<PAGE>
Securities and Exchange Commission on August 29, 1997
Registration No. 333-
================================================================================
SECURITIES AND EXCHANGE COMMISSION
Washington, DC 20549
_______________
FORM S-3
REGISTRATION STATEMENT
Under
THE SECURITIES ACT OF 1933
_______________
THE EASTWIND GROUP, INC.
(Exact Name of Registrant as Specified in Charter)
DELAWARE 23-2732753
(State or Other Jurisdiction (I.R.S. Employer
of Incorporation or Identification
Organization) Number)
100 FOUR FALLS CORPORATE CENTER, SUITE 305
WEST CONSHOHOCKEN, PENNSYLVANIA 19428
(610) 828-6860
(Address, Including Zip Code, and Telephone Number,
Including Area Code, of Registrant's Principal Executive Offices)
PAUL A. DEJULIIS
CHAIRMAN AND CHIEF EXECUTIVE OFFICER
THE EASTWIND GROUP, INC.
100 FOUR FALLS CORPORATE CENTER, SUITE 305
WEST CONSHOHOCKEN, PENNSYLVANIA 19428
(610) 828-6860
(Name, Address, Including Zip Code, and Telephone Number,
Including Area Code, of Agent for Service)
_______________
WITH A COPY TO:
PETER O. CLAUSS, ESQUIRE
PAUL T. PORRINI, ESQUIRE
PEPPER, HAMILTON & SCHEETZ LLP
3000 TWO LOGAN SQUARE
PHILADELPHIA, PA 19103-2799
(215) 981-4000
_______________
Approximate date of commencement of proposed sale to public: AS SOON AS
PRACTICABLE AFTER THE EFFECTIVENESS OF THIS REGISTRATION STATEMENT.
_______________
If the only securities being registered on this Form are being offered
pursuant to dividend or interest reinvestment plans, please check the following
box. [ ]
If any of the securities registered on this Form are to be offered on a
delayed or continuous basis pursuant to Rule 415 under the Securities Act of
1933, other than securities offered only in connection with dividend or interest
reinvestment plans, check the following box. [X]
If this Form is filed to register additional securities for an offering
pursuant to Rule 462(b) under the Securities Act, please check the following box
and list the Securities Act Registration number of the earlier effective
registration statement for the same offering. [ ]
If this Form is a post-effective amendment filed pursuant to Rule 462(c)
under the Securities Act, check the following box and list the Securities Act
registration statement number of the earlier effective registration statement
for the same offering. [ ]
If delivery of the prospectus is expected to be made pursuant to Rule 434,
please check the following box. [ ]
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CALCULATION OF REGISTRATION FEE
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<TABLE>
<CAPTION>
Amount of Shares Proposed Proposed
Title of Securities to be Maximum Offering Maximum Aggregate Amount of
to Be Registered Registered (1) Price Per Share (2) Offering Price (2) Registration Fee
- --------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
Common Stock 1,319,269 $4.00 $ 5,277,076 $1,599
1,061,000 $4.00 $ 4,244,000 $ 0(1)
- --------------------------------------------------------------------------------------------------------
Total 2,380,269 $ 9,521,076 $1,599
========================================================================================================
</TABLE>
(1) This Registration Statement amends the Company's Registration Statement
on Form SB-2. Commission File No. 333-08227 and pursuant to Rule 429 of
the Securities Act of 1933, as amended, carries forward 1,061,000 shares
of Common Stock. The filing fee of $4,341.60 was paid in connection with
the filing of the previous Registration Statement.
(2) Estimated pursuant to Rule 457(c) under the Securities Act of 1933
solely for the purpose of calculating the registration fee.
Pursuant to Rule 429 of the Securities Act of 1933, the Prospectus contained
herein is a combined Prospectus relating to this Registration Statement and
Registration Statement No. 333-08227.
The Registrant hereby amends this Registration Statement on such date or
dates as may be necessary to delay its effective date until the Registrant
shall file a further amendment which specifically states that this Registration
Statement shall thereafter become effective in accordance with Section 8(a) of
the Securities Act of 1933 or until the Registration Statement shall become
effective on such date as the Commisssion, acting pursuant to said Section 8(a),
may determine.
<PAGE>
INFORMATION CONTAINED HEREIN IS SUBJECT TO COMPLETION OR AMENDMENT. A
REGISTRATION STATEMENT RELATING TO THESE SECURITIES HAS BEEN FILED WITH THE
SECURITIES AND EXCHANGE COMMISSION. THESE SECURITIES MAY NOT BE SOLD NOR MAY
OFFERS TO BUY BE ACCEPTED PRIOR TO THE TIME THE REGISTRATION STATEMENT BECOMES
EFFECTIVE. THIS PROSPECTUS SHALL NOT CONSTITUTE AN OFFER TO SELL OR THE
SOLICITATION OF AN OFFER TO BUY NOR SHALL THERE BE ANY SALE OF THESE SECURITIES
IN ANY STATE IN WHICH SUCH OFFER, SOLICITATION OR SALE WOULD BE UNLAWFUL PRIOR
TO REGISTRATION OR QUALIFICATION UNDER THE SECURITIES LAWS OF ANY SUCH STATE.
SUBJECT TO COMPLETION DATED AUGUST 29, 1997
PROSPECTUS
THE EASTWIND GROUP, INC.
2,380,269 Shares
of
Common Stock
This Prospectus relates to the resale by certain stockholders named
herein (the "Selling Stockholders") of 2,380,269 shares ("Offered Shares") of
Common Stock, par value $0.10 per share (the "Common Stock"), of The Eastwind
Group, Inc., a Delaware corporation (the "Company"), including 1,302,500 shares
of Common Stock which may be acquired upon the exercise of outstanding warrants
to purchase shares of Common Stock (the "Warrants"). The Company will pay all
expenses incurred in connection with this offering other than underwriting fees,
discounts and commissions, and certain counsel fees of the Selling Stockholders.
See "Plan of Distribution."
The Warrants, which were issued in certain private placement
transactions, consist of the following: 10,000 Class C Common Stock Purchase
Warrants (the "Class C Warrants"), 5,000 Class D Common Stock Purchase Warrants
(the "Class D Warrants"), 385,000 Class A-1 Common Stock Purchase Warrants (the
"Class A-1 Warrants"), and 700,000 Common Stock Purchase Warrants issued to
Clifton Capital Ltd. (the "Clifton Warrants"), 100,000 Class C-3 Common Stock
Purchase Warrants (the "Class C-3 Warrants), 30,000 Class C-4 Common Stock
Purchase Warrants (the "Class C-4 Warrants"), 22,500 Class C-5 Common Stock
Purchase Warrants (the "Class C-5 Warrants"), 5,000 Common Stock Purchase
Warrants (the "QSFC Warrants") and 45,000 Common Stock Purchase Warrants (the
"Canterbury Warrants"). See "Description of Securities." This Prospectus has
been prepared for the purpose of registering the Offered Shares under the
Securities Act of 1933, as amended (the "Act"), to allow for future sales by the
Selling Stockholders to the public without restriction.
The Company will receive net proceeds from the exercise of the
Warrants but will not receive any part of the proceeds from the sale of the
Offered Shares by the Selling Stockholders. There is no assurance that any of
the Warrants will be exercised and, therefore, there is no assurance that the
Company will receive any proceeds as a result of the exercise of the Warrants.
See "Selling Stockholders" and "Plan of Distribution."
The sale of the Offered Shares by the Selling Stockholders or by its
pledgees, donees, transferees or other successors in interest, may be effected
from time to time directly by the Selling Stockholders acting as principals for
their own account or through brokers, agents, dealers or underwriters in one or
more transactions at market prices prevailing at the time of sale on any stock
exchange on which the Common Stock may be listed at the time of sale or in
private sales at prices related to such prevailing market prices at the time of
sale or at prices otherwise negotiated. The Selling Stockholders may pay
commissions or other compensation to broker-dealers in connection with such
sales, which may be in excess of customary commissions charged for national
stock exchange transactions. The Selling Stockholders and any brokers-dealers
acting in connection with the sale of the Offered Shares may be deemed to be
"underwriters" within the meaning of the Act. Any commissions received by a
broker or dealer in connection with resales of the Offered Shares may be deemed
to be underwriting commissions or discounts under the Act. See "Plan of
Distribution."
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.
PROSPECTIVE PURCHASERS SHOULD CONSIDER THE RISKS SET FORTH UNDER "RISK
FACTORS" COMMENCING ON PAGE 5.
The Common Stock trades on the Nasdaq Small Cap Market under the
symbol "EWND." On August 27, 1997, the last sale price of the Common Stock as
reported by the Nasdaq Small Cap Market, was $4.25 per share.
The date of this Prospectus is _________, 1997.
<PAGE>
AVAILABLE INFORMATION
The Company has filed a Registration Statement on Form S-3
(together with all amendments and exhibits thereto, the "Registration
Statement") with the Securities and Exchange Commission (the "Commission")
relating to the shares of Common Stock offered hereby. This Prospectus
does not contain all the information set forth in the Registration
Statement, certain portions of which have been omitted pursuant to the
rules and regulations of the Commission. Reference is hereby made to the
Registration Statement for further information with respect to the Company
and the securities offered hereby. Any statements contained herein
concerning the provisions of any document filed as an exhibit to the
Registration Statement or otherwise filed with the Commission are not
necessarily complete, and in each instance reference is made to the copy of
such document so filed. Each such statement shall be qualified in its
entirety by such reference.
The Company is subject to the informational requirements of the
Securities Exchange Act of 1934, as amended (the "Exchange Act"), and, in
accordance therewith, files reports, proxy statements and other information
with the Commission. Proxy statements concerning the Company, reports, and
other information filed by the Company can be inspected and copied at the
public reference facilities maintained by the Commission at 450 Fifth
Street, N.W., Washington, D.C. 20549 and at the Commission' s regional
offices in New York (7 World Trade Center, Suite 1300, New York, New York
10048) and Chicago (Citicorp Center, 500 West Madison Street, Suite 1400,
Chicago, Illinois, 60661-2511). Copies of such material can be obtained
from the Public Reference Section of the Commission at 450 Fifth Street,
N.W., Washington, DC 20549 at prescribed rates. In addition, registration
statements and certain other filings made with the Commission through its
"EDGAR" system are publicly available through the Commission's site on the
Internet's World Wide Web, located at http://www.sec.gov. This
Registration Statement, including all exhibits thereto, has been filed with
the Commission through EDGAR.
The Company will furnish, without charge, to any person to whom a
copy of this Prospectus is delivered, upon such person's written or oral
request, a copy of any and all of the documents that have been incorporated
by reference in this Prospectus (not including exhibits to such documents,
unless such exhibits are specifically incorporated by reference into such
documents). Any such request should be directed to William B. Miller,
Senior Vice President and Chief Financial Officer, The Eastwind Group,
Inc., 100 Four Falls Corporate Center, Suite 305, West Conshohocken,
Pennsylvania 19428, telephone number: (610) 828-6860.
INCORPORATION OF CERTAIN DOCUMENTS BY REFERENCE
The following documents filed by the Company with the Commission
(File No. 0-27638) are incorporated in this Prospectus by reference:
(a) The Company's Annual Report on Form 10-KSB for the
fiscal year ended December 31, 1996;
(b) The Company's Quarterly Reports on Form 10-QSB for the
quarters ended March 29, 1997 and June 28, 1997;
(c) The Company's Current Reports on Form 8-K and 8-K/A
filed November 1, 1996, December 31, 1996, January 14,
1997, March 17, 1997, April 2, 1997 and June 2, 1997;
(d) The description of the Common Stock contained in the
Company's Registration Statement on Form 8-A
dated January 29, 1996, including any amendments or
reports filed for the purpose of updating such
description; and
(e) All documents subsequently filed by the Company
pursuant to Sections 13(a), 13(c), 14 or 15(d)
of the Exchange Act prior to the termination of the
offering shall be deemed to be incorporated by
reference herein from their respective dates of filing.
Any statements contained in a document incorporated or deemed to
be incorporated by reference herein shall be deemed to be modified or
superseded for purposes of this Prospectus to the extent that a statement
contained herein or in any other subsequently filed document which also is
incorporated or deemed to be incorporated by reference
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herein modifies or supersedes such statement. Any such statement so
modified or superseded shall not be deemed, except as so modified or
superseded, to constitute a part of this Prospectus.
CAUTIONARY STATEMENT
When used in this Prospectus and in other public statements by
the Company and Company officers, the words "estimate," "project,"
"intend," "believe," "anticipate" and similar expressions are intended to
identify forward-looking statements regarding events and financial trends
which may affect the Company's future operating results and financial
position. Such statements are subject to risks and uncertainties that
could cause the Company's actual results and financial position to differ
materially. Such factors are described in detail below under "Risk
Factors" and include, among others: (i) the Company's ability to identify
appropriate acquisition candidates, complete acquisitions on satisfactory
terms, and successfully integrate acquired businesses; (ii) the intense
competition and low barriers to entry in the industries in which the
Company competes; (iii) the Company's ability to obtain financing on
satisfactory terms and the degree to which the Company is leveraged,
including the extent to which currently outstanding options and warrants
are exercised; (iv) the sensitivity of the Company's businesses to general
economic conditions; (v) the timing of orders from, and shipments to, major
customers; (vi) the timing of new product sales; (vii) the introduction and
market acceptance of new products; (viii) factors associated with
international sales such as the relative strength of the dollar when
compared to the currencies of the countries into which the Company exports
product; (ix) the Company's ability to remain in compliance with the
numerous environmental, health and safety requirements to which it is
subject; (x) changes in accounting principles, policies or guidelines; and
(xi) other economic, competitive, governmental and technological factors
affecting the Company's operations, markets, products, services and prices.
Additional factors are described in the Company's public reports filed with
the Commission. Investors are cautioned not to place undue reliance on
these forward-looking statements, which speak only as of the date made.
The Company undertakes no obligation to publicly release the result of any
revision of these forward-looking statements to reflect events or
circumstances after the date they are made or to reflect the occurrence of
unanticipated events.
THE COMPANY
GENERAL OVERVIEW
The Company is a holding company formed in Delaware in August
1993 to acquire and consolidate middle-market manufacturing businesses on
an industry by industry basis. The Company focuses on the acquisition of
entities that management believes are not performing to potential. To
date, the Company has completed the acquisition of the following six
companies, which currently comprise the Company's sole operating
subsidiaries: Polychem Corporation ("Polychem"), Princeton Academic Press,
Inc. ("Princeton"), Centennial Printing Corporation ("Centennial"), Ivy-
Tygart Acquisition Corp. ("Ivy"), Lavelle Company ("Lavelle") and
Wickersham Printing Company ("Wickersham").
Consistent with its strategy of consolidating industry groups,
the Company has formed a new wholly-owned subsidiary, Team Graphics, Inc.
("Team Graphics"), to become the principal entity for current and future
consolidation in the printing and graphic arts industry. In March 1997,
the Company exchanged a combination of its investments in Princeton,
Centennial and Wickersham and cash for all the outstanding stock of Team
Graphics, which concurrently became the parent of these printing companies.
Gary Stiffler was elected President and Chief Operating Officer of Team
Graphics, in addition to his duties as President of Centennial and
Wickersham. The Company believes that this consolidation of the printing
companies will provide benefits through increased purchasing power,
consolidation of general and administrative functions, and, perhaps most
importantly, a synergy of printing and binding capabilities to better
penetrate the markets of each company.
The Company's principal executive office is located at 100 Four
Falls Corporate Center, Suite 305, West Conshohocken, Pennsylvania and its
telephone number is (610) 828-6860.
POLYCHEM CORPORATION
Polychem is a Pennsylvania corporation formed in March 1995 which
acquired substantially all of the operating assets and business of the
Polychem Division of The Budd Company. As a division of The Budd Company,
Polychem produced a wide array of engineered components for the automotive
and other industries for over 50 years. In recent years, Polychem has
shifted its focus to manufacturing products designed for the wastewater
treatment market.
3
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Currently, revenues from the wastewater treatment market account for
approximately 85% of Polychem's annual revenue. Polychem develops and
manufactures custom engineered plastic molded products at its 220,000
square foot headquarters in Phoenixville, Pennsylvania. Its manufacturing
capabilities include injection, compression and transfer molding of
engineered plastics, reaction injection molded processing of cast nylon
material, profile extrusion of thermoset resins and a complete fabricating
shop with computerized numerical control equipment. Through these
processes, Polychem engineers and produces an extensive line of molded
plastic products. Typical products include complete non-metallic
rectangular clarifier component systems for wastewater treatment
applications, cast nylon sprockets and wear shoes, cast nylon elevator
buckets, phenolic sprockets and pulleys, bearings and molded conveyor
chains. Polychem markets its plastic chain, engineered plastic components
and plastic buckets primarily through distributors. The balance of its
products are sold by its own sales force.
PRINCETON ACADEMIC PRESS, INC.
Princeton is a Delaware corporation which was formed by Messrs.
Paul A. DeJuliis, the Chief Executive Officer of the Company and John R.
Thach, a director of the Company, and two other individuals in June 1993 to
complete the acquisition of the book manufacturing operations of Princeton
University Press ("PUP"), a book publisher associated with Princeton
University. PUP originally established Princeton's operation in 1905 to
service its book manufacturing needs, and over time Princeton evolved into
a high-quality manufacturer of black and white print work for university
presses. Currently, Princeton performs pre-press, printing and binding
services for a national clientele.
CENTENNIAL PRINTING CORPORATION
Centennial was formed in 1977 and was acquired by the Company on
October 17, 1996. Centennial is a full service commercial printer which
performs complete, high-quality electronic pre-press, multicolor printing,
bindery and fulfillment for clientele in the Mid-Atlantic region.
Centennial specializes in printing and finishing multicolor brochures,
folders, catalogues, posters and annual reports as well as film preparation
for advertisements, box manufacturers and WEB production. Centennial's
custom designed 50,000 square foot facility in King of Prussia,
Pennsylvania is able to meet exacting humidity and temperature control
specifications required for fine quality printing.
IVY-TYGART ACQUISITION CORPORATION
Ivy is a majority-owned (92.5%) subsidiary of the Company, which
was formed in October 1996 for the purpose of acquiring substantially all
of the assets of Tygart Moulding Corp., which acquisition was consummated
on December 31, 1996. Ivy serves three market areas: architectural
hardwood trim for the residential building trade, picture moulding for the
picture wholesale trade, and retail picture framing through four retail
stores. The three segments of the business do business under the names
Tygart Moulding, Ivy Industries, and Picture Parts, respectively.
Tygart Moulding manufactures hardwood flooring and trim products
for the residential homebuilding market. These items are sold through
distributor/dealers, directly to the homeowner or contractor. A sales
force comprised of independent representatives promotes these products to
major contractors in their territory.
Ivy Industries finishes picture moulding obtained from Tygart
Moulding and sells it to the picture frame industry. Its sales force
consists of manufacturers' representatives who present Ivy's products to
distributors, picture frame dealers and OEM accounts.
The Picture Parts segment consists of one (1) retail store which
sells picture frames manufactured by Ivy Industries and products from other
related framing accessory companies.
WICKERSHAM PRINTING COMPANY
The Company acquired all of the outstanding common stock of
Wickersham from its shareholders pursuant to a Stock Exchange Agreement
dated as of January 3, 1997. In return for their common stock of
Wickersham, the shareholders of Wickersham received from the Company, in
accordance with their percentage ownership of Wickersham common stock prior
to the acquisition, an aggregate of 30,000 shares of the Common Stock of
the Company.
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The Company also owns 250 shares of Series A Preferred Stock, par
value $1,000 per share, of Wickersham which it purchased from Wickersham on
May 13, 1996 for an aggregate purchase price of $250,000.
Wickersham is a commercial printer which, through its two
production facilities, manufactures books using conventional offset
printing and "on demand" printing technology.
LAVELLE COMPANY
Lavelle was incorporated to purchase the net assets of Lavelle
Aircraft which was liquidated under Chapter 11 of the U.S. Bankruptcy law.
Lavelle is a sheetmetal fabricator and manufacturer of products for the
aerospace industry.
The Company acquired all of the outstanding common stock of
Lavelle from its shareholders pursuant to a Stock Exchange Agreement dated
as of January 3, 1997. In return for their Lavelle common stock, the
shareholders of Lavelle received from the Company, in accordance with their
percentage ownership of Lavelle common stock prior to the acquisition, an
aggregate of 44,537 shares of the Common Stock of the Company
RISK FACTORS
The securities offered hereby are speculative in nature and
involve a high degree of risk. An investment in the securities should not
be made by any investor who cannot afford the loss of his entire
investment. Prior to making an investment decision with respect to the
securities offered by this Prospectus, prospective investors should
carefully consider, along with the other matters discussed in this
Prospectus, the following risk factors:
NO SIGNIFICANT INDEPENDENT HISTORY OF OPERATIONS; HISTORICAL NET LOSSES OF
OPERATING SUBSIDIARIES
The Company is a holding company which has only recently acquired
its operating subsidiaries and, as such, has a limited history of
independent operations. Both Polychem and Princeton were formerly, but are
no longer divisions of significantly larger entities in their respective
industries that realized net losses from operations during their last
fiscal years prior to acquisition by the Company. Princeton has realized
net losses from operations in all periods since its acquisition and
Polychem has been profitable in each calendar quarter since being purchased
by the Company, except the quarter ended June 28, 1997. Centennial has
experienced losses since being purchased by the Company continuing the
trend of pre-acquisition losses. Wickersham had a history of substantial
losses pre-acquisition and continues to realize losses post-acquisition,
however at a reduced rate. There can be no assurance that the Company's
operations will realize revenues and gross profits sufficient to achieve or
sustain profitability on a quarterly or annual basis in the future. In the
event it fails to do so, the Company's ability to raise additional
financing could be impaired. In addition, losses from operations will
negatively affect the value of stockholders' equity and, accordingly, the
value of each share of Common Stock.
ADDITIONAL CAPITAL REQUIREMENTS; RELIANCE ON FURTHER ACQUISITIONS
Although the Company intends to devote significant efforts to
improving the profitability of its current subsidiaries, ultimately the
Company's growth depends upon the achievement of its goal of acquiring and
consolidating underperforming middle-market manufacturing businesses. No
assurances can be made that the Company will be successful in identifying
future candidates for acquisition, that it will have the available
resources to fund such acquisitions, or, if such acquisitions are
consummated, that they will result in operating profits for the Company.
In addition, any additional equity financing may be dilutive to
stockholders, and debt financing may impose substantial restrictions on the
Company's ability to operate and raise capital. The success of the
Company's strategy to acquire and consolidate underperforming middle-market
manufacturing businesses will depend upon the Company's ability to raise
additional capital in amounts sufficient to fund future acquisitions.
There can be no assurance that additional capital will be available to fund
such future acquisitions or that, if available, it will be obtainable on
satisfactory terms.
NO ASSURANCE OF PROCEEDS
A significant source of potential capital to the Company is the
proceeds from the exercise of the Warrants. See "Description of
Securities." The Company, however, has received no firm commitment for the
exercise of the Warrants. Thus, there can be no assurances that the
Company will realize material proceeds, if any, from the
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exercise of the Warrants. Furthermore, the Company has established no
minimum number of Warrants which must be exercised.
Although the Class C Warrants may be redeemed if certain
operating performance criteria are met, many of the other Warrants are for
terms lasting a number of years and warrant holders may prefer to hold them
until expiration or earlier redemption, even if the market price of the
Common Stock rises above the exercise price of the Warrants. See
"Description of Securities."
CONTROL BY CERTAIN STOCKHOLDERS
Management of the Company presently possesses, directly or
beneficially, control over 20.7% of the Company's outstanding voting
securities and have options and warrants to acquire additional voting stock
and, therefore, is, and for the foreseeable future, will likely be, in a
position to elect or influence the election of, at least, a majority of the
directors, and direct the policies of the Company without the concurrence
of the Company's public stockholders. In addition, the Company, Messrs.
DeJuliis and Thach, American Maple Leaf Financial Corporation ("AMLF") and
FAC Enterprises, Inc. ("FAC") have entered into a voting agreement (the
"Voting Agreement") concerning the election of such directors, which will
continue in effect until the earlier of (i) March 10, 1998 or (ii) the
completion of an underwritten public offering which results in aggregate
cash proceeds of not less than $7.5 million at a per share price of not
less than $5.00 per share. Pursuant to the Voting Agreement, AMLF and FAC
are guaranteed the ability to elect at least one of the Company's
directors. See "Selling Stockholders" and "Description of Securities."
ADEQUACY OF WORKING CAPITAL FINANCING
The Company has financed its working capital requirements and
capital expenditures through cash flows generated from operations, bank
debt, sales of Company securities and equipment leases. Each of the
Company's operating subsidiaries has established revolving lines of credit
with commercial lenders that currently serve to satisfy each subsidiary's
working capital needs. In order to satisfy the Company's long-term
obligations and support its future growth, the Company may require
additional capital. Any additional equity financing may be dilutive to
stockholders, and debt financing may impose substantial restrictions on the
Company's ability to operate and raise additional funds. There can be no
assurance that additional capital will be available or that, if available,
such capital will be obtainable on satisfactory terms.
EFFECTS OF SECURED LIENS ON FUTURE FINANCING ACTIVITIES
A significant portion of the Company's assets has been pledged as
collateral to secure various debt obligations of the Company. In the event
the Company fails to comply with its obligations, its assets could be
foreclosed upon. Moreover, to the extent that the Company's assets
continue to be pledged to secure the obligations, such assets will be
unavailable to secure additional debt financing, which may adversely affect
the Company's ability to borrow in the future.
HOLDING COMPANY RISKS
The Company, as a holding company without significant income from
operations, will be dependent upon the income from its operating
subsidiaries to meet its operating expenses. If its operating subsidiaries
are unable to pay dividends or otherwise distribute amounts to the Company
sufficient to cover its operating expenses, the Company may be subject to
liquidity problems, even if, on a consolidated basis, its operating
subsidiaries are profitable.
EFFECT OF OUTSTANDING WARRANTS
As of the date hereof the Company had outstanding warrants and
options to purchase 2,347,500 shares of Common Stock. To the extent that
the warrants or options are exercised and the shares underlying such
warrants and options are issued, the price of the Common Stock in the
market may be substantially reduced. Moreover, for the term of the
warrants and options issued by the Company, 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 interest of the other stockholders.
Further, the terms on which the Company may obtain additional financing
during that period may be adversely affected by the existence of such
warrants and options. The holders of such warrants and options may
exercise them at a time when the Company might be able to obtain additional
capital through a new offering of securities on terms more favorable than
those provided therein. The Company has undertaken to file this Prospectus
with the Commission pursuant to certain
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registration rights enjoyed by the holders of certain warrants. The
expense of registration of this Prospectus will be borne by the Company.
DIVIDENDS NOT LIKELY
The Company does not intend to declare or pay cash dividends in
the foreseeable future. Earnings, if any, are expected to be retained to
help finance acquisitions and develop its business. Moreover, payment of
dividends is limited or prohibited pursuant to the terms of a subordinated
debenture issued by the Company to Mentor Special Situation Fund, L.P.
("MSSF") and the Series A Preferred Stock of the Company. In addition, the
loan agreements of certain of the Company's subsidiaries restrict or
prohibit the payment of dividends from such subsidiaries to the Company.
The Company is also dependent, in part, upon the earnings of its
subsidiaries for cash which would be used to pay dividends. See
"Description of Securities."
DEPENDENCE ON KEY PERSONNEL
The Company's future success is dependent upon the continued
efforts of its management personnel at both the Company's operating
subsidiaries and the holding company level. The loss of the services of
one or more of such key personnel at either the parent or subsidiary level
may have a material adverse effect on the Company's business. The Company
does not have any "key-man" insurance on the lives of any of its employees.
ANTI-TAKEOVER PROVISIONS; CERTAIN PROVISIONS OF THE COMPANY'S CERTIFICATE
OF INCORPORATION AND DELAWARE LAW
The Company's Certificate of Incorporation classifies the Board
of Directors into three separate classes as follows: Three directors
constitute the Class I Directors and are elected for a term expiring at the
2000 annual meeting; two directors constitute the Class II Directors and
are elected for a term expiring at the 1999 annual meeting; three directors
constitute the Class III Directors and are elected for a term expiring at
the 1998 annual meting. Successor directors will be elected for a term of
3 years.
The classified board may have a significant effect on the ability
of stockholders to change the composition of an incumbent board and to
benefit from certain business transactions which are opposed by an
incumbent board. It may therefore discourage accumulations by third
parties of voting stock in the Company because its provisions would operate
to delay the purchaser's ability to obtain control of the board in a
relatively short period of time because in the context of a classified
board it would generally take a purchaser of a majority of the Company's
stock at least two annual meetings of stockholders to elect a majority of
the board, and the purchaser would need to obtain the affirmative vote of
the holders of at least a majority of the voting power of the outstanding
shares entitled to vote in an election of directors in order to remove any
directors, and then only for cause. Consequently, the effect of the
classified board may be to enhance the longevity of present management and
discourage certain mergers, tender offers, proxy contests or other
potential takeover proposals which some or a majority of the stockholders
of the Company might otherwise believe to be in their best interests.
The Certificate of Incorporation contains provisions that may be
considered to have an anti-takeover effect including provisions which state
that directors may only be removed for cause and that prohibit stockholders
from calling a special meeting or from voting by written consent. The
Certificate of Incorporation also provides that shares of preferred stock
may be issued in the future without stockholder approval and upon such
terms and conditions and with such rights, privileges and preferences as
the Board of Directors may determine. See "Description of Securities."
The Company is governed by the provisions of Section 203 of the
General Corporation Law of the State of Delaware (the "DGCL"), an anti-
takeover law. In general, the law prohibits a public Delaware corporation
from engaging in a "business combination" with an "interested stockholder"
for a period of three years after the date of the transaction in which the
person became an interested stockholder, unless the business combination is
approved in a prescribed manner. "Business combination" includes mergers,
asset sales and other transactions resulting in a financial benefit to the
stockholder. An "interested stockholder" is a person who, together with
its affiliates and associates, owns (or, within three years did own) 15% or
more of the corporation's voting stock. The supermajority voting
provisions in the Company's bylaws and the provisions regarding certain
business combinations under the DGCL could have the effect of delaying,
deferring or preventing a change in control of the Company or the removal
of existing management. This may have an anti-takeover effect and may
delay, defer or prevent a takeover attempt that a stockholder may consider
in his best interest. This may also adversely affect prevailing market
prices for the Common Stock. See "Description of Securities."
7
<PAGE>
COMPETITION
Although the printing and publishing industries have historically
been highly fragmented, in recent years, consolidation of customers and
competitors within the Company's printing subsidiaries' markets has
increased competitive pricing pressures. While most establishments are
relatively small, several of the Company's printing subsidiaries'
competitors are considerably larger or are affiliated with companies which
are considerably larger and have greater financial and other resources than
the Company. Currently, the majority of the Company's printing
subsidiaries' projects are competitively bid in the marketplace. The major
competitive factors are prices, product quality, customer service,
availability of appropriate printing capacity, rapid turnaround, scheduling
flexibility and technology support. There can be no assurance that the
Company's printing subsidiaries' will be able to successfully compete in
their markets or that they will achieve operating profits.
The markets in which Polychem competes are also highly
competitive. Experienced competition exists in each of Polychem's major
markets, and many of Polychem's competitors maintain good working
relationships with their customers, produce quality products and have
access to significantly greater financial resources than Polychem and the
Company. Polychem may be further disadvantaged by its disassociation from
The Budd Company, a large multinational corporation, as customers may feel
less comfortable using a smaller supplier especially with regard to
reliance on product warranties. There can be no assurance that Polychem
will be able to keep pace with the technological demands of the marketplace
or successfully enhance its products or develop new products which are
demanded by the industry.
The picture moulding industry in which Ivy operates is
fragmented. There are a few very large entities that manufacture and
import, and a significant number of very small manufacturers. Ivy is
positioned at the upper end of the quality spectrum and between these two
extremes in terms of size.
Lavelle competes in the very competitive aerospace industry as a
specialty fabricator of parts and accessories, principally focused toward
the refit segment of the market. Its special tooling and engineering
expertise within selected markets allows it to have an edge on its
competition due to lesser tooling up costs.
USE OF PROCEEDS
The Company will not receive any proceeds from the sale of the
Offered Shares by the Selling Stockholders. See "Selling Stockholders."
The gross proceeds that would be realized by the Company upon
full exercise of the Warrants is $5,605,650. The Company has received no
firm commitments for their exercise, and there can be no assurance that any
of the Warrants will be exercised.
Management cannot predict the amount of proceeds, if any, that
may be generated from the exercise of the Warrants. The net proceeds that
may be realized by the Company upon exercise of the Warrants will not be
utilized for any specific purpose other than to contribute to the Company's
working capital and to continue the operations of the Company in accordance
with the business strategy identified by management.
SELLING STOCKHOLDERS
The following table sets forth certain information with respect
to the beneficial ownership of the Common Stock by the Selling Stockholders
as of August 21, 1997. Unless otherwise indicated, the Selling
Stockholders possess sole voting and investment power with respect to the
shares listed. Except for Messrs. DeJuliis, Thach, Miller and Mendicino
who will beneficially own 41,667, 23,333, 23,333 and 13,333 shares of
Common Stock, respectively, and MSSF which will beneficially own 80,000
shares of Common Stock, the Selling Stockholders will not beneficially own
any Common Stock after this offering, assuming that they sell all of the
Offered Shares.
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<PAGE>
Number of Shares
Beneficially Owned Number of
Prior to Shares
Registration Registered
------------------ ----------
Clifton Capital Ltd. 825,000 825,000 (1)
Paul A. DeJuliis 517,667 476,000 (2)(3)
John R. Thach 492,333 469,000 (2)(4)
Bruce K. Worrall 182,232 182,232 (5)
American Maple Leaf Financial Corp. 100,000 100,000 (6)
B. Graeme Frazier 76,000 76,000 (7)
Canterbury Companies, Inc. 45,000 45,000 (8)
Mentor Management Company 110,000 30,000 (9)
John Yurchak, Jr. 25,493 25,493
William B. Miller 48,333 25,000 (10)
Equibonds S.A. 22,500 22,500 (11)
Anthony J. Mendicino 31,333 18,000 (12)
Charlotte Givens 17,000 17,000
Murdoch and Company 10,000 10,000 (13)
Calvary Lutheran Church 8,000 8,000
Albert C. Bailey 6,508 6,508
HST Partners 5,000 5,000 (14)
Quaker State Financial Corporation 5,000 5,000 (15)
C.D.L. Perkins 4,438 4,438
Stephen Perkins 4,438 4,438
John Burrows 4,438 4,438
Edward Merves 4,438 4,438
Michael Schlupp 2,839 2,839
Stephen J. Cooper 2,576 2,576
Dorothy Gilbert 2,219 2,219
Samuel R. Foster 2,219 2,219
Patricia Medvic 2,000 2,000
Arthur R. Dean, Jr. 1,890 1,890
Barbara Marks 1,000 1,000
Alexander Hartel 1,000 1,000
Clara Thompkins 1,000 1,000
James L. Porter 41 41
(1) Includes 700,000 shares of Common Stock that may be acquired upon
exercise of the Clifton Warrants.
(2) Includes 175,000 shares of Common Stock that may be acquired upon
exercise of Class A-1 Warrants.
(3) Mr. DeJuliis is Chairman, Chief Executive Officer and a director of
the Company.
(4) Mr. Thach is a director of the Company.
(5) Mr. Worrall is the former president and sole shareholder of
Centennial.
(6) Includes 100,000 shares of Common Stock that may be acquired upon
exercise of Class C-3 Warrants. Andrew Panzo, a director of the
Company, is a managing director of American Maple Leaf Financial
Corporation.
(7) Includes 20,000 shares of Common Stock that may be acquired upon
exercise of Class A-1 Warrants. Mr. Frazier is Director of Sales for
Princeton and was previously President of Princeton.
(8) Includes 45,000 shares of Common Stock that may be acquired upon
exercise of the Canterbury Warrants.
9
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(9) Includes 30,000 shares of Common Stock that may be acquired upon
exercise of Class C-4 Warrants. Edward F. Sager, a director of the
Company, is the President of Mentor Management Company.
(10) Includes 15,000 shares of Common Stock which may be acquired upon
exercise of Class A-1 Warrants. Mr. Miller is Senior Vice President,
Chief Financial Officer and a director of the Company.
(11) Includes 22,500 shares of Common Stock that may be acquired upon
exercise of Class C-5 Warrants.
(12) Mr. Mendicino is President, Chief Operating Officer and a director of
the Company.
(13) Includes 10,000 shares of Common Stock that may be acquired upon
exercise of Class C Warrants.
(14) Includes 5,000 shares of Common Stock that may be acquired upon
exercise of Class D Warrants.
(15) Includes 5,000 shares of Common Stock that may be acquired upon the
exercise of the QSFC Warrants.
DESCRIPTION OF SECURITIES
COMMON STOCK
The Company is authorized to issue 10,000,000 shares of Common
Stock, $.10 par value per share. As of the date hereof, 2,925,019 shares
were issued and outstanding. An additional 2,297,500 shares of Common
Stock are reserved for issuance upon the exercise of the Warrants and other
outstanding Common Stock purchase warrants and options. All outstanding
shares of Common Stock are fully paid and non-assessable.
The holders of Common Stock have equal rights to receive
dividends when, as and if declared by the Board of Directors, out of funds
legally available therefore. However, the Company has no current plans to
pay dividends with respect to its shares of Common Stock and, in addition,
certain restrictions limiting or prohibiting payment of such dividends are
contained in a subordinated debenture issued to MSSF, the terms of the
Series A Preferred Stock of the Company and loan agreements to which the
Company or its operating subsidiaries are currently obligated. Holders of
Common Stock have one vote for each share held of record and do not have
cumulative voting rights.
Holders of Common Stock are entitled upon liquidation of the
Company to share ratably in the net assets available for distribution.
Shares of Common Stock are not redeemable and have no preemptive or similar
rights under the Company's Certificate of Incorporation. However, MSSF has
nonassignable contractual rights of first refusal to purchase, pro rata,
all or any part of new securities which the Company may from time to time
propose to sell and issue. For this purpose, new securities do not include
shares issued upon exercise of outstanding Warrants. MSSF's right expires
at the earlier of June 30, 2001 or the Company's repayment of a $500,000
subordinated debenture issued to MSSF.
PREFERRED STOCK
GENERAL
The Company is also authorized to issue 3,000,000 shares of
Preferred Stock, $0.10 par value per share, of which 1,000 shares are
outstanding. The Board of Directors is authorized to issue Preferred Stock
in classes or series and to fix from time to time before issuance thereof
the number of shares in each series or class and all terms of such series
or class, including, but not limited to, all designations, preferences,
qualifications, limitations and restrictions with respect to the rate and
nature of dividends, the price, terms and conditions on which shares may be
redeemed, the amount payable in the event of voluntary or involuntary
liquidation, the terms and conditions for conversion or exchange into any
other class or series of stock, voting rights and other terms. The
issuance of Preferred Stock may have the effect of delaying or preventing a
change in control of the Company. The issuance of Preferred Stock could
decrease the amount of earnings and assets available for distribution to
the holders of Common Stock or could adversely affect the rights and
powers, including voting rights, of the holders of Common Stock. In
certain circumstances, such issuance could have the effect of decreasing
the market price of the Common Stock.
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<PAGE>
SERIES A PREFERRED STOCK
On May 10, 1996, the Company issued 1,000 shares of its newly
designated Series A Preferred Stock (the "Series A Preferred Stock") to
Odyssey Capital Group, L.P. for gross proceeds of $1,000,000. The Series A
Preferred Stock has a stated value of $1,000 per share and pays quarterly
dividends at the rate of 9% per annum until May 9, 1999, 15% per annum
thereafter until May 9, 2002 and 18% per annum thereafter. The Company may
redeem the Series A Preferred Stock at any time on thirty days' prior
written notice at the stated value per share plus accrued and unpaid
dividends thereon to the date of redemption. The holders of the Series A
Preferred Stock are entitled to payment of the stated value plus accrued
and unpaid dividends thereon, prior to payment in respect of any class of
capital stock of the Company, in the event of a liquidation or dissolution
of the Company. The Series A Preferred Stock is not entitled to voting
rights.
In connection with the issuance of the Series A Preferred Stock,
the Company issued 220,000 Common Stock purchase warrants which are each
exercisable to purchase one share of Common Stock at $6.00 per share until
they expire on May 10, 2003.
REDEEMABLE SERIES B PREFERRED STOCK
On October 17, 1996, pursuant to the merger of Centennial with a
wholly owned subsidiary of the Company, the Company issued 9,000 shares of
its newly designated Redeemable Series B Preferred Stock (the "Series B
Preferred Stock") to Bruce K. Worrall. The Series B Preferred Stock has a
stated value of $100 per share and the holder is entitled to receive cash
dividends at a rate of 6% of the stated value per annum. The holder of the
Series B Preferred Stock may require the Company to redeem for cash, in an
amount equal to the stated value plus accrued dividends, up to 1,800 shares
of the Series B Preferred Stock during each three month period beginning on
April 1, 1997, which initial request has been made. The Company has not
redeemed any of the Series B Preferred Stock in light of certain
arbitration proceedings pending between Mr. Worrall and the Company.
