[EXHIBIT 1.1]
May 14, 2002
Eagle Supply Group, Inc.
122 East 42nd Street, Suite 1116
New York, NY 10168
ATTN: Douglas P. Fields
Gentlemen:
This letter will confirm our mutual agreement with respect to our
engagement as Placement Agent ("Distributor") to act on behalf of Eagle
Supply Group, Inc. (the "Company") in connection with the offer and sale
on a best efforts basis of up to 1,700,000 shares of the Common Stock of
the Company (to be sold in two equal tranches) to one or more individuals
or entities (each, a "Buyer") at a price per share of $2.75, for an
aggregate gross purchase price of not less than $3,000,000, subject to
applicable regulations. The purchase and sale of such shares will be
substantially on the terms described in the Confidential Memorandum
attached hereto as Exhibit 1 (the "Term Sheet"; provided, however, that
to the extent of a conflict in the terms of the transaction described in
this Agreement and those described in the Term Sheet, the terms of this
Agreement shall prevail) and such other terms (including modification to
any of the terms described in the Term Sheet or herein) as the Company,
the Distributor and the Buyers may agree. The shares sold in the
offering ("Offered Shares") will be duly registered for resale following
the closing of the initial tranche pursuant to the Securities Act of 1933
(the "Securities Act").
1. The engagement hereunder shall be for a term commencing upon
the execution of this letter by the Company and continuing until October
1,2002. You represent that no other offering is presently in progress
by the Company which has not been disclosed to us. You agree that you
will not engage any other finder, broker or distributor to act in such
capacity or any similar capacity with respect to this offering.
2. (a) The Company will pay a fee to the Distributors as follows
(i) a cash fee (the "Distributor's Fees") equal to ten percent (10%) of
the aggregate gross purchase price received by or on behalf of the
Company from the sale of the Offered Shares (for each tranche, the
"Purchase Price"), and (ii) the Distributor's Warrants (as defined
below). The Distributor's Fees will payable out of the Purchase Price
paid in or deposited in escrow by the Buyers in connection with the
closing of each tranche.
(b) The Company shall pay the legal and Escrow Agent's (as
defined below) fee of $20,000 (payable $10,000 on the closing of each
tranche). These fees shall be deducted from the Purchase Price paid in
or deposited in escrow by the Buyers in connection with the closing of
each tranche. The Company shall also pay legal fees of counsel for the
Buyers in connection with the review of the Registration Statement on
behalf of the Buyers; the fee for the review of the initial Registration
Statement may be held in escrow by the Escrow Agent out of the Purchase
Price deposited in escrow by the Buyers in connection with the closing
of the initial tranche.
(c) The net proceeds to be received by the Company after
deducting Distributor's Fees shall be (i) 90% of the Purchase Price paid
in or deposited in escrow by the Buyers in connection with the closing
of each tranche, less (ii) the amounts contemplated by the immediately
preceding paragraph (b).
(d) Other than the Distributor's Fees payable hereunder and
the Distributor's Warrants, the Distributor shall not be entitled to any
additional compensation from the Company, nor shall Distributor be
reimbursed for its expenses in connection with the transactions
contemplated by this Agreement.
3. (a) Each Buyer will be an "accredited investor" as said term
is defined in Rule 501 under Regulation D promulgated under the Act.
(b) The Company shall have the right in its sole discretion
to reject any subscription and to disapprove any person or entity which
is proposed by the Distributor to be a purchaser of any Offered Shares.
(c) Each Buyer will, within two business days after
acceptance by the Company of a Securities Purchase Agreement ("Securities
Purchase Agreement") in the form annexed hereto as Exhibit A, pay the
Purchase Price for the Offered Shares being purchased by that Buyer in
the initial tranche (the "Initial Common Stock") in escrow to the Escrow
Agent. The Escrow Agent is authorized to release the funds of each Buyer
to the Company (net of deductions contemplated by the Transaction
Documents, as defined in the Securities Purchase Agreement) after all of:
(i) the Company approves such Buyer and the Securities
Purchase Agreement which shall have been submitted
and signed by the Buyer, and
(ii) the Company has caused to be delivered to the
Escrow Agent or its designee, certificates
representing the Common Stock and the Warrants
being issued in connection with such tranche, as
contemplated by the Securities Purchase Agreement,
and the opinion of counsel contemplated by the
Securities Purchase Agreement.
