SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM 8-K
CURRENT REPORT
Pursuant to Section 13 or 15(d) of
the Securities Exchange Act of 1934
June 17, 1997
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Date of Report (Date of earliest event reported)
Empire of Carolina, Inc.
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(Exact name of registrant as specified in its charter)
Delaware 1-7909 13-2999480
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(State or other jurisdiction (Commission (IRS Employer
of incorporation) File Number) Identification No.)
5150 Linton Boulevard, 5th Floor, Delray Beach, Florida 33484
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(Address of principal executive offices) (Zip Code)
(561) 498-4000
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(Registrant's telephone number)
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ITEM 1. CHANGES IN CONTROL OF REGISTRANT
The transactions described in Item 5 below may be deemed to have
resulted in a change in control of the Company. See Item 5 below.
ITEM 5. OTHER EVENTS.
On June 17, 1997, pursuant to a Securities Purchase Agreement dated as
of May 5, 1997, as amended by Amendment No. 1 to the Securities Purchase
Agreement, dated as of June 5, 1997 (the "Securities Purchase Agreement"), among
Empire of Carolina, Inc., a Delaware corporation (the "Company"), HPA
Associates, LLC ("HPA") and EMP Associates, LLC ("EMP"), the Company issued to
HPA, EMP and other accredited investors (as defined in Rule 501 under the
Securities Act of 1933, as amended) ("Accredited Investors") 1,100,000 shares of
the Company's Series A preferred stock, $.01 par value per share, $10 face value
per share (the "Series A Preferred Stock") and 5,000,000 warrants to purchase
shares of the Company's common stock, $.10 par value per share (the "Common
Stock") (the "Principal Investment"). On June 18, 1997, the Company issued to
HPA and other Accredited Investors an additional 500,000 shares of the Series A
Preferred Stock and an additional 2,500,000 warrants (the "Additional
Investment"). The investors in the Principal Investment and Additional
Investment are collectively referred to herein as the "Purchasers". The total
shares of Series A Preferred Stock issued to Purchasers in connection with the
foregoing was 1,600,000 and the total number of warrants issued was 7,500,000.
The total gross proceeds from the sale of such securities was $16,000,000 (the
"Purchase Price"). $5,000,000 of the Purchase Price was non-cash consideration
represented by the conversion of $5 million of 12% bridge notes funded by HPA
and EMP in May 1997 in connection with the execution of the Securities
Purchase Agreement.
The Series A Preferred Stock is convertible into Common Stock at an
initial conversion price of $1.25 per share (subject to adjustment in certain
circumstances) and the exercise price per share of the warrants is $1.375 per
share (subject to adjustment in certain circumstances). The Series A Preferred
Stock has the right, as a class of stock of the Company, to designate two
directors and is entitled to vote on all matters presented to stockholders on an
as if converted basis. Purchasers also received certain registration rights. The
Certificate of Designation relating to the Series A Preferred Stock,
the Warrant Amendment to Warrant Certificate, the related
Warrant Agreement, and the Letter of the Company regarding the registration
rights and provisions affecting the Series A Preferred Stock are being filed
herewith as Exhibits 3.5, 4.7, 4.8, and 10.43, respectively, and are
incorporated herein by reference.
Pursuant to the Securities Purchase Agreement, all closing conditions
set forth in the Securities Purchase Agreement were met or waived prior to the
Principal Investment, including the following:
o The Company's 9% convertible debentures issued to affiliates
of Weiss, Peck & Greer in the original principal amount of $15
million were exchanged by the holders thereof for newly-issued
shares of Series C Preferred Stock of the Company with an
aggregate Stated Value (as defined) of $15 million. Such
holders also released, among other things, their claims to
accrued and unpaid interest, fees and expenses. Each share of
Series C Preferred Stock is
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convertible at any time, at the option of the holder thereof,
into fully paid and nonassessable shares of Common Stock at a
rate of one share of Common Stock for each $2.00 of Stated
Value of Series C Preferred Stock (subject to adjustment in
certain circumstances). Except as otherwise expressly provided
in the Charter or the By-laws of the Company, the Certificate
of Designation relating to the Series C Preferred Stock, or as
may otherwise be required by law, the Series C Stockholders,
by virtue of their ownership thereof, have no voting rights.
The Certificate of Designation relating to the Series C
Preferred Stock, the WPG Release Agreement and the WPG
Registration Rights Agreement are being filed herewith as
Exhibits 3.6, 10.45 and 10.46, respectively, and are
incorporated herein by reference.
o The successor to the seller under the Company's agreement to
purchase the assets of Buddy L waived or released the claim to
certain earn out, price protection and registration rights in
exchange for: (i) $100,000 in cash; (ii) 250,000 shares of
Common Stock of the Company; (iii) a $2.5 million 9% note from
the Company's major subsidiary, and guaranteed by the Company,
providing for $625,000 principal payments on the first four
anniversaries of the closing date of the Preferred Stock
Investment (which note includes certain affirmative and
negative covenants which could in certain circumstances
accelerate payments with respect to such note); and (iv)
certain other benefits, including registration rights. The
Buddy L Settlement Agreement, the Buddy L Promissory Note and
the Buddy L Registration Rights Agreement are being filed
herewith as Exhibits 10.42, 4.10 and 10.44, respectively, and
are incorporated herein by reference.
o The bank lenders under the Company's Credit Agreement were to
have agreed to certain amendments to the Credit Agreement as a
closing condition. This condition was waived by HPA. The
Company's senior lenders agreed, however, to extend the May
31, 1997 deadline for receipt of $6 million of additional
equity financing to June 30, 1997 (which deadline was
satisfied upon the closing of the Principal Investment), and
have orally advised the Company that they will agree to the
adoption of a proposed amendment to the Credit Agreement to
convert the current portion of the term loan to a one year
and a day obligation and have agreed to engage in further
discussions with the Company following the completion of the
Principal Investment.
On June 12, 1997, the Company and American Stock Transfer & Trust
Company, a New York corporation, as Rights Agent (the "Rights Agent"), adopted
the Second Amendment (the "Second Amendment") to the Rights Agreement dated as
of September 11, 1996 (the "Rights Agreement") between the Company and the
Rights Agent, as amended by the First Amendment thereto dated as of May 5, 1997.
The Second Amendment, among other things, amends the definition of "Acquiring
Person" in Section 1(a) of the Rights Agreement to base the 15% threshold
specified therein on the aggregate number of "Fully- Diluted Common Shares" (as
defined in the Second Amendment) of the Company. The
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Second Amendment is attached as Exhibit 4.9 hereto, and is incorporated herein
by reference.
On June 19, 1997, the Company issued the press release attached hereto
as Exhibit 99.1, which press release is hereby incorporated by reference herein,
announcing the closing of the Principal Investment and the Additional
Investment.
As of May 23, 1997, the Company had 7,403,564 shares of Common Stock
outstanding. Immediately following the closing of the Additional Investment, the
Company had 7,653,564 shares of Common Stock outstanding and the Purchasers in
the aggregate represent approximately 63% of the total voting power on matters
presented to the Company's stockholders, in each case without giving effect to
the exercise of any warrants, stock options or other derivative securities
issued by the Company. If all of the Series A Preferred Stock and Series C
Preferred Stock issued pursuant to the Securities Purchase Agreement were
converted, all outstanding warrants and stock options were exercised and all
authorized shares of Common Stock under the Company's employee benefit plans
were issued, the Purchasers in the aggregate would represent approximately 53%
of the total voting power on matters presented to the Company's stockholders.
However, to the knowledge of the Company, immediately following the
consummation of the Additonal Investment, no Purchaser beneficially owns
securities representing 10% or more of the voting power on matters to be
presented to the Company's stockholders or would have such voting power on a
fully-diluted basis.
On June 24, 1997, the Company issued the press release attached hereto
as Exhibit 99.2, which press release is hereby incorporated by reference herein,
announcing the election of Charles S. Holmes to replace Steve Geller as Chairman
of the Board of Directors of the Company.
In addition to the securities offered in connection with the Principal
Investment and Additional Investment, the Company intends to offer for sale
500,000 additional shares of Series A Preferred Stock and 500,000 warrants to
purchase shares of Common Stock) at an initial exercise price of $1.375 per
share. In connection with the sale of such additional securities, an additional
2,000,000 warrants to purchase shares of Common Stock will be allocated as
follows: 750,000 warrants to the placement agents who place the additional
securities in addition to a 6% cash commission payable upon closing of the sale
of such additional securities and 1,250,000 warrants to HPA. The additional
securities will be offered pending and conditioned upon receiving stockholder
approval. The offering of such additional securities will have a significant
dilutive effect upon stockholders of the Company, including the Purchasers.
There can be no assurance that the sale of such additional securities will be
approved by the stockholders or consummated. Reference is made to Amendment No.
1 to the Securities Purchase Agreement filed as Exhibit 10.41 hereto for
additional information regarding the sale of such additional securities, which
exhibit is incorporated herein by reference.
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The foregoing descriptions of documents are summaries that do not
purport to be complete and are qualified in their entirety by reference to the
actual terms and provisions of such documents filed as exhibits hereto.
ITEM 7. FINANCIAL STATEMENTS AND EXHIBITS.
Exhibit
Number Description
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3.5 Certificate of Designation relating to Series A Preferred Stock
3.6 Certificate of Designation relating to Series C Preferred Stock
4.7 Warrant Amendment dated May 6, 1997 to Warrant Certificate
issued May 6, 1997 among the Company, HPA Associates, LLC and
EMP Associates, LLC.
4.8 Warrant Agreement dated as of June 17, 1997 between the Company
and the holders from time to time of the warrants.
4.9 Second Amendment dated as of June 12, 1997, to Rights
Agreement, dated as of September 11, 1996, between Empire of
Carolina, Inc. and American Stock Transfer & Trust Company as
Rights Agent.
4.10 Promissory Note from the Company to Smedley Industries,
Inc. Liquidating Trust in the amount of $2,500,000.
10.40 Securities Purchase Agreement dated as of May 5, 1997 among the
Company, HPA Associates, LLC and EMP Associates, LLC
(previously filed as an exhibit to the Company's Quarterly
Report on Form 10-Q for the fiscal quarter ended March 31, 1997
and is incorporated by reference herein).
10.41 Amendment No. 1 dated as of June 5, 1997 to Securities Purchase
Agreement dated as of May 5, 1997 among the Company, HPA
Associates, LLC and EMP Associates, LLC.
10.42 Buddy L Settlement Agreement, dated as of June 17, 1997 between
the Company and Smedley Industries, Inc. Liquidating Trust.
10.43 Letter of the Company to Pellinore Securities Corp., Axiom
Capital Management, Inc., and Commonwealth Associates, Inc.,
regarding the registration rights provisions affecting the
Series A Preferred Stock.
10.44 Buddy L Registration Rights Agreement dated as of June 17, 1997
between the Company and Smedley Industries, Inc. Liquidating
Trust.
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10.45 WPG Registration Rights Agreement dated as of June 17, 1997
between the Company and WPG Corporate Development Associates
IV, L.P., WPG Corporate Development Associates IV (Overseas),
Ltd., Weiss, Peck & Greer, as trustee under Craig Whiting IRA,
Peter B. Pfister, Weiss, Peck & Greer, as Trustee under Nora
Kerppola IRA, Westpool Investment Trust Plc, Eugene M.
Matalene, Jr., Richard Hochman, and Glenbrook Partners, L.P.
(collectively, the "WPG-Affiliated Entities).
10.46 WPG Release Agreement dated as of June 17, 1997 between the
Company and the WPG-Affiliated Entities.
99.1 Press Release, dated June 19, 1997.
99.2 Press Release, dated June 24, 1997.
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SIGNATURES
Pursuant to the requirements of the Securities Exchange Act of 1934,
the Registrant has duly caused this report to be signed on its behalf by the
undersigned hereunto duly authorized.
EMPIRE OF CAROLINA, INC.
By /s/ Lawrence Geller
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Name: Lawrence Geller
Title: Vice President and
General Counsel
Date: June 30, 1997
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EXHIBIT INDEX
Exhibit
Number Description
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3.5 Certificate of Designation relating to Series A Preferred
Stock
3.6 Certificate of Designation relating to Series C Preferred
Stock
4.7 Warrant Amendment dated May 6, 1997 to Warrant Certificate
issued May 6, 1997 among the Company, HPA Associates, LLC
and EMP Associates, LLC.
4.8 Warrant Agreement dated as of June 17, 1997 between the
Company and the holders from time to time of the warrants.
4.9 Second Amendment dated as of June 12, 1997, to Rights
Agreement, dated as of September 11, 1996, between Empire
of Carolina, Inc. and American Stock Transfer & Trust
Company as Rights Agent.
4.10 Promissory Note from the Company to Smedley
Industries, Inc. Liquidating Trust in the amount of
$2,500,000.
10.40 Securities Purchase Agreement dated as of May 5, 1997 among
the Company, HPA Associates, LLC and EMP Associates, LLC
(previously filed as an exhibit to the Company's Quarterly
Report on Form 10-Q for the fiscal quarter ended March 31,
1997 and is incorporated by reference herein).
10.41 Amendment No. 1 dated as of June 5, 1997 to Securities
Purchase Agreement dated as of May 5, 1997 among the
Company, HPA Associates, LLC and EMP Associates, LLC.
10.42 Buddy L Settlement Agreement, dated as of June 17, 1997
between the Company and Smedley Industries, Inc.
Liquidating Trust.
10.43 Letter of the Company to Pellinore Securities Corp., Axiom
Capital Management, Inc., and Commonwealth Associates,
Inc., regarding the registration rights provisions
affecting the Series A Preferred Stock.
10.44 Buddy L Registration Rights Agreement dated as of June 17,
1997 between the Company and Smedley Industries, Inc.
Liquidating Trust.
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10.45 WPG Registration Rights Agreement dated as of June 17, 1997
between the Company and WPG Corporate Development
Associates IV, L.P., WPG Corporate Development Associates
IV (Overseas), Ltd., Weiss, Peck & Greer, as trustee under
Craig Whiting IRA, Peter B. Pfister, Weiss, Peck & Greer,
as Trustee under Nora Kerppola IRA, Westpool Investment
Trust Plc, Eugene M. Matalene, Jr., Richard Hochman, and
Glenbrook Partners, L.P. (collectively, the "WPG-Affiliated
Entities).
10.46 WPG Release Agreement dated as of June 17, 1997 between the
Company and the WPG-Affiliated Entities.
99.1 Press Release, dated June 19, 1997.
99.2 Press Release, dated June 24, 1997.
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EXHIBIT 3.5
CERTIFICATE OF DESIGNATION
OF
SERIES A PREFERRED STOCK
OF
EMPIRE OF CAROLINA, INC.
(Pursuant to Section 151 of the
Delaware General Corporation Law)
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Empire of Carolina, Inc., a corporation organized and existing under
the General Corporation Law of the State of Delaware (the "Company"), hereby
certifies that the following resolution was adopted by the Board of Directors of
the Company (the "Board of Directors" or the "Board") as required by Section 151
of the General Corporation Law at a meeting duly called and held at 3:00 P.M. on
June 10, 1997;
RESOLVED, that pursuant to the authority granted to and vested in the
Board of Directors of the Company in accordance with the provisions of the
Company's Restated Certificate of Incorporation, as amended to date (the
"Certificate of Incorporation"), the Board of Directors hereby creates a series
of Preferred Stock, par value $.01 per share (the "Preferred Stock"), of the
Company and hereby states the designation and number of shares, and fixes the
relative rights, preferences and limitations thereof, as follows:
Section 1. Designation and Amount. The shares of such series shall be
designated as "Series A Preferred Stock" (the "Series A Preferred Stock") and
the authorized number of shares constituting the Series A Preferred Stock shall
be 2,100,000. The stated value of each share of the Series A Preferred Stock
(the "Stated Value") shall be $10. Such shares may be issued only in connection
with the sale of shares by the Company pursuant to the Securities Purchase
Agreement dated as of May 5, 1997, as amended, among the Company, HPA
Associates, LLC and EMP Associates LLC (the "Securities Purchase Agreement").
From and after the first issuance of Series A Preferred Stock, such number of
shares shall be decreased automatically to the number of shares sold pursuant to
the Securities Purchase Agreement upon the completion of sales pursuant thereto,
provided that no decrease shall reduce the number of shares of Series A
Preferred Stock to a number less than the number of shares then outstanding.
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Section 2. Dividends. The holders of shares of the Series A Preferred
Stock (the "Series A Stockholders") shall be entitled to receive, when, as and
if declared by the Board of Directors, out of the assets of the Company legally
available therefor, dividends, distributions and offers of subscription, if any,
equivalent (both in amount and kind) to the dividends paid, and offers of
subscriptions made available, to the holders of the number of shares of Common
Stock into which the Series A Preferred Stock may be converted pursuant to
Section 6 hereof, provided that if any dividend is declared in shares of Common
Stock or any other security into which the Series A Preferred Stock is from time
to time convertible, rather than payment of such dividend to holders of Series A
Preferred Stock, the number of shares of Common Stock or such other security
into which the Series A Preferred Stock may be converted shall be adjusted in
accordance with the provisions of Section 6 hereof.
Section 3. Voting Rights. In addition to any voting rights provided
by law, the Series A Stockholders shall have the following voting rights:
a. So long as the Series A Preferred Stock is outstanding, each share
of Series A Preferred Stock shall entitle the holder thereof to vote at all
meetings of the stockholders of the Company on any matter voted on by holders of
Common Stock, together with the holders of Common Stock and of all other
securities entitled to vote with the Common Stock on such matter (the "Voting
Securities"). With respect to any such vote, from and after the first date on
which shares of the Series A Preferred Stock are issued (the "Issue Date"), each
share of the Series A Preferred Stock shall be entitled to cast a number of
votes equal to the number of shares of Common Stock into which a share of Series
A Preferred Stock may then be converted in accordance with Section 6 hereof.
b. In addition to any class votes required by law, the affirmative vote
of the holders of at least a majority of the outstanding shares of the Series A
Preferred Stock, voting separately as a class, in person or by proxy, at a
special or annual meeting of stockholders called for the purpose, shall be
necessary to (i) authorize, create, increase the authorized or issued number of
shares of, or issue (including on conversion or exchange of any convertible or
exchangeable securities or by reclassification), any shares of any class or
classes or series of the Company's capital stock having rights senior or
superior to (either as to dividends or upon distribution of assets, voluntary or
involuntary liquidation, dissolution or winding up) the Series A Preferred
Stock, or class or series of stock that ranks on a parity with Series A
Preferred Stock, or to increase the number of shares of Series A Preferred Stock
that are authorized for issuance, or (ii) amend, alter or repeal any of the
provisions of the Articles of Incorporation of the Company or the Certificate of
Designation of the Series A Preferred Stock (the "Certificate of Designation")
in a manner which would materially and adversely affect any right, preference,
privilege or voting power of the Series A Preferred Stock or the holders thereof
(provided, however, that, subject to (i) above, any increase in the amount of
authorized capital stock or the creation and issuance of any capital stock
ranking junior to the Series A Preferred Stock shall not be deemed materially
and adversely to affect such rights, preferences or voting powers).
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c. In addition to any class votes required by law or Section 3(b)
hereof, the affirmative vote of the holders of at least a majority of the
outstanding shares of the Series A Preferred Stock and Series C Preferred Stock
of the Company, voting together as a class, in person or by proxy, at a special
or annual meeting of stockholders called for the purpose, shall be necessary to
authorize, create, increase the authorized or issued number of shares of, or
issue (including on conversion or exchange of any convertible or exchangeable
securities or by reclassification), any shares of any class or classes or series
of the Company's capital stock having rights senior or superior in preference to
the Series A Preferred Stock or the Series C Preferred Stock as to any of
dividends, voluntary or involuntary liquidation, dissolution or winding up, or
(y) any shares of any class or series of stock that ranks on a parity with
Series A Preferred Stock or the Series C Preferred Stock as to any dividends,
voluntary or involuntary liquidation, dissolution or winding up.
d. Notwithstanding anything to the contrary contained in the Company's
Articles of Incorporation or By-Laws, from and after the Issue Date, the Series
A Stockholders shall have the right, voting separately as a class, to elect to
the Board of Directors two directors of the Company and shall have the right to
approve any expansion of the size of the Company's Board beyond five.
e. (1) The foregoing rights of Series A Stockholders to take any
actions as provided in this Section 3 may be exercised at any regular meeting of
stockholders or at a special meeting of stockholders held for such purpose as
hereinafter provided or at any adjournment thereof, or by written consent
pursuant to Section 228 of the Delaware General Corporation Law.
(2) So long as the right of the Series A Stockholders to elect
directors pursuant to Section 3(d) continues (and unless such right has been
exercised by written consent of the minimum number of shares required to take
such action), the Chairman of the Board of the Company may call, and upon the
written request of holders of record of 10% of the outstanding shares of the
Series A Preferred Stock addressed to the Secretary of the Company at the
principal office of the Company shall call, a special meeting of the Series A
Stockholders entitled to vote as provided herein. Such meeting shall be held
within 30 days after delivery of such request to the Secretary, at the place and
upon the notice provided by law and in the By-Laws of the Company for the
holding of meetings of stockholders.
(3) At each meeting of stockholders at which the Series A
Stockholders have the right, voting separately as a single series, or voting
separately as series with holders of Series C Preferred Stock of the Company, to
take action pursuant to Section 3(b) or Section 3(c), or to elect directors of
the Company as provided in Section 3(d), the presence in person or by proxy of
the holders of record of 50% of the total number of shares of the Series A
Preferred Stock, or, as applicable, Series A Preferred Stock and Series C
Preferred Stock, then outstanding and entitled to vote on the matter shall be
necessary and sufficient to constitute a quorum. At any such meeting or at any
adjournment thereof:
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(A) the absence of a quorum of the Series A
Stockholders shall not prevent the election of directors other
than those to be elected by the Series A Stockholders and the
absence of a quorum of the holders of shares of any other
class or series of capital stock shall not prevent the
election of directors to be elected by the Series A
Stockholders or the taking of any action as provided in this
Section 3; and
(B) in the absence of a quorum of the Series A
Stockholders, or, as applicable, holders of Series A Preferred
Stock and Series C Preferred Stock, the holders of a majority
of such shares present in person or by proxy shall have the
power to adjourn the meeting as to the actions to be taken by
the Series A Stockholders, or as applicable, holders of the
Series A Preferred Stock and the Series C Preferred Stock,
from time to time and place to place without notice other than
announcement at the meeting until a quorum is present.
(4) For the taking of any action as provided in Sections 3(b)
and 3(d) by the Series A Stockholders, or as provided in Section 3(c) with
respect to actions to be taken by holders of Series A Preferred Stock and Series
C Preferred Stock acting together, each such holder shall have one vote for each
share of such stock standing in his or her name on the transfer books of the
Company as of any record date fixed for such purpose or, if no such date be
fixed, at the close of business on the business day next preceding the day on
which notice is given, or if notice is waived, at the close of business on the
business day next preceding the day or which the meeting is held. A business day
shall mean any day other than a Saturday, Sunday or other day on which
commercial banks in the City of New York are authorized or required by law or
executive order to close.
(5) Each director elected by the Series A Stockholders as
provided in Section 3(d) shall, unless his term expires earlier, hold office
until the regular meeting of stockholders next succeeding his election or, in
each case, until his successor, if any, is elected and qualified.
In case any vacancy occurs among the directors elected by the Series A
Stockholders, as provided in Section 3(d), the remaining director or directors
theretofore elected by such holders (if there is such a remaining director or
directors), or such directors' successor in office, shall designate a director
to fill such vacancy for the unexpired portion of the term. If any such vacancy
is not so filled within 20 days after the creation thereof or if the directors
so elected by the Series A Stockholders cease to serve as directors before their
terms expire, the Series A Stockholders may, by written consent as herein
provided, or at a special meeting of such holders called as provided herein,
elect successors to hold office for the unexpired terms of the directors whose
places are vacant.
Any director elected by the Series A Stockholders voting separately as
a single series may be removed from office with or without cause by the vote or
written consent of the holders of at least a majority of the outstanding shares
of the Series A Preferred Stock voting
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separately as a single series. A special meeting of the Series A Stockholders
may be called in accordance with the procedures set forth in Section 3(e) (ii)
for the purpose of such vote.
Section 4. Reacquired Shares. Any shares of Series A Preferred Stock
purchased or otherwise acquired by the Company in any manner whatsoever shall be
retired and canceled promptly after the acquisition thereof. All such shares
shall upon their cancellation become authorized but unissued shares of Preferred
Stock and may be reissued as part of a new series of Preferred Stock subject to
the conditions and restrictions on issuance set forth herein, in the Certificate
of Incorporation or in any other certificate of designation creating a series of
Preferred Stock or Preferred Stock or any similar stock or as otherwise required
by law.
Section 5. Liquidation, Dissolution or Winding Up. Upon any
liquidation, dissolution or winding up of the Company, no distribution shall be
made (A) to holders of shares of stock ranking junior (either as to dividends or
upon liquidation, dissolution or winding up) to the Series A Preferred Stock
unless, prior thereto, the Series A Stockholders shall have received $10 per
share, or (B) to the holders of shares of stock ranking on a parity (either as
to dividends or upon liquidation, dissolution or winding up) with the Series A
Preferred Stock, except distributions made ratably on the Series A Preferred
Stock and all such parity stock in proportion to the total amounts to which the
holders of all such shares are entitled upon such liquidation, dissolution or
winding up. The Series A Preferred Stock shall rank on a parity with the
Company's Series C Preferred Stock with a stated value of no more than an
aggregate of $15,000,000 issued pursuant to the terms of the Securities Purchase
Agreement and senior to the shares of the Company's Series B Preferred Stock.
Section 6. Conversion.
a. Each share of Series A Preferred Stock shall be convertible at any
time, at the option of the holder, thereof, into fully paid and nonassessable
shares of Common Stock at a rate of one share of Common Stock for each $1.25 of
Stated Value of Series A Preferred Stock, subject to adjustment as set forth in
this Section 6 (the "Conversion Price").
b. The Conversion Price shall be adjusted from time to time in certain
cases as follows: if the Company, at any time or from time to time, (1) declares
a dividend on the Common Stock payable in shares of Common Stock, (2) subdivides
the outstanding Common Stock, (3) combines the outstanding Common Stock into a
smaller number of shares or (4) issues any shares of its capital stock in
respect of shares of Common Stock in a reclassification of the Common Stock
(including any such reclassification in connection with a consolidation or
merger in which the Company is the continuing corporation), then in each such
case, the Conversion Price in effect at the time of the record date for such
dividend or of the effective date of such subdivision, combination or
reclassification shall be adjusted to that price which will permit the number of
shares of Common Stock (or, in the case of (4), other capital stock into which
shares of Common Stock have been converted) into which Series A Preferred Stock
may be converted to be increased or reduced in the same proportion as the number
of shares of Common Stock (or, in the case of (4), other capital stock into
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which shares of Common Stock have been converted) are increased or reduced in
connection with such dividend, subdivision, combination or reclassification. Any
such adjustment shall become effective immediately after the record date of such
dividend or the effective date of such subdivision, combination or
reclassification. Such adjustments shall be made successively whenever any event
listed above occurs. In the event a dividend is declared but such dividend is
not paid, the Conversion Price shall be adjusted to the Conversion Price in
effect immediately prior to the record date of such dividend.
c. Conversion of the Series A Preferred Stock may be effected by any
Series A Stockholder upon the surrender to the Company at the Company's
principal executive office or at the office of any agent or agents of the
Company, as may be designated by the Board of Directors (the "Transfer Agent"),
of the certificate for such shares of the Series A Preferred Stock to be
converted (duly endorsed or assigned to the Company or in blank), or by transfer
of such shares to the Company's account through a securities clearing house,
accompanied by a written notice stating that such holder elects to convert all
or a specified whole number of such shares in accordance with the provisions of
this Section 6 and specifying the name or names in which such holder wishes the
certificate or certificates for shares of Common Stock to be issued. In case
such notice specifies a name or names other than that of such holder, such
notice shall be accompanied by a payment of all transfer taxes payable upon the
issuance of shares of Common Stock in such name or names. Other than such taxes,
the Company shall pay any and all issue and other taxes (other than taxes based
on or measured by income or gain) that may be payable in respect of any issue or
delivery of shares of Common Stock upon conversion of the Series A Preferred
Stock pursuant hereto. As promptly as practicable, and in any event within five
business days after the surrender of such certificate or certificates (or
transfer of such shares through a clearing house) and the receipt of such notice
relating thereto and, if applicable, payment of all transfer taxes (or the
demonstration to the satisfaction of the Company that such taxes have been
paid), the Company shall deliver or cause to be delivered (i) certificates
representing the number of validly issued, fully paid and nonassessable full
shares of Common Stock equal to the number of shares of Series A Preferred Stock
that are being converted and (ii) if less than the full number of shares of the
Series A Preferred Stock evidenced by the surrendered certificate or
certificates is being converted, a new certificate or certificates, of like
tenor, for the number of shares evidenced by such surrendered certificate or
certificates less the number of shares being converted. Such conversion shall be
deemed to have been made at the close of business on the date of giving of such
notice and of such surrender of the certificate or certificates (or transfer of
such shares through a clearing house) representing the shares of the Series A
Preferred Stock to be converted so that the rights of the holder thereof as to
the shares being converted shall cease except for the right to receive shares of
Common Stock (or other capital stock in accordance with Section 6(b)) in
accordance herewith, and the person entitled to receive the shares of Common
Stock (or other capital stock in accordance with Section 6(b)) shall be treated
for all purposes as having become the record holder of such shares of Common
Stock (or other capital stock in accordance with Section 6(b)) at such time.
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d. Except as specifically provided in Section 6(c), the issuance and
delivery of certificates for shares of Common Stock upon the conversion of
shares of Series A Preferred Stock shall be made without charge to a Series A
Stockholder for such certificates or for any tax in respect of the issuance or
delivery of such certificates or the securities represented thereby.
e. The Company shall at all times reserve and keep available out of its
authorized but unissued shares of Common Stock, solely for the purpose of
effecting the conversion of the shares of the Series A Preferred Stock, such
number of its shares of Common Stock, and such amount or number of securities or
other property (if the Series A Preferred Stock becomes convertible into the
same in accordance with the provisions of Section 6(b)), as are from time to
time sufficient to effect the conversion of all outstanding shares of the Series
A Preferred Stock; and if at any time the number of authorized but unissued
shares of Common Stock is not sufficient to effect the conversion of all then
outstanding shares of the Series A Preferred Stock, the Company shall take such
corporate action as may, in the opinion of its counsel, be necessary to increase
the number of shares of its authorized but unissued shares of Common Stock (or
such securities or other property) to such number of shares as shall be
sufficient for such purpose, including, without limitation, engaging in best
efforts to obtain the requisite shareholder approval of any necessary amendment
to the Certificate of Incorporation.
