[EXHIBIT 4.1]
SECURITIES PURCHASE AGREEMENT
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SECURITIES PURCHASE AGREEMENT (the "Agreement") dated as of February
6, 2003 by and between EAGLE SUPPLY GROUP, INC., a Delaware corporation
(the "Company"), and XXXXX X. XXXXXX, President of the Company (the
"Purchaser").
WHEREAS, the Purchaser desires to purchase from the Company, and
the Company desires to sell to the Purchaser, certain shares of the
Company's common stock, $0.0001 par value per share ("Common Stock"),
and warrants to purchase additional shares of Common Stock in the
amount and at the exercise prices set forth herein and therein;
WHEREAS, as an inducement and as a condition to entering into
this Agreement, the Corporation has agreed to grant to the Purchasers
certain registration rights, as described more fully herein, with
respect to the Common Stock and the Common Stock issuable upon the
exercise of the warrants; and
WHEREAS, the disinterested directors serving on the board of
directors of the Company (the "Board of Directors") have determined
that it is in the best interests of the Company to enter into this
Agreement and the Warrant Agreement (defined below);
NOW, THEREFORE, in consideration of the foregoing, and of the
mutual representations, warranties, covenants, and agreements herein
contained, the parties hereto agree as follows:
1. Purchase and Sale of the Securities
1.1 Purchase and Sale of the Securities. On the basis
of the representations, warranties, covenants and agreements contained
in this Agreement, and subject to the terms and conditions of this
Agreement, the Company will sell and issue to the Purchaser, and the
Purchaser agrees to purchase from the Company (a) 1,000,000 shares of
Common Stock (the "Shares"), and (b) warrants (the "Warrants") to
purchase 1,000,000 shares of Common Stock from the Company at an
exercise price of $1.50 per share (the "Warrant Shares") at the
Closing (as defined in Section 2 of this Agreement) for an aggregate
purchase price of One Million Dollars ($1,000,000) (the "Purchase
Price"). The specific terms and conditions of the Warrants shall be
set forth in a separate Warrant Agreement (as may be amended,
restated, or modified from time to time, the "Warrant Agreement")
substantially in the form attached hereto as Exhibit A. For purposes
of this Agreement, the Shares and the Warrants are collectively
referred to herein as the "Securities."
1.2 Payment of Purchase Price and Delivery of
Certificates. At the Closing: (a) the Purchaser shall deliver the
Purchase Price to the Company by certified or bank cashier's check or
by wire transfer as specified by the Company in writing, and (b) the
Company shall deliver to the Purchaser a certificate or certificates
for the Securities, registered in the name of the Purchaser, free and
clear of all liens, encumbrances, and pledges ("Liens")(except that
the Securities and the Warrant Shares may be deemed to be "restricted
securities" as that term is defined by Rule 144 promulgated under the
Securities Act of 1933, as amended (the "Securities Act")).
2. The Closing. Subject to the satisfaction (or written
waiver) of the conditions set forth in Section 6 and Section 7 of this
Agreement, the closing (the "Closing") of the sale and purchase of the
Securities under this Agreement shall take place at the offices of
Xxxxxxx Xxxxxx, P.A., One Harbour Place, 000 Xxxxx Xxxxxxx Xxxxxx
Xxxxxxxxx, Xxxxx, Xxxxxxx, at 2:00 p.m. on February
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6, 2003 or at such other date, time, and place as shall be mutually
agreed upon by the parties. The date of the Closing is hereinafter
referred to as the "Closing Date."
3. Representations, Warranties, and Covenants of the
Purchaser. The Purchaser hereby represents, warrants, and covenants
to the Company as follows:
3.1 Investment Purpose. The Purchaser is acquiring
the Securities and the Warrant Shares solely for his own account, for
investment purposes only, and not with an intent or a view to the sale
or distribution of any part thereof within the meaning of Section
2(11) of the Securities Act. By executing this Agreement, the
Purchaser further represents that he does not have any present intent
of selling, granting any participation in, or otherwise distributing
the Securities or the Warrant Shares in a manner contrary to the
Securities Act or the securities laws of any other applicable
jurisdictions, nor does the Purchaser have any contract, undertaking,
agreement, or arrangement with any person to offer, sell, transfer,
pledge, hypothecate, or otherwise dispose of the Securities or Warrant
Shares ("Transfer"), or grant any participation to such person with
respect to any of the Securities or Warrant Shares.
3.2 Accredited Investors. The Purchaser: (a) is an
"Accredited Investor" as that term is defined in Rule 501 of
Regulation D promulgated under the Securities Act, (b) has adequate
means of providing for his current cash needs and possible personal
contingencies without regard to this investment, and has no need for
liquidity of his investment in the Company, and (c) has such knowledge
and experience in financial and business matters that the Purchaser is
capable of evaluating the merits and risks of an investment in the
Securities.
3.3 Management Position. The Purchaser is the duly
elected President, Chief Operating Officer, and Vice Chairman of the
Board of Directors of the Company and as such has full and complete
access to all the books, records, plans, and other material
information concerning the Company and its business operations.
