentation. The reclassifications have no
effect on the results of operations for the year ended December 31, 1995.

NOTE B--RELATED PARTY TRANSACTIONS

The Company leases its office facilities in Mansfield, Frisco, Mesquite and
Colleyville, Texas, and in Colorado Springs and Henderson, Colorado, from the
Company's shareholder. No long-term lease agreements exist for these sites.
Facility rent paid during each of the years ended December 31, 1996 and 1995
amounted to approximately $428,000 and $331,000, respectively.

The Company's financial statements include all costs of doing business.

The Company transacts business with other companies, which are either owned
by the Company's shareholder, or owned by relatives of the Company's
shareholder.

F-70
<PAGE>
JEH COMPANY, INC.

NOTES TO FINANCIAL STATEMENTS (CONTINUED)

YEARS ENDED DECEMBER 31, 1996 AND 1995

NOTE B--RELATED PARTY TRANSACTIONS (CONTINUED)
A summary of these transactions in each of the years ended December 31, 1996
and 1995 is as follows:

<TABLE>
<CAPTION>
RELATED
YEAR ENDED DECEMBER 31, TOTAL SALES RECEIVABLES
- ------------------------------------------------------------------- ------------ -----------
<S> <C> <C>
1996............................................................... $ 992,565 $ 130,002
------------ -----------
------------ -----------
1995............................................................... $ 1,627,855 $ 133,476
------------ -----------
------------ -----------
</TABLE>

The following is a reconciliation of the activity in the note payable to
shareholder account for the year ended December 31, 1996:

<TABLE>
<S> <C>
Balance, beginning of year...................................... $4,622,887
Principal borrowings.......................................... 3,198,365
Principal reductions.......................................... (3,095,847)
---------
Balance, end of year............................................ $4,725,405
---------
---------
</TABLE>

The note payable to shareholder is due on demand. At December 31, 1996, the
interest rate in the note payable to shareholder was 9.75% per annum.

Compensation paid to the Company's sole shareholder during each of the years
ended December 31, 1996 and 1995 was approximately $2,330,000 and $3,988,000,
respectively. Such compensation included a base salary plus a discretionary
bonus.

Related companies participate with the Company in its employee benefit
programs; costs associated with the related companies are reimbursed to the
Company. (See Note I).

NOTE C--CONCENTRATION OF CREDIT RISK

Financial instruments that potentially subject the Company to credit risk
consist principally of trade receivables. The Company sells primarily to
customers in Texas and Colorado.

A summary of these transactions for each of the years ended December 31,
1996 and 1995 is as follows:

<TABLE>
<CAPTION>
1996 1995
------------- -------------
<S> <C> <C>
TOTAL SALES:
Texas.............................................................................. $ 50,972,325 $ 57,104,971
Colorado........................................................................... 20,433,490 16,716,910
Indiana............................................................................ 3,487,670 --
Oklahoma & Kansas.................................................................. -- --
------------- -------------
$ 74,893,485 $ 73,821,881
------------- -------------
------------- -------------
</TABLE>

F-71
<PAGE>
JEH COMPANY, INC.

NOTES TO FINANCIAL STATEMENTS (CONTINUED)

YEARS ENDED DECEMBER 31, 1996 AND 1995

NOTE C--CONCENTRATION OF CREDIT RISK (CONTINUED)

<TABLE>
<CAPTION>
1996
------------
<S> <C>
ACCOUNTS RECEIVABLE--NET:
Texas............................................................................................... $ 4,895,660
Colorado............................................................................................ 4,414,432
Indiana............................................................................................. 269,792
Oklahoma & Kansas................................................................................... --
------------
$ 9,579,884
Less: Related party................................................................................. (130,002)
Less: Allowance for doubtful accounts............................................................... (321,718)
------------
$ 9,128,164
------------
------------
</TABLE>

NOTE D--FIXED ASSETS

Fixed assets, which are stated at cost, consist of the following:

<TABLE>
<CAPTION>
ESTIMATED
USEFUL
LIVES
------------
<S> <C> <C>
Transportation equipment..................................... $ 2,648,369 5 to 7 years
Furniture & fixtures......................................... 132,003 5 to 7 years
Leasehold improvements....................................... 578,991 5 to 31.5 years
Equipment.................................................... 977,005 5 to 10 years
------------
4,336,368
Less: Accumulated depreciation............................... (2,353,758)
------------
$ 1,982,610
------------
------------
</TABLE>

NOTE E--OTHER ASSETS

The Company's other assets consist of the following:

<TABLE>
<S> <C>
Cash surrender value of life insurance............................ $ 725,647
Note receivable................................................... 212,940
Deposits and prepayments.......................................... 34,406
---------
$ 972,993
---------
---------
</TABLE>

F-72
<PAGE>
JEH COMPANY, INC.

NOTES TO FINANCIAL STATEMENTS (CONTINUED)

YEARS ENDED DECEMBER 31, 1996 AND 1995

NOTE F--CAPITAL LEASES

Certain equipment is being held under a number of noncancelable capital
leases with terms ranging from thirty-six to sixty months. These assets are
stated on the balance sheet with equipment and amounted to $126,252. Accumulated
depreciation on these assets amounted to $95,570.

The following is a schedule by years of future minimum lease payments under
capital leases together with the present value of the net minimum lease
payments:

<TABLE>
<CAPTION>
YEAR ENDING DECEMBER 31,
- -----------------------------------------------------------------------------------
<S> <C>
1997............................................................................. $ 10,620
1998............................................................................. 6,075
---------
Total lease payments............................................................... 16,695
Less amount representing interest.................................................. 678
---------
Present value of future minimum lease payments..................................... $ 16,017
---------
---------
</TABLE>

This amount is stated on the balance sheet as follows:

<TABLE>
<S> <C>
Obligations under capital leases................................... $ 16,017
Less: Current portion.............................................. (9,942)
---------
Long-term portion.................................................. $ 6,075
---------
---------
</TABLE>

NOTE G--LONG-TERM DEBT

The Company's long-term debt consist of the following:

<TABLE>
<S> <C> <C>
$6,000,000 revolving line of credit to bank, secured
by inventory and accounts receivable; interest
payable at 8.25% per annum; matures in June,
1997............................................... $3,970,618 $4,300,000
Equipment note payable to bank, payable monthly with
interest at 9.5% per annum through June, 1999;
collateralized by equipment........................ 403,274 553,309
Equipment note payable to bank, payable monthly with
interest at 7% per annum through June, 1998;
collateralized by equipment........................ 382,143 617,467
Other note payable................................... -- 8,551
--------- ---------
4,756,035 5,479,327
Less: Current portion................................ 4,380,179 5,091,985
--------- ---------
Long-term portion.................................... $ 375,856 $ 387,342
--------- ---------
--------- ---------
</TABLE>

F-73
<PAGE>
JEH COMPANY, INC.

NOTES TO FINANCIAL STATEMENTS (CONTINUED)

YEARS ENDED DECEMBER 31, 1996 AND 1995

NOTE G--LONG-TERM DEBT (CONTINUED)
Aggregate maturities under this debt for the years subsequent to December 31,
1996, are as follows:

NOTE H--LEASE COMMITMENTS

The Company leases certain office and warehouse facilities under
noncancelable operating leases, which expire on various dates through 2002.
Total rent expense to unrelated third parties for the years ended 1996 and 1995
was approximately $189,000 and $207,000, respectively. Future minimum annual
rentals are as follows:

<TABLE>
<CAPTION>
YEAR ENDING DECEMBER 31,
- ----------------------------------------------------------------------------------
<S> <C>
1997.............................................................................. $ 275,000
1998.............................................................................. 269,000
1999.............................................................................. 135,000
2000.............................................................................. 67,000
2001.............................................................................. 67,000
2002.............................................................................. 17,000
----------
$ 830,000
----------
----------
</TABLE>

NOTE I--DEFINED CONTRIBUTION PLAN

NOTE J--SUBSEQUENT EVENT

In early July 1997, the Company sold its roofing business including most of
its operating assets in exchange for $14,850,000 and the buyer assumed most of
its trade payables and accrued liabilities.