The terms for the closing of the Common Stock to be purchased in the
second tranche are described in the Securities Purchase Agreement.
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4. The Company will cause the Common Stock purchased pursuant to
such Securities Purchase Agreement to be delivered to Krieger & Prager,
LLP as escrow agent (the "Escrow Agent") pursuant to the terms of the
Joint Escrow Instructions attached as Annex I to the Securities Purchase
Agreement.
5. The Distributor represents, warrants and agrees that each
Buyer of the Common Stock will be qualified to purchase the Common Stock
under the laws of the jurisdiction in which such person resides and that
the offer and sale of the Common Stock will not violate the securities
or other laws of such jurisdiction. The Company agrees that with respect
to any offerees resident in the United States, the Company will file, at
the request of Distributor, such necessary applications with any
applicable securities regulatory authority, provided, that all U.S.
offerees will be accredited investors. The Distributor is a member of
NASD and a licensed broker-dealer.
6. Distributor is an independent contractor, and is not an
employee, partner, joint venturer or the agent of or with the Company.
Distributor is not authorized to bind the Company or to assume or create
any obligation or responsibility, express or implied, on behalf of the
Company or in its name, nor is Distributor authorized to make any
representations or warranties on behalf of the Company.
7. As more fully described in Exhibit B hereto, which is being
executed simultaneously herewith, each party hereto will indemnify and
hold the other (including its partners, agents, employees, and
controlling persons within the meaning of Section 15 of the Act or
Section 20 of the Exchange Act) harmless from and against certain claims,
liabilities, losses, damages and expenses incurred, including fees and
disbursements of counsel, related to or arising out of this engagement.
8. The Company agrees to issue to Distributor on each Closing
Date (as defined in the Securities Purchase Agreement) , transferable
divisible warrants (the "Distributor's Warrants") for such number of
shares of Common Stock equal to ten (10%) percent of the number of shares
of Common Stock purchased by all Buyers in each tranche. Such
Distributor's Warrants shall bear an exercise price per share of Common
Stock equal to $3.50 per share (which amount shall be equitably adjusted
to reflect capital adjustments, such as stock splits, effected after the
date hereof and before the issuance of the Warrant). The Distributor's
Warrants shall be exercisable immediately upon issuance, and for a
period of five (5) years thereafter, together with cashless exercise and
registration rights for the underlying shares in the Registration
Statement (as defined in the Securities Purchase Agreement) and piggy-
back registration rights after the expiration of the effectiveness of the
Registration Statement as contemplated by the Registration Rights
Agreement contemplated by the Securities Purchase Agreement.
