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As Filed with the Securities and Exchange Commission on May 14, 1998
Registration No. 333-
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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:
DOUGLAS M. LURIO, ESQUIRE
ALLA PASTERNACK, ESQUIRE
LURIO & ASSOCIATES
SUITE 1300, 1760 MARKET STREET
PHILADELPHIA, PA 19103
215-665-9300
_______________
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. [ ]
CALCULATION OF REGISTRATION FEE
PROPOSED PROPOSED
TITLE OF MAXIMUM MAXIMUM
SECURITIES AMOUNT OF SHARES OFFERING AGGREGATE AMOUNT OF
TO BE TO BE PRICE PER OFFERING REGISTRATION
REGISTERED REGISTERED (1) SHARE (2) PRICE (2) FEE
- -------------- ----------------- ---------- ----------- ------------
Common Stock 996,000 $2.00 $1,992,000 $597.60
- ------------------------------------------------------------------------
Total 996,000 $1,992,000 $597.60
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(1) INCLUDES 200,000 SHARES TO BE ISSUED UPON EXERCISE OF A COMMON STOCK
PURCHASE WARRANT ("WARRANT"). PURSUANT TO RULE 416 UNDER THE SECURITIES
ACT OF 1933, THIS REGISTRATION STATEMENT SHALL ALSO COVER SUCH
INDETERMINATE NUMBER OF ADDITIONAL SHARES OF COMMON STOCK AS MAY BECOME
ISSUABLE UPON EXERCISE OF THE WARRANT TO PREVENT DILUTION RESULTING FROM
STOCK SPLITS, STOCK DIVIDENDS OR SIMILAR TRANSACTIONS, OR BY REASON OF
CHANGES IN THE EXERCISE PRICE OF THE WARRANT IN ACCORDANCE WITH THE TERMS
THEREOF.
(2) ESTIMATED PURSUANT TO RULE 457(c) UNDER THE SECURITIES ACT OF 1933
SOLELY FOR THE PURPOSE OF CALCULATING THE REGISTRATION FEE.
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 COMMISSION, ACTING PURSUANT TO SAID SECTION 8(a),
MAY DETERMINE.
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PROSPECTUS
THE EASTWIND GROUP, INC.
996,000 Shares
of
Common Stock
This Prospectus relates to the resale by certain stockholders named
herein (the "Selling Stockholders") of 996,000 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 200,000 shares of
Common Stock which may be acquired upon the exercise of an outstanding warrant
to purchase shares of Common Stock (the "Warrant"). 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 Offered Shares and the Warrant were issued in connection with
certain private placement transactions. 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 Warrant
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 the Warrant will
be exercised and, therefore, there is no assurance that the Company will receive
any proceeds as a result of the exercise of the Warrant. See "Selling
Stockholders" and "Plan of Distribution."
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 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 on the
OTC Bulletin Board, 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 3.
The Common Stock trades on the Nasdaq Small Cap Market under the
symbol "EWND." On May 6, 1998, the last sale price of the Common Stock as
reported by the Nasdaq SmallCap Market, was $1.91 per share.
The date of this Prospectus is May ____, 1998.
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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 January 3, 1998;
(b) 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
(c) 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 officers of the Company, 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 "going concern" qualification contained in the audit opinion to the
financial statements in the Company's Form 10-KSB for the fiscal year ended
January 3, 1998 issued by the Company's independent public accountants; (ii) the
possibility that the Company's Common Stock may be delisted from trading on the
Nasdaq SmallCap Market; (iii) the Company's ability to identify appropriate
acquisition candidates, complete acquisitions on satisfactory terms, and
successfully integrate acquired businesses; (iv) the intense competition and low
barriers to entry in the industries in which the Company competes; (v) 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; (vi) the sensitivity of the
Company's businesses to general economic conditions; (vii) the timing of orders
from, and shipments to, major customers; (viii) the timing of new product sales;
(ix) the introduction and market acceptance of new products; (x) 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; (xi) the Company's ability to remain in compliance with the numerous
environmental, health and safety requirements to which it is subject; (xii)
changes in accounting principles, policies or guidelines; and (xiii) 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.
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 or her 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:
POSSIBLE DELISTING FROM NASDAQ SMALLCAP MARKET
On February 23, 1998, the Nasdaq Stock Market materially increased the
financial and other criteria necessary to qualify for continued listing on the
Nasdaq SmallCap Market. As of that date, the Company had net tangible assets
less than the $2,000,000 minimum required for continued listing on the Nasdaq
SmallCap Market. On February 26, 1998, the Nasdaq Stock Market, Inc. ("Nasdaq")
issued a delisting notification to the Company. On March 27, 1998, the Company
appealed such determination by written submission to Nasdaq supporting its
position that its securities should not be delisted, effectively staying the
delisting process until further Nasdaq review. On April 14, 1998, Nasdaq issued
to the Company a second delisting notification notice, notifying the Company
that it was not in agreement with the Company's position. On April 21, 1998, in
accordance with Nasdaq's delisting process, the Company timely requested an oral
hearing in front of a Nasdaq review panel, staying the delisting process until
final determination by Nasdaq. The Company has not been notified of the date of
such oral hearing.
No assurance can be given that the Company's appeal will be
successful. If the Company's appeal is unsuccessful, its Common Stock will be
delisted from the Nasdaq SmallCap Market. Trading, if any, in the Company's
Common Stock thereafter would be conducted on the OTC Electronic Bulletin Board
which could substantially reduce the liquidity of and the market for the
Company's Common Stock, and consequently, could materially adversely affect the
trading price of such Common Stock.