F-74
<PAGE>
JEH COMPANY, INC.

NOTES TO FINANCIAL STATEMENTS (CONTINUED)

YEARS ENDED DECEMBER 31, 1996 AND 1995

NOTE J--SUBSEQUENT EVENT (CONTINUED)
A summary of the transaction, which was effective as of July 1, 1997, is as
follows:

In connection with the closing of this transaction, the Company repaid its
notes payable and capital lease obligations to other than related parties
(approximately $8,560,000).

NOTE K--ALLOWANCE FOR DOUBTFUL ACCOUNTS

<TABLE>
<CAPTION>
BALANCE AT
YEAR ENDED BEGINNING BALANCE AT
DECEMBER 31, OF YEAR PROVISION WRITE-OFFS END OF YEAR
- --------------- ---------- ---------- ----------- -----------
<S> <C> <C> <C> <C>
1995........ $ 181,336 $ 334,732 $ (334,732) $ 181,336
---------- ---------- ----------- -----------
---------- ---------- ----------- -----------
1996........ $ 181,336 $ 844,235 $ (703,853) $ 321,718
---------- ---------- ----------- -----------
---------- ---------- ----------- -----------
</TABLE>

*****

F-75
<PAGE>
INDEPENDENT AUDITOR'S REPORT

To the Board of Directors and Shareholder of
Masonry Supply, Inc.

We have audited the accompanying balance sheet of Masonry Supply, Inc. (a Texas
corporation) as of October 21, 1998 and the related statements of operations and
retained earnings and cash flows for the period from July 1, 1998 through
October 21, 1998. These financial statements are the responsibility of the
Company's management. Our responsibility is to express an opinion on these
financial statements based on our audit.

In our opinion, the financial statements referred to above present fairly, in
all material respects, the financial position of Masonry Supply, Inc. as of
October 21, 1998, and the results of its operations and its cash flows for the
period from July 1, 1998 through October 21, 1998 in conformity with generally
accepted accounting principles.

Waters, Murray & Associates
December 10, 1998
Mansfield, Texas

F-76
<PAGE>
MASONRY SUPPLY, INC.

BALANCE SHEET

OCTOBER 21, 1998

<TABLE>
<S> <C>
ASSETS
CURRENT ASSETS
Cash and cash equivalents..................................................... $ 480,160
Accounts receivable-trade, net of allowance for doubtful accounts of $107,388
(Notes C, F and K).......................................................... 1,514,052
Inventories (Notes A and F)................................................... 1,402,341
Other receivables............................................................. 5,250
Prepaid expenses.............................................................. 96,437
---------
Total current assets........................................................ 3,498,240

FIXED ASSETS--NET OF ACCUMULATED DEPRECIATION (NOTES A, D, E AND F)............. 693,444

EXCESS COST OF INVESTMENT OVER NET ASSETS ACQUIRED (NET OF AMORTIZATION)........ 90,018
---------
TOTAL ASSETS.................................................................... $4,281,702
---------
---------

LIABILITIES AND SHAREHOLDER'S EQUITY
CURRENT LIABILITIES
Accounts payable (Note B)..................................................... $ 726,600
Accrued expenses.............................................................. 137,993
Obligation under capital lease-current portion (Note E)....................... 6,045
---------
Total current liabilities................................................... 870,638

LONG-TERM LIABILITIES (NOTE E AND F)............................................ 14,790
---------

TOTAL LIABILITIES............................................................... 885,428
---------

COMMITMENTS AND CONTINGENCIES (NOTES G AND H)

SHAREHOLDER'S EQUITY
Common shares, no par value, 10,000 shares authorized, 1,000 issued and
outstanding................................................................. 1,000
Retained earnings............................................................. 3,395,274
---------
Total shareholder's equity.................................................. 3,396,274
---------

TOTAL LIABILITIES & SHAREHOLDER'S EQUITY........................................ $4,281,702
---------
---------
</TABLE>

See accompanying notes and auditor's report

F-77
<PAGE>
MASONRY SUPPLY, INC.
STATEMENTS OF OPERATIONS AND RETAINED EARNINGS

FOR THE PERIODS FROM JULY 1, 1998 THROUGH OCTOBER 21, 1998 AND
UNAUDITED JULY 1, 1997 THROUGH OCTOBER 31, 1997

<TABLE>
<CAPTION>
1998 1997
------------ ------------
<S> <C> <C>
NET SALES............................................................................. $ 3,976,794 $ 4,156,116
COST OF SALES......................................................................... 2,375,820 2,619,523
------------ ------------
1,600,974 1,536,593
OPERATING EXPENSES (INCLUDING A PROVISION FOR DOUBTFUL ACCOUNTS OF $39,507 AND $36,506
FOR 1998 AND 1997, RESPECTIVELY).................................................... 979,797 998,689
------------ ------------
Income from operations.............................................................. 621,177 537,904
------------ ------------
OTHER EXPENSE
Loss from sale of assets............................................................ 9,588 --
Interest expense.................................................................... 10,629 15,634
------------ ------------
20,217 15,634
------------ ------------
Net income.......................................................................... 600,960 522,270
RETAINED EARNINGS:
Beginning of period................................................................. 2,794,314 1,944,095
------------ ------------
End of period....................................................................... $ 3,395,274 $ 2,466,365
------------ ------------
------------ ------------
</TABLE>

See accompanying notes and auditor's report

F-78
<PAGE>
MASONRY SUPPLY, INC.
STATEMENTS OF CASH FLOWS

FOR THE PERIODS JULY 1, 1998 THROUGH OCTOBER 21, 1998 AND
UNAUDITED JULY 1, 1997 THROUGH OCTOBER 31, 1997

<TABLE>
<CAPTION>
1998 1997
----------- -----------
<S> <C> <C>
CASH FLOWS FROM OPERATING ACTIVITIES:
Net income............................................................................ $ 600,960 $ 522,270
Adjustments to reconcile net income to cash provided by operating activities:
Depreciation and amortization..................................................... 43,078 36,396
Loss on sale of assets............................................................ 9,589 --
Changes in assets and liabilities
Accounts receivable............................................................. 97,622 (203,925)
Inventory....................................................................... (99,676) 146,530
Other assets.................................................................... (28,827) 30,400
Accounts payable and accrued expenses........................................... (344,071) 76,432
----------- -----------
Net cash provided by operating activities....................................... 278,675 608,103
----------- -----------
CASH FLOWS FROM INVESTING ACTIVITIES:
Capital expenditures.................................................................. (16,345) (47,765)
----------- -----------
Net cash used in investing activities........................................... (16,345) (47,765)
----------- -----------
CASH FLOWS FROM FINANCING ACTIVITIES:
Principal reductions on long-term debt................................................ (400,000) (43,306)
Principal reductions on capital lease................................................. (2,050) --
----------- -----------
Net cash used in financing activities........................................... (402,050) (43,306)
----------- -----------
NET (DECREASE) INCREASE IN CASH AND CASH EQUIVALENTS.................................... (139,720) 517,032
CASH AND CASH EQUIVALENTS, BEGINNING OF PERIOD.......................................... 619,880 112,353
----------- -----------
CASH AND CASH EQUIVALENTS, END OF PERIOD................................................ $ 480,160 $ 629,385
----------- -----------
----------- -----------
SUPPLEMENTAL INFORMATION:
Cash paid for interest expense........................................................ $ 10,629 $ 15,634
----------- -----------
----------- -----------
</TABLE>

See accompanying notes and auditor's report

F-79
<PAGE>
MASONRY SUPPLY, INC.
NOTES TO FINANCIAL STATEMENTS

FOR THE PERIODS JULY 1, 1998 THROUGH OCTOBER 21, 1998
AND UNAUDITED JULY 1, 1997 THROUGH OCTOBER 31, 1997

NOTE A--SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES

This summary of significant accounting policies of Masonry Supply, Inc. (the
"Company"), is presented to assist in understanding the Company's financial
statements. The financial statements and notes are representations of the
Company's management, who is responsible for their integrity and objectivity.
These accounting policies conform to generally accepted accounting principles
and have been consistently applied in the preparation of the financial
statements.