3.4 Exemption From Registration.
(a) The Purchaser has been advised and understands that:
(i) the Securities and Warrant Shares have not
been registered under the Securities Act or the laws of any other
jurisdiction;
(ii) neither the Securities and Exchange
Commission ("SEC") nor any other securities commission or regulatory
authority has made any finding or determination as to the fairness of
this offering nor has made any recommendation or endorsement of the
Securities or the Warrant Shares; and
(iii) the Purchaser's representations, warranties,
and covenants contained in this Agreement are being furnished, in part,
and will be relied on by the Company in determining whether this offer
and sale of the Securities and the Warrant Shares pursuant to this
Agreement and the Warrants are exempt from registration under the
Securities Act and the securities laws of all other applicable
jurisdictions and, accordingly, the Purchaser hereby confirms that all
such statements contained herein are true, complete, and accurate as
of the date hereof, and shall be true, accurate, and complete as of
the date that this Agreement is accepted, and shall survive such
acceptance. If any events occur or circumstances exist prior to the
issuance of the Securities to the Purchaser which
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would make any of the representations, warranties, agreements, or other
information set forth herein untrue or inaccurate, the Purchaser agrees
to immediately notify the Company in writing of such fact specifying which
representations, warranties, or covenants are not true, correct, or
accurate, and the reasons therefor.
(b) The Purchaser acknowledges and agrees that he:
(i) will not Transfer the Securities or the
Warrant Shares in violation of any of the securities laws of the United
States or of any other jurisdiction, or in violation of this Agreement; and
(ii) will not Transfer the Securities or Warrant
Shares unless they are registered under the Securities Act and the
securities laws of all other applicable jurisdictions, or an exemption
from such registration is available as supported by an opinion of
counsel reasonably satisfactory to the Company.
3.5 Legends. The Purchaser acknowledges and agrees that:
(a) until such time as it is no longer required under the
Securities Act and the rules and regulations thereunder, the
certificates and any other instruments representing the Securities and
the Warrant Shares shall bear a restrictive legend substantially in
the following form (and a stop-transfer order may be placed against
transfer of the certificates for such Securities and Warrant Shares):
"The securities represented by this certificate
have not been registered under the Securities Act
of 1933, as amended (the "Act"), or the
securities laws of any other jurisdiction
regulating the sale of securities and may not be
offered, sold, or otherwise transferred or
assigned unless registered under the Act and such
laws, or an opinion of counsel satisfactory to
the Company, is obtained to the effect that such
registration is not required."
(b) the certificates and any other instruments
representing the Securities and the Warrant Shares shall bear a
restrictive legend substantially in the following form:
"The securities represented by this certificate
are entitled to certain registration rights,
which are described in the Securities Purchase
Agreement, dated February 6, 2003, by and between
the Corporation and Xxxxx X. Xxxxxx (copies of
which will be made available at the offices of
the Corporation upon request and without
charge)."
3.6 Information Made Available. The Purchaser, his
accountants, and his attorneys have been furnished with or have had
access to all of the information that each of them shall have
requested or require from the Company in order for the Purchaser to
make an informed investment decision with respect to the purchase of
the Securities pursuant to this Agreement, and has been afforded the
opportunity to ask questions of and receive answers from the Company
or a person or persons acting on its behalf concerning the terms and
conditions of this investment, and all such questions have been
answered to the Purchaser's (and, if applicable, his attorney's, or
accountant's) full satisfaction. Without limiting the generality of
the foregoing, the Purchaser has
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reviewed the following documents filed with the SEC by the Company:
(a) Annual Report on Form 10-K for the fiscal year ended June 30, 2002,
(b) Quarterly Report on Form 10-Q for the fiscal quarters ended
September 30, 2002, (c) Definitive Proxy Statement filed on November
15, 2002, (d) Current Reports on Form 8-K filed on September 30, 2002,
October 23, 2002, November 14, 2002, and December 20, 2002, and (e) the
registration statement on Form S-3 filed on August 30, 2002 and declared
effective by the SEC on September 6, 2002 (collectively, the "Company's
SEC Documents").
3.7 Rule 144. The Purchaser is familiar with Rule 144
promulgated under the Securities Act, including the resale
restrictions set forth therein, and recognizes that the Company may
not, in the future, satisfy the informational requirements of such
rule which could prevent the Purchaser from selling the Securities and
the Warrant Shares pursuant to Rule 144.
3.8 Risk of Investment. The Purchaser recognizes that
an investment in the Securities involves certain risks and the Purchaser
has taken full cognizance of, understand, and are willing to bear all
of the risks related to the purchase of the Securities. The Purchaser
understands that, in the absence of registration under the Securities
Act or the availability of exemption from the registration
requirements of the Securities Act and the securities laws of all
other applicable jurisdictions, an investment in the Securities will
not be liquid. The Purchaser has carefully considered and, to the
extent the Purchaser has believed such discussion is necessary,
discussed with legal, tax, accounting, and financial advisors retained
by Purchaser the suitability of an investment in the Securities for
his particular tax and financial situations and has determined that
the Securities are a suitable investment for him. In purchasing the
Securities, the Purchaser has relied solely upon his investigation,
examination, and evaluation of the Company, its business, operations,
and financial condition (including information publicly available in
the Company's filings with the SEC and as is otherwise available to
the Purchaser in his capacity as an executive officer and director of
the Company), and has not relied on any statement or materials which
is not supported by Purchaser's investigation and examination and has
not relied on any statement made by Company (other than Company's
representations set forth in Section 4 of this Agreement and the
information publicly available in the Company's filings with the SEC,
and except to the extent that the Purchaser, an officer and director
of the Company, is aware of or has knowledge that the information
contained in such filings is no longer current, complete, accurate, or
true). In particular, the Purchaser confirms that he is familiar
with, and understands, the risk factors disclosures set forth in the
Company's SEC Documents.