Section 7. Reports as to Adjustments. Upon any adjustment of the
Conversion Ratio then in effect and any increase or decrease in the number of
shares of Common Stock issuable upon the operation of the conversion set forth
in Section 6, then, and in each such case, the Company shall promptly deliver to
the Transfer Agent of the Series A Preferred Stock and Common Stock a
certificate signed by the President or a Vice President and by the Treasurer or
an Assistant Treasurer or the Secretary or an Assistant Secretary of the Company
setting forth in reasonable detail the event requiring the adjustment and the
method by which such adjustment was calculated and specifying the Conversion
Ratio then in effect following such adjustment and the increased or decreased
number of shares issuable upon the conversion set forth in Section 6. The
Company shall also promptly after the making of such adjustment give written
notice to the registered Series A Stockholder at the address of each holder as
shown on the books of the Company maintained by the Transfer Agent thereof,
which notice shall state the Conversion Ratio then in effect, as adjusted, and
the increased or decreased number of shares issuable upon the exercise of the
right of conversion granted by Section 6, and shall set forth in reasonable
detail the method of calculation of each and a brief statement of the facts
requiring such adjustment.
Section 8. Enforceability. If any provision of this Certificate of
Designation is held to be invalid or unenforceable, such holding shall not
affect the validity or enforceability of any other provision hereof.
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IN WITNESS WHEREOF, this Certificate of Designation is executed on
behalf of the Company by its Chairman of the Board of Directors and attested by
its Secretary as of the 12th day of June 1997.
/s/ Steven Geller
------------------------------------
Steve Geller
Chairman and Chief Executive Officer
17
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EXHIBIT 3.6
CERTIFICATE OF DESIGNATION
OF
SERIES C PREFERRED STOCK
OF
EMPIRE OF CAROLINA, INC.
(PURSUANT TO SECTION 151 OF THE
DELAWARE GENERAL CORPORATION LAW)
Empire of Carolina, Inc., a corporation organized and existing
under the General Corporation Law of the State of Delaware (the "Company"),
hereby certifies that the following resolution was adopted by the Board of
Directors of the Company (the "Board of Directors" or the "Board") as required
by Section 151 of the General Corporation Law at a meeting duly called and held
on June 10, 1997;
RESOLVED, that pursuant to the authority granted to and vested
in the Board of Directors of the Company in accordance with the provisions of
the Company's Restated Certificate of Incorporation, as amended to date (the
"Certificate of Incorporation"), the Board of Directors hereby creates a series
of Preferred Stock, par value $.01 per share (the
18
<PAGE>
"Preferred Stock"), of the Company and hereby states the designation and number
of shares, and fixes the relative rights, preferences and limitations thereof,
as follows:
Section 1. Designation and Amount. The shares of such series
shall be designated as "Series C Preferred Stock" (the "Series C Preferred
Stock") and the authorized number of shares constituting the Series C Preferred
Stock shall be 1,500. The stated value of each share of the Series C Preferred
Stock (the "Stated Value") shall be $10,000. Such shares may be issued only in
connection with the sale of shares by the Company pursuant to the Securities
Purchase Agreement dated as of May 5, 1997, as amended, among the Company, HPA
Associates, LLC and EMP Associates LLC (the "Securities Purchase Agreement") and
the execution of that certain agreement dated June 17, 1997 by and among the
Company, and WPG Corporate Development Associates IV, L.P., WPG Corporate
Development Associates IV (Overseas), Ltd., Weiss, Peck & Greer, as trustee
under Craig Whiting IRDA, Peter B. Pfister, Weiss, Peck & Greer, as Trustee
under Nora Kerppola IRA, Westpool Investment Trust PLC Eugene M. Matalene, Jr.,
Richard Hochman, and Glenbrook Partners, L.P. (collectively, the "WPG
Affiliates") regarding the release by the WPG Affiliates of the Company's
obligations and liabilities to the WPG Affiliates under the Debenture Purchase
Agreement, dated December 2, 1994 and the Registration Rights Agreement dated
December 22, 1994.
Section 2. Dividends. The holder of shares of the Series C
Preferred Stock (the "Series C Stockholders") shall be entitled to receive,
when, as and if declared by the Board of Directors, out of the assets of the
Company legally available therefor, dividends, distributions and offers of
subscription, if any, equivalent (both in amount and
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kind) to the dividends and distributions and offers of subscription, if any,
paid and offers of subscription made available to the holders of the number of
shares of Common Stock into which the Series C Preferred Stock may be converted
pursuant to Section 6 hereof, provided that if any dividend is declared in
shares of Common Stock or any other security into which the Series C Preferred
Stock is from time to time convertible, rather than payment of such dividend to
holders of Series C Preferred Stock, the number of shares of Common Stock or
such other security into which the Series C Preferred Stock may be converted
shall be adjusted in accordance with the provisions of Section 6 hereof.
Section 3. Voting Rights. Except as otherwise expressly
provided herein or in the Certificate of Incorporation or the Amended and
Restated By-laws of the Company, or as may otherwise be required by law, the
Series C Stockholders, by virtue of their ownership thereof, shall have no
voting rights.
(a) in addition to any class votes required by law, the
affirmative vote of the holders of at least a majority of the outstanding shares
of the Series C Preferred Stock, voting separately as a class, in person or by
proxy, at a special or annual meeting of stockholders called for the purpose,
shall be necessary to:
(i) amend, alter or repeal any of the provisions of
the Certificate of Incorporation of the Company or the
Certificate of Designation of the Series A Preferred Stock
(the "Series A Certificate of Designation") to change the
conversion ratio (or rights of adjustment therein) rights to
receive dividends or distributions or liquidation preference
thereof in such a manner as to favor the
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Series A Preferred Stock over the Series C Preferred Stock
(except as necessary to reflect differences in conversion
ratios);
(ii) authorize any exchange, conversion or
reclassification of the Series A Preferred Stock into other
capital stock or securities of the Company (whether through
recapitalization, merger, consolidation, exchange,
reorganization or otherwise) in terms different from those
applicable to the Series A Preferred Stock (except to the
extent that such terms differ to reflect differences in the
conversion ratios of the Series C Preferred Stock and the
Series A Preferred Stock into Common Stock) except for
conversion of the Series A Preferred Stock into Common Stock
of the Company in accordance with Section 6 of the Series A
Certificate of Designation;
(iii) authorize any repurchase, redemption,
retirement, defeasance or similar transaction (or set aside
property of the Company for any such purpose) (a "Stock
Redemption") in respect of the Series A Preferred Stock prior
to the conversion of all Series C Preferred Stock, unless
there shall have been a Stock Redemption in respect of a
prorata portion of the Series C Preferred Stock on the same
relative terms (in relation to the conversion ratios of the
Series A Preferred Stock and the Series C Preferred Stock into
Common Stock), such prorata portion to be determined by
multiplying the number of shares of Series C Preferred Stock
then outstanding by the fraction the numerator of which is the
number of shares of Series A Preferred Stock subject to such
Stock Redemption at such time and the denominator of which is
the number of shares of Series A Preferred Stock then
outstanding;
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<PAGE>
(iv) amend, alter or repeal any of the provisions of
the Certificate of Incorporation of the Company or the
Certificate of Designation of the Series C Preferred Stock
(the "Series C Certificate of Designation") to increase the
number of shares of Series C Preferred Stock that are
authorized for issuance;
(v) amend, alter or repeal any of the provisions of
the Certificate of Incorporation of the Company of the Series
C Certificate of Designation in a manner which would
materially and adversely affect any right, preference,
privilege or voting power of the Series C Preferred Stock or
any holder thereof.
(b) In addition to any class votes required by law or Section
3(a) hereof, the affirmative vote of the holders of at least a majority of the
outstanding shares of the Series C Preferred Stock and Series A Preferred Stock,
voting together as a class, in person or by proxy, at a special or annual
meeting of stockholders called for the purpose, shall be necessary to:
(i) authorize, create, increase the authorized or
issued number of shares of, or issue (including on conversion
or exchange of any convertible or exchangeable securities or
by reclassification):
(x) any shares of any class or classes or
series of the Company's capital stock having rights
senior or superior in preference to the Series A
Preferred Stock or the Series C Preferred Stock as to
any of dividends, voluntary or involuntary
liquidation, dissolution or winding up; or
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<PAGE>
(y) any shares of any class or series of
stock that ranks on a parity with Series A Preferred
Stock or the Series C Preferred Stock as to any of
dividends, voluntary or involuntary liquidation,
dissolution or winding up.
(c) (i) The foregoing rights of holders of Series C Stock
("Series C Stockholders") to take any actions as provided in
this Section 3 may be exercised at any regular meeting of
stockholders or at a special meeting of stockholders held for
such purpose as hereinafter provided or at any adjournment
thereof, or by written consent pursuant to Section 228 of the
Delaware General Corporation Law.
(ii) At each meeting of stockholders at which the
Series C Stockholders have the right, voting separately as a
single series, or voting separately as series with holders of
Series A Preferred Stock of the Company, to take action
pursuant to Section 3(a) or Section 3(b), the presence in
person or by proxy of the holders of record of 50% of the
total number of shares of the Series C Preferred Stock, or, as
applicable, Series C Preferred Stock and Series A Preferred
Stock, then outstanding and entitled to vote on the matter
shall be necessary and sufficient to constitute a quorum. At
any such meeting or at any adjournment thereof, in the absence
of a quorum of the Series C Stockholders, or, as applicable,
holders of Series C Preferred Stock and Series A Preferred
Stock, the holders of a majority of such shares present in
person or by proxy shall have the power to adjourn the meeting
as to the actions to be taken by the Series C Stockholders, or
as applicable, holders of
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<PAGE>
the Series C Preferred Stock and the Series A Preferred Stock,
from time to time and place to place without notice other than
announcement at the meeting until a quorum is present.
(iii) For the taking of any action as provided in
Sections 3(a) by the Series C Stockholders, or as provided in
Section 3(b) with respect to actions to be taken by holders of
Series C Preferred Stock and Series A Preferred Stock acting
together, each such holder shall have one vote for each share
of such stock standing in his or her name on the transfer
books of the Company as of any record date fixed for such
purpose or, if no such date be fixed, at the close of business
on the business day next preceding the day on which notice is
given, or if notice is waived, at the close of business on the
business day next preceding the day on which the meeting is
held. A business day shall mean any day other than a Saturday,
Sunday or other day on which commercial banks in the City of
New York are authorized or required by law or executive order
to close.
Section 4. Reacquired Shares. Any shares of Series C Preferred
Stock purchased or otherwise acquired by the Company in any manner whatsoever
shall be retired and canceled promptly after the acquisition thereof. All such
shares shall upon their cancellation become authorized but unissued shares of
Preferred Stock and may be reissued as part of a new series of Preferred Stock
subject to the conditions and restrictions on issuance set forth herein, in the
Certificate of Incorporation or in any other certificate of designation creating
a series of Preferred Stock or Preferred Stock or any similar stock or as
otherwise required by law.
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<PAGE>
Section 5. Liquidation, Dissolution or Winding Up. Upon any
liquidation, dissolution or winding up of the Company, no distribution shall be
made (A) to holders of shares of stock ranking junior (either as to dividends or
upon liquidation, dissolution or winding up) to the Series C Preferred Stock
unless, prior thereto, the Series C Stockholders shall have received $10,000 per
share, or (B) to the holders of shares of stock ranking on a parity (either as
to dividends or upon liquidation, dissolution or winding up) with the Series C
Preferred Stock, except distributions made ratably on the Series C Preferred
Stock and all such parity stock in proportion to the total amounts to which the
holders of all such shares are entitled upon such liquidation, dissolution or
winding up. The Series C Preferred Stock shall rank on a parity with the
Company's Series A Preferred Stock, issued pursuant to the terms of the
Securities Purchase Agreement (and Senior to the shares of Series B Preferred
Stock), which Series A Preferred Stock will have a stated value of no more than
an aggregate of $21,000,000 and senior to the shares of the Company's Series B
Preferred Stock.
Section 6. Conversion.
(a) Each share of Series C Preferred Stock shall be
convertible at any time, at the option of the holder, thereof, into fully paid
and nonassessable shares of Common Stock at a rate of one share of Common Stock
for each $2.00 of Stated Value of Series C Preferred Stock, subject to
adjustment as set forth in this Section 6 (the "Conversion Price").
(b) The Conversion Price shall be adjusted from time to time
in certain cases as follows: if the Company, at any time or from time to time,
(1) declares a dividend on the Common Stock payable in shares of Common Stock,
(2) subdivides the outstanding Common Stock, (3) combines the outstanding Common
Stock into a smaller number of
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<PAGE>
shares or (4) issues any shares of its capital stock in respect of shares of
Common Stock in a reclassification of the Common Stock (including any such
reclassification in connection with a consolidation or merger in which the
Company is the continuing corporation), then in each such case, the Conversion
Price in effect at the time of the record date for such dividend or of the
effective date of such subdivision, combination or reclassification shall be
adjusted to that price which will permit the number of shares of Common Stock
(or, in the case of (4), other capital stock into which shares of Common Stock
have been converted) into which Series C Preferred Stock may be converted to be
increased or reduced in the same proportion as the number of shares of Common
Stock (or, in the case of (4), capital stock into which shares of Common Stock
have been converted) are increased or reduced in connection with such dividend,
subdivision, combination or reclassification. Any such adjustment shall become
effective immediately after the record date of such dividend or the effective
date of such subdivision, combination or reclassification. Such adjustments
shall be made successively whenever any event listed above occurs. In the event
a dividend is declared but such dividend is not paid, the Conversion Price shall
be adjusted to the Conversion Price in effect immediately prior to the record
date of such dividend.
(c) Conversion of the Series C Preferred Stock may be effected
by any Series C Stockholder upon the surrender to the Company at the Company's
principal executive office or at the office of any agent or agents of the
Company, as may be designated by the Board of Directors (the "Transfer Agent"),
of the certificate for such shares of the Series C Preferred Stock to be
converted (duly endorsed or assigned to the Company or in blank), or by transfer
of such shares to the Company's account through a securities clearing house,
accompanied by a written notice stating that such holder elects to
26
<PAGE>
convert all or a specified whole number of such shares in accordance with the
provisions of this Section 6 and specifying the name or names in which such
holder wishes the certificate or certificates for shares of Common Stock to be
issued. In case such notice specifies a name or names other than that of such
holder, such notice shall be accompanied by a payment of all transfer taxes
payable upon the issuance of shares of Common Stock in such name or names. Other
than such taxes, the Company shall pay any and all issue and other taxes (other
than taxes based on or measured by income or gain) that may be payable in
respect of any issue or delivery of shares of Common Stock upon conversion of
the Series C Preferred Stock pursuant hereto. As promptly as practicable, and in
any event within five business days after the surrender of such certificate or
certificates (or transfer of such shares through a clearing house) and the
receipt of such notice relating thereto and, if applicable, payment of all
transfer taxes (or the demonstration to the satisfaction of the Company that
such taxes have been paid), the Company shall deliver or cause to be delivered
(i) certificates representing the number of validly issued, fully paid and
nonassessable full shares of Common Stock equal to the number of shares of
Series C Preferred Stock that are being converted and (ii) if less than the full
number of shares of the Series C Preferred Stock evidenced by the surrender
certificate or certificates is being converted, a new certificate or
certificates, of like tenor, for the number of shares evidenced by such
surrendered certificate or certificates less the number of shares being
converted. Such conversion shall be deemed to have been made at the close of
business on the date of giving of such notice and of such surrender of the
certificate or certificates (or transfer of such shares through a clearing
house) representing the shares of the Series C Preferred Stock to be converted
so that the rights of the holder thereof as to the shares being converted shall
cease except for the right to
27
<PAGE>
receive shares of Common Stock (or other capital stock in accordance with
Section 6(b)) in accordance herewith, and the person entitled to receive the
shares of Common Stock (or other capital stock in accordance with Section 6(b))
shall be treated for all purposes as having become the record holder of such
shares of Common Stock (or other capital stock in accordance with Section 6(b))
at such time.
(d) Except as specifically provided in Subsection 6(c), the
issuance and delivery of certificates for shares of Common Stock upon the
conversion of shares of Series C Preferred Stock shall be made without charge to
a Series C Stockholder for such certificates or for any tax in respect of the
issuance or delivery of such certificates or the securities represented thereby.
(e) The Company shall at all times reserve and keep available
out of its authorized but unissued shares of Common Stock, solely for the
purpose of effecting the conversion of the shares of the Series C Preferred
Stock, such number of its shares of Common Stock, and such amount or number of
securities or other property (if the Series C Preferred Stock becomes
convertible into the same in accordance with the provisions of Section 6(b), as
are from time to time sufficient to effect the conversion of all outstanding
shares of the Series C Preferred Stock, and if at any time the number of
authorized by unissued shares of Common Stock is not sufficient to effect the
conversion of all then outstanding shares of the Series C Preferred Stock, the
Company shall take such corporate action as may, in the opinion of its counsel,
be necessary to increase the number of shares of its authorized but unissued
shares of Common Stock (or such securities or other property) to such number of
shares as shall be sufficient for such purpose, including, without limitation,
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engaging in best efforts to obtain the requisite shareholder approval of any
necessary amendment to the Certificate of Incorporation.
Section 7. Reports as to Adjustments. Upon any adjustment of
the Conversion Ratio then in effect and any increase or decrease in the number
of shares of Common Stock issuable upon the operation of the conversion set
forth in Section 6, then, and in each such case, the Company shall promptly
deliver to the Transfer Agent of the Series C Preferred Stock and Common Stock a
certificate signed by the President or a Vice President and by the Treasurer or
an Assistant Treasurer or the Secretary or an Assistant Secretary of the Company
setting forth in reasonable detail the event requiring the adjustment and the
method by which such adjustment was calculated and specifying the Conversion
Ratio then in effect following such adjustment and the increased or decreased
number of shares issuable upon the conversion set forth in Section 6. The
Company shall also promptly after the making of such adjustment give written
notice to the registered Series C Stockholder at the address of each holder as
shown on the books of the Company maintained by the Transfer Agent thereof,
which notice shall state the Conversion Ratio then in effect, as adjusted, and
the increased or decreased number of shares issuable upon the exercise of the
right of conversion granted by Section 6, and shall set forth in reasonable
detail the method of calculation of each and a brief statement of the facts
requiring such adjustment.
Section 8. Enforceability. If any provision of this
Certificate of Designation is held to be invalid or unenforceable, such holding
shall not affect the validity or enforceability of any other provision hereof.
29
<PAGE>
IN WITNESS WHEREOF, this Certificate of Designation is
executed on behalf of the Company by its Chairman of the Board of Directors and
attested by its Secretary as of the 12th day of June 1997.
/s/ Steven Geller
----------------------------------
Steve Geller
Chairman of the Board of Directors
30
<PAGE>
EXHIBIT 4.7
WARRANT AMENDMENT
THIS AMENDMENT is made as of May 6, 1997, by and among Empire of
Carolina, Inc., a Delaware corporation (the "Company"), HPA Associates, LLC, a
Delaware limited liability company ("HPA"), and EMP Associates LLC, a Delaware
limited liability company ("EMP"). Reference is hereby made to the Securities
Purchase Agreement by and among the Company, HPA and EMP, dated as of May 5,
1997 (the "Securities Purchase Agreement"), and the Common Stock Purchase
warrants, dated May 6, 1997, issued pursuant thereto (the "warrants").
Capitalized terms used in this Amendment and not otherwise defined herein have
the meanings ascribed to them in the Securities Purchase Agreement.
HPA and EMP are the sole holders of the currently outstanding warrants;
and the Company, HPA and EMP desire to amend the warrants as specified below.
NOW, THEREFORE, the parties hereto agree as follows:
Section 1. Amendment to the warrants.
Article 2(a) of the warrants is amended in its entirety to read as
follows:
"(a) Exercise; Payment of Purchase Price. Subject to the
provisions of Section 2.2.1.3 of the Securities Purchase
Agreement, this Warrant may be exercised, in whole or in part,
at any time and from time to time from and after the Permanent
Financing Final Date, as such date may be extended by the
parties to the Securities Purchase Agreement, and on or prior
to the Expiration Date by surrendering to the Company at its
principal office this Warrant, with the form of Election to
Purchase Shares attached hereto as Exhibit A duly executed by
the Holder and accompanied by payment of the Purchase Price
for the number of shares of Common Stock specified in such
form, in United States currency by wire transfer to an account
designated by the Company or delivery of a certified check or
bank check payable to the order of the Company."
Section 2. Counterparts; Effectiveness.
This Amendment may be executed in any number of counterparts and by
different parties hereto on separate counterparts, each of which counterparts,
when so executed and delivered, shall be deemed to be an original but all of
which counterparts, taken together, shall constitute but one and the same
instrument.
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IN WITNESS WHEREOF, the undersigned have executed, or have caused to be
executed, this Amendment on the date first written above.
EMPIRE OF CAROLINA, INC.
By: /s/ Steve Geller
---------------------------------------------
Name: Steve Geller
Title: Chairman and Chief Executive Officer
HPA ASSOCIATES, LLC
By: /s/ Charles S. Holmes
---------------------------------------------
Name:
Title: Managing Director
EMP ASSOCIATES LLC
By: EMP Management LLC
as Managing Member
By: /s/ J. Richard Messina
---------------------------------------------
Name: J. Richard Messina
Title: Manager
32
<PAGE>
EXHIBIT 4.8
WARRANT AGREEMENT (the "AGREEMENT"), dated as of June 17, 1997, by and
between Empire of Carolina, Inc., a Delaware corporation (the "COMPANY"), on the
one hand, and the holders from time to time of the warrants on the other (each,
a "HOLDER", and collectively, the "HOLDERS").
The Company has agreed to issue to the persons and in the amounts
designated by HPA Associates, LLC, a Delaware limited liability company ("HPA"),
warrants (the "OLD WARRANTS") to purchase up to an aggregate of 10,000,000
shares, subject to adjustment (the "WARRANT SHARES"), of Common Stock, par value
$.10 per share, of the Company pursuant to a Securities Purchase Agreement dated
as of May 5, 1997, as amended, among the Company, HPA and EMP Associates LLC,
a Delaware limited liability company ("EMP").
The parties hereto desire to restate the Old warrants in their entirety
pursuant to Section 18 of the Old warrants and to replace the Old warrants by
new warrants to be issued under this Agreement.
NOW, THEREFORE, in consideration of the premises and the mutual
agreements herein, the parties hereto agree as follows:
1. Definitions. For the purposes of this Agreement, the
following terms have the meanings indicated:
"Agreement" has the meaning ascribed to such term in the first
paragraph of this Agreement.
"Applicable Price" means the higher of (a) the Current Market
Price per share of Common Stock on the applicable record or other relevant date
and (b) the Purchase Price.
"Business Day" means any day other than a Saturday, Sunday or
other day on which commercial banks in the City of New York are authorized or
required by law or executive order to close.
"Closing Price" means, with respect to each share of Common
Stock for any day, (a) the last reported sale price regular way or, in case no
such sale takes place on such day, the average of the closing bid and asked
prices regular way, in either case as reported on the principal national
securities exchange on which the Common Stock is listed or admitted for trading,
or (b) if the Common Stock is not listed or admitted for trading on any national
securities exchange, the last reported sale price or, in case no such sale takes
place on such day, the average of the highest reported bid and the lowest
reported asked quotation for the Common Stock, in either case as reported on the
NASDAQ or a similar service if NASDAQ is no longer reporting such information.
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"Commission" means the Securities and Exchange Commission or
any successor authority thereof.
"Common Stock" means the shares of Common Stock, par value
$.10 per share, of the Company and any class or series of common stock of the
Company authorized after the date of this Agreement, or any other class of stock
resulting from successive changes or reclassifications of such Common Stock.
"Company" has the meaning ascribed to such term in the first
paragraph of this Agreement.
"Current Market Price" shall be determined in accordance with
Section 5(e).
"Election to Purchase Shares" has the meaning ascribed to such
term in Section 4(a).
"EMP" has the meaning ascribed to such term in the second
paragraph of this Agreement.
"Exchange Act" means the Securities Exchange Act of 1934, as
amended, and the rules and regulations promulgated thereunder.
"Exercise Date" has the meaning ascribed to such term in
Section 4(d).
"Expiration Date" means 5:00 P.M., New York City time, on May
6, 2003.
"Final Exercise Date" has the meaning ascribed to such term in
Section 11.
"Holder" has the meaning ascribed to such term in the first
paragraph of this Agreement.
"HPA" has the meaning ascribed to such term in the first
paragraph of this Agreement.
"NASDAQ" means the National Association of Securities Dealers
Automated Quotation system.
"Person" means any individual, firm, corporation, company,
partnership, trust, incorporated or unincorporated association, joint venture,
joint stock company, governmental authority or other entity of any kind, and
shall include any successor (by merger or otherwise) of such entity.
"Purchase Price" means $1.375 per Warrant Share, subject to
adjustment as provided under Section 5.
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"Registration Expenses" means the expenses set forth in
Section 14(e).
"Registrable Securities" has the meaning ascribed to such term
in Section 14(a).
"Securities Act" means the Securities Act of 1933, as amended,
and the rules and regulations of the Commission thereunder.
"Triggering Event" has the meaning ascribed to such term in
Section 11.
"Trigger Price" has the meaning ascribed to such term in
Section 11.
"Warrant" means the Old Warrants and the new warrants to be
issued pursuant to this Agreement.
"Warrant Register" has the meaning ascribed to such term in
Section 3.
"Warrant Share" has the meaning ascribed to such term in the
second paragraph of this Agreement.
2. Issuance of Warrants; Form of Warrants. The form of the Warrants
shall be substantially as set forth in Exhibit A attached hereto. The Warrants
shall be executed on behalf of the Company by the manual or facsimile signature
of the present or any future Chairman, President or Vice President of the
Company, under its corporate seal, affixed or in facsimile, attested by the
manual or facsimile signature of the Secretary or an Assistant Secretary of the
Company. Warrants shall be dated as of the date of the execution thereof by the
Company either upon initial issuance or upon division, exchange, including an
exchange of the Old Warrants for any new warrant issued hereunder, substitution
or transfer.
3. Registration. The Warrants shall be numbered and shall be registered
on the books of the Company (the "WARRANT REGISTER") as they are issued. The
Warrant Register shall reflect and identify, at all times, the ownership of any
interest in the Warrants. The Company shall be entitled to treat the registered
holder of any Warrant on the Warrant Register as the owner in fact thereof for
all purposes and shall not be bound to recognize any equitable or other claim to
or interest in such Warrant on the part of any other person, and shall not be
liable for any registration or transfer of Warrants which are registered or to
be registered in the name of a fiduciary or the nominee of a fiduciary unless
made with the actual knowledge that a fiduciary or nominee is committing a
breach of trust in requesting such registration or transfer, or with knowledge
of such facts that its participation therein amounts to bad faith. The Warrants
shall be issued to the persons and in the amounts specified by HPA.
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4. Exercise of Warrants.
(a) Exercise; Payment of Purchase Price. The Warrants may be
exercised, in whole or in part, at any time or from time to time on or prior to
the Expiration Date, by surrendering to the Company at its principal office the
Warrants, with the form of Election to Purchase Shares attached thereto (the
"ELECTION TO PURCHASE SHARES") duly executed by the Holder and accompanied by
payment of the Purchase Price for the number of shares of Common Stock specified
in such form, in United States currency by wire transfer to an account
designated by the Company or delivery of a certified check or bank check payable
to the order of the Company.
(b) Delivery of Shares. As soon as practicable after surrender
of the Warrants and receipt of payment, the Company shall promptly issue and
deliver to the Holder a certificate or certificates for the number of shares of
Common Stock set forth in the Election to Purchase Shares, in such name or names
as may be designated by such Holder, along with a check for the amount of cash
to be paid in lieu of issuance of fractional shares, if any.
(c) Partial Exercise. If a Warrant is exercised for less than
all of the shares of Common Stock purchasable under the Warrant, the Company
shall cancel the Warrant upon surrender hereof and shall execute and deliver to
the Holder a new Warrant of like tenor for the balance of the shares of Common
Stock purchasable thereunder.
(d) When Exercise Effective. The exercise of the Warrants
shall be deemed to have been effective immediately prior to the close of
business on the Business Day on which the Warrants are surrendered to and the
Purchase Price is received by the Company as provided in this Section 4 (the
"EXERCISE DATE"), and the Person in whose name any certificate for shares of
Common Stock shall be issuable upon such exercise, as provided in Section 4(b),
shall be deemed to be the record holder of such shares of Common Stock for all
purposes on the Exercise Date. If the last day for the exercise of the Warrants
is not a Business Day, then such exercise may be made on the next succeeding
Business Day.
5. Adjustment of Purchase Price and Number of Shares. The Purchase
Price, the Trigger Price and the number of shares of Common Stock issuable upon
exercise of the Warrants shall be adjusted from time to time upon the occurrence
of the following events:
(a) Dividend, Subdivision, Combination or Reclassification of
Common Stock. If the Company shall, at any time or from time to time, (i)
declare a dividend on the Common Stock payable in shares of its capital stock
(including Common Stock), (ii) subdivide the outstanding Common Stock, (iii)
combine the outstanding Common Stock into a smaller number of shares, or (iv)
issue any shares of its capital stock in a reclassification of the Common Stock
(including any such reclassification in connection with a consolidation or
merger in which the Company is the continuing corporation), then in each such
case, the Purchase Price and the Trigger Price in effect at the time of the
record date for such dividend or of the effective date of such subdivision,
combination or reclassification,
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and the number and kind of shares of capital stock issuable on such date shall
be proportionately adjusted so that the Holder of any Warrant exercised after
such date shall be entitled to receive, upon payment of the same aggregate
amount as would have been payable before such date, the aggregate number and
kind of shares of capital stock which, if such Warrant had been exercised
immediately prior to such date, such Holder would have owned upon such exercise
and been entitled to receive by virtue of such dividend, subdivision,
combination or reclassification. Any such adjustment shall become effective
immediately after the record date of such dividend or the effective date of such
subdivision, combination or reclassification. Such adjustment shall be made
successively whenever any event listed above shall occur. If a dividend is
declared and such dividend is not paid, the Purchase Price shall again be
adjusted to be the Purchase Price in effect immediately prior to such record
date.