ORGANIZATION

The Company, a Texas corporation, was incorporated in April 1979. The
Company is engaged primarily in the sale of masonry materials to building
contractors. The Company's headquarters and primary outlet is in Mansfield,
Texas, with other locations in Plano, Texas, Mesquite, Texas and Southlake,
Texas.

CASH AND CASH EQUIVALENTS

For the purposes of the statement of cash flows, the Company considers all
highly liquid instruments purchased with a maturity of three months or less to
be cash equivalents.

INVENTORIES

Inventories, which consist primarily of masonry materials, are stated at the
lower of cost or market. Cost is determined using the average cost method.

FAIR VALUE OF FINANCIAL INSTRUMENTS

The following disclosure of the estimated fair value of financial
instruments is made in accordance with the requirements of Statement of
Financial Accounting Standards No. 107, "Disclosures About Fair Value of
Financial Instruments." The estimated fair value amounts have been determined by
the Company, using available market information and appropriate valuation
methodologies. However, considerable judgement is required in interpreting
market data to develop the estimates of fair value. Accordingly, the estimates
presented herein are not necessarily indicative of the amounts that the Company
could realize in a current market exchange. The use of different market
assumptions and/or estimation methodologies may have a material effect on the
estimated fair value amounts.

CASH AND CASH EQUIVALENTS, ACCOUNTS RECEIVABLE, ACCOUNTS PAYABLE AND ACCRUED
EXPENSES--The carrying amounts of these items are a reasonable estimate of their
fair value.

The fair value estimates herein are based on pertinent information available
to management as of October 21, 1998. Although management is not aware of any
factors that would significantly affect the estimated fair value amounts, such
amounts have not been comprehensively revalued for purposes of these financial
statements since that date, and current estimates of fair value may differ
significantly from the amounts presented herein.

F-80
<PAGE>
MASONRY SUPPLY, INC.
NOTES TO FINANCIAL STATEMENTS (CONTINUED)

FOR THE PERIODS JULY 1, 1998 THROUGH OCTOBER 21, 1998
AND UNAUDITED JULY 1, 1997 THROUGH OCTOBER 31, 1997

NOTE A--SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (CONTINUED)
FIXED ASSETS

EXCESS COST OF INVESTMENT OVER NET ASSETS ACQUIRED ("GOODWILL")

Goodwill is being amortized over 40 years using the straight-line method.
Capitalized lease costs are being amortized on the straight-line basis over the
four-year lease term.

INCOME TAXES

In March, 1989, the Company elected to be taxed under the provisions of
Subchapter S of the Internal Revenue Code. Accordingly, the Company does not pay
Federal corporate income taxes on its taxable income. Instead, the Company's
shareholder is liable for individual income taxes on the Company's taxable
income. Although the income recognition timing differences originating before
attaining S corporation status will reverse, they will not generate a tax
liability at the Company level so long as S corporation status is maintained.

USE OF ESTIMATES

NOTE B--RELATED PARTY TRANSACTIONS

The Company leases its office facilities, showroom and warehouse in
Mansfield, Texas from the Company's shareholder on a month-to-month basis. No
long-term lease agreement exists for this site. Facility rent paid during both
periods presented amounted to approximately $55,700 per year.

There are no amounts due to shareholder at October 21, 1998.

Compensation paid to the Company's shareholder during each of the periods
presented was approximately $177,600 and $157,800 in 1998 and 1997,
respectively.

NOTE C--CONCENTRATION OF CREDIT RISK

The Company maintains its cash balances at several financial institutions.
At times, cash balances and high quality money market instruments in the
Company's accounts may exceed federally insured limits. Financial instruments
that potentially subject the Company to credit risk consist principally of trade
receivables. The Company sells primarily to customers in North Central Texas.

F-81
<PAGE>
MASONRY SUPPLY, INC.
NOTES TO FINANCIAL STATEMENTS (CONTINUED)

FOR THE PERIODS JULY 1, 1998 THROUGH OCTOBER 21, 1998
AND UNAUDITED JULY 1, 1997 THROUGH OCTOBER 31, 1997

NOTE D--FIXED ASSETS

Fixed assets, which are stated at cost, at consist of the following:

<TABLE>
<CAPTION>
ESTIMATED
USEFUL
LIVES
---------------
<S> <C> <C>
Transportation equipment.......................................................... $ 907,303 3 to 7 years
Furniture & fixtures.............................................................. 233,284 5 to 10 years
Leasehold improvements............................................................ 60,958 5 years
Machinery & equipment............................................................. 553,763 5 to 15 years
-------------
1,755,308
Less: Accumulated depreciation.................................................... (1,061,864)
-------------
$ 693,444
-------------
-------------
</TABLE>

NOTE E--CAPITAL LEASES

Certain equipment is being held under a noncancelable capital lease with a
remaining term of 35 months at October 21, 1998. This asset is included in
equipment and amounted to $26,931 at October 21, 1998. Accumulated depreciation
on this asset amounted to $6,421 at October 21, 1998. The following is a
schedule by years of future minimum lease payments under capital leases together
with the present value of the net minimum lease payments:

<TABLE>
<CAPTION>
YEAR ENDING
JUNE 30,
------------
<S> <C>
1999............................................................................. $ 5,677
2000............................................................................. 8,677
2001............................................................................. 8,677
2002............................................................................. 2,169
---------
Total lease payments............................................................... 25,200
Less: Amount representing interest............................................... (4,365)
---------
Present value of future minimum lease payments................................... $ 20,835
---------
---------
</TABLE>

This amount is stated on the balance sheet as follows:

<TABLE>
<S> <C>
Obligations uunder capital lease................................. $ 20,835
Less: Current portion............................................ (6,045)
---------
Long-term portion................................................ $ 14,790
---------
---------
</TABLE>

F-82
<PAGE>
MASONRY SUPPLY, INC.
NOTES TO FINANCIAL STATEMENTS (CONTINUED)

FOR THE PERIODS JULY 1, 1998 THROUGH OCTOBER 21, 1998
AND UNAUDITED JULY 1, 1997 THROUGH OCTOBER 31, 1997

NOTE F--LONG-TERM DEBT

The Company's long-term debt consists of the following:

$1,000,000 revolving line of credit to bank, secured by inventory and
accounts receivable; interest payable at Prime plus .25 (currrently 8.75%);
matures in June 1999. The Line of Credit was withdrawn on October 21, 1998.

NOTE G--LEASE COMMITMENTS

The Company leases certain office and warehouse facilities from unrelated
third parties under noncancelable operating leases that expire on various dates
through 2002. Total rent expense to unrelated third parties for the periods
presented was approximately $37,500 and $45,300 in 1998 and 1997, respectively.
Future minimum annual rentals are as follows:

<TABLE>
<CAPTION>
YEAR ENDED JUNE 30,
- ----------------------------------------------------------------------------------
<S> <C>
1999.......................................................................... $ 97,000
2000.......................................................................... 60,000
2001.......................................................................... 46,000
2002.......................................................................... 19,000
----------
$ 222,000
----------
----------
</TABLE>

NOTE H--DEFINED CONTRIBUTION PLAN

Employees of the Company are eligible to participate in the Company's
retirement plan. The plan is a qualified defined contribution plan to which the
Company can contribute a percentage of each employee's compensation up to the
maximum tax-deductible amount. For the periods presented, the Company
contributed approximately $21,300 and $31,000 in 1998 and 1997, respectively.