3.9 Representations and Warranties. The representations
and warranties of the Purchaser contained in this Agreement may be
relied upon by the Company in determining whether this offering of the
Securities and Warrant Shares is exempt from registration under the
Securities Act and the securities laws of other applicable
jurisdictions.
3.10 No Broker or Finder. The Purchaser has not retained
or used the services of any broker, finder, investment banker, or
other intermediary, nor has he paid or agreed to pay any brokerage,
finder's or other fee or commission in connection with the
transactions contemplated by this Agreement.
3.11 No Violation; Governmental Consents. Neither the
execution and delivery of this Agreement, nor the consummation by the
Purchaser of the transactions contemplated hereby will constitute a
violation of: (a) any agreement or commitment to which the Purchaser
is subject or by which he or any of his respective properties may be
bound; (b) any judgment, decree, order,
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regulation or rule of any court or governmental authority applicable to
the Purchaser; or (c) any statute, laws, or the rules or regulations of
any governmental authority applicable to the Purchaser. No consent of
any person or governmental authority is required in connection with the
execution, delivery, or performance of this Agreement by the Purchaser.
3.12 Company's Representations. To the knowledge of the
Purchaser, none of the representations or warranties of the Company
set forth in Section 4 of this Agreement is incorrect as of the date
of this Agreement.
4. Representations and Warranties of the Company. The Company
hereby represents and warrants to the Purchaser as follows:
4.1 Organization. The Company is a corporation duly
organized, validly existing, and in good standing under the laws of
the State of Delaware and has the requisite corporate power to own its
properties and to carry on its business as now being conducted as
described in the Company's SEC Documents.
4.2 Authority. The execution, delivery and performance
of this Agreement and the transactions contemplated thereby have been
duly authorized by all necessary corporate action on the part of the
Company. This Agreement has been duly executed and delivered by the
Company and constitutes a valid and binding obligation of the Company.
4.3 Issuance of Securities. The issuance, sale, and
delivery of the Securities in accordance with this Agreement, and the
issuance and delivery of the Warrant Shares in accordance with the
terms of the Warrant Agreement, have been duly authorized by all
necessary corporate action on the part of the Company, including its
Board of Directors and its stockholders, if required, under applicable
law and the rules and regulations of the National Association of
Securities Dealers Inc. ("NASD"), and all of the Shares and the
Warrant Shares have been duly reserved for issuance. The Securities,
when so issued, sold, and delivered against payment therefor in
accordance with the provisions of this Agreement, and the Warrant
Shares when issued upon exercise in accordance with the Warrant
Agreement, shall be duly and validly issued, fully paid, and
nonassessable, and shall be free and clear of any Liens, except that
the Securities and the Warrant Shares may be deemed to be "restricted
securities" as that term is defined by Rule 144 promulgated under the
Securities Act. The Common Stock has been registered under Section
12(g) of the Securities Exchange Act of 1934, as amended (the
"Exchange Act"), and is listed for quotation on the Nasdaq SmallCap
Market ("Principal Trading Market"). The Company is subject to the
periodic reporting requirements of Section 13 of the Exchange Act.
The Company has not received any written notice with respect to the
continued eligibility of the Common Stock for such listing and
quotation on the Principal Trading Market and, except for the minimum
bid price per share requirements set forth in NASD Rule 4310(c)(4), to
the knowledge of the Company, the Company has maintained all
requirements on its part for the continuation of such listing and
trading.
4.3 Capitalization.
(a) Without giving effect to the sale of the Securities
or the exercise of the Warrants, the authorized capital stock of the
Company consists of: (i) thirty million (30,000,000) shares of Common
Stock, of which 9,055,455 shares are outstanding, (ii) ten million
(10,000,000) shares of Class A Non-Voting Common Stock, none of which
has been issued or is outstanding, and (iii) ten million (10,000,000)
shares of preferred stock, par value $0.0001 per share, none of which
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has been issued or is outstanding. All of the issued and outstanding
shares of Common Stock have been duly authorized, validly issued, and
are fully paid and non-assessable. The Company has available, and has
reserved for issuance a sufficient number of shares of Common Stock as
is necessary to effect the issuance of the Securities and the Warrant
Shares.
(b) There are no outstanding preemptive rights to which
the Company is a party or by which the Company will be bound to offer
and sell its securities to persons other than the Purchaser as a
result of the offer and sale of the Securities pursuant to this
Agreement. The Company is not a party to any agreement pursuant to
which a third party has a right of first refusal, whether currently
exercisable or not, that would be applicable as a result of the offer
and sale of the Securities pursuant to this Agreement.