9. The Company represents, warrants, and agrees that, in addition
to the warranties to be made by the Company to the Buyers:
(a) the Company will use its commercially reasonable efforts
to registered the Offered Shares and the Warrant Shares (as defined in
the Securities Purchase Agreement) pursuant to the Securities Act of
1933, as amended (the "Exchange Act"), following the Initial Closing Date
(as defined in the Securities Purchase Agreement);
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(b) the Company represents that, as of the date hereof, it
has timely filed all the material required to be filed pursuant to
Section 13(a) or 15(d) of the Securities Exchange Act of 1934 for a
period of at least twelve months preceding the date hereof; and the
Company warrants that it will continue to file all such material on a
timely basis through the second anniversary of the Additional Closing
Date (as defined in the Securities Purchase Agreement);
(c) as of the date hereof, the Company is in full compliance,
to the extent applicable, with all reporting obligations under either
Section 12(b), 12(g) or 15(d) of the Exchange Act. The Company has
registered its Common Stock pursuant to Section 12 of the Exchange Act
and the Common Stock is listed on The NASDAQ/SmallCap Market, and has
received no notice, either oral or written, with respect to any potential
ineligibility for such listing;
(d) the Offered Shares will be offered and sold in compliance
with all U.S. securities laws and regulations; it being understood that
this representation, warranty and agreement is made relying exclusively
on the representations, warranties and agreements made by the Distributor
and/or Buyers herein or in the applicable subscription documents. The
Company will, at its expense, make all filings required under the
Securities Act or the Exchange Act, and any applicable domestic
securities exchange or trading market, if any;
(e) the information furnished by the Company to Buyers, taken
as a whole, will not contain any untrue statement of material fact or
omit to state a material fact required to be stated or necessary to make
the statements therein not misleading; provided however, that this
representation and warranty does not extend to written material furnished
to the Company by Distributor relating to Distributor or the distribution
process;
(f) the Company has all requisite corporate power and
authority to execute this agreement and to perform its agreements
contained herein. All corporate action necessary for the authorization,
execution, delivery and performance hereof have been taken. This
agreement constitutes a valid and binding obligation of the Company;
(g) the execution and performance of this agreement by the
Company and the offer and sale of the Offered Shares will not violate any
provision of the Articles of Incorporation or By-laws of the Company or
any material agreement or other instrument to which the Company is party
or by which it is bound, and which violation(s) would have a material
adverse effect on the business or financial condition of the Company.
Any material necessary approvals, U.S. governmental and private, will be
obtained by the Company prior to the issuance of the Offered Shares;
(h) the Company makes no other representation or warranty
with respect to the Company, its finances, assets, business or prospects
or otherwise, except as expressly set forth herein or in the Securities
Purchase Agreement or the other Transaction Agreements (as defined in the
Securities Purchase Agreement). Distributor will advise each Buyer and
potential Buyer of the foregoing, and that such Buyer is relying on its
own investigation with respect to all such matters, and that such Buyer
will be given reasonable access to any and all material publicly
available documents and Company personnel it may require for such
investigation; and
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(i) the Company believes it will be eligible to file a
Registration Statement on Form S-3 to register the resale of the Offered
Shares and the Warrant Shares by the Buyers following the Initial Closing
Date.
10. This Agreement shall be governed by and interpreted in
accordance with the laws of the State of New York. Each of the parties
consents to the jurisdiction of the federal courts whose districts
encompass any part of the County of New York or the state courts of the
State of New York sitting in the County of New York in connection with
any dispute arising under this Agreement and hereby waives, to the
maximum extent permitted by law, any objection, including any objection
based on forum non coveniens, to the bringing of any such proceeding in
such jurisdictions. A facsimile transmission of this signed Agreement
shall be legal and binding on all parties hereto. This Agreement may be
signed in one or more counterparts, each of which shall be deemed an
original. The headings of this Agreement are for convenience of
reference and shall not form part of, or affect the interpretation of,
this Agreement. If any provision of this Agreement shall be invalid or
unenforceable in any jurisdiction, such invalidity or unenforceability
shall not affect the validity or enforceability of the remainder of this
Agreement or the validity or enforceability of this Agreement in any
other jurisdiction. This Agreement may be amended only by an instrument
in writing signed by the party to be charged with enforcement. This
Agreement supersedes all prior agreements and understandings among the
parties hereto with respect to the subject matter hereof. Any notices
required or permitted to be given under the terms of this Agreement shall
be sent by mail or delivered personally or by courier and shall be
effective five days after being placed in the mail, if mailed, or upon
receipt, if delivered personally or by courier, in each case addressed
to a party at such party's address shown in the introductory paragraph or
on the signature page of this Agreement or such other address as a party
shall have provided by notice to the other party in accordance with this
provision.
Dated: May 14, 2002
vFINANCE INVESTMENTS, INC.
By: /s/Richard Rosenblum
--------------------------------
Its Managing Director
-----------------------------
AGREED & ACCEPTED:
EAGLE SUPPLY GROUP, INC.