NOTE I--SUBSEQUENT EVENT

On October 22, 1998, the Company sold its masonry business, including most
of its operating assets, in exchange for $8,000,000 and the buyer's assumption
of most of its liabilities.

A summary of the transaction, which was effective as of July 1, 1998, is as
follows:

<TABLE>
<S> <C> <C>
Total operating assets sold......................... $4,400,827
Debt assumed by purchaser........................... (1,612,249)
----------
Net assets sold................................... $2,788,578
----------
----------
Sale price
Cash.............................................. $6,000,000
Promissory note................................... 2,000,000
---------
$8,000,000
----------
----------
</TABLE>

F-83
<PAGE>
MASONRY SUPPLY, INC.
NOTES TO FINANCIAL STATEMENTS (CONTINUED)

FOR THE PERIODS JULY 1, 1998 THROUGH OCTOBER 21, 1998
AND UNAUDITED JULY 1, 1997 THROUGH OCTOBER 31, 1997

NOTE J--ACQUISITION

In May 1997, the Company acquired certain assets and assumed certain
liabilities of a privately held masonry supply business in Mesquite, Texas. The
acquisition was recorded as a purchase and, accordingly, results of operations
of the acquired entity are included in the accompanying statements of
operations. The purchase price was cash of $51,416 and a note for the remaining
balance of $50,000. The transaction gave rise to approximately $100,416 of
goodwill which is being amortized over a forty-year period.

NOTE K--ALLOWANCE FOR DOUBTFUL ACCOUNTS

<TABLE>
<CAPTION>
BALANCE AT
BALANCE AT OCTOBER 21,
JUNE 30, 1998 PROVISION WRITE-OFFS 1998
- ------------- ----------- ---------- ---------------
<S> <C> <C> <C>
$ 80,302 $ 39,507 $ (12,421) $ 107,388
- ------------- ----------- ---------- ---------------
</TABLE>

* * * * *

F-84
<PAGE>
INDEPENDENT AUDITOR'S REPORT

To the Board of Directors and Shareholder of
Masonry Supply, Inc.

We have audited the accompanying balance sheets of Masonry Supply, Inc. (a Texas
corporation) as of June 30, 1998 and 1997, and the related statements of
operations and retained earnings and cash flows for each of the three years in
the period ended June 30, 1998. These financial statements are the
responsibility of the Company's management. Our responsibility is to express an
opinion on these financial statements based on our audit.

In our opinion, the financial statements referred to above present fairly, in
all material respects, the financial position of Masonry Supply, Inc. as of June
30, 1998 and 1997, and the results of its operations and its cash flows for each
of the three years in the period ended June 30, 1998 in conformity with
generally accepted accounting principles.

Waters, Murray & Associates
September 25, 1998
Mansfield, Texas

F-85
<PAGE>
MASONRY SUPPLY, INC.

BALANCE SHEETS

JUNE 30, 1998 AND 1997

<TABLE>
<CAPTION>
1998 1997
------------ ------------
<S> <C> <C>
ASSETS
CURRENT ASSETS
Cash and cash equivalents........................................................... $ 619,880 $ 112,353
Accounts receivable-trade, net of allowance for doubtful accounts of $80,302 in
1998, and $128,086 in 1997 (Notes C, F and K)..................................... 1,615,863 1,219,605
Inventories (Notes A and F)......................................................... 1,302,665 1,272,730
Other receivables................................................................... 1,061 3,569
Prepaid expenses.................................................................... 67,610 102,536
------------ ------------
Total current assets.............................................................. 3,607,079 2,710,793
FIXED ASSETS--NET OF ACCUMULATED DEPRECIATION (NOTES A, D, E AND F)................... 727,178 817,249

EXCESS COST OF INVESTMENT OVER NET ASSETS ACQUIRED (NET OF AMORTIZATION).............. 92,606 100,966
------------ ------------
TOTAL ASSETS.......................................................................... $ 4,426,863 $ 3,629,008
------------ ------------
------------ ------------
LIABILITIES AND SHAREHOLDER'S EQUITY
CURRENT LIABILITIES
Accounts payable (Note B)........................................................... $ 952,720 $ 991,555
Accrued expenses.................................................................... 255,944 140,114
Current portion of long-term debt (Note F).......................................... 400,000 552,244
Obligation under capital lease-current portion (Note E)............................. 6,045 --
------------ ------------
Total current liabilities......................................................... 1,614,709 1,683,913

LONG-TERM LIABILITIES (NOTES E AND F)................................................. 16,840 --
------------ ------------

TOTAL LIABILITIES..................................................................... 1,631,549 1,683,913
------------ ------------
COMMITMENTS AND CONTINGENCIES (NOTES G AND H)

SHAREHOLDER'S EQUITY
Common shares, no par value, 10,000 shares authorized, 1,000 issued and outstanding 1,000 1,000
Retained earnings................................................................... 2,794,314 1,944,095
------------ ------------
Total shareholder's equity........................................................ 2,795,314 1,945,095
------------ ------------

TOTAL LIABILITIES & SHAREHOLDER'S EQUITY.............................................. $ 4,426,863 $ 3,629,008
------------ ------------
------------ ------------
</TABLE>

See accompanying notes and auditor's report

F-86
<PAGE>
MASONRY SUPPLY, INC.

STATEMENTS OF OPERATIONS AND RETAINED EARNINGS

FOR THE YEARS ENDED JUNE 30, 1998, 1997 AND 1996

<TABLE>
<CAPTION>
1998 1997 1996
------------- ------------ ------------
<S> <C> <C> <C>
NET SALES............................................................. $ 11,960,092 $ 9,101,396 $ 8,441,473
COST OF SALES......................................................... 7,374,319 5,559,856 5,181,174
------------- ------------ ------------
4,585,773 3,541,540 3,260,299
OPERATING EXPENSES (INCLUDING A PROVISION FOR DOUBTFUL ACCOUNTS OF
$109,519, $122,136 AND $50,161 FOR 1998, 1997 AND 1996,
RESPECTIVELY)....................................................... 3,572,243 2,976,883 2,680,578
------------- ------------ ------------
Income from operations.............................................. 1,013,530 564,657 579,721
------------- ------------ ------------
OTHER INCOME (EXPENSE)
Miscellaneous....................................................... (323) 12,659 23,613
Loss from sale of assets............................................ (7,037) (59,691) --
Interest expense.................................................... (43,053) (30,789) (45,358)
------------- ------------ ------------
(50,413) (77,821) (21,745)
------------- ------------ ------------
Net income.......................................................... 963,117 486,836 557,976

RETAINED EARNINGS:
Beginning of year................................................... 1,944,095 1,674,070 1,541,094
Distributions to shareholder........................................ (112,898) (216,811) (425,000)
------------- ------------ ------------
End of year......................................................... $ 2,794,314 $ 1,944,095 $ 1,674,070
------------- ------------ ------------
------------- ------------ ------------
</TABLE>

See accompanying notes and auditor's report

F-87
<PAGE>
MASONRY SUPPLY, INC.