(c) Neither this Agreement nor the purchase and sale of
the Securities or the issuance and purchase of the Warrant Shares upon
exercise of the Warrants will cause an adjustment to the number of
shares of Common Stock that are issuable upon exercise of warrants or
options issued by the Company prior to the date hereof.
4.5 Non-Contravention. The execution, delivery and
performance of this Agreement and the Warrant by the Company, the
issuance of the Securities and the Warrant Shares, and the
consummation by the Company of the other transactions contemplated by
this Agreement and the Warrant Agreement, do not and will not conflict
with or result in a breach by the Company of any of the terms or
provisions of, or constitute a default under (a) the certificate of
incorporation or other charter document and by-laws of the Company,
each as currently in effect, (b) any material indenture, mortgage,
deed of trust, or other material agreement or instrument to which the
Company is a party or by which it or any of its properties or assets
are bound, or (c) to its knowledge, any existing applicable law, rule,
or regulation or any applicable decree, judgment, or order of any
court, United States federal or state regulatory body, administrative
agency, or other governmental body having jurisdiction over the
Company or any of its respective properties or assets; except in the
case of Section 4.5(b) and 4.5(c) hereof for conflicts, breaches, or
defaults that would not have a material adverse effect on the Company.
4.6 Approvals. Assuming the accuracy of the Purchaser's
representations in Section 3 hereof and compliance with its covenants
and agreements set forth herein, no authorization, registration,
approval or consent of any court, governmental body, regulatory
agency, self-regulatory organization, stock exchange or market is
required to be obtained by the Company for the issuance and sale of
the Securities to the Purchaser pursuant to this Agreement, other than
any notification filings and payments that may need to be made under
the federal securities laws and applicable state securities and blue
sky laws following the issuance and sale of the Securities and except
for such authorizations, registrations, approvals, and consents that
have been obtained or for which the failure to obtain would not have a
material adverse effect on the Company.
4.7 Filings. As of their respective filing dates,
none of the Company's SEC Documents contained any untrue statement of
a material fact or omitted to state any material fact required to be
stated therein or necessary to make the statements made therein in
light of the circumstances under which they were made, not misleading
(except any statements or omissions therein which were corrected or
otherwise disclosed or updated in a filing of any of the subsequent
Company's SEC Documents).
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4.8 Absence of Litigation. Except as disclosed in
the Company's SEC Documents, there is no action, suit, proceeding,
inquiry or investigation before or by any court, governmental authority,
commission, board, bureau, agency or instrumentality or any other
person, public board or body pending or, to the knowledge of the
Company, threatened against or affecting the Company to which the
Company is a party or of which the Company is otherwise aware, wherein
an unfavorable decision, ruling or finding would have a material
adverse effect on the Company. Except as disclosed in the Company's
SEC Documents, there are no outstanding or unsatisfied judgments,
orders, decrees, writs, injunctions or stipulations to which the
Company is a party or by which it or any of its properties is bound
that have a material adverse effect on the Company.
4.9 Disclosure. As of the date of this Agreement, the
Company is not in possession of any facts material to the condition,
assets, liabilities, business, operations, and prospects of the
Company which are not already available to or known by the Purchaser
as an executive officer and director of the Company.
4.10 No Broker or Finder. The Company has not retained
or used the services of any broker, finder, investment banker, or other
intermediary, nor has it paid or agreed to pay any brokerage, finder's
or other fee or commission in connection with the transactions
contemplated by this Agreement.
5. Registration Rights.
5.1 Demand Registration. Commencing on August 6, 2003,
and ending upon the earlier to occur of: (a) no Registrable Securities
(defined below) remain outstanding, (b) all of the Registrable
Securities may be transferred, sold, or otherwise disposed of in
accordance with the provisions of Rule 144(e) or 144(k) promulgated
under the Securities Act, or (c) on the fifth anniversary of this
Agreement (the "Demand Period"), subject to the terms and conditions
of this Agreement, the holder ("Holder") of the Shares and the Warrant
Shares ("Registrable Securities") may make a written request to the
Company for registration of all or a portion of, the outstanding
Registrable Securities under the Securities Act of all Registrable
Securities ("Demand Registration"). A registration shall not be
deemed to be a Demand Registration (x) unless a Form S-3, or any
successor form thereto ("Form S-3 Registration Statement"), with
respect thereto has become effective, (y) if after it has become
effective, such registration is interfered with by any stop order,
injunction or other order or requirement of the SEC or other
governmental agency or court for any reason not attributable to the
Holder of Registrable Securities participating in such registration
and has not thereafter become effective, or (z) if the conditions to
closing specified in the underwriting agreement, if any, entered into
in connection with such registration are not satisfied or waived,
other than by reason of a failure on the part of the Holder of
Registrable Securities participating in such registration.
5.2 Demand Procedure.
(a) Subject to Section 5.2(b) hereof, during the
Demand Period the Holder may deliver to the Company a written request
(a "Demand Registration Request") that the Company register all of the
Registrable Securities.