Holders of Series B Preferred Stock are entitled to one-tenth of a vote for
each share held of record.
OUTSTANDING WARRANTS
CLASS C WARRANTS
The Class C Warrants were offered in March 1995 to create a
reserve to be used by the Company in raising funds for additional potential
business opportunities and acquisitions. Each Class C Warrant, of which
there are 10,000 outstanding, entitles the holder to purchase one share of
Common Stock at an exercise price of $6.00 until March 10, 2005. Each of
the Class C Warrants are redeemable by the Company, upon 30 days written
notice, in whole or in part, at a call price of $.001 per Class C Warrant,
but such call for redemption may only be made (i) following any calendar
year in which the Company's consolidated financial statements evidence net
income of at least $400,000 and net income per share of at least $.40 or
(ii) at any time after the Company proposes to consummate the acquisition
of all of the stock or assets of another company whose annual gross
revenues from operations is at least $10 million (and protective provisions
ensure that if such proposed acquisition is not consummated then such
warrants shall be returned to the holder and the warrants shall continue in
full force and effect as if such redemption call had not been made).
CLASS D WARRANTS
The Class D Warrants, of which there are 5,000 outstanding, were
issued in March 1995 to four investors who loaned money to the Company,
evidenced by a promissory note, and who received the Class D Warrants and
shares of the Company's Common Stock as an inducement for such loan. Each
Class D Warrant entitles the holder to purchase one share of Common Stock
at an exercise price of $3.50 until March 31, 1998. The Class D Warrants
are not redeemable.
CLASS A-1 WARRANTS
The Class A-1 Warrants have been issued to certain founding
stockholders and other officers of the Company or its operating
subsidiaries. Each Class A-1 Warrant, of which there are 385,000
outstanding, entitles the holder to purchase one share of Common Stock at
an exercise price of $4.00 until March 10, 2005. The Class A-1 Warrants
are not redeemable.
11
<PAGE>
CLIFTON WARRANTS
The Clifton Warrants have been issued to Clifton Capital Ltd.
("Clifton") in connection with Clifton's financing commitment to the
Company. There are 700,000 shares of Common Stock underlying two Clifton
Warrants. The first Clifton Warrant entitles the holder to purchase up to
500,000 shares of Common Stock at an exercise price of $3.00 per share
through December 31, 1997. The second Clifton Warrant entitles the holder
to purchase up to 200,000 shares of Common Stock at an exercise price of
$5.00 through December 31, 1997.
CLASS C-3 WARRANTS
The Class C-3 Warrants have been issued to American Maple Leaf
Financial Corporation as payment for investment banking services. Each
Class C-3 Warrant, of which 100,000 are outstanding, entitles the holder to
purchase one share of Common Stock at an exercise price of $9.00 until
October 7, 1999. The Class C-3 Warrants are not redeemable.
CLASS C-4 WARRANTS
The Class C-4 Warrants were issued to Mentor Management Company
in October 1996 as payment for investment banking services. Each Class C-4
Warrant, of which 30,000 are outstanding, entitles the holder to purchase
one share of Common Stock at an exercise price of $6.00 until October 7,
2001. The Class C-4 Warrants are not redeemable.
CLASS C-5 WARRANTS
The Class C-5 Warrants were issued to Equibonds S.A. in November
1996 as payment for investment banking services. Each Class C-5 Warrant,
of which there are 22,500 outstanding, entitles the holder to purchase one
share of Common Stock at an exercise price of $6.00 until November 4, 1999.
The Class C-5 Warrants are not redeemable.
QSFC WARRANTS
The QSFC Warrants were issued to Quaker State Financial
Corporation in March 1997 as payment for investment banking services. Each
QSFC Warrant, of which 5,000 are outstanding, entitles the holder to
purchase one share of Common Stock at an exercise price of $6.63 until
March 1, 2002. The QSFC Warrants are not redeemable.
CANTERBURY WARRANTS
The Canterbury Warrants were issued to Canterbury Companies, Inc.
in August 1997 as payment for investment banking services. Each Canterbury
Warrant, of which 45,000 are outstanding, entitles the holder to purchase
one share of Common Stock at an exercise price of $4.00 until August 20,
2002. The Canterbury Warrants contain redemption provisions similar to
those in the Class C Warrants described above.
GENERAL
There are two other warrants to purchase Common Stock presently
outstanding, the underlying Common Stock of which is not being registered
hereby: a warrant to purchase up to 80,000 shares of Common Stock at an
exercise price of $6.00 per share until May 10, 2003 and a warrant to
purchase up to 220,000 shares of Common Stock at an exercise price of $6.00
per share until May 10, 2003.
The warrants provide for adjustment of the exercise price and for
a change in the number of shares issuable upon exercise to protect holders
against dilution in the event of a stock dividend, stock split, combination
or reclassification of the Common Stock. The warrants may be exercised
upon surrender of the warrant certificate on or prior to the expiration
date (or in the case of those warrants which are redeemable, at an earlier
redemption date) of such warrant at the offices of the Company or its
Transfer Agent, with the form of "Election to Purchase" completed and
executed as indicated, accompanied by payment of the full exercise price
(by certified or bank check, payable to the order of the Company) for the
number of shares with respect to which the warrant is being exercised. In
the event that a warrant is being exercised for less than the full amount
of shares subject to such warrant, the Company will return to the holder a
replacement warrant evidencing the number of shares subject to the warrant
which have not been exercised.
12
<PAGE>
Shares issued upon exercise of warrants and paid for in accordance with the
terms of the warrants will be fully paid and non-assessable.
The warrants do not confer upon the holder thereof any voting or
other rights of a stockholder.
LIMITED GRANT OF REGISTRATION RIGHTS
The Company has granted registration rights to certain of the
stockholders who acquired shares in private placement transactions. The
Company has similarly granted registration rights to the holders of some of
the Warrants who acquired such Warrants in private placement transactions.
Accordingly, the Company has agreed to include such shares of Common Stock
held or issuable upon exercise of the Warrants in the Registration
Statement of which this Prospectus is a part. The costs of filing the
Registration Statement will be borne entirely by the Company.
In connection with any such registration, the Company shall have
no obligation (i) to assist or cooperate in the offering or disposition of
such Offered Shares; (ii) to indemnify or hold harmless the holders of any
such Offered Shares beyond those specific indemnification obligations
contained in certain agreements with the Selling Stockholders; (iii) to
obtain a commitment from an underwriter relative to the sale of any such
Offered Shares or (iv) to include such Offered Shares within an
underwritten offering of the Company. The Company assumes no obligation or
responsibility whatsoever to determine a method of disposition for such
Offered Shares.
TRANSFER AGENT
Stock Trans, Inc. of Ardmore, Pennsylvania, serves as Transfer
Agent for the Common Stock and the Warrants.
PLAN OF DISTRIBUTION
The Registration Statement, of which this Prospectus is a part,
has been filed with the Commission by the Company in accordance with an
agreement between the Company and the Selling Stockholders pursuant to
which the Company has agreed to pay the filing fees, costs and expenses
associated with the Registration Statement (other than underwriting fees,
discounts and commissions).
SELLING STOCKHOLDERS
The Selling Stockholders are offering the Offered Shares for
their own account, and not for the account of the Company. The Company
will not receive any proceeds from the sale of the Offered Shares by the
Selling Stockholders.
Each Selling Stockholder has agreed (a) not to effect any offers
or sales of the Common Stock in any manner other than as specified in this
Prospectus, (b) to inform the Company of any sale of Common Stock at least
one business day prior to such sale and (c) not to purchase or induce
others to purchase Common Stock in violation of Rule 102 of Regulation M
under the Exchange Act.
The sale of the Offered Shares by the Selling Stockholders or by
their pledgees, donees, transferees or other successors in interest may be
effected from time to time to purchasers directly by any of the Selling
Stockholders acting as principals for their own accounts in one or more
transactions on the Nasdaq Small Cap Market or on any other national stock
exchange upon which the Company is listed or in private sales at prices
related to such prevailing market prices at the time of sale or at prices
otherwise negotiated. Alternatively, the Offered Shares may be offered
from time to time through agents, brokers, dealers or underwriters
designated from time to time, and such agents, brokers, dealers or
underwriters may receive compensation in the form of commissions or
concessions from the Selling Stockholders or the purchasers of the Common
Stock which may be in excess of customary commissions charged for national
stock exchange transaction. The Selling Stockholders and any brokers-
dealers acting in connection with the sale of the Offered Shares may be
deemed to be "underwriters" within the meaning of the Act. Any commissions
received by a broker or dealer in connection with resales of the Offered
Shares may be deemed to be underwriting commissions or discounts under the
Act.
Under the Exchange Act, and the regulations thereunder, any
person engaged in a distribution of the shares of Common Stock of the
Company offered by this Prospectus may not simultaneously engage in market
making
13
<PAGE>
activities with respect to the Common Stock of the Company during the
applicable "cooling off" periods prior to the commencement of such
distribution. Each Selling Stockholder may be subject to applicable
provisions of the Exchange Act and the rules and regulations thereunder
including, without limitation, Rule 102 of Regulation M, which provisions
may limit the timing of purchases of Common Stock by the Selling
Stockholders. There are possible limitations upon trading activities and
restrictions upon broker-dealers effecting transactions in certain
securities which may also materially affect the value of, and an investor's
ability to dispose of, the Company's securities. See "Risk Factors."
EXERCISE OF WARRANTS
The Company is registering for resale shares of Common Stock
which may be acquired upon exercise of Warrants that were previously issued
to the holders thereof in private placement transactions. The Warrants are
exercisable by tendering to the Company the appropriate exercise price
along with the Warrant certificate (with the "Election to Purchase" section
properly filled out). Upon exercise, the Company will issue such fully
paid and non-assessable shares of Common Stock as are specified in exchange
for payment of the exercise price made in cash or by certified check or
bank draft payable to the order of the Company. The Class C Warrants may
be subject to redemption by the Company. See "Description of Securities."
The exercise price of the Warrants was determined through arm's
length negotiations with the holders thereof.
There can be no assurance that the Selling Stockholders will sell
any or all of the Offered Shares of Common Stock. The Company will receive
no proceeds from any sales of the Offered Shares of Common Stock.
LEGAL OPINION
The validity of the Offered Shares has been passed upon for the
Company by Pepper, Hamilton & Scheetz LLP, Philadelphia, Pennsylvania.
EXPERTS
The financial statements of the Company and its subsidiaries
incorporated into this Prospectus by reference to the Company's Annual
Report on Form 10-KSB for the fiscal year ended December 31, 1996 and its
current reports on Form 8-K/A filed December 31, 1996, March 17, 1997 and
June 2, 1997 have been so incorporated in reliance on the reports of Arthur
Andersen LLP, Laskaris & Laskaris, Hantzmon, Wiebel & Company and Walz,
Deihm, Geisenberger, Bucklen & Tennis P.C., respectively, independent
accountants, given on the authority of said firms as experts in auditing
and accounting.
14
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========================================
No dealer, salesman or other person has been authorized to give any information
or to make any representations other than those contained in this Prospectus in
connection with the offer made hereby, and, if given or made, such information
or representations must not be relied upon as having been authorized by the
Company. This Prospectus does not constitute an offer to sell, or a
solicitation of an offer to buy, the securities offered hereby to any person in
any state or other jurisdiction in which such offer or solicitation is unlawful.
Neither the delivery of this Prospectus nor any sale made hereunder shall, under
any circumstances, imply that information contained herein is correct as of any
time subsequent to its date or that there has not been any change in the facts
set forth in this Prospectus or in the affairs of the Company since the date
hereof.
___________________
TABLE OF CONTENTS
Page
Available Information...... 2
Incorporation of Certain
Information by Reference.. 2
Cautionary Statement....... 3
The Company................ 3
Risk Factors............... 5
Use of Proceeds............ 8
Selling Stockholders....... 8
Description of Securities.. 10
Plan of Distribution....... 13
Legal Opinion.............. 14
Experts.................... 14
========================================
========================================
2,380,269 Shares
THE EASTWIND GROUP, INC.
COMMON STOCK
----------
PROSPECTUS
----------
___________________, 1997
========================================
<PAGE>
PART II
INFORMATION NOT REQUIRED IN THE PROSPECTUS
ITEM 14. OTHER EXPENSES OF ISSUANCE AND DISTRIBUTION*
Securities and Exchange Commission Registration Fee......... $ 1,599
Legal fees and expenses .................................... 20,000
Accountants' fees and expenses.............................. 5,000
Miscellaneous............................................... 5,000
-------
TOTAL....................................... $31,599
=======
__________
* Estimated
ITEM 15. INDEMNIFICATION OF DIRECTORS AND OFFICERS
The Company has adopted the provisions of Section 102(b)(7) of
the General Corporation Law of the State of Delaware (the "DGCL") which
eliminate or limit the personal liability a director to the Company or its
stockholders for monetary damages for breach of fiduciary duty under
certain circumstances. The elimination or limitation does not apply where
there has been a breach of the duty of loyalty, failure to act in good
faith, engaging in intentional misconduct or knowingly violating a law,
paying a dividend or approving a stock repurchase which was deemed illegal
or obtaining an improper personal benefit.
Further, Section 145 of the DGCL provides, in general, that a
corporation incorporated under the laws of the State of Delaware, such as
the Company, may indemnify any person who was or is a party or is
threatened to be made a party to any threatened, pending or completed
action, suit or proceeding (other than an action by or in the right of the
corporation) by reason of the fact that such person is or was a director,
officer, employee or agent of the corporation, or is or was serving at the
request of the corporation as a director, officer, employee or agent of
another enterprise, against expenses (including attorneys' fees),
judgments, fines and amounts paid in settlement actually and reasonably
incurred by such person in connection with such action, suit or proceeding
if such person acted in good faith and in a manner such person reasonably
believed to be in or not opposed to the best interests of the corporation,
and, with respect to any criminal action or proceeding, had no reasonable
cause to believe such person's conduct was unlawful. In the case of an
action by or in the right of the corporation, a Delaware corporation may
indemnify any such person against expenses (including attorneys' fees)
actually and reasonably incurred by such person in connection with the
defense or settlement of such action or suit if such person acted in good
faith and in a manner such person reasonably believed to be in or not
opposed to the best interests of the corporation, except that no
indemnification shall be made in respect of any claim, issue or matter as
to which such person shall have been adjudged to be liable to the
corporation unless and only to the extent that the court determines such
person is fairly and reasonably entitled to indemnity for such expenses.
The directors and officers of the Company and its subsidiaries
are covered by policies of insurance under which they are insured, within
limits and subject to certain limitations, against certain expenses in
connection with the defense of actions, suits or proceedings, and certain
liabilities which might be imposed as a result of such actions, suits or
proceedings, in which they are parties by reason of being or having been
directors or officers. The Company is similarly insured, with respect to
certain payments it might be required to make to its directors or officers
under applicable statutes and its charter provisions.
Reference is made to Item 17 of this Registration Statement for
additional information regarding indemnification of directors and officers.
ITEM 16. EXHIBITS
4.1 Specimen Common Stock certificate of the Company (incorporated by
reference to exhibit 4.1 to the Company's Registration Statement on
Form SB-2, File no. 33-94252).
<PAGE>
4.2 Specimen form of Class A-1 Common Stock Purchase Warrant of the
Company (incorporated by reference to exhibit 4.2 to the Company's
Registration Statement on Form SB-2, File no. 33-94252).
4.3 Specimen form of Class C Common Stock Purchase Warrant of the Company
(incorporated by reference to exhibit 4.5 to the Company's
Registration Statement on Form SB-2, File no. 33-94252).
4.4 Specimen form of Class D Common Stock Purchase Warrant of the Company
(incorporated by reference to exhibit 4.6 to the Company's
Registration Statement on Form SB-2, File no. 33-94252).
4.5 Specimen forms of Common Stock Purchase Warrants issued to Clifton
Capital Ltd.
4.6 Specimen form of Class C-3 Common Stock Purchase Warrant.
4.7 Specimen form of Class C-4 Common Stock Purchase Warrant.
4.8 Specimen form of Class C-5 Common Stock Purchase Warrant.
4.9 Specimen form of QSFC Common Stock Purchase Warrant.
4.10 Specimen form of Canterbury Common Stock Purchase Warrant.
4.11 Certificate of Designation of Series A Preferred Stock (incorporated
by reference to exhibit 4.1 to the Company's Form 8-K dated May 10,
1996, File no. 0-27638).
4.12 Certificate of Designation of Series B Preferred Stock (incorporated
by reference to exhibit 4.8 to the Company's Form 10-KSB for the
fiscal year ended December 31, 1996, File no. 0-27638).
5 Opinion of Pepper, Hamilton & Scheetz LLP.
10.1 Securities Purchase Agreement between Clifton Capital Ltd. and the
Company dated July 16, 1997.
10.2 Registration Rights Agreement between Clifton Capital Ltd. and the
Company dated July 16, 1997.
23.1 Consent of Arthur Andersen LLP.
23.2 Consent of Laskaris & Laskaris.
23.3 Consent of Hantzmon, Wiebel & Company.
23.4 Consent of Walz, Deihm, Geisenberger, Bucklen & Tennis P.C.
23.5 Consent of Pepper, Hamilton & Scheetz LLP (included in Exhibit 5).
24 Power of Attorney (included on signature page).
ITEM 17. UNDERTAKINGS
(a) The undersigned registrant hereby undertakes:
(1) To file, during any period in which offers or sales are being
made, a post-effective amendment to this Registration Statement;
(i) To include any prospectus required by Section 10(a)(3) of the
Securities Act;
(ii) To reflect in the prospectus any facts or events which,
individually or in the aggregate, represent a fundamental change in the
information set forth in the Registration Statement. Notwithstanding the
foregoing, any increase or decrease in volume of securities offered (if the
total dollar value of securities offered would not exceed that which was
registered) and any deviation from the low or high and of the estimated
maximum offering range may be
II-2
<PAGE>
reflected in the form of prospectus filed with the Commission pursuant to
Rule 424(b) if, in the aggregate, the changes in volume and price represent
no more than a 20 percent change in the maximum aggregate offering price
set forth in the "Calculation of Registration Fee" table in the effective
registration statement.
(iii) To include any additional or changed material information
with respect to the plan of distribution not previously disclosed in the
Registration Statement or any material change to such information in the
Registration Statement;
provided, however, that paragraphs (a)(1)(i) and (a)(1)(ii) do not apply if
the information required to be included in a post-effective amendment by
those clauses is contained in periodic reports filed with or furnished to
the Commission by the Company pursuant to Section 13 or Section 15(d) of
the Exchange Act that are incorporated by reference in this Registration
Statement;
(2) That, for the purpose of determining any liability under the
Securities Act, each such post-effective amendment shall be deemed to be a
new registration statement relating to the securities offered therein, and
the offering of such securities at that time shall be deemed to be the
initial bona fide offering thereof.
(3) To remove from registration by means of a post-effective
amendment any of the securities being registered which remain unsold at the
termination of the offering.
(b) Insofar as indemnification for liabilities arising under the
Securities Act may be permitted to directors, officers and controlling
persons of the registrant pursuant to the foregoing provisions, or
otherwise, the registrant has been advised that in the opinion of the
Commission such indemnification is against public policy as expressed in
the Securities Act and is, therefore, unenforceable. In the event that a
claim for indemnification against such liabilities (other than the payment
by the registrant of expenses incurred or paid by a director, officer or
controlling person of the registrant in the successful defense of any
action, suit or proceeding) is asserted by such director, officer or
controlling person in connection with the securities being registered, the
registrant will, unless in the opinion of its counsel the matter has been
settled by controlling precedent, submit to a court of appropriate
jurisdiction the question whether such indemnification by it is against
public policy as expressed in the Securities Act and will be governed by
the final adjudication of such issue.
II-3
<PAGE>
SIGNATURES
Pursuant to the requirements of the Securities Act, the
registrant certifies that it has reasonable grounds to believe that it
meets all of the requirements for filing on Form S-3 and has duly caused
this post-effective amendment to a Registration Statement to be signed on
its behalf by the undersigned, thereunto duly authorized, in West
Conshohocken, Commonwealth of Pennsylvania, on August 29, 1997.
THE EASTWIND GROUP, INC.
By: /s/ Paul A. DeJuliis
---------------------
Paul A. DeJuliis, Chief
Executive Officer
and Chairman of the Board
POWER OF ATTORNEY
-----------------
KNOW ALL MEN BY THESE PRESENTS, that each person whose signature
appears below constitutes and appoints Paul A. DeJuliis, his true and
lawful attorney-in-fact and agent, with full power of substitution and
resubstitution, for him and in his name, place and stead, in any and all
capacities to sign any and all amendments (including, without limitation,
post-effective amendments) to this Registration Statement on Form S-3 and
any registration statement to which the prospectus contained herein relates
and any registration statement filed under Rule 462 under the Securities
Act, and to file the same, with all exhibits thereto, and other documents
in connection therewith, with authority to do and perform each and every
act and thing requisite and necessary to be done in and about the premises
as fully to all intents and purposes as he might or could do in person,
hereby ratifying and confirming all that said attorney-in-fact and agents
or his substitute or substitutes, may lawfully do or cause to be done by
virtue hereof.
Pursuant to the requirements of the Securities Act, this post-
effective amendment to the Company's Registration Statement has been signed
by the following persons in the capacities and on the dates indicated.
Date: August 29, 1997 /s/ Paul A. DeJuliis
---------------------------------
Paul A. DeJuliis, Chief Executive
Officer and Chairman of the Board
Date: August 29, 1997 /s/ Anthony J. Mendicino
--------------------------------
Anthony J. Mendicino, President,
Chief Operating Officer and
Director
Date: August 29, 1997 /s/ William B. Miller
----------------------------------
William B. Miller, Chief Financial
Officer, Treasurer and Director
Date: August 29, 1997 /s/ Porter Bibb
----------------------------------
Porter Bibb, Director
Date: August 29, 1997 /s/ Bruce Murray
----------------------------------
Bruce Murray, Director
Date: August 29, 1997 /s/ Andrew Panzo
----------------------------------
Andrew Panzo, Director
Date: August 29, 1997 /s/ Edward F. Sager
----------------------------------
Edward F. Sager, Director
Date: August 29, 1997 /s/ John R. Thach
---------------------------------
John R. Thach, Director
<PAGE>
EXHIBIT INDEX
4.5 Specimen forms of Common Stock Purchase Warrants issued to Clifton
Capital Ltd.
4.6 Specimen form of Class C-3 Common Stock Purchase Warrant.
4.7 Specimen form of Class C-4 Common Stock Purchase Warrant.
4.8 Specimen form of Class C-5 Common Stock Purchase Warrant.
4.9 Specimen form of QSFC Common Stock Purchase Warrant.
4.10 Specimen form of Canterbury Common Stock Purchase Warrant.
5 Opinion of Pepper, Hamilton & Scheetz LLP.
10.1 Securities Purchase Agreement between Clifton Capital Ltd. and the
Company dated July 16, 1997.
10.2 Registration Rights Agreement between Clifton Capital Ltd. and the
Company dated July 16, 1997.
23.1 Consent of Arthur Andersen LLP.
23.2 Consent of Laskaris & Laskaris.
23.3 Consent of Hantzmon, Wiebel & Company.
23.4 Consent of Walz, Deihm, Geisenberger, Bucklen & Tennis P.C.
<PAGE>
THIS WARRANT AND ANY SHARES ACQUIRED UPON THE EXERCISE OF THIS WARRANT HAVE NOT
BEEN REGISTERED UNDER THE SECURITIES ACT OF 1933, AS AMENDED, OR UNDER ANY OTHER
SECURITIES OR BLUE SKY LAWS. EXCEPT AS OTHERWISE SET FORTH HEREIN OR IN AN
AGREEMENT FROM THE HOLDER, NEITHER THIS WARRANT NOR ANY OF SUCH SHARES MAY BE
SOLD, OFFERED FOR SALE, ASSIGNED, TRANSFERRED, OR OTHERWISE DISPOSED OF IN THE
ABSENCE OF REGISTRATION UNDER SUCH ACT OR UNDER APPLICABLE STATE SECURITIES OR
BLUE SKY LAWS OR AN EXEMPTION THEREFROM. THIS WARRANT MAY NOT BE SOLD, ASSIGNED,
TRANSFERRED OR OTHERWISE DISPOSED OF EXCEPT PURSUANT TO THE EXPRESS PROVISIONS
OF THIS WARRANT, AND NO SALE, ASSIGNMENT, TRANSFER, OR OTHER DISPOSITION OF THIS
WARRANT SHALL BE VALID OR EFFECTIVE UNLESS AND UNTIL SUCH PROVISIONS SHALL HAVE
BEEN COMPLIED WITH.
COMMON STOCK PURCHASE WARRANT
THIS CERTIFIES THAT, for value received, Clifton Capital Ltd., or its
corporate successors, or its registered assigns (the "Holder"), is entitled to
purchase from THE EASTWIND GROUP, INC., a Delaware corporation (the "Company"),
at any time or from time to time during the period specified in Paragraph 2
hereof, up to 500,000 fully paid and nonassessable shares of the Company's
Common Stock, par value U.S.$.10 per share (the "Common Stock"), at an exercise
price of U.S.$3.00 per share (the "Exercise Price"). The term "Warrant Shares,"
as used herein, refers to the shares of Common Stock purchasable hereunder. The
Warrant Shares and the Exercise Price are subject to adjustment as provided in
Paragraph 4 hereof.
This Warrant is subject to the following terms, provisions and
conditions:
1. Manner of Exercise: Issuance of Certificates: Payment for Shares.
----------------------------------------------------------------
Subject to the provisions hereof, this Warrant may be exercised by the Holder,
in whole or in part, by the surrender of this Warrant, together with a complete
exercise agreement in the form attached hereto (the "Exercise Agreement"), to
the Company during normal business hours on any business day at the Company's
principal executive offices (or such other office or agency of the Company as it
may designate by notice to the Holder), and upon payment to the Company in cash
or by certified or official bank check of the Exercise Price for the Warrant
Shares specified in the Exercise Agreement. The Warrant Shares so purchased
shall be deemed to be issued to the Holder as the record owner of such shares as
of the close of business on the date on which this Warrant shall have been
surrendered, the completed Exercise Agreement delivered, and payment made for
such shares as set forth above. Certificates for the Warrant Shares so
purchased, representing the aggregate number of shares specified in the Exercise
Agreement, shall be delivered to the Holder within a reasonable time, not
exceeding five (5) business days, after this Warrant shall have been so
exercised. The certificates so delivered shall be in such denominations as may
be requested by the Holder and shall be registered in the name of such
1
<PAGE>
Holder or such other name as shall be designated by such Holder. If this Warrant
shall have been exercised only in part, then, unless this Warrant has expired,
the Company shall, at its expense, at the time of delivery of such certificates,
deliver to the Holder a new Warrant representing the number of shares with
respect to which this Warrant shall not then have been exercised. The Company
shall pay all taxes and other expenses and charges payable in connection with
the preparation, execution, and delivery of stock certificates (and any new
Warrants) pursuant to this Paragraph 1 except that, in case such stock
certificates shall be registered in a name or names other than the Holder at the
request of such Holder, funds sufficient to pay all stock transfer taxes which
shall be payable in connection with the execution and delivery of such stock
certificates shall be paid by the Holder to the Company at the time of the
delivery of such stock certificates by the Company as set forth above.
2. Period of Exercise. This Warrant is exercisable at any time or
------------------
from time to time on or after July 16, 1997 and before 5:00 p.m., Eastern time
on December 31, 1997 (the "Exercise Period").
3. Certain Agreements of the Company. The Company hereby covenants
---------------------------------
and agrees as follows:
(a) Shares to be Fully Paid. All Warrant Shares will, upon issuance,
-----------------------
be validly issued, fully paid, and nonassessable and free from all taxes, liens,
and charges with respect to the issue thereof
(b) Reservation of Shares. During the Exercise Period, the Company
---------------------
shall at all times have authorized, and reserved for the purpose of issue upon
exercise of this Warrant, a sufficient number of shares of Common Stock to
provide for the exercise of this Warrant.
(c) Certain Actions Prohibited. The Company will not, by amendment of
--------------------------
its charter or through any reorganization, transfer of assets, consolidation,
merger, dissolution, issue or sale of securities, or any other voluntary action,
avoid or seek to avoid the observance or performance of any of the terms to be
observed or performed by it hereunder, but will at all times in good faith
assist in the carrying out of all the provisions of this Warrant and in the
taking of all such actions as may reasonably be requested by the Holder in order
to protect the exercise privilege of the Holder against dilution or other
impairment, consistent with the tenor and purpose of this Warrant. Without
limiting the generality of the foregoing, the Company (i) will not increase the
par value of any shares of Common Stock receivable upon the exercise of this
Warrant above the Exercise Price then in effect, and (ii) will take all such
actions as may be necessary or appropriate in order that the Company may validly
and legally issue fully paid and nonassessable shares of Common Stock upon the
exercise of this Warrant.
(d) Successors and Assigns. This Warrant will be binding upon any
----------------------
entity succeeding to the Company by merger, consolidation or acquisition of all
or substantially all the Company's assets.
-2-
<PAGE>
4. Antidilution Provisions. During the Exercise Period, the
-----------------------
Exercise Price and the number of Warrant Shares shall be subject to adjustment
from time to time as provided in this Paragraph 4; provided, however, that no
-------- -------
adjustment will be made in the Exercise Price or the Warrant Shares in
connection with the issuance of Common Stock pursuant to this Warrant.
In the event that any adjustment of the Exercise Price as required
herein results in a fraction of a cent, such Exercise Price shall be rounded up
to the nearest cent.
(a) Adjustment of Exercise Price and Number of Shares upon Issuance of
------------------------------------------------------------------
Common Stock. In any case the Company shall hereafter issue additional shares
- ------------
of Common Stock at a price less than the effective Exercise Price of the Warrant
(the "Additional Shares") the Exercise Price shall be adjusted so that the same
shall equal the price determined by multiplying the then effective Exercise
Price by a fraction, the numerator of which shall be the sum of the number of
shares of Common Stock outstanding immediately prior to the date of issuance of
the Additional Shares and the number of additional shares of Common Stock which
the aggregate consideration for the total number of shares of Common Stock so
issued would purchase at the then effective Exercise Price, and the denominator
of which shall be the sum of the number of shares of Common Stock outstanding
immediately prior to the date of issuance of the Additional Shares and the
number of Additional Shares of Common Stock issued. Such adjustment shall be
made successively whenever such Additional Shares are issued and shall become
effective immediately after the Additional Shares are issued.
(b) Subdivision or Combination of Common Stock. If the Company at any
------------------------------------------
time subdivides (by any stock split, stock dividend, recapitalization,
reorganization, reclassification or otherwise) the shares of Common Stock
acquirable hereunder into a greater number of shares, then, after the date of
record for effecting such subdivision, the Exercise Price in effect immediately
prior to such subdivision will be proportionately reduced and the number of
shares of Common Stock acquirable upon exercise of this Warrant will be
proportionately increased. If the Company at any time combines (by reverse
stock split, recapitalization, reorganization, reclassification or otherwise)
the shares of Common Stock acquirable hereunder into a smaller number of shares,
then, after the date of record for effecting such combination, the Exercise
Price in effect immediately prior to such combination will be proportionately
increased and the number of shares of Common Stock acquirable upon exercise of
this Warrant will be proportionately decreased.
(c) Consolidation, Merger or Sale. In case of any consolidation of
-----------------------------
the Company with, or merger of the Company into any other corporation, or in
case of any sale or conveyance of all or substantially all of the assets of the
Company other than in connection with a plan of complete liquidation of the
Company, then as a condition of such consolidation, merger or sale or
conveyance, adequate provision will be made whereby the Holder will have the
right to acquire and receive upon exercise of this Warrant in lieu of the shares
of Common Stock immediately theretofore acquirable upon the exercise of this
Warrant, such shares of stock, securities or assets as may be issued or payable
with respect to or in exchange for the number of shares of Common Stock
immediately theretofore acquirable and receivable upon exercise of this
-3-
<PAGE>
Warrant had such consolidation, merger or sale or conveyance not taken place. In
any such case, the Company will make appropriate provision to insure that the
provisions of this Paragraph 4 hereof will thereafter be applicable as nearly as
may be in relation to any shares of stock or securities thereafter deliverable
upon the exercise of this Warrant. The Company will not effect any
consolidation, merger or sale or conveyance unless prior to the consummation
thereof, the successor corporation (if other than the Company) assumes by
written instrument the obligations under this Paragraph 4 and the obligations to
deliver to the Holder such shares of stock, securities or assets as, in
accordance with the foregoing provisions, the Holder may be entitled to acquire.
(d) Distribution of Assets. In case the Company shall declare or make
----------------------
any distribution of its assets to holders of Common Stock as a partial
liquidating dividend, by way of return of capital or otherwise, then, after the
date of record for determining stockholders entitled to such distribution, but
prior to the date of distribution, the Holder shall be entitled upon exercise of
this Warrant for the purchase of any or all of the shares of Common Stock
subject hereto, to receive the amount of such assets which would have been
payable to the Holder had such Holder been the holder of such shares of Common
Stock on the record date for the determination of stockholders entitled to such
distribution.
(e) Notice of Adjustment. Upon the occurrence of any event which
--------------------
requires any adjustment of the Exercise Price, then and in each such case the
Company shall give notice thereof to the Holder, which notice shall state the
Exercise Price resulting from such adjustment and the increase or decrease, if
any, in the number of Warrant Shares purchasable at such price upon exercise,
setting forth in reasonable detail the method of calculation and the facts upon
which such calculation is based.
(f) Minimum Adjustment of Exercise Price. No adjustment of the
------------------------------------
Exercise Price shall be made in an amount less than 1% of the Exercise Price in
effect at the time such adjustment is otherwise required to be made, but any
such lesser adjustment shall be carried forward and shall be made at the time
and together with the next subsequent adjustment which, together with any
adjustments so carried forward, shall amount to not less than 1% of such
Exercise Price.
(g) No Fractional Shares. No fractional shares of Common Stock are to
--------------------
be issued upon the exercise of this Warrant, but the Company shall pay a cash
adjustment in respect of any fractional share which would otherwise be issuable
in an amount equal to the same fraction of the Market Price of a share of Common
Stock on the date of such exercise.
(h) Other Notices. In case at any time:
-------------
(i) the Company shall declare any dividend upon the Common Stock
payable in shares of stock of any class or make any other distribution (other
than dividends or distributions payable in cash out of retained earnings) to the
holders of the Common Stock;
-4-
<PAGE>
(ii) the Company shall offer for subscription pro rata to
the holders of the Common Stock any additional shares of stock of any class;
(iii) there shall be any capital reorganization of the
Company, or reclassification of the Common Stock, or consolidation or merger of
the Company with or into, or sale of all or substantially all its assets to,
another corporation or entity; or
(iv) there shall be a voluntary or involuntary dissolution,
liquidation or winding-up of the Company;
then, in each such case, the Company shall give to the Holder (a) notice of the
date on which the books of the Company shall close or a record shall be taken
for determining the holders of Common Stock entitled to receive any such
dividend, distribution, or subscription rights or for determining the holders of
Common Stock entitled to vote in respect of any such reorganization,
reclassification, consolidation, merger, sale, dissolution, liquidation or
winding-up and (b) in the case of any such reorganization, reclassification,
consolidation, merger, sale, dissolution, liquidation or winding-up, notice of
the date (or, if not then known, a reasonable approximation thereof by the
Company) when the same shall take place. Such notice shall also specify the
date on which the holders of Common Stock shall be entitled to receive such
dividend, distribution, or subscription rights or to exchange their Common Stock
for stock or other securities or property deliverable upon such reorganization,
reclassification, consolidation, merger, sale, dissolution, liquidation, or
winding-up, as the case may be. Such notice shall be given at least 30 days
prior to the record date or the date on which the Company's books are closed in
respect thereto. Failure to give any such notice or any defect therein shall not
affect the validity of the proceedings referred to in clauses (i), (ii), (iii)
and (iv) above.
(i) "Common Stock," for purposes of this Paragraph 4, includes the
------------
Common Stock, and any additional class of stock of the Company having no
preference as to dividends or distributions on liquidation, provided that the
shares purchasable pursuant to this Warrant shall include only shares of Common
Stock, in respect of which this Warrant is exercisable, or shares resulting from
any subdivision or combination of such Common Stock, or in the case of any
reorganization, reclassification, consolidation, merger, or sale of the
character referred to in Paragraph 4(c) hereof, the stock or other securities or
property provided for in such Paragraph.
5. Issue Tax. The issuance of certificates for Warrant Shares upon
---------
the exercise of this Warrant shall be made without charge to the holder of this
Warrant or such shares for any issuance tax in respect thereof, provided that
the Company shall not be required to pay any tax which may be payable in respect
of any transfer involved in the issuance and delivery of any certificate in a
name other than the holder of this Warrant.
6. No Rights or Liabilities as a Stockholder. This Warrant shall
-----------------------------------------
not entitle the holder hereof to any voting rights or other rights as a
stockholder of the Company. No provision of this Warrant in the absence of
affirmative action by the holder hereof to purchase
-5-
<PAGE>
Warrant Shares, and no mere enumeration herein of the rights or privileges of
the holder hereof, shall give rise to any liability of such holder for the
Exercise Price or as a stockholder of the Company, whether such liability is
asserted by the Company or by creditors of the Company.
7. Transfer, Exchange, and Replacement of Warrant.
----------------------------------------------
(a) Restriction on Transfer. This Warrant and the rights granted to
-----------------------
the Holder are transferable, in whole or in part, only with the prior written
consent of Company, and then upon surrender of this Warrant, together with a
properly executed assignment in the form attached hereto, at the office or
agency of the Company referred to in Paragraph 7(e) below, provided, however,
-------- -------
that any transfer or assignment shall be subject to the conditions set forth in
Paragraph 7(f) hereof. Until due presentment for registration of transfer on
the books of the Company, the Company may treat the registered Holder hereof as
the owner and holder hereof for all purposes and the Company shall not be
affected by any notice to the contrary.
(b) Warrant Exchangeable for Different Denominations. This
------------------------------------------------
Warrant is exchangeable, upon the surrender hereof by the Holder at the office
or agency of the Company referred to in Paragraph 7(e) below, for new Warrants
of like tenor representing in the aggregate the right to purchase the number of
shares of Common Stock which may be purchased hereunder, each of such new
Warrants to represent the right to purchase such number of shares as shall be
designated by the Holder at the time of such surrender.
(c) Replacement of Warrant. Upon receipt of evidence reasonably
----------------------
satisfactory to the Company of the loss, theft, destruction, or mutilation of
this Warrant and, in the case of any such loss, theft, or destruction, upon
delivery of an indemnity agreement reasonably satisfactory in form and amount to
the Company, or, in the case of any such mutilation, upon surrender and
cancellation of this Warrant, the Company, at its expense, will execute and
deliver, in lieu thereof, a new Warrant of like tenor.
(d) Cancellation: Payment of Expenses. Upon the surrender of this
----------------------------------
Warrant in connection with any transfer, exchange, or replacement as provided in
this Paragraph 7, this Warrant shall be promptly canceled by the Company. The
Company shall pay all taxes (other than securities transfer taxes) and all other
expenses and charges payable in connection with the preparation, execution, and
delivery of Warrants pursuant to this Paragraph 7.
(e) Register. The Company shall maintain, at its principal
--------
executive offices (or such other office or agency of the Company as it may
designate by notice to the Holder), a register for this Warrant, in which the
Company shall record the name and address of the person in whose name this
Warrant has been issued, as well as the name and address of each transferee and
each prior owner of this Warrant .
(f) Exercise or Transfer Without Registration. If, at the time of
-----------------------------------------
the surrender of this Warrant in connection with any exercise, transfer, or
exchange of this Warrant, this Warrant (or, in the case of any exercise, the
Warrant Shares issuable hereunder) shall not be
-6-
<PAGE>
registered under the Securities Act of 1933, as amended (the "Securities Act"),
and under applicable state securities or blue sky laws, the Company may require,
as a condition of allowing such exercise, transfer, or exchange, (i) that the
Holder furnish to the Company a written opinion of counsel, which opinion and
counsel are acceptable to the Company, to the effect that such exercise,
transfer, or exchange may be made without registration under said Act and under
applicable state securities or blue sky laws and (ii) that the Holder execute
and deliver to the Company an investment letter in form and substance acceptable
to the Company. The first Holder of this Warrant, by taking and holding the
same, represents to the Company that such Holder is acquiring this Warrant for
investment and not with a view to the distribution thereof.