(b) Issuance of Rights to Purchase Common Stock Below Current
Market Price or Purchase Price. If the Company shall, at any time or from time
to time, fix a record date for the issuance of rights or warrants to all holders
of Common Stock entitling them (for a period expiring within 45 calendar days
after such record date) to subscribe for or purchase Common Stock or securities
convertible into Common Stock at a price per share of Common Stock, or having a
conversion price per share of Common Stock, if a security is convertible into
Common Stock (determined in either such case by dividing (x) the total
consideration payable to the Company upon exercise, conversion or exchange of
such rights, warrants or other securities convertible into Common Stock by (y)
the total number of shares of Common Stock covered by such rights, warrants or
other securities convertible into Common Stock) lower than either the Current
Market Price per share of Common Stock to be issued upon exercise of the
Warrants on such record date (or, if an ex-dividend date has been established
for such record date, on the day next preceding such ex-dividend date) or the
Purchase Price, then the Purchase Price shall be reduced to the price determined
by multiplying the Purchase Price in effect immediately prior to such record
date by a fraction, the numerator of which shall be the sum of the number of
shares of Common Stock outstanding on such record date plus the number of
additional shares of Common Stock which the aggregate offering price of the
total number of shares of Common Stock so to be offered (or the aggregate
initial conversion price of the convertible securities so to be offered) would
purchase at the Applicable Price and the denominator of which shall be the
number of shares of Common Stock outstanding on such record date plus the number
of additional shares of Common Stock to be offered for subscription or purchase
(or into which the convertible securities so to be offered are initially
convertible). In case such price for subscription or purchase may be paid in a
consideration part or all of which shall be in a form other than cash, the value
of such consideration shall be determined in good faith by the Board of
Directors of the Company. Any such adjustment shall become effective immediately
after the record date for such rights or warrants. Such adjustment shall be made
successively whenever such a record date is fixed. If such rights or warrants
are not so issued, the Purchase Price shall be adjusted to the Purchase Price in
effect immediately prior to such record date.
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(c) Certain Distributions. If the Company shall, at any time
or from time to time, fix a record date for the distribution to all holders of
Common Stock (including any such distribution made in connection with a
consolidation or merger in which the Company is the continuing corporation) of
evidences of indebtedness, assets or other property (other than regularly
scheduled cash dividends or cash distributions payable out of consolidated
earnings or earned surplus or dividends payable in capital stock for which
adjustment is made under Section 5(a)) or subscription rights or warrants
(excluding those referred to in Section 5(b)), the Purchase Price shall be
reduced to the price determined by multiplying the Purchase Price in effect
immediately prior to such record date by a fraction (which shall in no event be
less than zero), the numerator of which shall be the Current Market Price per
share of Common Stock to be issued upon exercise of the Warrants on such record
date (or, if an ex-dividend date has been established for such record date, on
the next day preceding such ex-dividend date), less the fair market value (as
determined in good faith by the Board of Directors of the Company) of the
portion of the assets, evidences of indebtedness, other property, subscription
rights or warrants so to be distributed applicable to one share of Common Stock
and the denominator of which shall be such Current Market Price per share of
Common Stock to be issued upon exercise of the Warrants. Any such adjustment
shall become effective immediately after the record date for such distribution.
Such adjustments shall be made successively whenever such a record date is
fixed. In the event that such distribution is not so made, the Purchase Price
shall be adjusted to the Purchase Price in effect immediately prior to such
record date.
(d) Issuance of Common Stock Below Current Market Price or
Purchase Price. If the Company shall after the date hereof, directly or
indirectly, sell or issue shares of Common Stock (regardless of whether
originally issued or from the Company's treasury), or rights, options, warrants
or convertible or exchangeable securities containing the right to subscribe for
or purchase shares of Common Stock (excluding shares issued (i) in any of the
transactions described in Sections 5(a), (b) and (c), (ii) upon exercise of the
Warrants, (iii) upon the exercise or conversion of options, warrants or any
other securities convertible into or exchangeable for shares of Common Stock
outstanding as of the date hereof, and (iv) to the Company's employees,
independent contractors or directors under bona fide benefit plans approved or
adopted by the Company's Board of Directors, if such shares would otherwise be
included in this Section 5(d)) at a price per share of Common Stock (determined,
in the case of rights, options, warrants or convertible or exchangeable
securities, by dividing (x) the total consideration received or receivable by
the Company in consideration of the sale or issuance of such rights, options,
warrants or convertible or exchangeable securities, plus the total consideration
payable to the Company upon exercise or conversion or exchange thereof, by (y)
the total number of shares of Common Stock covered by such rights, options,
warrants or convertible or exchangeable securities) lower than either the
Current Market Price per share of Common Stock to be issued upon exercise of the
Warrants or the Purchase Price immediately prior to such sale or issuance, then
the Purchase Price shall be reduced to a price determined by multiplying the
Purchase Price in effect immediately prior thereto by a fraction, the numerator
of which shall be the sum of the number of shares of Common Stock outstanding
immediately prior to such sale or issuance plus the number of shares of Common
Stock which the aggregate consideration received
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(determined as provided below) for such sale or issuance would purchase at the
Applicable Price and the denominator of which shall be the total number of
shares of Common Stock outstanding immediately after such sale or issuance. Such
adjustment shall be made successively whenever such sale or issuance is made.
For the purposes of such adjustments, the shares of Common Stock which the
holder of any such rights, options, warrants, or convertible or exchangeable
securities shall be entitled to subscribe for or purchase shall be deemed to be
issued and outstanding as of the date of such sale or issuance and the
consideration "received" by the Company therefor shall be deemed to be the
consideration actually received or receivable by the Company (plus any
underwriting discounts or commissions in connection therewith) for such rights,
options, warrants or convertible or exchangeable securities, plus the
consideration stated in such rights, options, warrants or convertible or
exchangeable securities to be payable to the Company for the shares of Common
Stock covered thereby. If the Company shall sell or issue shares of Common Stock
for a consideration consisting, in whole or in part, of property other than cash
or its equivalent, then in determining the "price per share of Common Stock" and
the "consideration" received or receivable by or payable to the Company for
purposes of the first sentence and the immediately preceding sentence of this
Section 5(d), the fair value of such property shall be determined in good faith
by the Board of Directors of the Company. The determination of whether any
adjustment is required under this Section 5(d) by reason of the sale and
issuance of rights, options, warrants or convertible or exchangeable securities
and the amount of such adjustment, if any, shall be made only at the time of
such issuance or sale and not at the subsequent time of issuance of shares of
Common Stock upon the exercise of such rights to subscribe or purchase. Any such
adjustment shall become effective immediately after the record date of such
issuance or sale. Such adjustment shall be made successively whenever any event
listed above shall occur. In the event that such issuance or sale of shares of
Common Stock or rights, options, warrants or convertible or exchangeable
securities containing the right to subscribe for or purchase shares of Common
Stock, at a price below the Current Market Price or the Purchase Price, is not
made, the Purchase Price shall be adjusted to the Purchase Price in effect
immediately prior to such record date.
(e) Determination of Current Market Price. For the purpose of
any computation under paragraph (b), (c) or (d) of this Section 5 or any other
provision of this Agreement, the Current Market Price per share of Common Stock
on any date shall be deemed to be the average of the daily Closing Prices per
share of Common Stock for the 10 consecutive trading days commencing 15 trading
days before such date. If on any such date the shares of Common Stock are not
listed or admitted for trading on any national securities exchange or quoted by
NASDAQ or a similar service, the Current Market Price for such shares shall be
the fair market value of such shares on such date as determined in good faith by
a committee of disinterested members of the Board of Directors of the Company
based on a written opinion of an independent investment banking firm of
nationally recognized stature.
(f) De Minimis Adjustments. No adjustment in the Purchase
Price shall be made if the amount of such adjustment would result in a change in
the Purchase Price per share of less than $.02, but in such case any adjustment
that would otherwise be required to be made shall be carried forward and shall
be made at the time of and together with the next
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subsequent adjustment that, together with any adjustment so carried forward,
would result in a change in the Purchase Price of $.05 per share. If the Company
shall, at any time or from time to time, issue Common Stock by way of dividends
on any stock of the Company or subdivide or combine the outstanding shares of
the Common Stock, such amounts of $.02 and $.05 (as theretofore increased or
decreased, if such amounts shall have been adjusted in accordance with the
provisions of this clause) shall forthwith be proportionately increased in the
case of a combination or decreased in the case of a subdivision or stock
dividend so as appropriately to reflect the same. Notwithstanding the provisions
of the first sentence of this Section 5(f), any adjustment postponed pursuant to
this Section 5(f) shall be made no later than the earlier of (i) three years
from the date of the transaction that would, but for the provisions of the first
sentence of this Section 5(f), have required such adjustment, (ii) an Exercise
Date or (iii) the Expiration Date.
(g) Adjustments to Other Shares. In the event that at any
time, as a result of an adjustment made pursuant to Section 5(a), any Holder
shall become entitled to receive, upon exercise of the Warrants, any shares of
capital stock of the Company other than shares of Common Stock, the number of
such other shares so receivable upon exercise of the Warrants shall be subject
to adjustment from time to time in a manner and on terms as nearly equivalent as
practicable to the provisions with respect to the shares of Common Stock
contained in Section 5(a), (b), (c) and (d), inclusive, and the provisions of
Sections 4, 6, 7, 8 and 9 with respect to the shares of Common Stock shall apply
on like terms to any such other shares.
(h) Adjustment of Number of Shares Issuable Upon Exercise.
Upon each adjustment of the Purchase Price as a result of the calculations made
in Section 5(a), (b), (c) or (d), the Warrants shall thereafter evidence the
right to receive, at the adjusted Purchase Price, that number of shares of
Common Stock (calculated to the nearest one-hundredth) obtained by dividing (x)
the product of the aggregate number of shares of Common Stock covered by the
Warrants immediately prior to such adjustment and the Purchase Price in effect
immediately prior to such adjustment of the Purchase Price by (y) the Purchase
Price in effect immediately after such adjustment of the Purchase Price.
6. Reorganization, Reclassification, Merger and Sale of Assets. If
there occurs any capital reorganization or any reclassification of the Common
Stock of the Company, the consolidation or merger of the Company with or into
another Person (other than a merger or consolidation of the Company in which the
Company is the continuing corporation and which does not result in any
reclassification or change of outstanding shares of its Common Stock) or the
sale or conveyance of all or substantially all of the assets of the Company to
another Person, then the Holders will thereafter be entitled to receive, upon
the exercise of the Warrants in accordance with the terms hereof, the same kind
and amounts of securities (including shares of stock) or other assets, or both,
which were issuable or distributable to the holders of outstanding Common Stock
of the Company upon such reorganization, reclassification, consolidation,
merger, sale or conveyance, in respect of that number of shares of Common Stock
then deliverable upon the exercise of the Warrants if the Warrants had been
exercised immediately prior to such reorganization, reclassification,
consolidation,
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merger, sale or conveyance; and, in any such case, appropriate adjustments (as
determined in good faith by the Board of Directors of the Company) shall be made
to assure that the provisions hereof (including provisions with respect to
changes in, and other adjustments of, the Purchase Price) shall thereafter be
applicable, as nearly as reasonably may be practicable, in relation to any
securities or other assets thereafter deliverable upon exercise of the Warrants.
7. Certificate as to Adjustments. Whenever the Purchase Price and the
number of shares of Common Stock issuable, or the securities or other property
deliverable, upon the exercise of the Warrants shall be adjusted pursuant to the
provisions hereof, the Company shall promptly give written notice thereof to the
Holders, in accordance with Section 20, in the form of a certificate signed by
the Chairman, President or one of the Vice Presidents of the Company, and by the
Chief Financial Officer, Treasurer or one of the Assistant Treasurers of the
Company, stating the adjusted Purchase Price, the number of shares of Common
Stock issuable, or the securities or other property deliverable, upon exercise
of the Warrants calculated to the nearest cent or the nearest one one-hundredth
of a share and setting forth in reasonable detail the method of calculation and
the facts requiring such adjustment and upon which such calculation is based.
Each adjustment shall remain in effect until a subsequent adjustment is
required.
8. Fractional Shares. Notwithstanding any adjustment pursuant to
Section 5(h) in the number of shares of Common Stock covered by the Warrants or
any other provision of this Agreement, the Company shall not be required to
issue fractions of shares upon exercise of the Warrants or to distribute
certificates which evidence fractional shares. In lieu of fractional shares, the
Company may make payment to the Holders, at the time of exercise of the Warrants
as herein provided, of an amount in cash equal to such fraction multiplied by
the greater of the Current Market Price of a share of Common Stock on the
Exercise Date and the Purchase Price.
9. Notice of Proposed Actions. In case the Company shall propose at any
time or from time to time (a) to declare or pay any dividend payable in stock of
any class to the holders of Common Stock or to make any other distribution to
the holders of Common Stock (other than a regularly scheduled cash dividend),
(b) to offer to the holders of Common Stock rights or warrants to subscribe for
or to purchase any additional shares of Common Stock or shares of stock of any
class or any other securities, rights or options, (c) to effect any
reclassification of its Common Stock, (d) to effect any consolidation, merger or
sale, transfer or other disposition of all or substantially all of the property,
assets or business of the Company which would, if consummated, adjust the
Purchase Price or the securities issuable upon exercise of the Warrants, (e) to
effect the liquidation, dissolution or winding up of the Company, or (f) to take
any other action that would require a vote of the Company's stockholders, then,
in each such case, the Company shall give to the Holders, in accordance with
Section 20, a written notice of such proposed action, which shall specify (i)
the record date for the purposes of such stock dividend, distribution of rights
or warrants or vote of the stockholders of the Company, or if a record is not to
be taken, the date as of which the holders of shares of Common Stock of record
to be entitled to such dividend,
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distribution of rights or warrants, or vote is to be determined, or (ii) the
date on which such reclassification, consolidation, merger, sale, transfer,
disposition, liquidation, dissolution or winding up is expected to become
effective, and such notice shall be so given as promptly as possible but in any
event at least ten (10) Business Days prior to the applicable record,
determination or effective date specified in such notice.
10. No Dilution or Impairment. The Company shall not, by amendment of
its Certificate of Incorporation or through any reorganization, transfer of
assets, consolidation, merger, dissolution, issue or sale of securities or any
other action, avoid or seek to avoid the observance or performance of any of the
terms of this Agreement or the Warrants, but shall at all times in good faith
assist in the carrying out of all such terms and in the taking of all such
action as may be necessary or appropriate in order to protect the rights of the
Holders of the Warrants against dilution or other impairment. Without limiting
the generality of the foregoing, the Company (a) shall not increase the par
value of any shares of stock receivable on the exercise of the Warrants above
the amount payable therefor on such exercise, (b) shall at all times reserve and
keep available the maximum number of its authorized shares of Common Stock, free
from all preemptive rights therein, which will be sufficient to permit the full
exercise of the Warrants, and (c) shall take all such action as may be necessary
or appropriate in order that all shares of Common Stock as may be issued
pursuant to the exercise of the Warrants will, upon issuance, be duly and
validly issued, fully paid and nonassessable, and free from all taxes, liens and
charges with respect to the issue thereof.
11. Mandatory Exercise. Notwithstanding the provisions of Section 4,
if, at any time after May 6, 2000, the Closing Price of shares of Common Stock
for a period of not less than thirty (30) consecutive trading days is equal to
or greater than the following "Trigger Prices" (subject to adjustment as set
forth in Section 5(a)) for any of the following periods:
Period Trigger Price
May 7, 2000 to May 6, 2001 $6.25
May 7, 2001 to May 6, 2002 $7.75
May 7, 2002 to February 28, 2003 $9.25
(each such event being referred to herein as the "TRIGGERING EVENT"), the
Company may elect to cancel all Warrants that have not been exercised pursuant
to Section 4 and that remain outstanding on or prior to the date that is 45 days
from the Triggering Event (the "FINAL EXERCISE DATE"), without compensation to
the Holders for their loss. To invoke such mandatory exercise mechanism, the
Company shall provide written notice to each Holder of Warrants, which notice
shall be mailed no later than the 35th day before the Final Exercise Date, by
registered mail, return receipt requested, which notice shall (i) state that a
Triggering Event has occurred and inform the Holders of Warrants that the
Company has elected to cancel all Warrants that have not been exercised on or
prior to the Final Exercise Date, (ii) set forth the Purchase Price then in
effect and the number of shares of Common Stock that may be purchased upon
exercise of the Warrants and (iii) inform the Holders that
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all Warrants that have not been exercised in compliance with Section 4 by the
close of business on the Final Exercise Date shall automatically be canceled in
accordance with this Section 11 and that all rights of the Holders of such
Warrants as holders will cease with respect to such Warrants at such time. No
failure to mail such notice nor any defect therein or in the mailing thereof
shall affect the validity of the proceedings for such mandatory exercise except
as to a Holder (a) to whom notice was not mailed or (b) whose notice was
defective. Effective at 5:00 P.M. (New York City time) on the Final Exercise
Date, all Warrants then outstanding shall be canceled and the Holders thereof
shall have no further rights thereunder. In connection herewith, the Company
shall comply with all other notification requirements of any securities
exchanges and other markets on which any securities of the Company are traded.
12. Replacement of Warrants. On receipt by the Company of an affidavit
of an authorized representative of a Holder stating the circumstances of the
loss, theft, destruction or mutilation of any Warrant (and in the case of any
such mutilation, on surrender and cancellation of such Warrant) and of such bond
and indemnification as the Company may reasonably require, the Company at its
expense will promptly execute and deliver, in lieu thereof, a new Warrant of
like tenor.
13. Divisibility of Warrants; Transfer.
(a) The Warrants may be divided into warrants of [one hundred]
shares or multiples thereof, upon surrender at the principal office of the
Company, without charges to the Holders. Upon such division, the Warrants may be
transferred of record as the Holders may specify without charge to the Holders
(other than any applicable transfer taxes). In addition, Holders shall also have
the right to transfer the Warrants in their entirety to any Person.
(b) The term "Holder" as used herein shall also include any
transferee of the Warrants whose name has been recorded by the Company in the
Warrant Register. Subject to Section 14 hereof, each transferee of the Warrants
acknowledges that the Warrants have not been registered under the Securities Act
and may be transferred only pursuant to an effective registration under the
Securities Act or pursuant to an applicable exemption from the registration
requirements of the Securities Act.
(c) Upon surrender for registration of transfer or exchange of
the Warrants together with a properly completed and executed Form of Assignment
attached thereto and all documents required to be provided by the Form of
Assignment, at the principal office of the Company, the Company shall, at its
expense, execute and deliver one or more new Warrants of like tenor which shall
be exercisable for a like aggregate number of shares of Common Stock, registered
in the name of the Holder or a transferee or transferees upon partial exercises
return balance. Partial exercise of any Warrant issued hereunder shall be
subject to Section 4(d).
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14. Registration Rights. The Holders of the Warrants and of the
Warrant Shares shall be entitled to the following registration rights:
(a) Shelf Registration. Within 180 days from the Closing Date,
the Company shall cause to be filed a registration statement (a "SHELF
REGISTRATION") on Form S-3 or any other appropriate form under the Securities
Act for an offering to be made on a delayed or continuous basis pursuant to Rule
415 thereunder or any similar rule that may be adopted by the Commission and
permitting (i) sales of Warrants, both in ordinary course brokerage or dealer
transactions or in any other transfer for consideration not involving an
underwritten public offering, and (ii) the sale of Warrant Shares (together, the
"REGISTRABLE SECURITIES") (and in both cases shall register or qualify the
shares to be sold in such offering under such other securities or "blue sky"
laws, if any, as would be required pursuant to paragraph (d)(ii) hereof). In
addition, shares of Common Stock ("HPA PARTY COMMON STOCK") that are acquired
upon the exercise of Warrants by HPA, Charles S. Holmes or James J. Pinto, or
any direct or indirect transferee of Warrants from any of them in transactions
not involving a public offering (an "HPA PERSON"), shall constitute Registrable
Securities and, subject to paragraph (c) below, shall be registered as part of
the Shelf Registration promptly upon such party's request. Prior to the filing
of the Shelf Registration or any supplement or amendment thereto, the Company
will furnish copies of the Shelf Registration or such amendment to one counsel
designated by HPA, and will not file the Shelf Registration or such amendment
without the prior consent of such counsel, which consent shall not be
unreasonably withheld. The Company shall use its reasonable efforts to (1) cause
the Shelf Registration to be declared effective by the Commission as soon as
practicable after its filing with the Commission and (2) keep the Shelf
Registration continuously effective, subject to paragraph (c) below. The Company
shall, if necessary, supplement or make amendments to the Shelf Registration, if
required by the registration form used by the Company for the Shelf Registration
or by the instructions applicable to such registration form or by the Securities
Act or the rules or regulations thereunder or as may reasonably be requested by
HPA. The Company shall pay all Registration Expenses incurred in connection with
the Shelf Registration.
(b) Piggyback Registration. At any time prior to May 6, 2000
(or, with respect to the HPA Party Common Stock, so long as shares of HPA Party
Common Stock are held by an HPA Party who is an affiliate of the Company for
purposes of Rule 144 (as defined below)), whenever the Company proposes to file
a registration statement under the Securities Act with respect to an
underwritten public offering of Common Stock by the Company for its own account
or for the account of any other holder of Common Stock, the Company shall give
written notice (the "OFFERING NOTICE") of such proposed filing to each Holder of
at least 100,000 Warrants at least 30 days before the anticipated filing date.
Such Offering Notice shall offer all such Holders the opportunity to register
such number of Warrants or HPA Party Common Stock as each such Holder may
request in writing, which request for registration (each, a "PIGGYBACK
REGISTRATION") must be received by the Company within 15 days after the Offering
Notice is given. The Company shall use all reasonable efforts to cause the
managing underwriter or underwriters of a proposed underwritten offering to
permit the Holders of the Registrable Securities requested to be
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included in the registration for such offering to include such Registrable
Securities in such offering on the same terms and conditions as the securities
of the Company included therein. Notwithstanding the foregoing, if the managing
underwriter or underwriters of a proposed underwritten offering advise the
Company in writing that in its or their opinion the number of Registrable
Securities proposed to be sold in such offering exceeds the number of
Registrable Securities that can be sold in such offering without adversely
affecting the market for the Company's securities or the price that may be
obtained in such offering, the Company will include in such registration the
number of Registrable Securities that in the opinion of such managing
underwriter or underwriters can be sold without adversely affecting the market
for the Company's common stock or the price to be received in such offering. In
such event, the number of Registrable Securities, if any, to be offered for the
accounts of Holders shall be reduced pro rata on the basis of the relative
number of any Registrable Securities requested by each such Holder to be
included in such registration to the extent necessary to reduce the total number
of Registrable Securities to be included in such offering to the number
recommended by such managing underwriter or underwriters, provided that if any
other Person has rights to a Piggyback Registration with respect to the same
underwritten public offering, the rights of the Holders to sell their securities
together with such other Persons holding Piggyback Rights shall be cut back
proportionately (in relation to the number of shares that each Person so
participating in the Piggyback Registration has requested to be included
compared to the number of all shares with respect to which inclusion has been
properly requested (with Warrants to be considered shares for the purposes of
this calculation)), except to the extent that the instrument providing for such
other Piggyback Rights specifically provides that the rights held by such other
Person either take precedence over or shall be subordinated to the Piggyback
Rights held by the Holders hereunder. The Company shall pay all Registration
Expenses incurred in connection with any Piggyback Registration.
(c) Termination of Registration Rights; Provision of Rule 144
Information. As used in this section "affiliate" has the meaning given to it in
Rule 144 under the Securities Act ("RULE 144"). The registration rights provided
hereunder shall continue so long as any Warrants remain outstanding and shall
then terminate (except in the case of HPA Party Common Stock), provided that (i)
the Company shall be entitled to remove from registration under paragraph (a)
Warrants held by Persons (other than HPA Persons who are affiliates of the
Company) who have acquired such Warrants for consideration pursuant to a
transaction covered by the registration provided by paragraph (a), and (ii) at
any time after two years after the date of the issuance of the Warrants, so long
as the Warrants are freely tradable under Rule 144 in the hands of Persons who
are not affiliates of the Company, (A) the Company shall be entitled to remove
Warrants held by non-affiliates from registration under paragraph (a) and, (B)
if no HPA Person remains an affiliate of the Company, or no HPA Person who is an
affiliate of the Company owns more than 1% of the then outstanding Warrants,
registration of the Warrants under paragraph (a) shall no longer be required.
Registration may terminate with respect to HPA Party Common Stock when, and to
the extent that, no HPA Person who remains an affiliate of the Company owns more
than 1% of the then outstanding shares of Common Stock.
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For a period of at least two years, and continuing while any HPA Person
remains an affiliate of the Company and continues to hold Warrants or HPA Party
Common Stock, the Company shall be required (i) to file such reports under the
Exchange Act, or otherwise make publicly available such information, as may be
required by section (c) of Rule 144 in order for sales to be permitted under the
provisions of Rule 144 and (ii) to provide confirmation of such filing or
availability upon request to any Holder or HPA Person who seeks to rely upon
Rule 144 (other than section (k) thereof) in the sale of Warrants or HPA Party
Common Stock.
(d) Registration Procedures. Whenever Registrable Securities
are to be registered pursuant hereto, the Company shall use its best efforts to
effect the registration of Registrable Securities in accordance with the
intended method of disposition thereof as expeditiously as practicable and, in
connection with any such request, the Company shall as expeditiously as
possible:
(i) furnish to each seller of
Registrable Securities such number of copies of the registration statement, each
amendment and supplement thereto (in each case including all exhibits thereto),
the prospectus included in such registration statement (including each
preliminary prospectus) and such other documents as each seller may reasonably
request in order to facilitate the disposition of the Registrable Securities
owned by such seller;
(ii) if required, use best efforts to
register or qualify such Registrable Securities under such other securities or
"blue sky" laws of such jurisdictions as any seller reasonably requests in
writing and to do any and all other acts and things that may be reasonably
necessary or advisable to register or qualify for sale in such jurisdictions the
Registrable Securities owned by such seller; provided, however, that the Company
shall not be required to (i) qualify generally to do business in any
jurisdiction where it is not then so qualified, (ii) subject itself to taxation
in any such jurisdiction, (iii) consent to general service of process in any
such jurisdiction or (iv) provide any undertaking required by such other
securities or "blue sky" laws or make any change in its charter or by-laws that
the Board of Directors of the Company determines in good faith to be contrary to
the best interest of the Company and its stockholders;
(iii) use best efforts to cause the
Registrable Securities covered by such registration statement to be registered
with or approved by such other governmental agencies or authorities as may be
necessary by virtue of the business and operations of the Company to enable the
seller or sellers thereof to consummate the disposition of such Registrable
Securities;
(iv) notify each seller of such
Registrable Securities at any time when a prospectus relating thereto is
required to be delivered under the Securities Act of the happening of any event
as a result of which the prospectus included in such registration statement
contains an untrue statement of a material fact or omits to state any material
fact required to be stated therein or necessary to make the statements therein,
in light of the
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circumstances under which they were made, not misleading, and prepare and file
with the Commission a supplement or amendment to such prospectus so that, as
thereafter delivered to the purchasers of such Registrable Securities, such
prospectus will not contain an untrue statement of a material fact or omit to
state any material fact required to be stated therein or necessary to make the
statements therein, in light of the circumstances under which they were made,
not misleading, provided, in the use of a Piggyback Registration, that prior to
the filing of such supplement or amendment, the Company will furnish copies
thereof to the Holders whose shares or Warrants are included in such
registration, any underwriters and counsel for such Holders, and will not file
such supplement or amendment without the prior consent of such counsel, which
consent shall not be unreasonably withheld;
(v) enter into customary agreements
(including an underwriting agreement in customary form) if the offering is an
underwritten offering) and take such other actions as are reasonably required in
order to expedite or facilitate the disposition of such Registrable Securities;
(vi) make available for inspection by any
seller of Registrable Securities and any attorney, accountant or other agent
retained by any such seller (collectively, the "INSPECTORS"), all financial and
other records, pertinent corporate documents and properties of the Company
(collectively, the "RECORDS") as are reasonably necessary to enable them to
exercise their due diligence responsibility, and cause the Company's officers,
directors, employees and agents to supply all information reasonably requested
by any such Inspector in connection with such registration statement. Records
that the Company determines, in good faith, to be confidential and that it
notifies the Inspectors are confidential shall not be disclosed by the
Inspectors unless (i) the disclosure of such Records is, in the reasonable
judgment of any Inspector, necessary to avoid or correct a misstatement or
omission of a material fact in the registration statement or (ii) the release of
such Records is ordered pursuant to a subpoena or other order from a court or
governmental agency of competent jurisdiction or required (in the written
opinion of counsel to such Holder or underwriter, which counsel shall be
reasonably acceptable to the Company) pursuant to applicable state or federal
law. Each seller of Registrable Securities shall be required to agree, however,
that it will, upon learning that disclosure of such Records are sought by a
court or governmental agency, give notice to the Company and allow the Company,
at the Company's expense, to undertake appropriate action to prevent disclosure
of the Records deemed confidential;
(vii) if such sale is pursuant to an
underwritten offering, use reasonable efforts to obtain a "cold comfort" letter
and updates thereof from the Company's independent public accountants in
customary form and covering such matters of the type customarily covered by
"cold comfort" letters as the managing underwriter or underwriters reasonably
request; and
(viii) otherwise use its best efforts to
comply with all applicable rules and regulations of the Commission, and make
generally available to its security holders, as soon as reasonably practicable,
an earnings statement covering a period of 12 months,
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beginning within three months after the effective date of the registration
statement, which earnings statement shall satisfy the provisions of Section
11(a) of the Securities Act.
Provided that the applicable listing requirements continue to be
satisfied, the Company shall use its best efforts to maintain the listing of the
Common Stock on the American Stock Exchange or, if such stock is delisted from
the American Stock Exchange, to provide for the listing of the Common Stock on
NASDAQ/NMS; and provided that such a listing continues to be in effect, the
Company shall cause any Common Stock received upon the exercise of the Warrants
to be listed on the applicable market. In the case of the Warrants, if (i) at
least 500,000 Warrants have been sold pursuant to one or more Piggyback
Registrations or (ii) Holders of at least 20% of the then outstanding Warrants
request the Company to make a determination whether the public distribution and
float of the Warrants will qualify for such a listing and the Company determines
that the applicable standards have been met, the Company shall use its best
efforts to cause the Warrants to be registered under the Exchange Act and to be
listed for trading on each securities market, if any, on which the Common Stock
is then listed or, with the consent of the Company (which shall not be
unreasonably withheld), on any other United States securities exchange that is
registered under the Exchange Act or over-the-counter market that is maintained
by the National Association of Securities Dealers, Inc.
The Company may require each seller or prospective seller of
Registrable Securities as to which any registration is being effected to furnish
to the Company such information regarding the distribution of such securities
and other matters as may be required to be included in the registration
statement.