By: /s/Frederick M. Friedman
---------------------------------
Its Executive Vice President
-----------------------------
EXHIBIT B
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INDEMNIFICATION AGREEMENT
In consideration of the agreement of vFINANCE INVESTMENTS, INC..
(hereinafter "Distributor") to act on behalf of EAGLE SUPPLY GROUP, INC.
(the "Company") pursuant to the Distributor's Agreement (the
"Agreement"), dated May 14, 2002, the Company agrees to indemnify and
hold harmless Distributor and each of its directors, officers, agents,
employees and controlling persons (within the meaning of Section 15 of
the Securities Act of 1933, as amended) (Distributor and each such other
person or entity are hereinafter referred to as an "Indemnified Person"),
from and against any losses, claims, damages, expenses and liabilities
or actions in respect thereof (collectively "Losses"), as they may be
incurred including all reasonable legal fees and other reasonable
expenses incurred in connection with investigating, preparing, defending,
paying, settling or compromising any Losses (whether or not in connection
with any pending or threatened litigation in which any Indemnified Person
is a named party) to which any of them may become subject (including in
any settlement effected with the Company's consent) as a result of any
claim, investigation or legal proceeding made or instituted by any third
party relating to or arising out of Distributor's engagement under the
Agreement (excluding any engagement that may arise out of the right of
first refusal set forth in Section 9 of the Agreement). The Company will
not, however, be responsible under the foregoing provisions with respect
to any Losses (a) to the extent that a court of competent jurisdiction
shall have determined by a final judgment that such Losses resulted from
actions taken or omitted to be taken by an Indemnified Person due to its
gross negligence, bad faith, willful misconduct, (b) to the extent that
such Losses consist of amounts paid or agreed to be paid in settlement
of any claim or lawsuit, if such settlement is effected without the prior
written consent of the Company, which consent shall not be unreasonably
withheld, (c) the marketing actions of the Distributor not specifically
approved and authorized by the Company, including, without limitation,
the Distributor's making any representations and misstatements regarding
the Company not contained in (i) the Company SEC Documents or the
Transaction Agreements (as those terms are defined in the Securities
Purchase Agreement referred to in the Agreement) or (ii) any other
writing of the Company specifically provided by the Company to the
Distributor, or (d) the failure of the Distributor to provide to
prospective investors any material provided by the Company to the
Distributor with specific instructions for the Distributor to disclose
the same to such prospective investors.
If the indemnity referred to in this agreement should be, for any
reason whatsoever (other than any of the reasons set forth in the last
sentence of the immediately preceding paragraph), unenforceable,
unavailable or otherwise insufficient to hold such Indemnified Person
harmless for any Losses for which the Company has agreed to hold such
Indemnified Person harmless hereunder, the Company shall pay to or on
behalf of each Indemnified Person contributions for Losses so that each
Indemnified Person ultimately bears only a portion of such Losses as is
appropriate (i) to reflect the relative benefits received by each such
Indemnified Person, respectively, on the one hand and the Company on the
other hand in connection with the transaction, or (ii) if the allocation
on that basis is not permitted by applicable law, to reflect not only the
relative benefits referred to in clause (i) above but also the relative
fault of each such Indemnified Person, respectively, and the Company as
well as any other relevant equitable considerations; provided, however,
that in no event shall the aggregate contribution of all Indemnified
Persons to all Losses in connection with any transaction exceed the value
of the consideration actually received by Distributor pursuant to the
Agreement. The respective relative benefits received by Distributor and
the Company in connection with any transaction shall be deemed to be in
the same proportion as the aggregate consideration received by
Distributor in connection with the transaction bears to the total
consideration of the transaction. The relative fault of each Indemnified
Person and the Company shall be determined by reference to, among other
things, whether the actions or omissions to act were by such Indemnified
Person or the Company, and the parties' relative intent, knowledge,
access to information and opportunity to correct or prevent such action
or omission to act.