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NO SIGNIFICANT INDEPENDENT HISTORY OF OPERATIONS; HISTORICAL NET LOSSES OF
OPERATING SUBSIDIARIES
The Company reported a net loss for its fiscal year ended January 3,
1998. The Company is a holding company which has only recently acquired its
operating subsidiaries and, as such, has a limited history of independent
operations. 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.
AUDIT OPINION OF INDEPENDENT PUBLIC ACCOUNTANTS
The Company experienced a significant net loss in the fiscal year
ended January 3, 1998. The cash resources of the Company will not be sufficient
to sustain such cash losses, should they continue to occur. In its audit report
to the financial statements contained in the Company's Form 10-KSB for the year
ended January 3, 1998, the Company's independent public accountants opined that
there was substantial doubt about the Company's ability to continue as a going
concern as a result of experiencing such significant losses from operations.
Management has taken steps to revise its operating and financial condition,
which it believes are sufficient to provide the Company with the ability to
continue as a going concern. The Company has closed down certain unprofitable
operations and has instituted certain revenue enhancing measures and cost-
cutting programs. In addition, the Company has been attempting to refinance its
senior debt in order to expand its lines of credit and borrowings to solve such
cash difficulties, although such refinance project has been delayed due
principally to the Company's current inability to meet certain closing
requirements of the lender. There can be no assurance that any or all of the
steps taken or to be taken by the Company will enable the Company to continue as
a going concern.
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 under performing 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 Company is currently attempting to refinance its senior debt, however, such
refinancing has been postponed as a result of continuing concern with respect to
losses in the printing operations under its Premier operations and the Company's
current inability to meet certain closing requirements of the lender. There is
no assurance that the closing of the Premier operations will cause the lender in
question to proceed with such refinancing.
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 Warrant and other outstanding warrants and
options. See "Description of Securities." The Company, however, has received no
firm commitment for the exercise of the Warrant and the current market price of
the Company's Common Stock is significantly below the exercise price of the
other outstanding warrants and options. Thus, there can be no assurances that
the Company will realize material proceeds, if any, from the exercise of the
warrants and options. As of the date hereof, there are an aggregate of 1,149,464
warrants outstanding (including the Warrant) and 507,500 options to acquire
shares of Common Stock outstanding (of which 351,668 are vested as of the date
hereof).
Although certain of the Company's outstanding warrants may be redeemed
if certain operating performance criteria are met, such warrants are for terms
lasting a number of years and warrant holders may prefer to hold
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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 of 7.5% of the Company's outstanding voting securities
before giving effect to the issuance of shares of Common Stock pursuant to the
exercise of the Warrant and before giving effect to the exercise of any
other outstanding 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.
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. The
Company is currently attempting to refinance its senior debt. Such refinancing
has been postponed as a result of continuing concern with respect to losses in
the printing operations under its Premier operations and the Company's current
inability to meet certain closing requirements of the lender. In order to
satisfy the Company's long-term obligations and support its future growth, the
Company will 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. The Company is currently attempting to refinance its senior debt,
however, such refinancing has been postponed as a result of continuing concern
with respect to losses in the printing operations under its former Premier
operations and the Company's current inability to meet certain closing
requirements of the lender. If the Company cannot refinance its senior debt, the
Company would be required to raise additional equity capital in order to satisfy
such senior debt. There can be no assurance that additional capital will be
available or that, if available, such capital will be obtainable on satisfactory
terms.
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. In addition,
payment of dividends are limited or prohibited under certain restrictions in
the loan agreements of the Company's subsidiaries, which would be necessary to
provide the cash for any such dividends.
EFFECT OF OUTSTANDING WARRANTS AND OPTIONS
As of the date hereof the Company had outstanding warrants (including
the Warrant) and options to purchase 1,656,964 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
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able to obtain additional capital through a new offering of securities on terms
more favorable than those provided therein. Additionally, the outstanding
warrants generally contain anti-dilution protection. See "Description of
Securities." The Company has undertaken to file this Prospectus with the
Commission pursuant to certain registration rights enjoyed by the holder of the
Warrant and has agreed to register the Common Stock held by the other Selling
Stockholders for resale under the Act. 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 and does not presently intend to
purchase any such insurance.
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: two directors presently
constitute the Class I Directors and are elected for a term expiring at the 2000
annual meeting; two directors presently constitute the Class II Directors and
are elected for a term expiring at the 1999 annual meeting; two directors
presently 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 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.
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)
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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.
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 and Lavelle compete are also highly
competitive. Experienced competition exists in each of the major markets for
both companies, and many of their competitors maintain good working
relationships with their customers, produce quality products and have access to
significantly greater financial resources than Polychem, Lavelle 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. Additionally, consolidation in the waste water treatment
industry has resulted in competitors significantly larger than Lavelle and has
increased competitive pricing pressures in such industry. There can be no
assurance that either Polychem or Lavelle will be able to keep pace with the
technological demands of the marketplace or successfully enhance their products
or develop new products which are demanded by the their respective industries.
THE COMPANY
GENERAL OVERVIEW
The Eastwind Group, Inc. (the "Company") is a holding company formed
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. Since its
inception, the Company has completed six acquisitions, three of which now
comprise the Company's operating business segments:
1. Polychem Corporation ("Polychem"), acquired March 10, 1995,
develops and manufactures engineered plastic molded products for wastewater
treatment facilities and other industrial uses.
2. TEAM Graphics, Inc. ("TEAM Graphics") through its operating
subsidiary Centennial Printing Company ("Centennial"), acquired October 16,
1996, is engaged in commercial printing, book manufacturing and the printing of
journals and manuals.