Upon receipt of any notice from the Company of the happening of any
event of the kind described in clause (iv), each holder of Registrable
Securities shall forthwith discontinue disposition of Registrable Securities
pursuant to the registration statement covering such Registrable Securities
until such holder's receipt of the copies of the supplemented or amended
prospectus contemplated by this clause (iv) and, if so directed by the Company,
such holder shall deliver to the Company (at the Company's expense) all copies,
other than permanent file copies then in such holder's possession, of the
prospectus covering such Registrable Securities current at the time of receipt
of such notice. If the Company gives any such notice, the Company shall extend
the period during which such registration statement shall be maintained
effective pursuant to this Agreement by the number of days during the period
from and including the date of the giving of such notice pursuant to clause (iv)
to and including the date when each seller of Registrable Securities covered by
such registration statement shall have received the copies of the supplemented
or amended prospectus contemplated in clause (iv). Notwithstanding anything to
the contrary set forth above in this paragraph, the Company may not require the
holders of Registrable Securities to discontinue disposition of Registrable
Securities for purposes of effecting a public offering of any securities of the
Company by any of its securityholders (other than an offering made pursuant to a
registration on Form S-8). Notwithstanding the foregoing, if the Company
furnishes to the Holders a certificate signed by the Chief Financial Officer of
the Company stating that (i) in the good faith judgment of the Board of
Directors of the Company it would be
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significantly disadvantageous to the Company and its stockholders for any such
Shelf Registration to be amended or supplemented and (ii) the need for such an
amendment or supplement is not caused by a proposed secondary public offering of
securities of the Company by any of its securityholders (other than an offering
made pursuant to a registration on Form S-8), the Company may defer such
amending or supplementing of such Shelf Registration for not more than 45 days
and in such event the Holders shall be required to discontinue disposition of
any Registrable Securities covered by such Shelf Registration during such
period. Notwithstanding the foregoing, in connection with any amendment or
supplement required to reflect a public offering of securities by the Company,
the Company shall file such amendment or supplement no later than the same day
that it files a registration statement relating to such offering and shall
provide written notice of the filing of such amendment or supplement to the
holders of Registrable Securities promptly following such filing.
(e) Registration Expenses. The Company shall pay all expenses
incident to its performance of or compliance with this Agreement, regardless of
whether such registration becomes effective including, without limitation, (a)
all Commission, stock exchange or market and National Association of Securities
Dealers, Inc. registration and filing fees, (b) all fees and expenses incurred
in complying with securities or "blue sky" laws (including reasonable fees and
disbursements of counsel in connection with "blue sky" qualifications of the
Registrable Securities), (c) all printing, messenger and delivery expenses, (d)
all fees and disbursements of the Company's independent public accountants and
counsel, (e) all fees and expenses of any special experts retained by the
Company in connection with any Piggyback Registration pursuant to the terms of
this Agreement, and (f) the fees and disbursements of one counsel retained
collectively by the Holders for a registration; provided, however, that the
Company shall not pay the costs and expenses of any counsel, accountants or
other representatives retained by the Holders, individually or in the aggregate.
(f) Indemnification; Contribution.
(1) Indemnification by the Company. The Company
shall indemnify, to the fullest extent permitted by law, each Holder, its
officers, directors and agents and each Person, if any, who controls such Holder
(within the meaning of the Securities Act) (it being understood that, for these
purposes, an HPA Person who is an affiliate of the Company shall be considered a
Holder in respect of HPA Party Common Stock), against any and all losses,
claims, damages, liabilities and expenses caused by any untrue or alleged untrue
statement of material fact contained in any registration statement, prospectus
or preliminary prospectus or any amendment thereof or supplement thereto or any
omission or alleged omission to state therein a material fact required to be
stated therein or necessary to make the statements therein (in the case of a
prospectus, in light of the circumstances under which they were made) not
misleading, except insofar as the same are caused by or contained in any
information with respect to such Holder furnished in writing to the Company by
such Holder expressly for use therein or by such Holder's failure to deliver a
copy of the prospectus or any supplements thereto after the Company has
furnished such
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Holder with a sufficient number of copies of the same or by the delivery of
prospectuses by such Holder after the Company notified such Holder in writing to
discontinue delivery of prospectuses. The Company also shall indemnify any
underwriters of the Registrable Securities, their officers and directors and
each Person who controls such underwriters (within the meaning of the Securities
Act) to the same extent as provided above with respect to the indemnification of
the Holders.
(2) Indemnification by Holders. In connection
with any registration statement in which a Holder is participating, each such
Holder shall furnish to the Company in writing such information and affidavits
with respect to such Holder as the Company reasonably requests for use in
connection with any such registration statement or prospectus and agrees to
indemnify, severally and not jointly, to the fullest extent permitted by law,
the Company, its officers, directors and agents and each Person, if any, who
controls the Company (within the meaning of the Securities Act) against any and
all losses, claims, damages, liabilities and expenses resulting from any untrue
or alleged untrue statement of a material fact or any omission or alleged
omission of a material fact required to be stated in any registration statement,
prospectus or preliminary prospectus or any amendment thereof or supplement
thereto or necessary to make the statements therein (in the case of a
prospectus, in light of the circumstances under which they were made) not
misleading, to the extent, but only to the extent, that such untrue or alleged
untrue statement or omission is contained in or improperly omitted from, as the
case may be, any information or affidavit with respect to such Holder so
furnished in writing by such Holder. Each Holder also shall indemnify any
underwriters of the Registrable Securities, their officers and directors and
each Person who controls such underwriters (within the meaning of the Securities
Act) to the same extent as provided above with respect to the indemnification of
the Company.
(3) Conduct of Indemnification Proceedings. Any
party that proposes to assert the right to be indemnified hereunder shall,
promptly after receipt of notice of commencement of any action against such
party in respect of which a claim is to be made against an indemnifying party or
parties hereunder, notify each such indemnifying party of the commencement of
such action, enclosing a copy of all papers served, but the omission so to
notify such indemnifying party will not relieve it from any liability that it
may have to any indemnified party under the foregoing provisions unless, and
only to the extent that, such omission results in the forfeiture of substantive
rights or defenses by the indemnifying party. If any such action is brought
against any indemnified party and it notifies the indemnifying party of its
commencement, the indemnifying party will be entitled to participate in and, to
the extent that it elects by delivering written notice to the indemnified party
promptly after receiving notice of the commencement of the action from the
indemnified party, jointly with any other indemnifying party similarly notified,
to assume the defense of the action, with counsel reasonably satisfactory to the
indemnified party, and after notice from the indemnifying party to the
indemnified party of its election to assume the defense, the indemnifying party
will not be liable to the indemnified party for any legal or other expenses
except as provided below and except for the reasonable costs of investigation
subsequently incurred by the indemnified party in connection with the defense.
If the indemnifying party assumes the defense, the indemnifying party shall have
the right to settle
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such action without the consent of the indemnified party; provided, however,
that the indemnifying party shall be required to obtain such consent (which
consent shall not be unreasonably withheld) if the settlement includes any
admission of wrongdoing on the part of the indemnified party or any decree or
restriction on the indemnified party or its officers or directors; provided,
further, that no indemnifying party, in the defense of any such action, shall,
except with the consent of the indemnified party (which consent shall not be
unreasonably withheld), consent to entry of any judgment or enter into any
settlement that does not include as an unconditional term thereof the giving by
the claimant or plaintiff to such indemnified party of a release from all
liability with respect to such action against the indemnified party. The
indemnified party will have the right to employ its own counsel in any such
action, but the fees, expenses and other charges of such counsel will be at the
expense of such indemnified party unless (a) the employment of counsel by the
indemnified party has been authorized in writing by the indemnifying party, (b)
the indemnified party has reasonably concluded (based on advice of counsel) that
there may be legal defenses available to it or other indemnified parties that
are different from or in addition to those available to the indemnifying party,
(c) a conflict or potential conflict exists (based on advice of counsel to the
indemnified party) between the indemnified party and the indemnifying party (in
which case the indemnifying party will not have the right to direct the defense
of such action on behalf of the indemnified party) or (d) the indemnifying party
has not in fact employed counsel to assume the defense of such action within a
reasonable time after receiving notice of the commencement of the action, in
each of which cases the reasonable fees, disbursements and other charges of
counsel will be at the expense of the indemnifying party or parties. It is
understood that the indemnifying party or parties shall not, in connection with
any proceeding or related proceedings in the same jurisdiction, be liable for
the reasonable fees, disbursements and other charges of more than one separate
firm admitted to practice in such jurisdiction at any one time from all such
indemnified party or parties unless (x) the employment of more than one counsel
has been authorized in writing by the indemnifying party or parties, (y) an
indemnified party has reasonably concluded (based on advice of counsel) that
there may be legal defenses available to it that are different from or in
addition to those available to the other indemnified parties or (z) a conflict
or potential conflict exists (based on advice of counsel to an indemnified
party) between such indemnified party and the other indemnified parties, in each
of which cases the indemnifying party shall be obligated to pay the reasonable
fees and expenses of such additional counsel or counsels. An indemnifying party
shall not be liable for any settlement of any action or claim effected without
its written consent (which consent shall not be unreasonably withheld).
(4) Contribution. If the indemnification
provided for herein from the indemnifying party is unavailable to an indemnified
party hereunder in respect of any losses, claims, damages, liabilities or
expenses referred to herein, then the indemnifying party, to the extent such
indemnification is unavailable, in lieu of indemnifying such indemnified party,
shall contribute to the amount paid or payable by such indemnified party as a
result of such losses, claims, damages, liabilities or expenses in such
proportion as is appropriate to reflect the relative fault of the indemnifying
party and indemnified parties in connection with the actions that resulted in
such losses, claims, damages, liabilities or expenses. The relative fault of
such indemnifying party and indemnified parties shall be
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determined by reference to, among other things, whether any action in question,
including any untrue or alleged untrue statement of a material fact or omission
or alleged omission to state a material fact, has been made by, or relates to
information supplied by, such indemnifying party or indemnified parties, and the
parties' relative intent, knowledge, access to information and opportunity to
correct or prevent such action. The amount paid or payable by a party as a
result of the losses, claims, damages, liabilities and expenses referred to
above shall be deemed to include, subject to the limitations set forth in
subparagraph (3) hereof, any legal or other fees or expenses reasonably incurred
by such party in connection with any investigation or proceeding.
If indemnification is available hereunder, the indemnifying parties
shall indemnify each indemnified party to the full extent provided in
subparagraphs (1) and (2) hereof without regard to the relative fault of said
indemnifying parties or indemnified party.
15. Warrant Certificates to Bear Legend. Each Warrant and each stock
certificate for the Warrant Shares shall (and each Warrant or stock certificate
issued upon direct or indirect transfer or in substitution for any Warrant or
any Warrant Share pursuant to Sections 12 and 13 shall) be stamped or otherwise
imprinted with a legend in substantially the following form:
THE SECURITIES REPRESENTED HEREBY HAVE NOT BEEN REGISTERED UNDER THE SECURITIES
ACT OF 1933, AS AMENDED, OR THE SECURITIES LAW OF ANY STATE AND May NOT BE SOLD
OR OTHERWISE DISPOSED OF EXCEPT PURSUANT TO AN EFFECTIVE REGISTRATION STATEMENT
UNDER SUCH ACT AND APPLICABLE STATE SECURITIES LAWS OR PURSUANT TO AN APPLICABLE
EXEMPTION FROM THE REGISTRATION REQUIREMENTS OF SUCH ACT AND SUCH LAWS.
16. No Rights or Liability as a Stockholder. The Warrants do not
entitle the Holders thereof to any voting rights or other rights as a
stockholder of the Company. No provisions in this Agreement or the Warrants, in
the absence of affirmative action by the Holders thereof to purchase Common
Stock, and no enumeration herein and therein of the rights or privileges of the
Holders shall give rise to any liability of such Holders as stockholders of the
Company.
17. Reservation of Shares. The Company shall at all times reserve and
keep available out of its authorized Common Stock, solely for the purpose of
issue or delivery upon exercise of the Warrants, as provided herein, the maximum
number of shares of Common Stock that may be issuable or deliverable upon such
exercise. Such shares shall, when issued or delivered in accordance with the
Warrants, be duly and validly issued and fully paid and non-assessable. The
Company shall issue such shares in accordance with the provisions of the
Warrants, and shall otherwise comply with the terms thereof.
18. Charges, Taxes and Expenses. Issuance of certificates for shares
of Common Stock upon the exercise of the Warrants shall be made without charge
to the Holders thereof
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for any issue or transfer tax, or other incidental expense, in respect of the
issuance or delivery of such certificates or the securities represented thereby,
all of which taxes and expenses shall be paid by the Company.
19. Amendment or Waiver. This Agreement and any term hereof may be
amended, waived, discharged or terminated only by and with the written consent
of the Company and the Holders of 75% of the Warrants given in writing upon at
least 20 days' notice or at a meeting called for the purpose in accordance with
the By-laws of the Company applicable to meetings of stockholders. This
Agreement and any term hereof may be amended, waived, discharged or terminated
without the written consent of the Holders to (i) cure any ambiguity or to
correct or supplement any provision herein which may be defective or
inconsistent with any other provisions herein, or to (ii) add to the covenants
of the Company or add any other provision for the benefit of the Holders;
provided, however, that any action pursuant to (i) and (ii) above shall not
adversely affect the interest of the Holders in any respect.
20. Notices. Any notice or other communication (or delivery) required
or permitted hereunder shall be made in writing and shall be by registered mail
or certified first class mail, return receipt requested, telecopier, courier
service or personal delivery to each Holder at its address as it appears in the
Warrant Register and to the Company at:
EMPIRE OF CAROLINA, INC.
5150 Linton Blvd.
Delray Beach, FL 33484
Telecopier No.: (561) 498-0722
Attention: Steve Geller, Chairman and Chief Executive Officer
Lawrence Geller, General Counsel
All such notices and communications (and deliveries) shall be deemed to have
been duly given: when delivered by hand, if personally delivered; when delivered
by courier, if delivered by commercial overnight courier service; five Business
Days after being deposited in the mail, postage prepaid, if mailed; and when
receipt is acknowledged, if telecopied.
21. Effect of Failure to Notify. Failure to file any certificate or
notice or to mail any notice, or any defect in any certificate or notice shall
not affect the legality or validity of the adjustment to the Exercise Price, the
number of shares purchasable upon exercise of this Warrant, or any transaction
giving rise thereto.
22. Appointment of Agent. The Company/Holders representing not less
than a majority of the outstanding Warrants may at any time appoint an agent to
take any and all actions under this Agreement as instructed by Holders
representing not less than a majority of the outstanding Warrants (subject to
Section 19), which instructions shall be binding upon all Holders. The Company
may be appointed to act as agent pursuant to this Section 22.
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23. Certain Remedies. The Holders shall be entitled to an injunction or
injunctions to prevent breaches of the provisions of this Agreement and to
enforce specifically the terms and provisions of this Agreement in any court of
the United States or any state thereof having jurisdiction, this being in
addition to any other remedy to which such Holders may be entitled at law or in
equity.
24. Consent. The terms of the Warrants to be issued hereunder and the
effectiveness of this Agreement shall be subject in all respects to the specific
written consent of HPA and EMP.
25. Governing Law. This Agreement shall be governed by and construed
in accordance with the laws of the state of Delaware, without regard to the
principles of conflicts of law of such State.
26. Headings. The headings in this Agreement are for convenience of
reference only and shall not limit or otherwise affect the meaning hereof.
EMPIRE OF CAROLINA, INC.
By: /s/ Lawrence Geller
-----------------------------------------
Name: Lawrence Geller
Title: Vice-President and General Counsel
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EXHIBIT A TO WARRANT AGREEMENT
[FORM OF WARRANT CERTIFICATE]
May 6, 1997
THE SECURITIES REPRESENTED HEREBY HAVE NOT BEEN REGISTERED UNDER THE
SECURITIES ACT OF 1933, AS AMENDED, OR THE SECURITIES LAW OF ANY STATE AND MAY
NOT BE SOLD OR OTHERWISE DISPOSED OF EXCEPT PURSUANT TO AN EFFECTIVE
REGISTRATION STATEMENT UNDER SUCH ACT AND APPLICABLE STATE SECURITIES LAWS OR
PURSUANT TO AN APPLICABLE EXEMPTION FROM THE REGISTRATION REQUIREMENTS OF SUCH
ACT AND SUCH LAWS.
No. __ Warrant to Purchase _______
Shares of Common Stock
EMPIRE OF CAROLINA, INC.
COMMON STOCK PURCHASE WARRANT
Void after 5 p.m. on May 6, 2003
EMPIRE OF CAROLINA, INC., a Delaware corporation (the "COMPANY"),
hereby certifies that for value received, ___________________, a
__________________, or successors and assigns (the "HOLDER") is entitled to
purchase, subject to the terms and conditions hereinafter set forth, an
aggregate of _____________ fully paid and nonassessable shares of Common Stock
(as hereinafter defined) of the Company, at an exercise price of $1.375 per
share subject to adjustment as provided herein (the "PURCHASE PRICE"), at any
time or from time to time prior to 5:00 P.M., New York City time, on May 6, 2003
(the "EXPIRATION DATE").
Payment of the Purchase Price may be made in United States currency by
wire transfer to an account designated by the Company or delivery of a certified
check or bank check payable to the order of the Company. On the Expiration Date,
the Warrants evidenced by this Warrant certificate not theretofore exercised
shall become null and void, and all rights of the Holder hereof shall cease. As
provided in the Warrant Agreement referred to below, the Purchase Price and the
number or kind of shares which may be purchased upon the exercise of the
Warrants evidenced by this Warrant certificate are, upon the happening of
certain events, subject to modification and adjustment.
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This Warrant Certificate is subject to, and entitled to the benefits
of, all of the terms, provisions and conditions of an agreement, dated as of
____________ __, 1997 (the "WARRANT AGREEMENT"), between the Company and
______________________, which Warrant Agreement is hereby incorporated herein by
reference and made a part hereof and to which Warrant Agreement reference is
hereby made for a full description of the rights, limitations of rights,
obligations, duties and immunities hereunder of the Company and the holders of
the Warrant Certificates. Copies of the Warrant Agreement are on file at the
principal office of the Company. The Holder hereof may be treated by the Company
and all other persons dealing with this Warrant Certificate as the absolute
owner hereof for any purpose and as the person entitled to exercise the rights
represented hereby, or to the transfer hereof on the books of the Company, any
notice to the contrary notwithstanding, and until such transfer on such books,
the Company may treat the Holder hereof as the owner for all purposes.
The Holders of the Warrants are entitled to certain registration rights
with respect to the Warrants and the shares of Common Stock purchasable upon
exercise thereof. Said registration rights are set forth in full in the Warrant
Agreement.
No fractional shares of Common Stock will be issued upon the exercise
of any Warrant or Warrants evidenced hereby, but in lieu thereof a cash payment
will be made as provided in the Warrant Agreement.
No Holder shall be entitled to vote or receive dividends or be deemed
the holder of Common Stock or any other securities of the Company which may at
any time be issuable on the exercise hereof for any purpose, nor shall anything
contained in the Warrant Agreement or herein be construed to confer upon such
Holder, as such, any of the rights of a shareholder of the Company or any right
to vote for the election of directors or upon any matter submitted to
shareholders at any meeting thereof, or, to give or withhold consent to any
corporate action (whether upon any recapitalization, issue of stock,
reclassification of stock, change of par value or change of stock to no par
value, consolidation, merger, conveyance, or otherwise) or, except as provided
in the Warrant Agreement, to receive notice of meetings, or to receive dividends
or subscription rights or otherwise, until the Warrant or Warrants evidenced by
this Warrant Certificate shall have been exercised as provided in the Warrant
Agreement.
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IN WITNESS WHEREOF, Empire of Carolina, Inc. has caused its Chairman,
President or Vice President and its Secretary or one of its Assistant
Secretaries to execute this Warrant Certificate (or such officers' facsimile
signatures to be printed hereon) and has caused its corporate seal (or facsimile
thereof) to be printed hereon.
Dated:
EMPIRE OF CAROLINA, INC.
[SEAL] By:
Name:
Title:
Attest:
By:
Name:
Title:
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FORM OF ELECTION TO PURCHASE SHARES
[To Be Executed upon Exercise of Warrant]
The undersigned hereby irrevocably elects to exercise the right,
represented by this Warrant, to receive ______ shares of Common Stock and
herewith tenders payment for such shares to the order of Empire of Carolina,
Inc. in the amount of $___________ in accordance with the terms hereof. The
undersigned requests that a certificate for such shares be registered in the
name of _______________________, whose address is __________________________
_________________ and that such shares be delivered to __________________ whose
address is ____________________________. If said number of shares is less than
all of the shares of Common Stock purchasable hereunder, the undersigned
requests that a new Warrant representing the remaining balance of such shares be
registered in the name of ____________________________, whose address is
_________________________________ _______________________________, and that such
Warrant be delivered to _____________, whose address is ________________________
_____________________________________.
Signature:
Date:
Signature Guaranteed:
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ASSIGNMENT FORM
To assign this Warrant, fill in the form below:
I or we assign and transfer this Warrant to:
(Print or type assignee's name, address and zip code)
(Insert assignee's soc. sec. or tax I.D. No.)
Date: Your Signature*:
Signature Guarantee:
(Signature must be guaranteed by a participant in
[a recognized signature guarantee medallion
program or] bank or trust company)
(*) Sign exactly as your name appears on this Warrant.
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CERTIFICATE TO BE DELIVERED UPON
EXCHANGE OR REGISTRATION OF WARRANTS
This certificate relates to ________ Warrants held in (check applicable space)
____ book-entry or ____ certificated form by the undersigned.
In connection with any transfer or exchange of any of the Warrants evidenced by
this certificate, the undersigned confirms that such Warrants are being:
CHECK ONE BOX BELOW:
(1) |_| acquired for the undersigned's own account, without
transfer; or
(2) |_| transferred to the Company; or
(3) |_| transferred pursuant to and in compliance with Rule
144A or in accordance with Regulation S under the
Securities Act of 1933, as amended (the "Securities
Act"); or
(4) |_| transferred to an institutional "accredited investor"
(as defined in Rule 501(a)(1), (2), (3) or (7) under
the Securities Act), that has furnished to the
Company a signed letter containing certain
representations and agreements (the form of which
letter can be obtained from the Administrators); or
(5) |_| transferred pursuant to another available exemption
from the registration requirements of the Securities
Act; or
(6) |_| transferred pursuant to an effective registration
statement.
Unless one of the boxes is checked, the Company shall refuse to register any of
the Warrants evidenced by this certificate in the name of any person other than
the registered holder thereof; provided, however, that (i) if box (1) is checked
and the Warrants are being acquired prior to registration under the securities
laws, or (ii) if box (3), (4) or (5) is checked, the Company may require, prior
to registering any such transfer of the Capital Securities, in its sole
discretion, such legal opinions, certifications and other information as is
reasonably requested to confirm that such transfer is being made pursuant to an
exemption from, or in a transaction not subject to, the registration
requirements of the Securities Act, such as the exemption provided by Rule 144
under such Act; provided, further, that if box 3
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is checked, the transferee must also certify that it is a qualified
institutional buyer as defined in Rule 144A of the Securities Act.
Signature:
Signature Guarantee:
(Signature must be guaranteed by a participant in a [signature guarantee
medallion program or] bank or trust company)
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EXHIBIT 4.9
SECOND AMENDMENT TO RIGHTS AGREEMENT
THIS SECOND AMENDMENT to the Rights Agreement (the "Rights Agreement")
dated as of September 11, 1996, between Empire of Carolina, Inc. and American
Stock Transfer & Trust Company as Rights Agent ("American Stock Transfer") is
dated as of the 12th day of June 1997.
WHEREAS, following the consummation of the transactions contemplated by
that certain Securities Purchase Agreement dated as of May 5, 1997 among the
Corporation, HPA Associates L.L.C., a Delaware limited liability company, and
EMP Associates L.L.C., a Delaware limited liability company, as amended by
Amendment No. 1 thereto (as amended, the "Securities Purchase Agreement"), the
Company will have issued securities convertible into or exercisable for a
substantial number of shares of the Corporation's Common Stock and certain
investors will beneficially own securities convertible into or exercisable for
significant levels of the Corporation's outstanding Common Stock; and
WHEREAS, the Board of Directors of the Company believes that it is in
the best interests of the Company and its stockholders that the Rights Agreement
be amended as set forth herein; and
WHEREAS, Section 27 of the Rights Agreement authorizes the Board of
Directors of the Company and the Rights Agent to adopt the proposed amendment
without the approval of the Company's stockholders;
NOW, THEREFORE, in consideration of the premises and the mutual
agreements herein set forth, the parties agree to amend the Rights Agreement as
follows:
1. Section 1(a) of the Rights Agreement is hereby amended by deleting
Section 1(a) thereof in its entirety and substituting the following therefor:
(a) "Acquiring Person" means any Person who or which, together
with all Affiliates and Associates of such Person, shall be the
Beneficial Owner of 15% or more of the aggregate number of
Fully-Diluted Common Shares of the Company, but shall in no event
include any Exempt Person. Notwithstanding the foregoing, (i) no Person
shall become an "Acquiring Person" as the result of (A) an acquisition
of Common Shares by the Company which, by reducing the number of the
Company's Common Shares outstanding, increases the proportionate number
of shares beneficially owned by such Person to 15% or more of the
Fully-Diluted Common Shares or (B) the lapse, forfeiture, cancellation,
termination or expiration without exercise or conversion into Common
Shares of the Company of any stock option, warrant, convertible
security or other right to acquire Common Shares; provided, however,
that if a Person shall become the Beneficial Owner of 15% or more of
the Fully-Diluted
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Common Shares of the Company by reason of share acquisitions by the
Company or the lapse, forfeiture, cancellation, termination or
expiration without exercise or conversion into Common Shares of any
stock option, warrant, convertible security or other right to acquire
Common Shares of the Company and shall, after such share acquisitions
by the Company or such lapse, forfeiture, cancellation, termination or
expiration, (A) acquire, in one or more transactions, beneficial
ownership of an additional number of Common Shares which exceeds the
lesser of 10,000 Common Shares or 0.25% of the then-outstanding Common
Shares and (B) beneficially own after such acquisition 15% or more of
the Fully-Diluted Common Shares of the Company at such time, then such
Person shall be deemed to be an "Acquiring Person" and (ii) if the
Board of Directors determines in good faith that a Person who would
otherwise be an Acquiring Person, as defined pursuant to the foregoing
provisions of this paragraph (a), has become such inadvertently, and
such Person divests as promptly as practicable a sufficient number of
Common Shares so that such Person would no longer be an Acquiring
Person, as defined pursuant to the foregoing provisions of this
paragraph (a), then such Person shall not be deemed to be an "Acquiring
Person" for any purposes of this Agreement.
2. Section 1 of the Rights Agreement is hereby amended by inserting the
following immediately after Section 1(l) thereof:
(m) "Fully-Diluted Common Shares" means the sum of (A) the
aggregate number of Common Shares of the Company then outstanding and
(B) the aggregate number of Common Shares of the Company then issuable
upon the exercise of all outstanding stock options, warrants,
convertible securities, and other rights to acquire Common Shares of
the Company then outstanding.
3. Section 1 of the Rights Agreement is hereby amended by redesignating
paragraphs (m) through (y) thereof as paragraphs (n) through (z).
4. Capitalized terms used but not defined herein shall have the meaning
assigned to such terms in the Rights Agreement.
5. Except as expressly amended hereby, the Rights Agreement remains in
full force and effect.
6. This Amendment shall be deemed to be a contract made under the laws
of the State of Delaware, and for all purposes shall be governed by and
construed in accordance with the laws of such State applicable to contracts made
and performed entirely within such State.
7. This Amendment may be executed in any number of counterparts and
each of such counterparts shall for all purposes be deemed to be an original,
and all such counterparts shall together constitute but one and the same
instrument.
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IN WITNESS WHEREOF, the parties hereto have caused this Amendment to be
duly executed as of the day and year first above written.
EMPIRE OF CAROLINA, INC.
Attest:
By /s/ Lawrence Geller By /s/ Steven Geller
- ------------------------------------ -------------------------
Name: Lawrence Geller Name: Steven Geller
Title: General Counsel and Secretary Title: Chairman and Chief
Executive Officer
AMERICAN STOCK TRANSFER &
TRUST COMPANY
Attest:
By [SIGNATURE] By /s/ Herbert J. Lemmer
- ------------------------------------ -------------------------
Name: Name: Herbert J. Lemmer
Title: Title: Vice President
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EXHIBIT 4.10
PROMISSORY NOTE
$2,500,000 June 17, 1997
New York, New York
FOR VALUE RECEIVED, EMPIRE INDUSTRIES, INC., a North Carolina
corporation (the "Company"), with offices at 5150 Linton Boulevard, Delray
Beach, Florida 33484, hereby promises to pay to the order of SMEDLEY INDUSTRIES,
INC. LIQUIDATING TRUST, with offices at c/o Kahn Consulting, Inc., 152 West 57th
Street, New York, New York 10019, or its successors or registered assigns (the
"Payee"), the principal sum of TWO MILLION FIVE HUNDRED THOUSAND DOLLARS
($2,500,000), which shall be due and payable as hereinafter provided.
1. Maturity. The unpaid principal amount of this Note shall be due and
payable on the following dates in the amounts indicated:
Date Amount
June 1, 1998 $625,000
June 1, 1999 $625,000
June 1, 2000 $625,000
June 1, 2001 $625,000
2. Interest. This Note shall bear interest from June 17, 1997 on the
unpaid principal balance at the rate of 9.0% per annum (the "Base Rate"),
payable quarterly in arrears, on March 1, June 1, September 1 and December 1 of
each year, commencing September 1, 1997. Upon the occurrence of an Event of
Default (as defined in Section 7 hereof) and at all times thereafter until all
Events of Default shall have been cured or waived, interest shall be payable on
demand at the rate of the Base Rate plus 3.0% per annum on (i) the unpaid
principal balance and (ii) to the fullest extent permitted by law, all accrued
but unpaid interest and all other amounts owing hereunder. Interest shall be
computed on the basis of twelve 30-day months and a 360-day year.
3. Registered Note. This Note is a registered Note and, upon surrender
of this Note for registration of transfer, duly endorsed, or accompanied by a
written instrument of transfer duly executed, by the Payee or the Payee's
attorney duly authorized in writing, a new Note for a like principal amount will
be issued to, and registered in the name of, the transferee. Prior to due
presentment for registration and transfer, the Company may treat the person in
whose name this Note is registered as the owner hereof for the purpose of
receiving payment and for all other purposes, and the Company shall not be
affected by any notice to the contrary.
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4. Payments. The Company shall make each payment hereunder not later
than 12:00 p.m. (New York City time) on the day when due in lawful money of the
United States of America to the holder of this Note by wire transfer in
immediately available funds, without deduction, setoff or counterclaim, pursuant
to the following wire transfer instructions:
The Chase Manhattan Bank N.A.
ABA # 021-000-021
Acct. # 0371289679
Ref:Smedley Ind. Inc. Liquidating Trust
Attn: Robert Kennedy
(212) 397-6222
or pursuant to such other instructions as the Payee shall from time to time
designate in writing. Whenever any payment to be made hereunder shall be stated
to be due on a Saturday, Sunday or a public or bank holiday or the equivalent
for banks generally under the laws of the State of New York (any other day being
a "Business Day"), such payment may be made on the next succeeding Business Day.