The Company also agrees that no Indemnified Person shall have any
liability to the Company or its affiliates, directors, officers,
employees, agents or shareholders related to or arising out of the
Agreement, except that each Indemnified Person shall indemnify and hold
harmless the Company, its directors, officers, agents, consultants and
controlling persons from and against any Losses as they are incurred
which result from actions taken or omitted to be taken by such
Indemnified Person due to its gross negligence, bad faith, or willful
misconduct. Notwithstanding the immediately prior sentence of this
paragraph, each of the Distributor and the Company, for itself and for
any party claiming any rights hereunder through it, if and to the extent
contemplated hereby, understands and agrees that the indemnification and
reimbursement commitment set forth in this Agreement shall not apply to
any lawsuit, claim, controversy or proceeding solely between and among
the Distributor and/or any other Indemnified Party claiming through the
Distributor, on the one hand, and the Company and/or any party, if any,
claiming through the Company, on the other hand, other than the
enforcement of this Agreement itself. In no event, regardless of the
legal theory advanced, shall the Company or any Indemnified Person be
liable for any consequential, indirect, incidental or special damages of
any nature.
If any action is brought against any Indemnified Person in respect
of which indemnity may be sought against the Company hereunder, such
Indemnified Person shall promptly notify the Company in writing of such
action and the Company shall be entitled to participate therein and, to
the extent the Company shall wish, assume the defense thereof. Upon the
request of an Indemnified Person, the Company shall retain counsel
reasonably satisfactory to such Indemnified Person to represent such
Indemnified Person and any others the Company may designate in such
action and shall pay the reasonable fees and expenses of such counsel
related thereto as they are incurred. In any such action, an Indemnified
Person shall have the right to retain its own counsel at its own expense,
except that the Company shall pay as they are incurred the reasonable
fees and expenses of counsel retained by such Indemnified Person only in
the event that (i) the Company and such Indemnified Person shall have
mutually agreed to the retention of such counsel or (ii) the Company has
directed counsel to represent one or more parties in addition to such
Indemnified Person in such action, and in the written opinion of such
counsel, representation of both such Indemnified Person and such other
party or parties by the [continued on next page]
same counsel would be inappropriate due to actual or potential conflict
of interests between them, it being understood that the Company shall not
be liable for the reasonable fees and expenses of more than one separate
firm for all the Indemnified Persons. No indemnification provided for
herein shall be available to any Indemnified Person that fails to give
notice as provided above if the Company was unaware of the action to
which such notice would have related and was substantially prejudiced by
such failure or to any Indemnified Person that retains its own counsel
in accordance with the immediately preceding sentence except in the
circumstances set forth in clause (i) or (ii) thereof. The Company
agrees that without Distributor's prior written consent it shall not
settle, compromise or consent to the entry of any judgment in any pending
or threatened claim, action, suit or proceeding related to the Agreement
unless the settlement, compromise or consent also includes an express
unconditional release of all Indemnified Persons from all liability and
obligations arising therefrom.
The indemnity agreements herein shall apply with respect to all
claims for indemnity made within three (3) years after the Additional
Closing Date; provided, however, that such agreements shall continue to
apply to all Losses relating to or arising out of such claim even with
respect to any portion of the Losses which were incurred or accrued or
otherwise relate to periods after the third anniversary of the Additional
Closing Date.
The respective obligations of the Company and the Indemnified
Persons referred to above shall be in addition to any rights that any
Indemnified Person or the Company, as the case may be, may otherwise have
and shall be binding upon and inure to the benefit of any successors,
assigns, heirs and personal representatives of any Indemnified Person and
the Company. It is understood that the respective obligations of the
Company and the Indemnified Persons will remain operative regardless of
any termination or completion of Distributor's services pursuant to the
Agreement.
The provisions of Section 10 of the Agreement are incorporated
herein by reference as if set forth herein in full.
vFINANCE INVESTMENTS, INC.
By: /s/Richard Rosenblum
---------------------------------
Title: Managing Director
---------------------------
EAGLE SUPPLY GROUP, INC...
By: /s/Frederick M. Friedman
---------------------------------
Title: Executive Vice President
---------------------------