8. Notices. All notices, requests, and other communications
-------
required or permitted to be given or delivered hereunder to the Holder shall be
in writing, and shall be personally delivered, or shall be sent by certified or
registered mail, postage prepaid and addressed, to such Holder at the address
shown for such Holder on the books of the Company, or at such other address as
shall have been furnished to the Company by notice from such Holder. All
notices, requests, and other communications required or permitted to be given or
delivered hereunder to the Company shall be in writing, and shall be personally
delivered, or shall be sent by certified or registered mail or by recognized
overnight mail carrier, postage prepaid and addressed, to the office of the
Company at 100 Four Falls Corporate Center, Suite 305, West Conshohocken, PA
19428 Attention: Chairman, or at such other address as shall have been furnished
to the Holder by notice from the Company. Any such notice, request, or other
communication may be sent by telegram, telex, or telecopy, but shall in such
case be subsequently confirmed by a writing personally delivered or sent by
certified or registered mail as provided above. All notices, requests, and
other communications shall be deemed to have been given either at the time of
the delivery thereof to (or the receipt by, in the case of a telegram, telex or
telecopy) the person entitled to receive such notice at the address of such
person for purposes of this Paragraph 8, or, if mailed, at the completion of the
third full day following the time of such mailing thereof to such address, as
the case may be.
9. GOVERNING LAW. THIS WARRANT SHALL BE GOVERNED BY AND CONSTRUED
-------------
AND ENFORCED IN ACCORDANCE WITH THE INTERNAL LAWS OF THE STATE OF DELAWARE
WITHOUT REGARD TO THE BODY OF LAW CONTROLLING CONFLICTS OF LAW. EACH OF THE
PARTIES HERETO HEREBY CONSENTS TO THE EXCLUSIVE JURISDICTION OF ANY STATE OR
FEDERAL COURT LOCATED WITHIN THE STATE OF DELAWARE FOR ANY PROCEEDING TO WHICH
ANY OF THE PARTIES HERETO IS A PARTY AND WHICH RELATES TO THIS WARRANT. TO THE
EXTENT PERMITTED BY LAW, EACH PARTY WAIVES ANY OBJECTION WHICH IT MAY HAVE BASED
ON LACK OF JURISDICTION OR IMPROPER VENUE OR FORUM NON-CONVENIENS TO THE CONDUCT
OF ANY PROCEEDING INSTITUTED HEREUNDER OR ANY PROCEEDING TO WHICH ANY PARTY TO
THIS WARRANT IS A PARTY AND WHICH RELATES TO THIS WARRANT AND THE TRANSACTIONS
CONTEMPLATED HEREBY.
-7-
<PAGE>
10. Miscellaneous.
-------------
(a) Amendments. This Warrant and any provision hereof may not be
----------
changed, waived, discharged, or terminated orally, but only by an instrument in
writing signed by the Company and Holders representing a majority of the shares
of Common Stock acquirable upon exercise of this Warrant.
(b) Descriptive Headings. The descriptive headings of the several
--------------------
paragraphs of this Warrant are inserted for purposes of reference only, and
shall not affect the meaning or construction of any of the provisions hereof.
IN WITNESS WHEREOF, the Company has caused this Warrant to be signed
by its duly authorized officer.
THE EASTWIND GROUP, INC.
By:__________________________
Paul A. DeJuliis
Chairman and Chief Executive Officer
-8-
<PAGE>
FORM OF EXERCISE AGREEMENT
Dated: ____________
To: The Eastwind Group, Inc.
Attention: Chief Financial Officer
The undersigned, pursuant to the provisions set forth in the within
Common Stock Purchase Warrant, hereby agrees to purchase ______ shares of Common
Stock covered by such Common Stock Purchase Warrant, and makes payment herewith
in full therefor at the price per share provided by such Common Stock Purchase
Warrant in cash or by certified or official bank check in the amount of
U.S.$________. Please issue a certificate or certificates for such shares of
Common Stock in the name of and pay any cash for any fractional share to:
Name:_______________________________
Signature:__________________________
Title of Signing Officer (if any):
_____________________________________
Address: ____________________________
_____________________________________
and, if said number of shares of Common Stock shall not be all the shares
purchasable under the within Common Stock Purchase Warrant, a new Common Stock
Purchase Warrant is to be issued in the name of said undersigned covering the
balance of the shares purchasable thereunder less any fraction of a share paid
in cash.
-9-
<PAGE>
FORM OF ASSIGNMENT
FOR VALUE RECEIVED, the undersigned hereby sells, assigns, and
transfers all of the rights of the undersigned under the within Common Stock
Purchase Warrant, with respect to the number of shares of Common Stock covered
thereby set forth herein below, to:
Name of Assignee Address No. of Shares
- ---------------- ------- -------------
and hereby irrevocably constitutes and appoints ___________________ as agent and
attorney-in-fact to transfer said Common Stock Purchase Warrant on the books of
the Eastwind Group, Inc., with full power of substitution in the premises.
Dated: ________________
In the presence of
_______________________
Name: ____________________________________
Signature: _________________________________
Title of Signing Officer
(if any): __________________________________
Address: ___________________________________
____________________________________________
-10-
<PAGE>
THIS WARRANT AND ANY SHARES ACQUIRED UPON THE EXERCISE OF THIS WARRANT HAVE NOT
BEEN REGISTERED UNDER THE SECURITIES ACT OF 1933, AS AMENDED, OR UNDER ANY OTHER
SECURITIES OR BLUE SKY LAWS. EXCEPT AS OTHERWISE SET FORTH HEREIN OR IN AN
AGREEMENT FROM THE HOLDER, NEITHER THIS WARRANT NOR ANY OF SUCH SHARES MAY BE
SOLD, OFFERED FOR SALE, ASSIGNED, TRANSFERRED, OR OTHERWISE DISPOSED OF IN THE
ABSENCE OF REGISTRATION UNDER SUCH ACT OR UNDER APPLICABLE STATE SECURITIES OR
BLUE SKY LAWS OR AN EXEMPTION THEREFROM. THIS WARRANT MAY NOT BE SOLD, ASSIGNED,
TRANSFERRED OR OTHERWISE DISPOSED OF EXCEPT PURSUANT TO THE EXPRESS PROVISIONS
OF THIS WARRANT, AND NO SALE, ASSIGNMENT, TRANSFER, OR OTHER DISPOSITION OF THIS
WARRANT SHALL BE VALID OR EFFECTIVE UNLESS AND UNTIL SUCH PROVISIONS SHALL HAVE
BEEN COMPLIED WITH.
COMMON STOCK PURCHASE WARRANT
THIS CERTIFIES THAT, for value received, Clifton Capital Ltd., or its
corporate successors, or its registered assigns (the "Holder"), is entitled to
purchase from THE EASTWIND GROUP, INC., a Delaware corporation (the "Company"),
at any time or from time to time during the period specified in Paragraph 2
hereof, up to 200,000 fully paid and nonassessable shares of the Company's
Common Stock, par value U.S.$.10 per share (the "Common Stock"), at an exercise
price of U.S.$5.00 per share (the "Exercise Price"). The term "Warrant Shares,"
as used herein, refers to the shares of Common Stock purchasable hereunder. The
Warrant Shares and the Exercise Price are subject to adjustment as provided in
Paragraph 4 hereof.
This Warrant is subject to the following terms, provisions and
conditions:
1. Manner of Exercise: Issuance of Certificates: Payment for Shares.
----------------------------------------------------------------
Subject to the provisions hereof, this Warrant may be exercised by the Holder,
in whole or in part, by the surrender of this Warrant, together with a complete
exercise agreement in the form attached hereto (the "Exercise Agreement"), to
the Company during normal business hours on any business day at the Company's
principal executive offices (or such other office or agency of the Company as it
may designate by notice to the Holder), and upon payment to the Company in cash
or by certified or official bank check of the Exercise Price for the Warrant
Shares specified in the Exercise Agreement. The Warrant Shares so purchased
shall be deemed to be issued to the Holder as the record owner of such shares as
of the close of business on the date on which this Warrant shall have been
surrendered, the completed Exercise Agreement delivered, and payment made for
such shares as set forth above. Certificates for the Warrant Shares so
purchased, representing the aggregate number of shares specified in the Exercise
Agreement, shall be delivered to the Holder within a reasonable time, not
exceeding five (5) business days, after this Warrant shall have been so
exercised. The certificates so delivered shall be in such denominations as may
be requested by the Holder and shall be registered in the name of such
1
<PAGE>
Holder or such other name as shall be designated by such Holder. If this Warrant
shall have been exercised only in part, then, unless this Warrant has expired,
the Company shall, at its expense, at the time of delivery of such certificates,
deliver to the Holder a new Warrant representing the number of shares with
respect to which this Warrant shall not then have been exercised. The Company
shall pay all taxes and other expenses and charges payable in connection with
the preparation, execution, and delivery of stock certificates (and any new
Warrants) pursuant to this Paragraph 1 except that, in case such stock
certificates shall be registered in a name or names other than the Holder at the
request of such Holder, funds sufficient to pay all stock transfer taxes which
shall be payable in connection with the execution and delivery of such stock
certificates shall be paid by the Holder to the Company at the time of the
delivery of such stock certificates by the Company as set forth above.
2. Period of Exercise. This Warrant is exercisable at any time or
------------------
from time to time on or after July 16, 1997 and before 5:00 p.m., Eastern time
on December 31, 1997 (the "Exercise Period").
3. Certain Agreements of the Company. The Company hereby covenants
---------------------------------
and agrees as follows:
(a) Shares to be Fully Paid. All Warrant Shares will, upon issuance,
-----------------------
be validly issued, fully paid, and nonassessable and free from all taxes, liens,
and charges with respect to the issue thereof
(b) Reservation of Shares. During the Exercise Period, the Company
---------------------
shall at all times have authorized, and reserved for the purpose of issue upon
exercise of this Warrant, a sufficient number of shares of Common Stock to
provide for the exercise of this Warrant.
(c) Certain Actions Prohibited. The Company will not, by amendment of
--------------------------
its charter or through any reorganization, transfer of assets, consolidation,
merger, dissolution, issue or sale of securities, or any other voluntary action,
avoid or seek to avoid the observance or performance of any of the terms to be
observed or performed by it hereunder, but will at all times in good faith
assist in the carrying out of all the provisions of this Warrant and in the
taking of all such actions as may reasonably be requested by the Holder in order
to protect the exercise privilege of the Holder against dilution or other
impairment, consistent with the tenor and purpose of this Warrant. Without
limiting the generality of the foregoing, the Company (i) will not increase the
par value of any shares of Common Stock receivable upon the exercise of this
Warrant above the Exercise Price then in effect, and (ii) will take all such
actions as may be necessary or appropriate in order that the Company may validly
and legally issue fully paid and nonassessable shares of Common Stock upon the
exercise of this Warrant.
(d) Successors and Assigns. This Warrant will be binding upon any
----------------------
entity succeeding to the Company by merger, consolidation or acquisition of all
or substantially all the Company's assets.
-2-
<PAGE>
4. Antidilution Provisions. During the Exercise Period, the
-----------------------
Exercise Price and the number of Warrant Shares shall be subject to adjustment
from time to time as provided in this Paragraph 4; provided, however, that no
-------- -------
adjustment will be made in the Exercise Price or the Warrant Shares in
connection with the issuance of Common Stock pursuant to this Warrant.
In the event that any adjustment of the Exercise Price as required
herein results in a fraction of a cent, such Exercise Price shall be rounded up
to the nearest cent.
(a) Adjustment of Exercise Price and Number of Shares upon Issuance of
------------------------------------------------------------------
Common Stock. In any case the Company shall hereafter issue additional shares
- ------------
of Common Stock at a price less than the effective Exercise Price of the Warrant
(the "Additional Shares") the Exercise Price shall be adjusted so that the same
shall equal the price determined by multiplying the then effective Exercise
Price by a fraction, the numerator of which shall be the sum of the number of
shares of Common Stock outstanding immediately prior to the date of issuance of
the Additional Shares and the number of additional shares of Common Stock which
the aggregate consideration for the total number of shares of Common Stock so
issued would purchase at the then effective Exercise Price, and the denominator
of which shall be the sum of the number of shares of Common Stock outstanding
immediately prior to the date of issuance of the Additional Shares and the
number of Additional Shares of Common Stock issued. Such adjustment shall be
made successively whenever such Additional Shares are issued and shall become
effective immediately after the Additional Shares are issued.
(b) Subdivision or Combination of Common Stock. If the Company at any
------------------------------------------
time subdivides (by any stock split, stock dividend, recapitalization,
reorganization, reclassification or otherwise) the shares of Common Stock
acquirable hereunder into a greater number of shares, then, after the date of
record for effecting such subdivision, the Exercise Price in effect immediately
prior to such subdivision will be proportionately reduced and the number of
shares of Common Stock acquirable upon exercise of this Warrant will be
proportionately increased. If the Company at any time combines (by reverse
stock split, recapitalization, reorganization, reclassification or otherwise)
the shares of Common Stock acquirable hereunder into a smaller number of shares,
then, after the date of record for effecting such combination, the Exercise
Price in effect immediately prior to such combination will be proportionately
increased and the number of shares of Common Stock acquirable upon exercise of
this Warrant will be proportionately decreased.
(c) Consolidation, Merger or Sale. In case of any consolidation of
-----------------------------
the Company with, or merger of the Company into any other corporation, or in
case of any sale or conveyance of all or substantially all of the assets of the
Company other than in connection with a plan of complete liquidation of the
Company, then as a condition of such consolidation, merger or sale or
conveyance, adequate provision will be made whereby the Holder will have the
right to acquire and receive upon exercise of this Warrant in lieu of the shares
of Common Stock immediately theretofore acquirable upon the exercise of this
Warrant, such shares of stock, securities or assets as may be issued or payable
with respect to or in exchange for the number of shares of Common Stock
immediately theretofore acquirable and receivable upon exercise of this
-3-
<PAGE>
Warrant had such consolidation, merger or sale or conveyance not taken place. In
any such case, the Company will make appropriate provision to insure that the
provisions of this Paragraph 4 hereof will thereafter be applicable as nearly as
may be in relation to any shares of stock or securities thereafter deliverable
upon the exercise of this Warrant. The Company will not effect any
consolidation, merger or sale or conveyance unless prior to the consummation
thereof, the successor corporation (if other than the Company) assumes by
written instrument the obligations under this Paragraph 4 and the obligations to
deliver to the Holder such shares of stock, securities or assets as, in
accordance with the foregoing provisions, the Holder may be entitled to acquire.
(d) Distribution of Assets. In case the Company shall declare or make
----------------------
any distribution of its assets to holders of Common Stock as a partial
liquidating dividend, by way of return of capital or otherwise, then, after the
date of record for determining stockholders entitled to such distribution, but
prior to the date of distribution, the Holder shall be entitled upon exercise of
this Warrant for the purchase of any or all of the shares of Common Stock
subject hereto, to receive the amount of such assets which would have been
payable to the Holder had such Holder been the holder of such shares of Common
Stock on the record date for the determination of stockholders entitled to such
distribution.
(e) Notice of Adjustment. Upon the occurrence of any event which
--------------------
requires any adjustment of the Exercise Price, then and in each such case the
Company shall give notice thereof to the Holder, which notice shall state the
Exercise Price resulting from such adjustment and the increase or decrease, if
any, in the number of Warrant Shares purchasable at such price upon exercise,
setting forth in reasonable detail the method of calculation and the facts upon
which such calculation is based.
(f) Minimum Adjustment of Exercise Price. No adjustment of the
------------------------------------
Exercise Price shall be made in an amount less than 1% of the Exercise Price in
effect at the time such adjustment is otherwise required to be made, but any
such lesser adjustment shall be carried forward and shall be made at the time
and together with the next subsequent adjustment which, together with any
adjustments so carried forward, shall amount to not less than 1% of such
Exercise Price.
(g) No Fractional Shares. No fractional shares of Common Stock are to
--------------------
be issued upon the exercise of this Warrant, but the Company shall pay a cash
adjustment in respect of any fractional share which would otherwise be issuable
in an amount equal to the same fraction of the Market Price of a share of Common
Stock on the date of such exercise.
(h) Other Notices. In case at any time:
-------------
(i) the Company shall declare any dividend upon the Common Stock
payable in shares of stock of any class or make any other distribution (other
than dividends or distributions payable in cash out of retained earnings) to the
holders of the Common Stock;
-4-
<PAGE>
(ii) the Company shall offer for subscription pro rata to
the holders of the Common Stock any additional shares of stock of any class;
(iii) there shall be any capital reorganization of the
Company, or reclassification of the Common Stock, or consolidation or merger of
the Company with or into, or sale of all or substantially all its assets to,
another corporation or entity; or
(iv) there shall be a voluntary or involuntary dissolution,
liquidation or winding-up of the Company;
then, in each such case, the Company shall give to the Holder (a) notice of the
date on which the books of the Company shall close or a record shall be taken
for determining the holders of Common Stock entitled to receive any such
dividend, distribution, or subscription rights or for determining the holders of
Common Stock entitled to vote in respect of any such reorganization,
reclassification, consolidation, merger, sale, dissolution, liquidation or
winding-up and (b) in the case of any such reorganization, reclassification,
consolidation, merger, sale, dissolution, liquidation or winding-up, notice of
the date (or, if not then known, a reasonable approximation thereof by the
Company) when the same shall take place. Such notice shall also specify the
date on which the holders of Common Stock shall be entitled to receive such
dividend, distribution, or subscription rights or to exchange their Common Stock
for stock or other securities or property deliverable upon such reorganization,
reclassification, consolidation, merger, sale, dissolution, liquidation, or
winding-up, as the case may be. Such notice shall be given at least 30 days
prior to the record date or the date on which the Company's books are closed in
respect thereto. Failure to give any such notice or any defect therein shall not
affect the validity of the proceedings referred to in clauses (i), (ii), (iii)
and (iv) above.
(i) "Common Stock," for purposes of this Paragraph 4, includes the
------------
Common Stock, and any additional class of stock of the Company having no
preference as to dividends or distributions on liquidation, provided that the
shares purchasable pursuant to this Warrant shall include only shares of Common
Stock, in respect of which this Warrant is exercisable, or shares resulting from
any subdivision or combination of such Common Stock, or in the case of any
reorganization, reclassification, consolidation, merger, or sale of the
character referred to in Paragraph 4(c) hereof, the stock or other securities or
property provided for in such Paragraph.
5. Issue Tax. The issuance of certificates for Warrant Shares upon
---------
the exercise of this Warrant shall be made without charge to the holder of this
Warrant or such shares for any issuance tax in respect thereof, provided that
the Company shall not be required to pay any tax which may be payable in respect
of any transfer involved in the issuance and delivery of any certificate in a
name other than the holder of this Warrant.
6. No Rights or Liabilities as a Stockholder. This Warrant shall
-----------------------------------------
not entitle the holder hereof to any voting rights or other rights as a
stockholder of the Company. No provision of this Warrant in the absence of
affirmative action by the holder hereof to purchase
-5-
<PAGE>
Warrant Shares, and no mere enumeration herein of the rights or privileges of
the holder hereof, shall give rise to any liability of such holder for the
Exercise Price or as a stockholder of the Company, whether such liability is
asserted by the Company or by creditors of the Company.
7. Transfer, Exchange, and Replacement of Warrant.
----------------------------------------------
(a) Restriction on Transfer. This Warrant and the rights granted to
-----------------------
the Holder are transferable, in whole or in part, only with the prior written
consent of Company, and then upon surrender of this Warrant, together with a
properly executed assignment in the form attached hereto, at the office or
agency of the Company referred to in Paragraph 7(e) below, provided, however,
-------- -------
that any transfer or assignment shall be subject to the conditions set forth in
Paragraph 7(f) hereof. Until due presentment for registration of transfer on
the books of the Company, the Company may treat the registered Holder hereof as
the owner and holder hereof for all purposes and the Company shall not be
affected by any notice to the contrary.
(b) Warrant Exchangeable for Different Denominations. This
------------------------------------------------
Warrant is exchangeable, upon the surrender hereof by the Holder at the office
or agency of the Company referred to in Paragraph 7(e) below, for new Warrants
of like tenor representing in the aggregate the right to purchase the number of
shares of Common Stock which may be purchased hereunder, each of such new
Warrants to represent the right to purchase such number of shares as shall be
designated by the Holder at the time of such surrender.
(c) Replacement of Warrant. Upon receipt of evidence reasonably
----------------------
satisfactory to the Company of the loss, theft, destruction, or mutilation of
this Warrant and, in the case of any such loss, theft, or destruction, upon
delivery of an indemnity agreement reasonably satisfactory in form and amount to
the Company, or, in the case of any such mutilation, upon surrender and
cancellation of this Warrant, the Company, at its expense, will execute and
deliver, in lieu thereof, a new Warrant of like tenor.
(d) Cancellation: Payment of Expenses. Upon the surrender of this
----------------------------------
Warrant in connection with any transfer, exchange, or replacement as provided in
this Paragraph 7, this Warrant shall be promptly canceled by the Company. The
Company shall pay all taxes (other than securities transfer taxes) and all other
expenses and charges payable in connection with the preparation, execution, and
delivery of Warrants pursuant to this Paragraph 7.
(e) Register. The Company shall maintain, at its principal
--------
executive offices (or such other office or agency of the Company as it may
designate by notice to the Holder), a register for this Warrant, in which the
Company shall record the name and address of the person in whose name this
Warrant has been issued, as well as the name and address of each transferee and
each prior owner of this Warrant .
(f) Exercise or Transfer Without Registration. If, at the time of
-----------------------------------------
the surrender of this Warrant in connection with any exercise, transfer, or
exchange of this Warrant, this Warrant (or, in the case of any exercise, the
Warrant Shares issuable hereunder) shall not be
-6-
<PAGE>
registered under the Securities Act of 1933, as amended (the "Securities Act"),
and under applicable state securities or blue sky laws, the Company may require,
as a condition of allowing such exercise, transfer, or exchange, (i) that the
Holder furnish to the Company a written opinion of counsel, which opinion and
counsel are acceptable to the Company, to the effect that such exercise,
transfer, or exchange may be made without registration under said Act and under
applicable state securities or blue sky laws and (ii) that the Holder execute
and deliver to the Company an investment letter in form and substance acceptable
to the Company. The first Holder of this Warrant, by taking and holding the
same, represents to the Company that such Holder is acquiring this Warrant for
investment and not with a view to the distribution thereof.
8. Notices. All notices, requests, and other communications
-------
required or permitted to be given or delivered hereunder to the Holder shall be
in writing, and shall be personally delivered, or shall be sent by certified or
registered mail, postage prepaid and addressed, to such Holder at the address
shown for such Holder on the books of the Company, or at such other address as
shall have been furnished to the Company by notice from such Holder. All
notices, requests, and other communications required or permitted to be given or
delivered hereunder to the Company shall be in writing, and shall be personally
delivered, or shall be sent by certified or registered mail or by recognized
overnight mail carrier, postage prepaid and addressed, to the office of the
Company at 100 Four Falls Corporate Center, Suite 305, West Conshohocken, PA
19428 Attention: Chairman, or at such other address as shall have been furnished
to the Holder by notice from the Company. Any such notice, request, or other
communication may be sent by telegram, telex, or telecopy, but shall in such
case be subsequently confirmed by a writing personally delivered or sent by
certified or registered mail as provided above. All notices, requests, and
other communications shall be deemed to have been given either at the time of
the delivery thereof to (or the receipt by, in the case of a telegram, telex or
telecopy) the person entitled to receive such notice at the address of such
person for purposes of this Paragraph 8, or, if mailed, at the completion of the
third full day following the time of such mailing thereof to such address, as
the case may be.
9. GOVERNING LAW. THIS WARRANT SHALL BE GOVERNED BY AND CONSTRUED
-------------
AND ENFORCED IN ACCORDANCE WITH THE INTERNAL LAWS OF THE STATE OF DELAWARE
WITHOUT REGARD TO THE BODY OF LAW CONTROLLING CONFLICTS OF LAW. EACH OF THE
PARTIES HERETO HEREBY CONSENTS TO THE EXCLUSIVE JURISDICTION OF ANY STATE OR
FEDERAL COURT LOCATED WITHIN THE STATE OF DELAWARE FOR ANY PROCEEDING TO WHICH
ANY OF THE PARTIES HERETO IS A PARTY AND WHICH RELATES TO THIS WARRANT. TO THE
EXTENT PERMITTED BY LAW, EACH PARTY WAIVES ANY OBJECTION WHICH IT MAY HAVE BASED
ON LACK OF JURISDICTION OR IMPROPER VENUE OR FORUM NON-CONVENIENS TO THE CONDUCT
OF ANY PROCEEDING INSTITUTED HEREUNDER OR ANY PROCEEDING TO WHICH ANY PARTY TO
THIS WARRANT IS A PARTY AND WHICH RELATES TO THIS WARRANT AND THE TRANSACTIONS
CONTEMPLATED HEREBY.
-7-
<PAGE>
10. Miscellaneous.
-------------
(a) Amendments. This Warrant and any provision hereof may not be
----------
changed, waived, discharged, or terminated orally, but only by an instrument in
writing signed by the Company and Holders representing a majority of the shares
of Common Stock acquirable upon exercise of this Warrant.
(b) Descriptive Headings. The descriptive headings of the several
--------------------
paragraphs of this Warrant are inserted for purposes of reference only, and
shall not affect the meaning or construction of any of the provisions hereof.
IN WITNESS WHEREOF, the Company has caused this Warrant to be signed
by its duly authorized officer.
THE EASTWIND GROUP, INC.
By:__________________________
Paul A. DeJuliis
Chairman and Chief Executive Officer
-8-
<PAGE>
FORM OF EXERCISE AGREEMENT
Dated: ____________
To: The Eastwind Group, Inc.
Attention: Chief Financial Officer
The undersigned, pursuant to the provisions set forth in the within
Common Stock Purchase Warrant, hereby agrees to purchase ______ shares of Common
Stock covered by such Common Stock Purchase Warrant, and makes payment herewith
in full therefor at the price per share provided by such Common Stock Purchase
Warrant in cash or by certified or official bank check in the amount of
U.S.$________. Please issue a certificate or certificates for such shares of
Common Stock in the name of and pay any cash for any fractional share to:
Name:_______________________________
Signature:___________________________
Title of Signing Officer (if any):
_____________________________________
Address: ____________________________
_____________________________________
and, if said number of shares of Common Stock shall not be all the shares
purchasable under the within Common Stock Purchase Warrant, a new Common Stock
Purchase Warrant is to be issued in the name of said undersigned covering the
balance of the shares purchasable thereunder less any fraction of a share paid
in cash.
-9-
<PAGE>
FORM OF ASSIGNMENT
FOR VALUE RECEIVED, the undersigned hereby sells, assigns, and
transfers all of the rights of the undersigned under the within Common Stock
Purchase Warrant, with respect to the number of shares of Common Stock covered
thereby set forth herein below, to:
Name of Assignee Address No. of Shares
- ---------------- ------- -------------
and hereby irrevocably constitutes and appoints ___________________ as agent and
attorney-in-fact to transfer said Common Stock Purchase Warrant on the books of
the Eastwind Group, Inc., with full power of substitution in the premises.
Dated: ________________
In the presence of
_______________________
Name: ___________________________________
Signature: ________________________________
Title of Signing Officer
(if any): _________________________________
Address: ___________________________________
____________________________________________
-10-
<PAGE>
EXHIBIT 4.6
THIS WARRANT AND ANY SHARES ACQUIRED UPON THE EXERCISE OF THIS WARRANT HAVE NOT
BEEN REGISTERED UNDER THE SECURITIES ACT OF 1933, AS AMENDED, OR UNDER ANY STATE
SECURITIES OR BLUE SKY LAWS. EXCEPT AS OTHERWISE SET FORTH HEREIN OR IN AN
AGREEMENT FROM THE HOLDER, NEITHER THIS WARRANT NOR ANY OF SUCH SHARES MAY BE
SOLD, OFFERED FOR SALE, ASSIGNED, TRANSFERRED, OR OTHERWISE DISPOSED OF IN THE
ABSENCE OF REGISTRATION UNDER SUCH ACT OR UNDER APPLICABLE STATE SECURITIES OR
BLUE SKY LAWS OR AN EXEMPTION THEREFROM. THIS WARRANT MAY NOT BE SOLD, ASSIGNED,
TRANSFERRED OR OTHERWISE DISPOSED OF EXCEPT PURSUANT TO THE EXPRESS PROVISIONS
OF THIS WARRANT, AND NO SALE, ASSIGNMENT, TRANSFER, OR OTHER DISPOSITION OF THIS
WARRANT SHALL BE VALID OR EFFECTIVE UNLESS
AND UNTIL SUCH PROVISIONS SHALL HAVE BEEN COMPLIED WITH.
Right to
Purchase
100,000
Shares of
Common Stock,
par value $.10
per share
CLASS C-3 STOCK PURCHASE WARRANT
THIS CERTIFIES THAT, for value received, American Maple Leaf Financial
Corporation (the "Holder") or its registered assigns, is entitled to purchase
from THE EASTWIND GROUP, INC., a Delaware corporation (the "Company"), at any
time or from time to time during the period specified in Paragraph 2 hereof, One
Hundred Thousand (100,000) fully paid and nonassessable shares of the Company's
Common Stock, par value $.10 per share (the "Common Stock"), at an exercise
price of $9.00 per share (the "Exercise Price"). The term "Warrant Shares", as
used herein, refers to the shares of Common Stock purchasable hereunder. The
Warrant Shares and the Exercise Price are subject to adjustment as provided in
Paragraph 4 hereof
This Warrant is subject to the following terms, provisions and conditions:
1. Manner of Exercise; Issuance of Certificates; Payment for Shares.
----------------------------------------------------------------
Subject to the provisions hereof, this Warrant may be exercised by the holder
hereof, in whole or in part, by the surrender of this Warrant, together with a
complete exercise agreement in the form attached hereto (the "Exercise
Agreement"), to the Company during normal business hours on any business day at
the Company's principal executive offices (or such other office or agency of the
Company as it may designate by notice to the holder hereof), and upon Payment to
the
<PAGE>
Company in cash or by certified or official bank check of the Exercise Price
for the Warrant Shares specified in the Exercise Agreement. The Warrant Shares
so purchased shall be deemed to be issued to the holder hereof or such holder's
designee as the record owner of such shares as of the close of business on the
date on which this Warrant shall have been surrendered, the completed Exercise
Agreement delivered, and Payment made for such shares as set forth above.
Certificates for the Warrant Shares so purchased, representing the aggregate
number of shares specified in the Exercise Agreement, shall be delivered to the
holder hereof within a reasonable time, not exceeding five (5) business days,
after this Warrant shall have been so exercised. The certificates so delivered
shall be in such denominations as may be requested by the holder hereof and
shall be registered in the name of such holder or such other name as shall be
designated by such holder. If this Warrant shall have been exercised only in
part, then, unless this Warrant has expired, the Company shall, at its expense,
at the time of delivery of such certificates, deliver to the holder a new
Warrant representing the number of shares with respect to which this Warrant
shall not then have been exercised. The Company shall pay all taxes and other
expenses and charges payable in connection with the preparation, execution, and
delivery of stock certificates (and any new Warrants) pursuant to this Paragraph
1 except that, in case such stock certificates shall be registered in a name or
names other than the holder of this Warrant at the request of such holder, funds
sufficient to pay all stock transfer taxes which shall be payable in connection
with the execution and delivery of such stock certificates shall be paid by the
holder hereof to the Company at the time of the delivery of such stock
certificates by the Company as set forth above.
2. Period of Exercise. Subject to the Company's right to redeem
------------------
this Warrant in accordance with Paragraph 9 below, this Warrant is exercisable
in whole or in part, at any time and from time to time on or after October 7,
1996 and before 5:00 p.m., Eastern time on October 7, 1999.
3. Certain Agreements of the Company. The Company hereby covenants
---------------------------------
and agrees as follows:
(a) Shares to be Fully Paid. All Warrant Shares will, upon issuance,
-----------------------
be validly issued, fully paid, and nonassessable and free from all taxes, liens,
and charges with respect to the issue thereof.
(b) Reservation of Shares. During the Exercise Period, the Company
---------------------
shall at all times have authorized, and reserved for the purpose of issue upon
exercise of this Warrant, a sufficient number of shares of Common Stock to
provide for the exercise of this Warrant.
(c) Certain Actions Prohibited. The Company will not, by amendment of
--------------------------
its charter or through any reorganization, transfer of assets, consolidation,
merger, dissolution, issue or sale of securities, or any other voluntary action,
avoid or seek to avoid the observance or performance of any of the terms to be
observed or performed by it hereunder, but will at all times in good faith
assist in the carrying out of all the provisions of this Warrant and in the
taking of all
-2-
<PAGE>
such actions as may reasonably be requested by the holder of this
Warrant in order to protect the exercise privilege of the holder of this Warrant
against dilution or other impairment, consistent with the tenor and purpose of
this Warrant. Without Awaiting the generality of the foregoing, the Company (i)
will not increase the par value of any shares of Common Stock receivable upon
the exercise of this Warrant above the Exercise Price then in effect, and (ii)
will take all such actions as may be necessary or appropriate in order that the
Company may validly and legally issue fully paid and nonassessable shares of
Common Stock upon the exercise of this Warrant.
(d) Successors and Assigns. This Warrant will be binding upon any
----------------------
entity succeeding to the Company by merger, consolidation, or acquisition of all
or substantially all the Company's assets.
4. Antidilution Provisions. During the Exercise Period, the
-----------------------
Exercise Price and the number of Warrant Shares shall be subject to adjustment
from time to time as provided in this Paragraph 4; provided, however, that no
-------- -------
adjustment will be made in the Exercise Price or the Warrant Shares in
connection with the issuance of Common Stock pursuant to this Warrant.
In the event that any adjustment of the Exercise Price as required
herein results in a fraction of a cent, such Exercise Price shall be rounded up
to the nearest cent.
(a) Adjustment of Exercise Price and Number of Shares upon Issuance of
------------------------------------------------------------------
Common Stock. Except as otherwise provided in Paragraphs 4(c) and 4(d) hereof,
- ------------
if and whenever on or after the date of issuance of this Warrant, the Company
issues or sells, or in accordance with Paragraph 4(b) hereof is deemed to have
issued or sold, any shares of Common Stock for no consideration or for a
consideration per share (before deduction of reasonable expenses or commissions
or underwriting discounts or allowances in connection therewith) less than the
then current Market Price (as hereinafter defined) of the Common Stock on the
date the Company fixes the price of such issuance of Common Stock (a "Dilutive
Issuance"), then immediately upon the Dilutive Issuance, the Exercise Price will
be reduced to a price determined by dividing (i) the sum of (x) the product
derived by multiplying the Exercise Price in effect immediately prior to the
Dilutive Issuance times the number of shares of Common Stock Deemed Outstanding
(as hereinafter defined) immediately prior to the Dilutive Issuance, plus (y)
the quotient derived from dividing the aggregate consideration (before deduction
for reasonable expenses or commissions or underwriting discounts or allowances
in connection therewith), calculated as set forth in Section 4(b) hereof,
received by the Company upon such Dilutive Issuance by the Market Price on the
date of issuance; by (ii) the total number of shares of Common Stock Deemed
Outstanding immediately after the Dilutive Issuance. Upon each such adjustment
of the Exercise Price hereunder, the number of shares of Common Stock acquirable
upon exercise of this warrant will be adjusted to the number of shares
determined by multiplying the Exercise Price in effect immediately prior to such
adjustment by the number of shares of Common Stock acquirable upon exercise of
this Warrant immediately prior -to such adjustment and dividing the product
thereof by the Exercise Price resulting from such adjustment.
-3-
<PAGE>
(b) Effect on Exercise Price of Certain Events. For purposes of
------------------------------------------
determining the adjusted Exercise Price under Paragraph 4(b) hereof, the
following will be applicable:
(i) Issuance of Rights or Options. If the Company in any manner
-----------------------------
issues or grants any rights or options, whether or not immediately exercisable
to subscribe for or to purchase Common Stock or other securities convertible
into or exchangeable for Common Stock ("Convertible Securities") (such rights or
options to purchase Common Stock or Convertible Securities are hereinafter
referred to as "Options") and the price per share for which Common Stock is
issuable upon the exercise of such Options is less than the then current Market
Price of the Common Stock on the date of issuance of such Options, then the
maximum total number of shares of Common Stock issuable upon the exercise of all
such Options will, as of the date of the issuance or grant of such Options, be
deemed to be outstanding and to have been issued and sold by the Company for
such price per share. For purposes of the preceding sentence, the "price per
share for which Common Stock is issuable upon the exercise of such Options" is
determined by dividing (i) the minimum total amount, if any, received or
receivable by the Company as consideration for the issuance or granting of all
such Options, plus the minimum aggregate amount of additional consideration, if
any, payable to the Company upon the exercise of all such Options, plus, in the
case of Convertible Securities issuable upon the exercise of such Options, the
minimum aggregate amount of additional consideration payable upon the conversion
or "change thereof at the time such Convertible Securities first become
convertible or exchangeable, by (ii) the maximum total number of shares of
Common Stock issuable upon the exercise of all such Options. No further
adjustment to the Exercise Price will be made upon the actual issuance of such
Common Stock, upon the exercise of such Options or upon the conversion or
exchange of Convertible Securities issuable upon exercise of such Options.
(ii) Issuance of Convertible Securities. If the Company in
----------------------------------
any manner issues or sells any Convertible Securities, whether or, not
immediately convertible (other than where the same are issuable upon the
exercise of Options) and the price per share for which Common Stock is issuable
upon such conversion or exchange is less than the then Current Market Price of
the Common Stock on the date of issuance of such Convertible Securities then the
maximum total number of shares of Common Stock issuable upon the conversion or
exchange of all such Convertible Securities will, as of the date of the issuance
of such Convertible Securities, be deemed to be outstanding and to have been
issued and sold by the Company for such price per share. For the purposes of
the preceding sentence, the "price per share for which Common Stock is issuable
upon such conversion or exchange" is determined by dividing (i) the minimum
total amount, if any, received or receivable by the Company as consideration for
the issuance or sale of all such Convertible Securities, plus the minimum
aggregate amount of additional consideration, if any, payable to the Company
upon the conversion or exchange thereof at the time such Convertible Securities
first become convertible or exchangeable, by (ii) the maximum total number of
shares of Common Stock issuable upon the conversion or exchange of all such
Convertible Securities. No further adjustment to the
-4-
<PAGE>
Exercise Price will be made upon the actual[ issuance of such Common Stock upon
conversion or exchange of such Convertible Securities.
(iii) Change in Option Price or Conversion Rate. If there is
-----------------------------------------
a change at any time in (i) the amount of additional consideration payable to
the Company upon the exercise of any Options; (ii) the amount of additional
consideration, if any, payable to the Company upon the conversion or exchange of
any Convertible Securities; or (iii) the rate at which any Convertible
Securities are convertible into or exchangeable for Common Stock (other than
under or by reason of provisions designed to protect against dilution), the
Exercise Price in effect at the time of such change will be readjusted to the
Exercise Price which would have been in effect at such time had such Options or
Convertible Securities still outstanding provided for such changed additional
consideration or changed conversion rate, as the case may be, at the time
initially granted, issued or sold, and the number of shares of Common Stock
acquirable upon exercise of this Warrant will be correspondingly readjusted.
(iv) Treatment of Expired Options and Unexercised
--------------------------------------------
Convertible Securities. If, in any case, the total number of shares of Common
- ----------------------
Stock issuable upon exercise of any Option or upon conversion or exchange of any
Convertible Securities is not, in fact, issued and the rights to exercise such
Option or to convert or exchange such Convertible Securities shall have expired
or terminated, the Exercise Price then in effect and the number of shares of
Common Stock acquirable upon exercise of this Warrant, as adjusted, will be
readjusted to the Exercise Price and the number of shares which would have been
in effect at the time of such expiration or termination had such Option or
Convertible Securities, to the extent outstanding immediately prior to such
expiration or termination (other than in respect of the actual number of shares
of Common Stock issued upon exercise or conversion thereof), never been issued.
(v) Calculation of Consideration Received. If any Common Stock,
-------------------------------------
Options or Convertible Securities are issued, granted or sold for cash, the
consideration received therefor for purposes of this Warrant will be the amount
received by the Company therefor, before deduction of reasonable commissions,
underwriting discounts or allowances or other reasonable expenses paid or
incurred by the Company in connection with such issuance, grant or !;ale. In
case any Common Stock, Options or Convertible Securities are issued or sold for
a consideration other than cash, the amount of the consideration other than cash
received by the Company will be the fair value of such consideration, except
where such consideration consists of securities, in which case the amount of
consideration received by the Company will be the Market Price thereof as of the
date of receipt. In case any Common Stock, Options or Convertible Securities
are issued in connection with any merger or consolidation in which the Company
is the surviving corporation, the amount of consideration therefor will be
deemed to be the fair value of such portion of the net assets and business of
the non-surviving corporation as is attributable to such Common Stock, Options
or Convertible Securities, as the case may be. The fair value of any
consideration other than cash or securities will be determined in good faith by
the Board of Directors of the Company.