(b) The Holder of Registrable Securities will be
entitled to Demand Registration only if the Company is eligible to
register the Registrable Securities on a Form S-3 Registration Statement
with the SEC, and such Registrable Securities are registered under the
Securities Act on
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such form. Further, the Holder of Registrable
Securities will be entitled to only one (1) Demand Registration on a
Form S-3 Registration Statement.
(c) A Demand Registration Request from the Holder shall
(i) set forth the number of Registrable Securities intended to be sold
pursuant to the Demand Registration Request, (ii) specify the method
of distribution, disclosing whether all or any portion of a
distribution pursuant to such registration will be sought by means of
an underwriting, and (iii) identify any underwriter or underwriters
proposed for the underwritten portion, if any, of such registration.
(d) If, during the Demand Period, the Company receives
a Demand Registration Request from the Holder satisfying the
requirements of Section 5.2(b) and 5.2(c) of this Agreement, the
Company, subject to the limitations of Section 5.2(e) hereof, shall
prepare and file a Form S-3 Registration Statement with the SEC to
register for sale all of the Registrable Securities that Holder of the
Registrable Securities requested to be registered pursuant to the
Demand Registration Request (a "Demand Registration Statement"). In
connection with this foregoing, the Company shall use its commercially
reasonable efforts to prepare and file the Demand Registration
Statement within one hundred twenty (120) days after receipt of a
Demand Registration Request. No other securities may be included in
the Demand Registration Statement without the consent of the Holder.
The Company shall use its commercially reasonable efforts (i) to cause
such Registration Statement to become effective as soon as
practicable, and (ii) thereafter to keep it continuously effective
until the earlier of such time as all of the Registrable Securities
included in the Registration Statement have been sold (or otherwise
disposed of by the holder thereof) or two years has elapsed from the
effective date of the Demand Registration Statement. Notwithstanding
anything to the contrary contained herein, the Company will not be
required to file, and may postpone for a reasonable period of time the
filing of any Demand Registration Statement under Section 5 of this
Agreement if (A) any other registration statement for an offering of
the Company's securities has been filed with the SEC prior to, or is
anticipated to be filed within thirty (30) days from, the receipt of a
Demand Registration Request, or (B) with respect to an offering of the
Registrable Securities, an audit (other than the regular audit
conducted by the Company at the end of its fiscal year) would be
required to be conducted pursuant to the Securities Act or the rules
and regulations promulgated thereunder, the form on which the
Registration Statement is to be filed, or otherwise by the SEC, or by
the managing underwriter, if any, or (C) the Board or a committee
thereof determines, in its reasonable judgment, that such registration
would have a material adverse effect upon the Company or interfere
with any financing, merger, acquisition, sale, corporate
reorganization, or other material transaction involving the Company or
any of its affiliates; provided, however, that the Company shall
promptly give the Holder written notice of such determination
containing a general statement of the reasons for such postponement
and an approximation of such delay.
(e) It is anticipated that the Demand Registration
Statement filed with the SEC may allow for different means of
distribution, including sales by means of an underwriting as well as
sales into the open market. A determination of whether all or part of
the distribution will be by means of an underwriting shall be made by
the Holder. If the Holder desires to distribute all or part of the
Registrable Securities covered by its request by means of an
underwriting, the Holder shall so advise the Company in writing in
Holder's Demand Registration Request as described in Section 5.2(c)
hereof. Selection of the lead managing underwriter in any
underwriting made in connection with a Demand Registration Request
shall be subject to the reasonable approval by the Company's Board of
Directors.
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5.3 Registration Expenses. Except as specifically
otherwise provided herein, the Company will be responsible for payment
of all expenses incident to the Company's performance of or compliance
with Section 5.1 of this Agreement and any registration hereunder.
Notwithstanding the foregoing, the Holder of Registrable Securities
included in such registration will be responsible for payment of
brokerage discounts, commissions, underwriting fees, and other sales
expenses incident to the registration of any Registrable Shares
registered hereunder and payment of Holder's own legal fees if Holder
retains legal counsel separate from that of the Company.
5.4 Registration Indemnification.
(a) Indemnification by Company. In the event of any
registration of any Registrable Securities under the Securities Act,
the Company hereby agrees to indemnify, to the fullest extent
permitted by law, and hold harmless the Holder and each other person
who participates as an underwriter in the offering or sale of such
Registrable Securities, against all losses, claims, damages,
liabilities and expenses (including attorneys fees) in connection with
defending against any such losses, claims, damages and liabilities or
in connection with any investigation or inquiry, in each case caused
by or based on any untrue or alleged untrue statement of material fact
contained in any Demand Registration Statement in which such
Registrable Securities are registered under the Securities Act,
prospectus or preliminary prospectus contained therein, or any
amendment thereof or supplement thereto, or any omission or alleged
omission of a material fact required to be stated therein or necessary
to make the statements therein not misleading, and the Company will
reimburse each such indemnified person for any reasonable legal or any
other expenses reasonably incurred by them or any of them in
connection with investigating or defending any such claim (or action
or proceeding in respect thereof); provided, that the Company shall
not be liable in any such case to the extent that (i) same arises out
of or is based on an untrue statement or alleged untrue statement or
omission or alleged omission made in such Demand Registration
Statement, any such prospectus or preliminary prospectus, or in any
amendment or supplement thereto in reliance on and in conformity with
written information furnished to the Company by the Holder, or
(ii) the Holder or any underwriter or selling agents failed to deliver
a copy of the prospectus or any amendments or supplements thereto to
the person asserting such loss, claim, damage, liability, or expense
if the Company had furnished such Holder with a reasonably sufficient
number of copies of the same. Further, the indemnification provisions
of this Section 5.4(a) shall not apply to amounts paid in settlement
of any claim if such settlement is effected without the prior written
consent of the Company, which consent shall not be unreasonably
withheld.