3. Lavelle Company ("Lavelle"), acquired January 3, 1997, fabricates
and manufactures sheet metal products for the aerospace industry.
Three of the Company's acquisitions since its inception in 1993 have
been dissolved or disposed of during fiscal year 1998. On February 23, 1998,
the Company sold its 92.5% ownership interest in Ivy-Tygart Acquisition Corp.
("Ivy"). Acquired December 31, 1996, as an operating business unit of the
Company, Ivy engaged in the manufacture of architectural moulding and picture
frame moulding.
7
<PAGE>
On March 10, 1995 and on January 3, 1997, respectively, the Company
acquired Princeton Academic Press ("Princeton") and Wickersham Printing Company
("Wickersham"), two entities which were engaged in the commercial printing and
book manufacturing industries. Jointly, Wickersham and Princeton conducted
operations as Premier Book Press ("Premier"). On April 13, 1998, the Company
decided to close the operations of Premier.
Each of the Company's operating business segments are described in
detail below. 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, 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.
TEAM GRAPHICS, INC.
In January 1997, the Company formed TEAM Graphics, Inc. ("TEAM
Graphics"), as the principal entity for its operations in the printing industry.
The Company exchanged a combination of its investment in Centennial, Princeton
and Wickersham, which was acquired in January 1997, and cash for all of the
outstanding stock of TEAM Graphics.
In mid-1997, the operations of Princeton and Wickersham were
consolidated under the trade name Premier Book Press in two rented facilities in
Lancaster, Pennsylvania to eliminate overhead costs associated with running two
separate operations. Hiring and training new employees and implementing the
required management systems and controls at Wickersham to respond to the near
doubling in throughput resulting from the consolidation proved to be highly
problematic. Consequently, productivity fell, quality levels slipped, and
delivery schedules were not met. As a further consequence, market shares also
declined. During the second half of 1997, Premier's operations suffered
substantial financial losses. Despite improvements in productivity and the
narrowing of losses during the first quarter of 1998, the Company concluded that
it did not have the financial resources to continue these operations. The
Company decided to close the operations of Premier effective April 13, 1998. The
Company does not anticipate that it or any other of its subsidiaries will incur
any material liabilities or losses in connection with Premier.
Presently, TEAM Graphics conducts it operations in the printing
industry through its subsidiary, Centennial. Centennial's products include
annual reports, high-quality advertising brochures, pamphlets, and high-profile
marketing pieces. Centennial's customer base is primarily comprised of
pharmaceutical, financial, museum, manufacturing, service, and marketing
companies, which are located in the Eastern United States. The strategy of
Centennial is to grow through the purchase of additional printing equipment and
applications of computer technology that will increase its capabilities and
therefore, its product offerings and also enhance its competitive position
through lower costs. Because the customers of Centennial are different than
those of Premier, the Company does not anticipate any decline in the business
of Centennial as a result of the recent closing of Premier.
LAVELLE COMPANY
8
<PAGE>
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 sheet metal 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.
Lavelle fabricates and manufactures sheet metal products according to
design criteria established by its customers in the aerospace industry. In
general, the products manufactured by Lavelle are highly specific in design and
low in volume quantities. Lavelle's customer base consists of the United States
Government (who, with one other customer comprised approximately 50% of sales in
fiscal 1997), who purchase products used in defense applications and contractors
and subcontractors in the aerospace industry, who purchase products for the
commercial and defense segments of such industry.
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 Warrant (which is not exercisable until September 30, 1998) is
$250,000. The Company has received no firm commitments for its exercise, and
there can be no assurance that the Warrant will be exercised.
Management cannot predict the amount of proceeds, if any, that may be
generated from the exercise of the Warrant. The net proceeds that may be
realized by the Company upon exercise of the Warrant 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 May
6, 1998. Unless otherwise indicated, the Selling Stockholders possess sole
voting and investment power with respect to the shares listed. Clifton Capital
Ltd. and SPH Equities, Inc. will not beneficially own any Common Stock after
this offering, assuming that they sell all of the Offered Shares. Mr. DeJuliis
would beneficially own 375,000 shares of Common Stock after this offering
assuming that he sold all of the Offered Shares. Mr. Worrall would beneficially
own 75,930 shares of Common Stock after this offering assuming that he sells
all of the Offered Shares.
Number of Shares
Beneficially Owned Number of
Prior to Shares
Registration Registered
------------------ ----------
Clifton Capital Ltd. 600,000 600,000 (1)
SPH Equities, Inc. 50,000 50,000
Bruce K. Worrall 45,000 45,000
Paul A. DeJuliis 609,334 301,000
(1) Includes 200,000 shares of Common Stock that may be acquired upon exercise
of the Warrant.
9
<PAGE>
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 including the 796,000 shares of
Common Stock issued to the Selling Stockholders by the Company, 4,521,019 shares
were issued and outstanding. An additional 1,510,000 shares of Common Stock are
reserved for issuance upon the exercise of the Warrant and other vested and
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 Mentor Special Situation Fund, L.P. ("MSSF"),
the terms of the Company's 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 the Warrant or shares issued by the Company to the Selling
Stockholders. 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.
On April 10, 1998, the Company agreed to issue 400,000 shares of
Common Stock to Clifton Capital Ltd. for gross proceeds of $500,000, or $1.25
per share. On the same date, the Company also agreed to issue the Warrant to
Clifton Capital Ltd. The Warrant entitles the holder thereof to purchase up to
200,000 shares of Common Stock at $1.25 per share at any time on or after
September 30, 1998 and on or before September 30, 2001. These shares and the
Warrant will be issued pursuant to the private placement exemption in Section
4(2) of the Act.