-5-
<PAGE>
(c) Subdivision or Combination of Common Stock. If the Company at any
------------------------------------------
time subdivides (by any stock split, stock dividend, recapitalization,
reorganization, reclassification or otherwise) the shares of Common Stock
acquirable hereunder into a greater number of shares, then, after the date of
record for effecting such subdivision, the Exercise Price in effect immediately
prior to such subdivision will be proportionately reduced and the number of
shares of Common Stock acquirable upon exercise of this Warrant will be
proportionately increased. If the Company at any time combines (by reverse
stock split, recapitalization, reorganization, reclassification or otherwise)
the shares of Common Stock acquirable hereunder into a smaller number of shares,
then, after the date of record for effecting such combination, the Exercise
Price in effect immediately prior to such combination will be proportionately
increased and the number of shares of Common Stock acquirable upon exercise of
this Warrant will be proportionately decreased.
(d) Consolidation, Merger or Sale. In case of any consolidation of
-----------------------------
the Company with, or merger of the Company into any other corporation, or- in
case of any sale or conveyance of all or substantially all of the assets of the
Company other than in connection with a plan of complete liquidation of the
Company, then as a condition of such consolidation, merger or sale or
conveyance, adequate provision will be :made whereby the holder of this Warrant
will have the right to acquire and receive upon exercise of this Warrant in lieu
of the shares of Common Stock immediately theretofore acquirable upon the
exercise of this Warrant, such shares of stock, securities or assets as may be
issued or payable with respect to or in exchange for the number of shares of
Common Stock immediately theretofore acquirable and receivable upon exercise of
this Warrant had such consolidation, merger or sale or conveyance not taken
place. In any such case, the Company will make appropriate provision to insure
that the provisions of this Paragraph 4 hereof will thereafter be applicable as
nearly as may be in relation to any shares of stock or securities thereafter
deliverable upon the exercise of this Warrant. The Company will not effect any
consolidation, merger or sale or conveyance unless prior to the consummation
thereof, the successor corporation (if other than the Company) assumes by
written instrument the obligations under this Paragraph 4 and the obligations to
deliver to the holder of this Warrant such shares of stock, securities or assets
as, in accordance with the foregoing provisions, the holder may be entitled to
acquire.
(e) Distribution of Assets. In case the Company shall declare or make
----------------------
any distribution of its assets to holders of Common Stock as a partial
liquidating dividend, by way of return of capital or otherwise, then, after the
date of record for determining stockholders entitled to such distribution, but
prior to the date of distribution, the holder of this Warrant shall be entitled
upon exercise of this Warrant for the purchase of any or all of the shares of
Common Stock subject hereto, to receive the amount of such assets which would
have been payable to the holder had such holder been the holder of such shares
of Common Stock on the record date for the determination of stockholders
entitled to such distribution.
(f) Notice of Adjustment. Upon the occurrence of any event which
--------------------
requires any adjustment of the Exercise Price, then and in each such case the
Company shall give
-6-
<PAGE>
notice thereof to the holder of this Warrant, which notice shall state the
Exercise Price resulting from such adjustment and the increase or decrease, if
any, in the number of Warrant Shares purchasable at such price upon exercise,
setting forth in reasonable detail the method of calculation and the facts upon
which such calculation is based.
(g) Minimum Adjustment of Exercise Price. No adjustment of the
------------------------------------
Exercise Price shall be made in an amount less than 1% of the Exercise Price in.
effect at the time such adjustment is otherwise required to be made, but any
such lesser adjustment shall be carried forward and shall be made at the time
and together with the next subsequent adjustment which, together with any
adjustments so carried forward, shall amount to not less than 1% of such
Exercise Price.
(h) No Fractional Shares. No fractional shares of Common Stock are to
--------------------
be issued upon the exercise of this Warrant, but the Company shall pay a cash
adjustment other rights; -in respect of any fractional share which would
otherwise be issuable in an amount equal to the same fraction of the Market
Price of a share of Common Stock on the date of such exercise.
(i) Other Notices. In case at any time:
-------------
(i) the Company shall declare any dividend upon the Common Stock
payable in shares of stock of any class or make any other distribution (other
than dividends or distributions payable in cash out of retained earnings) to the
holders of the Common Stock;
(ii) the Company shall offer for subscription pro rata to
the holders of the Common Stock any additional shares of stock of any class or
(iii) there shall be any capital reorganization of the
Company, or reclassification of the Common Stock, or consolidations or merger of
the Company with or into, or sale of all or substantially all its assets to,
another corporation or entity; or
(iv) there shall be a voluntary or involuntary dissolution,
liquidation winding-up of the Company;
then, in each such case, the Company shall give to the holder of this Warrant
(a) notice of the date on which the books of the Company shall close or a record
:shall be taken for determining the holders of Common Stock entitled to receive
any such dividend, distribution, or subscription rights or for determining the
holders of Common Stock entitled to vote in respect of any such reorganization,
reclassification, consolidation, merger, sale, dissolution, liquidation or
winding-up and (b) in the case of any such reorganization, reclassification,
consolidation, merger, sale, dissolution, liquidation or winding-up, notice of
the date (or, if not then known, a reasonable approximation thereof by the
Company) when the same shall take place. Such notice shall also specify the
date on which the holders of Common Stock shall be entitled to receive such
-7-
<PAGE>
dividend, distribution, or subscription rights or to exchange their Common Stock
for stock or other securities or property deliverable upon such reorganization,
reclassification, consolidation, merger, sale, dissolution, liquidation, or
winding-up, as the case may be. Such notice shall be given at least 30 days
prior to the record date or the date on which the Company's books art-, closed
in respect thereto. Failure to give any such notice or any defect therein shall
not affect the validity of the proceedings referred to in clauses (i), (ii),
(iii) and (iv) above.
(j) Certain Events. If any event occurs of the type contemplated by
--------------
the adjustment provisions of this Paragraph 4 but not expressly provided for by
such provisions, the Company will give notice of such event as provided in
Paragraph 4(f) hereof, and the Company's Board of Directors will make an
appropriate adjustment in the Exercise Price and the number of shares of Common
Stock acquirable upon exercise of this Warrant so that the rights of the Holder
shall be neither enhanced nor diminished by such event.
(k) Certain Definitions.
-------------------
(i) "Common Stock Deemed Outstanding" shall mean the number of shares
---------------------------------
of Common Stock actually outstanding (not including shares of Common Stock held
in the treasury of the Company), plus (x) pursuant to Paragraph 4(b)(i) hereof,
the maximum total number of shares of Common Stock issuable upon the exercise of
Options, as of the date of such issuance or grant of such Options, if any, and
(y) pursuant to Paragraph 4(b)(ii) hereof, the maximum total number of shares of
Common Stock issuable upon conversion or exchange of Convertible Securities, as
of the date of issuance of such Convertible Securities, if any.
(ii) "Market Price" of any security shall be as follows: If
--------------
such shares are listed or admitted to trading on one or more national securities
exchanges, the average of the last reported sales prices per share or, in case
no such reported sales take place, the average of the last reported bid and
asked prices per share, in either case on the principal national securities
exchange on which such shares are listed or admitted to trading, for the five
(5) trading days immediately preceding the closing date of the transaction
pursuant to which the securities for which the market price determination is
being made were issued, sold or otherwise transferred (the "Determination
Date"); if such shares are not listed or admitted to trading on a national
securities exchange, but are quoted on a regular (and not sporadic) basis by the
NASD Automatic Quotation System ("NASDAQ"), the average of the last reported
sales prices per share for the five (5) trading days immediately preceding the
Determination Date, as furnished by the National Quotation Bureau Incorporated
or such other nationally recognized quotation service as may be selected by the
Company if such Bureau is not at the time furnishing quotations; and if the
securities are not (i) listed or admitted to trading on a national securities
exchange or (ii) quoted by NASDAQ on a regular (and not sporadic) basis, the
market price will be the fair market value thereof determined in good faith by
the Board of Directors of the Company or, if the holder shall object in writing
to such Board determination within twenty (20) days after it is rendered, fair
market value shall be determined in good faith by an independent investment
banking firm selected jointly by the holder and the Board of Directors of the
Company, or if such
-8-
<PAGE>
selection cannot be made, by an independent investment banking firm selected by
the American Arbitration Association in accordance with its rules. All costs of
determining fair market value subsequent to an objection by the holder as
contemplated in the immediately preceding sentence shall be home by the holder;
provided, however, if the fair market value determined in accordance with the
immediately preceding sentence subsequent to an objection by the holder is at
least 15% less than the fair market value determined in. good faith by the Board
of Directors of the Company, such costs shall be borne by the Company.
(iii) "Common Stock," for purposes of this Paragraph 4,
---------------
includes the Common Stock, par value $.10, and any additional class of stock of
the Company having no preference as to dividends or distributions on
liquidation, provided that the shares purchasable pursuant to this Warrant shall
include only shares of Common Stock, par value $.10, ]in respect of which this
Warrant is exercisable, or shares resulting from any subdivision or combination
of such Common Stock, or in the case of any reorganization, reclassification,
consolidation, merger, or sale of the character referred to in Paragraph 4(d)
hereof, the stock or other securities or property provided for in such
Paragraph.
5. Issue Tax. The issuance of certificates for Warrant Shares upon
---------
the exercise of this Warrant shall be made without charge to the holder of this
Warrant or such shares for any issuance tax in respect thereof, provided that
the Company shall not be required to pay any tax which, may be payable in
respect of any transfer involved in the issuance and delivery of any certificate
in a name other than the holder of this Warrant.
6. No Rights or Liabilities as a Shareholder. This Warrant shall
-----------------------------------------
not entitle the holder hereof to any voting rights or other rights as a
shareholder of the Company. No provision of this Warrant in the absence of
affirmative action by the holder hereof to purchase Warrant Shares, and no mere
enumeration herein of the rights or privileges of the holder hereof, shall give
rise to any liability of such holder for the Exercise Price or as a shareholder
of the Company, whether such liability is asserted by this Company or by
creditors of the Company.
7. Transfer, Exchange, and Replacement of Warrant.
----------------------------------------------
(a) Restriction on Transfer. This Warrant and the rights granted to
-----------------------
the holder hereof are transferable, in whole or in part, only with the prior
written consent of Company, and then upon surrender of this Warrant, together
with a properly executed assignment in the form attached hereto, at the office
or agency of the Company referred to in Paragraph 7(e) below, provided, however,
that any transfer or assignment shall be subject to the conditions set forth in
Paragraph 7(f) hereof. Until due presentment for registration of transfer on
the books of the Company, the Company may treat the registered holder hereof as
the owner and holder hereof for all purposes and the Company shall not be
affected by any notice to the contrary.
(b) Warrant Exchangeable for Different Denominations. This Warrant is
------------------------------------------------
exchangeable, upon the surrender hereof by the holder hereof at the office or
agency of the
-9-
<PAGE>
Company referred to in Paragraph 7(e) below, for new Warrants of like tenor
representing in the aggregate the right to purchase the number of shares of
Common Stock which may be purchased hereunder, each of such new Warrants to
represent the right to purchase such number of shares as shall be designated by
the holder hereof at the time of such surrender.
(c) Replacement of Warrant. Upon receipt of evidence reasonably
----------------------
satisfactory to the Company of the loss, theft, destruction, or mutilation of
this Warrant and, in the case of any such loss, theft, or destruction, upon
delivery of an indemnity agreement reasonably satisfactory in form and amount to
the Company, or, in the case of any such mutilation, upon surrender and
cancellation of this Warrant, the Company, at its expense, will execute and
deliver, in lieu thereof, a new Warrant of like tenor.
(d) Cancellation: Payment of Expenses. Upon the surrender of this
----------------------------------
Warrant in connection with any transfer, exchange, or replacement as provided in
this Paragraph 7, this Warrant shall be promptly canceled by the Company. The
Company shall pay all taxes (other than securities transfer taxes) and all other
expenses and charges payable in connection with the preparation, execution, and
delivery of Warrants pursuant to this Paragraph 7.
(e) Register. The Company shall maintain, at its principal executive
--------
offices (or such other office or agency of the Company as it may designate by
notice to the holder hereof), a register for this Warrant, in which the Company
shall record the name and address of the person in whose name this Warrant has
been issued, as well as the name and address of each transferee and each prior
owner of this Warrant.
(f) Exercise or Transfer Without Registration. If, at the time of the
-----------------------------------------
surrender of this Warrant in connection with any exercise, transfer, or exchange
of this Warrant, this Warrant (or, in the case of any exercise, the Warrant
Shares issuable hereunder, shall not be registered under the Securities Act of
1933, as amended (the "Securities Act"), and under applicable state securities
or blue sky laws, the Company may require, as a condition of allowing such
exercise, transfer, or exchange, (i) that the holder or transferee of this
Warrant, as the case may be, furnish to the Company a written opinion of
counsel, which opinion and counsel are acceptable to the Company, to the effect
that such exercise, transfer, or exchange may be made without registration under
said Act and under applicable state securities or blue sky laws and (ii) that
the holder or transferee execute and deliver to the Company an investment letter
in form and substance acceptable to the Company. Except in respect of a sale
pursuant to an effective Registration Statement under the Securities Act as
contemplated by Section 9 of the Securities Purchase Agreement, the first holder
of this Warrant, by taking and holding the same, represents to the Company that
such holder is acquiring this Wan-ant for investment and not with a view to the
distribution thereof.
IF THE INITIAL HOLDER OF THIS WARRANT IS A PENNSYLVANIA RESIDENT, SUCH HOLDER
HEREBY AGREES NOT TO SELL THIS WARRANT OR THE WARRANT SHARES FOR A PERIOD OF 12
MONTHS FROM THE DATE HEREOF, EXCEPT IN
-10-
<PAGE>
ACCORDANCE WITH SEC-NON 204.011 OF THE PENNSYLVANIA SECURITIES ACT OF 1972, AS
AMENDED.
8. Registration Rights.
-------------------
The holder of this Warrant or the Warrant Shares shall have only such
registration rights, if any, in respect of this Warrant and the Warrant Shares
as are later provided and agreed to in writing by the Company, if any.
9. Right to Redeem.
---------------
The Company shall have the right, upon thirty (30) days written
notice, to call this Warrant for redemption, in whole or in part, at a call
price of $.001 per Warrant Share (i) following any calendar year in which the
Company's consolidated financial statements evidence net income of at least
$400,000 and net income per share of at least $.40 per share or (ii) at any time
after the Company proposes to consummate the acquisition of all of the stock or
assets of another company whose annual gross revenues from operations is at
least $10,000,000; provided, however, that in the event that this Warrant is
called for redemption pursuant to clause (ii) above and this Warrant is not
thereafter exercised in accordance with the terms hereof, then the holder shall
deliver this Warrant to the Company and the Company shall hold this Warrant in
escrow pending the consummation of such transaction. In the event such
transaction is terminated prior to consummation, this Warrant shall be returned
to the holder and all terms of this Warrant shall continue in full force and
effect as if such call had not been made, and in the event the transaction is
consummated the Company shall pay the redemption proceeds to the holder and
cancel the Warrant.
10. Notices. All notices, requests, and other communications
-------
required or permitted to be given or delivered hereunder to the holder of this
Warrant shall be in writing, and shall be personally delivered, or shall be sent
by certified or registered mail, postage prepaid and addressed, to such holder
at the address shown for such holder on the books of the Company, or at such
other address as shall have been furnished to the Company by notice from such
holder. All notices, requests, and other communications required or permitted to
be given or delivered hereunder to the Company shall be in writing, and shall be
personally delivered, or shall be sent by certified or registered mail or by
recognized overnight mail carrier, postage prepaid and addressed, to the office
of the Company at 100 Four Falls Corporate Center, Suite 305, West Conshohocken,
PA 19428 Attention: Chairman, or at such other address as shall have been
furnished to the holder of this Warrant by notice from the Company. Any such
notice, request, or other communication may be sent by telegram, telex, or
telecopy, but shall in such case be subsequently confirmed by a writing
personally delivered or sent by certified or registered mail as provided above.
All notices, requests, and other communications shall be deemed to have been
given either at the time of the delivery thereof to (or the receipt by, in the
case of a telegram, telex or telecopy) the person entitled to receive such
notice at the address of such person for
-11-
<PAGE>
purposes of this Paragraph 10, or, if mailed, at the completion of the third
full day following the time of such mailing thereof to such address, as the case
may be.
11. GOVERNING LAW. THIS WARRANT SHALL BE GOVERNED BY AND CONSTRUED
-------------
AND ENFORCED IN ACCORDANCE WITH THE INTERNAL LAWS OF THE STATE OF DELAWARE
WITHOUT REGARD TO THE BODY OF LAW CONTROLLING CONFLICTS OF LAW. EACH OF THE
PARTIES HERETO HEREBY CONSENTS TO THE EXCLUSIVE JURISDICTION OF ANY STATE OR
FEDERAL COURT LOCATED WITHIN THE STATE OF DELAWARE FOR ANY PROCEEDING TO WHICH
ANY OF THE PARTIES HERETO IS A PARTY AND WHICH RELATES TO THIS WARRANT. TO THE
EXTENT PERMITTED BY LAW, EACH PARTY WAIVES ANY OBJECTION WHICH IT MAY HAVE BASED
ON LACK OF JURISDICTION OR IMPROPER VENUE OR FORUM NON-CONVENIENS TO THE CONDUCT
OF ANY PROCEEDING INSTITUTED HEREUNDER OR ANY PROCEEDING TO WHICH ANY PARTY TO
THIS WARRANT IS A PARTY AND WHICH RELATES TO THIS WARRANT AND THE TRANSACTIONS
CONTEMPLATED HEREBY.
12. Miscellaneous.
-------------
(a) Amendments. This Warrant and any provision hereof may not be
----------
changed, waived, discharged, or terminated orally, but only by, an instrument in
writing signed by the Company and holders representing a majority of the shares
of Common Stock acquirable upon exercise of this Warrant.
(b) Descriptive Headings. The descriptive headings of the several
--------------------
paragraphs of this Warrant are inserted for purposes of reference only, and
shall not affect the meaning or construction of any of the provisions hereof.
IN WITNESS WHEREOF, the Company has caused this Class C-3 Warrant to
be signed by its duly authorized officer.
THE EASTWIND GROUP, INC.
By:_____________________________
Its:___________________________
Agreed to and Accepted
By: ___________________________________
American Maple Leaf Financial Corporation
Initial Holder
-12-
<PAGE>
FORM OF EXERCISE AGREEMENT
Dated: ____________, ____.
To:_________________
The undersigned, pursuant to the provisions set forth in the within
Warrant, hereby agrees to purchase ________ shares of Common Stock covered by
such Warrant, and makes Payment herewith in full therefor at the price per share
provided by such Warrant in cash or by certified or official bank check in the
amount of, or by surrender of securities issued by the Company having a market
value equal to $_________. Please issue a certificate or certificates for such
shares of Common Stock in the name of and pay, any cash for any fractional share
to:
Name:_____________________________
Signature:________________________
Address:__________________________
__________________________
Note: The above signature should correspond
exactly with the name on the face of the
within Warrant.
and, if said number of shares of Common Stock shall not be all the shares
purchasable under the within Warrant, a new Warrant is to be issued in the name
of said undersigned covering the balance of the shares purchasable thereunder
less any fraction of a share paid in cash.
-14-
<PAGE>
FORM OF ASSIGNMENT
------------------
FOR VALUE RECEIVED, the undersigned hereby sells, assigns, and
transfers all of the rights of the undersigned under the within Warrant, with
respect to the number of shares of Common Stock covered thereby set forth herein
below, to:
Name of Assignee Address No. of Shares
- ---------------- ------- -------------
, and hereby irrevocably constitutes and appoints as agent and attorney-in-fact
to transfer said Warrant on the books of the within-named corporation, with full
power of substitution in the premises.
Dated: _________, ____.
In the presence of
________________________
Name:___________________________
Signature:________________________
Title of Signing Officer or Agent (if any):
________________________________
Address:_________________________
_________________________
Note: The above signature should
correspond exactly with the
name on the face of the within
Warrant.
-15-
<PAGE>
EXHIBIT 4.7
THIS WARRANT AND ANY SHARES ACQUIRED UPON THE EXERCISE OF THIS WARRANT HAVE NOT
BEEN REGISTERED UNDER THE SECURITIES ACT OF 1933, AS AMENDED, OR UNDER ANY STATE
SECURITIES OR BLUE SKY LAWS. EXCEPT AS OTHERWISE SET FORTH HEREIN OR IN AN
AGREEMENT FROM THE HOLDER, NEITHER THIS WARRANT NOR ANY OF SUCH SHARES MAY BE
SOLD, OFFERED FOR SALE, ASSIGNED, TRANSFERRED, OR OTHERWISE DISPOSED OF IN THE
ABSENCE OF REGISTRATION UNDER SUCH ACT OR UNDER APPLICABLE STATE SECURITIES OR
BLUE SKY LAWS OR AN EXEMPTION THEREFROM. THIS WARRANT MAY NOT BE SOLD, ASSIGNED,
TRANSFERRED OR OTHERWISE DISPOSED OF EXCEPT PURSUANT TO THE EXPRESS PROVISIONS
OF THIS WARRANT, AND NO SALE, ASSIGNMENT, TRANSFER, OR OTHER DISPOSITION OF THIS
WARRANT SHALL BE VALID OR EFFECTIVE UNLESS AND UNTIL SUCH PROVISIONS SHALL HAVE
BEEN COMPLIED WITH.
Right to
Purchase
30,000
Shares of
Common Stock,
par value $.10
per share
CLASS C-4 STOCK PURCHASE WARRANT
THIS CERTIFIES THAT, for value received, Mentor Management Co. (the
"Holder") or its registered assigns, is entitled to purchase from THE EASTWIND
GROUP, INC., a Delaware corporation (the "Company"), at any time or from time to
time during the period specified in Paragraph 2 hereof, Thirty Thousand (30,000)
fully paid and nonassessable shares of the Company's Common Stock, par value
$.10 per share (the "Common Stock"), at an exercise price of $6.00 per share
(the "Exercise Price"). The term "Warrant Shares", as used herein, refers to
the shares of Common Stock purchasable hereunder. The Warrant Shares and the
Exercise Price are subject. to adjustment as provided in Paragraph 4 hereof
This Warrant is subject to the following terms, provisions and
conditions:
1. Manner of Exercise; Issuance of Certificates; Payment for Shares.
----------------------------------------------------------------
Subject to the provisions hereof, this Warrant may be exercised by the holder
hereof, in whole or in part, by the surrender of this Warrant, together with a
complete exercise agreement in the form attached hereto (the "Exercise
Agreement"), to the Company during normal business hours on any business day at
the Company's principal executive offices (or such other office or agency of the
Company as it may designate by notice to the holder hereof), and upon payment to
the Company in cash or by certified or official bank check of the Exercise Price
for the Warrant Shares specified in the Exercise Agreement. The Warrant Shares
so purchased shall be deemed
<PAGE>
to be issued to the holder hereof or such holder's designee as the record owner
of such shares as of the close of business on the date on which this Warrant
shall have been surrendered, the completed Exercise Agreement delivered, and
payment made for such shares as set forth above. Certificates for the Warrant
Shares so purchased, representing the aggregate number of shares specified in
the Exercise Agreement, shall be delivered to the holder hereof within a
reasonable time, not exceeding five (5) business days, after this Warrant shall
have been so exercised. 'The certificates so delivered shall be in such
denominations as may be requested by the holder hereof and shall be registered
in the name of such holder or such other name as shall be designated by such
holder. If this Warrant shall have been exercised only in part, then, unless
this Warrant has expired, the Company shall, at its expense, at the time of
delivery of such certificates, deliver to the holder a new Warrant representing
the number of shares with respect to which this Warrant shall not then have been
exercised. The Company shall pay all taxes and other expenses and charges
payable in connection with the preparation, execution, and delivery of stock
certificates (and any new Warrants) pursuant to this Paragraph 1 except that, in
case such stock certificates shall be registered in a name or names other than
the holder of this Warrant at the request of such holder, funds sufficient to
pay all stock transfer taxes which shall be payable in connection with the
execution and delivery of such stock certificates shall be paid by the holder
hereof to the Company at the time of the delivery of such stock certificates by
the Company as set forth above.
2. Period of Exercise. Subject to the Company's right to redeem
------------------
this Warrant in accordance with Paragraph 9 below, this Warrant is exercisable
in whole or in part, at any time and from time to time on or after October 7,
1996 and before 5:00 p.m., Eastern time on October 7, 2001.
3. Certain Agreements of the Company. The Company hereby covenants
---------------------------------
and agrees as follows:
a. Shares to be Fully Paid. All Warrant Shares will, upon
-----------------------
issuance, be validly issued, fully paid, and nonassessable and free from all
taxes, liens, and charges with respect to the issue thereof.
b. Reservation of Shares. During the Exercise Period, the
---------------------
Company shall at all times have authorized, and reserved for the purpose of
issue upon exercise of this Warrant, a sufficient number of shares of Common
Stock to provide for the exercise of this Warrant.
c. Certain Actions Prohibited. The Company will not, by
--------------------------
amendment of its charter or through any reorganization, transfer of assets,
consolidation, merger, dissolution, issue or sale of securities, or any other
voluntary action, avoid or seek to avoid the observance or performance of any of
the terms to be observed or performed by it hereunder, but will at all times in
good faith assist, in the carrying out of all the provisions of this Warrant and
in the taking of all such actions as may reasonably be requested by the holder
of this Warrant in order to protect the exercise privilege of the holder of this
Warrant against dilution or other impairment
-2-
<PAGE>
consistent with the tenor and purpose of this Warrant. Without limiting the
generality of the foregoing, the Company (i) will not increase the par value of
any shares of Common Stock receivable upon the exercise of this Warrant above
the Exercise Price then in effect, and (ii) will take all such actions as may be
necessary or appropriate in order that the Company may validly and legally issue
fully paid. and nonassessable shares of Common Stock upon the exercise of this
Warrant.
d. Successors and Assigns. This Warrant will be binding upon
----------------------
any entity succeeding to the Company by merger, consolidation, or acquisition of
all or substantially all the Company's assets.
4. Antidilution Provisions. During the Exercise Period, the
-----------------------
Exercise Price and the number of Warrant Shares shall be subject to adjustment
from time to time as provided in this Paragraph 4; provided, however, that no
adjustment will be made in the Exercise Price or the Warrant Shares in
connection with the issuance of Common Stock pursuant to this Warrant.
In the event that any adjustment of the Exercise Price as required
herein results in a fraction of a cent, such Exercise Price shall be rounded up
to the nearest cent.
a. Adjustment of Exercise Price and Number of Shares upon
------------------------------------------------------
Issuance of Common Stock. Except as otherwise provided in Paragraphs 4(c) and
- ------------------------
4(d) hereof, if and whenever on or after the date of issuance of this Warrant,
the Company issues or sells, or in accordance with Paragraph 4(b) hereof is
deemed to have issued or sold, any shares of Common Stock for no consideration
or for a consideration per. share (before deduction of reasonable expenses or
commissions or underwriting discounts or allowances in connection therewith)
less than the then current Market Price (as hereinafter defined) of the Common
Stock on the date the Company fixes the price of such issuance of Common Stock
(a "Dilutive Issuance"), then immediately upon the Dilutive Issuance, the
Exercise Price will be reduced to a price determined by dividing (i) the sum of
(x) the product derived by multiplying the Exercise Price in effect immediately
prior to the Dilutive Issuance times the number of shares of Common Stock Deemed
Outstanding (as hereinafter defined) immediately prior to the Dilutive Issuance,
plus (y) the quotient derived from dividing the aggregate consideration (before
deduction for reasonable expenses or commissions or underwriting discounts or
allowances in connection therewith), calculated as set forth in Section 4(b)
hereof, received by the Company upon such Dilutive Issuance by the Market Price
on the date of issuance; by (ii) the total number of shares of Common Stock
Deemed Outstanding immediately after the Dilutive Issuance. Upon each such
adjustment of the Exercise Price hereunder, the number of shares of Common Stock
acquirable upon exercise of this warrant will be adjusted to the number of
shares determined by multiplying the Exercise Price in effect immediately prior
to such adjustment by the number of shares of Common Stock acquirable upon
exercise of this Warrant immediately prior to such adjustment and dividing the
product thereof by the Exercise Price resulting from such adjustment.
-3-
<PAGE>
b. Effect on Exercise Price of Certain Events. For purposes of
------------------------------------------
determining the adjusted Exercise Price under Paragraph 4(b) hereof, the
following will be applicable:
(i) Issuance of Rights or Options. If the Company in any
-----------------------------
manner issues or grants any rights or options, whether or not
immediately exercisable to subscribe for or to purchase Common
Stock or other securities convertible into or exchangeable for
Common Stock ("Convertible Securities") (such rights or options
to purchase Common Stock or Convertible Securities are
hereinafter referred to as "Options") and the price per share for
which Common Stock is issuable upon the exercise of such Options
is less than the then current Market Price of the Common Stock on
the date of issuance of such Options, then the maximum total
number of shares of Common Stock issuable upon the exercise of
all such Options will, as of the date of the issuance or grant of
such Options, be deemed to be outstanding and to have been issued
and sold by the Company for such price per share. For purposes
of the preceding sentence, the "price per share for which Common
Stock is issuable upon the exercise of such Options" is
determined by dividing (i) the minimum total amount, if any,
received or receivable by the Company as consideration for the
issuance or granting of all such Options, plus the minimum
aggregate amount of additional consideration, if any, payable to
the Company upon the exercise of all such Options, plus, in the
case of Convertible Securities issuable upon the exercise of such
Options, the minimum aggregate amount of additional consideration
payable upon the conversion or exchange thereof at the time such
Convertible Securities first become convertible or exchangeable,
by (ii) the maximum total number of shares of Common Stock
issuable upon the exercise of all such Options. No further
adjustment to the Exercise Price will be made upon the actual
issuance of such Common Stock, upon the exercise of such Options
or upon the conversion or exchange of Convertible Securities
issuable upon exercise of such Options.
(ii) Issuance of Convertible Securities. If the Company in
----------------------------------
any manner issues or sells any Convertible Securities, whether or
not immediately convertible (other than where the same are
issuable upon the exercise of Options) and the price per share
for which Common Stock is issuable upon such conversion or
exchange is less than the then Current Market Price of the Common
Stock on the date of issuance of such Convertible Securities then
the maximum total number of shares of Common Stock issuable upon
the conversion or exchange of all such Convertible Securities
will, as of the date of the issuance of such Convertible
Securities, be deemed to be outstanding and to have been
-4-
<PAGE>
issued and sold by the Company for such price per share. For the
purposes of the preceding sentence, the "price per share for
which Common Stock is issuable upon such conversion or exchange"
is determined by dividing (i) the minimum total amount, if any,
received or receivable by the Company as consideration for the
issuance or sale of all such Convertible Securities, plus the
minimum aggregate amount of additional consideration, if any,
payable to the Company upon the conversion or exchange thereof at
the time such Convertible Securities first become convertible or
exchangeable, by (ii) the maximum total number of shares of
Common Stock issuable upon the conversion or exchange of all such
Convertible Securities. No further adjustment to the Exercise
Price will be made upon the actual issuance of such Common Stock
upon conversion or exchange of such Convertible Securities.
(iii) Change in Option Price or Conversion Rate. If there is
-----------------------------------------
a change at any time in (i) the amount of additional
consideration payable to the Company upon the exercise of any
Options; (ii) the amount of additional consideration, if any,
payable to the Company upon the conversion or exchange of any
Convertible Securities; or (iii) the rate at which any
Convertible Securities are convertible into or exchangeable for
Common Stock (other than under or by reason of provisions
designed to protect against dilution), the Exercise Price in
effect at the time of such change will be readjusted to the
Exercise Price which would have been in effect at such time had
such Options or Convertible Securities still outstanding provided
for such changed additional consideration or changed conversion
rate, as the case may be, at the time initially granted, issued
or sold, and the number of shares of Common Stock acquirable upon
exercise of this Warrant will be correspondingly readjusted.
(iv) Treatment of Expired Options and Unexercised
--------------------------------------------
Convertible Securities. If, in any case, the total number of
----------------------
shares of Common Stock issuable upon exercise of any Option or
upon conversion or exchange of any Convertible Securities is not,
in fact, issued and the rights to exercise such Option or to
convert or exchange such Convertible Securities shall have
expired or terminated, the Exercise Price then in effect and the
number of shares of Common Stock acquirable upon exercise of this
Warrant, as adjusted, will be readjusted to the Exercise Price
and the number of shares which would have been in effect at the
time of such expiration or termination had such Option or
Convertible Securities, to the extent outstanding immediately
prior to such expiration or termination (other than in respect of
the actual number of shares of Common Stock issued upon exercise
or conversion thereof), never been issued.
-5-
<PAGE>
(v) Calculation of Consideration Received. If any Common
-------------------------------------
Stock, Options or Convertible Securities are issued, granted or
sold for cash, the consideration received therefor for purposes
of this Warrant will be the amount received by the Company
therefor, before deduction of reasonable commissions,
underwriting discounts or allowances or other reasonable expenses
paid or incurred by the Company in connection with such issuance,
grant or sale. In case any Common Stock, Options or Convertible
Securities are issued or sold for a consideration other than
cash, the amount of the consideration other than cash received by
the Company will be the fair value of such consideration, except
where such consideration consists of securities, in which case
the amount of consideration received by the Company will be the
Market Price thereof as of the date of receipt. In case any
Common Stock, Options or Convertible Securities are issued in
connection with any merger or consolidation in which the Company
is the surviving corporation, the amount of consideration
therefor will be deemed to be the fair value of such portion of
the net assets and business of the non-surviving corporation as
is attributable to such Common Stock, Options or Convertible
Securities, as the case may be. The fair value of any
consideration other than cash or securities will be determined in
good faith by the Board of Directors of the Company.
c. Subdivision or Combination of Common Stock. If the Company
------------------------------------------
at any time subdivides (by any stock split, stock dividend, recapitalization,
reorganization, reclassification or otherwise) the shares of Common Stock
acquirable hereunder into a greater number of shares, then, after the date of
record for effecting such subdivision, the Exercise Price in effect immediately
prior to such subdivision will be proportionately reduced and the number of
shares of Common Stock acquirable upon exercise of this Warrant will be
proportionately increased. If the Company at any time combines (by reverse
stock split, recapitalization, reorganization, reclassification or otherwise)
the shares of Common Stock acquirable hereunder into a smaller number of shares,
then, after the date of record for effecting such combination, the Exercise
Price in effect immediately prior to such combination will be proportionately
increased and the number of shares of Common Stock acquirable upon exercise of
this Warrant will be proportionately decreased.
d. Consolidation, Merger or Sale. In case of any consolidation
-----------------------------
of the Company with, or merger of the Company into any other corporation, or in
case of any sale or conveyance of all or substantially all of the assets of the
Company other than in connection with a plan of complete liquidation of the
Company, then as a condition of such consolidation merger or sale or conveyance,
adequate provision will be made whereby the holder of this Warrant will have the
right to acquire and receive upon exercise of this Warrant in lieu of the shares
of Common Stock immediately theretofore acquirable upon the exercise of this
Warrant, such shares of stock, securities or assets and may be issued or payable
with respect to or in exchange
-6-
<PAGE>
for the number of shares of Common Stock immediately theretofore acquirable and
receivable upon exercise of this Warrant had such consolidation, merger or sale
or conveyance not taken place. In any such case, the Company will make
appropriate provision to insure that the provisions of this Paragraph 4 hereof
will thereafter be applicable as nearly as may be in relation to any shares of
stock or securities thereafter deliverable upon the exercise of this Warrant.
The Company will not effect any consolidation, merger or sale or conveyance
unless prior to the consummation thereof, the successor corporation (if other
than the Company) assumes by written instrument the obligations under this
Paragraph 4 and the obligations to deliver to the holder of this Warrant such
shares of stock, securities or assets as, in accordance with the foregoing
provisions, the holder may be entitled to acquire.
e. Distribution of Assets. In case the Company shall declare
----------------------
or make any distribution of its assets to holders of Common Stock as a partial
liquidating dividend, by way of return of capital or otherwise, then, after the
date of record for determining stockholders entitled to such distribution, but
prior to the date of distribution, the holder of this Warrant shall be entitled
upon exercise of this Warrant for the purchase of any or all of the shares of
Common Stock subject hereto, to receive the amount of such assets which would
have been payable to the holder had such holder been the holder of such shares
of Common Stock on the record date for the determination of stockholders
entitled to such distribution.
f. Notice of Adjustment. Upon the occurrence of any event which
--------------------
requires any adjustment of the Exercise Price, then and in each such case the
Company shall give notice thereof to the holder of this Warrant, which notice
shall state the Exercise Price resulting from such adjustment and the increase
or decrease, if any, in the number of Warrant Shares purchasable at such price
upon exercise, setting forth in reasonable detail the method of calculation and
the facts upon which such calculation is based.
g. Minimum Adjustment of Exercise Price. No adjustment of the
------------------------------------
Exercise Price shall be made in an amount less than 1% of the Exercise Price in
effect at the time such adjustment is otherwise required to be made, but any
such lesser adjustment shall be carried forward and shall be made at the time
and together with the next subsequent adjustment which, together with any
adjustments so carried forward, shall amount to not less than 1% of such
Exercise Price.
h. No Fractional Shares. No fractional shares of Common Stock
--------------------
are to be issued upon the exercise of this Warrant, but the Company shall pay a
cash adjustment in respect of any fractional share which would otherwise be
issuable in an amount equal to the same fraction of the Market Price of a share
of Common Stock on the date of such exercise.
i. Other Notices. In case at any time:
-------------
(i) the Company shall declare any dividend upon
the
-7-
<PAGE>
Common Stock payable in shares of stock of any class or make any
other distribution (other than dividends or distributions payable
in cash out of retained earnings) to the holders of the Common
Stock;
(ii) the Company shall offer for subscription pro rata to
the holders of the Common Stock any additional shares of stock of
any class or other rights;
(iii) there shall be any capital reorganization of the
Company, or reclassification of the Common Stock, or
consolidation or merger of the Company with or into, or sale of
all or substantially all its assets to, another corporation or
entity; or
(iv) there shall be a voluntary or involuntary dissolution,
liquidation winding-up of the Company;
then, in each such case, the Company shall give to the holder of this Warrant
(a) notice of MP
the date on which the books of the Company shall close or a record shall be
taken for determining the holders of Common Stock entitled to receive any such
dividend, distribution, or subscription rights or for determining the holders of
Common Stock entitled to vote in respect of any such reorganization,
reclassification, consolidation, merger, sale, dissolution, liquidation or
winding-up and (b) in the case of any such reorganization, reclassification;
consolidation, merger, sale, dissolution, liquidation or winding-up, notice of
the date (or, if not then known, a reasonable approximation thereof by the
Company) when the same shall take place. Such notice shall also specify the
date on which the holders of Common Stock shall be entitled to receive such
dividend, distribution, or subscription rights or to exchange their Common Stock
for stock or other securities or property deliverable upon such reorganization,
reclassification, consolidation, merger, sale, dissolution, liquidation, or
winding-up, as the case may be. Such notice shall be given at least 30 days
prior to the record date or the date on which the Company's books are closed in
respect thereto. Failure to give any such notice or any defect therein shall
not affect the validity of the proceedings referred to in clauses (i), (ii),
(iii) and (iv) above.
j. Certain Events. If any event occurs of the type
--------------
contemplated by the adjustment provisions of this Paragraph 4 but not expressly
provided for by such provisions, the Company will give notice of such event as
provided in Paragraph 4(f) hereof, and the Company's Board of Directors will
make an appropriate adjustment in the Exercise Price and the number of shares of
Common Stock acquirable upon exercise of this Warrant so that the rights of the
Holder shall be neither enhanced nor diminished by such event.
k. Certain Definitions.
-------------------
(i) "Common Stock Deemed Outstanding" shall mean the number
-------------------------------
of shares of Common Stock actually outstanding (not including
-8-
<PAGE>
shares of Common Stock held in the treasury of the Company), plus
(x) pursuant to Paragraph 4(b)(i) hereof, the maximum total
number of shares of Common Stock issuable upon the exercise of
Options, as of the date of such issuance or grant of such
Options, if any, and (y) pursuant to Paragraph 4(b)(ii) hereof,
the maximum total number of shares of Common Stock issuable upon
conversion or exchange of Convertible Securities, as of the date
of issuance of such Convertible Securities, if any.
(ii) "Market Price" of any security shall be as follows: If
------------
such shares are listed or admitted to trading on one or more
national securities exchanges, the average of the last reported
sales prices per share or, in case no such reported sales take
place, the average of the last reported bid and asked prices per
share, in either case on the principal national securities
exchange on which such shares are listed or admitted to trading,
for the five (5) trading days immediately preceding the closing
date. of the transaction pursuant to which the securities for
which the market price determination is being made were issued,
sold or otherwise transferred (the "Determination Date"); if such
shares are not listed or admitted to trading on a national
securities exchange, but are quoted on a regular (and not
sporadic) basis by the NASD Automatic Quotation System
("NASDAQ"), the average of the last reported sales prices per
share for the five (5) trading days immediately preceding the
Determination Date, as furnished by the National Quotation Bureau
Incorporated or such other nationally recognized quotation
service as may be selected by the Company if such Bureau is not
at the time furnishing quotations; and if the securities are not
(i) listed or admitted to trading on a national securities
exchange or (ii) quoted by NASDAQ oil a regular (and not
sporadic) basis, the market price will be the fair market value
thereof determined in good faith by the Board of Directors of the
Company or, if the holder shall object in writing to such Board
determination within twenty (20) days after it is rendered, fair
market value shall be determined in good faith by an independent
investment banking firm selected jointly by the holder and the
Board of Directors of the Company, or if such selection cannot be
made, by an independent investment banking firm selected by the
American Arbitration Association in accordance with its rules.
