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Rule 424(b)(2)
Registration No. 333-34697
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 September 9, 1997, the last sale price of the Common Stock as
reported by the Nasdaq Small Cap Market, was $3.875 per share.
The date of this Prospectus is September 10, 1997.
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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 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.
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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. Currently,
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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.
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.
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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 exercise of the Warrants. Furthermore, the
Company has established no minimum number of Warrants which must be exercised.
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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 registration rights enjoyed by the
holders of certain warrants. The expense of registration of this Prospectus
will be borne by the Company.
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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 meeting.
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 unanimous 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."
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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.
8
<PAGE>
<TABLE>
<CAPTION>
Number of Shares
Beneficially Owned Number of
Prior to Shares
Registration Registered
------------------ ----------
<S> <C> <C> <C>
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
</TABLE>
(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
<PAGE>
(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 7,000,000 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.
10
<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 are not redeemable.
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. Shares issued upon
exercise of warrants and paid for in accordance with the terms of the warrants
will be fully paid and non-assessable.
12
<PAGE>
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 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 activities
13
<PAGE>
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
<PAGE>
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
<TABLE>
<CAPTION>
Page
----
<S> <C>
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
</TABLE>
2,380,269 Shares
THE EASTWIND GROUP, INC.
COMMON STOCK
-------------------------
PROSPECTUS
-------------------------
September 10, 1997