On April 21, 1998, the Company agreed to issue 50,000 shares of
Common Stock to SPH Equities, Inc. as compensation for investment banking
services rendered to the Company in connection with the Clifton Capital Ltd.
transaction. The shares to be issued by the Company to SPH Equities, Inc.
will be made pursuant to the private placement exemption in Section 4(2) of the
Act.
On April 30, 1998, Mr. DeJuliis purchased an aggregate of 301,000
shares of Common Stock from the Company for an aggregate of $376,250, or for
$1.25 per share. On April 21, 1998, Mr. DeJuliis sold 301,000 shares of
Common Stock then owned by him to FAC Enterprises, Inc., for an aggregate of
$376,250, or at $1.25 per share. The shares issued by the Company to Mr.
DeJuliis were issued pursuant to the private placement exemption in Section
4(2) of the Act.
On May 11, 1998, the Company and Mr. Worrall executed a Settlement
Agreement pursuant to which among other things, the Company agreed to issue to
Mr. Worrall an aggregate of 45,000 additional shares of Common Stock. The
Settlement Agreement provides that the Company will register these shares for
resale under the Act. The shares will be issued by the Company to Mr. Worrall
pursuant to the private placement exemption in Section 4(2) of the Act. The
Settlement Agreement also provides for the cancellation by the Company of all
the Series B Preferred Voting Stock of the Company held by Mr. Worrall,
including any accrued dividends thereon.
COMMON STOCK PURCHASE WARRANT
The Warrant entitles the holder thereof to purchase, subject to
adjustment in the event of stock splits, stock dividends and the like, up to
200,000 shares of Common Stock for an exercise price of $1.25 per share. The
exercise price and the amount of shares of Common Stock underlying the Warrant
are also subject to adjustment in certain instances. The Warrant is not
exercisable until September 30, 1998, after which date it is exercisable until
September 30, 2001, the date on which it expires.
10
<PAGE>
LIMITED GRANT OF REGISTRATION RIGHTS
The Company has granted registration rights to the Selling
Stockholders who acquired the above shares in private placement transactions.
The Company has similarly granted registration rights to the holder of the
Warrant who acquired such Warrant in a private placement transaction.
Accordingly, the Company has agreed to include such shares of Common Stock held
or issuable upon exercise of the Warrant 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.
TRANSFER AGENT
Stock Trans, Inc. of Ardmore, Pennsylvania, serves as Transfer Agent
for the Common Stock.
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.
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 SmallCap Market, or on any other national stock exchange upon which the
Company is listed, or on the OTC Bulletin Board, 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 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.
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
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."
The exercise price of the Warrant and the sales price of the Common
Stock issued by the Company to the Selling Stockholders was determined through
arm's length negotiations with the holders thereof. The purchase price of the
shares of Common Stock sold to Mr. DeJuliius by the Company were at the same
price at which Mr. DeJuliius sold his shares of Common Stock to FAC Enterprises,
Inc., and no profit was made by Mr. DeJuliius in connection with the
transaction.
11
<PAGE>
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 Lurio & Associates, P.C., Philadelphia, Pennsylvania.
EXPERTS
The consolidated financial statements of the Company as of January 3,
1998 and for the fiscal year then ended, included in the Company's Annual Report
on Form 10-KSB, incorporated by reference in this Registration
Statement/Prospectus, have been audited by Grant Thornton LLP, independent
certified public accountants, whose report thereon appears, and are incorporated
by reference herein in reliance upon such report of Grant Thornton LLP, given
upon the authority of such firm as experts in auditing and accounting.
12
<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
Page
----
AVAILABLE INFORMATION............ 2
INCORPORATION OF CERTAIN
INFORMATION BY REFERENCE....... 2
CAUTIONARY STATEMENT............. 3
RISK FACTORS..................... 3
THE COMPANY...................... 7
USE OF PROCEEDS.................. 9
SELLING STOCKHOLDERS............. 9
DESCRIPTION OF SECURITIES........ 10
PLAN OF DISTRIBUTION............. 11
LEGAL OPINION.................... 12
EXPERTS.......................... 12
================================================================================
================================================================================
996,000 Shares
THE EASTWIND GROUP, INC.
COMMON STOCK
-------------------------
PROSPECTUS
-------------------------
May ___, 1998
<PAGE>
PART II
INFORMATION NOT REQUIRED IN THE PROSPECTUS
ITEM 14. OTHER EXPENSES OF ISSUANCE AND DISTRIBUTION*
Securities and Exchange Commission Registration Fee... $ 597.60
Legal fees and expenses............................... $ 10,000
Accountants' fees and expenses........................ $ 5,000
Miscellaneous......................................... $ 5,000
TOTAL............................................ $20,597.60
-----
- --------------------
* 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.
<PAGE>
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).
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 Common Stock Purchase Warrant issued to Clifton Capital Ltd.
4.6 Specimen form of Class C-4 Common Stock Purchase Warrant (incorporated by
reference to exhibit 4.7 to the Company's Registration Statement on
Form S-3 , File No. 333-34697).
4.7 Specimen form of Class C-5 Common Stock Purchase Warrant (incorporated by
reference to exhibit 4.8 to the Company's Registration Statement on
Form S-3 , File No. 333-34697).
4.8 Specimen form of QSFC Common Stock Purchase Warrant (incorporated by
reference to exhibit 4.9 to the Company's Registration Statement on
Form S-3 , File No. 333-34697).
4.9 Specimen form of Canterbury Common Stock Purchase Warrant (incorporated by
reference to exhibit 4.10 to the Company's Registration Statement on
Form S-3 , File No. 333-34697).