All costs of determining fair market value subsequent to an
objection by the holder as contemplated in the immediately
preceding sentence shall be borne by the holder; provided,
however, if the fair market value determined in accordance with
the immediately preceding sentence subsequent to an objection by
the holder is at least 15% less than the fair market value
determined in good faith by the Board of Directors of the
Company, such costs shall be borne by the Company.
-9-
<PAGE>
(iii) "Common Stock," for purposes of this Paragraph 4,
-------------
includes the Common Stock, par value $.10, and any additional
class of stock of the Company having no preference as to
dividends or distributions on liquidation, provided that the
shares purchasable pursuant to this Warrant shall include only
shares of Common Stock, par value $.10, in respect of which this
Warrant is exercisable, or shares resulting from any subdivision
or combination of such Common Stock, or in the case of any
reorganization, reclassification, consolidation, merger, or sale
of the character referred to in Paragraph 4(d) hereof, the stock
or other securities or property provided for in such Paragraph.
5. Issue Tax. The issuance of certificates for Warrant Shares upon
---------
the exercise of this Warrant shall be made without charge to the holder of this
Warrant or such shares for any issuance tax in respect thereof, provided that
the Company shall not be required to pay any tax which may be payable in respect
of any transfer involved in the issuance and delivery of any certificate in a
name other than the holder of this Warrant.
6. No Rights or Liabilities as a Shareholder. This Warrant shall
-----------------------------------------
not entitle the holder hereof to any voting rights or other rights as a
shareholder of the Company. No provision of this Warrant in the absence of
affirmative action by the holder hereof to purchase Warrant Shares, and no mere
enumeration herein of the rights or privileges of the holder hereof, shall give
rise to any liability of such holder for the Exercise Price or as a shareholder
of the Company, whether such liability is asserted by the Company or by
creditors of the Company.
7. Transfer, Exchange, and Replacement of Warrant.
----------------------------------------------
a. Restriction on Transfer. This Warrant and the rights
-----------------------
granted to the holder hereof are transferable, in whole or in part, only with
the prior written consent of Company, and then upon surrender of this Warrant,
together with a properly executed assignment in the form attached hereto, at the
office or agency of the Company referred to in Paragraph 7(e) below, provided,
however, that any transfer or assignment shall be subject to the conditions set
forth in Paragraph 7(f) hereof. Until due presentment for registration of
transfer on the books of the Company, the Company may treat the registered
holder hereof as the owner and holder hereof for all purposes and the Company
shall not be affected by any notice to the contrary.
b. Warrant Exchangeable for Different Denominations. This
------------------------------------------------
Warrant is exchangeable, upon the surrender hereof by the holder hereof at the
office or agency of the Company referred to in Paragraph 7(e) below, for new
Warrants of like tenor representing in the aggregate the right to purchase the
number of shares of Common Stock which may be purchased hereunder, each of such
new Warrants to represent the right to purchase such number of shares as shall
be designated by the holder hereof at the time of such surrender.
-10-
<PAGE>
c. Replacement of Warrant. Upon receipt of evidence reasonably
----------------------
satisfactory to the Company of the loss, theft, destruction, or mutilation of
this Warrant and, in the case of any such loss, theft, or destruction, upon
delivery of an indemnity agreement reasonably satisfactory in form and amount to
the Company, or, in the case of any such mutilation, upon surrender and
cancellation of this Warrant, the Company, at its expense, will execute and
deliver, in lieu thereof, a new Warrant of like tenor.
d. Cancellation: Payment of Expenses. Upon the surrender of
---------------------------------
this Warrant in connection with any transfer, exchange, or replacement as
provided in this Paragraph 7, this Warrant shall be promptly canceled by the
Company. The Company shall pay all taxes (other than securities transfer taxes)
and all other expenses and charges payable in connection with the preparation,
execution, and delivery of Warrants pursuant to this Paragraph 7.
e. Register. The Company shall maintain, at its principal
--------
executive offices (or such other office or agency of the Company as it may
designate by notice to the holder hereof), a register for this Warrant, in which
the Company shall record the name and address of the person in whose name this
Warrant has been issued, as well as the name and address of each transferee and
each prior owner of this Warrant.
f. Exercise or Transfer Without Registration. If, at the time
-----------------------------------------
of the surrender of this Warrant in connection with any exercise, transfer, or
exchange of this Warrant, this Warrant (or, in the case of any exercise, the
Warrant Shares issuable hereunder, shall not be registered under the Securities
Act of 1933, as amended (the "Securities Act"), and under applicable state
securities or blue sky laws, the Company may require, as a condition of allowing
such exercise, transfer, or exchange, (i) that the holder or transferee of this
Warrant, as the case may be, furnish to the Company a written opinion of
counsel, which opinion and counsel are acceptable to the Company, to the effect
that such exercise, transfer, or exchange may be made without registration under
said Act and under applicable state securities or blue sky laws and (ii) that
the holder or transferee execute and deliver to the Company an investment letter
in form and substance acceptable to the Company. Except in respect of a sale
pursuant to an effective Registration Statement under the Securities Act as
contemplated by Section 9 of the Securities Purchase Agreement, the first holder
of this Warrant, by taking and holding the same, represents to the Company that
such holder is acquiring this Warrant for investment and not with a view to the
distribution thereof.
IF THE INITIAL HOLDER OF THIS WARRANT IS A PENNSYLVANIA RESIDENT, SUCH
HOLDER HEREBY AGREES NOT TO SELL THIS WARRANT OR THE WARRANT SHARES FOR A PERIOD
OF 12 MONTHS FROM THE DATE HEREOF, EXCEPT IN ACCORDANCE WITH SECTION 204.011 OF
THE PENNSYLVANIA SECURITIES ACT OF 1972, AS AMENDED.
-11-
<PAGE>
8. Registration Rights. The holder of this Warrant or the Warrant
-------------------
Shares shall have only such registration rights, if any, in respect of this
Warrant and the Warrant Shares as are later provided and agreed to in writing by
the Company, if any.
9. Right to Redeem. The Company shall have the right, upon thirty
---------------
(30) days written notice, to call this Warrant for redemption, in whole or in
part, at a call price of $.001 per Warrant Share (i) following any calendar year
in which the Company's consolidated financial statements evidence net income of
at least $400,000 and net income per share of at least $.40 per share or (ii) at
any time after the Company proposes to consummate the acquisition of all of the
stock or assets of another company whose annual gross revenues from operations
is at least $10,000,000; provided, however, that in the event that this Warrant
-------- -------
is called for redemption pursuant to clause (ii) above and this Warrant is not
thereafter exercised in accordance with the terms hereof, then the holder shall
deliver this Warrant to the Company and the Company shall hold this Warrant in
escrow pending the consummation of such transaction. In the event such
transaction is terminated prior to consummation, this Warrant shall be returned
to the holder and all terms of this Warrant shall continue in full force and
effect as if such call had not been made, and in the event the transaction is
consummated the Company shall pay the redemption proceeds to the holder and
cancel the Warrant.
10. Notices. All notices, requests, and other communications
-------
required or permitted to be given or delivered hereunder to the holder of this
Warrant shall be in writing, and shall be personally delivered, or shall be sent
by certified or registered mail, postage prepaid and addressed, to such holder
at the address shown for such holder on the books of the Company, or at such
other address as shall have been furnished to the Company by notice from such
holder. All notices, requests, and other communications required or permitted to
be given or delivered hereunder to the Company shall be in writing, and shall be
personally delivered, or shall be sent by certified or registered mail or by
recognized overnight mail carrier, postage prepaid and addressed, to the office
of the Company at 100 Four Falls Corporate Center, Suite 305, West Conshohocken,
PA 19428 Attention: Chairman, or at such other address as shall have been
furnished to the holder of this Warrant by notice from the Company. Any such
notice, request, or other communication may be sent by telegram, telex, or
telecopy, but shall in such case be subsequently confirmed by a writing
personally delivered or sent by certified or registered mail as provided above.
All notices, requests, and other communications shall be deemed to have been
given either at the time of the delivery thereof to (or the receipt by, in the
case of a telegram, telex or telecopy) the person entitled to receive :Such
notice at the address of such person for purposes of this Paragraph 10, or, if
mailed, at the completion of the third full day following the time of such
mailing thereof to such address, as the case may be.
11. GOVERNING LAW. THIS WARRANT SHALL BE GOVERNED BY AND CONSTRUED
-------------
AND ENFORCED IN ACCORDANCE WITH THE INTERNAL LAWS OF THE STATE OF DELAWARE
WITHOUT REGARD TO THE BODY OF LAW CONTROLLING CONFLICTS OF LAW. EACH OF THE
PARTIES HERETO HEREBY CONSENTS TO THE EXCLUSIVE JURISDICTION OF ANY STATE OR
FEDERAL COURT
-12-
<PAGE>
LOCATED WITHIN THE STATE OF DELAWARE FOR ANY PROCEEDING TO WHICH ANY OF THE
PARTIES HERETO IS A PARTY AND WHICH RELATES TO THIS WARRANT. TO THE EXTENT
PERMITTED BY LAW, EACH PARTY WAIVES ANY OBJECTION WHICH IT MAY HAVE BASED ON
LACK OF JURISDICTION OR IMPROPER VENUE OR FORUM NON-COVENANTS TO THE CONDUCT OF
ANY PROCEEDING INSTITUTED HEREUNDER OR ANY PROCEEDING TO WHICH ANY PARTY TO THIS
WARRANT IS A PARTY AND WHICH RELATES TO THIS WARRANT AND THE TRANSACTIONS
CONTEMPLATED HEREBY.
12. Miscellaneous.
-------------
a. Amendments. This Warrant and any provision hereof may not be
----------
changed, waived, discharged, or terminated orally, but only by an instrument in
writing signed by the Company and holders representing a majority of the shares
of Common Stock acquirable upon exercise of this Warrant.
b. Descriptive Headings. The descriptive headings of the
--------------------
several paragraphs of this Warrant are inserted for purposes of reference only,
and shall not affect the meaning or construction of any of the provisions
hereof.
IN WITNESS WHEREOF, the Company has caused this Class C-4 Warrant to
be signed by its duly authorized officer.
THE EASTWIND GROUP, INC.
By: ___________________________
Its: ___________________________
Agreed to and Accepted
By: __________________________
Mentor Management Co.
Initial Holder
Dated as of October 7, 1996.
DATE OF FIRST EXERCISE: October 7,1996
DATE UPON WHICH EXERCISE PERIOD TERMINATES: October 7, 2001
-13-
<PAGE>
FORM OF EXERCISE AGREEMENT
Dated: ____________, ____
To: ____________________
The undersigned, pursuant to the provisions set forth in the within
Warrant, hereby agrees to purchase shares of Common Stock covered by such
Warrant, and makes payment herewith in full therefor at the price per share
provided by such Warrant in cash or by certified or official bank check in the
amount of, or by surrender of securities issued by the Company having a market
value equal to $ _________. Please issue a certificate or certificates for such
shares of Common Stock in the name of and pay, any cash for any fractional share
to:
Name: _____________________________
Signature: ________________________
Address: __________________________
__________________________
Note: The above signature should correspond
exactly with the name on the face
of the within Warrant.
and, if said number of shares of Common Stock shall not be all the shares
purchasable under the within Warrant, a new Warrant is to be issued in the name
of said undersigned covering the balance of the shares purchasable thereunder
less any fraction of a share paid in cash.
-14-
<PAGE>
FORM OF ASSIGNMENT
FOR VALUE RECEIVED, the undersigned hereby sells, assigns, and
transfers all of the rights of the undersigned under the within Warrant, with
respect to the number of shares of Common Stock covered thereby set forth herein
below, to:
Name of Assignee Address No. of Shares
- ---------------- ------- -------------
, and hereby irrevocably constitutes and appoints ________________ as agent and
attorney-in-fact to transfer said Warrant on the books of the within-named
corporation, with full power of substitution in the premises.
Dated: ________________, ____.
In the presence of
____________________________
Name: __________________________
Signature: _______________________
Title of Signing Officer or Agent (if any):
________________________________
Address: ________________________
________________________
Note: The above signature should
correspond exactly with the
name on the face of the within
Warrant.
-15-
<PAGE>
EXHIBIT 4.8
THIS WARRANT AND ANY SHARES ACQUIRED UPON THE EXERCISE OF THIS WARRANT HAVE NOT
BEEN REGISTERED UNDER THE SECURITIES ACT OF 1933, AS AMENDED, OR UNDER ANY STATE
SECURITIES OR BLUE SKY LAWS. EXCEPT AS OTHERWISE SET FORTH HEREIN OR IN AN
AGREEMENT FROM THE HOLDER, NEITHER THIS WARRANT NOR ANY OF SUCH SHARES MAY BE
SOLD, OFFERED FOR SALE, ASSIGNED, TRANSFERRED, OR OTHERWISE DISPOSED OF IN THE
ABSENCE OF REGISTRATION UNDER SUCH ACT OR UNDER APPLICABLE STATE SECURITIES OR
BLUE SKY LAWS OR AN EXEMPTION THEREFROM. THIS WARRANT MAY NOT BE SOLD, ASSIGNED,
TRANSFERRED OR OTHERWISE DISPOSED OF EXCEPT PURSUANT TO THE EXPRESS PROVISIONS
OF THIS WARRANT, AND NO SALE, ASSIGNMENT, TRANSFER, OR OTHER DISPOSITION OF THIS
WARRANT SHALL BE VALID OR EFFECTIVE UNLESS AND UNTIL SUCH PROVISIONS SHALL HAVE
BEEN COMPLIED WITH.
Right to
Purchase
22,500
Shares of
Common Stock
par value $.10
per share
CLASS C-5 STOCK PURCHASE WARRANT
THIS CERTIFIES THAT, for value received, Equibonds S.A. (the "Holder")
or its registered assigns, is entitled to purchase from THE EASTWIND GROUP,
INC., a Delaware corporation (the "Company"), at any time or from time to time
during the period specified in Paragraph 2 hereof, Twenty-Two Thousand Five
Hundred (22,500) fully paid and nonassessable shares of the Company's Common
Stock, par value $.10 per share (the "Common Stock"), at an exercise price of
$6.00 per share (the "Exercise Price"). The term "Warrant Shares," as used
herein, refers to the shares of Common Stock purchasable hereunder. The Warrant
Shares and the Exercise Price are subject to adjustment as provided in Paragraph
4 hereof.
This Warrant is subject to the following terms, provisions and
conditions:
1. Manner of Exercise; Issuance of Certificates; Payment for Shares.
----------------------------------------------------------------
Subject to the provisions hereof, this Warrant may be exercised by the holder
hereof, in whole or in part, by the surrender of this Warrant, together with a
complete exercise agreement in the form attached hereto (the "Exercise
Agreement"), to the Company during normal business hours on
<PAGE>
any business day at the Company's principal executive offices (or such other
office or agency of the Company as it may designate by notice to the holder
hereof), and upon payment to the Company in cash or by certified or official
bank check of the Exercise Price for the Warrant Shares specified in the
Exercise Agreement. The Warrant Shares so purchased shall be deemed to be issued
to the holder hereof or such holder's designee as the record owner of such
shares as of the close of business on the (late on which this Warrant shall have
been surrendered, the completed Exercise Agreement delivered, and payment made
for such shares as set forth above. Certificates for the Warrant Shares so
purchased, representing the aggregate number of shares specified in the Exercise
Agreement, shall be delivered to the holder hereof within a reasonable time, not
exceeding five (5) business days, after this Warrant shall have been so
exercised. The certificates so delivered shall be in such denominations as may
be requested by the holder hereof and shall be registered in the name of such
holder or such other name as shall be designated by such holder. If this Warrant
shall have been exercised only in part, then, unless this Warrant has expired,
the Company shall, at its expense, at the time of delivery of such certificates,
deliver to the holder a new Warrant representing the number of shares with
respect to which this Warrant shall not then have been exercised. The Company
shall pay all taxes and other expenses and charges payable in connection with
the preparation, execution, and delivery of stock certificates (and any new
Warrants) pursuant to this Paragraph 1 except that, in case such stock
certificates shall be registered in a name or names other than the holder of
this Warrant at the request of such holder, funds sufficient to pay all stock
transfer taxes which shall be payable in connection with the execution and
delivery of such stock certificates shall be paid by the holder hereof to the
Company at the time of the delivery of such stock certificates by the Company as
set forth above.
2. Period of Exercise. Subject to the Company's right to redeem
------------------
this Warrant in accordance with Paragraph 9 below, this Warrant is exercisable
in whole or in part, at any time and from time to time on or after November 4,
1996 and before 5:00 p.m., Eastern time on November 4, 1999.
3. Certain Agreements of the Company. The Company hereby covenants
---------------------------------
and agrees as follows:
(a) Shares to be Fully Paid. All Warrant Shares will, upon
--------------------------
issuance, be validly issued, fully paid, and nonassessable and free from all
taxes, liens, and charges with respect to the issue thereof.
(b) Reservation of Shares. During the Exercise Period, the Company
---------------------
shall at all times have authorized, and reserved for the purpose of issue upon
exercise of this Warrant, a sufficient number of shares of Common Stock to
provide for the exercise of this Warrant.
(c) Certain Actions Prohibited. The Company will not, by amendment of
--------------------------
its charter or through any reorganization, transfer of assets, consolidation,
merger, dissolution, issue or sale of securities, or any other voluntary action,
avoid or seek to avoid the observance or
-2-
<PAGE>
performance of any of the terms to be observed or performed by it hereunder, but
will at all times in good faith assist in the carrying out of all the provisions
of this Warrant and in the taking of all such actions as may reasonably be
requested by the holder of this Warrant in order to protect the exercise
privilege of the holder of this Warrant against dilution or other impairment
consistent with the tenor and purpose of this Warrant. Without limiting the
generality of the foregoing, the Company (i) will not increase the par value of
any shares of Common Stock receivable upon the exercise of this Warrant above
the Exercise Price then in effect, and (ii) will take all such actions as may be
necessary or appropriate in order that the Company may validly and legally issue
fully paid and nonassessable shares of Common Stock upon the exercise of this
Warrant.
(d) Successors and Assigns, This Warrant will be binding upon any
----------------------
entity succeeding to the Company by merger, consolidation, or acquisition of all
or substantially all the Company's assets.
4. Antidilution Provisions. During the Exercise Period, the
-----------------------
Exercise Price and the number of Warrant Shares shall be subject to adjustment
from time to time as provided in this Paragraph 4; provided, however, that no
-------- -------
adjustment will be made in the Exercise Price or the Warrant Shares in
connection with the issuance of Common Stock pursuant to this Warrant.
In the event that any adjustment of the Exercise Price as required
herein results in a fraction of a cent, such Exercise Price shall be rounded up
to the nearest cent.
(a) Adjustment of Exercise Price and Number of Shares upon Issuance of
------------------------------------------------------------------
Common Stock. Except as otherwise provided in Paragraphs 4(c) and 4(d) hereof,
- ------------
if and whenever on or after the date of issuance of this Warrant, the Company
issues or sells, or in accordance with Paragraph 4(b) hereof is deemed to have
issued or sold, any shares of Common Stock for no consideration or for a
consideration per share (before deduction of reasonable expenses or commissions
or underwriting discounts or allowances in connection therewith) less than the
then current Market Price (as hereinafter defined) of the Common Stock on the
date the Company fixes the price of such issuance of Common Stock (a "Dilutive
Issuance"), then immediately upon the Dilutive Issuance, the Exercise Price will
be reduced to a price determined by dividing (i) the sum of (x) the product
derived by multiplying the Exercise Price in effect immediately prior to the
Dilutive Issuance times the number of shares of Common Stock Deemed Outstanding
(as hereinafter defined) immediately prior to the Dilutive Issuance, plus (y)
the quotient derived from dividing the aggregate consideration (before deduction
for reasonable expenses or commissions or underwriting discounts or allowances
in connection therewith), calculated as set forth in Section 4(b) hereof,
received by the Company upon such Dilutive Issuance by the Market Price on the
date of issuance; by (ii) the total number of shares of Common Stock Deemed
Outstanding immediately after the Dilutive Issuance. Upon each such adjustment
of the Exercise Price hereunder, the number of shares of Common Stock acquirable
upon exercise of -this warrant will be adjusted to the number of shares
determined by multiplying the Exercise Price in effect immediately prior to such
-3-
<PAGE>
adjustment by the number of shares of Common Stock acquirable upon exercise of
this Warrant immediately prior to such adjustment and dividing the product
thereof by the Exercise Price resulting from such adjustment.
(b) Effect on Exercise Price of Certain Events. For purposes of
------------------------------------------
determining the adjusted Exercise Price under Paragraph 4(b) hereof, the
following will be applicable:
(i) Issuance of Rights or Options. If the Company in any manner
-----------------------------
issues or grants any rights or options, whether or not immediately exercisable
to subscribe for or to purchase Common Stock or other securities convertible
into or exchangeable for Common Stock ("Convertible Securities") (such rights or
options to purchase Common Stock or Convertible Securities are hereinafter
referred to as "Options") and the price per share for which Common Stock is
issuable upon the exercise of such Options is less than the then current Market
Price of the Common Stock on the date of issuance of such Options, then the
maximum total number of shares of Common Stock issuable upon the exercise of all
such Options will, as of the date of the issuance or grant of such Options, be
deemed to be outstanding and to have been issued and sold by the Company for
such price per share. For purposes of the preceding sentence, the "price per
share for which Common Stock is issuable upon the exercise of such Options" is
determined by dividing (i) the minimum total amount, if any, received or
receivable by the Company as consideration for the issuance or granting of all
such Options, plus the minimum aggregate amount of additional consideration, if
any, payable to the Company upon the exercise of all such Options, plus, in the
case of Convertible Securities issuable upon the exercise of such Options, the
minimum aggregate amount of additional consideration payable upon the conversion
or exchange thereof at the time such Convertible Securities first become
convertible or exchangeable, by (ii) the maximum total number of shares of
Common Stock issuable upon the exercise of all such Options. No further
adjustment to the Exercise Price will be made upon the actual issuance of such
Common Stock, upon the exercise of such Options or upon the conversion or
exchange of Convertible Securities issuable upon exercise of such Options.
(ii Issuance of Convertible Securities. If the Company in
----------------------------------
any manner issues or sells any Convertible Securities, whether or not
immediately convertible (other than where the same are issuable upon the
exercise of Options) and the price per share for which Common Stock is issuable
upon such conversion or exchange is less than the then Current Market Price of
the Common Stock on the date of issuance of such Convertible Securities then the
maximum total number of shares of Common Stock issuable upon the conversion or
exchange of all such Convertible Securities will, as of the date of the issuance
of such Convertible Securities, be deemed to be outstanding and to have been
issued and sold by the Company for such price per share. For the purposes of
the preceding sentence, the price per share for which Common Stock is issuable
upon such conversion or exchange" is determined by dividing (i) the minimum
total amount, if any, received or receivable by the Company as consideration for
the issuance or sale of all such Convertible Securities, plus the minimum
aggregate amount of additional consideration, if any, payable to the Company
upon the conversion or exchange thereof at the time such Convertible Securities
first become convertible
-4-
<PAGE>
or exchangeable, by (ii) the maximum total number of shares of Common Stock
issuable upon the conversion or exchange of all such Convertible Securities. No
further adjustment to the Exercise Price will be made upon the actual issuance
of such Common Stock upon conversion or exchange of such Convertible Securities.
(ii) Change in Option Price or Conversion Rate. If there is
-----------------------------------------
a change at any time in (i) the amount of additional consideration payable to
the Company upon the exercise of any Options; (ii) the amount of additional
consideration, if any, payable to the Company upon the conversion or exchange of
any Convertible Securities; or (iii) the rate at which any Convertible
Securities are convertible into or exchangeable for Common Stock (other than
under or by reason of provisions designed to protect against dilution), the
Exercise Price in effect at the time of such change will be readjusted to the
Exercise Price which would have been in effect at such time had such Options or
Convertible Securities still outstanding provided for such changed additional
consideration or changed conversion rate, as the case may be, at the time
initially granted, issued or sold, and the number of shares of Common Stock
acquirable upon exercise of this Warrant will be correspondingly readjusted.
(iv) Treatment of Expired Options and Unexercised
--------------------------------------------
Convertible Securities. If, in any case, the total number of shares of Common
- ----------------------
Stock issuable upon exercise of any Option or upon conversion or exchange of any
Convertible Securities is not, in fact, issued and the rights to exercise such
Option or to convert or exchange such Convertible Securities shall have expired
or terminated, the Exercise Price then in effect and the number of shares of
Common Stock acquirable upon exercise of this Warrant, as adjusted, will be
readjusted to the Exercise Price and the number of shares which would have been
in effect at the time of such expiration or termination had such Option or
Convertible Securities, to the extent outstanding immediately prior to such
expiration or termination (other than in respect of the actual number of shares
of Common Stock issued upon exercise or conversion thereof), never been issued.
(v) Calculation of Consideration Received. If any Common Stock,
-------------------------------------
Options or Convertible Securities are issued, granted or sold for cash, the
consideration received therefor for purposes of this Warrant will be the amount
received by the Company therefor, before deduction of reasonable commissions,
underwriting discounts or allowances or other reasonable expenses paid or
incurred by the Company in connection with such issuance, grant or sale. In
case any Common Stock, Options or Convertible Securities are issued or sold for
a consideration other than cash, the amount of the consideration other than cash
received by the Company will be the fair value of such consideration, except
where such consideration consists of securities, in which case the amount of
consideration received by the Company will be the Market Price thereof as of the
date of receipt. In case any Common Stock, Options or Convertible Securities
are issued in connection with any merger or consolidation in which the Company
is the surviving corporation, the amount of consideration therefor will be
deemed to be the fair value of such portion of the net assets and business of
the non-surviving corporation as is attributable to such Common Stock, Options
or Convertible Securities, as the case may be. The
-5-
<PAGE>
fair value of any consideration other than cash or securities will be determined
in good faith by the Board of Directors of the Company.
(c) Subdivision or Combination of Common Stock. If the Company at any
------------------------------------------
time subdivides (by any stock split, stock dividend, recapitalization,
reorganization, reclassification or otherwise) the shares of Common Stock
acquirable hereunder into a greater number of shares, then, after the date of
record for effecting such subdivision, the Exercise Price in effect immediately
prior to such subdivision will be proportionately reduced and the number of
shares of Common Stock acquirable upon exercise of this Warrant will be
proportionately increased. If the Company at any time combines (by reverse
stock split, recapitalization, reorganization, reclassification or otherwise)
the shares of Common Stock acquirable hereunder into a smaller number of shares,
then, after the date of record for effecting such combination, the Exercise
Price in effect immediately prior to such combination will be proportionately
increased and the number of shares of Common Stock acquirable upon exercise of
this Warrant will be proportionately decreased.
(d) Consolidation, Merger or Sale. In case of any consolidation of
-----------------------------
the Company with, or merger of the Company into any other corporation, or in
case of any sale or conveyance of all or substantially all of the assets of the
Company other than in connection with a plan of complete liquidation of the
Company, then as a condition of such consolidation, merger or sale or
conveyance, adequate provision will be made whereby the holder of this Warrant
will have the right to acquire and receive upon exercise of this Warrant in lieu
of the shares of Common Stock immediately theretofore acquirable upon the
exercise of this Warrant, such shares of stock, securities or assets as may be
issued or payable with respect to or in exchange for the number of shares of
Common Stock immediately theretofore acquirable and receivable upon exercise of
this Warrant had such consolidation, merger or sale or conveyance not taken
place. In any such case, the Company will make appropriate provision to insure
that the provisions of this Paragraph 4 hereof will thereafter be applicable as
nearly as may be in relation to any shares of stock or securities thereafter
deliverable upon the exercise of this Warrant. The Company will not effect any
consolidation, merger or sale or conveyance unless prior to the consummation
thereof, the successor corporation (if other than the Company) assumes by
written instrument the obligations under this Paragraph 4 and the obligations to
deliver to the holder of this Warrant such shares of stock, securities or assets
as, in accordance with the foregoing provisions, the holder may be entitled to
acquire.
(e) Distribution of Assets. In case the Company shall declare or make
----------------------
any distribution of its assets to holders of Common Stock as a partial
liquidating dividend, by way of return of capital or otherwise, then, after the
date of record for determining stockholders entitled to such distribution, but
prior to the date of distribution, the holder of this Warrant shall be entitled
upon exercise of this Warrant for the, purchase of any or all of the shares of
Common Stock subject hereto, to receive the amount of such assets which would
have been payable to the holder had such holder been the holder of such shares
of Common Stock on the record date for the determination of stockholders
entitled to such distribution.
-6-
<PAGE>
(f) Notice of Adjustment. Upon the occurrence of' any event which
--------------------
requires any adjustment of the Exercise Price, then and in each such case the
Company shall give notice thereof to the holder of this Warrant, which notice
shall state the Exercise Price resulting from such adjustment and the increase
or decrease, if any, in the number of Warrant Shares purchasable at such price
upon exercise, setting forth in reasonable detail the method of calculation and
the facts upon which such calculation is based.
(g) Minimum Adjustment of Exercise Price. No adjustment of the
------------------------------------
Exercise Price shall be made in an amount less than 1% of the Exercise Price in
effect at the time such adjustment is otherwise required to be made, but any
such lesser adjustment shall be carried forward and shall be made at the time
and together with the next subsequent adjustment which, together with any
adjustments so carried forward, shall amount to not less than 1% of such
Exercise Price.
(h) No Fractional Shares. No fractional shares of Common Stock are to
--------------------
be issued upon the exercise of this Warrant, but the Company shall pay a cash
adjustment in respect of any fractional share which would otherwise be issuable
in an amount equal to the same fraction of the Market Price of a share of Common
Stock on the date of such exercise.
(i) Other Notices. In case at any time:
-------------
(i) the Company shall declare any dividend upon the Common Stock
payable in shares of stock of any class or make any other distribution (other
than dividends or distributions payable in cash out of retained earnings) to the
holders of the Common Stock;
(ii) the Company shall offer for subscription pro rata to
the holders of the Common Stock any additional shares of stock of any class or
other rights;
(iii) there shall be any capital reorganization of the Company, or
reclassification of the Common Stock, or consolidation or merger of the Company
with or into, or sale of all or substantially all its assets to, another
corporation or entity; or
(iv) there shall be a voluntary or involuntary dissolution,
liquidation winding-up of the Company;
then, in each such case, the Company shall give to the holder of this Warrant
(a) notice of the date on which the books of the Company shall close or a record
shall be taken for determining the holders of Common Stock entitled to receive
any such dividend, distribution, or subscription rights or for determining the
holders of Common Stock entitled to vote in respect of any such reorganization,
reclassification, consolidation, merger, sale, dissolution, liquidation or
winding-up and (b) in the case of any such reorganization, reclassification,
consolidation, merger, sale, dissolution, liquidation or winding-up, notice of
the date (or, if not then known, a reasonable
-7-
<PAGE>
approximation thereof by the Company) when the same shall take place. Such
notice shall also specify the date on which the holders of Common Stock shall be
entitled to receive such dividend, distribution, or subscription rights or to
exchange their Common Stock for stock or other securities or property
deliverable upon such reorganization, reclassification, consolidation, merger,
sale, dissolution, liquidation, or winding-up, as the case may be. Such notice
shall be given at least 30 days prior to the record date or the date on which
the Company's books are closed in respect thereto. Failure to give any such
notice or any defect therein shall not affect the validity of the proceedings
referred to in clauses (i), (ii), (iii) and (iv) above.
(j) Certain Events. If any event occurs of the type contemplated by
--------------
the adjustment provisions of this Paragraph 4 but not expressly provided for by
such provisions, the Company will give notice of such event as provided in
Paragraph 4(f) hereof, and the Company's Board of Directors will make an
appropriate adjustment in the Exercise Price and the number of shares of Common
Stock acquirable upon exercise of this Warrant so that the rights of the Holder
shall be neither enhanced nor diminished by such event.
(k) Certain Definitions.
-------------------
(i) "Common Stock Deemed Outstanding" shall mean the number of shares
-------------------------------
of Common Stock actually outstanding (not including shares of Common Stock held
in the treasury of the Company), plus (x) pursuant to Paragraph 4(b)(i) hereof,
the maximum total number of shares of Common Stock issuable upon the exercise of
Options, as of the date of such issuance or grant of such Options, if any, and
(y) pursuant to Paragraph 4(b)(ii) hereof, the maximum total number of shares of
Common Stock issuable upon conversion or exchange of Convertible Securities, as
of the date of issuance of such Convertible Securities, if any.
(ii) "Market Price" of any security shall be as follows: If
------------
such shares are listed or admitted to trading on one or more national securities
exchanges, the average of the last reported sales prices per share or, in case
no such reported sales take place, the average of the last reported bid and
asked prices per share, in either case on the principal national securities
exchange on which such shares are listed or admitted to trading, for the five
(5) trading days immediately preceding the closing date of the transaction
pursuant to which the securities for which the market price determination is
being made were issued, sold or otherwise transferred (the "Determination
Date"); if such shares are not listed or admitted to trading on a national
securities exchange, but are quoted on a regular (and not sporadic) basis by the
NASD Automatic Quotation System ("NASDAQ"), the average of the last reported
sales prices per share for the five (5) trading days immediately preceding the
Determination Date, as furnished by the National Quotation Bureau Incorporated
or such other nationally recognized quotation service as may be selected by the
Company if such Bureau is not at the time furnishing quotations; and if the
securities are not (i) listed or admitted to trading on a national securities
exchange or (ii) quoted by NASDAQ on a regular (and not sporadic) basis, the
market price will be the fair market value thereof determined in good faith by
the Board of Directors of the Company or, if the holder shall object in writing
to such Board determination within twenty (20) days after it is
-8-
<PAGE>
rendered, fair market value shall be determined in good faith by an independent
investment banking firm selected jointly by the holder and the Board of
Directors of the Company, or if such selection cannot be made, by an independent
investment banking firm selected by the American Arbitration Association in
accordance with its rules. All costs of determining fair market value subsequent
to an objection by the holder as contemplated in the immediately preceding
sentence shall be home by the holder; provided, however, if the fair market
value determined in accordance with the immediately preceding sentence
subsequent to an objection by the holder is at least 15% less than the fair
market value determined in good faith by the Board of Directors of the Company,
such costs shall be borne by the Company.
(ii) "Common Stock," for purposes of this Paragraph 4,
------------
includes the Common Stock, par value $.10, and any additional class of stock of
the Company having no preference as to dividends or distributions on
liquidation, provided that the shares purchasable pursuant to this Warrant shall
include only shares of Common Stock, par value $.10, in respect of which this
Warrant is exercisable, or shares resulting from any subdivision or combination
of such Common Stock, or in the case of any reorganization, reclassification,
consolidation, merger, or sale of the character referred to in Paragraph 4(d)
hereof, the stock or other securities or property provided for in such
Paragraph.
5. Issue Tax. The issuance of certificates for Warrant Shares upon
---------
the exercise of this Warrant shall be made without charge to the holder of this
Warrant or such shares for any issuance tax in respect thereof, provided that
the Company shall not be required to pay any tax which may be payable in respect
of any transfer involved in the issuance and delivery of any certificate in a
name other than the holder of this Warrant.
6. No Rights or Liabilities as a Shareholder. This Warrant shall
-----------------------------------------
not entitle the holder hereof to any voting rights or other rights as a
shareholder of the Company. No provision of this Warrant in the absence of
affirmative action by the holder hereof to purchase Warrant Shares, and no mere
enumeration herein of the rights or privileges of the holder hereof, shall give
rise to any liability of such holder for the Exercise Price or as a shareholder
of the Company, whether such liability is asserted by the Company or by
creditors of the Company.
7. Transfer, Exchange, and Replacement of Warrant.
----------------------------------------------
(a) Restriction on Transfer. This Warrant and the rights granted to
-----------------------
the holder hereof are transferable, in whole or in part, only with the prior
written consent of Company, and then upon surrender of this Warrant, together
with a properly executed assignment in the form attached hereto, at the office
or agency of the Company referred to in Paragraph 7(e) below, provided, however,
that any transfer or assignment shall be subject to the conditions set forth in
Paragraph 7(f) hereof. Until due presentment for registration of transfer on
the books of the Company, the Company may treat the registered holder hereof' as
the owner and holder hereof for all purposes and the Company shall not be
affected by any notice to the contrary.
-9-
<PAGE>
(b) Warrant Exchangeable for Different Denominations. This Warrant is
------------------------------------------------
exchangeable, upon the surrender hereof by the holder hereof at the office or
agency of the Company referred to in Paragraph 7(e) below, for new Warrants of
like tenor representing in the aggregate the right to purchase the number of
shares of Common Stock which may be purchased hereunder, each of such new
Warrants to represent the right to purchase such number of shares as shall be
designated by the holder hereof at the time of such surrender.
(c) Replacement of Warrant. Upon receipt of evidence reasonably
----------------------
satisfactory to the Company of the loss, theft, destruction, or mutilation of
this Warrant and, in the case of any such loss, theft, or destruction, upon
delivery of an indemnity agreement reasonably satisfactory in form and amount to
the Company, or, in the case of any such mutilation, upon surrender and
cancellation of this Warrant, the Company, at its expense, will execute and
deliver, in lieu thereof, a new Warrant of like tenor.
(d) Cancellation; Payment of Expenses. Upon the surrender of this
---------------------------------
Warrant in connection with any transfer, exchange, or replacement as provided in
this Paragraph 7, this Warrant shall be promptly canceled by the Company. The
Company shall pay all taxes (other than securities transfer taxes) and au other
expenses and charges payable in connection with the preparation, execution, and
delivery of Warrants pursuant to this Paragraph 7.
(e) Register. The Company shall maintain, at its principal executive
--------
offices (or such other office or agency of the Company as it may designate by
notice to the holder hereof), a register for this Warrant, in which the Company
shall record the name and address of the person in whose name this Warrant has
been issued, as well as the name and address of each transferee and each prior
owner of this Warrant.
(f) Exercise or Transfer Without Registration. If, at the time of the
-----------------------------------------
surrender of this Warrant in connection with any exercise, transfer, or exchange
of this Warrant, this Warrant (or, in the case of any exercise, the Warrant
Shares issuable hereunder, shall not be registered under the Securities Act of
1933, as amended (the "Securities Act"), and under applicable state securities
or blue sky laws, the Company may require, as a condition of allowing such
exercise, transfer, or exchange, (i) that the holder or transferee of this
Warrant, as the case may be, furnish to the Company a written opinion of
counsel, which opinion and counsel are acceptable to the Company, to the effect
that such exercise, transfer, or exchange may be made without registration under
said Act and under applicable state securities or blue sky laws and (ii) that
the holder or transferee execute and deliver to the Company an investment letter
in form and substance acceptable to the Company. Except in respect of a sale
pursuant to an effective Registration Statement under the Securities Act as
contemplated by Section 9 of the Securities Purchase Agreement, the first holder
of this Warrant, by taking and holding the same, represents to the Company that
such holder is acquiring this Warrant for investment and not with a view to the
distribution thereof.
-10-
<PAGE>
IF THE INITIAL HOLDER OF THIS WARRANT IS A PENNSYLVANIA RESIDENT, SUCH
HOLDER HEREBY AGREES NOT TO SELL THIS WARRANT OR THE WARRANT SHARES FOR A PERIOD
OF 12 MONTHS FROM THE DATE HEREOF, EXCEPT IN ACCORDANCE WITH SEC-NON 204.011 OF
THE PENNSYLVANIA SECURITIES ACT OF 1972, AS AMENDED.
8. Registration Rights.
-------------------
The holder of this Warrant or the Warrant Shares shall have only such
registration rights, if any, in respect of this Warrant and the Warrant Shares
as are later provided and agreed to in writing by the Company, if any.
9. Right to Redeem.
---------------
The Company shall have the right, upon thirty (30) days written
notice, to call this Warrant for redemption, in whole or in part, at a call
price of $.001 per Warrant Share (i) following any calendar year in which the
Company's consolidated financial statements evidence net income of at least
$400,000 and net income per share of at least $.40 per share or (ii) at any time
after the Company proposes to consummate the acquisition of all of the stock or
assets of another company whose annual gross revenues from operations is at
least $10,000,000; provided, however, that in the event that this Warrant is
-------- -------
called for redemption pursuant to clause (ii) above and this Warrant is not
thereafter exercised in accordance with the terms hereof, then the holder shall
deliver this Warrant to the Company and the Company shall hold this Warrant in
escrow pending the consummation of such transaction. In the event such
transaction is terminated prior to consummation, this Warrant shall be returned
to the holder and all terms of this Warrant shall continue in full force and
effect as if such call had not been made, and in the event the transaction is
consummated the Company shall pay the redemption proceeds to the holder and
cancel the Warrant.