(b) Indemnification by Purchaser. In connection with
any Demand Registration Statement, the Holder will furnish to the
Company in writing information concerning the Holder that is required
by the provisions of applicable law and regulation to be included in a
registration statement as the Company reasonably requests for use in
connection with any such registration statement or related prospectus
and, to the extent permitted by law, the Holder will indemnify the
Company, its directors and officers, and each person who controls
(within the meaning of Section 15 of the Securities Act or Section 20
of the Exchange Act) the Company against any losses, claims, damages,
liabilities and expenses resulting from any untrue or alleged untrue
statement of material fact contained in the Demand Registration
Statement, prospectus or preliminary prospectus or any amendment
thereof or supplement thereto or any omission or alleged omission of a
material fact required to be stated therein or necessary to make the
statements therein not misleading, but only to the extent that such
untrue statement or omission is contained in any information so
furnished in writing by such Holder expressly for use in connection
with such Demand Registration Statement.
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(c) Assumption of Defense by Indemnifying Party. Any
person entitled to indemnification hereunder will (i) give prompt
written notice to the indemnifying party of any claim with respect to
which it seeks indemnification and (ii) permit such indemnifying party
to assume the defense of such claim with counsel reasonably
satisfactory to the indemnified party; provided, however, that any
person entitled to indemnification hereunder shall have the right to
employ separate counsel and to participate in the defense of such
claim, but the fees and expenses of such counsel shall be at the
expense of such person unless (A) the indemnifying party has agreed to
pay such fees or expenses, or (B) the indemnifying party shall have
failed to assume the defense of such claim and employ counsel
reasonably satisfactory to such person, or (C) in the reasonable
judgment of any such person, based upon written advice of its counsel,
a conflict of interest may exist between such person and the
indemnifying party with respect to such claims (in which case, if the
person notifies the indemnifying party in writing that such person
elects to employ separate counsel at the expense of the indemnifying
party, the indemnifying party shall not have the right to assume the
defense of such claims on behalf of such person). If such defense is
not assumed, the indemnifying party will not be subject to any
liability for any settlement made without its consent (but such
consent will not be unreasonably withheld). An indemnifying party
which is not entitled to, or elects not to, assume the defense of a
claim will not be obligated to pay the fees and expenses of more than
one counsel for all parties indemnified by such indemnifying party
with respect to such claim, unless in the reasonable judgment of any
indemnified party a conflict of interest may exist between such
indemnified party and any other of such indemnified parties with
respect to such claim, in which case the indemnifying party shall pay
the reasonable fees and expenses of such additional counsel or
counsels. The failure of any indemnified party to provide the notice
required by Section 5.4(c)(i) above shall not relieve the indemnifying
party under this Section 5, except to the extent that the indemnifying
party is actually prejudiced by such failure to give notice.
(d) Contribution. If for any reason the indemnification
provided for in Sections 5.4(a) and 5.4(b) is unavailable to an
indemnified party or insufficient to hold it harmless as contemplated
by Sections 5.4(a) and 5.4(b), then the indemnifying party shall
contribute to the amount paid or payable by the indemnified party as a
result of such loss, claim, damage or liability in such proportion as
is appropriate to reflect not only the relative benefits received by
the indemnified party and the indemnifying party, but also the
relative fault of the indemnified party and the indemnifying party, as
well as any other relevant equitable considerations. No person guilty
of fraudulent misrepresentation (within the meaning of Section 11(f)
of the Securities Act) shall be entitled to contribution from any
person who was not guilty of such fraudulent misrepresentation.
(e) Binding Effect; Limitations. The indemnification
provided for under this Agreement shall in no event exceed $1,000,000
and such indemnification will remain in full force and effect
regardless of any investigation made by or on behalf of the
indemnified party or any officer, director or controlling person of
such indemnified party and will survive the transfer of securities.