4.10 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).
5 Opinion of Lurio & Associates, P.C..
10.1 Securities Purchase Agreement between Clifton Capital Ltd. and the Company
dated April 10, 1998.
10.2 Registration Rights Agreement between Clifton Capital Ltd. and the Company
dated April 10, 1998.
10.3 Settlement Agreement dated May 11, 1998 by and between the Company, Bruce
K. Worrall, Centennial Printing Corporation, and Centennial Racing
Corporation.
10.4 Securities Purchase Agreement between the Company and Mentor Special
Situation Fund, L.P. dated June 20, 1996 (incorporated by reference to
Exhibit 10.28 to the Company's Registration Statement on form SB-2, File
No. 333-08227).
23.1 Consent of Grant Thornton LLP.
23.2 Consent of Arthur Andersen LLP.
23.3 Consent of Lurio & Associates (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;
2
<PAGE>
(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 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.
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 May 14, 1998.
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: May 14, 1998 /s/ Paul A. DeJuliis
---------------------------------
Paul A. DeJuliis, Chief Executive
Officer and Chairman of the Board
Date: May 14, 1998 /s/ Anthony J. Mendicino
---------------------------------
Anthony J. Mendicino, President,
Chief Operating Officer and Director
Date: May 14, 1998 /s/ William B. Miller
---------------------------------
William B. Miller, Chief Financial
Officer, Treasurer and Director
Date: May 14, 1998 /s/ Bruce Murray
---------------------------------
Bruce Murray, Director
Date: May 14, 1998 /s/ Andrew Panzo
---------------------------------
Andrew Panzo, Director
Date: May 14, 1998 /s/ Edward F. Sager
---------------------------------
Edward F. Sager, Director
<PAGE>
EXHIBIT INDEX
4.5 Common Stock Purchase Warrant issued to Clifton Capital Ltd.
5 Opinion of Lurio & Associates, P.C.
10.1 Securities Purchase Agreement between Clifton Capital Ltd. and the Company
dated April 10, 1998.
10.2 Registration Rights Agreement between Clifton Capital Ltd. and the Company
dated April 10, 1998.
10.3 Settlement Agreement dated May 11, 1998 by and between the Company, Bruce
K. Worrall, Centennial Printing Corporation, and Centennial Racing
Corporation.
23.1 Consent of Grant Thornton LLP.
23.2 Consent of Arthur Andersen LLP.
<PAGE>
Exhibit 4.5
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.$1.25 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
<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 September 30, 1998 and before 5:00 p.m., Eastern
time on September 30, 2001 (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) 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.
(b) 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.
(c) 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
3
<PAGE>
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.
(d) 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.
(e) 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.
(f) 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.
(g) 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;
(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
4
<PAGE>
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.
(h) "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(b) 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 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 the 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.
5
<PAGE>
(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 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.
6
<PAGE>
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.
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.
7
<PAGE>
IN WITNESS WHEREOF, the Company has caused this Warrant to be signed
by its duly authorized officer.
THE EASTWIND GROUP, INC.
By: /s/ Paul A. DeJuliis
__________________________
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 5
- ---------
May 14, 1998
Securities and Exchange Commission
Division of Corporation Finance
450 Fifth Street, N.W.
Washington, D.C. 20549
RE: The Eastwind Group, Inc. - 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 meaning ascribed
to them in the Registration Statement.
The Registration Statement covers 996,000 shares of Common Stock, $.10 par
value per share, of the Company ("Shares"), 796,000 of which may be sold by
certain stockholders of the Company as identified in the Registration Statement,
and up to 200,000 of which may be issued by the Company upon exercise of an
outstanding warrant (the "Warrant").
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 Warrant, 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. For purposes hereof, we have assumed that the Shares have been fully
paid for by the Selling Stockholders in accordance with their respective
agreements with the Company, and the Shares have been issued to the Selling
Stockholders by the Company.
Based on 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 Warrant, we are of the opinion that the Shares, when sold, and with respect
to the Shares underlying the Warrant, when issued and paid for in accordance
with the terms of, and upon exercise of the Warrant, 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 and to all references to our firm included in the
Prospectus.
Sincerely,
LURIO & ASSOCIATES, P.C.
<PAGE>
Exihibit 10.1
SECURITIES PURCHASE AGREEMENT
-----------------------------
This Securities Purchase Agreement made this 10th day of April, 1998
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 400,000 shares of Common
Stock and a Common Stock Purchase Warrant for the purchase of up to 200,000
shares of Common Stock at an exercise price of U.S.$1.25 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 April 10, 1998 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 400,000 shares of Common Stock and a
Common Stock Purchase Warrant (the "Warrant") for the purchase of up to 200,000
shares of Common Stock at an exercise price of U.S.$1.25 per share (subject to
adjustment as provided in the Warrant) at an aggregate purchase price of
U.S.$500,000 (the "Purchase Price") payable in United States Dollars in cash by
wire transfer of immediately available funds at Closing, as defined below.
<PAGE>
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 three (3) 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 three (3) business days of Closing, the Warrant, a form of which is
attached to the Offering Memorandum as Exhibit B, respectively;
(c) PURCHASER shall deliver or cause to be delivered to ISSUER
U.S.$500,000 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.
(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.
2
<PAGE>
(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, 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
3
<PAGE>
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.
(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
4
<PAGE>
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.
7. TRANSFER AGENT INSTRUCTIONS.
---------------------------
The Securities will be issued subject to a restrictive legend as
follows:
5
<PAGE>
"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 Warrant 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 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 Securities Purchase 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
6
<PAGE>
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 10th day of April, 1998.