5. Prepayments.
(a) The Company shall have the right to prepay the principal
amount of this Note, in whole or in part, at any time or from time to
time, without premium or penalty, but with interest on the portion of
the principal amount so prepaid accrued to the date of prepayment.
(b) In the event that the Company shall at any time sell,
transfer or otherwise dispose of any assets other than (i) in the
ordinary course of business or (ii) pursuant to a Permitted Asset Sale
(as defined herein in Section 10(c)), then, in such event, the Company
shall apply all net proceeds of such sales, transfers and dispositions
to the prepayment of the aggregate outstanding principal amount of this
Note, in whole or in part, plus interest thereon accrued to the date of
prepayment.
6. Guarantee.
(a) For value received, Empire of Carolina, Inc. and its
successors and assigns (the "Guarantor") hereby guarantees to the Payee
the prompt payment in full when due (whether at stated maturity, by
acceleration or otherwise) of the principal amount of this Note and
interest thereon and all other amounts at any time owing to the Payee
by the Company under this Note, in each case strictly in accordance
with the terms hereof (such obligations being herein collectively
called the "Guaranteed Obligations"). The Guarantor hereby further
agrees that if the Company shall fail to pay in full when due (whether
at maturity, by acceleration or otherwise) any of the Guaranteed
Obligations, the Guarantor will promptly pay the same, without
deduction, setoff or counterclaim, and without any demand or notice
whatsoever.
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(b) The obligations of the Guarantor hereunder are absolute
and unconditional, and shall not be impaired, modified, released or
limited by any occurrence or condition whatsoever, including, without
limitation, (i) any compromise, settlement, release, waiver, renewal,
extension, indulgence or modification of, or any change in, any of the
obligations and liabilities of the Company contained in this Note, (ii)
any impairment, modification, release or limitation of the liability of
the Company or its estate in bankruptcy, or any remedy for the
enforcement thereof, resulting from the operation of any present or
future provision of any applicable bankruptcy law, as amended, or other
statute or from the decision of any court, (iii) the assertion or
exercise by the Company or the holder of the Note of any rights or
remedies under this Note or their delay in or failure to assert or
exercise any such rights or remedies, (iv) the assignment or the
purported assignment of any property as additional security for this
Note, including all or any part of the rights of the Company hereunder,
(v) the extension of the time for payment by the Company of any
payments or other sums or any part thereof owing or payable under any
of the terms and provisions of this Note or of the time for performance
by the Company of any other obligations under or arising out of any
such terms and provisions or the extension or the renewal of any
thereof, (vi) the modification or amendment (whether material or
otherwise) of any duty, agreement or obligation of the Company set
forth in this Note, (vii) the voluntary or involuntary liquidation,
dissolution, sale or other disposition of all or substantially all of
the assets, marshalling of assets and liabilities, receivership,
insolvency, bankruptcy, assignment for the benefit of creditors,
reorganization, arrangement, composition or readjustment of, or other
similar proceeding affecting, the Company or the Guarantor or any of
their respective assets, or the disaffirmance of this Guarantee
pursuant to this Section 6 or this Note in any such proceeding, (viii)
the release or discharge of the Company from the performance or
observance of any agreement, covenant, term or condition contained in
any of such instruments by operation of law, (ix) the unenforceability
of this Note or the Guarantee, or (x) any other circumstance which
might otherwise constitute a legal or equitable discharge of a surety
or guarantor.
(c) The Guarantor hereby (i) waives diligence, presentment,
demand of payment, filing of claims with a court in the event of the
merger, insolvency or bankruptcy of the Company, any right to require a
proceeding first against the Company or to realize on any collateral,
protest or notice with respect to the Guaranteed Obligations and all
demands whatsoever, (ii) acknowledges that any agreement, instrument or
document evidencing the Guaranteed Obligations may be transferred and
that the benefit of its obligations hereunder shall extend to each
holder of any agreement, instrument or document evidencing the
Guaranteed Obligations without notice to them, and (iii) covenants that
its Guarantee pursuant to this Section 6 will not be discharged except
by complete performance of the Guaranteed Obligations and of its
Guarantee pursuant to this Section 6.
(d) The Guarantee pursuant to this Section 6 shall, to the
fullest extent permitted by law, continue to be effective or be
reinstated, as the case may be, if at any time payment and performance
of any of the Guaranteed Obligations is, pursuant to
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applicable law, rescinded or reduced in amount, or must otherwise be
restored or returned by the holder of this Note, whether as a result of
any proceeding in bankruptcy (including as a "voidable preference,"
"fraudulent conveyance" or "fraudulent transfer") or otherwise (of the
Company, the Guarantor or any third party), all as though such payment
or performance had not been made. In the event that any payment, or any
part thereof, is rescinded, reduced, restored or returned, (i) the
Guaranteed Obligations shall, to the fullest extent permitted by law,
be reinstated and deemed reduced only by such amount paid and not so
rescinded, reduced, restored or returned, and (ii) the Guarantor shall
indemnify the Payee on demand for all costs and expenses (including,
without limitation, fees and expenses of counsel) incurred by the Payee
in connection with such rescission, reduction, restoration or return,
including any such costs and expenses incurred in defending against any
claim alleging that such payment consisted a preference, fraudulent
conveyance, fraudulent transfer or similar payment under any
bankruptcy, insolvency or similar law.
(e) The Guarantee in this Section 6 is a continuing guarantee,
and shall apply to all Guaranteed Obligations whenever arising.
(f) In any action or proceeding involving any state corporate
law, or any state or Federal bankruptcy, insolvency, reorganization or
other law affecting the rights of creditors generally, if the
obligations of the Guarantor hereunder would otherwise be held or
determined to be void, invalid or unenforceable, or subordinated to the
claims of any other creditors, on account of the amount of its
liability hereunder, then, notwithstanding any other provision hereof
to the contrary, the amount of such liability shall, without any
further action by the Guarantor, the Payee or any other person or
entity, be automatically limited and reduced to the highest amount
which is valid and enforceable and not subordinated to the claims of
other creditors as determined in such action or proceeding.
7. Event of Default. In case one or more of the following events of
default (each, an "Event of Default") shall have occurred and be continuing:
(a) the Company fails to make any payment of any principal,
interest or other amount under this Note when due (whether at stated
maturity, by acceleration or otherwise);
(b) the Company fails to perform, comply with or observe any
term, covenant or agreement contained in Section 9(c), (d) or (e) of
this Note and such failure shall continue for a period of five days;
(c) the Company fails to perform, comply with or observe any
term, covenant or agreement contained in this Note (other than Section
9(c), (d) or (e) hereof) and such failure shall continue for a period
of five days after notice thereof to the Company by the Payee;
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(d) any representation or warranty made by the Company herein
shall prove to be false or misleading in any material respect as of the
date made or deemed to have been made;
(e) the Company or the Guarantor fails to perform, comply with
or observe any term, covenant or agreement to be performed, complied
with or observed by the Company or the Guarantor pursuant to the
Registration Rights Agreement of even date herewith by and between the
Guarantor and Smedley Industries, Inc. Liquidating Trust;
(f) (i) the Company or the Guarantor fails to
perform, comply with or observe any term, covenant or
agreement to be performed, complied with or observed by
either of them pursuant to (x) the Loan and Security
Agreement, dated May 29, 1996, among BT Commercial
Corporation, LaSalle National Bank and the Company, as
amended from time to time (the "Loan Agreement"), (y) the
documentation evidencing or relating to the Refinancing
Debt (as defined in Section 10(b)) or (z) any other
evidence of indebtedness or liability for borrowed money
(other than this Note), or
(ii) any other event shall occur or condition
shall exist, if the effect of such failure, event or
condition is to accelerate or otherwise cause the
maturity of any indebtedness under the Loan Agreement,
the documentation evidencing or relating to the
Refinancing Debt or any other evidence of indebtedness or
liability for borrowed money (other than this Note);
(g) material adverse orders, judgments or decrees shall be
entered against the Company or the Guarantor in excess of $1,000,000 in
the aggregate, and such orders, judgments or decrees shall continue
unstayed and in effect for a period of 30 days;
(h) Charles S. Holmes ("Holmes") shall not be a director of
the Company and the Guarantor;
(i) Holmes shall not be the sole legal and beneficial owner
and holder of, or shall not have good and marketable title to, at least
510,000 shares of the Company's Series A Preferred Stock (the "Shares")
and 1,020,000 warrants entitling him to purchase 1,020,000 shares of
the Company's common stock (or such shares, to the extent Holmes has
exercised such rights) (the "Warrants") (or, in each case, the number
and type of securities Holmes would be entitled to had he owned the
Shares and the Warrants on the date hereof and never assigned,
transferred or otherwise disposed of such Shares or Warrants, i.e.
after giving effect to stock splits, combinations and dividends,
recapitalizations and similar events), in each case free and clear of
all liens, claims, security interests, encumbrances and other rights of
any kind;
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(j) the Company or the Guarantor shall sell, transfer or
otherwise dispose of all or substantially all of its assets;
(k) a court having jurisdiction shall have entered a decree or
order for relief against the Company or the Guarantor in an involuntary
case under any applicable bankruptcy, insolvency or other similar law
now or hereafter in effect, or shall have appointed a receiver,
liquidator, assignee, custodian, trustee, sequestrator (or similar
official) of the Company or the Guarantor or for any of their
respective assets or properties, or shall have ordered the winding-up
or liquidation of either of their affairs, and such decree or order
shall have remained unstayed and in effect for a period of thirty
consecutive days;
(l) the Company or the Guarantor shall have commenced a
voluntary case under any applicable bankruptcy, insolvency or other
similar law now or hereafter in effect, or shall have consented to the
entry of an order for relief in an involuntary case under any such law,
or shall have consented to the appointment of or taking possession by a
receiver, liquidator, assignee, trustee, custodian, sequestrator (or
similar official) of the Company or the Guarantor or for any of their
respective assets or properties, or shall have made an assignment for
the benefit of creditors, or shall have admitted in writing either of
their inability to pay their debts as they mature, or shall have taken
any corporate action in furtherance of any of the foregoing; or
(m) the Guarantor has not received after the date hereof and
prior to July 1, 1997, net proceeds in cash from HPA Associates, LLC
and EMP Associates LLC in consideration for the issuance of $5 million
of its Series A Preferred Stock of at least $4.5 million (after taking
into account the placement agent's fees and the expenses of such
offering);
then the holder of this Note, by notice to the Company in writing, may at its
option declare the principal amount of this Note and accrued interest thereon to
the date of such declaration to be due and payable immediately. Upon any such
declaration, the same shall become and shall be immediately due and payable;
provided, however, that if an event specified in clause (k) or (l) above occurs,
such amount shall become and be immediately due and payable automatically,
without any declaration or other act on the part of the holder of this Note.
8. Representations and Warranties. The Company and the Guarantor
hereby represent and warrant to the holder of this Note as follows:
(a) The Company and the Guarantor and each subsidiary of
either of them that is an operating entity or that has any material
assets are corporations duly organized, validly existing and in good
standing under the laws of the jurisdiction of their respective
incorporations, (ii) have all requisite power and authority to own or
to lease and to operate their respective properties and assets and to
carry on their respective businesses as now conducted and as proposed
to be conducted, and (iii) are duly qualified and authorized to do
business and are in good standing in every jurisdiction in which they
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own or lease property and in which the conduct of its business requires
them to so qualify or be licensed.
(b) This Note has been duly authorized, executed and delivered
by the Company and the Guarantor. The execution and delivery of this
Note by the Company and the Guarantor and the performance of their
respective obligations hereunder: (i) is within the Company's and the
Guarantor's corporate powers, (ii) is duly authorized by all necessary
corporate action, including by the Company's and the Guarantor's Board
of Directors and, if necessary, stockholders, (iii) is not in
contravention of the terms of the Company's or the Guarantor's charter
documents, (iv) does not conflict with or result in the breach of, or
constitute a default under, any material indenture, contract,
agreement, mortgage, deed of trust, lease or other instrument or
undertaking binding on or affecting the Company or the Guarantor or any
of their respective subsidiaries or any of their respective properties,
(v) does not violate or contravene any law, rule, regulation, order,
writ, judgment, injunction, decree, determination or award, and (vi)
will not result in or require the creation or imposition of any lien.
None of the Company, the Guarantor or any of their respective
subsidiaries is in violation of any law, rule, regulation, order, writ,
judgment, injunction, decree, determination or award or, except as
provided in the Guarantor's most recent Annual Report on Form 10-K and
Quarterly Report on Form 10-Q, in breach of any contract, loan
agreement, indenture, mortgage, deed of trust, lease or other
instrument.
(c) No authorization or approval or other action by, and no
notice to or filing with, any governmental authority or regulatory body
or any other third party is required for (i) the due execution,
delivery, recordation, filing or performance of this Note or (ii) the
exercise by the holder of this Note of its rights and remedies under or
in respect of this Note.
(d) This Note is the legal, valid and binding joint and
several obligation of the Company and the Guarantor and is enforceable
against each of them in accordance with its terms.
(e) No information, exhibit or report furnished by the Company
or the Guarantor or any of their respective subsidiaries to the Payee
contained any untrue statement of a material fact or omitted to state a
material fact necessary to make the statements made therein not
misleading.
(f) Set forth on Schedule I hereto is a complete and accurate
list of each subsidiary of the Company or the Guarantor that is an
operating entity or that has any material assets, showing as of the
date hereof (as to each such subsidiary) the jurisdiction of its
incorporation and the percentage ownership (direct and indirect) of the
Company and the Guarantor in each class of capital stock or other
equity interests of each of its respective subsidiaries and also
identifies the direct owner thereof. Except for the subsidiaries set
forth on Schedule I, neither the Company nor the Guarantor has any
subsidiary that is engaged in business or that owns material assets.
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(g) Except as disclosed in Schedule II, there is no judgment
outstanding against the Company or the Guarantor or any of their
respective subsidiaries, or any of their respective assets or
properties, nor is there any action, suit, investigation, litigation,
contested claim or proceeding affecting any of them or any of their
respective assets or properties, now pending or, to the best of their
knowledge after diligent inquiry of their executive officers,
threatened, that (i) could reasonably be expected to have, in the
aggregate, a material adverse effect on (A) the business operations,
results of operations, assets, liabilities or condition (in each case
financial or otherwise) of the Company or the Guarantor, (B) the
ability of the Company or the Guarantor to perform any of their
respective obligations under this Note or the Guarantee or (C) the
rights and remedies of the holder of this note hereunder (a "Material
Adverse Effect"), or (ii) purports to affect the legality, validity or
enforceability of any of this Note or any of the actions contemplated
hereby.
(h) Except for defaults under the Loan Agreement, and except
for litigation listed on Schedule II, none of the Company, the
Guarantor or any of their respective subsidiaries is in default under
any material contract, lease, commitment or other agreement to which it
is a party or by which it is bound which could reasonably be expected
to have, in the aggregate, a Material Adverse Effect. None of the
Company, the Guarantor or any of their respective subsidiaries knows of
any dispute regarding any material contract, lease, commitment or other
agreement which could reasonably be expected to have, in the aggregate,
a Material Adverse Effect.
(i) The Guarantor has received net proceeds in cash from HPA
Associates, LLC and EMP Associates LLC in consideration for the
issuance of $6 million of its Series A Preferred Stock of at least
$5.09 million (after taking into account the placement agent's fees and
the expenses of such offering). All $5 million aggregate principal
amount of the Guarantor's Promissory Notes Due February 6, 1998 have
been converted into $5 million of the Guarantor's Series A Preferred
Stock, and all $15 million of the Guarantor's outstanding debentures
have been converted into $15 million of the Guarantor's Series C
Preferred Stock, and all such Notes and debentures have been
surrendered to and cancelled by the Guarantor.
9. Affirmative Covenants. Until such time as the Company shall have
paid in full in cash all amounts outstanding hereunder to the holder of this
Note, the Company and the Guarantor hereby covenant to and to cause each of
their respective subsidiaries to:
(a) Do or cause to be done all things necessary to preserve
and keep in full force and effect its corporate existence and its
rights (charter and statutory), licenses and franchises.
(b) Cause copies of all quarterly and annual reports and of
the information, documents and other reports ("SEC Reports") which the
Company and/or the Guarantor files or is required to file with the
Securities and Exchange Commission (the "SEC") to be delivered to the
holder of this Note at the address set forth herein, in each case,
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within five days of filing with the SEC. If the Company or the
Guarantor is not subject to the requirements of Section 13(a) or 15(d)
of the Securities Exchange Act of 1934 (the "Exchange Act") or shall
cease to be required by the SEC to file SEC Reports, the Company and
the Guarantor shall nevertheless continue to cause SEC Reports,
comparable to those which it would be required to file pursuant to
Section 13(a) or 15(d) of the Exchange Act if it were subject to the
requirements of either such Section, to be delivered to the holder of
this Note, but only upon such holder's written request, in each case,
within the same time periods as would have applied (including under the
preceding sentence) had the Company and the Guarantor been subject to
the requirements of Section 13(a) or 15(d) of the Exchange Act.
(c) Deliver to the holder of this Note a written statement of
an officer of the Company and the Guarantor setting forth the nature of
any fact or circumstance that, with the giving of notice and/or the
passage of time, would allow (i) the holder of this Note to accelerate
the maturity hereof, or (ii) so long as the holder thereof or any other
person or entity shall be entitled to receive notice thereof, the
acceleration of any indebtedness of the Company or the Guarantor in
excess of $1,000,000. Such statement shall be delivered as soon as
possible, and in any event within two days after the initial occurrence
of any such fact or circumstance.
(d) Deliver to the holder of this Note within 30 days after
the end of each quarterly fiscal period of each fiscal year of the
Guarantor, a certificate of a senior financial officer of the Company
and the Guarantor to the effect that no Event of Default, and no event
that with the giving of notice and/or the passage of time could become
an Event of Default, has occurred and is continuing (or, if any Event
of Default or any such event has occurred and is continuing, describing
the same in reasonable detail and describing the action that the
Company has taken or proposes to take with respect thereto).
(e) Upon the written request of the holder of this Note,
deliver to such holder within five business days' of such request
documents and information to evidence the accuracy and completeness of
the certificates delivered pursuant to Section 9(d) hereof.
10. Negative Covenants. Until such time as the Company shall have paid
in full in cash all amounts outstanding hereunder to the holder of this Note,
the Company and the Guarantor hereby covenant not to and to cause each of its
respective subsidiaries not to:
(a) Create, incur, assume or suffer to exist any lien,
security interest, pledge or other charge or encumbrance of any kind,
or any other type of preferential arrangement (including any easement,
right of way or other encumbrance on title to real property) on or with
respect to any of its properties or assets of any character, whether
real, personal or mixed, whether now owned or hereafter acquired,
except for (i) liens granted by the Company pursuant to the Loan
Agreement to secure the indebtedness created thereby, (ii) liens
granted by the Company to secure Refinancing Debt (as defined herein),
(iii) liens granted by the Company to secure indebtedness of the
Company of
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which 100% of the net proceeds thereof is used to repay amounts
outstanding under this Note, (iv) liens for taxes or of warehousemen,
mechanics, common carriers and landlords arising by operation of law
and incurred in the ordinary course of business, for amounts that are
not yet due and payable or which are being diligently contested in good
faith by the Company by appropriate proceedings promptly instituted,
provided that in any such case an adequate reserve is being maintained
on the books of the Company in accordance with generally accepted
accounting principles, (v) additional liens upon real or personal
property to secure Additional Debt (as defined herein in Section 10(c),
provided that the aggregate amount of Additional Debt secured thereby
plus the aggregate amount of judgments secured by liens may not exceed
$2,000,000, (vi) liens securing judgments, provided that the aggregate
amount of Additional Debt secured by liens plus judgments secured by
liens may not exceed $2,000,000, and (vii) purchase money mortgages or
security interests securing indebtedness representing the purchase
price of assets acquired by the Company after the date hereof, incurred
solely for the purpose of financing the acquisition of such assets;
provided, however, that such mortgages or security interests shall
encumber only such assets and such indebtedness is non-recourse to the
Company, the Guarantor and, except for such acquired assets, their
respective properties and assets.
(b) Create, incur, assume, guarantee or otherwise be or become
liable for any obligations for borrowed money or other indebtedness
other than (i) indebtedness arising under this Note, (ii) indebtedness
of the Company incurred pursuant to the Loan Agreement, as it exists on
the date hereof (the "Bank Debt"), (iii) indebtedness of the Company of
which 100% of the net proceeds thereof is used to repay the Bank Debt
("Refinancing Debt"), (iv) indebtedness of the Company of which 100% of
the net proceeds thereof is used to repay amounts outstanding under
this Note, (v) current trade liabilities of the Company or the
Guarantor, as the case may be, or extensions thereof, incurred in the
ordinary course of their respective businesses from time to time and
payable in accordance with customary practices, (vi) indebtedness that
is unsecured and subordinated (on terms being acceptable to the holder
of this Note) to the payment in full of all amounts outstanding
hereunder, and (vii) indebtedness representing the purchase price of
assets acquired by the Company or the Guarantor after the date hereof
solely for the purpose of financing the acquisition of such assets;
provided, however, that such indebtedness is non-recourse to the
Company, the Guarantor and, except for such acquired assets, their
respective properties and assets. Notwithstanding the foregoing, the
Company and the Guarantor may, in the aggregate, incur an amount of
unsecured indebtedness equal to the difference between $5,000,000 and
the aggregate gross proceeds of all Permitted Asset Sales ("Additional
Debt"); provided, however, that if the rate of interest accruing at any
time in respect of any such Additional Debt exceeds 9.0%, then the Base
Rate hereunder shall thereafter equal the greater of 9.0% or the
highest rate of interest accruing at any time in respect of Additional
Debt.
(c) Sell, lease, assign, transfer or otherwise dispose of any
assets, or grant any option or other right to purchase, lease or
otherwise acquire any assets, except (i) sales of assets in the
ordinary course of its business, (ii) sales of assets by the Company
and the Guarantor for cash at fair value that do not exceed (on a
consolidated basis for the
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Company, the Guarantor and their respective subsidiaries) an aggregate
amount equal to the difference between $5,000,000 and the aggregate
amount of Additional Debt outstanding at any time ("Permitted Asset
Sales"), and (iii) sales of assets for cash and fair value, 100% of the
net proceeds of which are used to repay permanently the Bank Debt,
Refinancing Debt or amounts outstanding under this Note. The terms of
this Section 10(c) shall apply to, inter alia, the sale, termination,
renegotiation and exercise of contract rights, including, without
limitation, the termination or renegotiation of the Distribution
Agreement dated as of September 24, 1996, between the Company and Tyco
Industries, Inc. (the "Distribution Agreement"); provided, however,
that the first $3 million of proceeds received by the Company in
consideration for the termination or renegotiation of the Distribution
Agreement shall not be subject to the terms of this Section 10(c) or
Section 5(b).
(d) Declare or make any dividend payment or other distribution
of assets, properties, cash, warrants, rights, options, obligations or
securities on account of any shares of any class of its or any of its
subsidiaries' capital stock (other than pursuant to and in consummation
of a stock split or a stock dividend or a dividend or distribution by a
subsidiary of the Company to the Company), or purchase, redeem, retire
or otherwise acquire for value any shares of any class of its or any of
its subsidiaries' capital stock or any warrants, rights or options to
acquire any such shares, now or hereafter outstanding.
(e) Enter into any transaction or series of related
transactions, including, without limitation, the purchase, sale or
exchange of property or the rendering of any service, with any of its
affiliates, except to the extent that such transaction or series of
related transactions is (i) pursuant to the reasonable requirements of
the Company's or the Guarantor's business, (ii) upon fair and
reasonable terms no less favorable to the Company and the Guarantor
than it would obtain in a comparable arm's-length transaction with an
unaffiliated person or entity, and (iii) with respect to any
transaction or series of related transactions that is of a value
greater than $75,000, such transaction or series of related
transactions is approved by a majority of the disinterested directors
of the Company and the Guarantor.
(f) Consolidate with or merge with or into any person or
entity.
11. Rights and Remedies. All powers and remedies given to the holder of
this Note shall, to the extent permitted by law, be deemed cumulative and not
exclusive of any thereof or of any other powers and remedies available to the
holder of this Note, by judicial proceedings or otherwise, to enforce the
performance or observance of the covenants and agreements contained in this
Note, and no delay or omission of the holder of this Note to exercise any right
or power accruing upon any default hereunder shall impair any such right or
power, or shall be construed to be a waiver of any such default or an
acquiescence therein.
(a) Successors and Assigns. This Note shall be binding upon
the Company and its successors and assigns, and the terms and
provisions of this Note shall inure to
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the benefit of the Payee and its successors and assigns, including
subsequent holders hereof.
(b) Governing Law. This Note shall be governed by and
construed in accordance with the internal laws of the State of New
York, without regard to the principles of the conflict of laws thereof.
Each party hereto hereby irrevocably consents to the exclusive
jurisdiction of the United States Court for the Southern District of
New York and the courts of the State of New York located in the City
and State of New York in any action to enforce, interpret or construe
any provision of this Note or of any agreement or document delivered in
connection herewith, and hereby irrevocably waives any defense of
improper venue, forum non conveniens or lack of personal jurisdiction
to any such action brought in those Courts. Each party hereby
irrevocably consents to the service by certified or registered mail,
return receipt requested, to be sent to its address set forth herein,
or to such other address as it may designate in writing from time to
time, of any process in any action to enforce, interpret or construe
any provision hereof.
(c) Severability. The terms and provisions of this Note are
severable, and if any term or provision shall be determined to be
superseded, illegal, invalid or otherwise unenforceable in whole or in
part pursuant to applicable law by a governmental authority having
jurisdiction, such determination shall not in any manner impair or
otherwise affect the validity, legality or enforceability of that term
or provision in any other jurisdiction or any of the remaining terms
and provisions of this Note in any jurisdiction.
(d) Waiver. Presentment for payment, notice of dishonor,
protest, notice of protest and any other notice are hereby waived. The
Company and the Guarantor hereby waive any and all common law or
statutory setoff rights either of them may have against the Payee, and
all payments hereunder shall be without any deduction, setoff or
counterclaim.
(e) Amendment, Waiver. No amendment, modification or waiver of
any term or provision of this Note, nor consent to any departure by the
Company or the Guarantor herefrom, shall be effective, and no right or
obligation under this Note shall otherwise be affected in any way,
without the prior written consent of the holder of this Note, and then
such waiver, modification or consent shall be effective only in the
specific instance and for the specific purpose for which given.
(f) No Third Party Beneficiaries. Nothing in this Note,
expressed or implied, shall give or be construed to give any person,
firm or corporation, other than the parties hereto, any legal or
equitable right, remedy or claim under or in respect of this Note, or
under any covenant, condition or provision herein contained; all such
covenants, conditions and provisions being for the sole benefit of the
Company and the holder of this Note.
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IN WITNESS WHEREOF, the Company has caused this Note to be executed and
delivered to the Payee on the date and year first above written.
EMPIRE INDUSTRIES, INC.
By: /s/ Lawrence Geller
----------------------
Name: Lawrence Geller
Title: Vice President-General Counsel
GUARANTOR:
EMPIRE OF CAROLINA, INC.
By: /s/ Lawrence Geller
-------------------
Name: Lawrence Geller
Title: Vice President-General Counsel
Address: 5150 Linton Boulevard
Delray Beach, Florida 33484
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EXHIBIT 10.41
AMENDMENT NO. 1 TO SECURITIES PURCHASE AGREEMENT
AMENDMENT, dated as of June 5, 1997, to Securities Purchase Agreement
(the "Securities Purchase Agreement") dated as of May 5, 1997 among EMPIRE OF
CAROLINA, INC., a Delaware corporation (the "Company"), HPA ASSOCIATES, LLC, a
Delaware limited liability company ("HPA"), and EMP ASSOCIATES LLC, a Delaware
limited liability company.
Capitalized terms used in this Amendment that are not otherwise defined
herein have the meanings given to them in the Securities Purchase Agreement. In
recognition of certain changes in circumstances since the execution of the
Securities Purchase Agreement, the parties thereto wish to modify the Securities
Purchase Agreement as set forth in this Agreement.
NOW, THEREFORE, in consideration of the premises, the parties hereto
hereby agree as follows:
1. Modification of Permanent Financing.
1.1 The definition of "Permanent Financing Final Date" is
hereby amended to provide that such term means June 16, 1997.
1.2 HPA and EMP acknowledge that the Company has exercised the
Additional Financing Option pursuant to a letter of notification dated May 14,
1997. Notwithstanding the exercise of the Additional Financing Option, however,
the Notes shall be convertible upon the occurrence of the Permanent Financing on
or prior to the Permanent Financing Final Date.
1.3 As part of the Permanent Financing, HPA and EMP shall each
be required to convert the entire principal amount of their Notes into Series A
Preferred Stock in accordance with the terms of the Securities Purchase
Agreement and the Notes.
2. Modification of Additional Financing.
2.1 The definition of "Additional Financing Final Date" is
hereby amended to provide that such term means June 30, 1997.
2.2 Section 2.2.2.1 of the Securities Purchase Agreement is
hereby amended by inserting the following parenthetical phrase after the word
"Company" in the seventh line thereof, "(it being understood that, subject to
the satisfaction or waiver of the conditions to closing set forth herein, HPA
guaranties such purchase, such obligation being primary and not contingent upon
the availability of other Additional Preferred Stock Purchasers)".
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2.3 Section 2.2.2.3 of the Securities Purchase Agreement is
hereby deleted.
3. Provision for Further Financing.
3.1 The following new definitions are added:
"FURTHER FINANCING CLOSING DATE" means the date agreed upon by
HPA and the Company, not later than the Further Financing Final Date, as
the date for the closing of the Further Financing.
"FURTHER FINANCING FINAL DATE" means December 31, 1997.
3.2 The following new provisions are added to the Securities
Purchase Agreement as Section 2.2.3:
2.2.3 Further Financing.
2.2.3.1 Subject to the terms and
conditions herein set forth, on the Further Financing Closing Date, the
Company shall issue to HPA and such other persons who may agree to acquire
(the "FURTHER PREFERRED STOCK PURCHASERS"), and the Further Preferred
Stock Purchasers shall acquire from the Company, an additional aggregate
amount of up to $5,000,000 of Series A Preferred Stock (the "FURTHER
FINANCING"), and the Company shall issue, pro rata in relation to the
proportion of $5,000,000 of Series A Preferred Stock that is purchased in
the Further Financing, to such Person or Persons as may be specified by
HPA (including HPA itself), an additional 2,500,000 Warrants (the "FURTHER
WARRANTS").