10. Notices. All notices, requests, and other communications
-------
required or permitted to be given or delivered hereunder to the holder of this
Warrant shall be in writing, and shall be personally delivered, or shall be sent
by certified or registered mail, postage prepaid and addressed, to such holder
at the address shown for such holder on the books of the Company, or at such
other address as shall have been furnished to the Company by notice from such
holder. All notices, requests, and other communications required or permitted to
be given or delivered hereunder to the Company shall be in writing, and shall be
personally delivered, or shall be sent by certified or registered mail or by
recognized overnight mail carrier, postage prepaid and addressed, to the office
of the Company at 100 Four Falls Corporate Center, Suite 305, West Conshohocken,
PA 19428 Attention: Chairman, or at such other address as shall have been
furnished to the holder of this Warrant by notice from the Company. Any such
notice, request, or other communication may be sent by telegram, telex, or
telecopy, but shall in such case be subsequently confirmed by a writing
personally delivered or sent by certified or registered mail as provided above.
All notices, requests, and other communications shall be deemed to have
-11-
<PAGE>
been given either at the time of the delivery thereof to (or the receipt by, in
the case of a telegram, telex or telecopy) the person entitled to receive such
notice at the address of such person for purposes of this Paragraph 10, or, if
mailed, at the completion of the third fall day following the time of such
mailing thereof to such address, as the case may be.
11. GOVERNING LAW. THIS WARRANT SHALL BE GOVERNED BY AND CONSTRUED
-------------
AND ENFORCED IN ACCORDANCE WITH THE INTERNAL ]LAWS OF THE STATE OF DELAWARE
WITHOUT REGARD TO THE BODY OF LAW CONTROLLING CONFLICTS OF LAW. EACH OF THE
PARTIES HERETO HEREBY CONSENTS TO THE EXCLUSIVE JURISDICTION OF ANY STATE OR
FEDERAL COURT LOCATED WITHIN THE STATE OF DELAWARE FOR ANY PROCEEDING TO WHICH
ANY OF THE PARTIES HERETO IS A PARTY AND WHICH RELATES TO THIS WARRANT. TO THE
EXTENT PERMITTED BY LAW, EACH PARTY WAIVES ANY OBJECTION TO WHICH IT MAY HAVE
BASED ON LACK OF JURISDICTION OR IMPROPER VENUE OR FORUM NON-CONVENIENS
_______________________________
______________________________________________________________________________
PROCEEDING TO WHICH ANY PARTY TO THIS WARRANT IS A PARTY AND WHICH RELATES TO
THIS WARRANT AND THE TRANSACTIONS CONTEMPLATED HEREBY.
12. Miscellaneous.
-------------
(a) Amendments. This Warrant and any provision hereof may not be
----------
changed, waived, discharged, or terminated orally, but only by an instrument in
writing signed by the Company and holders representing a majority of the shares
of Common Stock acquirable upon exercise of this Warrant.
(b) Descriptive Headings. The descriptive headings of the several
--------------------
paragraphs of this Warrant are inserted for purposes of reference only, and
shall not affect the meaning or construction of any of the provisions hereof.
-12-
<PAGE>
IN WITNESS WHEREOF, the Company has caused this Class C-5 Warrant to be
signed by its duly authorized officer.
THE EASTWIND GROUP, INC.
By:
--------------------------------
Its:
------------------------------
Agreed to and Accepted
By:
--------------------------
Equibonds S.A.
Initial Holder
Dated as of November 4, 1996.
DATE OF FIRST EXERCISE: November 4, 1996
DATE UPON WHICH EXERCISE PERIOD TERMINATES: November 4,1999
-13-
<PAGE>
FORM OF EXERCISE AGREEMENT
Dated: ____________________, __________.
To:
-----------------------
The undersigned, pursuant to the provisions set forth in the within
Warrant, hereby agrees to purchase __________ shares of Common Stock covered by
such Warrant, and makes payment herewith in full therefor at the price per share
provided by such Warrant in cash or by certified or official bank check in the
amount of, or by surrender of securities issued by the Company having a market
value equal to $_______________. Please issue a certificate or certificates for
such shares of Common Stock in the name of and pay any cash for any fractional
share to:
Name:
------------------------
Signature:
-------------------
Address:
---------------------
Note: The above signature should
correspond exactly with the
name on the face of the
within Warrant.
and, if said number of shares of Common Stock shall not be all the shares
purchasable under the within Warrant, a new Warrant is to be issued in the name
of said undersigned covering the balance of the shares purchasable thereunder
less any fraction of a share paid in cash.
-14-
<PAGE>
FORM OF ASSIGNMENT
FOR VALUE RECEIVED, the undersigned hereby sells, assigns, and
transfers all of the rights of the undersigned under the within Warrant, with
respect to the number of shares of Common Stock covered thereby set forth herein
below, to:
Name of Assignee Address No. of Shares
---------------- ------- -------------
, and hereby irrevocably constitutes and appoints
___________________________________ as agent and attorney-in-fact to transfer
said Warrant on the books of the within-named corporation, with full power of
substitution in the premises.
Dated: , .
------------- ----
In the presence of
- ------------------------
Name:
-----------------------------
Signature:
------------------------
Title of Signing Officer or Agent
(if any):
----------------------------------
Address:
--------------------------
Note: The above signature should
correspond exactly with the
name on the face of the within
Warrant.
-15-
<PAGE>
THIS WARRANT AND ANY SHARES ACQUIRED UPON THE EXERCISE OF THIS WARRANT HAVE NOT
BEEN REGISTERED UNDER THE SECURITIES ACT OF 1933, AS AMENDED, OR UNDER ANY STATE
SECURITIES OR BLUE SKY LAWS. EXCEPT AS OTHERWISE SET FORTH HEREIN OR IN AN
AGREEMENT FROM THE HOLDER, NEITHER THIS WARRANT NOR ANY OF SUCH SHARES MAY BE
SOLD, OFFERED FOR SALE, ASSIGNED, TRANSFERRED, OR OTHERWISE DISPOSED OF IN THE
ABSENCE OF REGISTRATION UNDER SUCH ACT OR UNDER APPLICABLE STATE SECURITIES OR
BLUE SKY LAWS OR AN EXEMPTION THEREFROM. THIS WARRANT MAY NOT BE SOLD, ASSIGNED,
TRANSFERRED OR OTHERWISE DISPOSED OF EXCEPT PURSUANT TO THE EXPRESS PROVISIONS
OF THIS WARRANT, AND NO SALE, ASSIGNMENT, TRANSFER, OR OTHER DISPOSITION OF THIS
WARRANT SHALL BE VALID OR EFFECTIVE UNLESS AND UNTIL SUCH PROVISIONS SHALL HAVE
BEEN COMPLIED WITH.
Right to
Purchase
5,000
Shares of
Common Stock,
par value $.10
per share
STOCK PURCHASE WARRANT
THIS CERTIFIES THAT, for value received, Quaker State Financial Corp.,
or its corporate successors, or its registered assigns (the "Holder"), is
entitled to purchase from THE EASTWIND GROUP, INC., a Delaware corporation (the
"Company"), at any time or from time to time during the period specified in
Paragraph 2 hereof, Five Thousand (5,000) fully paid and nonassessable shares of
the Company's Common Stock, par value $.10 per share (the "Common Stock"), at an
exercise price of $6.63 per share (the "Exercise Price"). The term "Warrant
Shares", as used herein, refers to the shares of Common Stock purchasable
hereunder. The Warrant Shares and the Exercise Price are subject to adjustment
as provided in Paragraph 4 hereof.
This Warrant is subject to the following terms, provisions and
conditions:
1. Manner of Exercise: Issuance of Certificates: Payment for Shares.
----------------------------------------------------------------
Subject to the provisions hereof, this Warrant may be exercised by the Holder,
in whole or in part, by the surrender of this Warrant, together with a complete
exercise agreement in the form attached hereto (the "Exercise Agreement"), to
the Company during normal business hours on any business day at the Company's
principal executive offices (or such other office or agency of the Company as it
may designate by notice to the Holder), and upon payment to the Company in cash
<PAGE>
or by certified or official bank check of the Exercise Price for the Warrant
Shares specified in the Exercise Agreement. The Warrant Shares so purchased
shall be deemed to be issued to the Holder as the record owner of such shares as
of the close of business on the date on which this Warrant shall have been
surrendered, the completed Exercise Agreement delivered, and payment made for
such shares as set forth above. Certificates for the Warrant Shares so
purchased, representing the aggregate number of shares specified in the Exercise
Agreement, shall be delivered to the Holder within a reasonable time, not
exceeding five (5) business days, after this Warrant shall have been so
exercised. The certificates so delivered shall be in such denominations as may
be requested by the Holder and shall be registered in the name of such Holder or
such other name as shall be designated by such Holder. If this Warrant shall
have been exercised only in part, then, unless this Warrant has expired, the
Company shall, at its expense, at the time of delivery of such certificates,
deliver to the Holder a new Warrant representing the number of shares with
respect to which this Warrant shall not then have been exercised. The Company
shall pay all taxes and other expenses and charges payable in connection with
the preparation, execution, and delivery of stock certificates (and any new
Warrants) pursuant to this Paragraph 1 except that, in case such stock
certificates shall be registered in a name or names other than the Holder at the
request of such Holder, funds sufficient to pay all stock transfer taxes which
shall be payable in connection with the execution and delivery of such stock
certificates shall be paid by the Holder to the Company at the time of the
delivery of such stock certificates by the Company as set forth above.
2. Period of Exercise. This Warrant is exercisable at any time or
------------------
from time to time on or after March 1, 1997 and before 5:00 p.m., Eastern time
on March 1, 2002.
3. Certain Agreements of the Company. The Company hereby covenants
---------------------------------
and agrees as follows:
(a) Shares to be Fully Paid. All Warrant Shares will, upon
-----------------------
issuance, be validly issued, fully paid, and nonassessable and free from all
taxes, liens, and charges with respect to the issue thereof
(b) Reservation of Shares. During the Exercise Period, the Company
---------------------
shall at all times have authorized, and reserved for the purpose of issue upon
exercise of this Warrant, a sufficient number of shares of Common Stock to
provide for the exercise of this Warrant.
(c) Certain Actions Prohibited. The Company will not, by
--------------------------
amendment of its charter or through any reorganization, transfer of assets,
consolidation, merger, dissolution, issue or sale of securities, or any other
voluntary action, avoid or seek to avoid the observance or performance of any of
the terms to be observed or performed by it hereunder, but will at all times in
good faith assist in the carrying out of all the provisions of this Warrant and
in the taking of all such actions as may reasonably be requested by the Holder
in order to protect the exercise privilege of the Holder against dilution or
other impairment, consistent with the tenor and purpose of this Warrant. Without
limiting the generality of the foregoing, the Company (i) will
-2-
<PAGE>
not increase the par value of any shares of Common Stock receivable upon the
exercise of this Warrant above the Exercise Price then in effect, and (ii) will
take all such actions as may be necessary or appropriate in order that the
Company may validly and legally issue fully paid and nonassessable shares of
Common Stock upon the exercise of this Warrant.
(d) Successors and Assigns. This Warrant will be binding upon any
entity succeeding to the Company by merger, consolidation or acquisition of all
or substantially all the Company's assets.
4. Antidilution Provisions. During the Exercise Period, the
-----------------------
Exercise Price and the number of Warrant Shares shall be subject to adjustment
from time to time as provided in this Paragraph 4; provided, however, that no
-------- -------
adjustment will be made in the Exercise Price or the Warrant Shares in
connection with the issuance of Common Stock pursuant to this Warrant.
In the event that any adjustment of the Exercise Price as required
herein results in a fraction of a cent, such Exercise Price shall be rounded up
to the nearest cent.
(a) Adjustment of Exercise Price and Number of Shares upon Issuance
------------------------------------------------------------------
of Common Stock. Except as otherwise provided in Paragraphs 4(c) and 4(d)
- ---------------
hereof, if and whenever on or after the date of issuance of this Warrant, the
Company issues or sells, or in accordance with Paragraph 4(b) hereof is deemed
to have issued or sold, any shares of Common Stock for no consideration or for a
consideration per share (before deduction of reasonable expenses or commissions
or underwriting discounts or allowances in connection therewith) less than the
then current Market Price (as hereinafter defined) of the Common Stock on the
date the Company fixes the price of such issuance of Common Stock (a "Dilutive
Issuance"), then immediately upon the Dilutive Issuance, the Exercise Price will
be reduced to a price determined by dividing (i) the sum of (x) the product
derived by multiplying the Exercise Price in effect immediately prior to the
Dilutive Issuance times the number of shares of Common Stock Deemed Outstanding
(as hereinafter defined) immediately prior to the Dilutive Issuance, plus (y)
the quotient derived from dividing the aggregate consideration (before deduction
for reasonable expenses or commissions or underwriting discounts or allowances
in connection therewith), calculated as set forth in Section 4(b) hereof,
received by the Company upon such Dilutive Issuance by the Market Price on the
date of issuance; by (ii) the total number of shares of Common Stock Deemed
Outstanding immediately after the Dilutive Issuance. Upon each such adjustment
of the Exercise Price hereunder, the number of shares of Common Stock acquirable
upon exercise of this warrant will be adjusted to the number of shares
determined by multiplying the Exercise Price in effect immediately prior to such
adjustment by the number of shares of Common Stock acquirable upon exercise of
this Warrant immediately prior to such adjustment and dividing the product
thereof by the Exercise Price resulting from such adjustment.
(b) Effect on Exercise Price of Certain Events. For purposes of
------------------------------------------
determining the adjusted Exercise Price under Paragraph 4(b) hereof, the
following will be applicable:
-3-
<PAGE>
(i) Issuance of Rights or Options. If the Company in any manner issues
or grants any rights or options, whether or not immediately exercisable, to
subscribe for or to purchase Common Stock or other securities convertible into
or exchangeable for Common Stock ("Convertible Securities") (such rights or
options to purchase Common Stock or Convertible Securities are hereinafter
referred to as "Options") and the price per share for which Common Stock is
issuable upon the exercise of such Options is less than the then current Market
Price of the Common Stock on the date of issuance of such Options, then the
maximum total number of shares of Common Stock issuable upon the exercise of all
such Options will, as of the date of the issuance or grant of such Options, be
deemed to be outstanding and to have been issued and sold by the Company for
such price per share. For purposes of the preceding sentence, the "price per
share for which Common Stock is issuable upon the exercise of such Options" is
determined by dividing (i) the minimum total amount, if any, received or
receivable by the Company as consideration for the issuance or granting of all
such Options, plus the minimum aggregate amount of additional consideration, if
any, payable to the Company upon the exercise of all such Options, plus, in the
case of Convertible Securities issuable upon the exercise of such Options, the
minimum aggregate amount of additional consideration payable upon the conversion
or exchange thereof at the time such Convertible Securities first become
convertible or exchangeable, by (ii) the maximum total number of shares of
Common Stock issuable upon the exercise of all such Options. No further
adjustment to the Exercise Price will be made upon the actual issuance of such
Common Stock, upon the exercise of such Options or upon the conversion or
exchange of Convertible Securities issuable upon exercise of such Options.
(ii) Issuance of Convertible Securities. If the Company in
----------------------------------
any manner issues or sells any Convertible Securities, whether or not
immediately convertible (other than where the same are issuable upon the
exercise of Options) and the price per share for which Common Stock is issuable
upon such conversion or exchange is less than the then Current Market Price of
the Common Stock on the date of issuance of such Convertible Securities then the
maximum total number of shares of Common Stock issuable upon the conversion or
exchange of all such Convertible Securities will, as of the date of the issuance
of such Convertible Securities, be deemed to be outstanding and to have been
issued and sold by the Company for such price per share. For the purposes of
the preceding sentence, the "price per share for which Common Stock is issuable
upon such conversion or exchange" is determined by dividing (i) the minimum
total amount, if any, received or receivable by the Company as consideration for
the issuance or sale of all such Convertible Securities, plus the minimum
aggregate amount of additional consideration, if any, payable to the Company
upon the conversion or exchange thereof at the time such Convertible Securities
first become convertible or exchangeable, by (ii) the maximum total number of
shares of Common Stock issuable upon the conversion or exchange of all such
Convertible Securities. No further adjustment to the Exercise Price will be
made upon the actual issuance of such Common Stock upon conversion or exchange
of such Convertible Securities.
(iii) Change in Option Price or Conversion Rate. If there is
-----------------------------------------
a change at any time in (i) the amount of additional consideration payable to
the Company upon the exercise of any Options; (ii) the amount of additional
consideration, if any, payable to the Company upon the
-4-
<PAGE>
conversion or exchange of any Convertible Securities; or (iii) the rate at which
any Convertible Securities are convertible into or exchangeable for Common Stock
(other than under or by reason of provisions designed to protect against
dilution), the Exercise Price in effect at the time of such change will be
readjusted to the Exercise Price which would have been in effect at such time
had such Options or Convertible Securities still outstanding provided for such
changed additional consideration or changed conversion rate, as the case may be,
at the time initially granted, issued or sold, and the number of shares of
Common Stock acquirable upon exercise of this Warrant will be correspondingly
readjusted.
(iv) Treatment of Expired Options and Unexercised Convertible
-------------------------------------------- -----------
Securities. If, in any case, the total number of shares of Common
- ----------
Stock issuable upon exercise of any Option or upon conversion or exchange of any
Convertible Securities is not, in fact, issued and the rights to exercise such
Option or to convert or exchange such Convertible Securities shall have expired
or terminated, the Exercise Price then in effect and the number of shares of
Common Stock acquirable upon exercise of this Warrant, as adjusted, will be
readjusted to the Exercise Price and the number of shares which would have been
in effect at the time of such expiration or termination had such Option or
Convertible Securities, to the extent outstanding immediately prior to such
expiration or termination (other than in respect of the actual number of shares
of Common Stock issued upon exercise or conversion thereof), never been issued.
(v) Calculation of Consideration Received. If any Common Stock,
-------------------------------------
Options or Convertible Securities are issued, granted or sold for cash, the
consideration received therefor for purposes of this Warrant will be the amount
received by the Company therefor, before deduction of reasonable commissions,
underwriting discounts or allowances or other reasonable expenses paid or
incurred by the Company in connection with such issuance, grant or sale. In
case any Common Stock, Options or Convertible Securities are issued or sold for
a consideration other than cash, the amount of the consideration other than cash
received by the Company will be the fair value of such consideration, except
where such consideration consists of securities, in which case the amount of
consideration received by the Company will be the Market Price thereof as of the
date of receipt. In case any Common Stock, Options or Convertible Securities
are issued in connection with any merger or consolidation in which the Company
is the surviving corporation, the amount of consideration therefor will be
deemed to be the fair value of such portion of the net assets and business of
the non-surviving corporation as is attributable to such Common Stock, Options
or Convertible Securities, as the case may be. The fair value of any
consideration other than cash or securities will be determined in good faith by
the Board of Directors of the Company.
(c) Subdivision or Combination of Common Stock. If the Company at any
------------------------------------------
time subdivides (by any stock split, stock dividend, recapitalization,
reorganization, reclassification or otherwise) the shares of Common Stock
acquirable hereunder into a greater number of shares, then, after the date of
record for effecting such subdivision, the Exercise Price in effect immediately
prior to such subdivision will be proportionately reduced and the number of
shares of Common Stock acquirable upon exercise of this Warrant will be
proportionately increased. If the Company at any time combines (by reverse
stock split, recapitalization,
-5-
<PAGE>
reorganization, reclassification or otherwise) the shares of Common Stock
acquirable hereunder into a smaller number of shares, then, after the date of
record for effecting such combination, the Exercise Price in effect immediately
prior to such combination will be proportionately increased and the number of
shares of Common Stock acquirable upon exercise of this Warrant will be
proportionately decreased.
(d) Consolidation, Merger or Sale. In case of any consolidation of
-----------------------------
the Company with, or merger of the Company into any other corporation, or in
case of any sale or conveyance of all or substantially all of the assets of the
Company other than in connection with a plan of complete liquidation of the
Company, then as a condition of such consolidation, merger or sale or
conveyance, adequate provision will be made whereby the Holder will have the
right to acquire and receive upon exercise of this Warrant in lieu of the shares
of Common Stock immediately theretofore acquirable upon the exercise of this
Warrant, such shares of stock, securities or assets as may be issued or payable
with respect to or in exchange for the number of shares of Common Stock
immediately theretofore acquirable and receivable upon exercise of this Warrant
had such consolidation, merger or sale or conveyance not taken place. In any
such case, the Company will make appropriate provision to insure that the
provisions of this Paragraph 4 hereof will thereafter be applicable as nearly as
may be in relation to any shares of stock or securities thereafter deliverable
upon the exercise of this Warrant. The Company will not effect any
consolidation, merger or sale or conveyance unless prior to the consummation
thereof, the successor corporation (if other than the Company) assumes by
written instrument the obligations under this Paragraph 4 and the obligations to
deliver to the Holder such shares of stock, securities or assets as, in
accordance with the foregoing provisions, the holder may be entitled to acquire.
(e) Distribution of Assets. In case the Company shall declare or make
----------------------
any distribution of its assets to holders of Common Stock as a partial
liquidating dividend, by way of return of capital or otherwise, then, after the
date of record for determining stockholders entitled to such distribution, but
prior to the date of distribution, the Holder shall be entitled upon exercise of
this Warrant for the purchase of any or all of the shares of Common Stock
subject hereto, to receive the amount of such assets which would have been
payable to the Holder had such Holder been the holder of such shares of Common
Stock on the record date for the determination of stockholders entitled to such
distribution.
(f) Notice of Adjustment. Upon the occurrence of any event which
--------------------
requires any adjustment of the Exercise Price, then and in each such case the
Company shall give notice thereof to the Holder, which notice shall state the
Exercise Price resulting from such adjustment and the increase or decrease, if
any, in the number of Warrant Shares purchasable at such price upon exercise,
setting forth in reasonable detail the method of calculation and the facts upon
which such calculation is based.
(g) Minimum Adjustment of Exercise Price. No adjustment of the
------------------------------------
Exercise Price shall be made in an amount less than 1% of the Exercise Price in
effect at the time such adjustment is otherwise required to be made, but any
such lesser adjustment shall be carried forward and shall be made at the time
and together with the next subsequent adjustment which,
-6-
<PAGE>
together with any adjustments so carried forward, shall amount to not less than
1% of such Exercise Price.
(h) No Fractional Shares. No fractional shares of Common Stock are to
--------------------
be issued upon the exercise of this Warrant, but the Company shall pay a cash
adjustment in respect of any fractional share which would otherwise be issuable
in an amount equal to the same fraction of the Market Price of a share of Common
Stock on the date of such exercise.
(i) Other Notices. In case at any time:
-------------
(i) the Company shall declare any dividend upon the Common Stock
payable in shares of stock of any class or make any other distribution (other
than dividends or distributions payable in cash out of retained earnings) to the
holders of the Common Stock;
(iii) the Company shall offer for subscription pro rata to
the holders of the Common Stock any additional shares of stock of any class or
(ii) there shall be any capital reorganization of the Company, or
reclassification of the Common Stock, or consolidation or merger of the Company
with or into, or sale of all or substantially all its assets to, another
corporation or entity; or
(iv) there shall be a voluntary or involuntary dissolution,
liquidation winding-up of the Company;
then, in each such case, the Company shall give to the Holder (a) notice of the
date on which the books of the Company shall close or a record shall be taken
for determining the holders of Common Stock entitled to receive any such
dividend, distribution, or subscription rights or for determining the holders of
Common Stock entitled to vote in respect of any such reorganization,
reclassification, consolidation, merger, sale, dissolution, liquidation or
winding-up and (b) in the case of any such reorganization, reclassification,
consolidation, merger, sale, dissolution, liquidation or winding-up, notice of
the date (or, if not then known, a reasonable approximation thereof by the
Company) when the same shall take place. Such notice shall also specify the
date on which the holders of Common Stock shall be entitled to receive such
dividend, distribution, or subscription rights or to exchange their Common Stock
for stock or other securities or property deliverable upon such reorganization,
reclassification, consolidation, merger, sale, dissolution, liquidation, or
winding-up, as the case may be. Such notice shall be given at least 30 days
prior to the record date or the date on which the Company's books are closed in
respect thereto. Failure to give any such notice or any defect therein shall not
affect the validity of the proceedings referred to in clauses (i), (ii), (iii)
and (iv) above.
(j) Certain Events. If any event occurs of the type contemplated by
--------------
the adjustment provisions of this Paragraph 4 but not expressly provided for by
such provisions, the Company will give notice of such event as provided in
Paragraph 4(f) hereof, and the Company's Board of Directors will make an
appropriate adjustment in the Exercise Price and the
-7-
<PAGE>
number of shares of Common Stock acquirable upon exercise of this Warrant so
that the rights of the Holder shall be neither enhanced nor diminished by such
event.
(k) Certain Definitions.
-------------------
(i) "Common Stock Deemed Outstanding" shall mean the number of
-------------------------------
shares of Common Stock actually outstanding (not including shares of Common
Stock held in the treasury of the Company), plus (x) pursuant to Paragraph
4(b)(i) hereof, the maximum total number of shares of Common Stock issuable upon
the exercise of Options, as of the date of such issuance or grant of such
Options, if any, and (y) pursuant to Paragraph 4(b)(ii) hereof, the maximum
total number of shares of Common Stock issuable upon conversion or exchange of
Convertible Securities, as of the date of issuance of such Convertible
Securities, if any.
(ii) "Market Price" of any security shall be as follows: If
------------
such shares are listed or admitted to trading on one or more national securities
exchanges, the average of the last reported sales prices per share or, in case
no such reported sales take place, the average of the last reported bid and
asked prices per share, in either case on the principal national securities
exchange on which such shares are listed or admitted to trading, for the five
(5) trading days immediately preceding the closing date of the transaction
pursuant to which the securities for which the market price determination is
being made were issued, sold or otherwise transferred (the "Determination
Date"); if such shares are not listed or admitted to trading on a national
securities exchange, but are quoted on a regular (and not sporadic) basis by the
NASD Automated Quotation System ("NASDAQ"), the average of the last reported
sales prices per share for the five (5) trading days immediately preceding the
Determination Date, as furnished by the National Quotation Bureau Incorporated
or such other nationally recognized quotation service as may be selected by the
Company if such Bureau is not at the time furnishing quotations; and if the
securities are not (i) listed or admitted to trading on a national securities
exchange or (ii) quoted by NASDAQ on a regular (and not sporadic) basis, the
market price will be the fair market value thereof determined in good faith by
the Board of Directors of the Company or, if the holder shall object in writing
to such Board determination within twenty (20) days after it is rendered, fair
market value shall be determined in good faith by an independent investment
banking firm selected jointly by the holder and the Board of Directors of the
Company, or if such selection cannot be made, by an independent investment
banking firm selected by the American Arbitration Association in accordance with
its rules. All costs of determining fair market value subsequent to an
objection by the Holder as contemplated in the immediately preceding sentence
shall be borne by the Holder; provided, however, if the fair market value
-------- -------
determined in accordance with the immediately preceding sentence subsequent to
an objection by the Holder is at least 15% less than the fair market value
determined in good faith by the Board of Directors of the Company, such costs
shall be borne by the Company.
(iii) "Common Stock," for purposes of this Paragraph 4,
------------
includes the Common Stock, and any additional class of stock of the Company
having no preference as to dividends or distributions on liquidation, provided
that the shares purchasable pursuant to this Warrant shall include only shares
of Common Stock, in respect of which this
-8-
<PAGE>
Warrant is exercisable, or shares resulting from any subdivision or combination
of such Common Stock, or in the case of any reorganization, reclassification,
consolidation, merger, or sale of the character referred to in Paragraph 4(d)
hereof, the stock or other securities or property provided for in such
Paragraph.
5. Issue Tax. The issuance of certificates for Warrant Shares upon
---------
the exercise of this Warrant shall be made without charge to the holder of this
Warrant or such shares for any issuance tax in respect thereof, provided that
the Company shall not be required to pay any tax which may be payable in respect
of any transfer involved in the issuance and delivery of any certificate in a
name other than the holder of this Warrant.
6. No Rights or Liabilities as a Shareholder. This Warrant shall
-----------------------------------------
not entitle the holder hereof to any voting rights or other rights as a
shareholder of the Company. No provision of this Warrant in the absence of
affirmative action by the holder hereof to purchase Warrant Shares, and no mere
enumeration herein of the rights or privileges of the holder hereof, shall give
rise to any liability of such holder for the Exercise Price or as a shareholder
of the Company, whether such liability is asserted by the Company or by
creditors of the Company.
7. Transfer, Exchange, and Replacement of Warrant.
----------------------------------------------
(a) Restriction on Transfer. This Warrant and the rights granted
-----------------------
to the Holder are transferable, in whole or in part, only with the prior written
consent of Company, and then upon surrender of this Warrant, together with a
properly executed assignment in the form attached hereto, at the office or
agency of the Company referred to in Paragraph 7(e) below, provided, however,
-------- -------
that any transfer or assignment shall be subject to the conditions set forth in
Paragraph 7(f) hereof. Until due presentment for registration of transfer on
the books of the Company, the Company may treat the registered Holder hereof as
the owner and holder hereof for all purposes and the Company shall not be
affected by any notice to the contrary.
(b) Warrant Exchangeable for Different Denominations. This
------------------------------------------------
Warrant is exchangeable, upon the surrender hereof by the Holder at the office
or agency of the Company referred to in Paragraph 7(e) below, for new Warrants
of like tenor representing in the aggregate the right to purchase the number of
shares of Common Stock which may be purchased hereunder, each of such new
Warrants to represent the right to purchase such number of shares as shall be
designated by the Holder at the time of such surrender.
(c) Replacement of Warrant. Upon receipt of evidence reasonably
----------------------
satisfactory to the Company of the loss, theft, destruction, or mutilation of
this Warrant and, in the case of any such loss, theft, or destruction, upon
delivery of an indemnity agreement reasonably satisfactory in form and amount to
the Company, or, in the case of any such mutilation, upon surrender and
cancellation of this Warrant, the Company, at its expense, will execute and
deliver, in lieu thereof, a new Warrant of like tenor.
-9-
<PAGE>
(d) Cancellation: Payment of Expenses. Upon the surrender of this
----------------------------------
Warrant in connection with any transfer, exchange, or replacement as provided in
this Paragraph 7, this Warrant shall be promptly canceled by the Company. The
Company shall pay all taxes (other than securities transfer taxes) and all other
expenses and charges payable in connection with the preparation, execution, and
delivery of Warrants pursuant to this Paragraph 7.
(e) Register. The Company shall maintain, at its principal
--------
executive offices (or such other office or agency of the Company as it may
designate by notice to the Holder), a register for this Warrant, in which the
Company shall record the name and address of the person in whose name this
Warrant has been issued, as well as the name and address of each transferee and
each prior owner of this Warrant.
(f) Exercise or Transfer Without Registration. If, at the time of
-----------------------------------------
the surrender of this Warrant in connection with any exercise, transfer, or
exchange of this Warrant, this Warrant (or, in the case of any exercise, the
Warrant Shares issuable hereunder, shall not be registered under the Securities
Act of 1933, as amended (the "Securities Act"), and under applicable state
securities or blue sky laws, the Company may require, as a condition of allowing
such exercise, transfer, or exchange, (i) that the Holder furnish to the Company
a written opinion of counsel, which opinion and counsel are acceptable to the
Company, to the effect that such exercise, transfer, or exchange may be made
without registration under said Act and under applicable state securities or
blue sky laws and (ii) that the Holder execute and deliver to the Company an
investment letter in form and substance acceptable to the Company. The first
Holder of this Warrant, by taking and holding the same, represents to the
Company that such Holder is acquiring this Warrant for investment and not with a
view to the distribution thereof.
IF THE INITIAL HOLDER OF THIS WARRANT IS A PENNSYLVANIA RESIDENT, SUCH
HOLDER HEREBY AGREES NOT TO SELL THIS WARRANT OR THE WARRANT SHARES FOR A PERIOD
OF 12 MONTHS FROM THE DATE HEREOF, EXCEPT IN ACCORDANCE WITH SECTION 204.011 OF
THE PENNSYLVANIA SECURITIES ACT OF 1972, AS AMENDED.
8. Notices. All notices, requests, and other communications
-------
required or permitted to be given or delivered hereunder to the Holder shall be
in writing, and shall be personally delivered, or shall be sent by certified or
registered mail, postage prepaid and addressed, to such holder at the address
shown for such holder on the books of the Company, or at such other address as
shall have been furnished to the Company by notice from such Holder. All
notices, requests, and other communications required or permitted to be given or
delivered hereunder to the Company shall be in writing, and shall be personally
delivered, or shall be sent by certified or registered mail or by recognized
overnight mail carrier, postage prepaid and addressed, to the office of the
Company at 100 Four Falls Corporate Center, Suite 305, West Conshohocken, PA
19428 Attention: Chairman, or at such other address as shall have been furnished
to the Holder by notice from the Company. Any such notice, request, or other
communication may be sent by telegram, telex, or telecopy, but shall in such
case be subsequently confirmed by a writing personally delivered or sent by
certified or registered mail
-10-
<PAGE>
as provided above. All notices, requests, and other communications shall be
deemed to have been given either at the time of the delivery thereof to (or the
receipt by, in the case of a telegram, telex or telecopy) the person entitled to
receive such notice at the address of such person for purposes of this Paragraph
8, or, if mailed, at the completion of the third full day following the time of
such mailing thereof to such address, as the case may be.
9. GOVERNING LAW. THIS WARRANT SHALL BE GOVERNED BY AND CONSTRUED
-------------
AND ENFORCED IN ACCORDANCE WITH THE INTERNAL LAWS OF THE STATE OF DELAWARE
WITHOUT REGARD TO THE BODY OF LAW CONTROLLING CONFLICTS OF LAW. EACH OF THE
PARTIES HERETO HEREBY CONSENTS TO THE EXCLUSIVE JURISDICTION OF ANY STATE OR
FEDERAL COURT LOCATED WITHIN THE STATE OF DELAWARE FOR ANY PROCEEDING TO WHICH
ANY OF THE PARTIES HERETO IS A PARTY AND WHICH RELATES TO THIS WARRANT. TO THE
EXTENT PERMITTED BY LAW, EACH PARTY WAIVES ANY OBJECTION WHICH IT MAY HAVE BASED
ON LACK OF JURISDICTION OR IMPROPER VENUE OR FORUM NON-CONVENIENS TO THE CONDUCT
OF ANY PROCEEDING INSTITUTED HEREUNDER OR ANY PROCEEDING TO WHICH ANY PARTY TO
THIS WARRANT IS A PARTY AND WHICH RELATES TO THIS WARRANT AND THE TRANSACTIONS
CONTEMPLATED HEREBY.
10. Miscellaneous.
-------------
(a) Amendments. This Warrant and any provision hereof may not be
----------
changed, waived, discharged, or terminated orally, but only by an instrument in
writing signed by the Company and Holders representing a majority of the shares
of Common Stock acquirable upon exercise of this Warrant.
(b) Descriptive Headings. The descriptive headings of the several
--------------------
paragraphs of this Warrant are inserted for purposes of reference only, and
shall not affect the meaning or construction of any of the provisions hereof.
-11-
<PAGE>
IN WITNESS WHEREOF, the Company has caused this Warrant to be signed
by its duly authorized officer.
THE EASTWIND GROUP, INC.
By:__________________________
Its:
Agreed to and Accepted
________________________________
Quaker State Financial Corp. by
its duly authorized ______________
Dated as of March 1, 1997.
-12-
<PAGE>
FORM OF EXERCISE AGREEMENT
Dated: __________, __
To: ________________________
The undersigned, pursuant to the provisions set forth in the within
Warrant, hereby agrees to purchase ______ shares of Common Stock covered by such
Warrant, and makes payment herewith in full therefor at the price per share
provided by such Warrant in cash or by certified or official bank check in the
amount of, or by surrender of securities issued by the Company having a market
value equal to $________. Please issue a certificate or certificates for such
shares of Common Stock in the name of and pay any cash for any fractional share
to:
Name:________________________
Signature:___________________
Address: _____________________
_____________________
Note: The above signature should
correspond exactly with the name
on the face of the within Warrant.
and, if said number of shares of Common Stock shall not be all the shares
purchasable under the within Warrant, a new Warrant is to be issued in the name
of said undersigned covering the balance of the shares purchasable thereunder
less any fraction of a share paid in cash.
-13-
<PAGE>
FORM OF ASSIGNMENT
FOR VALUE RECEIVED, the undersigned hereby sells, assigns, and
transfers all of the rights of the undersigned under the within Warrant, with
respect to the number of shares of Common Stock covered thereby set forth herein
below, to:
Name of Assignee Address No. of Shares
- ---------------- ------- -------------
, and hereby irrevocably constitutes and appoints ___________________ as agent
and attorney-in-fact to transfer said Warrant on the books of the within-named
corporation, with full power of substitution in the premises.
Dated: ___________, __
In the presence of
_______________________
Name:
Signature:
Title of Signing Officer or Agent
(if any):
____________________________________
Address: ________________________
________________________
Note: The above signature should correspond
exactly with the name on the face of
the within Warrant.
-14-
<PAGE>
THIS WARRANT AND ANY SHARES ACQUIRED UPON THE EXERCISE OF THIS WARRANT HAVE NOT
BEEN REGISTERED UNDER THE SECURITIES ACT OF 1933, AS AMENDED, OR UNDER ANY STATE
SECURITIES OR BLUE SKY LAWS. EXCEPT AS OTHERWISE SET FORTH HEREIN OR IN AN
AGREEMENT FROM THE HOLDER, NEITHER THIS WARRANT NOR ANY OF SUCH SHARES MAY BE
SOLD, OFFERED FOR SALE, ASSIGNED, TRANSFERRED, OR OTHERWISE DISPOSED OF IN THE
ABSENCE OF REGISTRATION UNDER SUCH ACT OR UNDER APPLICABLE STATE SECURITIES OR
BLUE SKY LAWS OR AN EXEMPTION THEREFROM. THIS WARRANT MAY NOT BE SOLD, ASSIGNED,
TRANSFERRED OR OTHERWISE DISPOSED OF EXCEPT PURSUANT TO THE EXPRESS PROVISIONS
OF THIS WARRANT, AND NO SALE, ASSIGNMENT, TRANSFER, OR OTHER DISPOSITION OF THIS
WARRANT SHALL BE VALID OR EFFECTIVE UNLESS AND UNTIL SUCH PROVISIONS SHALL HAVE
BEEN COMPLIED WITH.
Right to
Purchase
45,000
Shares of
Common Stock,
par value $.10
per share
STOCK PURCHASE WARRANT
THIS CERTIFIES THAT, for value received, Canterbury Companies, Inc.,
of _________________________________________, or its corporate successors, or
its registered assigns (the "Holder"), is entitled to purchase from THE
EASTWIND GROUP, INC., a Delaware corporation (the "Company"), at any time or
from time to time during the period specified in Paragraph 2 hereof, Forty-Five
Thousand (45,000) fully paid and nonassessable shares of the Company's Common
Stock, par value $.10 per share (the "Common Stock"), at an exercise price of
$4.00 per share (the "Exercise Price"). The term "Warrant Shares", as used
herein, refers to the shares of Common Stock purchasable hereunder. The Warrant
Shares and the Exercise Price are subject to adjustment as provided in Paragraph
4 hereof.
This Warrant is subject to the following terms, provisions and
conditions:
1. Manner of Exercise: Issuance of Certificates: Payment for Shares.
----------------------------------------------------------------
Subject to the provisions hereof, this Warrant may be exercised by the Holder,
in whole or in part, by the surrender of this Warrant, together with a complete
exercise agreement in the form attached hereto (the "Exercise Agreement"), to
the Company during normal business hours on any business day at the Company's
principal executive offices (or such other office or agency of the Company as it
may designate by notice to the Holder), and upon payment to the Company in cash
<PAGE>
or by certified or official bank check of the Exercise Price for the Warrant
Shares specified in the Exercise Agreement. The Warrant Shares so purchased
shall be deemed to be issued to the Holder as the record owner of such shares as
of the close of business on the date on which this Warrant shall have been
surrendered, the completed Exercise Agreement delivered, and payment made for
such shares as set forth above. Certificates for the Warrant Shares so
purchased, representing the aggregate number of shares specified in the Exercise
Agreement, shall be delivered to the Holder within a reasonable time, not
exceeding five (5) business days, after this Warrant shall have been so
exercised. The certificates so delivered shall be in such denominations as may
be requested by the Holder and shall be registered in the name of such Holder or
such other name as shall be designated by such Holder. If this Warrant shall
have been exercised only in part, then, unless this Warrant has expired, the
Company shall, at its expense, at the time of delivery of such certificates,
deliver to the Holder a new Warrant representing the number of shares with
respect to which this Warrant shall not then have been exercised. The Company
shall pay all taxes and other expenses and charges payable in connection with
the preparation, execution, and delivery of stock certificates (and any new
Warrants) pursuant to this Paragraph 1 except that, in case such stock
certificates shall be registered in a name or names other than the Holder at the
request of such Holder, funds sufficient to pay all stock transfer taxes which
shall be payable in connection with the execution and delivery of such stock
certificates shall be paid by the Holder to the Company at the time of the
delivery of such stock certificates by the Company as set forth above.