PURCHASER:
CLIFTON CAPITAL LTD.
/s/ Patricia A. Riley
By:___________________________
Name: ________________________
Title: _______________________
Acknowledged and Accepted:
THE EASTWIND GROUP, INC.
/s/ Paul A. DeJuliis
By:_____________________________
Chairman
Title:__________________________
7
<PAGE>
Exhibit 10.2
REGISTRATION RIGHTS AGREEMENT
REGISTRATION RIGHTS AGREEMENT (this "AGREEMENT") dated as of April 10,
1998, 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) 400,000 shares (the "SHARES") of the
Company's common stock (the "COMMON STOCK"), and a warrant (the "WARRANT") to
acquire up to 200,000 shares of Common Stock with an exercise price of U.S.$1.25
per share (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, subject to
the conditions contained herein;
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 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").
<PAGE>
(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. Promptly after the Closing Date and the
----------------------
filing of its Form 10-KSB for the fiscal year ended January 3, 1998, if the
Company is eligible to use Form S-3 at such time, the Company shall, use its
best efforts to prepare and file with the SEC a Registration Statement on Form
S-3, 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 Warrant (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 Warrant in accordance with the terms thereof.
Notwithstanding anything herein to the contrary, the Company shall have no
obligation to file a Registration Statement or maintain the effectiveness of a
Registration Statement if it is, or at any time becomes, ineligible to use short
form registration on Form S-3.
b. Effectiveness of Registration Statement. Subject to the final
---------------------------------------
sentence of section 2(a) above, 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).
3. OBLIGATIONS OF THE COMPANY.
--------------------------
In connection with the registration of the Registrable Securities, if at
the time the obligations set forth below arise, the Company is eligible to use
short form registration on Form S-3, 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 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
2
<PAGE>
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, 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 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
3
<PAGE>
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 reasonable 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. 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.
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.
4
<PAGE>
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. If the
Company's Common Stock is delisted from the NASDAQ Small Cap Market, after
appeal to NADAQ the Company shall be deemed to have complied with this Section
3(j).
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
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.
5
<PAGE>
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
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).
6
<PAGE>
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
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").
7
<PAGE>
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, 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
8
<PAGE>
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
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
9
<PAGE>
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 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 is defined in Rule 501 of Regulation D promulgated under the 1933 Act.
10
<PAGE>
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 and Clifton. 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
with a copy to:
Pepper Hamilton LLP
Suite 400
1235 Westlakes Drive
Berwyn, PA 19312
Telecopy: (610) 640-7835
Attention: Paul T. Porrini, Esquire
11
<PAGE>
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.
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
12
<PAGE>
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 Clifton.
[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.
/s/ Paul A. DeJuliis
By:__________________________________________
Name:________________________________________
Its:_________________________________________
CLIFTON CAPITAL, LTD.
/s/ Patricia A. Riley
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 Warrant (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 Warrant of the Company issued pursuant to the terms of the
Securities Purchase Agreement dated as of April 10, 1998, between the Company
and Clifton Capital Ltd. (the "WARRANT") upon surrender to you of a properly
completed and duly executed Exercise Agreement and such Warrant (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 LLP as to registration of the
Outstanding Shares and the Warrant Shares under the Securities Act of 1933, as
amended.
<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]
<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) warrant (the "WARRANT") to
acquire Common Stock. The Common Stock and Warrant were purchased by the
Holder pursuant to a Securities Purchase Agreement, dated as of April 6, 1998,
between the Holder and the Company (the "AGREEMENT"). Pursuant to a
Registration Rights Agreement, dated as of April 10, 1998, between the Company
and the Holder (the "REGISTRATION RIGHTS AGREEMENT"), the Company agreed with
the Holder 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 and subject to the conditions (including
the condition that the copy be S-3 eligible) provided in the Registration Rights
Agreement. In connection with the Company's obligations under the Registration
Rights Agreement, on _____ __, 1998, the Company filed a Registration Statement
on Form S-3 (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]
<PAGE>
Exhibit 10.3
SETTLEMENT AGREEMENT
--------------------
This Settlement Agreement is entered into by and between The Eastwind
Group, Inc., a Delaware Corporation ("Eastwind") and Bruce K. Worrall
("Worrall"). Centennial Printing Corporation, a Delaware Corporation
("Centennial"), and Centennial Racing, Inc., a North Carolina Corporation
("Racing") in settlement of a Demand for Arbitration filed with the American
Arbitration Association at No. 14Y4890010897 B/J, "The Eastwind Group, Inc. and
Bruce K. Worrall", and the counterclaim brought thereunder ("the Arbitration").
In consideration of the mutual covenants and agreements contained herein, the
parties stipulate and agree as follows:
1. The parties hereby acknowledge the existence of the Amended and
Restated Agreement and Plan of Merger By and Between Centennial
Printing Corporation, The Eastwind Group, Inc. and Centennial
Acquisition Corporation ("Merger Agreement") dated September 30,
1996, subject to the modifications and amendments more fully set
forth herein.
2. Worrall hereby relinquishes any and all right, title and
interest to the 9,000 shares of "Eastwind Series B Preferred
Stock", evidenced by Stock Certificate No. 1, and more fully
described in Sections 102(e) and 1.03(c) of the Merger Agreement
and in Exhibit 1.02 (e) "Certificate of Powers, Designations,
Preferences and Special Rights of Series B Preferred Stock" of
the Merger Agreement and any and all alleged payment in respect
thereto since execution of the Merger agreement, and further
agrees that the Settlement Agreement cancels all terms of the
Merger Agreement related to "Eastwind Series B Preferred Stock"
effective as of September 30, 1996. In lieu of a separate stock
power, Worrall hereby irrevocably constitutes and appoints
William B. Miller, Secretary of Eastwind, attorney to transfer
those 9,000 shares of Eastwind Series B Preferred Stock to
Eastwind for cancellation on the books of said corporation.