2.2.3.2 If, on the Further
Financing Final Date, sufficient Further Preferred Stock Purchasers are
ready, willing and able to close on the Further Financing and the
condition to closing specified in Section 3.6.1 hereof has been satisfied,
but the Company fails to close on such Further Financing on the Further
Financing Final Date despite such potential Further Preferred Stock
Purchasers' readiness to do so, the Company shall issue to such Persons as
HPA may designate (including HPA itself) the Further Warrants, promptly
after the Further Financing Final Date; provided that if such failure to
close by the Company is attributable to a failure by the Company to be
able to satisfy the conditions to closing set forth in Section 3.1.1, the
Company shall not be required to issue such Warrants unless such failure
to satisfy such condition was deliberately caused by the Company, in whole
or in part, for the purpose of preventing the Company from being able to
satisfy such condition to closing.
2.2.3.3 If sufficient Further
Preferred Stock Purchasers are ready, willing and able to close on the
full amount of Further Financing on the Further Financing Final Date and
the condition to closing specified in Section 3.6.1 hereof has been
satisfied, (i) the Company shall issue such amount of Series A Preferred
Stock as may be requested by those Further Preferred Stock Purchasers who
do wish to
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purchase Series A Preferred Stock in the Further Financing, together with
the appropriate pro rata portion of the Further Warrants (as specified by
HPA), (ii) the parties shall have no further obligation to one another
under this Agreement with regard to the provision of financing and the
issuance of additional securities, but (iii) the obligations of the
parties pursuant to Articles 7 through 11 shall continue.
2.2.3.4 All funds raised to fund
the Further Financing shall be held in escrow at a bank reasonably
acceptable to the Company and HPA pending the closing of the Further
Financing and shall not be withdrawable therefrom until the earlier to
occur of the closing of the Further Financing, the failure to pass,
acknowledged as such by the Company, of a resolution seeking the
stockholder approval specified in Section 3.6.1. and the Further Financing
Final Date. Persons who have contributed such funds into such escrow shall
receive a fee from the Company, payable upon the withdrawal of such funds
from escrow, at the rate of 7% per annum from the date of contribution to
the date of such withdrawal; and the Company shall be entitled to receive
any amount earned upon the investment of such funds (subject to any charge
made by the bank at which such escrow is held).
3.3 The following provision is added to the Securities
Purchase Agreement:
3.6 Condition to Closing on Further
Financing. The following shall be a condition to the closing of the
Further Financing:
3.6.1. Stockholder Approval. The
issuance of the Series A Preferred Stock and the Further Warrants in the
Further Financing, on the terms set forth in Section 2.2.3.1, shall have
been approved by the Company's stockholders, by vote of a majority of
votes cast thereon.
3.4 Section 11.15 (Expenses) of the Securities Purchase
Agreement is hereby amended by adding the words "and the Further Financing"
before the comma in the next to last line thereof.
4. Restructuring of Senior Loan Agreement. HPA (i) acknowledges
that satisfactory (but not definitive) negotiations have occurred toward the
satisfaction of the conditions to the closing of the Permanent Financing on the
Permanent Financing Closing Date that are set forth in Section 3.4.2 of the
Securities Purchase Agreement and (ii) hereby waives the further satisfaction of
such conditions. In consideration of such waiver, the Company shall use its best
efforts to cooperate with HPA in connection with the effectuation of a written
agreement modifying the Senior Loan Agreement in form and substance satisfactory
to HPA.
5. Parties Bound. The parties acknowledge that EMP has no
interest in the Further Financing and is not a party to the agreements set forth
in Section 3 of this Amendment No. 1.
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IN WITNESS WHEREOF, the parties hereto have caused this Amendment to be
executed and delivered by their respective officers hereunto duly authorized as
of the date first written above.
================================================================================
EMPIRE OF CAROLINA, INC.
By /s/ Steve Geller
-----------------------
Name: Steve Geller
Title: Chairman & Chief
Executive Officer
- --------------------------------------------------------------------------------
HPA ASSOCIATES, LLC
By /s/ Charles S. Holmes
------------------------
Name: Charles S. Holmes
Title: Managing Director
- --------------------------------------------------------------------------------
EMP ASSOCIATES LLC
By: EMP Management LLC
as Managing Member
By /s/ J. Richard Messina
-------------------------
Name: J. Richard Messina
Title: Manager
- --------------------------------------------------------------------------------
================================================================================
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EXHIBIT 10.42
AGREEMENT
Agreement, dated as of June 17, 1997, by and among EMPIRE OF CAROLINA,
INC., a Delaware corporation (the "Company"), EMPIRE INDUSTRIES, INC., a North
Carolina corporation ("Industries"), and SMEDLEY INDUSTRIES, INC. LIQUIDATING
TRUST (the "Trust").
WHEREAS, on March 2, 1995, Smedley Industries, Inc. (f/k/a Buddy L Inc.)
("Smedley") filed a voluntary petition for relief under the Bankruptcy Code;
WHEREAS, pursuant to the Amended and Restated Asset Purchase Agreement, as
amended (the "Asset Purchase Agreement"), dated as of May 19, 1995, by and among
the Company, Smedley and Buddy L (Hong Kong) Limited, Smedley sold the
toy-related assets of Buddy L Inc. to the Company, and in connection therewith,
the parties executed a Registration Rights Agreement, dated as of July 7, 1995
(the "Old Registration Rights Agreement"), which, among other things, provided
Smedley with observation rights set forth therein (the "Observation Rights") and
the right to additional shares of the Company's common stock upon the occurrence
of certain events (the "Price Protection Shares");
WHEREAS, pursuant to Smedley's First Amended and Restated Chapter 11 Plan,
dated June 17, 1996 (the "Plan"), and the Order Confirming First Amended Joint
Chapter 11 Plan entered by the Bankruptcy Court for the District of Delaware,
the Trust succeeded to all of Smedley's rights in, to and under the Asset
Purchase Agreement and the Old Registration Rights Agreement, including, without
limitation, the Price Protection Shares and the Observation Rights;
WHEREAS, the Trust has significant claims against and interests in the
Company, including among other things, the contingent payment obligations
included in the Asset Purchase Agreement, 416,667 shares of the Company's common
stock, certain inventory payment obligations and the Trust's contractual right
to the Price Protection Shares;
WHEREAS, the Company alleges that it has setoff rights against certain
inventory payment obligations and Smedley receivables and disagrees as to, among
other things, the number of Price Protection Shares that may be available to the
Trust;
WHEREAS, HPA Associates, LLC and EMP Associates LLC (collectively, the
"HPA Group") and the Company have entered into a Securities Purchase Agreement,
dated as of May 5, 1997 (the "HPA Agreement"), pursuant to which the HPA Group
is purchasing at least $11 million of the Company's Series A Preferred Stock
(the "New Equities");
WHEREAS, the holder of the Company's outstanding debentures (the
"Debentureholders") have entered into an Agreement, dated as of June 17, 1997
(the "Debentureholder Agreement"), pursuant to which the Debentureholders are
exchanging all $15 million of outstanding debentures
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(and all rights relating thereto) (the "Debentures") for $15 million of the
Company's Series C Preferred Stock;
WHEREAS, the Company, the HPA Group and the Debentureholders are unwilling
to consummate the transactions contemplated by the HPA Agreement and the
Debentureholder Agreement (collectively, the "Transactions") unless and until
Industries, the Company and the Trust execute and deliver this Agreement; and
WHEREAS, the Trust may receive significantly less than the consideration
to the Trust provided herein in respect of its claims against and interests in
the Company than if the Transactions are not completed.
NOW THEREFORE, in consideration of the premises contained herein, and
other good and valuable consideration, the receipt and sufficiency of which are
hereby acknowledged, the parties hereto agree as follows:
1. Transfer. Contemporaneously with the consummation of the Transactions
(the "Closing"), the Company shall wire transfer to the Trust the sum of
$100,000.00 (the "Settlement Amount") in immediately available funds pursuant to
the following wire transfer instructions:
The Chase Manhattan Bank N.A.
ABA #021-000-021
Acct. #0371289679
Ref: Smedley Ind. Inc. Liquidating Trust
Attn: Robert Kennedy
(212) 397-6222
2. Registration Rights. Upon the Trust's receipt of the Settlement
Amount, the Additional Shares and the Note (collectively, the "Settlement
Distribution"), the Old Registration Rights Agreement shall be terminated and be
of no further force or effect. Without in any manner limiting the breadth of the
foregoing, it is understood and agreed that, from and after the Trust's receipt
of the Settlement Distribution, the Trust shall no longer have Observation
Rights or rights to the Price Protection Shares. Contemporaneously with the
Closing, the Company and the Trust shall enter into a registration rights
agreement in the form annexed hereto as Exhibit A (the "New Registration Rights
Agreement").
3. Asset Purchase Agreement. Upon the Trust's receipt of the Settlement
Distribution, all obligations, duties and liabilities of the Trust, Smedley and
the Company under or pursuant to the Asset Purchase Agreement shall be deemed to
be fully satisfied and none of them shall have any ongoing or future
obligations, duties or liabilities thereunder.
4. Issuance of Note. Contemporaneously with the Closing, Industries
shall issue to the Trust a promissory note, guarantied by the Company, in the
original principal amount of $2,500,000 in the form annexed hereto as Exhibit B.
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5. Issuance of Stock. Contemporaneously with the Closing, the Company
shall issue to the Trust an additional 250,000 shares of its common stock (the
"Additional Shares").
6. Opinion. Contemporaneously with the Closing, Sonnenschein Nath &
Rosenthal, counsel to the Company and Industries, shall deliver to the Trust an
opinion in the form annexed hereto as Exhibit C.
7. Officer's Certificate. Contemporaneously with the Closing, the
Company shall deliver to the Trust an Officer's Certificate in the form annexed
hereto as Exhibit D.
8. Releases.
(a) The Trust hereby absolutely and unconditionally releases
the Company and Industries and each of their respective agents,
representatives, directors, officers and counsel (but, in each case,
solely in their capacity as such) from any and all claims, liabilities,
obligations, demands, actions, causes of action, suits, controversies,
promises and damages, in law or in equity, of whatsoever nature,
whether known or unknown, liquidated or unliquidated, fixed or
contingent, direct or indirect, whether suspected or unsuspected,
whether having arisen or hereafter to arise, which the Trust ever had,
now has or claims to have or hereafter can, shall or may for any reason
have, against the Company or Industries arising out of any matter or
event occurring prior to the Closing; provided, however, that nothing
contained herein shall in any way be construed to waive or release any
claims, actions, causes of action or other rights that (i) the Trust
has, or may have, in its capacity as a shareholder of the Company, (ii)
the Trust may have in respect of or in connection with the Note or the
New Registration Rights Agreement, or (iii) arise from any breach by
Industries or the Company of this Agreement.
(b) The Company and Industries hereby absolutely and
unconditionally release the Trust, Smedley, each of their respective
agents, trustees, representatives, directors, officers and counsel
(but, in each case, solely in their capacity as such), and Northwestern
Mutual Life Insurance Company, Phoenix Home Life Mutual Ins. Co. and
Equitable Life Assurance Society of the United States (but, in each
case, solely in its capacity as a party to its respective
confidentiality agreement with the Company) from any and all claims,
liabilities, obligations, demands, actions, causes of action, suits,
controversies, promises and damages, in law or in equity, of whatsoever
nature, whether known or unknown, liquidated or unliquidated, fixed or
contingent, direct or indirect, whether suspected or unsuspected,
whether having arisen or hereafter to arise, which the Company or
Industries ever had, now has or claims to have or hereafter can, shall
or may for any reason have, against any of them arising out of any
matter or event occurring prior to the Closing; provided, however, that
nothing contained herein shall in any way be construed to waive or
release any claims, actions, causes of action or other rights that (i)
the Company has or may have against any party that has breached a
confidentiality agreement with the Company, but solely to the extent of
the actual liability of the Company to a third party (including
governmental agencies) directly resulting from such breach, or (ii)
arise from any breach by the Trust of this Agreement.
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9. Representations of the Company and Industries. The Company and
Industries represent and warrant to, and covenant with, the Trust as of the date
of this Agreement and as of the Closing that:
(a) Each of the Company, Industries and each of their
respective subsidiaries that is an operating entity or that has any
material assets is a corporation duly incorporated, validly existing
and in good standing under the laws of the jurisdiction of its
incorporation and has all necessary corporate power and authority to
conduct its business as currently conducted and to own or lease the
properties and assets it now owns or holds under lease. Each of the
Company, Industries and each of their respective subsidiaries is duly
qualified or licensed to do business and is in good standing as a
foreign corporation in every jurisdiction in which the conduct of its
business or the ownership or leasing of its properties requires it to
be so qualified or licensed, except where the failure to be so
qualified or licensed or in good standing would not individually, or in
the aggregate, have a material adverse effect on the business, assets,
condition (financial or otherwise), results of operations or prospects
of the Company, Industries and their respective subsidiaries, taken as
a whole.
(b) The Company and Industries have all necessary corporate
power and authority to execute and deliver this Agreement, the New
Registration Rights Agreement and the Note, to consummate the
transactions contemplated hereby and thereby, including the issuance of
the Settlement Distribution, and to perform their obligations hereunder
and thereunder. The execution and delivery by the Company and
Industries of this Agreement, the New Registration Rights Agreement and
the Note and the performance of its obligations hereunder and
thereunder, including the issuance of the Settlement Distribution, have
been duly authorized by all necessary corporate and other action, and
no further authorization on the part of the Company or Industries is
necessary to authorize such execution, delivery and performance. This
Agreement, the New Registration Rights Agreement and the Note have been
duly executed and delivered by the Company and Industries. This
Agreement, the New Registration Rights Agreement and the Note
constitute legal, valid and binding agreements of the Company and
Industries, enforceable against them in accordance with their
respective terms, except as enforceability may be subject to the
application of general equitable principles and to bankruptcy,
insolvency, moratorium or other similar laws affecting creditors'
rights generally. The execution and delivery by the Company and
Industries of this Agreement, the New Registration Rights Agreement and
the Note, the consummation of the transactions contemplated hereby and
thereby, including the issuance of the Settlement Distribution, and the
performance by the Company and Industries of its obligations hereunder
and thereunder do not and will not conflict with, violate, result in a
breach of, constitute a default under or require any consent or notice
not previously obtained or provided under any agreement, instrument,
organizational document, law, regulation, judicial, administrative or
arbitral decree or governmental order to which it is a party or by
which it or its property is bound.
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(c) The Additional Shares have been duly authorized and, upon
issuance at the Closing, will be validly issued, fully paid and
non-assessable, and free and clear of any and all liens, security
interest, encumbrances and claims of any kind, and the issuance of such
Additional Shares is not and will not be subject to any preemptive or
similar right of any other stockholder of the Company.
(d) The Company has not made any assignment, sale, grant,
conveyance or other transfer of any portion of its right, title or
interest in, to or under the Asset Purchase Agreement or the Old
Registration Rights Agreement, it is the sole legal and beneficial
owner and holder thereof, free and clear of all claims, liens, security
interests and encumbrances, and it has the sole right to execute this
Agreement in connection therewith, either without obtaining or
requesting the consent of any other person or entity or having already
obtained such consent.
(e) Immediately after giving effect to the Transactions and
the transactions contemplated by this Agreement, the authorized capital
stock of each of the Company and Industries will be as set forth in the
Company's most recent Annual Report on Form 10- K and Quarterly Report
on Form 10-Q. All of the outstanding shares of capital stock of each of
the Company and Industries have been duly authorized and validly issued
and are fully paid and non-assessable. Immediately after giving effect
to the Transactions and the transactions contemplated by this
Agreement, except as provided in the Offering Memorandum of the Company
dated May 23, 1997 and the Offering Memorandum Supplement of the
Company dated June 9, 1997, there will be no outstanding securities
convertible into or exchangeable for capital stock of the Company or
Industries or options, warrants or other rights to purchase or
subscribe to capital stock of the Company or Industries of any of their
respective subsidiaries or contracts, commitments, agreements,
understandings or arrangements of any kind to which the Company or
Industries is a party relating to the issuance of any capital stock of
the Company, Industries or any such subsidiary, any such convertible or
exchangeable securities or any such options, warrants or rights.
(f) Set forth on Schedule I hereto is a complete and accurate
list of each subsidiary of the Company or the Guarantor that is an
operating entity or that has any material assets, showing as of the
date hereof (as to each such subsidiary) the jurisdiction of its
incorporation and the percentage ownership (direct and indirect) of the
Company and the Guarantor in each class of capital stock or other
equity interests of each of its respective subsidiaries and also
identifies the direct owner thereof. Except for the subsidiaries set
forth on Schedule I, neither the Company nor the Guarantor has any
subsidiary that is engaged in business or that owns material assets.
All of the outstanding shares of capital stock of such subsidiaries
that are corporations are validly issued, fully paid and
non-assessable. As of the date hereof, all of the outstanding shares of
capital stock of, or other ownership interests in, each such subsidiary
are owned by the Company or Industries, as provided therein, in each
case free and clear of any liens, claims, charges or encumbrances of
any kind, except to the extent set forth in the Loan Agreement. No
subsidiary of the Company or Industries has outstanding options,
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warrants, subscriptions, calls, rights, convertible securities or other
agreements or commitments obligating such subsidiary to issue, transfer
or sell any of its securities.
(g) The Company has received net proceeds in cash from the HPA
Group in consideration for the issuance of the New Equities of at least
$10,000,000 (after taking into account the placement agent's fees and
the expenses of such offering). The HPA Group has converted $5,000,000
of the Company's Promissory Notes Due February 6, 1998 into an
additional $5,000,000 of the Company's Series A Preferred Stock. The
Debentures have been surrendered to the Company by the Debentureholders
and have been cancelled by the Company. Annexed hereto are true and
complete executed copies of the HPA Agreement and the Debentureholder
Agreement, each as amended through the date hereof, executed by the
respective parties thereto.
(h) Except as expressly set forth in this Agreement, the New
Registration Rights Agreement or the Note, no party has made any
representation or warranty to any other party in connection with, or as
an inducement to enter into, this Agreement.
10. Representations of the Trust. The Trust represents and warrants
to, and covenants with, the Company and Industries as of the date of this
Agreement and as of the Closing that:
(a) It is a trust, duly formed, validly existing and in good
standing under the laws of the jurisdiction of its formation. It has
all necessary power and authority to execute and deliver this Agreement
and the New Registration Rights Agreement, to consummate the
transactions contemplated hereby and thereby and to perform its
obligations hereunder and thereunder. The execution and delivery by it
of this Agreement and the New Registration Rights Agreement, and the
performance of its obligations hereunder and thereunder, have been duly
authorized by all necessary action, and no further authorization on the
part of the Trust (including approval of any Bankruptcy Court) is
necessary to authorize such execution, delivery and performance. This
Agreement and the New Registration Rights Agreement have been duly
executed and delivered by the Trust. This Agreement and the New
Registration Rights Agreement constitute legal, valid and binding
agreements of the Trust, enforceable against the Trust in accordance
with their respective terms, except as enforceability may be subject to
the application of general equitable principles and to bankruptcy,
insolvency, moratorium or other similar laws affecting creditors'
rights generally. The execution and delivery by the Trust of this
Agreement and the New Registration Rights Agreement, the consummation
of the transactions contemplated hereby and thereby and the performance
by the Trust of its obligations hereunder and thereunder do not and
will not conflict with, violate, result in a breach of, constitute a
default under or require any consent or notice not previously obtained
or provided under any agreement, instrument, organizational document,
law, regulation, judicial, administrative or arbitral decree or
governmental order to which it is a party or by which it or its
property is bound.
(b) The Trust hereby represents and warrants to the Company
and Industries that, except in respect of shares of the Company's stock
sold in connection with the
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Company's public offering in July 1996, (i) it has made no assignment,
sale, grant, conveyance or other transfer of any portion of its right,
title or interest in, to or under the Asset Purchase Agreement or the
Old Registration Rights Agreement, (ii) it is the sole legal and
beneficial owner and holder thereof, free and clear of all claims,
liens, security interests and encumbrances, and (iii) it has the sole
right to execute this Agreement in connection therewith, either without
obtaining or requesting the consent of any other person or entity or
having already obtained such consent.
(c) Except as expressly set forth in this Agreement, the New
Registration Rights Agreement or the Note, no party has made any
representation or warranty to any other party in connection with, or as
an inducement to enter into, this Agreement.
(d) The Additional Shares delivered to the Trust on the date
hereof have not been registered for sale under the Securities Act of
1933 (the "Securities Act"), and may be sold only as permitted
thereunder or pursuant to registration or an exemption therefrom, and
the certificate evidencing the Trust's ownership of the Additional
Shares will contain a legend to that effect.
11. Indemnification
(a) The Company and Industries agree and covenant to hold
harmless and indemnify the Trust and each of its affiliates and their
respective employees, directors, officers, trustees, principals, equity
holders, controlling persons, advisors and agents (each of the
foregoing Persons being an "Indemnified Person"), from and against any
losses, claims, damages, liabilities and expenses (including attorneys'
fees and expenses of investigation) incurred by such Indemnified Person
in connection with (i) any breach by the Company or the Guarantor of
any its representations, warranties, covenants or agreements contained
herein, in the New Registration Rights Agreement or in the Note, or in
any agreement, instrument or document delivered by the Company or the
Guarantor hereunder or thereunder or (ii) enforcing the rights of an
Indemnified Person under this Agreement, the New Registration Rights
Agreement or the Note.
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(b) The Trust agrees and covenants to hold harmless and
indemnify the Company, Industries and their affiliates and their
respective employees, directors, officers, principals, equity holders,
controlling persons, advisors and agents (each of the foregoing Persons
being an "Indemnified Person"), from and against any losses, claims,
damages, liabilities and expenses (including attorneys' fees and
expenses of investigation) incurred by such Indemnified Person in
connection with (i) any breach by the Trust of any its representations,
warranties, covenants or agreements contained herein, in the New
Registration Rights Agreement or in the Note, or in any agreement,
instrument or document delivered by the Trust hereunder or thereunder
or (ii) enforcing the rights of an Indemnified Person under this
Agreement, the New Registration Rights Agreement or the Note.
12. Miscellaneous.
(a) Specific Performance. Each of the Company, Industries and
the Trust acknowledges that the other parties hereto will be
irreparably damaged, and cannot be fully compensated by monetary
relief, in the event that such party commits a breach of its
obligations under this Agreement. Accordingly, in the event of a breach
of this Agreement by any party, any aggrieved party shall be entitled
to specific performance and other appropriate equitable relief, without
the requirement of posting a bond, and without forgoing any claim for
monetary damages. The provisions of this Section 11.a. shall not be
deemed incorporated into any other agreements between the parties
hereto.
(b) Entire Agreement; Modifications. This document constitutes
the entire agreement of the Company, Industries and the Trust with
respect to the subject matter hereof and supersedes all prior
agreements. This Agreement may not be amended or terminated, and no
provision hereof may be waived, except with the written consent of the
party to be bound thereby.
(c) Exclusive Jurisdiction. The Company, Industries and the
Trust agree that the courts located in the City and State of New York
shall have exclusive jurisdiction to hear any dispute concerning, and
to enforce, this Agreement and any document entered into in connection
herewith. Each of the parties hereby submits to the personal
jurisdiction of the courts in the City and State of New York in
connection with any such matter, and agrees that service of process
shall be deemed effective if delivered by certified mail, return
receipt requested, addressed in accordance with the foregoing notice
provisions.
(d) Governing Law. THE VALIDITY, INTERPRETATION AND
ENFORCEMENT OF THIS AGREEMENT SHALL BE GOVERNED BY AND CONSTRUED AND
ENFORCED IN ACCORDANCE WITH THE LAWS OF THE STATE OF NEW YORK WITHOUT
GIVING EFFECT TO THE CONFLICT OF LAW PRINCIPLES THEREOF.
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(e) Successors and Assigns. This Agreement shall be binding
upon and inure to the benefit of the Company, Industries and the Trust
and their respective successors and assigns.
(f) Notices. All notices, demands and other communications
provided for hereunder shall be in writing, given by registered or
certified mail, return receipt requested, telecopy, courier service or
personal delivery, addressed to the Company or Industries as follows:
Empire of Carolina, Inc.
Empire Industries, Inc.
5150 Linton Boulevard
Delray Beach, FL 33484
Attention: Mr. Steve Geller
Telecopy: (561) 498-0722
with a copy to:
Sonnenschein Nath & Rosenthal
8000 Sears Tower
Chicago, IL 60606
Attention: Mr. Kenneth Kolmin
Telecopy: (312) 876-7934
and to the Trust as follows:
Smedley Industries, Inc. Liquidating Trust
Kahn Consulting, Inc., Trustee
152 West 57th Street, Suite 4500
New York, NY 10019
Attention: Christopher J. Kearns
Telecopy: (212) 841-9350
with a copy to:
Kramer, Levin, Naftalis & Frankel
919 Third Avenue
New York, NY 10022
Attention: Saul E. Burian, Esq.
Telecopy: (212) 715-8000
(g) Counterparts. This Agreement may be executed in any number
of counterparts, each of which when so executed and delivered shall be
an original, but all of which shall together constitute one and the
same instrument.
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(h) Headings Descriptive. The headings of the several
sections and subsections of this Agreement are inserted for convenience
only and shall not in any way affect the meaning or construction of any
provision of this Agreement.
(i) Termination. This Agreement is terminable at will by the
Trust in the event that (i) the Transactions have not been fully
consummated on or prior to the date hereof, (ii) the Trust has not
received the Settlement Distribution on or before the date hereof, or
(iii) the New Registration Rights Agreement has not become effective on
or before the date hereof.
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IN WITNESS WHEREOF, the undersigned have duly executed and delivered
this Agreement.
EMPIRE OF CAROLINA, INC.
By: /s/ Lawrence Geller
-------------------
Name: Lawrence Geller
Title: Vice President-General Counsel
EMPIRE OF INDUSTRIES, INC.
By: /s/ Lawrence Geller
-------------------
Name: Lawrence Geller
Title: Vice President-General Counsel
SMEDLEY INDUSTRIES, INC.
LIQUIDATING TRUST
By: /s/ Christopher J. Kearns
-------------------------
Name: Christopher J. Kearns
Title: Director
Kahn Construction, Inc.-
Trustee
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EXHIBIT 10.43
Empire of Carolina, Inc.
5150 Linton Boulevard
Delray Beach, FL 33484
June 17, 1997
Pellinore Securities Corp.
745 Fifth Avenue
New York, New York 10151
Axiom Capital Management Inc.
399 Park Avenue
27th Floor
New York, New York 10022
Commonwealth Associates Inc.
733 Third Avenue
New York, New York 10018
Gentlemen:
This is to advise each of you and all purchasers of Series A Preferred
Stock of Empire Carolina, Inc. ("Empire") that Empire agrees to be bound by the
Registration Rights provisions affecting the Series A Preferred Stock that are
appended to the Supplement to the Subscription Agreement relating to the Empire
financing.
Very truly yours,
Empire Carolina, Inc.
By: /s/ Lawrence Geller
-------------------
Lawrence Geller
Vice President and General
Counsel
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[THE FOLLOWING ARE THE REGISTRATION RIGHTS PROVISIONS AFFECTING THE SERIES A
PREFERRED STOCK THAT ARE AN APPENDIX TO THE SUPPLEMENT TO THE SUBSCRIPTION
AGREEMENT AND ARE REFERENCED IN THE PRECEDING LETTER.]
APPENDIX TO SUBSCRIPTION AGREEMENT
REGISTRATION RIGHTS
Capitalized terms used in this Appendix that are not otherwise defined
are used with the meanings given to them in the Certificate of Designation for
the Series A Preferred Stock of Empire of Carolina, Inc. (the "Company") (the
"Certificate of Designation") to be purchased pursuant to the Subscription
Agreement to which this Appendix is attached.
(a) Shelf Registration. Within 180 days from the first date of issuance
of the Series A Preferred Stock, the Company shall cause to be filed a
registration statement (a "Shelf Registration") on Form S-3 or any other
appropriate form under the Securities Act of 1933 (the "Securities Act") for an
offering to be made on a delayed or continuous basis pursuant to Rule 415
thereunder or any similar rule that may be adopted by the Securities and
Exchange Commission (the "Commission") and permitting (i) sales of shares
("Preferred Shares") of Series A Preferred Stock, both in ordinary course
brokerage or dealer transactions or in any other transfer for consideration not
involving an underwritten public offering, and (ii) the sale in such
transactions of shares of Common Stock ("Common Shares") of the Company into
which Preferred Shares may be converted ("Converted Common Shares") pursuant to
the Certificate of Designation (together, the "Registrable Securities") (and in
both cases shall register or qualify the shares to be sold in such offering
under such other securities or "blue sky" laws, if any, as would be required
pursuant to paragraph (d)(ii) hereof). Prior to the filing of the Shelf
Registration or any supplement or amendment thereto, the Company shall furnish
copies of the Shelf Registration or such amendment to one counsel designated by
HPA Associates, LLC ("HPA"), and will not file the Shelf Registration or such
amendment without the prior consent of such counsel, which consent shall not be
unreasonably withheld. The Company shall use its reasonable efforts to (1) cause
the Shelf Registration to be declared effective by the Commission as soon as
practicable after its filing with the Commission and (2) keep the Shelf
Registration continuously effective, subject to paragraph (c) below. The Company
shall, if necessary, supplement or make amendments to the Shelf Registration, if
required by the registration form used by the Company for the Shelf Registration
or by the instructions applicable to such registration form or by the Securities
Act or the rules or regulations thereunder or as may reasonably be requested by
HPA. The Company shall pay all Registration Expenses incurred in connection with
the Shelf Registration.
(b) Piggyback Registration. The following provisions apply at any time
prior to the later of June 18, 2000 and the date upon which the right of
Piggyback Registration is no longer held by any holder of the Company's Series C
Preferred Stock (or, with respect to Registrable Securities that are owned by
HPA, Charles S. Holmes
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or James J. Pinto, or any direct or indirect transferees of Registrable
Securities from them in a transaction not involving a public offering (such
parties being referred to as "HPA Parties" and such Registrable Securities as
"HPA Party Shares"), so long as HPA Party Shares are held by an HPA Party who is
an affiliate of the Company for purposes of Rule 144 (as defined below)).