6. Other Agreements and Covenants.
6.1 Rule 144. With a view to making available certain
exemptions from the registration provisions of the Securities Act for
the sale of the Registrable Securities, the Company covenants that for
a period of five years following the date of this Agreement at all
times that the Common Stock is registered under Section 12(b) or 12(g)
of the Exchange Act, the Company will exercise its commercially
reasonable efforts to file timely the reports required to be filed by
the Company under the Securities Act and the Exchange Act (or, if the
Company is not registered under
10
Section 12(b) or 12(g) of the Exchange Act and is not otherwise required
to file such reports under Sections 13 or 15(d) thereunder, it will,
upon the request of the Purchaser, make publicly available such other
information required under Rule 144 for so long as necessary to permit
sales pursuant to Rule 144 under the Securities Act), and it will take
such further action as the Purchaser may reasonably request to the extent
required from time to time to enable the Purchaser to sell the
Registrable Securities without registration under the Securities Act
within the limitations of the exemptions provided by (i) Rule 144 under
the Securities Act, as such rule may be amended from time to time or
(ii) any similar rule or regulation hereafter adopted by the SEC. Upon
the request of the Purchaser, the Company will deliver to Holder a written
sstatement as to whether it has complied with such requirements.
6.2 Nasdaq Listing. The Company will use its commercially
reasonable efforts to have the Shares and the Warrant Shares listed
for quotation on the Principal Trading Market.
6.3 Use of Proceeds. The Company will use the net
proceeds from the sale of the Securities for working capital purposes,
including general corporate purposes of the Company and its
subsidiaries. The Company shall not, directly or indirectly, use such
proceeds for any loan to or investment in any other corporation,
partnership enterprise or other person or for the repurchase or
redemption of any securities of the Company.
6.4 Legends. The Company agrees that the legends set
forth on the certificate pursuant to Section 3.5 hereof shall be
issued by delivery of substitute certificates without such legend if
the Purchaser shall have delivered either an opinion of counsel
reasonably satisfactory to the Company and its counsel, or a no-action
letter from the staff of the SEC, to the effect that such legend is
not required for purposes of the Securities Act.
7. Conditions to the Obligations of the Company. The
obligations of the Company to perform this Agreement and to issue the
Securities are subject to fulfillment, or the waiver, of the following
conditions on or before the Closing:
7.1 Execution and Delivery of Agreement. The Purchaser
shall have executed this Agreement and delivered the same to the
Company.
7.2 Delivery of the Purchaser Price. The Purchaser
shall have delivered to the Company the Purchase Price in accordance
with Section 1.2 of this Agreement.
7.3 Accuracy of Representations and Warranties. The
representations and warranties of the Purchaser contained in Section 3
of this Agreement shall be true on and as of the Closing Date with the
same effect as though such representations and warranties had been
made and as of that date.
7.4 No Prohibition. No litigation, statute, rule,
regulation, executive order, decree, ruling or injunction shall have
been enacted, entered, promulgated or endorsed by or in any court or
governmental authority of competent jurisdiction or any
self-regulatory organization having authority over the matters
contemplated hereby which prohibits the consummation of any of the
transactions contemplated by this Agreement.
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7.5 Fairness Opinion. The Company shall have received
a written opinion from each of Xxxxxx X. Xxxx and Soroban, Inc. that the
sale of the Securities at the Purchase Price therefor is fair to the
Company and its stockholders from a financial point of view.
8. Conditions to the Obligations of the Purchaser. The
obligation of the Purchaser to perform this Agreement and to purchase
the Securities is subject to fulfillment, or the waiver, of the
following conditions on or before the Closing.
8.1 Execution and Delivery of Agreement. The Company
shall have executed this Agreement and delivered the same to the
Purchaser.
8.2 Execution and Delivery of Warrant Agreement. The
Company shall have executed the Warrant Agreement and delivered the
same to the Purchaser.
8.3 Delivery of the Securities. The Company shall have
delivered the Securities to the Purchaser in accordance with Section
1.2 of this Agreement.
8.4 Accuracy of Representations and Warranties. The
representations and warranties of the Company contained in Section 4
of this Agreement shall be true on and as of the Closing Date with the
same effect as though such representations and warranties had been
made as of that date.
8.5 No Prohibition. No litigation, statute, rule,
regulation, executive order, decree, ruling or injunction shall have
been enacted, entered, promulgated or endorsed by or in any court or
governmental authority of competent jurisdiction or any
self-regulatory organization having authority over the matters
contemplated hereby which prohibits the consummation of any of the
transactions contemplated by this Agreement.
8.6 Fairness Opinion. The Purchaser shall have received
a copy of the fairness opinions referenced in Section 7.5 of this
Agreement.
9. Indemnification.
9.1 By the Purchaser. The Purchaser acknowledges and
understands the meaning and legal consequences of the representations
and warranties made by him in this Agreement, especially the reliance
placed thereon by the Company for satisfying an exemption from the
registration provisions of all applicable securities and blue sky
laws, and accordingly, agrees to indemnify and hold harmless the
Company and its officers, directors, employees and representatives
from and against all loss (including attorneys' fees), liabilities,
damages, and expenses arising out of the untruth of, or
misrepresentation or omission by, the Purchaser of any of such
representations or warranties, or a breach by the Purchaser of any
agreement or covenant contained in this Agreement.
9.2 By the Company.
(a) The Company agrees to indemnify and hold harmless
the Purchaser and his respective representatives and agents from and
against any losses, claims, damages, liabilities or expenses
(including reasonable attorneys' fees) incurred (collectively
"Damages") and any action in respect thereof to which any of them
becomes subject to, resulting from or arising out of any
misrepresentation, breach of warranty or nonfulfillment of or failure
to perform any covenant or
12
agreement on the part of Company contained in this Agreement, except to
the extent such Damages result primarily from the Purchaser's failure
to perform any covenant or agreement contained in this Agreement or the
Purchaser's negligence, recklessness, or bad faith in performing its
obligations under this Agreement.