3. Worrall hereby relinquishes any and all right, title and
interest to the "Floor Guarantee of Resale Price of Eastwind
Closing Shares" as more fully set forth at (S)5.08 of the Merger
Agreement, and agrees that this Settlement Agreement cancels all
terms of the Merger Agreement related to the "Floor Guarantee of
Resale Price of Eastwind Closing Shares" effective as of
September 30, 1996.
4. (a) Within ten (10) days of execution of the Settlement
Agreement, Eastwind shall issue and deliver to a Worrall a stock
certificate for Forty-Five Thousand (45,000) shares of Eastwind
common stock and all rights attendant thereto. These shares are
in addition to the 182,232 shares of Eastwind common stock
already registered to Worrall pursuant to inter alia,
----- ----
Section 1.03(e) and Exhibit 1.02(f) of the Merger Agreement.
Thereafter, commencing October 17, 1998, Worrall shall be
promised to sell or otherwise dispose of net more than Five
Thousand (5,000) of the additional Eastwind Shares in any thirty
(30) day period. There shall not be any cumulative carryover of
any number of shares less than 5,000 not sold in any particular
thirty (30) day period.
(b) As soon as practicably, and prior to September 30, 1998,
Eastwind will file with the Securities and Exchange Commission a
Registration Statement for the additional 45,000 shares of
Eastwind common stock issued
<PAGE>
and delivered to Worrall hereunder, but only provided that
Eastwind is then eligible to use Form S-3 Registration Statement
for such purpose. To the extent consistent with this provision,
the terms of Section 5.07(c), (e) (i)-(iv), (f), (g), (h), (i),
(j), (k), (l), (m), (p), (q) of the Merger Agreement shall
govern the registration rights provided herein. However, Section
5.07(e) shall not apply if Eastwind becomes ineligible at any
time during the period specified in Section 5.07(e)(i) to
continue to utilize short form registration on Form S-3. At such
time, all registration obligations of Eastwind imposed by this
Settlement Agreement and the sections of the Merger Agreement
specified above shall cease. Moreover, the terms and limitations
set forth in Paragraph 4 are applicable only to the additional
45,000 shares of Eastwind Common Stock and the rights and
obligations of all parties with respect to the original 182,232
shares of Eastwind common stock remain as more fully set forth
in the Merger Agreement, as amended by paragraph 3 above.
5. (S)5.05 Promotion, of the Merger Agreement, and the Amendment
---------
and Restatement of Sponsorship Agreement dated October 1, 1996
obligated Centennial Printing Corporation ("Centennial") to pay
to Centennial Racing, Inc. ("Racing"), inter alia. One Hundred
----- ----
Thousand ($100,000.00) Dollars per year for three (3) years,
from the effective date. Worrall and Racing hereby relinquish
any and all right, title and interest he or Racing has to any
payments other than those heretofore paid as provided by these
agreements.
6. The parties hereby ratify and confirm the leases dated the first
day of July, 1995 between Bruce K. Worrall and Vicki Worall and
Centennial Printing Corporation for Lots 10, Unit 3 on a map of
Section 7, and lot 25, Unit 3 on a map of Section 10, Lake
Naomi, Pocono Pines, Tobyhanna Township, Monroe County,
Pennsylvania, as amended October 15, 1996.
7. (a) Eastwind hereby assumes liability and responsibility for
satisfaction of any and all sums due and owing for past
sales/use taxes by Centennial to the Commonwealth of
Pennsylvania, Department of Revenue, for Assessment No. 934-423-
097-042-5 dated April 28, 1997 ("sales/use tax claim") in the
original amount of Seven Hundred Seventy-one Thousand Nine
Hundred Forty-Seven and 23/100 Dollars ($771,947.23) plus any
additional interest and penalties. Eastwind shall have the right
to compromise and settle this sales/use tax claim with the
Commonwealth. Should no settlement be achieved with regard to
this sales/use tax claim, any sum finally determined to be due
and owing of the sales/use claim, shall be paid by, and remain
solely the obligation of, Eastwind and Centennial. Also, Worrall
shall receive a copy of any and all correspondence received by
Centennial or Eastwind or their counsel from the Commonwealth of
Pennsylvania regarding this sales/use tax claim.
(b) Eastwind will indemnify and hold harmless Worrall against
any claims, losses, damages and liability to the extent
permitted under Delaware corporate law (including reasonable
attorneys' fees incurred by Worrall in connection with civil
proceedings initiated by the Commonwealth to obtain satisfaction
of its assessments for the failure of Centennial to pay sales-
use taxes) for which Worrall may become subject, insofar as such
claim, loss, damages and liability arises out of or is based
upon Eastwind's or Centennial's failure to fully satisfy the
above-stated sales/use tax claim, including civil penalties and
interests, assessed in final assessment from the Commonwealth of
Pennsylvania, and does not exceed the total amount assessed by
the Commonwealth of Pennsylvania,
<PAGE>
including penalties and interest, less any amount paid by
Eastwind or Centennial in satisfaction of said assessment.
Should the Commonwealth of Pennsylvania seek satisfaction of the
sales/use tax claim from Worrall, Worrall shall advise Eastwind
of such occurrence and provide Eastwind or its counsel with a
copy of any and all correspondence received by Worrall or its
counsel from the Commonwealth of Pennsylvania.