STATEMENTS OF CASH FLOWS

YEARS ENDED JUNE 30, 1998, 1997 AND 1996

<TABLE>
<CAPTION>
1998 1997 1996
----------- ----------- -----------
<S> <C> <C> <C>
CASH FLOWS FROM OPERATING ACTIVITIES:
Net income............................................................... $ 963,117 $ 486,836 $ 557,976
Adjustments to reconcile net income to cash provided by operating
activities:
Depreciation and amortization.......................................... 187,557 154,599 161,115
Loss on sale of assets................................................. 7,037 59,691 --
Changes in assets and liabilities
Accounts receivable.................................................. (393,751) (71,938) (212,368)
Inventory............................................................ (29,935) (185,335) (87,948)
Other assets......................................................... 35,476 (79,593) 3,522
Accounts payable and accrued expenses................................ 76,996 260,612 269,333
----------- ----------- -----------
Net cash provided by operating activities............................ 846,497 624,872 691,630
----------- ----------- -----------
CASH FLOWS FROM INVESTING ACTIVITIES:
Capital expenditures..................................................... (106,272) (402,916) (296,646)
Goodwill on business acquisition......................................... -- (100,416) --
Proceeds from sale of assets............................................. 9,559 63,030 --
----------- ----------- -----------
Net cash used in investing activities................................ (96,713) (440,302) (296,646)
----------- ----------- -----------
CASH FLOWS FROM FINANCING ACTIVITIES:
Principal borrowings on long-term debt................................... 400,000 600,000 286,731
Principal borrowings on capital lease.................................... 26,931 -- --
Principal reductions on long-term debt................................... (552,244) (516,544) (229,872)
Principal reductions on capital lease.................................... (4,045) -- --
Distributions to shareholder............................................. (112,898) (216,811) (425,000)
----------- ----------- -----------
Net cash used in financing activities................................ (242,256) (133,355) (368,141)
----------- ----------- -----------
NET INCREASE IN CASH AND CASH EQUIVALENTS.................................. 507,528 51,215 26,843
CASH AND CASH EQUIVALENTS, BEGINNING OF YEAR............................... 112,353 61,138 34,295
----------- ----------- -----------
CASH AND CASH EQUIVALENTS, END OF YEAR..................................... $ 619,881 $ 112,353 $ 61,138
----------- ----------- -----------
----------- ----------- -----------
SUPPLEMENTAL INFORMATION:
Cash paid for interest expense........................................... $ 39,456 $ 30,005 $ 46,089
----------- ----------- -----------
----------- ----------- -----------
</TABLE>

See accompanying notes and auditor's report

F-88
<PAGE>
MASONRY SUPPLY, INC.

NOTES TO FINANCIAL STATEMENTS

FOR THE YEARS ENDED JUNE 30, 1998, 1997 AND 1996

NOTE A--SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES

ORGANIZATION

CASH AND CASH EQUIVALENTS

For the purposes of the statement of cash flows, the Company considers all
highly liquid instruments purchased with a maturity of three months or less to
be cash equivalents.

INVENTORIES

Inventories, which consist primarily of masonry materials, are stated at the
lower of cost or market. Cost is determined using the average cost method.

FAIR VALUE OF FINANCIAL INSTRUMENTS

The following disclosure of the estimated fair value of financial
instruments is made in accordance with the requirements of Statement of
Financial Accounting Standards No. 107, "Disclosures About Fair Value of
Financial Instruments". The estimated fair value amounts have been determined by
the company, using available market information and appropriate valuation
methodologies. However, considerable judgement is required in interpreting
market data to develop the estimates of fair value. Accordingly, the estimates
presented herein are not necessarily indicative of the amounts that the Company
could realize in a current market exchange. The use of different market
assumptions and/or estimation methodologies may have a material effect on the
estimated fair value amounts.

CASH AND CASH EQUIVALENTS, ACCOUNTS RECEIVABLE, ACCOUNTS PAYABLE AND ACCRUED
EXPENSES--The carrying amounts of these items are a reasonable estimate of their
fair value.

The fair value estimates herein are based on pertinent information available
to management as of June 30, 1998. Although management is not aware of any
factors that would significantly affect the estimated fair value amounts, such
amounts have not been comprehensively revalued for purposes of these financial
statements since that date, and current estimates of fair value may differ
significantly from the amounts presented herein.

F-89
<PAGE>
MASONRY SUPPLY, INC.

NOTES TO FINANCIAL STATEMENTS (CONTINUED)

FOR THE YEARS ENDED JUNE 30, 1998, 1997 AND 1996

NOTE A--SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (CONTINUED)
FIXED ASSETS

AMORTIZATION

Goodwill is being amortized over 40 years using the straight-line method.
Capitalized lease costs are being amortized on the straight-line basis over the
four-year lease term.

INCOME TAXES

In March, 1989, the Company elected to be taxed under the provisions of
Subchapter S of the Internal Revenue Code. Accordingly, the Company does not pay
Federal corporate income taxes on its taxable income. Instead, the shareholder
is liable for individual income taxes on the Company's taxable income. Although
the income recognition timing differences originating before attaining S
corporation status will reverse, they will not generate a tax liability at the
Company level so long as S corporation status is maintained.

USE OF ESTIMATES

NOTE B--RELATED PARTY TRANSACTIONS

The Company leases its office facilities in Mansfield, Texas from the
Company's shareholder on a month-to-month basis. No long-term lease agreements
exist for these sites. Facility rent paid during each of the three years ended
June 30, 1998 amounted to approximately $192,000 per year.

The Company transacts business with another company owned by the Company's
shareholder. A summary of these transactions in each of the three years ended
June 30, 1998 is as follows:

<TABLE>
<CAPTION>
TOTAL RELATED
YEAR ENDED JUNE 30, PURCHASES PAYABLES
------------------ -------------- ---------------
<S> <C> <C>
1998.................................................... $ 387,000 $ --
-------------- -------
-------------- -------
1997.................................................... $ 452,000 $ 52,138
-------------- -------
-------------- -------
1996.................................................... $ 304,000 $ 50,007
-------------- -------
-------------- -------
</TABLE>

There are no amounts due to shareholder at June 30, 1998 and 1997,
respectively.

F-90
<PAGE>
MASONRY SUPPLY, INC.

NOTES TO FINANCIAL STATEMENTS (CONTINUED)

FOR THE YEARS ENDED JUNE 30, 1998, 1997 AND 1996

NOTE B--RELATED PARTY TRANSACTIONS (CONTINUED)
Compensation paid to the Company's shareholder during each of the years
ended June 30, 1998, 1997, and 1996 was approximately $725,000, $522,000, and
$472,000, respectively. Such compensation included a base salary plus a
discretionary bonus.

NOTE C--CONCENTRATION OF CREDIT RISK

NOTE D--FIXED ASSETS

Fixed assets, which are stated at cost consist of the following:

<TABLE>
<CAPTION>
ESTIMATED
USEFUL
1998 1997 LIVES
------------- ------------- ---------------
<S> <C> <C> <C>
Transportation equipment........................................... $ 952,202 $ 981,121 3 to 7 years
Furniture & fixtures............................................... 232,920 214,873 5 to 10 years
Leasehold improvements............................................. 47,339 47,339 5 years
Machinery & equipment.............................................. 602,704 577,310 5 to 15 years
------------- ------------- ---------------
1,835,165 1,820,643
Less: Accumulated depreciation..................................... (1,107,987) (1,003,394)
------------- -------------
$ 727,178 $ 817,249
------------- -------------
------------- -------------
</TABLE>

NOTE E--CAPITAL LEASES

Certain equipment is being held under a noncancelable capital lease with a
remaining term of 39 months at June 30, 1998. This asset is included in
equipment and amounted to $26,931 in 1998. Accumulated depreciation on this
asset amounted to $5,050 in 1998. The following is a schedule by years of future
minimum lease payments under the capital lease together with the present value
of the net minimum lease payments:

<TABLE>
<CAPTION>
YEAR ENDING
JUNE 30, 1998
------------ ---------
<S> <C>
1999........................................................................... $ 8,677
2000........................................................................... 8,677
2001........................................................................... 8,677
2002........................................................................... 2,169
---------
Total lease payments............................................................... 28,200
Less: Amount representing interest............................................... (5,315)
---------
Present value of future minimum lease payments................................... $ 22,885
---------
---------
</TABLE>

F-91
<PAGE>
MASONRY SUPPLY, INC.