(b) If (i) the Purchaser becomes involved in any capacity
in any action, proceeding or investigation brought by any stockholder
of the Company, in connection with or as a result of the consummation
of the transactions contemplated by this Agreement, or if the
Purchaser is impleaded in any such action, proceeding or investigation
by any person, or (ii) the Purchaser becomes involved in any capacity
in any action, proceeding or investigation brought by the SEC, any
self-regulatory organization or other body having jurisdiction,
against or involving the Company and in connection with or as a result
of the consummation of the transactions contemplated by this
Agreement, or (iii) if the Purchaser is impleaded in any such action,
proceeding or investigation by any person,
then in any such case, the Company hereby agrees to indemnify, defend
and old harmless the Purchaser from and against and in respect of all
losses, claims, liabilities, damages or expenses resulting from, imposed
upon or incurred by the Purchaser, directly or indirectly, and reimburse
the Purchaser for any reasonable legal and other expenses (including the
cost of any investigation and preparation) incurred in connection
therewith.
(c) The indemnification agreements contained in
Section 9.1(b)(ii) shall be in addition to any liability the Company
have under Section 5.4 hereof. Nothing in this paragraph shall
limit, restrict, or other adversely effect the Purchaser's rights of
indemnification now or hereafter existing under, any statute, the
Company's certificate of incorporation, the Company's bylaws, or any
employment agreement or indemnification agreement between the
Purchaser and the Company or any affiliate of the Company.
10. Miscellaneous.
10.1 Notices. All notices and other communications
given or made under this Agreement shall be in writing and shall be
deemed to be sufficiently given when personally delivered or when sent
by registered or certified mail, return receipt requested, postage
prepaid, to the other party at the address set forth below:
If to Company: Eagle Supply Group, Inc.
000 Xxxx 00xx Xxxxxx
Xxx Xxxx, XX 00000
Attention: Xxxxxxx X. Xxxxxx,
Chairman and CEO
With Copy to:
Xxxxxxx X. Xxxxxx, Esquire
Xxxxxxx Xxxxxx, P.A.
000 X. Xxxxxxx Xxxxxx Xxxxxxxxx
Xxxxx, XX 00000
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If to Purchasers: Xxxxx X. Xxxxxx and Xxxxxxx Xxxxxx
At the address set forth on the
corporate books of the Company.
With Copy to: Xxxxxxx X. Xxxxxxxx, Esquire
Xxxxxxxx & Xxxxxx, LLP
000 Xxxx Xxxxxx, Xxxxx 000
Xxxx Xxxxx, XX 00000
10.2 No Waiver. Failure of either party hereto to exercise
any right or remedy under this Agreement between the Company and the
Purchaser or otherwise, or delay by any party hereto in exercising the
same, will not operate as a waiver thereof. No waiver by any party
hereto is effective unless and until it is in writing and signed by or
on behalf of the party against whom the waiver would operate.
10.3 Amendments. This Agreement and the provisions hereof
may not be modified, amended, altered, or supplemented except by
execution and delivery of a written instrument signed by the parties
hereto.
10.4 Construction of Terms. All provisions and any
variations thereof used herein shall be deemed to refer to the
masculine, feminine, neuter, singular, or plural as the identity of
such person or persons shall require.
10.5 Governing Law. This Agreement shall be governed by
and construed in accordance with the substantive laws of the State of
Delaware, without giving effect to the principles of the conflict of
laws. In the event that any provision of this Agreement is invalid or
unenforceable under any applicable statute or rule of law, then such
provision shall be deemed inoperative to the extent that it may
conflict therewith and shall be deemed modified to conform with such
statute or rule of law. Any provision hereof which may prove invalid
or unenforceable under any law shall not affect the validity or
enforceability of any other provision hereof.
10.6 Entire Agreement. This Agreement and the Warrant
Agreement constitute the entire agreement between the parties hereto
with respect to the subject matter hereof and may be amended only by a
writing executed by all parties.
10.7 Survival of Representations, Warranties, and
Covenants. The representations, warranties, and agreements of the
Purchaser and the Company made herein and in any certificates or other
agreements or investments delivered by or on behalf of such party
pursuant to this Agreement shall survive the Closing.
10.8 Benefit of the Parties. This Agreement is for the
benefit of the parties hereto and shall inure to their heirs, legal
representatives, successors, and assigns.
10.9 Counterparts. This Agreement 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.
[Rest of Page Intentionally Left Blank; Signatures on Following Page]
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THE COMPANY
EAGLE SUPPLY GROUP, INC.
a Delaware corporation
By: /s/ Xxxxxxx X. Xxxxxx
-------------------------------
Xxxxxxx X. Xxxxxx,
Chief Executive Officer
PURCHASER
Xxxxx X. Xxxxxx, Individually
/s/ Xxxxx X. Xxxxxx
----------------------------------
Xxxxx X. Xxxxxx
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