8. For and in consideration of the above-described covenants and
agreements, The Eastwind Group, Inc., Centennial Printing
Corporation, Bruce K. Worrall and Centennial Racing, Inc. hereby
release, remise and discharge each other, their heirs,
executors, administrators, predecessors, successors, insurers,
departments, divisions, parents, subsidiaries, subdivisions and
affiliated companies, and present and former directors,
officers, employees, shareholders, principals, agents, servants
and assigns, and any and all related persons, entities,
associations or corporations, whether herein referred to or not,
their predecessors, successors and assigns, of and from any
manner of claims, actions, causes of action, suits, debts, dues,
accounts, controversies, bonds, liabilities, demands,
obligations, liens, rights, damages, costs, expenses and/or
compensation, judgements and demands whatsoever, in law or in
equity, including any claims related to or resulting from any
representations or warranties contained in the Merger Agreement
other than as more fully provided herein, or any nature
whatsoever, that the releasing parties now have or than may
hereafter accrue to them, known, or unknown, foreseen or
unforeseen, related to or arising from, the facts alleged in the
Arbitration. The parties, specifically exclude from this Release
any claims arising out of a breach by Centennial, Eastwind,
Worrall or Centennial Acquisition Corporation, of the
obligations under the Closing Agreement dated October 17, 1996
for which Worrall and Vicki Worrall are intended beneficiaries.
9. It is expressly understood and agreed by and among the parties
that this Release represents a settlement and compromise of
disputed claims and that the payment of the consideration and
release and termination of rights mentioned in this Settlement
Agreement is not to be construed as an admission of liability on
the part of any party, as the liability claims that the
releasing parties have asserted in the arbitration are
specifically and vigorously denied and disputed by The Eastwind
Group, Inc. and Bruce K. Worrall.
10. The parties hereby stipulate and agree that this Settlement
Agreement can be entered as an award by the Board of
Arbitrators. If any party believes that any other party is in
violation of this Settlement Agreement, they shall first advise
the other party in writing of said breach and provide a ten (10)
day opportunity for cure by the allegedly offending party. If
any of the undersigned parties thereafter brings an action to
enforce any of the terms of this Settlement Agreement, that
action must be brought in accordance with Section 11.04
(Arbitration) of the Merger Agreement.
11. The undersigned hereby declare that this Settlement Agreement
has been read completely before signing, has been discussed with
legal counsel and is fully understood and voluntarily accepted
for the purpose of making a full and final compromise,
adjustment and settlement of any and all claims between Eastwind
and Worrall which were asserted, or which could have been
asserted, in the Arbitration or which are in any way related to
the facts or occurrences which were or could have been alleged
therein, and for the express purpose of
<PAGE>
precluding forever any further suits arising out of the facts or
occurrences which were or could have been alleged in the
Arbitration.
12. This Settlement Agreement is intended to bind and benefit
Eastwind, Centennial Printing Corporation, Worrall, and
Centennial Racing, Inc. and is not intended to confer any
benefit upon any other person or entity except as specifically
provided herein.
13. In the event any portion of this Settlement Agreement shall be
determined by a court of competent jurisdiction, to be illegal,
invalid or unenforceable, such portion shall be severed and
deleted, and the remaining portions hereof shall remain, legal,
valid and enforceable, except that this paragraph shall not
apply if any portion of paragraphs 1 through 9 of this
Settlement Agreement is determined by a court of competent
jurisdiction to be illegal, invalid or unenforceable.
14. It is further understood and agreed that this Settlement
Agreement is the complete agreement between the parties, and
that there are no other written, or oral understandings or
agreements. This Settlement shall be binding upon and inure to
the benefit of the predecessors, successors, assigns, heirs,
executors, administrators, and legal representatives of the
respective parties.
15. This Settlement may be executed in two or more counterparts,
each of which shall be deemed an original but all of which
together shall construe one and the same instrument.
16. This Settlement Agreement shall be construed and interpreted in
accordance with the laws of the Commonwealth of Pennsylvania.
17. This Settlement Agreement shall become effective immediately
upon execution by the parties.
IN WITNESS WHEREOF, we have set our hands and seals this ___ day of
__________, 1998.
The Eastwind Group, Inc.
/s/ Bruce K. Worrall By: /s/ William B. Miller
____________________________ ______________________ (SEAL)
BRUCE K. WORRALL WILLIAM B. MILLER
Senior Vice President and
Chief Financial Officer
Centennial Racing, Inc. Centennial Printing Corporation
By: /s/ Bruce K. Worrall By: /s/ Bruce Jackson
_________________________ (SEAL) ______________________ (SEAL)
BRUCE K. WORRALL BRUCE JACKSON
President
<PAGE>
Exhibit 23.1
- ------------
CONSENT OF INDEPENDENT CERTIFIED PUBLIC ACCOUNTANTS
---------------------------------------------------
We have issued our report dated April 17, 1998, accompanying the consolidated
financial statements of The Eastwind Group, Inc. and Subsidiaries appearing in
the 1998 Annual Report of the Company on Form 10-KSB for the fiscal year ended
January 3, 1998 which is incorporated by reference in this Registration
Statement and Prospectus. We consent to the incorporation by reference of the
aforementioned report in the Registration Statement and Prospectus, and to the
use of our name as it appears under the caption "Experts."
GRANT THORNTON LLP
Philadelphia, Pennsylvania
May 12, 1998
<PAGE>
Exhibit 23.2
- ------------
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
January 3, 1998, and to all references to our Firm included in this
Registration Statement.
ARTHUR ANDERSEN LLP
Philadelphia, Pa.
May 12, 1998