NOTES TO FINANCIAL STATEMENTS (CONTINUED)

FOR THE YEARS ENDED JUNE 30, 1998, 1997 AND 1996

NOTE E--CAPITAL LEASES (CONTINUED)
This amount is stated on the balance sheet as follows:

<TABLE>
<S> <C>
Obligations under capital lease.................................... $ 22,885
Less: Current portion.............................................. (6,045)
---------
Long-term portion.................................................. $ 16,840
---------
---------
</TABLE>

NOTE F--LONG-TERM DEBT

The Company's long-term debt consists of the following:

<TABLE>
<CAPTION>
1998 1997
---------- ----------
<S> <C> <C>
$1,000,000 revolving line of credit to bank, secured by inventory and accounts receivable;
interest payable at Prime plus .25 (currrently 8.75%); matures in June, 1999............ $ 400,000 $ 400,000
Equipment notes payable to banks, payable monthly with interest at rates from 7.75% to
8.50% through June, 1998; collateralized by equipment................................... -- 152,244
---------- ----------
400,000 552,244
Less: Current portion..................................................................... 400,000 552,244
---------- ----------
Long-term portion......................................................................... $ -- $ --
---------- ----------
---------- ----------
</TABLE>

NOTE G--LEASE COMMITMENTS

The Company leases certain office and warehouse facilities from unrelated
third parties under noncancelable operating leases that expire on various dates
through 2002. Total rent expense to unrelated third parties for the years ended
1998, 1997, and 1996 was approximately $106,000, $77,000, and $36,000,
respectively. Future minimum annual rentals are as follows:

<TABLE>
<CAPTION>
YEAR ENDED JUNE 30,
---------------------
<S> <C>
1999........................................................................ $ 97,000
2000........................................................................ 60,000
2001........................................................................ 46,000
2002........................................................................ 19,000
----------
$ 222,000
----------
----------
</TABLE>

NOTE H--DEFINED CONTRIBUTION PLAN

Employees of the Company are eligible to participate in the Company's
retirement plan. The plan is a qualified defined contribution plan to which the
Company can contribute a percentage of each employee's compensation up to the
maximum tax-deductible amount. The Company contributed approximately $124,000,
$126,000 and $91,500 in 1998, 1997 and 1996, respectively.

F-92
<PAGE>
MASONRY SUPPLY, INC.

NOTES TO FINANCIAL STATEMENTS (CONTINUED)

FOR THE YEARS ENDED JUNE 30, 1998, 1997 AND 1996

NOTE I--SUBSEQUENT EVENT

On October 22, 1998, the Company sold its masonry business, including most
of its operating assets, in exchange for $8,296,000 and the buyer's assumption
of most of its liabilities.

A summary of the transaction, which was effective as of July 1, 1998, is as
follows:

<TABLE>
<S> <C> <C>
Total operating assets sold......................... $4,400,827
Debt assumed by purchaser........................... (1,612,249)
----------
Net assets sold................................... $2,788,578
----------
----------
Sale price
Cash.............................................. $6,000,000
Five-year note.................................... 2,296,000
---------
$8,296,000
----------
----------
</TABLE>

NOTE J--ACQUISITION

In May 1997, the Company acquired certain assets and assumed certain
liabilities of a privately held masonry supply business in Mesquite, Texas. The
acquisition was recorded as a purchase and accordingly, results of operations of
the acquired entity are included in the accompanying statements of operations.
The purchase price was cash of $51,416 and a note for the remaining balance of
$50,000. The transaction gave rise to approximately $100,416 of goodwill which
is being amortized over a forty-year period.

NOTE K--ALLOWANCE FOR DOUBTFUL ACCOUNTS

<TABLE>
<CAPTION>
BALANCE AT
YEAR ENDING BEGINNING BALANCE AT
JUNE 30, OF YEAR PROVISION WRITE-OFFS END OF YEAR
- ----------- ---------- ---------- ----------- -----------
<S> <C> <C> <C> <C>
1996 $ 103,626 $ 50,161 $ (59,987) $ 93,800
---------- ---------- ----------- -----------
---------- ---------- ----------- -----------
1997 $ 93,800 $ 122,136 $ (87,850) $ 128,086
---------- ---------- ----------- -----------
---------- ---------- ----------- -----------
1998 $ 128,086 $ 109,519 $ (157,303) $ 80,302
---------- ---------- ----------- -----------
---------- ---------- ----------- -----------
</TABLE>

* * * * *

F-93
<PAGE>
MSI/EAGLE SUPPLY, INC.
(A WHOLLY-OWNED SUBSIDIARY OF TDA INDUSTRIES, INC.)

UNAUDITED BALANCE SHEET

OCTOBER 31, 1998

<TABLE>
<S> <C>
ASSETS
CURRENT ASSETS:
Cash.......................................................................... $ 171,339
Accounts receivable--trade (net of allowance for doubtful accounts of $4,000)
(Note 4).................................................................... 1,544,292
Inventories (Note 4).......................................................... 1,180,861
Deferred tax asset............................................................ 1,000
Other current assets.......................................................... 108,930
---------
Total current assets........................................................ 3,006,422
IMPROVEMENTS AND EQUIPMENT (net of accumulated depreciation and amortization)
(Note 3)...................................................................... 665,823
EXCESS COST OF INVESTMENT OVER NET ASSETS ACQUIRED (net of accumulated
amortization)................................................................. 5,486,126
DEFERRED FINANCING COSTS........................................................ 109,686
---------
$9,268,057
---------
---------

LIABILITIES AND SHAREHOLDER'S EQUITY
CURRENT LIABILITIES:
Accounts payable.............................................................. $ 754,022
Accrued expenses and other current liabilities................................ 414,877
Current portion of long-term debt (Note 4).................................... 1,270,542
Due to related party (Note 2)................................................. 250,000
Federal and state income taxes due to Parent.................................. 24,000
---------
Total current liabilities................................................... 2,713,441

LONG-TERM DEBT (Note 4)......................................................... 5,281,756
DUE TO PARENT................................................................... 233,318
---------
Total liabilities........................................................... 8,228,515
---------

COMMITMENTS AND CONTINGENCIES (Notes 6 and 7)

SHAREHOLDER'S EQUITY:
Common shares, $.01 par value per share, 3,000 shares authorized, issued and
outstanding................................................................. 30
Additional paid-in capital.................................................... 999,970
Retained earnings............................................................. 39,542
---------
Total shareholder's equity.................................................. 1,039,542
---------
$9,268,057
---------
---------
</TABLE>

See notes to unaudited financial statements.

F-94
<PAGE>
MSI/EAGLE SUPPLY, INC.
(A WHOLLY-OWNED SUBSIDIARY OF TDA INDUSTRIES, INC.)

UNAUDITED STATEMENT OF OPERATIONS AND RETAINED EARNINGS

FOR THE PERIOD OCTOBER 22, 1998 TO OCTOBER 31, 1998

<TABLE>
<S> <C>
REVENUES.......................................................................... $ 364,684

COST OF SALES..................................................................... 209,124
---------
155,560
---------
OPERATING EXPENSES (including a provision for doubtful accounts of $3,565)........ 68,706
DEPRECIATION...................................................................... 4,858
AMORTIZATION OF EXCESS COST OF INVESTMENT OVER NET ASSETS ACQUIRED................ 3,764
AMORTIZATION OF DEFERRED FINANCING COSTS.......................................... 604
---------
77,932
---------
INCOME FROM OPERATIONS............................................................ 77,628
INTEREST EXPENSE.................................................................. (14,086)
---------
INCOME BEFORE PROVISION FOR INCOME TAXES.......................................... 63,542
PROVISION FOR INCOME TAXES........................................................ 24,000
---------
NET INCOME AND RETAINED EARNINGS.................................................. $ 39,542
---------
---------
</TABLE>

See notes to unaudited financial statements.

F-95
<PAGE>
MSI/EAGLE SUPPLY, INC.
(A WHOLLY-OWNED SUBSIDIARY OF TDA INDUSTRIES, INC.)