2. Period of Exercise.. Subject to the Company's right to redeem
------------------
this Warrant in accordance with Paragraph 9 below, this Warrant is exercisable
at any time or from time to time on or after August 20, 1997 and before 5:00
p.m. Eastern Time on August 20, 2002, provided that exercise must be for all of
the Warrant Shares issuable hereunder.
3. Certain Agreements of the Company. The Company hereby covenants
---------------------------------
and agrees as follows:
(a) Shares to be Fully Paid. All Warrant Shares will, upon
-----------------------
issuance, be validly issued, fully paid, and nonassessable and free from all
taxes, liens, and charges with respect to the issue thereof
(b) Reservation of Shares. During the Exercise Period, the Company
---------------------
shall at all times have authorized, and reserved for the purpose of issue upon
exercise of this Warrant, a sufficient number of shares of Common Stock to
provide for the exercise of this Warrant.
(c) Certain Actions Prohibited. The Company will not, by
--------------------------
amendment of its charter or through any reorganization, transfer of assets,
consolidation, merger, dissolution, issue or sale of securities, or any other
voluntary action, avoid or seek to avoid the observance or performance of any of
the terms to be observed or performed by it hereunder, but will at all times in
good faith assist in the carrying out of all the provisions of this Warrant and
in the taking of all such actions as may reasonably be requested by the Holder
in order to protect the exercise
<PAGE>
privilege of the Holder against dilution or other impairment, consistent with
the tenor and purpose of this Warrant. Without limiting the generality of the
foregoing, the Company (i) will not increase the par value of any shares of
Common Stock receivable upon the exercise of this Warrant above the Exercise
Price then in effect, and (ii) will take all such actions as may be necessary or
appropriate in order that the Company may validly and legally issue fully paid
and nonassessable shares of Common Stock upon the exercise of this Warrant.
(d) Successors and Assigns. This Warrant will be binding upon any
entity succeeding to the Company by merger, consolidation or acquisition of all
or substantially all the Company's assets.
4. Antidilution Provisions. During the Exercise Period, the
-----------------------
Exercise Price and the number of Warrant Shares shall be subject to adjustment
from time to time as provided in this Paragraph 4; provided, however, that no
-------- -------
adjustment will be made in the Exercise Price or the Warrant Shares in
connection with the issuance of Common Stock pursuant to this Warrant.
In the event that any adjustment of the Exercise Price as required
herein results in a fraction of a cent, such Exercise Price shall be rounded up
to the nearest cent.
(a) Adjustment of Exercise Price and Number of Shares upon
------------------------------------------------------
Issuance of Common Stock. Except as otherwise provided in Paragraphs 4(c) and
- ------------------------
4(d) hereof,if and whenever on or after the date of issuance of this Warrant,
the Company 4(d) issues or sells, or in accordance with Paragraph 4(b) hereof is
deemed to have issued or sold, any shares of Common Stock for no consideration
or for a consideration per share (before deduction of reasonable expenses or
commissions or underwriting discounts or allowances in connection therewith)
less than the then current Market Price (as hereinafter defined) of the Common
Stock on the date the Company fixes the price of such issuance of Common Stock
(a "Dilutive Issuance"), then immediately upon the Dilutive Issuance, the
Exercise Price will be reduced to a price determined by dividing (i) the sum of
(x) the product derived by multiplying the Exercise Price in effect immediately
prior to the Dilutive Issuance times the number of shares of Common Stock Deemed
Outstanding (as hereinafter defined) immediately prior to the Dilutive Issuance,
plus (y) the quotient derived from dividing the aggregate consideration (before
deduction for reasonable expenses or commissions or underwriting discounts or
allowances in connection therewith), calculated as set forth in Section 4(b)
hereof, received by the Company upon such Dilutive Issuance by the Market Price
on the date of issuance; by (ii) the total number of shares of Common Stock
Deemed Outstanding immediately after the Dilutive Issuance. Upon each such
adjustment of the Exercise Price hereunder, the number of shares of Common Stock
acquirable upon exercise of this warrant will be adjusted to the number of
shares determined by multiplying the Exercise Price in effect immediately prior
to such adjustment by the number of shares of Common Stock acquirable upon
exercise of this Warrant immediately prior to such adjustment and dividing the
product thereof by the Exercise Price resulting from such adjustment.
<PAGE>
(b) Effect on Exercise Price of Certain Events. For purposes of
------------------------------------------
determining the adjusted Exercise Price under Paragraph 4(b) hereof, the
following will be applicable:
(i) Issuance of Rights or Options. If the Company in any manner
issues or grants any rights or options, whether or not immediately exercisable,
to subscribe for or to purchase Common Stock or other securities convertible
into or exchangeable for Common Stock ("Convertible Securities") (such rights or
options to purchase Common Stock or Convertible Securities are hereinafter
referred to as "Options") and the price per share for which Common Stock is
issuable upon the exercise of such Options is less than the then current Market
Price of the Common Stock on the date of issuance of such Options, then the
maximum total number of shares of Common Stock issuable upon the exercise of all
such Options will, as of the date of the issuance or grant of such Options, be
deemed to be outstanding and to have been issued and sold by the Company for
such price per share. For purposes of the preceding sentence, the "price per
share for which Common Stock is issuable upon the exercise of such Options" is
determined by dividing (i) the minimum total amount, if any, received or
receivable by the Company as consideration for the issuance or granting of all
such Options, plus the minimum aggregate amount of additional consideration, if
any, payable to the Company upon the exercise of all such Options, plus, in the
case of Convertible Securities issuable upon the exercise of such Options, the
minimum aggregate amount of additional consideration payable upon the conversion
or exchange thereof at the time such Convertible Securities first become
convertible or exchangeable, by (ii) the maximum total number of shares of
Common Stock issuable upon the exercise of all such Options. No further
adjustment to the Exercise Price will be made upon the actual issuance of such
Common Stock, upon the exercise of such Options or upon the conversion or
exchange of Convertible Securities issuable upon exercise of such Options.
(ii) Issuance of Convertible Securities. If the Company in
----------------------------------
any manner issues or sells any Convertible Securities, whether or not
immediately convertible (other than where the same are issuable upon the
exercise of Options) and the price per share for which Common Stock is issuable
upon such conversion or exchange is less than the then Current Market Price of
the Common Stock on the date of issuance of such Convertible Securities then the
maximum total number of shares of Common Stock issuable upon the conversion or
exchange of all such Convertible Securities will, as of the date of the issuance
of such Convertible Securities, be deemed to be outstanding and to have been
issued and sold by the Company for such price per share. For the purposes of
the preceding sentence, the "price per share for which Common Stock is issuable
upon such conversion or exchange" is determined by dividing (i) the minimum
total amount, if any, received or receivable by the Company as consideration for
the issuance or sale of all such Convertible Securities, plus the minimum
aggregate amount of additional consideration, if any, payable to the Company
upon the conversion or exchange thereof at the time such Convertible Securities
first become convertible or exchangeable, by (ii) the maximum total number of
shares of Common Stock issuable upon the conversion or exchange of all such
Convertible Securities. No further adjustment to the Exercise Price will be
made upon the actual issuance of such Common Stock upon conversion or exchange
of such Convertible Securities.
<PAGE>
(iii) Change in Option Price or Conversion Rate. If there is
-----------------------------------------
a change at any time in (i) the amount of additional consideration payable to
the Company upon the exercise of any Options; (ii) the amount of additional
consideration, if any, payable to the Company upon the conversion or exchange of
any Convertible Securities; or (iii) the rate at which any Convertible
Securities are convertible into or exchangeable for Common Stock (other than
under or by reason of provisions designed to protect against dilution), the
Exercise Price in effect at the time of such change will be readjusted to the
Exercise Price which would have been in effect at such time had such Options or
Convertible Securities still outstanding provided for such changed additional
consideration or changed conversion rate, as the case may be, at the time
initially granted, issued or sold, and the number of shares of Common Stock
acquirable upon exercise of this Warrant will be correspondingly readjusted.
(iv) Treatment of Expired Options and Unexercised Convertible
---------------------------------------------------------
Securities. If, in any case, the total number of shares of Common
- ----------
Stock issuable upon exercise of any Option or upon conversion or exchange of any
Convertible Securities is not, in fact, issued and the rights to exercise such
Option or to convert or exchange such Convertible Securities shall have expired
or terminated, the Exercise Price then in effect and the number of shares of
Common Stock acquirable upon exercise of this Warrant, as adjusted, will be
readjusted to the Exercise Price and the number of shares which would have been
in effect at the time of such expiration or termination had such Option or
Convertible Securities, to the extent outstanding immediately prior to such
expiration or termination (other than in respect of the actual number of shares
of Common Stock issued upon exercise or conversion thereof), never been issued.
(v) Calculation of Consideration Received. If any Common Stock,
-------------------------------------
Options or Convertible Securities are issued, granted or sold for cash, the
consideration received therefor for purposes of this Warrant will be the amount
received by the Company therefor, before deduction of reasonable commissions,
underwriting discounts or allowances or other reasonable expenses paid or
incurred by the Company in connection with such issuance, grant or sale. In
case any Common Stock, Options or Convertible Securities are issued or sold for
a consideration other than cash, the amount of the consideration other than cash
received by the Company will be the fair value of such consideration, except
where such consideration consists of securities, in which case the amount of
consideration received by the Company will be the Market Price thereof as of the
date of receipt. In case any Common Stock, Options or Convertible Securities
are issued in connection with any merger or consolidation in which the Company
is the surviving corporation, the amount of consideration therefor will be
deemed to be the fair value of such portion of the net assets and business of
the non-surviving corporation as is attributable to such Common Stock, Options
or Convertible Securities, as the case may be. The fair value of any
consideration other than cash or securities will be determined in good faith by
the Board of Directors of the Company.
(c) Subdivision or Combination of Common Stock. If the Company at any
------------------------------------------
time subdivides (by any stock split, stock dividend, recapitalization,
reorganization, reclassification or otherwise) the shares of Common Stock
acquirable hereunder into a greater number of shares, then, after the date of
record for effecting such subdivision, the Exercise Price
<PAGE>
in effect immediately prior to such subdivision will be proportionately reduced
and the number of shares of Common Stock acquirable upon exercise of this
Warrant will be proportionately increased. If the Company at any time combines
(by reverse stock split, recapitalization, reorganization, reclassification or
otherwise) the shares of Common Stock acquirable hereunder into a smaller number
of shares, then, after the date of record for effecting such combination, the
Exercise Price in effect immediately prior to such combination will be
proportionately increased and the number of shares of Common Stock acquirable
upon exercise of this Warrant will be proportionately decreased.
(d) Consolidation, Merger or Sale. In case of any consolidation of
-----------------------------
the Company with, or merger of the Company into any other corporation, or in
case of any sale or conveyance of all or substantially all of the assets of the
Company other than in connection with a plan of complete liquidation of the
Company, then as a condition of such consolidation, merger or sale or
conveyance, adequate provision will be made whereby the Holder will have the
right to acquire and receive upon exercise of this Warrant in lieu of the shares
of Common Stock immediately theretofore acquirable upon the exercise of this
Warrant, such shares of stock, securities or assets as may be issued or payable
with respect to or in exchange for the number of shares of Common Stock
immediately theretofore acquirable and receivable upon exercise of this Warrant
had such consolidation, merger or sale or conveyance not taken place. In any
such case, the Company will make appropriate provision to insure that the
provisions of this Paragraph 4 hereof will thereafter be applicable as nearly as
may be in relation to any shares of stock or securities thereafter deliverable
upon the exercise of this Warrant. The Company will not effect any
consolidation, merger or sale or conveyance unless prior to the consummation
thereof, the successor corporation (if other than the Company) assumes by
written instrument the obligations under this Paragraph 4 and the obligations to
deliver to the Holder such shares of stock, securities or assets as, in
accordance with the foregoing provisions, the holder may be entitled to acquire.
(e) Distribution of Assets. In case the Company shall declare or make
----------------------
any distribution of its assets to holders of Common Stock as a partial
liquidating dividend, by way of return of capital or otherwise, then, after the
date of record for determining stockholders entitled to such distribution, but
prior to the date of distribution, the Holder shall be entitled upon exercise of
this Warrant for the purchase of any or all of the shares of Common Stock
subject hereto, to receive the amount of such assets which would have been
payable to the Holder had such Holder been the holder of such shares of Common
Stock on the record date for the determination of stockholders entitled to such
distribution.
(f) Notice of Adjustment. Upon the occurrence of any event which
--------------------
requires any adjustment of the Exercise Price, then and in each such case the
Company shall give notice thereof to the Holder, which notice shall state the
Exercise Price resulting from such adjustment and the increase or decrease, if
any, in the number of Warrant Shares purchasable at such price upon exercise,
setting forth in reasonable detail the method of calculation and the facts upon
which such calculation is based.
<PAGE>
(g) Minimum Adjustment of Exercise Price. No adjustment of the
------------------------------------
Exercise Price shall be made in an amount less than 1% of the Exercise Price in
effect at the time such adjustment is otherwise required to be made, but any
such lesser adjustment shall be carried forward and shall be made at the time
and together with the next subsequent adjustment which, together with any
adjustments so carried forward, shall amount to not less than 1% of such
Exercise Price.
(h) No Fractional Shares. No fractional shares of Common Stock are to
--------------------
be issued upon the exercise of this Warrant, but the Company shall pay a cash
adjustment in respect of any fractional share which would otherwise be issuable
in an amount equal to the same fraction of the Market Price of a share of Common
Stock on the date of such exercise.
(i) Other Notices. In case at any time:
-------------
(i) the Company shall declare any dividend upon the Common Stock
payable in shares of stock of any class or make any other distribution (other
than dividends or distributions payable in cash out of retained earnings) to the
holders of the Common Stock;
(ii) the Company shall offer for subscription pro rata to
the holders of the Common Stock any additional shares of stock of any class or
(iii) there shall be any capital reorganization of the
Company, or reclassification of the Common Stock, or consolidation or merger of
the Company with or into, or sale of all or substantially all its assets to,
another corporation or entity; or
(iv) there shall be a voluntary or involuntary dissolution,
liquidation winding-up of the Company;
then, in each such case, the Company shall give to the Holder (a) notice of the
date on which the books of the Company shall close or a record shall be taken
for determining the holders of Common Stock entitled to receive any such
dividend, distribution, or subscription rights or for determining the holders of
Common Stock entitled to vote in respect of any such reorganization,
reclassification, consolidation, merger, sale, dissolution, liquidation or
winding-up and (b) in the case of any such reorganization, reclassification,
consolidation, merger, sale, dissolution, liquidation or winding-up, notice of
the date (or, if not then known, a reasonable approximation thereof by the
Company) when the same shall take place. Such notice shall also specify the
date on which the holders of Common Stock shall be entitled to receive such
dividend, distribution, or subscription rights or to exchange their Common Stock
for stock or other securities or property deliverable upon such reorganization,
reclassification, consolidation, merger, sale, dissolution, liquidation, or
winding-up, as the case may be. Such notice shall be given at least 30 days
prior to the record date or the date on which the Company's books are closed in
respect thereto. Failure to give any such notice or any defect therein shall not
affect the validity of the proceedings referred to in clauses (i), (ii), (iii)
and (iv) above.
<PAGE>
(j) Certain Events. If any event occurs of the type contemplated by
--------------
the adjustment provisions of this Paragraph 4 but not expressly provided for by
such provisions, the Company will give notice of such event as provided in
Paragraph 4(f) hereof, and the Company's Board of Directors will make an
appropriate adjustment in the Exercise Price and the number of shares of Common
Stock acquirable upon exercise of this Warrant so that the rights of the Holder
shall be neither enhanced nor diminished by such event.
(k) Certain Definitions.
-------------------
(i) "Common Stock Deemed Outstanding" shall mean the number of
-------------------------------
of Common Stock actually outstanding (not including shares of Common Stock held
in the treasury of the Company), plus (x) pursuant to Paragraph 4(b)(i) hereof,
the maximum total number of shares of Common Stock issuable upon the exercise of
Options, as of the date of such issuance or grant of such Options, if any, and
(y) pursuant to Paragraph 4(b)(ii) hereof, the maximum total number of shares of
Common Stock issuable upon conversion or exchange of Convertible Securities, as
of the date of issuance of such Convertible Securities, if any.
(ii) "Market Price" of any security shall be as follows: If
------------
such shares are listed or admitted to trading on one or more national securities
exchanges, the average of the last reported sales prices per share or, in case
no such reported sales take place, the average of the last reported bid and
asked prices per share, in either case on the principal national securities
exchange on which such shares are listed or admitted to trading, for the five
(5) trading days immediately preceding the closing date of the transaction
pursuant to which the securities for which the market price determination is
being made were issued, sold or otherwise transferred (the "Determination
Date"); if such shares are not listed or admitted to trading on a national
securities exchange, but are quoted on a regular (and not sporadic) basis by the
NASD Automated Quotation System ("NASDAQ"), the average of the last reported
sales prices per share for the five (5) trading days immediately preceding the
Determination Date, as furnished by the National Quotation Bureau Incorporated
or such other nationally recognized quotation service as may be selected by the
Company if such Bureau is not at the time furnishing quotations; and if the
securities are not (i) listed or admitted to trading on a national securities
exchange or (ii) quoted by NASDAQ on a regular (and not sporadic) basis, the
market price will be the fair market value thereof determined in good faith by
the Board of Directors of the Company or, if the holder shall object in writing
to such Board determination within twenty (20) days after it is rendered, fair
market value shall be determined in good faith by an independent investment
banking firm selected jointly by the holder and the Board of Directors of the
Company, or if such selection cannot be made, by an independent investment
banking firm selected by the American Arbitration Association in accordance with
its rules. All costs of determining fair market value subsequent to an
objection by the Holder as contemplated in the immediately preceding sentence
shall be borne by the Holder; provided, however, if the fair market value
-------- -------
determined in accordance with the immediately preceding sentence subsequent to
an objection by the Holder is at least 15% less than the fair market value
determined in good faith by the Board of Directors of the Company, such costs
shall be borne by the Company.
<PAGE>
(iii) "Common Stock," for purposes of this Paragraph 4,
------------
includes the Common Stock, and any additional class of stock of the Company
having no preference as to dividends or distributions on liquidation, provided
that the shares purchasable pursuant to this Warrant shall include only shares
of Common Stock, in respect of which this Warrant is exercisable, or shares
resulting from any subdivision or combination of such Common Stock, or in the
case of any reorganization, reclassification, consolidation, merger, or sale of
the character referred to in Paragraph 4(d) hereof, the stock or other
securities or property provided for in such Paragraph.
5. Issue Tax. The issuance of certificates for Warrant Shares upon
---------
the exercise of this Warrant shall be made without charge to the holder of this
Warrant or such shares for any issuance tax in respect thereof, provided that
the Company shall not be required to pay any tax which may be payable in respect
of any transfer involved in the issuance and delivery of any certificate in a
name other than the holder of this Warrant.
6. No Rights or Liabilities as a Shareholder. This Warrant shall
-----------------------------------------
not entitle the holder hereof to any voting rights or other rights as a
shareholder of the Company. No provision of this Warrant in the absence of
affirmative action by the holder hereof to purchase Warrant Shares, and no mere
enumeration herein of the rights or privileges of the holder hereof, shall give
rise to any liability of such holder for the Exercise Price or as a shareholder
of the Company, whether such liability is asserted by the Company or by
creditors of the Company.
7. Transfer, Exchange, and Replacement of Warrant.
----------------------------------------------
(a) Restriction on Transfer. This Warrant and the rights granted
-----------------------
to the Holder are transferable, in whole or in part, only with the prior written
consent of Company, and then upon surrender of this Warrant, together with a
properly executed assignment in the form attached hereto, at the office or
agency of the Company referred to in Paragraph 7(e) below, provided, however,
-------- -------
that any transfer or assignment shall be subject to the conditions set forth in
Paragraph 7(f) hereof. Until due presentment for registration of transfer on
the books of the Company, the Company may treat the registered Holder hereof as
the owner and holder hereof for all purposes and the Company shall not be
affected by any notice to the contrary.
(b) Warrant Exchangeable for Different Denominations. This Warrant
------------------------------------------------
is exchangeable, upon the surrender hereof by the Holder at the office or agency
of the Company referred to in Paragraph 7(e) below, for new Warrants of like
tenor representing in the aggregate the right to purchase the number of shares
of Common Stock which may be purchased hereunder, each of such new Warrants to
represent the right to purchase such number of shares as shall be designated by
the Holder at the time of such surrender.
(c) Replacement of Warrant. Upon receipt of evidence reasonably
----------------------
satisfactory to the Company of the loss, theft, destruction, or mutilation of
this Warrant and, in the case of any such loss, theft, or destruction, upon
delivery of an indemnity agreement reasonably satisfactory in form and amount to
the Company, or, in the case of any such
<PAGE>
mutilation, upon surrender and cancellation of this Warrant, the Company, at its
expense, will execute and deliver, in lieu thereof, a new Warrant of like tenor.
(d) Cancellation: Payment of Expenses. Upon the surrender of this
----------------------------------
Warrant in connection with any transfer, exchange, or replacement as provided in
this Paragraph 7, this Warrant shall be promptly canceled by the Company. The
Company shall pay all taxes (other than securities transfer taxes) and all other
expenses and charges payable in connection with the preparation, execution, and
delivery of Warrants pursuant to this Paragraph 7.
(e) Register. The Company shall maintain, at its principal executive
--------
offices (or such other office or agency of the Company as it may designate by
notice to the Holder), a register for this Warrant, in which the Company shall
record the name and address of the person in whose name this Warrant has been
issued, as well as the name and address of each transferee and each prior owner
of this Warrant.
(f) Exercise or Transfer Without Registration. If, at the time of the
-----------------------------------------
surrender of this Warrant in connection with any exercise, transfer, or exchange
of this Warrant, this Warrant (or, in the case of any exercise, the Warrant
Shares issuable hereunder, shall not be registered under the Securities Act of
1933, as amended (the "Securities Act"), and under applicable state securities
or blue sky laws, the Company may require, as a condition of allowing such
exercise, transfer, or exchange, (i) that the Holder furnish to the Company a
written opinion of counsel, which opinion and counsel are acceptable to the
Company, to the effect that such exercise, transfer, or exchange may be made
without registration under said Act and under applicable state securities or
blue sky laws and (ii) that the Holder execute and deliver to the Company an
investment letter in form and substance acceptable to the Company. The first
Holder of this Warrant, by taking and holding the same, represents to the
Company that such Holder is acquiring this Warrant for investment and not with a
view to the distribution thereof.
IF THE INITIAL HOLDER OF THIS WARRANT IS A PENNSYLVANIA RESIDENT, SUCH
HOLDER HEREBY AGREES NOT TO SELL THIS WARRANT OR THE WARRANT SHARES FOR A PERIOD
OF 12 MONTHS FROM THE DATE HEREOF, EXCEPT IN ACCORDANCE WITH SECTION 204.011 OF
THE PENNSYLVANIA SECURITIES ACT OF 1972, AS AMENDED.
8. Registration Rights. The holder of this Warrant shall have no
-------------------
registration rights in respect of this Warrant. Following exercise of this
Warrant, but only if all of the Warrants evidenced hereby and then held by
Holder are exercised at the same time, the Warrant Shares issued thereunder may
be registered for resale by the Company if it determines to do so in its sole
discretion.
9. Right To Redeem. The Company shall have the right, upon thirty
---------------
(30) days written notice, to call this Warrant for redemption, in whole or in
part, at a call price of $.001 per Warrant Share (i) following any calendar year
in which the Company's consolidated financial statements evidenced net income of
at least $400,000 and net income per share of at
<PAGE>
least $.40 per share or (ii) at any time after the Company proposes to
consummate the acquisition of all of the stock or assets of another company
whose annual gross revenues from operations is at least $10,000,000; provided,
--------
however, that in the event that this Warrant is called for redemption pursuant
- -------
to clause (ii) above and this Warrant is not thereafter exercised in accordance
with the terms hereof, then the Holder shall deliver this Warrant to the Company
and the Company shall hold this Warrant in escrow pending the consummation of
such transaction. In the event such transaction is terminated prior to
consummation, this Warrant shall be returned to the Holder and all terms of this
Warrant shall continue in full force and effect as if such call had not been
made, and in the event the transaction is consummated the Company shall pay the
redemption proceeds to the Holder and cancel the Warrant.
10. Notices. All notices, requests, and other communications
-------
required or permitted to be given or delivered hereunder to the Holder shall be
in writing, and shall be personally delivered, or shall be sent by certified or
registered mail, postage prepaid and addressed, to such Holder at the address
shown for such Holder on the books of the Company, or at such other address as
shall have been furnished to the Company by notice from such Holder. All
notices, requests, and other communications required or permitted to be given or
delivered hereunder to the Company shall be in writing, and shall be personally
delivered, or shall be sent by certified or registered mail or by recognized
overnight mail carrier, postage prepaid and addressed, to the office of the
Company at 100 Four Falls Corporate Center, Suite 305, West Conshohocken, PA
19428 Attention: Chairman, or at such other address as shall have been furnished
to the Holder by notice from the Company. Any such notice, request, or other
communication may be sent by telegram, telex, or telecopy, but shall in such
case be subsequently confirmed by a writing personally delivered or sent by
certified or registered mail as provided above. All notices, requests, and
other communications shall be deemed to have been given either at the time of
the delivery thereof to (or the receipt by, in the case of a telegram, telex or
telecopy) the person entitled to receive such notice at the address of such
person for purposes of this Paragraph 10, or, if mailed, at the completion of
the third full day following the time of such mailing thereof to such address,
as the case may be.
11. GOVERNING LAW. THIS WARRANT SHALL BE GOVERNED BY AND CONSTRUED
-------------
AND ENFORCED IN ACCORDANCE WITH THE INTERNAL LAWS OF THE STATE OF DELAWARE
WITHOUT REGARD TO THE BODY OF LAW CONTROLLING CONFLICTS OF LAW. EACH OF THE
PARTIES HERETO HEREBY CONSENTS TO THE EXCLUSIVE JURISDICTION OF ANY STATE OR
FEDERAL COURT LOCATED WITHIN THE STATE OF DELAWARE FOR ANY PROCEEDING TO WHICH
ANY OF THE PARTIES HERETO IS A PARTY AND WHICH RELATES TO THIS WARRANT. TO THE
EXTENT PERMITTED BY LAW, EACH PARTY WAIVES ANY OBJECTION WHICH IT MAY HAVE BASED
ON LACK OF JURISDICTION OR IMPROPER VENUE OR FORUM NON-CONVENIENS TO THE CONDUCT
OF ANY PROCEEDING INSTITUTED HEREUNDER OR ANY PROCEEDING TO WHICH ANY PARTY TO
THIS WARRANT IS A PARTY AND WHICH RELATES TO THIS WARRANT AND THE TRANSACTIONS
CONTEMPLATED HEREBY.
<PAGE>
12. Miscellaneous.
-------------
(a) Amendments. This Warrant and any provision hereof may not be
----------
changed, waived, discharged, or terminated orally, but only by an instrument in
writing signed by the Company and Holders representing a majority of the shares
of Common Stock acquirable upon exercise of this Warrant.
(b) Descriptive Headings. The descriptive headings of the several
--------------------
paragraphs of this Warrant are inserted for purposes of reference only, and
shall not affect the meaning or construction of any of the provisions hereof.
IN WITNESS WHEREOF, the Company has caused this Warrant to be signed
by its duly authorized officer.
THE EASTWIND GROUP, INC.
By:__________________________
Its:
Agreed to and Accepted
________________________________
by Canterbury Companies, Inc.
its duly authorized ______________
Dated as of August 20, 1997
Date of First Exercise: August 20, 1997
Date Where Exercise Period Terminates: August 20, 2002
<PAGE>
FORM OF EXERCISE AGREEMENT
Dated: __________, __
To: ________________________
The undersigned, pursuant to the provisions set forth in the within
Warrant, hereby agrees to purchase ______ shares of Common Stock covered by such
Warrant, and makes payment herewith in full therefor at the price per share
provided by such Warrant in cash or by certified or official bank check in the
amount of, or by surrender of securities issued by the Company having a market
value equal to $________. Please issue a certificate or certificates for such
shares of Common Stock in the name of and pay any cash for any fractional share
to:
Name:________________________
Signature:___________________
Address: _____________________
_____________________
Note: The above signature should
correspond exactly with the name on
the face of the within Warrant.
and, if said number of shares of Common Stock shall not be all the shares
purchasable under the within Warrant, a new Warrant is to be issued in the name
of said undersigned covering the balance of the shares purchasable thereunder
less any fraction of a share paid in cash.
<PAGE>
FORM OF ASSIGNMENT
FOR VALUE RECEIVED, the undersigned hereby sells, assigns, and
transfers all of the rights of the undersigned under the within Warrant, with
respect to the number of shares of Common Stock covered thereby set forth herein
below, to:
Name of Assignee Address No. of Shares
- ---------------- ------- -------------
, and hereby irrevocably constitutes and appoints ___________________ as
agent and attorney-in-fact to transfer said Warrant on the books of the within-
named corporation, with full power of substitution in the premises.
Dated: ___________, __
In the presence of
_______________________
Name:
Signature:
Title of Signing Officer or Agent
(if any):
____________________________________
Address: ________________________
________________________
Note: The above signature should
correspond exactly with the name on
the face of the within Warrant.
<PAGE>
Exhibit 5
August 29, 1997
Securities and Exchange Commission
Division of Corporation Finance
450 Fifth Street, N.W.
Washington, D.C. 20549
Re: Registration Statement on Form S-3
----------------------------------
Dear Sir or Madam:
Reference is made to a Registration Statement on Form S-3 of The Eastwind
Group, Inc. (the "Company") which is being filed with the Securities and
Exchange Commission on the date hereof (the "Registration Statement").
Capitalized terms not otherwise defined herein shall have the meanings ascribed
to them in the Registration Statement.
The Registration Statement covers 2,380,269 shares of Common Stock, $.10
par value per share, of the Company (the "Shares"), 1,077,769 of which may be
sold by certain stockholders of the Company as identified in the Registration
Statement and up to 1,302,500 of which may be issued by the Company upon
exercise of certain outstanding warrants (the "Warrants").
We have examined the Registration Statement, including the exhibits
thereto, the Company's Amended and Restated Certificate of Incorporation, the
Company's Amended and Restated By-laws, the Warrants, certain registration
rights agreements and such other documents as we have deemed appropriate. In
the foregoing examination, we have assumed the genuineness of all signatures,
the authenticity of all documents submitted to us as originals and the
authenticity of all documents submitted to us as copies of originals.
Based upon the foregoing and assuming that the authorized number of shares
of Common Stock is not exceeded by the issuance of shares pursuant to exercises
of the Warrants, we are of the opinion that the Shares, when sold, and with
respect to the Shares underlying the Warrants, when issued and paid for in
accordance with the terms of, and upon exercise of the Warrants, will be validly
issued, fully paid and non-assessable.
We hereby consent to the filing of this opinion as Exhibit 5 to the
Registration Statement.
Very truly yours,
PEPPER, HAMILTON & SCHEETZ LLP
<PAGE>
EXHIBIT "A"
SECURITIES PURCHASE AGREEMENT
-----------------------------
This Securities Purchase Agreement made this 16th day of July, 1997 is
executed in reliance upon the transactional exemption afforded by Regulation D
("Regulation D") as promulgated by the Securities and Exchange Commission
("SEC"), under the Securities Act of 1933, as amended ("1933 Act").
This Securities Purchase Agreement has been executed by the
undersigned in connection with the private placement of 125,000 shares of Common
Stock, a Common Stock Purchase Warrant for the purchase of up to 500,000 shares
of Common Stock at an exercise price of U.S.$3.00 per share and an additional
Common Stock Purchase Warrant for the purchase of up to 200,000 shares of Common
Stock at an exercise price of U.S.$5.00 per share (hereinafter collectively
referred to as the "Securities") of:
The Eastwind Group, Inc.
100 Four Falls Corporate Center
Suite 305
West Conshohocken, Pennsylvania 19428
a corporation organized under the laws of the State of Delaware (hereinafter
referred to as "ISSUER"), all in accordance with the terms of a Confidential
Private Offering Memorandum of ISSUER dated July 16, 1997 and all exhibits and
attachments thereto (the "Offering Memorandum").
The undersigned:
Clifton Capital Ltd.
Tropic Isle Building
Road Town
Tortola, British Virgin Islands
a corporation organized under the laws of the British Virgin Islands
(hereinafter referred to as the "PURCHASER"), hereby represents and warrants to,
and agrees with ISSUER as follows:
1. AGREEMENT TO SUBSCRIBE; PURCHASE PRICE.
----------------------------------------
PURCHASER hereby subscribes for 125,000 shares of Common Stock, a
Common Stock Purchase Warrant (the "First Warrant") for the purchase of up to
500,000 shares of Common Stock at an exercise price of U.S.$3.00 per share
(subject to adjustment as provided in the First Warrant) and an additional
Common Stock Purchase Warrant (the "Second Warrant") for the purchase of up to
200,000 shares of Common Stock at an exercise price of U.S.$5.00 per
<PAGE>
share (subject to adjustment as provided in the Second Warrant) at an aggregate
purchase price of U.S.$375,000 (the "Purchase Price") payable in United States
Dollars in cash by wire transfer of immediately available funds at Closing, as
defined below.
2. THE CLOSING-ACTIONS TO BE COMPLETED AT THE CLOSING.
---------------------------------------------------
It is contemplated by the parties hereto that a closing (the
"Closing") shall occur upon receipt by ISSUER of this Securities Purchase
Agreement duly executed by PURCHASER, which executed Securities Purchase
Agreement is then accepted and executed by ISSUER. The date of the Closing
shall be the Closing Date. At the Closing, the following shall occur:
(a) ISSUER shall deliver or cause to be delivered to PURCHASER within
ten (10) business days of Closing, certificates representing the shares of
Common Stock acquired hereby, registered in the name of PURCHASER, free and
clear of all liens, claims, charges and encumbrances (except as imposed under
applicable securities laws);
(b) ISSUER shall deliver or cause to be delivered to PURCHASER within
ten (10) business days of Closing, the First Warrant and the Second Warrant,
forms of which are attached to the Offering Memorandum as Exhibits B and C,
respectively;
(c) PURCHASER shall deliver or cause to be delivered to ISSUER
U.S.$375,000 in cash by wire transfer of immediately available funds in full
payment of the Purchase Price; and
(d) ISSUER shall execute and deliver to PURCHASER a registration
rights agreement in substantially the form appearing as Appendix "A" hereto.
3. PURCHASER REPRESENTATIONS AND WARRANTIES.
-----------------------------------------
PURCHASER represents and warrants to ISSUER as follows:
(a) PURCHASER is purchasing the Securities for its own account for
investment only and not with a view to resale or distribution and will not offer
to sell, transfer or otherwise dispose of the Securities without registration
under the Act and any other applicable securities laws, or pursuant to an
exemption therefrom in the opinion of counsel satisfactory to ISSUER.
(b) All offering documents received by PURCHASER include statements to
the effect that the Securities have not been registered under the Act or any
other securities or blue sky laws and may not be offered for sale, sold,
transferred or otherwise disposed of unless the Securities are registered under
the Act and any other applicable securities laws or pursuant to an exemption
therefrom in the opinion of counsel satisfactory to ISSUER.
-2-
<PAGE>
(c) PURCHASER acknowledges that the purchase of the Securities
involves a high degree of risk and further acknowledges that it can bear the
economic risk of the purchase of the Securities, including the total loss of its
investment for an indefinite period of time.
(d) PURCHASER understands that the Securities are being offered and
sold to it in reliance on specific exemptions from the registration requirements
of federal and other applicable securities laws and that ISSUER is relying upon
the truth and accuracy of the representations, warranties, agreements,
acknowledgments and understandings of PURCHASER set forth herein in order to
determine the applicability of such exemptions and the suitability of PURCHASER
to acquire the Securities.
(e) PURCHASER is sufficiently experienced in financial and business
matters to be capable of evaluating the merits and risks of its investments, and
to make an informed decision relating thereto and is an "accredited investor" as
that term is defined in Rule 501 of Regulation D under the Act.
(f) In evaluating this investment, PURCHASER has consulted its own
investment and/or legal and/or tax advisors.
(g) PURCHASER acknowledges that in the view of the SEC the statutory
basis for the exemption claimed for this transaction would not be present if the
offering of Securities, although in technical compliance with Regulation D, is
part of a plan or scheme to evade the registration provisions of the Act.
PURCHASER is acquiring the Securities for investment purposes and has no present
intention to resell, distribute, or offer to resell the Securities.
(h) PURCHASER is not an underwriter of, or dealer in, the Securities,
and PURCHASER is not participating, pursuant to a contractual agreement, in the
distribution of the Securities.
(i) If PURCHASER is purchasing the Securities subscribed for hereby
in a representative or fiduciary capacity, the representations and warranties in
this Securities Purchase Agreement shall be deemed to have been made on behalf
of the person or persons for whom PURCHASER is so purchasing.
(j) PURCHASER acknowledges that it has received and reviewed carefully
the Offering Memorandum to which a form of this Securities Purchase Agreement is
attached, and all other exhibits thereto.
(k) PURCHASER acknowledges that, in making the decision to purchase
the Securities subscribed for, it has relied upon independent investigations
made by it and its purchaser representatives, if any, and PURCHASER, and such
representatives, if any,
-3-
<PAGE>
have, prior to any sale to it, been given access and the opportunity to examine
all material books and records of ISSUER, all material contracts and documents
relating to this offering and an opportunity to ask questions of, and to receive
answers from ISSUER or any person acting on its behalf concerning the terms and
conditions of this offering. PURCHASER and its advisors, if any, have been
furnished with access to all publicly available materials relating to the
business, finances and operations of the ISSUER and materials relating to the
offer and sale of the Securities which have been requested. PURCHASER and its
advisors, if any, have received complete and satisfactory answers to any such
inquiries.
(l) PURCHASER understands that no federal or state agency has made or
will make any finding or determination relating to the fairness for public
investment in the Securities, or has passed or made, or will pass on or make,
any recommendation or endorsement of the Securities.
(m) If PURCHASER is a partnership, corporation or trust, the person
executing this Securities Purchase Agreement on its behalf represents and
warrants that:
(1) He or she has made due inquiry to determine the truthfulness
of the representations and warranties made pursuant to this Securities Purchase
Agreement; and that
(2) He or she is duly authorized to make this investment and to
enter into and execute this Securities Purchase Agreement on behalf of such
entity.
(n) PURCHASER has legal power and authority to enter into and perform
this Securities Purchase Agreement and to consummate the transactions
contemplated hereby.
(o) This Securities Purchase Agreement has been duly executed and
delivered by PURCHASER and constitutes a legal, valid and binding obligation of
PURCHASER, enforceable against PURCHASER in accordance with its terms.
(p) The execution and delivery of this Securities Purchase Agreement
and the performance of the obligations imposed hereunder will not result in a
violation of any order, decree or judgment of any court or governmental agency
having jurisdiction over PURCHASER or PURCHASER's properties, will not conflict
with, constitute a default under, or result in the breach of, any contract,
agreement or other instrument to which PURCHASER is a party or is otherwise
bound and no consent, authorization or order of, or filing or registration with,
any court or governmental agency is required for the execution, delivery and
performance of this Securities Purchase Agreement.
-4-
<PAGE>
(q) There is no litigation or proceeding pending or, to the best
knowledge of PURCHASER threatened, against PURCHASER which would have an effect
on the validity or performance of this Securities Purchase Agreement.
(r) PURCHASER understands and acknowledges that the acceptance of a
Purchase by ISSUER does not constitute a determination by ISSUER that an
investment in the Securities is suitable for the PURCHASER. The final
determination of the suitability of investment in the Securities must be made by
the PURCHASER and his, her or its advisors.
The foregoing representations and warranties are true and accurate as
of the date hereof, shall be true and accurate as of the date of the acceptance
by ISSUER of PURCHASER's subscription, and shall survive thereafter. If
PURCHASER has knowledge, prior to the acceptance of this Securities Purchase
Agreement by ISSUER, that any such representations and warranties shall not be
true and accurate in any respect, PURCHASER, prior to such acceptance, will give
written notice of such fact to ISSUER specifying which representations and
warranties are not true and accurate and the reasons therefor.