Whenever the Company proposes to file a registration statement under the
Securities Act with respect to an underwritten public offering of Preferred
Shares or Common Shares by the Company for its own account or for the account of
any other holder of Preferred Shares or Common Shares or any other security
convertible into Common Shares, the Company shall give at least 30 days' written
notice before the anticipated filing date (the "Offering Notice") of such
proposed filing to each person identified on the transfer records of the Company
(a "Holder") as holding Preferred Shares that are convertible into at least
50,000 Common Shares or at least 50,000 Converted Common Shares, or Preferred
Shares and Converted Common Shares that aggregate the equivalent of 50,000
Common Shares upon conversion. Such Offering Notice shall offer all such Holders
the opportunity to register such number of Preferred Shares, Common Shares or
HPA Party Shares as each such Holder may request in writing, which request for
registration (each, a "Piggyback Registration", with the rights to registration
thereof being referred to as "Piggyback Rights") must be received by the Company
within 15 days after the Offering Notice is given. The Company shall use all
reasonable efforts to cause the managing underwriter or underwriters of a
proposed underwritten offering to permit the Holders of the Registrable
Securities requested to be included in the registration for such offering to
include such Registrable Securities in such offering on the same terms and
conditions as the securities of the Company included therein. Notwithstanding
the foregoing, if the managing underwriter or underwriters of a proposed
underwritten offering advise the Company in writing that in its or their opinion
the number of Registrable Securities proposed to be sold in such offering
exceeds the number of Registrable Securities that can be sold in such offering
without adversely affecting the market for the Company's securities or the price
that may be obtained in such offering, the Company shall include in such
registration the number of Registrable Securities that in the opinion of such
managing underwriter or underwriters can be sold without adversely affecting the
market for the Preferred Shares or the Common Shares or the price to be received
in such offering. In such event, the number of Registrable Securities, if any,
to be offered for the accounts of Holders shall be reduced pro rata on the basis
of the relative number of any Registrable Securities requested by each such
Holder to be included in such registration to the extent necessary to reduce the
total number of Registrable Securities to be included in such offering to the
number recommended by such managing underwriter or underwriters, provided that
if any other Person has rights to a Piggyback Registration with respect to the
same underwritten public offering, the rights of the Holders to sell their
securities together with such other Persons holding Piggyback Rights shall be
cut back proportionately (in relation to the number of shares that each Person
so participating in the Piggyback Registration has requested to be included
(using Converted Common Share equivalents in a case in which a cutback is
required of a Piggyback Registration of Preferred Shares) compared to the number
of all shares with respect to which inclusion has been properly requested),
except to the extent that the instrument governing such other Piggyback Rights
specifically provides that the rights held by such other Person either take
precedence over or shall be subordinated to the Piggyback Rights held by the
Holders hereunder, it being
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understood that the rights of holders of Series A Preferred Stock hereunder take
precedence as to cutbacks over the rights of holders of Series C Preferred
Stock. The Company shall pay all Registration Expenses incurred in connection
with any Piggyback Registration.
(c) Termination of Registration Rights; Provision of Rule 144
Information. As used in this section "affiliate" has the meaning given to it in
Rule 144 under the Securities Act ("Rule 144"). The registration rights provided
hereunder shall continue so long as any Series A Shares and Converted Common
Shares remain outstanding and shall then terminate (except in the case of HPA
Party Shares), provided that (i) the Company shall be entitled to remove from
registration under paragraph (a) Preferred Shares held by Persons (other than
HPA Persons who are affiliates of the Company) who have acquired such Preferred
Shares or Converted Common Shares for consideration pursuant to a transaction
covered by the registration provided by paragraph (a), and (ii) at any time
after two years after the date of the issuance of the Preferred Shares, so long
as the Preferred Shares and Converted Common Shares are freely tradable under
Rule 144 in the hands of Persons who are not affiliates of the Company, (A) the
Company shall be entitled to remove Registrable Securities held by
non-affiliates from registration under paragraph (a) and, (B) if no HPA Person
remains an affiliate of the Company, or no HPA Person who is an affiliate of the
Company owns more than 1% of the then outstanding Preferred Shares or Common
Shares, registration of the Preferred Shares or Converted Common Shares (as
applicable) under paragraph (a) shall no longer be required. Registration may
terminate under paragraph (a) with respect to HPA Party Shares when, and to the
extent that, no HPA Person who remains an affiliate of the Company owns more
than 1% of the then outstanding Preferred Shares or Common Shares.
For a period of at least two years, and continuing while any HPA Person
remains an affiliate of the Company and continues to hold Preferred Shares or
Converted Common Shares, the Company shall be required (i) to file such reports
under the Exchange Act, or otherwise make publicly available such information,
as may be required by section (c) of Rule 144 in order for sales to be permitted
under the provisions of Rule 144 and (ii) to provide confirmation of such filing
or availability upon request to any Holder or HPA Person who seeks to rely upon
Rule 144 (other than section (k) thereof) in the sale of Preferred Shares or
Converted Common Shares.
(d) Registration Procedures. Whenever Registrable Securities are to be
registered pursuant hereto, the Company shall use its best efforts to effect the
registration of Registrable Securities in accordance with the intended method of
disposition thereof as expeditiously as practicable and, in connection with any
such request, the Company shall as expeditiously as possible:
(i) furnish to each seller of
Registrable Securities such number of copies of the registration statement, each
amendment and supplement thereto (in each case including all exhibits thereto),
the prospectus included in such registration statement (including each
preliminary prospectus) and such other documents as each seller
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may reasonably request in order to facilitate the disposition of the Registrable
Securities owned by such seller;
(ii) if required, use best efforts
to register or qualify such Registrable Securities under such other securities
or "blue sky" laws of such jurisdictions as any seller reasonably requests in
writing and to do any and all other acts and things that may be reasonably
necessary or advisable to register or qualify for sale in such jurisdictions the
Registrable Securities owned by such seller; provided, however, that the Company
shall not be required to (i) qualify generally to do business in any
jurisdiction where it is not then so qualified, (ii) subject itself to taxation
in any such jurisdiction, (iii) consent to general service of process in any
such jurisdiction or (iv) provide any undertaking required by such other
securities or "blue sky" laws or make any change in its charter or by-laws that
the Board of Directors of the Company determines in good faith to be contrary to
the best interest of the Company and its stockholders;
(iii) use best efforts to cause the
Registrable Securities covered by such registration statement to be registered
with or approved by such other governmental agencies or authorities as may be
necessary by virtue of the business and operations of the Company to enable the
seller or sellers thereof to consummate the disposition of such Registrable
Securities;
(iv) notify each seller of such
Registrable Securities at any time when a prospectus relating thereto is
required to be delivered under the Securities Act of the happening of any event
as a result of which the prospectus included in such registration statement
contains an untrue statement of a material fact or omits to state any material
fact required to be stated therein or necessary to make the statements therein,
in light of the circumstances under which they were made, not misleading, and
prepare and file with the Commission a supplement or amendment to such
prospectus so that, as thereafter delivered to the purchasers of such
Registrable Securities, such prospectus will not contain an untrue statement of
a material fact or omit to state any material fact required to be stated therein
or necessary to make the statements therein, in light of the circumstances under
which they were made, not misleading, provided, in the use of a Piggyback
Registration, that prior to the filing of such supplement or amendment, the
Company shall furnish copies thereof to the Holders whose Registrable Securities
are included in such registration, any underwriters and counsel for such
Holders, and will not file such supplement or amendment without the prior
consent of such counsel, which consent shall not be unreasonably withheld;
(v) enter into customary
agreements (including an underwriting agreement in customary form) if the
offering is an underwritten offering) and take such other actions as are
reasonably required in order to expedite or facilitate the disposition of such
Registrable Securities;
(vi) make available for inspection
by any seller of Registrable Securities and any attorney, accountant or other
agent retained by any such seller (collectively, the "Inspectors"), all
financial and other records, pertinent corporate documents
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and properties of the Company (collectively, the "Records") as are reasonably
necessary to enable them to exercise their due diligence responsibility, and
cause the Company's officers, directors, employees and agents to supply all
information reasonably requested by any such Inspector in connection with such
registration statement. Records that the Company determines, in good faith, to
be confidential and that it notifies the Inspectors are confidential shall not
be disclosed by the Inspectors unless (i) the disclosure of such Records is, in
the reasonable judgment of any Inspector, necessary to avoid or correct a
misstatement or omission of a material fact in the registration statement or
(ii) the release of such Records is ordered pursuant to a subpoena or other
order from a court or governmental agency of competent jurisdiction or required
(in the written opinion of counsel to such Holder or underwriter, which counsel
shall be reasonably acceptable to the Company) pursuant to applicable state or
federal law. Each seller of Registrable Securities shall be required to agree,
however, that it will, upon learning that disclosure of such Records are sought
by a court or governmental agency, give notice to the Company and allow the
Company, at the Company's expense, to undertake appropriate action to prevent
disclosure of the Records deemed confidential;
(vii) if such sale is pursuant to an
underwritten offering, use reasonable efforts to obtain a "cold comfort" letter
and updates thereof from the Company's independent public accountants in
customary form and covering such matters of the type customarily covered by
"cold comfort" letters as the managing underwriter or underwriters reasonably
request; and
(viii) otherwise use its best efforts
to comply with all applicable rules and regulations of the Commission, and make
generally available to its security holders, as soon as reasonably practicable,
an earnings statement covering a period of 12 months, beginning within three
months after the effective date of the registration statement, which earnings
statement shall satisfy the provisions of Section 11(a) of the Securities Act.
Provided that the applicable listing requirements continue to be
satisfied, the Company shall use its best efforts to maintain the listing of the
Common Shares on the American Stock Exchange or, if such stock is delisted from
the American Stock Exchange, to provide for the listing of the Common Shares on
NASDAQ/NMS; and provided that such a listing continues to be in effect, the
Company shall cause any Converted Common Shares to be listed on the applicable
market. In the case of the Preferred Shares, if (i) Preferred Shares convertible
into at least 500,000 Common Shares have been sold pursuant to one or more
Piggyback Registrations or (ii) Holders of at least 10% of the then outstanding
Preferred Shares request the Company to make a determination whether the public
distribution and float of the Preferred Shares will qualify for such a listing
and the Company determines that the applicable standards have been met, the
Company shall use its best efforts to cause the Preferred Shares to be
registered under the Securities Exchange Act of 1934 (the "Exchange Act") and to
be listed for trading on each securities market, if any, on which the Common
Shares are listed or, with the consent of the Company (which shall not be
unreasonably withheld), on any other United States securities exchange that is
registered under the
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Exchange Act or over-the-counter market that is maintained by the National
Association of Securities Dealers, Inc.
The Company may require each seller or prospective seller of Registrable
Securities as to which any registration is being effected to furnish to the
Company such information regarding the distribution of such securities and other
matters as may be required to be included in the registration statement.
Upon receipt of any notice from the Company of the happening of any event
of the kind described in clause (iv), each holder of Registrable Securities
shall forthwith discontinue disposition of Registrable Securities pursuant to
the registration statement covering such Registrable Securities until such
holder's receipt of the copies of the supplemented or amended prospectus
contemplated by this clause (iv) and, if so directed by the Company, such holder
shall deliver to the Company (at the Company's expense) all copies, other than
permanent file copies then in such holder's possession, of the prospectus
covering such Registrable Securities current at the time of receipt of such
notice. If the Company gives any such notice, the Company shall extend the
period during which such registration statement shall be maintained effective
pursuant to this Agreement by the number of days during the period from and
including the date of the giving of such notice pursuant to clause (iv) to and
including the date when each seller of Registrable Securities covered by such
registration statement shall have received the copies of the supplemented or
amended prospectus contemplated in clause (iv). Notwithstanding anything to the
contrary set forth above in this paragraph, the Company may not require the
holders of Registrable Securities to discontinue disposition of Registrable
Securities for purposes of effecting a public offering of any securities of the
Company by any of its securityholders (other than an offering made pursuant to a
registration on Form S-8). Notwithstanding the foregoing, if the Company
furnishes to the Holders a certificate signed by the Chief Financial Officer of
the Company stating that (i) in the good faith judgment of the Board of
Directors of the Company it would be significantly disadvantageous to the
Company and its stockholders for any such Shelf Registration to be amended or
supplemented and (ii) the need for such an amendment or supplement is not caused
by a proposed secondary public offering of securities of the Company by any of
its securityholders (other than an offering made pursuant to a registration on
Form S-8), the Company may defer such amending or supplementing of such Shelf
Registration for not more than 45 days and in such event the Holders shall be
required to discontinue disposition of any Registrable Securities covered by
such Shelf Registration during such period. Notwithstanding the foregoing, in
connection with any amendment or supplement required to reflect a public
offering of securities by the Company, the Company shall file such amendment or
supplement no later than the same day that it files a registration statement
relating to such offering and shall provide written notice of the filing of such
amendment or supplement to the holders of Registrable Securities promptly
following such filing.
(e) Registration Expenses. The Company shall pay all expenses incident
to its performance of or compliance with this Agreement ("Registration
Expenses"), regardless of whether such registration becomes effective including,
without
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limitation, (a) all Commission, stock exchange or market and National
Association of Securities Dealers, Inc. registration and filing fees, (b) all
fees and expenses incurred in complying with securities or "blue sky" laws
(including reasonable fees and disbursements of counsel in connection with "blue
sky" qualifications of the Registrable Securities), (c) all printing, messenger
and delivery expenses, (d) all fees and disbursements of the Company's
independent public accountants and counsel, (e) all fees and expenses of any
special experts retained by the Company in connection with any Piggyback
Registration pursuant to the terms of this Agreement, and (f) the fees and
disbursements of one counsel retained collectively by the Holders for a
registration; provided, however, that the Company shall not pay the costs and
expenses of any counsel, accountants or other representatives retained by the
Holders, individually or in the aggregate.
(f) Indemnification; Contribution.
(1) Indemnification
by the Company. The Company shall indemnify, to the fullest extent permitted by
law, each Holder, its officers, directors and agents and each Person, if any,
who controls such Holder (within the meaning of the Securities Act) (it being
understood that, for these purposes, an HPA Person who is an affiliate of the
Company shall be considered a Holder in respect of HPA Party Shares), against
any and all losses, claims, damages, liabilities and expenses caused by any
untrue or alleged untrue statement of material fact contained in any
registration statement, prospectus or preliminary prospectus or any amendment
thereof or supplement thereto or any omission or alleged omission to state
therein a material fact required to be stated therein or necessary to make the
statements therein (in the case of a prospectus, in light of the circumstances
under which they were made) not misleading, except insofar as the same are
caused by or contained in any information with respect to such Holder furnished
in writing to the Company by such Holder expressly for use therein or by such
Holder's failure to deliver a copy of the prospectus or any supplements thereto
after the Company has furnished such Holder with a sufficient number of copies
of the same or by the delivery of prospectuses by such Holder after the Company
notified such Holder in writing to discontinue delivery of prospectuses. The
Company also shall indemnify any underwriters of the Registrable Securities,
their officers and directors and each Person who controls such underwriters
(within the meaning of the Securities Act) to the same extent as provided above
with respect to the indemnification of the Holders.
(2) Indemnification
by Holders. In connection with any registration statement in which a Holder is
participating, each such Holder shall furnish to the Company in writing such
information and affidavits with respect to such Holder as the Company reasonably
requests for use in connection with any such registration statement or
prospectus and agrees to indemnify, severally and not jointly, to the fullest
extent permitted by law, the Company, its officers, directors and agents and
each Person, if any, who controls the Company (within the meaning of the
Securities Act) against any and all losses, claims, damages, liabilities and
expenses resulting from any untrue or alleged untrue statement of a material
fact or any omission or alleged omission of a material fact required to be
stated in any registration statement, prospectus or preliminary prospectus
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or any amendment thereof or supplement thereto or necessary to make the
statements therein (in the case of a prospectus, in light of the circumstances
under which they were made) not misleading, to the extent, but only to the
extent, that such untrue or alleged untrue statement or omission is contained in
or improperly omitted from, as the case may be, any information or affidavit
with respect to such Holder so furnished in writing by such Holder. Each Holder
also shall indemnify any underwriters of the Registrable Securities, their
officers and directors and each Person who controls such underwriters (within
the meaning of the Securities Act) to the same extent as provided above with
respect to the indemnification of the Company.
(3) Conduct of
Indemnification Proceedings. Any party that proposes to assert the right to be
indemnified hereunder shall, promptly after receipt of notice of commencement of
any action against such party in respect of which a claim is to be made against
an indemnifying party or parties hereunder, notify each such indemnifying party
of the commencement of such action, enclosing a copy of all papers served, but
the omission so to notify such indemnifying party will not relieve it from any
liability that it may have to any indemnified party under the foregoing
provisions unless, and only to the extent that, such omission results in the
forfeiture of substantive rights or defenses by the indemnifying party. If any
such action is brought against any indemnified party and it notifies the
indemnifying party of its commencement, the indemnifying party will be entitled
to participate in and, to the extent that it elects by delivering written notice
to the indemnified party promptly after receiving notice of the commencement of
the action from the indemnified party, jointly with any other indemnifying party
similarly notified, to assume the defense of the action, with counsel reasonably
satisfactory to the indemnified party, and after notice from the indemnifying
party to the indemnified party of its election to assume the defense, the
indemnifying party will not be liable to the indemnified party for any legal or
other expenses except as provided below and except for the reasonable costs of
investigation subsequently incurred by the indemnified party in connection with
the defense. If the indemnifying party assumes the defense, the indemnifying
party shall have the right to settle such action without the consent of the
indemnified party; provided, however, that the indemnifying party shall be
required to obtain such consent (which consent shall not be unreasonably
withheld) if the settlement includes any admission of wrongdoing on the part of
the indemnified party or any decree or restriction on the indemnified party or
its officers or directors; provided, further, that no indemnifying party, in the
defense of any such action, shall, except with the consent of the indemnified
party (which consent shall not be unreasonably withheld), consent to entry of
any judgment or enter into any settlement that does not include as an
unconditional term thereof the giving by the claimant or plaintiff to such
indemnified party of a release from all liability with respect to such action
against the indemnified party. The indemnified party will have the right to
employ its own counsel in any such action, but the fees, expenses and other
charges of such counsel will be at the expense of such indemnified party unless
(a) the employment of counsel by the indemnified party has been authorized in
writing by the indemnifying party, (b) the indemnified party has reasonably
concluded (based on advice of counsel) that there may be legal defenses
available to it or other indemnified parties that are different from or in
addition to those available to the indemnifying party, (c) a conflict or
potential conflict exists (based on advice of counsel
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to the indemnified party) between the indemnified party and the indemnifying
party (in which case the indemnifying party will not have the right to direct
the defense of such action on behalf of the indemnified party) or (d) the
indemnifying party has not in fact employed counsel to assume the defense of
such action within a reasonable time after receiving notice of the commencement
of the action, in each of which cases the reasonable fees, disbursements and
other charges of counsel will be at the expense of the indemnifying party or
parties. It is understood that the indemnifying party or parties shall not, in
connection with any proceeding or related proceedings in the same jurisdiction,
be liable for the reasonable fees, disbursements and other charges of more than
one separate firm admitted to practice in such jurisdiction at any one time from
all such indemnified party or parties unless (x) the employment of more than one
counsel has been authorized in writing by the indemnifying party or parties, (y)
an indemnified party has reasonably concluded (based on advice of counsel) that
there may be legal defenses available to it that are different from or in
addition to those available to the other indemnified parties or (z) a conflict
or potential conflict exists (based on advice of counsel to an indemnified
party) between such indemnified party and the other indemnified parties, in each
of which cases the indemnifying party shall be obligated to pay the reasonable
fees and expenses of such additional counsel or counsels. An indemnifying party
shall not be liable for any settlement of any action or claim effected without
its written consent (which consent shall not be unreasonably withheld).
(4) Contribution.
If the indemnification provided for herein from the indemnifying party is
unavailable to an indemnified party hereunder in respect of any losses, claims,
damages, liabilities or expenses referred to herein, then the indemnifying
party, to the extent such indemnification is unavailable, in lieu of
indemnifying such indemnified party, shall contribute to the amount paid or
payable by such indemnified party as a result of such losses, claims, damages,
liabilities or expenses in such proportion as is appropriate to reflect the
relative fault of the indemnifying party and indemnified parties in connection
with the actions that resulted in such losses, claims, damages, liabilities or
expenses. The relative fault of such indemnifying party and indemnified parties
shall be determined by reference to, among other things, whether any action in
question, including any untrue or alleged untrue statement of a material fact or
omission or alleged omission to state a material fact, has been made by, or
relates to information supplied by, such indemnifying party or indemnified
parties, and the parties' relative intent, knowledge, access to information and
opportunity to correct or prevent such action. The amount paid or payable by a
party as a result of the losses, claims, damages, liabilities and expenses
referred to above shall be deemed to include, subject to the limitations set
forth in subparagraph (3) hereof, any legal or other fees or expenses reasonably
incurred by such party in connection with any investigation or proceeding.
If indemnification is available hereunder, the indemnifying parties shall
indemnify each indemnified party to the full extent provided in subparagraphs
(1) and (2) hereof without regard to the relative fault of said indemnifying
parties or indemnified party.
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EXHIBIT 10.44
REGISTRATION RIGHTS AGREEMENT
REGISTRATION RIGHTS AGREEMENT, dated as of June 17, 1997 ("Agreement"),
by and among EMPIRE OF CAROLINA, INC., a Delaware corporation (the "Company"),
and SMEDLEY INDUSTRIES, INC. LIQUIDATING TRUST (the "Investor").
RECITALS
A. Pursuant to that certain Agreement by and between the Company and
Investor dated as of June 17, 1997 (the "Buddy L Agreement"), the Investor,
among other things, agreed to release the Company from its obligations and
liabilities under certain agreements in return for certain cash and stock
payments as contemplated by that certain Securities Purchase Agreement
("Securities Purchase Agreement"), dated as of May 5, 1997 by and between HPA
Associates, LLC, EMP Associates LLC and the Company.
B. As a condition to the consummation of the transactions contemplated
by the Buddy L Agreement and the Securities Purchase Agreement, the parties
hereto (collectively, the "Parties" and each, individually, a "Party") have
entered into this Agreement to provide certain securities registration rights to
the Investor.
C. The provisions of this Agreement supersede and replace any and all
registration rights previously held by any Party with respect to securities of
the Company, including the registration rights contemplated by that certain
Registration Rights Agreement dated July 7, 1995 (the "Buddy L Registration
Rights Agreement") between the Company and Investor.
AGREEMENTS
In consideration of the foregoing recitals (which are hereby
incorporated into and shall be deemed a part of this Agreement), the mutual
covenants herein contained and other good and valuable consideration, the
receipt and sufficiency of which are hereby acknowledged, the Parties hereby
agree as follows:
1. Definitions. For the purposes of this Agreement, the
following terms have the meanings indicated:
"Commission" shall mean the United States Securities and
Exchange Commission or any successor to the functions of such agency.
"Common Stock" shall mean the Company's Common Stock, $.10 par
value, and any Stock into which such Common Stock may hereafter be changed.
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"Company" shall mean Empire of Carolina, Inc., a Delaware
corporation, and all successor corporations thereof.
"Exchange Act" shall mean the Securities Exchange Act of 1934,
as amended, or any federal statute or statutes which shall be enacted to take
the place of such Act, together with all amendments and supplements thereto.
"Holders" shall mean the Persons who shall from time to time
own of record any Security. The term "Holder" shall mean any one of the Holders.
"Person" shall mean an individual, a corporation, a
partnership, a limited liability company, a trust, an unincorporated
organization or a governmental organization or any agency or political
subdivision thereof or other similar entity.
"Prospectus" shall mean any prospectus which is a part of a
Registration Statement, together with all amendments or supplements thereto.
"Registrable Securities" shall mean, at any time, the shares
of the then outstanding Common Stock issued to the Investor pursuant to the
Buddy L Agreement or any subsequent Holder of Registrable Securities having
rights hereunder pursuant to Section 10 hereof; provided, however, that
Registrable Securities shall not be deemed to include any shares after such
shares have been registered under the Securities Act and sold pursuant to such
registration or any shares sold without registration under the Securities Act in
compliance with Rule 144, or pursuant to any other exemption from registration
under the Securities Act to a Person who is free to resell such shares without
registration or restriction under the Securities Act; and provided, further,
that Registrable Securities shall not include any shares which are eligible to
be sold without registration under the Securities Act in compliance with
subsection (k) of Rule 144.
"Registration Statement" shall mean any registration statement
filed with the Commission in accordance with the Securities Act, together with
all amendments or supplements thereto.
"Securities" shall mean any debt or equity securities of the
Company, whether now or hereafter authorized, and any instrument convertible
into or exchangeable for Securities or a Security. The term "Security" shall
mean any one of the Securities.
"Securities Act" shall mean the Securities Act of 1933, as
amended, or any federal statute or statutes which shall be enacted to take the
place of such Act, together with all rules and regulations promulgated
thereunder.
2. Shelf Registration. Within 180 days from the Closing Date,
the Company shall cause to be filed a Registration Statement (a "Shelf
Registration") on Form S-3 or any other appropriate form under the Securities
Act for an offering to be made on a delayed or continuous basis pursuant to Rule
415 thereunder or any similar rule that may be adopted by
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the Commission and permitting the sale of Registrable Securities by the Holders
thereof (and shall register or qualify the shares to be sold in such offering
under such other securities or "blue sky" laws, if any, as would be required
pursuant to Section 5 below). Prior to the filing of the Shelf Registration or
any supplement or amendment thereto, the Company will furnish copies of the
Shelf Registration or such amendment to one counsel designated by Investor, and
will not file the Shelf Registration or such amendment without the prior consent
of such counsel, which consent shall not be unreasonably withheld. The Company
shall use its reasonable efforts to (1) cause the Shelf Registration to be
declared effective by the Commission as soon as practicable after its filing
with the Commission and (2) keep the Shelf Registration continuously effective,
subject to Sections 4 and 5 below. The Company shall, if necessary, supplement
or make amendments to the Shelf Registration, if required by the registration
form used by the Company for the Shelf Registration or by the instructions
applicable to such registration form or by the Securities Act or the rules or
regulations thereunder or as may reasonably be requested by Investor. The
Company shall pay all Registration Expenses (as defined below) incurred in
connection with the Shelf Registration.
3. Piggyback Registration. At any time prior to May 6, 2000
whenever the Company proposes to file a Registration Statement under the
Securities Act with respect to an underwritten public offering of Common Stock
by the Company for its own account or for the account of any other holder of
Common Stock, the Company shall give written notice (the "Offering Notice") of
such proposed filing at least 30 days before the anticipated filing date. Such
Offering Notice shall offer Holder the opportunity to register such number of
Common Stock as Investor may request in writing, which request for registration
(each, a "Piggyback Registration") must be received by the Company within 25
days after the Offering Notice is given. The Company shall use all reasonable
efforts to cause the managing underwriter or underwriters of a proposed
underwritten offering to permit Holder requested to include such Registrable
Securities in such offering on the same terms and conditions as the Securities
of the Company included therein. Notwithstanding the foregoing, if the managing
underwriter or underwriters of a proposed underwritten offering advise the
Company in writing that in its or their opinion the number of Registrable
Securities proposed to be sold in such offering exceeds the number of
Registrable Securities that can be sold in such offering without adversely
affecting the market for the Company's Securities or the price that may be
obtained in such offering, the Company will include in such registration the
number of Registrable Securities that in the opinion of such managing
underwriter or underwriters can be sold without adversely affecting the market
for the Company's common stock or the price to be received in such offering. In
such event, the number of Registrable Securities, if any, to be offered for the
account of Holder shall be reduced to the extent necessary to reduce the total
number of Registrable Securities to be included in such offering to the number
recommended by such managing underwriter or underwriters, provided that if any
other Person has rights to a Piggyback Registration with respect to the same
underwritten public offering, the right of the Holder to sell its securities
together with such other Persons holding Piggyback Rights shall be cut back
proportionately (in relation to the number of shares that each Person so
participating in the Piggyback Registration has requested to be included
compared to the number of all shares with respect to which inclusion has been
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properly requested). The Company shall pay all Registration Expenses (as defined
below) incurred in connection with any Piggyback Registration.
4. Termination of Registration Rights. The registration rights
provided hereunder shall continue so long as Registrable Securities remain
outstanding and shall then terminate.
5. Registration Procedures. Whenever Registrable Securities are
to be registered pursuant hereto, the Company shall use its best efforts to
effect the registration of Registrable Securities in accordance with the
intended method of disposition thereof as expeditiously as practicable and, in
connection with any such request, the Company shall as expeditiously as
possible:
(i) furnish to Holder such number of copies of the
Registration Statement, each amendment and supplement thereto (in each case
including all exhibits thereto), the Prospectus included in such Registration
Statement (including each preliminary Prospectus) and such other documents as
Holder may reasonably request in order to facilitate the disposition of the
Registrable Securities owned by Holder;
(ii) if required, use best efforts to register or qualify such
Registrable Securities under such other securities or "blue sky" laws of such
jurisdictions as Holder reasonably requests in writing and to do any and all
other acts and things that may be reasonably necessary or advisable to register
or qualify for sale in such jurisdictions the Registrable Securities owned by
such Holder; provided, however, that the Company shall not be required to (i)
qualify generally to do business in any jurisdiction where it is not then so
qualified, (ii) subject itself to taxation in any such jurisdiction, (iii)
consent to general service of process in any such jurisdiction or (iv) provide
any undertaking required by such other securities or "blue sky" laws or make any
change in its charter or by-laws that the Board of Directors of the Company
determines in good faith to be contrary to the best interest of the Company and
its stockholders;
(iii) use best efforts to cause the Registrable Securities
covered by such Registration Statement to be registered with or approved by such
other governmental agencies or authorities as may be necessary by virtue of the
business and operations of the Company to enable the seller or sellers thereof
to consummate the disposition of such Registrable Securities;
(iv) notify Holder at any time when a Prospectus relating
thereto is required to be delivered under the Securities Act of the happening of
any event as a result of which the Prospectus included in such Registration
Statement contains an untrue statement of a material fact or omits to state any
material fact required to be stated therein or necessary to make the statements
therein, in light of the circumstances under which they were made, not
misleading, and prepare and file with the Commission a supplement or amendment
to such Prospectus so that, as thereafter delivered to the purchasers of such
Registrable Securities, such Prospectus will not contain an untrue statement of
a material fact or omit to state any material fact required to be stated therein
or necessary to make the statements therein, in
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light of the circumstances under which they were made, not misleading, provided,
in the use of a Piggyback Registration, that prior to the filing of such
supplement or amendment, the Company will furnish copies thereof to the Holder
and any underwriters and counsel for Holder, and will not file such supplement
or amendment without the prior consent of such counsel, which consent shall not
be unreasonably withheld;
(v) enter into customary agreements (including an underwriting
agreement in customary form if the offering is an underwritten offering) and
take such other actions as are reasonably required in order to expedite or
facilitate the disposition of such Registrable Securities;
(vi) make available for inspection by any seller of
Registrable Securities and any attorney, accountant or other agent retained by
Holder (collectively, the "Inspectors"), all financial and other records,
pertinent corporate documents and properties of the Company (collectively, the
"Records") as are reasonably necessary to enable them to exercise their due
diligence responsibility, and cause the Company's officers, directors, employees
and agents to supply all information reasonably requested by any such Inspector
in connection with such Registration Statement. Records that have not been filed
by the Company with the Commission shall not be disclosed by the Inspectors
unless (i) the disclosure of such Records is, in the reasonable judgment of any
Inspector, necessary to avoid or correct a misstatement or omission of a
material fact in the Registration Statement or (ii) the release of such Records
is ordered pursuant to a subpoena or other order from a court or governmental
agency of competent jurisdiction or required (in the written opinion of counsel
to such Holder or underwriter, which counsel shall be reasonably acceptable to
the Company) pursuant to applicable state or federal law. Each seller of
Registrable Securities shall be required to agree, however, that it will, upon
learning that disclosure of such Records are sought by a court or governmental
agency, give notice to the Company and allow the Company, at the Company's
expense, to undertake appropriate action to prevent disclosure of the Records
deemed confidential;
(vii) if such sale is pursuant to an underwritten offering,
use reasonable efforts to obtain a "cold comfort" letter and updates thereof
from the Company's independent public accountants in customary form and covering
such matters of the type customarily covered by "cold comfort" letters as the
managing underwriter or underwriters reasonably request;
(viii) provide, if such sale is pursuant to a firm commitment
underwriting, at the request of the Investor, a legal opinion of the Company's
independent counsel for purpose of such registration with respect to the
Registration Statement, each amendment and supplement thereto, the Prospectus
included therein (including any preliminary Prospectus) and such other documents
relating thereto in customary form and covering such matters of that type
customarily covered by legal opinions is such nature at the date thereof; and
(ix) otherwise use best efforts to comply with all applicable
rules and regulations of the Commission, and make generally available to its
security holders, as soon
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as reasonably practicable, an earnings statement covering a period of 12 months,
beginning within three months after the effective date of the Registration
Statement, which earnings statement shall satisfy the provisions of Section
11(a) of the Securities Act.