UNAUDITED STATEMENT OF CASH FLOWS

FOR THE PERIOD OCTOBER 22, 1998 TO OCTOBER 31, 1998

<TABLE>
<S> <C>
CASH FLOWS FROM OPERATING ACTIVITIES:
Net income.................................................................... $ 39,542
Adjustments to reconcile net income to net cash provided by operating
activities:
Depreciation and amortization............................................... 9,226
Deferred income taxes....................................................... (1,000)
Increase in allowance for doubtful accounts................................. 3,565
Changes in operating assets and liabilities:
Increase in accounts receivable........................................... (33,805)
Decrease in inventories................................................... 221,480
Increase in other current assets.......................................... (11,493)
Increase in accounts payable.............................................. 27,422
Increase in accrued expenses and other current liabilities................ 35,932
Increase in federal and state income taxes due to Parent.................. 24,000
----------
Net cash provided by operating activities............................... 314,869
----------
CASH FLOWS FROM INVESTING ACTIVITIES:
Capital expenditures.......................................................... (684)
Payment for purchase of net assets from Masonry Supply, Inc. (See below and
Note 2)..................................................................... (1,519,840)
----------
Net cash used in investing activities................................... (1,520,524)
----------
CASH FLOWS FROM FINANCING ACTIVITIES:
Principal borrowings on long-term debt........................................ 89,994
Principal reductions on long-term debt........................................ (713,000)
Note payable--Parent.......................................................... 1,000,000
Capital contribution from Parent.............................................. 1,000,000
----------
Net cash provided by financing activities............................... 1,376,994
----------
NET INCREASE IN CASH............................................................ 171,339
CASH, BEGINNING OF PERIOD....................................................... --
----------
CASH, END OF PERIOD............................................................. $ 171,339
----------
SUPPLEMENTAL DISCLOSURE OF NONCASH INVESTING ACTIVITIES:
Acquisition of Masonry Supply, Inc.:
Fair value of assets acquired............................................... $9,284,007
Liabilities assumed......................................................... (1,359,698)
Note issued to seller....................................................... (2,045,972)
Due to related party........................................................ (250,000)
Bank debt incurred.......................................................... (4,108,497)
----------
Cash paid..................................................................... $1,519,840
----------
----------
</TABLE>

See notes to unaudited financial statements.

F-96
<PAGE>
MSI/EAGLE SUPPLY, INC.
(A WHOLLY-OWNED SUBSIDIARY OF TDA INDUSTRIES, INC.)

NOTES TO UNAUDITED FINANCIAL STATEMENTS

FOR THE PERIOD OCTOBER 22, 1998 TO OCTOBER 31, 1998

1. BASIS OF FINANCIAL STATEMENT PRESENTATION AND SIGNIFICANT ACCOUNTING POLICIES

The financial statements of MSI/Eagle Supply, Inc. (the "Company"), a
wholly-owned subsidiary of TDA Industries, Inc. ("TDA" or the "Parent") 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 financial statements, to the best of management's knowledge and belief,
were prepared in accordance with generally accepted accounting principles.
Operating results for the interim period are not necessarily indicative of
results for the entire year.

In October 1998, the Company was formed for the purpose of acquiring the
assets and business of Masonry Supply, Inc. ("MSI Co." or the "Predecessor").
The Company received an initial capital contribution from TDA of $1,000,000 and
a loan from TDA in the principal amount of $1,000,000 (Note 4).

BUSINESS DESCRIPTION--The Company is engaged in the wholesale distribution
of masonry supplies and related products utilized primarily in the construction
industry in Texas. 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 first-in, first-out (FIFO) method.

EXCESS COST OF INVESTMENT OVER NET ASSETS ACQUIRED--Excess cost of
investment over net assets acquired ("goodwill") is being amortized on a
straight-line method over 40 years. Management of TDA has adopted a 40 year
amortization period based on its experience operating other companies in the
same industry segment, a review of the amortization periods adopted by other
companies in the same industry segment and the belief that the excess purchase
price will be recovered over the 40 year period through profitable operations.
Management evaluates the on-going value and future benefits of goodwill based
upon expectations of future non discounted cash flows. Should management
determine that impairment has occurred, goodwill would be reduced by the excess,
if any, of the carrying value of goodwill over management's estimate of the
anticipated non discounted future net cash flows.

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.

F-97
<PAGE>
MSI/EAGLE SUPPLY, INC.
(A WHOLLY-OWNED SUBSIDIARY OF TDA INDUSTRIES, INC.)

NOTES TO UNAUDITED FINANCIAL STATEMENTS (CONTINUED)

FOR THE PERIOD OCTOBER 22, 1998 TO OCTOBER 31, 1998

1. BASIS OF FINANCIAL STATEMENT PRESENTATION AND SIGNIFICANT ACCOUNTING POLICIES
(CONTINUED)
FAIR VALUE OF FINANCIAL INSTRUMENTS--The following disclosure of the
estimated fair value of financial instruments is made in accordance with the
requirements of Statement of Financial Accounting Standards No. 107, DISCLOSURES
ABOUT FAIR VALUE OF FINANCIAL INSTRUMENTS. The estimated fair value amounts have
been determined by the Company using available market information and
appropriate valuation methodologies. However, considerable judgment is required
in interpreting market data to develop the estimates of fair value. Accordingly,
the estimates presented herein are not necessarily indicative of the amounts
that the Company could realize in a current market exchange. The use of
different market assumptions and/or estimation methodologies may have a material
effect on the estimated fair value amounts.

CASH, ACCOUNTS AND NOTES RECEIVABLE, ACCOUNTS PAYABLE AND ACCRUED
EXPENSES--The carrying amounts of these items are a reasonable estimate of their
fair value.

The fair value estimates presented herein are based on pertinent information
available to management as of October 31, 1998. Although management is not aware
of any factors that would significantly affect the estimated fair value amounts,
such amounts have not been comprehensively revalued for purposes of these
financial statements since that date, and current estimates of fair value may
differ significantly from the amounts presented herein.

2. ACQUISITION

On October 22, 1998, the Company acquired the business and substantially all
of the assets of Masonry Supply, Inc., engaged in the wholesale distribution of
masonry supplies and related products utilized primarily in the construction
industry. The purchase price, as adjusted, was $8,537,972 consisting of
$6,492,000 in cash and a five-year, 8% per annum note in the principal amount of
$2,045,972. The purchase price and the note are subject to further adjustment
under certain conditions. Further, the Company is obligated for potentially
substantial additional payments if, among other factors, the business of the
Company attains certain levels of income, as defined, during the five-year
period ending June 30, 2003. More specifically, MSI Co. or its designee is to
receive a percentage of the EBITA or the modified EBITA (as defined) of the
Company (the "MSI EBITA") on a per year, non-cumulative basis for each of the
Company's fiscal years ending on June 30 of 1999 through 2003 (the "Applicable
Period"). If the MSI

F-98
<PAGE>
MSI/EAGLE SUPPLY, INC.
(A WHOLLY-OWNED SUBSIDIARY OF TDA INDUSTRIES, INC.)

NOTES TO UNAUDITED FINANCIAL STATEMENTS (CONTINUED)

FOR THE PERIOD OCTOBER 22, 1998 TO OCTOBER 31, 1998

2. ACQUISITION (CONTINUED)
EBITA reaches $2,000,000 and $2,750,000 in the foregoing fiscal years, MSI Co.
or its designee is to receive 25% and 35%, respectively, of that fiscal year's
MSI EBITA in excess of those levels, respectively. Additionally, if the Offering
described in Note 7 is consummated prior to October 22, 2003 and in the event
certain MSI EBITA levels are reached for the Company, MSI Co. or its designee
will be entitled to receive (i) $1,000,000 or (ii) $750,000 (either in cash or
in common shares of Eagle Supply Group, Inc. valued at the public offering
price) if the MSI EBITA level is (i) not less than $2,000,000 per year or (ii)
less than $2,000,000 but not less than $1,500,000, respectively. Eagle Supply
Group, Inc. will issue 200,000 of its common shares and not pay the foregoing
amounts to MSI Co. or its designee, even if the MSI EBITA does not reach the
required levels.