4. INDEMNIFICATION. PURCHASER agrees to indemnify and hold harmless
---------------
the ISSUER and its officers, directors and affiliates from and against all
damages, losses, costs and expenses (including reasonable attorneys' fees) which
they may incur by reason of the failure of PURCHASER to fulfill any of the terms
or conditions of this Securities Purchase Agreement, or by reason of any breach
of the representations and warranties made by PURCHASER herein, or in any
document provided by the undersigned to the ISSUER.
5. ISSUER REPRESENTATIONS AND WARRANTIES.
--------------------------------------
ISSUER represents and warrants to PURCHASER as follows:
(a) ISSUER is a corporation duly organized, validly existing and
in good standing under the laws of the State of Delaware and has the corporate
power to conduct its business.
(b) The execution, delivery and performance of this Securities
Purchase Agreement by ISSUER has been duly approved by the Board of Directors of
ISSUER.
(c) The Securities have been duly and validly authorized and when
issued in accordance with the terms hereof, will be validly issued and non-
assessable.
6. EXEMPTION, RELIANCE ON REPRESENTATIONS.
--------------------------------------
PURCHASER understands that the offer and sale of the Securities is not
being registered under the Act and that ISSUER is relying on the rules governing
the limited offering exemption pursuant to Regulation D under the Act.
-5-
<PAGE>
7. TRANSFER AGENT INSTRUCTIONS.
---------------------------
The Securities will be issued subject to a restrictive legend as
follows:
"The shares of Common Stock represented by this Certificate were
issued pursuant to Regulation D under the Securities Act of 1933, as
amended (the "Act") and may not be sold, transferred or otherwise
disposed of except pursuant to registration under the Act and any
other applicable securities laws or the availability of an exemption
from registration under the Act and such laws, based upon an opinion
of counsel satisfactory to the Company."
The Warrants will also bear the following legend:
"This Warrant and the shares of Common Stock to be issued in
connection with this Warrant were issued pursuant to Regulation D
under the Securities Act of 1933, as amended (the "Act") and may
not be sold, transferred, or otherwise disposed of except
pursuant to registration under the Act and any other applicable
securities laws, or the availability of an exemption from
registration under the Act and such laws, based upon an opinion
of counsel satisfactory to the Company."
8. CONDITIONS TO THE ISSUER'S OBLIGATION TO SELL.
---------------------------------------------
PURCHASER understands ISSUER's obligation to sell the Securities is
conditioned upon:
(a) The receipt and acceptance by ISSUER of this Securities
Purchase Agreement for all of the Securities subscribed for (which acceptance
shall be evidenced by execution of this Securities Purchase Agreement by an
executive officer of ISSUER).
(b) Delivery to ISSUER by PURCHASER of the Purchase Price as
payment for the purchase of the Securities.
9. GOVERNING LAW.
-------------
This Securities Purchase Agreement shall enforced, governed by and
construed in accordance with the laws of the State of Delaware applicable to
agreements made and to be performed entirely within such State. In the event
that any provision of this Securities Purchase Agreement is invalid or
unenforceable under any applicable statute or rule of law, then such
-6-
<PAGE>
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.
The parties hereto hereby submit to the exclusive jurisdiction of the United
States Federal Courts located in Delaware with respect to any dispute arising
under this Securities Purchase Agreement or the transactions contemplated
hereby.
10. ENTIRE AGREEMENT.
----------------
This Securities Purchase Agreement constitutes the entire agreement
among the parties hereof with respect to the subject matter hereof and
supersedes any and all prior or contemporaneous representations, warranties,
agreements and understandings in connection therewith. This Securities Purchase
Agreement may be amended only by a writing executed by all parties hereto.
IN WITNESS WHEREOF, the undersigned have executed this Securities
Purchase Agreement as of the 16th day of July, 1997.
PURCHASER:
CLIFTON CAPITAL LTD.
By:___________________________
Name: ________________________
Title: _________________________
Acknowledged and Accepted:
THE EASTWIND GROUP, INC.
By:_____________________________
Title:____________________________
-7-
<PAGE>
APPENDIX A
REGISTRATION RIGHTS AGREEMENT
REGISTRATION RIGHTS AGREEMENT (this "AGREEMENT") dated as of July 16, 1997,
by and among THE EASTWIND GROUP, INC., a Delaware corporation, with headquarters
located at 100 Four Falls Corporate Center, Suite 305, West Conshohocken, PA
19428 (the "COMPANY"), and CLIFTON CAPITAL LTD. ("CLIFTON").
WHEREAS:
A. In connection with the Securities Purchase Agreement by and between
the parties hereto of even date herewith (the "SECURITIES PURCHASE AGREEMENT"),
the Company has agreed, upon the terms and subject to the conditions contained
therein, to issue and sell to Clifton (i) 125,000 shares (the "SHARES") of the
Company's common stock (the "COMMON STOCK"), (ii) a warrant (the "FIRST
WARRANT") to acquire up to 400,000 shares of Common Stock with an exercise price
of U.S.$3.00 per share and (iii) a warrant (the "SECOND WARRANT" and together
with the First Warrant, the "WARRANTS") to acquire up to 200,000 shares of
Common Stock with an exercise price of U.S.$5.00 per share (together with the
shares of Common Stock underlying the First Warrant, the "WARRANT SHARES"); and
B. To induce Clifton to execute and deliver the Securities Purchase
Agreement, the Company has agreed to provide certain registration rights under
the Securities Act of 1933, as amended, and the rules and regulations thereunder
(collectively, the "1933 ACT"), and applicable state securities laws;
NOW, THEREFORE, in consideration of the premises and the mutual covenants
contained herein and other good and valuable consideration, the receipt and
sufficiency of which are hereby acknowledged, the Company and Clifton hereby
agree as follows:
1. DEFINITIONS.
-----------
a. As used in this Agreement, the following terms shall have the
following meanings:
(i) "INVESTORS" means Clifton and any transferees or assignees who
agrees to become bound by the provisions of this Agreement in accordance with
Section 9 hereof.
(ii) "REGISTER," "REGISTERED," and "REGISTRATION" refer to a
registration effected by preparing and filing a Registration Statement or
Statements in compliance with the 1933 Act and pursuant to Rule 415 under the
1933
<PAGE>
Act or any successor rule providing for offering securities on a continuous
basis ("RULE 415"), and the declaration or ordering of effectiveness of such
Registration Statement by the United States Securities and Exchange Commission
(the "SEC").
(iii) "REGISTRABLE SECURITIES" means the Shares and the
Warrant Shares issued or issuable and any shares of capital stock issued or
issuable as a dividend on or in exchange for or otherwise with respect to any of
the foregoing.
(iv) "REGISTRATION STATEMENT" means a registration statement of
the Company under the 1933 Act.
b. Capitalized terms used herein and not otherwise defined herein
shall have the respective meanings set forth in the Securities Purchase
Agreement.
2. REGISTRATION.
------------
a. Mandatory Registration. The Company shall, promptly after the
----------------------
Closing Date, use its best efforts to prepare and file with the SEC a
Registration Statement on Form S-3 (or, if Form S-3 is not then available to the
Company, on such form of Registration Statement as is then available to effect a
registration of the Registrable Securities), covering the resale of the
Registrable Securities, which Registration Statement, to the extent allowable
under the 1933 Act (including Rule 416 thereunder), shall state that such
Registration Statement also covers such indeterminate number of additional
shares of Common Stock as may become issuable upon exercise of the Warrants (i)
to prevent dilution resulting from stock splits, stock dividends or similar
transactions or (ii) by reason of changes in the exercise prices of the Warrants
in accordance with the terms thereof.
b. Effectiveness of Registration Statement. The Company shall use
---------------------------------------
its best efforts to obtain effectiveness of the Registration Statement as soon
as practicable and shall continue to use such best efforts to maintain such
effectiveness for the Registration Period (as defined below).
c. Eligibility for Form S-3. The Company represents and warrants
------------------------
that it meets as of the date hereof the requirements for the use of Form S-3 for
registration of the sale by Clifton of the Registrable Securities and the
Company shall use its best efforts to file all reports required to be filed by
the Company with the SEC in a timely manner so as to maintain such eligibility
for the use of Form S-3.
3. OBLIGATIONS OF THE COMPANY.
--------------------------
In connection with the registration of the Registrable Securities, the
Company shall have the following obligations:
a. The Company shall, promptly after the Closing Date, prepare and
file with the SEC a Registration Statement with respect to the number of
Registrable Securities provided in
2
<PAGE>
Section 2(a), and thereafter use its best efforts to cause such Registration
Statement relating to Registrable Securities to become effective as soon as
possible after such filing, and keep the Registration Statement effective
pursuant to Rule 415 at all times until such date as is the earlier of (i) the
date on which all of the Registrable Securities have been sold and (ii) the date
on which all Registrable Securities (in the reasonable opinion of counsel to
Clifton or the Company) may be immediately sold without registration (the
"REGISTRATION PERIOD"), which Registration Statement (including any amendments
or supplements thereto and prospectuses contained therein) shall not contain any
untrue statement of a material fact or omit to state a material fact required to
be stated therein, or necessary to make the statements therein not misleading.
b. The Company shall use its best efforts to prepare and file with
the SEC such amendments (including post-effective amendments) and supplements to
the Registration Statement and the prospectus used in connection with the
Registration Statement as may be necessary to keep the Registration Statement
effective at all times during the Registration Period, and, during such period,
comply with the Company's obligations under the provisions of the 1933 Act with
respect to the disposition of all Registrable Securities of the Company covered
by the Registration Statement until such time as all of such Registrable
Securities have been disposed of in accordance with the intended methods of
disposition by the seller or sellers thereof as set forth in the Registration
Statement. In the event the number of shares available under a Registration
Statement filed pursuant to this Agreement is insufficient to cover all of such
Registrable Securities then reserved for issuance by the Company, the Company
shall amend the Registration Statement, or file a new Registration Statement (on
the short form available therefor, if applicable), or both, so as to cover all
of the Registrable Securities, in each case as soon as practicable, after the
necessity therefor arises and is brought to the attention of the Company by
written notice (based on the market price of the Common Stock and other relevant
factors on which the Company reasonably elects to rely after consultation with
Clifton). The Company shall use its best efforts to cause such amendment and/or
new Registration Statement to become effective as soon as practicable following
the filing thereof.
c. The Company shall furnish to each Investor whose Registrable
Securities are included in the Registration Statement (i) promptly after the
same is prepared and publicly distributed, filed with the SEC, or received by
the Company, one copy of the Registration Statement and any amendment thereto,
each preliminary prospectus and prospectus and each amendment or supplement
thereto, and (ii) such number of copies of a prospectus, including a preliminary
prospectus, and all amendments and supplements thereto and such other documents
in the Company's possession as such Investor may reasonably request in order to
facilitate the disposition of the Registrable Securities owned by such Investor.
d. The Company shall use reasonable efforts to (i) register and
qualify the Registrable Securities covered by the Registration Statement under
such other securities or "blue sky" laws of such jurisdictions in the United
States, to the extent required pursuant to such laws, as the Investors who hold
a majority in interest of the Registrable Securities being offered reasonably
request, (ii) prepare and file in those jurisdictions such amendments (including
post-effective amendments) and supplements to such registrations and
qualifications as may be necessary to
3
<PAGE>
maintain the effectiveness thereof during the Registration Period, (iii) take
such other actions as may be necessary to maintain such registrations and
qualifications in effect at all times during the Registration Period, and (iv)
take all other actions reasonably necessary or advisable to qualify the
Registrable Securities for sale in such jurisdictions;
provided, however, that the Company shall not be required in connection
- -------- -------
therewith or as a condition thereto to (a) qualify to do business in any
jurisdiction where it would not otherwise be required to qualify but for this
Section 3(d), (b) subject itself to general taxation in any such jurisdiction,
(c) file a general consent to service of process in any such jurisdiction, (d)
provide any undertakings that cause the Company undue expense or burden, or (e)
make any change in its charter or bylaws, which in each case the Board of
Directors of the Company determines to be contrary to the best interests of the
Company and its stockholders.
e. In the event Investors who hold a majority in interest of the
Registrable Securities being offered in the offering select underwriters for the
offering, the Company shall enter into and perform its obligations under an
underwriting agreement, in usual and customary form, including, without
limitation, customary indemnification and contribution obligations, with the
underwriters of such offering.
f. As promptly as practicable after becoming aware of such event,
the Company shall notify each Investor of the happening of any event, of which
the Company has knowledge, as a result of which the prospectus included in the
Registration Statement, as then in effect, includes an untrue statement of a
material fact or omission to state a material fact required to be stated therein
or necessary to make the statements therein not misleading, and use its best
efforts promptly to prepare a supplement or amendment to the Registration
Statement to correct such untrue statement or omission, and deliver such number
of copies of such supplement or amendment to each Investor as such Investor may
reasonably request; provided, that, not more than once in any twelve month
period, for up to a period of thirty (30) days, the Company may delay the
disclosure of material non-public information concerning the Company the
disclosure of which at the time is not, in the good faith opinion of the Board
of Directors of the Company, in the best interest of the Company and, in the
opinion of counsel to the Company, otherwise required by applicable law (an
"ALLOWED DELAY"); provided, further, that the Company shall promptly (i) notify
the Investors in writing of the existence of material non-public information
giving rise to an Allowed Delay and (ii) advise the Investors in writing to
cease all sales under the Registration Statement until the end of the Allowed
Delay. Notwithstanding the first proviso of the immediately preceding sentence,
the provisions of Section 2(c) shall be applicable during the period of an
Allowed Delay. Upon expiration of the Allowed Delay, the Company shall again be
bound by the first sentence of this Section 3(f) with respect to the information
giving rise thereto.
g. The Company shall use its best efforts to prevent the issuance of
any stop order or other suspension of effectiveness of a Registration Statement,
and, if such an order is issued, to obtain the withdrawal of such order at the
earliest possible moment and to notify each Investor who holds Registrable
Securities being sold (or, in the event of an underwritten offering, the
managing underwriters) of the issuance of such order and the resolution thereof.
4
<PAGE>
h. The Company shall make generally available to its security
holders as soon as practical, but not later than ninety (90) days after the
close of the period covered thereby, an earnings statement (in form complying
with the provisions of Rule 158 under the 1933 Act) covering a twelve-month
period beginning not later than the first day of the Company's fiscal quarter
next following the effective date of the Registration Statement.
i. The Company shall hold in confidence and not make any disclosure
of information concerning an Investor provided to the Company unless (i)
disclosure of such information is necessary to comply with federal or state
securities or other laws, (ii) the disclosure of such information is necessary
to avoid or correct a misstatement or omission in any Registration Statement,
(iii) the release of such information is ordered pursuant to a subpoena or other
order from a court or governmental body of competent jurisdiction, or (iv) such
information has been made generally available to the public other than by
disclosure in violation of this or any other agreement. The Company agrees that
it shall, upon learning that disclosure of such information concerning an
Investor is sought in or by a court or governmental body of competent
jurisdiction or through other means, give prompt notice to such Investor prior
to making such disclosure, and allow the Investor, at its expense, to undertake
appropriate action to prevent disclosure of, or to obtain a protective order
for, such information.
j. The Company shall use its best efforts either to (i) cause all
the Registrable Securities covered by the Registration Statement to be listed on
each national securities exchange on which securities of the same class or
series issued by the Company are then listed, if any, if the listing of such
Registrable Securities is then permitted under the rules of such exchange, or
(ii) secure the designation and quotation, of all the Registrable Securities
covered by the Registration Statement on the NASDAQ National Market ("NASDAQ-
NM") or, if not eligible for the NASDAQ-NM, on the NASDAQ Small Cap Market and,
without limiting the generality of the foregoing, to arrange for at least two
market makers to register with the National Association of Securities Dealers,
Inc. ("NASD") as such with respect to such Registrable Securities.
k. The Company shall provide a transfer agent and registrar, which
may be a single entity, for the Registrable Securities not later than the
effective date of the Registration Statement.
l. The Company shall cooperate with the Investors who hold
Registrable Securities being offered and the managing underwriter or
underwriters, if any, to facilitate the timely preparation and delivery of
certificates (not bearing any restrictive legends) representing Registrable
Securities to be offered pursuant to the Registration Statement and enable such
certificates to be in such denominations or amounts, as the case may be, as the
managing underwriter or underwriters, if any, or the Investors may reasonably
request and registered in such names as the managing underwriter or
underwriters, if any, or the Investors may request, and, within three (3)
business days after a Registration Statement which includes Registrable
Securities is ordered effective by the SEC, the Company shall deliver, and shall
cause legal counsel selected by the Company to deliver, to the transfer agent
for the Registrable Securities (with copies to the Investors whose Registrable
5
<PAGE>
Securities are included in such Registration Statement) an instruction in
substantially the form attached hereto as EXHIBIT 1 and an opinion of such
counsel substantially in the form attached hereto as EXHIBIT 2.
4. OBLIGATIONS OF THE INVESTORS.
----------------------------
In connection with the registration of the Registrable Securities, the
Investors shall have the following obligations:
a. It shall be a condition precedent to the obligations of the
Company to complete the registration pursuant to this Agreement with respect to
the Registrable Securities of a particular Investor that such Investor shall
furnish to the Company such information regarding itself, the Registrable
Securities held by it and the intended method of disposition of the Registrable
Securities held by it as shall be reasonably required to effect the registration
of such Registrable Securities and shall execute such documents in connection
with such registration as the Company may reasonably request. At least three
(3) business days prior to the first anticipated filing date of the Registration
Statement, the Company shall notify each Investor of the information the Company
requires from each such Investor if such Investor elects to have any of such
Investor's Registrable Securities included in the Registration Statement.
b. Each Investor, by such Investor's acceptance of the Registrable
Securities, agrees to cooperate with the Company as reasonably requested by the
Company in connection with the preparation and filing of the Registration
Statement hereunder, unless such Investor has notified the Company in writing of
such Investor's election to exclude all of such Investor's Registrable
Securities from the Registration Statement.
c. In the event Investors holding a majority in interest of the
Registrable Securities being registered determine to engage the services of an
underwriter, each Investor agrees to enter into and perform such Investor's
obligations under an underwriting agreement, in usual and customary form,
including, without limitation, customary indemnification and contribution
obligations, with the managing underwriter of such offering and take such other
actions as are reasonably required in order to expedite or facilitate the
disposition of the Registrable Securities, unless such Investor has notified the
Company in writing of such Investor's election to exclude all of such Investor's
Registrable Securities from the Registration Statement.
d. Each Investor agrees that, upon receipt of any notice from the
Company of the happening of any event of the kind described in Section 3(f) or
3(g), such Investor will immediately discontinue disposition of Registrable
Securities pursuant to the Registration Statement covering such Registrable
Securities until, in the case of an event of the kind described in Section 3(f),
such Investor's receipt of the copies of the supplemented or amended prospectus
contemplated by Section 3(f) or, in the case of an event of the kind described
in Section 3(g), written notification by the Company of the resolution of the
event and authority to continue the disposition of Registrable Securities
pursuant to the Registration Statement. If so directed by the Company, such
6
<PAGE>
Investor shall deliver to the Company (at the expense of the Company) or destroy
(and deliver to the Company a certificate of destruction) all copies in such
Investor's possession, of the prospectus covering such Registrable Securities
current at the time of receipt of the notice of the happening of an event as
described in Section 3(f) or 3(g).
e. No Investor may participate in any underwritten registration
hereunder unless such Investor (i) agrees to sell such Investor's Registrable
Securities on the basis provided in any underwriting arrangements in usual and
customary form entered into by the Company, (ii) completes and executes all
questionnaires, powers of attorney, indemnities, underwriting agreements and
other documents reasonably required under the terms of such underwriting
arrangements, and (iii) agrees to pay its pro rata share of all underwriting
discounts and commissions and any expenses in excess of those payable by the
Company pursuant to Section 5 below.
f. Each Investor agrees to comply with all applicable laws and
regulations in connection with any sale, transfer or other disposition of
Registrable Securities.
5. EXPENSES OF REGISTRATION.
------------------------
All reasonable expenses, other than underwriting fees, discounts and
commissions, incurred in connection with registrations, filings or
qualifications pursuant to Sections 2 and 3, including, without limitation, all
registration, listing and qualifications fees, printers and the Company's
accounting fees, and the fees and disbursements of counsel for the Company,
shall be borne by the Company.
6. INDEMNIFICATION.
---------------
In the event any Registrable Securities are included in a Registration
Statement under this Agreement:
a. To the extent permitted by law, the Company will indemnify, hold
harmless and defend (i) each Investor who holds such Registrable Securities,
(ii) the directors, officers, partners, employees, agents and each person who
controls any Investor within the meaning of the 1933 Act or the Securities
Exchange Act of 1934, as amended (the "1934 ACT"), if any, and (iii) any
underwriter (as defined in the 1933 Act) for the Investors; and the directors,
officers, partners, employees and each person who controls any such underwriter
within the meaning of the 1933 Act or the 1934 Act, if any, (each, an
"INDEMNIFIED PERSON"), against any joint or several losses, claims, damages,
liabilities or expenses (collectively, together with actions, proceedings or
inquiries by any regulatory or self-regulatory organization, whether commenced
or threatened, in respect thereof, "CLAIMS") to which any of them may become
subject insofar as such Claims arise out of or are based upon: (i) any untrue
statement or alleged untrue statement of a material fact in a Registration
Statement or the omission or alleged omission to state therein a material fact
required to be stated or necessary to make the statements therein not
misleading, or (ii) any untrue statement or alleged untrue statement of a
material fact contained in any preliminary prospectus if used prior to the
7
<PAGE>
effective date of such Registration Statement, or contained in the final
prospectus (as amended or supplemented, if the Company files any amendment
thereof or supplement thereto with the SEC) or the omission or alleged omission
to state therein any material fact necessary to make the statements made
therein, in light of the circumstances under which the statements therein were
made, not misleading, (the matters in the foregoing clauses (i) and (ii) being,
collectively, "VIOLATIONS"). Subject to the restrictions set forth in Section
6(c) with respect to the number of legal counsel, the Company shall reimburse
the Investors and each such underwriter or controlling person, promptly as such
expenses are incurred and are due and payable, for any reasonable legal fees or
other reasonable expenses incurred by them in connection with investigating or
defending any such Claim. Notwithstanding anything to the contrary contained
herein, the indemnification agreement contained in this Section 6(a): (i) shall
not apply to a Claim to the extent it arises out of or is based upon a Violation
which is based upon or arises out of information furnished in writing to the
Company by any Indemnified Person or underwriter for such Indemnified Person
expressly for use in connection with the preparation of the Registration
Statement or any such amendment thereof or supplement thereto; (ii) 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; and (iii) with respect to any preliminary prospectus or
prospectus, shall not inure to the benefit of any Indemnified Person if the
untrue statement or omission of material fact contained therein was corrected on
a timely basis in the final prospectus or a corrected prospectus, as then
amended or supplemented, such final or corrected prospectus was timely made
available by the Company pursuant to Section 3(c) hereof, and the Indemnified
Person was promptly advised in writing not to use the incorrect prospectus prior
to the use giving rise to a Violation and such Indemnified Person,
notwithstanding such advice, used it. Such indemnity shall remain in full force
and effect regardless of any investigation made by or on behalf of the
Indemnified Person and shall survive the transfer of the Registrable Securities
by the Investors pursuant to Section 9.
b. In connection with any Registration Statement in which an
Investor is participating, each such Investor agrees severally and not jointly
to indemnify, hold harmless and defend, to the same extent and in the same
manner set forth in Section 6(a), the Company, each of its directors, officers,
employees, agents and each person who controls the Company within the meaning of
the 1933 Act or the 1934 Act, any underwriter and any other stockholder selling
securities pursuant to the Registration Statement or any of its directors or
officers or any person who controls such stockholder or underwriter within the
meaning of the 1933 Act or the 1934 Act (collectively, an "INDEMNIFIED PARTY"),
against any Claim to which any of them may become subject, under the 1933 Act,
the 1934 Act or otherwise, insofar as such Claim arises out of or is based upon
any Violation, in each case to the extent (and only to the extent) that such
Violation is based upon or arises out of written information furnished to the
Company by such Investor expressly for use in connection with such Registration
Statement; and subject to Section 6(c) such Investor will reimburse any legal or
other expenses (promptly as such expenses are incurred and are due and payable)
reasonably incurred by them in connection with investigating or defending any
such Claim; provided, however, that the indemnity agreement contained in this
-----------------
Section 6(b) shall not apply to amounts paid in settlement of any Claim if such
settlement is effected without the prior written consent of such Investor, which
consent shall not be unreasonably withheld; provided, further,
-----------------
8
<PAGE>
however, that an Investor shall be liable under this Agreement (including this
- -------
Section 6(b) and Section 7) for only that amount as does not exceed the net
proceeds (i.e., after deduction of selling commissions and discounts) to such
----
Investor as a result of the sale of Registrable Securities pursuant to such
Registration Statement. Such indemnity shall remain in full force and effect
regardless of any investigation made by or on behalf of such Indemnified Party
and shall survive the transfer of the Registrable Securities by the Investors
pursuant to Section 9. Notwithstanding anything to the contrary contained
herein, the indemnification agreement contained in this Section 6(b) with
respect to any preliminary prospectus shall not inure to the benefit of any
Indemnified Party if the untrue statement or omission of material fact contained
in the preliminary prospectus was corrected on a timely basis in the prospectus,
as then amended or supplemented.
c. Promptly after receipt by an Indemnified Person or Indemnified
Party under this Section 6 of notice of the commencement of any action
(including any governmental action), such Indemnified Person or Indemnified
Party shall, if a Claim in respect thereof is to be made against any
indemnifying party under this Section 6, deliver to the indemnifying party a
written notice of the commencement thereof, and the indemnifying party shall
have the right to participate in, and, to the extent the indemnifying party so
desires, jointly with any other indemnifying party similarly noticed, to assume
control of the defense thereof with counsel mutually satisfactory to the
indemnifying party and the Indemnified Person or the Indemnified Party, as the
case may be; provided, however, that an Indemnified Person or Indemnified Party
-----------------
shall have the right to retain its own counsel with the fees and expenses to be
paid by the indemnifying party, if, in the reasonable opinion of counsel
retained by the indemnifying party, the representation by such counsel of the
Indemnified Person or Indemnified Party and the indemnifying party would be
inappropriate due to actual or likely differing interests between such
Indemnified Person or Indemnified Party and any other party represented by such
counsel in such proceeding. The indemnifying party shall pay for only one
separate legal counsel for the Indemnified Persons or the Indemnified Parties,
as applicable, and such legal counsel shall be selected by Investors holding a
majority-in-interest of the Registrable Securities included in the Registration
Statement to which the Claim relates, if the Investors are entitled to
indemnification hereunder, or the Company, if the Company is entitled to
indemnification hereunder, as applicable. The failure to deliver written notice
to the indemnifying party within a reasonable time of the commencement of any
such action shall not relieve such indemnifying party of any liability to the
Indemnified Person or Indemnified Party under this Section 6, except to the
extent that the indemnifying party is actually prejudiced in its ability to
defend such action. The indemnification required by this Section 6 shall be
made by periodic payments of the amount thereof during the course of the
investigation or defense, as such expense, loss, damage or liability is incurred
and is due and payable.
7. CONTRIBUTION.
------------
To the extent any indemnification by an indemnifying party is prohibited or
limited by law, the indemnifying party agrees to make the maximum contribution
with respect to any amounts for which it would otherwise be liable under Section
6 to the fullest extent permitted by law; provided, however, that (i) no
-------- -------
contribution shall be made under circumstances where the maker would not have
9
<PAGE>
been liable for indemnification under the fault standards set forth in Section
6, (ii) no seller of Registrable Securities guilty of fraudulent
misrepresentation (within the meaning of Section 11(f) of the 1933 Act) shall be
entitled to contribution from any seller of Registrable Securities who was not
guilty of such fraudulent misrepresentation, and (iii) contribution (together
with any indemnification or other obligations under this Agreement) by any
seller of Registrable Securities shall be limited in amount to the net amount of
proceeds received by such seller from the sale of such Registrable Securities
and provided, further, that such contribution shall be made in such proportion
-------- -------
as is appropriate to reflect the relative fault of the Company on the one hand,
and the Investor or Investors on the other, in connection with the statements or
omissions which resulted in such claims.
8. REPORTS UNDER THE 1934 ACT.
--------------------------
With a view to making available to the Investors the benefits of Rule 144
promulgated under the 1933 Act or any other similar rule or regulation of the
SEC that may at any time permit the Investors to sell restricted securities of
the Company to the public without registration ("RULE 144"), the Company agrees
to use its best efforts to:
a. make and keep public information available, as those terms are
understood and defined in Rule 144;
b. file with the SEC in a timely manner all reports and other
documents required of the Company under the 1934 Act so long as the Company
remains subject to such requirements and the filing of such reports and other
documents is required for the applicable provisions of Rule 144; and
c. furnish to each Investor so long as such Investor owns
Registrable Securities, promptly upon request, (i) a written statement by the
Company as to the status of its compliance with the reporting requirements of
Rule 144 and the 1934 Act, (ii) a copy of the most recent annual or quarterly
report of the Company and such other reports and documents so filed by the
Company, and (iii) such other information as may be reasonably requested to
permit the Investors to sell such securities pursuant to Rule 144 without
registration.
9. ASSIGNMENT OF REGISTRATION RIGHTS.
---------------------------------
The rights to have the Company register Registrable Securities pursuant to
this Agreement shall be automatically assignable by the Investors to any
transferee of all or any portion of Registrable Securities if: (i) the Investor
agrees in writing with the transferee or assignee to assign such rights, and a
copy of such agreement is furnished to the Company within a reasonable time
after such assignment, (ii) the Company is, within a reasonable time after such
transfer or assignment, furnished with written notice of (a) the name and
address of such transferee or assignee, and (b) the securities with respect to
which such registration rights are being transferred or assigned, (iii)
following such transfer or assignment, the further disposition of such
securities by the transferee or assignee is restricted under the 1933 Act and
applicable state securities laws, (iv) at or before the
10
<PAGE>
time the Company receives the written notice contemplated by clause (ii) of this
sentence, the transferee or assignee agrees in writing with the Company to be
bound by all of the provisions contained herein, (v) such transfer shall have
been made in accordance with the applicable requirements of the Securities
Purchase Agreement, and (vi) such transferee shall be an "ACCREDITED INVESTOR"
as that term defined in Rule 501 of Regulation D promulgated under the 1933 Act.
10. AMENDMENT OF REGISTRATION RIGHTS.
--------------------------------
Provisions of this Agreement may be amended and the observance thereof may
be waived (either generally or in a particular instance and either retroactively
or prospectively), only with written consent of the Company, Clifton (to the
extent Clifton still owns Registrable Securities) and Investors who hold a
majority interest of the Registrable Securities. Any amendment or waiver
effected in accordance with this Section 10 shall be binding upon each Investor
and the Company.
11. MISCELLANEOUS.
-------------
a. A person or entity is deemed to be a holder of Registrable
Securities whenever such person or entity owns of record such Registrable
Securities. If the Company receives conflicting instructions, notices or
elections from two or more persons or entities with respect to the same
Registrable Securities, the Company shall act upon the basis of instructions,
notice or election received from the registered owner of such Registrable
Securities.
b. Notices required or permitted to be given hereunder shall be in
writing and shall be deemed to be sufficiently given when personally delivered
(by hand, by courier, by facsimile transmission or other means) or sent by
certified mail, return receipt requested, properly addressed and with proper
postage pre-paid,
if to the Company:
The Eastwind Group, Inc.
100 Four Falls Corporate Center
Suite 305
West Conshohocken, PA 19428
Attention: Chief Financial Officer
Telecopy: (610) 828-6980
11
<PAGE>
with copy to:
Pepper, Hamilton & Scheetz LLP
Suite 400
1235 Westlakes Drive
Berwyn, PA 19312
Telecopy: (610) 640-7835
Attention: Paul T. Porrini, Esquire
if to Clifton Capital Ltd.:
Clifton Capital Ltd.,
Tropic Isle Building
Road Town
Tortola, British Virgin Islands
Telecopy: _________________
Attention: _________________
and if to any other Investor, at such address as such Investor shall have
provided in writing to the Company, or at such other address as each such party
furnishes by notice given in accordance with this Section 11(b), and shall be
effective, when personally delivered, upon receipt and, when so sent by
certified mail, four (4) days after deposit with the United States Postal
Service.
c. Failure of any party to exercise any right or remedy under this
Agreement or otherwise, or delay by a party in exercising such right or remedy,
shall not operate as a waiver thereof.
d. This Agreement shall be enforced, governed by and construed in
accordance with the laws of the State of Delaware applicable to agreements made
and to be performed entirely within such State. 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. The parties hereto hereby submit to the exclusive
jurisdiction of the United States Federal Courts located in Delaware with
respect to any dispute arising under this Agreement or the transactions
contemplated hereby.
e. This Agreement and the Securities Purchase Agreement (including
all exhibits thereto) constitute the entire agreement among the parties hereto
with respect to the subject matter hereof and thereof. There are no
restrictions, promises, warranties or undertakings, other than those set forth
or referred to herein and therein. This Agreement and the Securities Purchase
Agreement supersede all prior agreements and understandings among the parties
hereto with respect to the subject matter hereof and thereof.
12
<PAGE>
f. Subject to the requirements of Section 9 hereof, this Agreement
shall inure to the benefit of and be binding upon the successors and assigns of
each of the parties hereto.
g. The headings in this Agreement are for convenience of reference
only and shall not limit or otherwise affect the meaning hereof.
h. This Agreement may be executed in two or more counterparts, each
of which shall be deemed an original but all of which shall constitute one and
the same agreement. This Agreement, once executed by a party, may be delivered
to the other party hereto by facsimile transmission of a copy of this Agreement
bearing the signature of the party so delivering this Agreement.
i. Each party shall do and perform, or cause to be done and
performed, all such further acts and things, and shall execute and deliver all
such other agreements, certificates, instruments and documents, as the other
party may reasonably request in order to carry out the intent and accomplish the
purposes of this Agreement and the consummation of the transactions contemplated
hereby.
j. All consents and other determinations to be made by the Investors
pursuant to this Agreement shall be made by Investors holding a majority of the
Registrable Securities, determined as if all Warrants then outstanding have been
exercised for Registrable Securities.
[REMAINDER OF PAGE INTENTIONALLY LEFT BLANK]
13
<PAGE>
IN WITNESS WHEREOF, the Company and Clifton have caused this Agreement to
be duly executed as of the date first above written.
THE EASTWIND GROUP, INC.
By:________________________________________________________________
Name:____________________________________________________________
Its:________________________________________________________________
CLIFTON CAPITAL, LTD.
By:________________________________________________________________
Name:____________________________________________________________
Its:________________________________________________________________
14
<PAGE>
EXHIBIT 1
TO
REGISTRATION
RIGHTS
AGREEMENT
[Company Letterhead]
[Date]
[Name and address of Transfer Agent]
Ladies and Gentlemen:
This letter shall serve as our irrevocable authorization and direction
to you (1) to transfer or re-register the certificates for the shares of Common
Stock, U.S.$.10 par value (the "COMMON STOCK"), of The Eastwind Group, Inc., a
Delaware corporation (the "COMPANY"), represented by certificate numbers _____
for an aggregate of _____ shares (the "OUTSTANDING SHARES") of Common Stock
presently registered in the name of [Name of Investor] (which shares were
previously issued outright or by exercise of the Company's Warrants (as
hereinafter defined) upon surrender of such certificates to you (or evidence of
loss, theft or destruction thereof), notwithstanding the legend appearing on
such certificates, and (2) to issue shares (the "WARRANT SHARES") of Common
Stock to or upon the order of the registered holder from time to time upon
exercise of the Warrants of the Company issued pursuant to the terms of the
Securities Purchase Agreement dated as of July 16, 1997, between the Company and
Clifton Capital Ltd. (the "WARRANTS") upon surrender to you of a properly
completed and duly executed Exercise Agreement and such Warrants (or evidence of
loss, theft or destruction thereof) and confirmation from the Company that the
exercise price has been paid to the Company, notwithstanding the legend
appearing on such Warrants. The transfer or re-registration of the certificates
for the Outstanding Shares by you should be made at such time as you are
requested to do so by the record holder of the Outstanding Shares, subject to
the surrender and confirmation requirements set forth in the preceding sentence.
The certificate issued upon such transfer or re-registration should be
registered in such name as requested by the holder of record of the certificate
surrendered to you and should not bear any legend which would restrict the
transfer of the shares represented thereby. In addition, you are hereby
directed to remove any stop-transfer instruction relating to the Outstanding
Shares. Certificates for the Warrant Shares should not bear any restrictive
legend and should not be subject to any stop-transfer restriction.
Contemporaneous with the delivery of this letter, the Company is
delivering to you an opinion of Pepper, Hamilton & Scheetz LLP as to
registration of the Outstanding Shares and the Warrant Shares under the
Securities Act of 1933, as amended.
15
<PAGE>
Should you have any questions concerning this matter, please contact
me.
Very truly yours,
THE EASTWIND GROUP, INC.
By: _________________________
Name:
Title:
Enclosures:
cc: [Name of Investor]
16
<PAGE>
EXHIBIT 2
TO
REGISTRATION
RIGHTS
AGREEMENT
[Date]
[Name and address
of transfer agent]
RE: THE EASTWIND GROUP, INC.
Ladies and Gentlemen:
We are counsel to The Eastwind Group, Inc., a Delaware corporation (the
"COMPANY"), and we understand that [Name of Investor] (the "HOLDER") has
purchased from the Company (i) shares of the Company's Common Stock, par value
U.S.$.10 per share (the "Common Stock") and (ii) warrants (the "WARRANTS") to
acquire Common Stock. The Common Stock and Warrants were purchased by the
Holder pursuant to a Securities Purchase Agreement, dated as of July 16, 1997,
between the Holder and the Company (the "AGREEMENT"). Pursuant to a
Registration Rights Agreement, dated as of July 16, 1997, between the Company
and the Holder (the "REGISTRATION RIGHTS AGREEMENT"), the Company agreed with
the Holder, among other things, to register the Registrable Securities (as that
term is defined in the Registration Rights Agreement) under the Securities Act
of 1933, as amended (the "SECURITIES ACT"), upon the terms provided in the
Registration Rights Agreement. In connection with the Company's obligations
under the Registration Rights Agreement, on _____ __, 1997, the Company filed a
Registration Statement on Form S-___ (File No. 333- _____________) (the
"REGISTRATION STATEMENT") with the Securities and Exchange Commission (the
"SEC") relating to the Registrable Securities, which names the Holder as a
selling stockholder thereunder.
[Other reasonable introductory and scope of examination language to be
inserted by counsel rendering the opinion]
Based on the foregoing, we are of the opinion that the Registrable
Securities have been registered under the Registration Statement for resale by
the Holder under the Securities Act.
Very truly yours,
cc: [Name of investor]
17
<PAGE>
EXHIBIT 23.1
CONSENT OF INDEPENDENT PUBLIC ACCOUNTANTS
As independent public accountants, we hereby consent to the incorporation by
reference in this Form S-3 Registration Statement of our report dated March 26,
1997, included in The Eastwind Group, Inc.'s Form 10-KSB for the year ended
December 31, 1996, and to all references to our Firm included in this
Registration Statement.
ARTHUR ANDERSEN LLP
Philadelphia, Pa.,
August 28, 1997
<PAGE>
EXHIBIT 23.2
[LETTERHEAD OF LASKARIS & LASKARIS]
CONSENT OF CERTIFIED PUBLIC ACCOUNTANTS
As certified public accountants, we hereby consent to the incorporation by
reference in this Form S-3 Registration Statement of our report dated October
14, 1996, on the financial statements of Centennial Printing Corporation
included in the Eastwind Group, Inc.'s Form 8-K/A filed on December 31, 1996.
/s/Laskaris & Laskaris
Laskaris & Laskaris
Philadelphia, PA
August 28, 1997
<PAGE>
Exhibit 23.3
CONSENT OF CERTIFIED PUBLIC ACCOUNTANTS
As certified public accountants, we hereby consent to the incorporation
by reference in this Form S-3 Registration Statement of our report dated
December 30, 1996 on the financial statements of Tygart Moulding Corporation
included in The Eastwind Group, Inc.'s Form 8-K/A (pages F-1 through F-20) filed
on March 17, 1997.
/s/ Hantzmon, Wiebel & Company
Charlottesville, Virginia
August 28, 1997
<PAGE>
[Letterhead of Walz, Deihm, Geisenberger, Bucklen & Tennis]
EXHIBIT 23.4
CONSENT OF INDEPENDENT ACCOUNTANTS
As independent accountants, we hereby consent to the incorporation by reference
in this Form S-3 Registration Statement of our report dated February 18, 1997,
on the financial statement of Wickersham Printing Company, Inc. included in the
Eastwind Group, Inc.'s Form 8-K/A filed on June 2, 1997.
/s/ Walz, Deihm, Geisenberger, Bucklen & Tennis
WALZ, DEIHM, GEISENBERGER,
BUCKLEN & TENNIS, P.C.
Certified Public Accountants
Lancaster, Pennsylvania
August 28, 1997
