[EXHIBIT 4.2]
FIRST AMENDMENT
TO
WARRANT
FIRST AMENDMENT TO WARRANT (this "First Amendment") dated as of May
5, 2003 by and between EAGLE SUPPLY GROUP, INC., a Delaware corporation
(the "Company") and XXXXX X. XXXXXX, President of the Company (the
"Holder").
RECITALS
WHEREAS, the Company and the Holder entered into a Securities
Purchase Agreement, dated as of February 6, 2003 ("Securities Purchase
Agreement"), whereby the Company issued and sold to the Holder
1,000,000 shares of Common Stock and Warrants to purchase 1,000,000
shares of Common Stock for an aggregate purchase price of $1,000,000;
WHEREAS, in accordance with the terms of the Securities Purchase
Agreement the Company executed a Warrant No. 001 dated February 6,
2003 (the "Original Warrant"), which sets forth the terms, rights, and
privileges with respect to the Warrants;
WHEREAS, the Common Stock is listed on the Nasdaq SmallCap
Market;
WHEREAS, the parties hereto believed that the transactions
contemplated by the Securities Purchase Agreement and the Original
Warrant satisfied applicable Nasdaq rules and interpretations and did
not require prior stockholder approval, upon review of the Securities
Purchase Agreement and the Original Warrant Nasdaq determined that the
approval of the Company's stockholders is required prior to: (i) the
adjustment of the exercise price of the Warrants below 87.5 cents per
Warrant Share, and (ii) the Holder's exercise of the Warrants with
respect to Warrant Shares exceeding 811,090 Warrant Shares
(collectively, the "Nasdaq Shareholder Approval Proposals");
WHEREAS, as an inducement to the Holder to enter into this First
Amendment, the Company, the Holder, and TDA Industries, Inc., a New
York corporation ("TDA"), will enter into a First Amendment to
Securities Purchase Agreement of even date herewith pursuant to which
TDA has agreed to vote all shares of Common Stock held by TDA in favor
of the Nasdaq Shareholder Approval Proposals when a vote of the
Company's stockholders is solicited with respect to the approval of
the Nasdaq Shareholder Approval Proposals; and
WHEREAS, upon the recommendation of Nasdaq the Company and the
Holder now desire to amend the Original Warrant on the terms and
conditions set forth in the First Amendment (the Original Warrant, as
amended by this First Amendment, is referred to herein as this
"Warrant").
NOW, THEREFORE, in consideration of the above and mutual
representations, warranties, covenants, and agreements herein
contained, the parties hereby agree as follows:
1. Warrant Exercise Condition. Section 1(b) of the Original
Warrant is hereby amended by adding subsection "(i)" immediately
following the caption "Warrant Exercise" and by deleting the period at
the end of Section 1(b) and adding the following language at the end
thereof:
"; provided, however, that the purchase rights
represented by this Warrant may not be exercised with
respect to more than 811,090 Warrant Shares (as may be
adjusted pursuant to Section 5 of this Warrant)
without the approval of the holders of a majority of
the shares of Common Stock voting at a meeting at
which a quorum is present.
(ii) In the event that the Holder seeks to exercise
the Warrant with respect to more than 811,090 Warrant
Shares and the stockholders of the Company have not
prior thereto approved the Nasdaq Shareholder Approval
Proposals, then the Holder shall notify the Company of
this intention and, upon receipt thereof, the Company,
at its sole expense and cost, shall use its
commercially reasonable best efforts to submit the
matter to the Company's stockholders for their
approval of the exercise of the Warrant with respect
to more than 811,090 Warrant Shares as promptly as
reasonable practicable; provided, however, the
Company's obligation to do so shall terminate if and
when the stockholders of the Company fail to approve
the issuance and sale of more than 811,090 Warrant
Shares."
2. Stockholder Approval of Diluting Issuances.
The Original Warrant is hereby amended by adding a new
Section 5(d)(iv) as follows:
"(iv) Notwithstanding anything to the contrary herein,
if a Diluting Issue should take place which would
cause the Purchase Price to be reduced to an amount
less than the $0.875 (as may be adjusted pursuant to
Section 5 of this Warrant) ("Unqualified Purchase
Price") and the stockholders of the Company have not
prior thereto approved the Nasdaq Shareholder Approval
Proposals, then:
(A) the Purchase Price in effect immediately prior to
such Diluting Issue shall be deemed immediately after
such sale or issuance to be reduced to $0.875 (as may
be adjusted pursuant to Section 5 of this Warrant)
("Minimum Purchase Price"), subject to further
reduction to the Unqualified Purchase Price as
provided in Section 5.4(d)(iv)(B)(II);
(B) the Holder shall have ten business days following
receipt of the notice required by Section 6(b) of this
Warrant to give the Company notice of his election, at
his sole discretion, either (I) to accept as the
Purchase Price, the Minimum Purchase Price, in lieu of
the Unqualified Purchase Price, or (II) to demand the
Unqualified Purchase Price as the Purchase Price,
subject, however, to the approval of the Unqualified
Purchase Price by a majority of the shares of Common
Stock voting at a meeting at which a quorum is present
("Stockholder Approval"). In the event Stockholder
Approval is not received, the Purchase Price shall
revert back to the Minimum Purchase Price; provided,
however, that at all times the Purchase Price shall be
subject to further adjustment as provided in this
Section 5.
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(C) if the Holder gives the Company the notice
described in Section 5.4(d)(iv)(B)(II) and the
stockholders of the Company have not prior thereto
approved the Nasdaq Shareholder Approval Proposals,
the Company, at its sole expense and cost, shall use
its commercially reasonable best efforts to submit the
matter to the Company's stockholders for their
approval of the Unqualified Purchase Price as promptly
as reasonably practicable; provided, however, the
Company's obligation to do so shall terminate if and
when the stockholders of the Company fail to approve
the sale and issuance of Warrant Shares to the Holder
at a price per Warrant Share below the Minimum
Purchase Price; provided, further, however, that the
Holder may, in its sole discretion, at any time
following a request to seek Stockholder Approval, and
without payment of any costs incurred in connection
therewith, determine to terminate the solicitation of
such Stockholder Approval and to accept the Purchase
Price under Section 5(d)(iv)(B)(I) hereof.
2. Defined Terms. All terms that are capitalized herein, but
are not otherwise defined by this First Amendment shall have the
meaning ascribed to them in the Original Warrant.
3. Inconsistent Provisions. All provisions of the Original
Warrant that have not been amended by this First Amendment shall
remain in full force and effect. Notwithstanding the foregoing to the
contrary, to the extent that there is any inconsistency between the
provisions of the Original Warrant and this First Amendment, the
provisions of this First Amendment shall control and be binding.
4. Counterparts. This First Amendment may be executed in one
or more counterparts, all of which taken together shall constitute a
single instrument. Execution and delivery may be by facsimile
transmission.
5. Effective Date. Each of the parties hereto hereby agrees
that upon execution of this First Amendment the changes to the
Original Warrant contained herein shall be effective as of February 6,
2003.
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IN WITNESS WHEREOF, each of the parties hereto has caused this
First Amendment to be executed on its behalf.
THE COMPANY
EAGLE SUPPLY GROUP, INC.
a Delaware corporation
By: /s/ Xxxxxxx X. Xxxxxx
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Xxxxxxx X. Xxxxxx,
Chief Executive Officer
PURCHASER
Xxxxx X. Xxxxxx, Individually
/s/ Xxxxx X. Xxxxxx
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Xxxxx X. Xxxxxx