The foregoing transaction was accounted for as a purchase and, accordingly,
the results of the operations acquired from MSI Co. have been included in the
statement of operations from the date of the acquisition. This transaction gave
rise to approximately $5,490,000 of goodwill which is being amortized over a
forty-year period. Management of TDA has adopted a 40 year amortization period
based on its experience operating other companies in the same industry segment,
a review of the amortization periods adopted by other companies in the same
industry segment and the belief that the excess purchase price will be recovered
over the 40 year period through profitable operations. Any additional payments
to which MSI Co. or its designee will be entitled will be accounted for as
additional goodwill which will be amortized over the then remaining forty-year
period.

3. IMPROVEMENTS AND EQUIPMENT

The major classes of improvements and equipment are as follows:

<TABLE>
<CAPTION>
ESTIMATED
USEFUL LIVES
---------------
<S> <C> <C>
Automotive equipment............................................. $ 423,807 3 to 7 years
Furniture, fixtures and equipment................................ 268,202 5 to 15 years
Leasehold improvements........................................... 16,584 5 years
----------
708,593
Less: Accumulated depreciation and amortization.................. 42,770
----------
$ 665,823
----------
----------
</TABLE>

F-99
<PAGE>
MSI/EAGLE SUPPLY, INC.
(A WHOLLY-OWNED SUBSIDIARY OF TDA INDUSTRIES, INC.)

NOTES TO UNAUDITED FINANCIAL STATEMENTS (CONTINUED)

FOR THE PERIOD OCTOBER 22, 1998 TO OCTOBER 31, 1998

4. LONG-TERM DEBT

Long-term debt consists of the following:

<TABLE>
<S> <C>
Revolving credit loan (A).......................... $ 410,491
Term loan (A)...................................... 3,075,000
8% promissory note due October 2003 (Note 2) 2,045,972
Note payable--Parent (B)........................... 1,000,000
Capitalized equipment lease obligations (C)........ 20,835
---------
6,552,298
Less: Current portion of long-term debt............ 1,270,542
---------
$5,281,756
---------
---------
</TABLE>

- ------------------------

A) In order to finance the purchase of substantially all of the assets and
business of MSI Co. and to provide for working capital needs, the Company
entered into a loan agreement for a credit facility in the aggregate amount
of $9,075,000 which is collateralized by substantially all of the tangible
and intangible assets of the Company. The credit facility has an initial
maturity of October 22, 2003 and consists of a $3,075,000 term loan and the
balance in the form of a revolving credit loan. The term loan is payable in
83 equal monthly installments each in the amount of $37,000 and a final
payment of the then outstanding principal amount. The revolving credit loan
bears interest at the lender's prime rate, plus one-half percent, or at the
London interbank offered rate, plus two and one-half percent, at the option
of the Company. The term loan bears interest at the lender's prime rate,
plus one and one-half percent, or at the London interbank offered rate, plus
three and one-quarter percent, at the option of the Company. The credit
facility has been guaranteed by the Parent.

B) In October 1998, the Parent lent the Company $1,000,000 pursuant to a 6%
two-year note. The note is payable in full in October 2000, and the Parent
has agreed to defer the interest payable on the note until its maturity.

C) Future minimum lease payments for capitalized equipment lease obligations at
October 31, 1998 are as follows:

<TABLE>
<CAPTION>
YEAR ENDING JUNE 30, AMOUNT
- ------------------------------------------------------------------------- ---------
<S> <C>
1999..................................................................... $ 5,677
2000..................................................................... 8,677
2001..................................................................... 8,677
2002..................................................................... 2,169
---------
25,200
Less: Interest........................................................... 4,365
---------
Present value of net minimum payments.................................... $ 20,835
---------
---------
</TABLE>

F-100
<PAGE>
MSI/EAGLE SUPPLY, INC.
(A WHOLLY-OWNED SUBSIDIARY OF TDA INDUSTRIES, INC.)

NOTES TO UNAUDITED FINANCIAL STATEMENTS (CONTINUED)

FOR THE PERIOD OCTOBER 22, 1998 TO OCTOBER 31, 1998

4. LONG-TERM DEBT (CONTINUED)
The aggregate future maturities of long-term debt, excluding capitalized
equipment lease obligations, are as follows:

<TABLE>
<S> <C>
1999.................................................... $1,270,542
2000.................................................... 650,000
2001.................................................... 1,650,000
2002.................................................... 650,000
2003.................................................... 650,000
Thereafter.............................................. 1,681,756
---------
$6,552,298
---------
---------
</TABLE>

5. TRANSACTIONS WITH RELATED PARTIES

The Company leases its corporate offices, showroom and warehouse in
Mansfield, Texas, from the President of the Company pursuant to a three-year
written lease at an annual rent aggregating approximately $107,000.

6. COMMITMENTS AND CONTINGENCIES

The Company is committed to unrelated parties for long-term leases for
property, automotive and data processing equipment. The leases expire on various
dates through 2002. Certain of the leases for property include renewal options
and provide for the payment of taxes and other occupancy costs.

The approximate future minimum rental commitments under these leases are as
follows:

F-101
<PAGE>
MSI/EAGLE SUPPLY, INC.
(A WHOLLY-OWNED SUBSIDIARY OF TDA INDUSTRIES, INC.)

NOTES TO UNAUDITED FINANCIAL STATEMENTS (CONTINUED)

FOR THE PERIOD OCTOBER 22, 1998 TO OCTOBER 31, 1998

7. CONTEMPLATED TRANSACTION WITH RELATED PARTY

8. ALLOWANCE FOR DOUBTFUL ACCOUNTS

<TABLE>
<CAPTION>
BALANCE AT
BEGINNING (WRITEOFFS)/ BALANCE AT
OF PERIOD PROVISION RECOVERIES END OF PERIOD
- ------------- ----------- ----------- -------------
<S> <C> <C> <C>
$ -- $ 3,565 $ -- $ 3,565
----------- ----------- ------
----------- ----------- ------
</TABLE>

******

F-102
<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

<TABLE>
<CAPTION>
PAGE
---------
<S> <C>
Prospectus Summary.............................. 3
Risk Factors.................................... 11
Dilution........................................ 23
Use of Proceeds................................. 25
Capitalization.................................. 28
Unaudited Pro Forma Condensed Consolidated
Financial Statements.......................... 29
Selected Financial Information.................. 35
Management's Discussion and Analysis of
Financial Condition and Results of
Operations.................................... 38
The Acquisitions................................ 55
Business........................................ 61
Management...................................... 74
Principal Stockholders.......................... 83
Certain Transactions............................ 84
Description of Securities....................... 88
Shares Eligible for Future Sale................. 91
Underwriting.................................... 92
Selling Securityholders......................... 95
Legal Matters................................... 96
Experts......................................... 96
Additional Information.......................... 96
Index to Financial Statements................... F-1
</TABLE>

------------------------

UNTIL APRIL 6, 1999 (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.

2,500,000 SHARES OF
COMMON STOCK AND
2,500,000 REDEEMABLE
COMMON STOCK PURCHASE WARRANTS

---------------------

PROSPECTUS

---------------------

[LOGO]

7700 W. Camino Real
Boca Raton, Florida 33433
(561) 347-1200

Beverly Hills, California
Boston, Massachusetts
Brooklyn, New York
Buffalo, New York
Chicago, Illinois
Clearwater, Florida
Duluth, Georgia
West Boca Raton, Florida
Edison, New Jersey
Eureka Springs, Arkansas
Fort Lauderdale, Florida
Hasbrouck Heights, New Jersey
LaJolla, California
Naples, Florida
New York, New York
Orlando, Florida
Sarasota, Florida
Tampa, Florida

March 12, 1999

- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------