Provided that the applicable listing requirements are satisfied, the
Company shall use reasonable best efforts to maintain the listing of the Common
Stock on the American Stock Exchange or, if such stock is delisted from the
American Stock Exchange, to provide for the listing of the Common Stock on the
Nasdaq National Market.
The Company may require Holder as to which any registration is being
effected to furnish to the Company such information regarding the distribution
of such securities and other matters as may be required by applicable federal
law to be included in the Registration Statement.
Upon receipt of any notice from the Company of the happening of any
event of the kind described in clause (iv) of this Section, Holder shall
forthwith discontinue disposition of Registrable Securities pursuant to the
Registration Statement covering such Registrable Securities until such holder's
receipt of the copies of the supplemented or amended Prospectus contemplated by
this clause (iv) and, if so directed by the Company, Holder shall deliver to the
Company (at the Company's expense) all copies, other than permanent file copies
then in such Holder's possession, of the Prospectus covering such Registrable
Securities current at the time of receipt of such notice. If the Company gives
any such notice, the Company shall extend the period during which such
Registration Statement shall be maintained effective pursuant to this Agreement
by the number of days during the period from and including the date of the
giving of such notice pursuant to clause (iv) to and including the date when
each seller of Registrable Securities covered by such Registration Statement
shall have received the copies of the supplemented or amended Prospectus
contemplated in clause (iv). Notwithstanding anything to the contrary set forth
above in this paragraph, the Company may not require Holder of Registrable
Securities to discontinue disposition of Registrable Securities for purposes of
effecting a public offering of any securities of the Company by any of its
securityholders (other than an offering made pursuant to a registration on Form
S-8). Notwithstanding the foregoing, if the Company furnishes to Holder a
certificate signed by the Chief Financial Officer of the Company stating that
(i) in the good faith judgment of the Board of Directors of the Company it would
be significantly disadvantageous to the Company and its stockholders for any
such Shelf Registration to be amended or supplemented and (ii) the need for such
an amendment or supplement is not caused by a proposed secondary public offering
of securities of the Company by any of its securityholders (other than an
offering made pursuant to a registration on Form S-8), the Company may defer
such amending or supplementing of such Shelf Registration for not more than 45
days and in such event Holder shall be required to discontinue disposition of
any Registrable Securities covered by such Shelf Registration during such
period. Notwithstanding the foregoing, in connection with any amendment or
supplement required to reflect a public offering of securities by the Company,
the Company shall file such amendment or supplement no later than the same day
that it files a Registration Statement
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relating to such offering and shall provide written notice of the filing of such
amendment or supplement to the Holder promptly following such filing.
6. Registration Expenses. The Company shall pay all expenses
incident to its performance of or compliance with this Agreement, regardless of
whether such registration becomes effective including, without limitation, (a)
all Commission, stock exchange or market and National Association of Securities
Dealers, Inc. registration and filing fees, (b) all fees and expenses incurred
in complying with securities or "blue sky" laws (including reasonable fees and
disbursements of counsel in connection with "blue sky" qualifications of the
Registrable Securities), (c) all printing, messenger and delivery expenses, (d)
all fees and disbursements of the Company's independent public accountants and
counsel, (e) all fees and expenses of any special experts retained by the
Company in connection with any Piggyback Registration pursuant to the terms of
this Agreement, and (f) the fees and disbursements of one counsel retained
collectively by the Holder for a registration; provided, however, that the
Company shall not pay the costs and expenses of any counsel, accountants or
other representatives retained by the Holder, individually or in the aggregate
(the "Registration Expenses").
7. Indemnification; Contribution.
(i) Indemnification by the Company. The Company shall
indemnify, to the fullest extent permitted by law, Holder, its officers,
directors and agents and each Person, if any, who controls Holder (within the
meaning of the Securities Act and the Exchange Act), against any and all losses,
claims, damages, liabilities and expenses caused by any untrue or alleged untrue
statement of material fact contained in any Registration Statement, Prospectus
or preliminary Prospectus or any amendment thereof or supplement thereto or any
omission or alleged omission to state therein a material fact required to be
stated therein or necessary to make the statements therein (in the case of a
Prospectus, in light of the circumstances under which they were made) not
misleading, except insofar as the same are caused by or contained in any
information with respect to Holder furnished in writing to the Company by Holder
expressly for use therein, by Holder's failure to deliver a copy of the
Prospectus or any supplements thereto after the Company has furnished Holder
with a sufficient number of copies of the same or by the delivery of
Prospectuses by Holder after the Company notified Holder in writing to
discontinue delivery of Prospectuses or by any violation of any federal, state
or common law rule or regulation applicable to the Company and relating to
action required of, or inaction by the Company in connection with such
regulation. The Company also shall indemnify any underwriters of the Registrable
Securities, their officers and directors and each Person who controls such
underwriters (within the meaning of the Securities Act) to the same extent as
provided above with respect to the indemnification of the Holder. Such indemnity
shall remain in full force and effect regardless of any investigation made by or
on behalf of any Person seeking indemnification and shall survive the transfer
of such securities by such Person seeking information.
(ii) Indemnification by Holder. In connection with any
Registration Statement in which Holder is participating, Holder shall furnish to
the Company in writing
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such information and affidavits with respect to Holder as the Company reasonably
requests for use in connection with any such Registration Statement or
Prospectus and agrees to indemnify, severally and not jointly, to the fullest
extent permitted by law, the Company, its officers, directors and agents and
each Person, if any, who controls the Company (within the meaning of the
Securities Act) against any and all losses, claims, damages, liabilities and
expenses resulting from any untrue or alleged untrue statement of a material
fact or any omission or alleged omission of a material fact required to be
stated in any Registration Statement, Prospectus or preliminary Prospectus or
any amendment thereof or supplement thereto or necessary to make the statements
therein (in the case of a Prospectus, in light of the circumstances under which
they were made) not misleading, to the extent, but only to the extent, that such
untrue or alleged untrue statement or omission is contained in or improperly
omitted from, as the case may be, any information or affidavit with respect to
Holder so furnished in writing by Holder. Holder also shall indemnify any
underwriters of the Registrable Securities, their officers and directors and
each Person who controls such underwriters (within the meaning of the Securities
Act) to the same extent as provided above with respect to the indemnification of
the Company. Such indemnity shall remain in full force and effect regardless of
any investigation made by or on behalf of any Person seeking indemnification and
shall survive the transfer of such securities by such Person seeking
information.
(iii) Conduct of Indemnification Proceedings. Any party that
proposes to assert the right to be indemnified hereunder shall, promptly after
receipt of notice of commencement of any action against such party in respect of
which a claim is to be made against an indemnifying party or parties hereunder,
notify each such indemnifying party of the commencement of such action,
enclosing a copy of all papers served, but the omission so to notify such
indemnifying party will not relieve it from any liability that it may have to
any indemnified party under the foregoing provisions unless, and only to the
extent that, such omission results in the forfeiture of substantive rights or
defenses by the indemnifying party. If any such action is brought against any
indemnified party and it notifies the indemnifying party of its commencement,
the indemnifying party will be entitled to participate in and, to the extent
that it elects by delivering written notice to the indemnified party promptly
after receiving notice of the commencement of the action from the indemnified
party, jointly with any other indemnifying party similarly notified, to assume
the defense of the action, with counsel reasonably satisfactory to the
indemnified party, and after notice from the indemnifying party to the
indemnified party of its election to assume the defense, the indemnifying party
will not be liable to the indemnified party for any legal or other expenses
except as provided below and except for the reasonable costs of investigation
subsequently incurred by the indemnified party in connection with the defense.
If the indemnifying party assumes the defense, the indemnifying party shall have
the right to settle such action without the consent of the indemnified party;
provided, however, that the indemnifying party shall be required to obtain such
consent (which consent shall not be unreasonably withheld) if the settlement
includes any admission of wrongdoing on the part of the indemnified party or any
decree or restriction on the indemnified party or its officers or directors;
provided, further, that no indemnifying party, in the defense of any such
action, shall, except with the consent of the indemnified party (which consent
shall not be unreasonably withheld), consent to entry
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of any judgment or enter into any settlement that does not include as an
unconditional term thereof the giving by the claimant or plaintiff to such
indemnified party of a release from all liability with respect to such action
against the indemnified party. The indemnified party will have the right to
employ its own counsel in any such action, but the fees, expenses and other
charges of such counsel will be at the expense of such indemnified party unless
(a) the employment of counsel by the indemnified party has been authorized in
writing by the indemnifying party, (b) the indemnified party has reasonably
concluded (based on advice of counsel) that there may be legal defenses
available to it or other indemnified parties that are different from or in
addition to those available to the indemnifying party, (c) a conflict or
potential conflict exists (based on advice of counsel to the indemnified party)
between the indemnified party and the indemnifying party (in which case the
indemnifying party will not have the right to direct the defense of such action
on behalf of the indemnified party) or (d) the indemnifying party has not in
fact employed counsel to assume the defense of such action within a reasonable
time after receiving notice of the commencement of the action, in each of which
cases the reasonable fees, disbursements and other charges of counsel will be at
the expense of the indemnifying party or parties. It is understood that the
indemnifying party or parties shall not, in connection with any proceeding or
related proceedings in the same jurisdiction, be liable for the reasonable fees,
disbursements and other charges of more than one separate firm admitted to
practice in such jurisdiction at any one time from all such indemnified party or
parties unless (x) the employment of more than one counsel has been authorized
in writing by the indemnifying party or parties, (y) an indemnified party has
reasonably concluded (based on advice of counsel) that there may be legal
defenses available to it that are different from or in addition to those
available to the other indemnified parties or (z) a conflict or potential
conflict exists (based on advice of counsel to an indemnified party) between
such indemnified party and the other indemnified parties, in each of which cases
the indemnifying party shall be obligated to pay the reasonable fees and
expenses of such additional counsel or counsels. An indemnifying party shall not
be liable for any settlement of any action or claim effected without its written
consent (which consent shall not be unreasonably withheld).
(iv) Contribution. If the indemnification provided for herein
from the indemnifying party is unavailable to an indemnified party hereunder in
respect of any losses, claims, damages, liabilities or expenses referred to
herein, then the indemnifying party, to the extent such indemnification is
unavailable, in lieu of indemnifying such indemnified party, shall contribute to
the amount paid or payable by such indemnified party as a result of such losses,
claims, damages, liabilities or expenses in such proportion as is appropriate to
reflect the relative fault of the indemnifying party and indemnified parties in
connection with the actions that resulted in such losses, claims, damages,
liabilities or expenses. The relative fault of such indemnifying party and
indemnified parties shall be determined by reference to, among other things,
whether any action in question, including any untrue or alleged untrue statement
of a material fact or omission or alleged omission to state a material fact, has
been made by, or relates to information supplied by, such indemnifying party or
indemnified parties, and the parties' relative intent, knowledge, access to
information and opportunity to correct or prevent such action. The amount paid
or payable by a party as a result of the losses, claims, damages, liabilities
and expenses referred to above shall be deemed to
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include, subject to the limitations set forth in subparagraph (3) hereof, any
legal or other fees or expenses reasonably incurred by such party in connection
with any investigation or proceeding.
The Company and the Holder agree that it would not be just and
equitable if contribution pursuant to this Section 7(iv) were determined by pro
rata allocation or by any other method of allocation which does not take account
of the equitable considerations referred to in the immediately preceding
paragraph. The amount paid or payable by an indemnified party as a result of the
losses, claims, damages or liabilities referred to in the immediately preceding
paragraph shall be deemed to include, subject to the limitations set forth
above, any legal or other expenses reasonably incurred by such indemnified party
in connection with investigating or defending any such action or claim.
Notwithstanding the provisions of this Section 7(iv), no Holder shall be liable
for or required to contribute pursuant to this Section 7(iv) or otherwise
aggregate amounts exceeding the product of the public offering price, less
underwriting discounts, commissions and expenses, per Registrable Securities and
the number of Registrable Securities being sold by such Holder. No Person guilty
of fraudulent misrepresentation (within the meaning of Section 11(f) of the
Securities Act) shall be entitled to contribution from any Person who was not
guilty of such fraudulent misrepresentation.
If indemnification is available hereunder, the indemnifying parties
shall indemnify each indemnified party to the full extent provided in
subparagraphs (i) and (ii) hereof without regard to the relative fault of said
indemnifying parties or indemnified party.
8. Rule 144. The Company hereby covenants that, after the Company
shall have filed a registration statement pursuant to the requirements of
Section 12 of the Exchange Act or a registration statement on Form S-4, the
Company will file in a timely manner all reports required to be filed by it
under the Securities Act and the Exchange Act (or, if the Company is not
required to file such reports, it will, upon the request of the Holder, make
publicly available other information so long as necessary to permit sales by the
Holder under Rule 144 under the Securities Act), and it will take such further
action as the Holder may reasonably request, all to the extent required from
time to time to enable the Holder to sell Registrable Securities without
registration under the Securities Act within the limitation of the exemptions
provided by (i) Rule 144 under the Securities Act, as such Rule may be amended
from time to time, or (ii) any similar rule or regulation hereafter adopted by
the Commission. Upon the request of the Holder, the Company will deliver to such
Holder a written statement as to whether it has compiled with such requirements.
9. Assignability of Registration Rights. The registration rights
set forth in this Agreement shall accrue to each subsequent Holder of
Registrable Securities who consents in writing to be bound by the terms and
conditions of this Agreement.
10. Severability. Whenever possible, each provision of this
Agreement will be interpreted in such manner as to be effective and valid under
applicable law. However, in the event that any court or any governmental
authority or agency declares all or any part of
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any Section of this Agreement to be unlawful or invalid, such unlawfulness or
invalidity shall not serve to invalidate any other Section of this Agreement,
and in the event that only a portion of any Section is so declared to be
unlawful or invalid, such unlawfulness or invalidity shall not serve to
invalidate the balance of such Section.
11. Descriptive Headings. The descriptive headings of this
Agreement are inserted for convenience only and do not constitute a part of this
Agreement.
12. Notices. All notices required or permitted hereunder shall be
in writing and shall be: (a) sent by telex or facsimile transmission (to be
effective when receipt is acknowledged unless sent after 5:00 p.m. on any
business day, in which event notice shall be deemed received on the next
business day); (b) personally delivered; (c) sent by certified mail, return
receipt requested; or (d) sent by a nationally recognized commercial overnight
delivery service with provisions for a receipt, postage or delivery charges
prepaid and, except as otherwise provided in Section 12(a) above, shall be
deemed given when personally delivered or within three business days after such
mailing and addressed to the Party, to the Investors at their address on the
books and records of the Company, and to the Company as follows:
To the Company: Empire of Carolina, Inc.
5150 Linton Boulevard
Delray Beach, Florida 33484
Attn.: Lawrence Geller,
Vice President and General Counsel
Facsimile: (561) 498-0722
with a copy to: Sonnenschein Nath & Rosenthal
8000 Sears Tower
Chicago, Illinois 60606
Attn: Kenneth G. Kolmin
Facsimile: (312) 876-7934
Such addresses may be changed by any such Party by providing like notice to the
other Parties in accordance with this Section.
13. Counterparts. This Agreement may be executed in two or more
counterparts, each of which shall be deemed an original but all of which shall
together constitute one and the same document.
14. Entire Agreement. This Agreement contains the entire agreement
and understanding of the Parties concerning the subject matter hereof, and
supersedes and replaces all prior and contemporaneous negotiations, proposed
agreements and agreements, written and oral, relating to such subject matter.
There are no agreements, representations or warranties between the Parties as to
the subject matter hereof other than those provided herein. Each of the Parties
agrees and acknowledges that this Agreement replaces and
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terminates any and all registration rights provided for in the Buddy L
Registration Rights Agreement.
15. Amendments and Governing Law. This Agreement may be amended,
modified or supplemented only by a written instrument executed by the Company
and Holders of a majority of the then existing shares of Registrable Securities.
Any term, covenant, agreement or condition in this Agreement may be waived
(either generally or in particular instances and either retroactively or
prospectively) by written instruments signed by the Company and Holders of a
majority of the existing shares of Registrable Securities. Any such waiver shall
be limited to its express terms and shall not be deemed a waiver of any other
term, covenant, agreement or condition. This Agreement shall be governed by and
construed in accordance with the laws of the State of Delaware applicable to
contracts made and to be performed in that state. Any amendment or waiver
effected in accordance with this Section shall be binding upon each Holder of
Registrable Securities then outstanding, each future Holder of such Registrable
Securities and the Company.
16. JURISDICTION. EACH PARTY TO THIS AGREEMENT HEREBY IRREVOCABLY
AGREES THAT ANY LEGAL ACTION OR PROCEEDING ARISING OUT OF OR RELATING TO THIS
AGREEMENT, THE NOTES OR ANY AGREEMENTS OR TRANSACTIONS CONTEMPLATED HEREBY OR
THEREBY MAY BE BROUGHT IN THE COURTS OF THE STATE OF NEW YORK OR OF THE UNITED
STATES OF AMERICA FOR THE SOUTHERN DISTRICT OF NEW YORK AND HEREBY EXPRESSLY
SUBMITS TO THE PERSONAL JURISDICTION AND VENUE OF SUCH COURTS FOR THE PURPOSES
THEREOF AND EXPRESSLY WAIVES ANY CLAIM OF IMPROPER VENUE AND ANY CLAIM THAT SUCH
COURTS ARE AN INCONVENIENT FORUM. EACH PARTY HEREBY IRREVOCABLY CONSENTS TO THE
SERVICE OF PROCESS OF ANY OF THE AFOREMENTIONED COURTS IN ANY SUCH SUIT, ACTION
OR PROCEEDING BY THE MAILING OF COPIES THEREOF BY REGISTERED OR CERTIFIED MAIL,
POSTAGE PREPAID, TO THE ADDRESS SET FORTH BELOW, SUCH SERVICE TO BECOME
EFFECTIVE 10 DAYS AFTER SUCH MAILING.
17. Further Assurances. Each Party agrees to take all such steps,
execute and deliver such further documents and perform such acts as may be
reasonably requested by any other Party in order to effectuate the transactions
contemplated by this Agreement.
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IN WITNESS WHEREOF, each of the parties hereto has duly executed this
Agreement as of the date first above written.
EMPIRE OF CAROLINA, INC. SMEDLEY INDUSTRIES, INC.
LIQUIDATING TRUST
By: /s/ Lawrence Geller By: /s/ Christopher J. Kearns
------------------- -------------------------
Name: Lawrence Geller Name: Christopher J. Kearns
Title: Vice President-General Counsel Title: Director-Kahn Construction, Inc.,
Trustee
Address: Address:
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EXHIBIT 10.45
REGISTRATION RIGHTS AGREEMENT
REGISTRATION RIGHTS AGREEMENT, dated as of June 17, 1997 ("Agreement"),
by and among EMPIRE OF CAROLINA, INC., a Delaware corporation ("Empire" or the
"Company"), and WPG CORPORATE DEVELOPMENT ASSOCIATES IV, L.P. ("CDA IV"), WPG
CORPORATE DEVELOPMENT ASSOCIATES IV (OVERSEAS), LTD. ("CDA IV Overseas"), WEISS,
PECK & GREER, as trustee under Craig Whiting IRA, Peter B. Pfister, WEISS, PECK
& GREER, as Trustee under Nora Kerppola IRA, WESTPOOL INVESTMENT TRUST PLC,
EUGENE M. MATALENE, JR., RICHARD HOCHMAN, and GLENBROOK PARTNERS, L.P.
(collectively, the "Investors").
RECITALS
A. Pursuant to that certain Agreement by and between the Company and
Investors dated as of June 17, 1997 (the "WPG Agreement"), the Investors, among
other things, agreed to exchange their outstanding 9% convertible debentures in
return for non-voting Series C Preferred Stock as contemplated by that certain
Securities Purchase Agreement ("Securities Purchase Agreement"), dated as of May
5, 1997, by and between HPA Associates, LLC, EMP Associates LLC and Empire.
B. As a condition to the consummation of the transactions contemplated
by the WPG Agreement and the Securities Purchase Agreement, the parties hereto
(collectively, the "Parties" and each, individually, a "Party") have entered
into this Agreement to provide certain securities registration rights to the
Investors.
C. The provisions of this Agreement supersede and replace any and all
registration rights previously held by any Party with respect to securities of
the Company, including the registration rights contemplated by that certain
Registration Rights Agreement dated December 22, 1994 (the "WPG Registration
Rights Agreement") between the Company and Investors.
AGREEMENTS
In consideration of the foregoing recitals (which are hereby
incorporated into and shall be deemed a part of this Agreement), the mutual
covenants herein contained and other good and valuable consideration, the
receipt and sufficiency of which are hereby acknowledged, the Parties hereby
agree as follows:
1. Definitions. For the purposes of this Agreement, the
following terms have the meanings indicated:
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"Board" shall mean the Board of Directors of the Company.
"Blackout Event" shall mean any of the following events: (i)
if the Board or the Executive Committee of the Board determines in good faith
that effecting such a registration or continuing such disposition at such time
would have a material adverse effect upon a proposed sale of all (or
substantially all) of the assets of the Company or a merger, reorganization,
recapitalization or similar current transaction materially affecting the capital
structure or equity ownership of the Company, or (ii) if the Company is in
possession of material information which the Board or the Executive Committee of
the Board determines in good faith it is not in the best interests of the
Company to disclose in a registration statement at such time.
"Common Stock" shall mean the Company's Common Stock, $.10
par value, and any Stock into which such Common Stock may hereafter be changed.
"Company" shall mean Empire of Carolina, Inc., a Delaware
corporation, and all successor corporations thereof.
"Conversion Stock" means Common Stock issued upon conversion
of the Series C Preferred Stock.
"Exchange Act" shall mean the Securities Exchange Act of
1934, as amended, or any federal statute or statutes which shall be enacted to
take the place of such Act, together with all amendments and supplements
thereto.
"Holders" shall mean the Persons who shall from time to time
own of record any Security. The term "Holder" shall mean any one of the Holders.
"Other WPG Stock" shall mean Common Stock issuable or issued
to, or acquired by, the Investors (other than Conversion Stock or Series C
Preferred Stock (as defined below)) and any Common Stock of the Company issued
as (or issuable upon the conversion or exercise of any warrant, rights or other
security which is issued as) a dividend, stock split or other distribution with
respect to, or in exchange for or in replacement of such Common Stock.
"Person" shall mean an individual, a corporation, a
partnership, a limited liability company, a trust, an unincorporated
organization or a governmental organization or any agency or political
subdivision thereof.
"Prospectus" shall mean any prospectus which is a part of a
Registration Statement, together with all amendments or supplements thereto.
"Registrable Stock" shall mean at any time: (i) the shares of
the then outstanding Conversion Stock; (ii) the Conversion Stock then issuable
upon conversion of the then outstanding Series C Preferred Stock; and (iii)
Other WPG Stock owned by any Investor
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or any subsequent Holder of Registrable Stock having rights hereunder pursuant
to Section 10 hereof; provided, however, that Registrable Stock shall not be
deemed to include any shares after such shares have been registered under the
Securities Act and sold pursuant to such registration or any shares sold without
registration under the Securities Act in compliance with Rule 144, or pursuant
to any other exemption from registration under the Securities Act to a Person
who is free to resell such shares without registration or restriction under the
Securities Act.
"Registration Statement" shall mean any registration
statement filed with the Securities and Exchange Commission in accordance with
the Securities Act, together with all amendments or supplements thereto.
"Securities" shall mean any debt or equity securities of the
Company or a Subsidiary, whether now or hereafter authorized, and any instrument
convertible into or exchangeable for Securities or a Security. The term
"Security" shall mean any one of the Securities.
"Securities Act" shall mean the Securities Act of 1933, as
amended, or any federal statute or statutes which shall be enacted to take the
place of such Act, together with all rules and regulations promulgated
thereunder.
"Securities and Exchange Commission" shall mean the United
States Securities and Exchange Commission or any successor to the functions of
such agency.
"Seller" shall mean each Holder of Securities of the Company
as to which Securities the Company could be required to file a Registration
Statement or which could be registered under the Securities Act at the request
of such Holder pursuant to any of the provisions of this Agreement.
"Stock" shall include any and all shares, interests or other
equivalents (however designated) of, or participation in, corporate stock.
"Securities Purchase Agreement" shall have the meaning given
such term in the Recitals hereto.
"Series C Preferred Stock" shall mean the Company's Series C
Convertible Preferred Stock, $.01 par value, and any Stock into which such Stock
may hereafter be changed, other than by exercise of the conversion right of such
Series C Preferred Stock.
2. Required Registrations.
(A) Subject to Sections 2(B) and 5 below, upon the written
request to register any number of shares of Registrable Stock under the
Securities Act made at any time by Holders of a majority of the shares of
Registrable Stock then outstanding, the Company will use its reasonable best
efforts to effect the registration of Registrable Stock under the
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Securities Act and the registration or qualification thereof under all
applicable state securities or blue sky laws, but only to the extent provided
for in the following provisions of this Agreement. A request pursuant to this
Section 2(A) shall state the intended method of disposition of the Registrable
Stock sought to be registered. Whenever the Company shall, pursuant to this
Section 2(A), be requested to effect the registration of any Registrable Stock
under the Securities Act, the Company shall promptly give written notice of such
proposed registration to all Holders of Registrable Stock, stating that such
Holders have the right to request that any or all of the Registrable Stock owned
by them be included in such registration. The Company shall include in such
registration all Registrable Stock with respect to which the Company receives
written requests from the Holders thereof for inclusion therein (stating the
intended method of disposition of such Registrable Stock); and thereupon the
Company will, as expeditiously as is practicable, use its reasonable best
efforts to effect the registration, under the Securities Act, of such
Registrable Stock which the Company has been requested to register for
disposition by such Holders in accordance with the intended method of
disposition described in the requests of such Holders, all to the extent
requisite to permit such sale or other disposition by such Holders of the
Registrable Stock so registered.
(B) The foregoing registration rights of Holders of
Registrable Stock shall be deemed satisfied by the Company when two Registration
Statements shall have been filed by the Company with and made effective by the
Securities and Exchange Commission under the Securities Act pursuant to requests
made pursuant to Section 2(A) and all Registrable Stock offered pursuant to each
such Registration Statement shall have been sold. All Holders of Registrable
Stock shall use their best efforts to include all shares of Registrable Stock of
such Holder in the first demand registration pursuant to this Section 2;
provided that such Holders shall not be required to include all such shares of
Registrable Stock if it reasonably believes that the inclusion of all such
shares of Registrable Stock would adversely affect the price at which such
shares could be sold. The Company shall have the right to select the investment
banker or bankers who shall serve as the manager and/or co-managers for the
offering of Securities covered by such Registration Statement, but only with the
consent of the Holders of a majority of the Registrable Stock included in a
Registration Statement filed pursuant to this Section 2, which consent shall not
be unreasonably withheld.
3. Piggyback Registration. At any time whenever the Company
proposes to file a Registration Statement under the Securities Act with respect
to an underwritten public offering of Common Stock by the Company for its own
account or for the account of any other holder of Common Stock, the Company
shall give written notice (the "Offering Notice") of such proposed filing at
least 30 days before the anticipated filing date. Such Offering Notice shall
offer Holder the opportunity to register such number of Common Stock as Investor
may request in writing, which request for registration (each, a "Piggyback
Registration") must be received by the Company within 15 days after the Offering
Notice is given. Subject to Section 9 hereof, the Company shall use all
reasonable efforts to cause the managing underwriter or underwriters of a
proposed underwritten offering to permit Holder requested to include such
Registrable Securities in such offering on the same terms and conditions as the
Securities of the Company included therein. No registrations of Registrable
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Stock under this Section 3 shall relieve the Company of its obligation to effect
registrations under Section 2 hereof, or shall constitute a registration request
by any Holder of Registrable Stock under Section 2. The Company shall have the
right to select the investment banker or bankers who shall serve as the manager
and/or co-managers for all offerings of Securities under this Section 3.
4. Registration Procedures. Whenever the Company is required by
the provisions of this Agreement to use its reasonable best efforts to effect
the registration of any Registrable Stock under the Securities Act, the Company
will, as expeditiously as is practicable:
(A) prepare and file with the Securities and Exchange
Commission a Registration Statement with respect to such Registrable Stock and
use its reasonable best efforts to cause such Registration Statement to become
and remain effective for a period of not less than one year, provided that
before filing a Registration Statement or Prospectus or any amendments or
supplements thereto, the Company will furnish to counsel for the Holders of
Registrable Stock included in such Registration Statement copies of all such
documents proposed to be filed, which documents will be subject to the review of
such counsel and shall not be filed without the consent of such counsel (which
consent shall not be unreasonably withheld or delayed);
(B) prepare and file with the Securities and Exchange
Commission such amendments and supplements to such Registration Statement and
the Prospectus used in connection therewith as may be necessary to keep such
Registration Statement effective for a period of not less than one year and to
comply with the provisions of the Securities Act with respect to the sale or
other disposition of all Registrable Stock covered by such Registration
Statement during such period in accordance with the intended method or methods
of disposition by the Sellers thereof set forth in such Registration Statement;
(C) furnish to each Seller such number of copies of such
Registration Statement, each amendment and supplement thereto, the Prospectus
included in the Registration Statement (including each preliminary Prospectus),
and such other documents, as such Seller may reasonably request in order to
facilitate the public sale or other disposition of the Registrable Stock owned
by such Seller;
(D) use every reasonable effort to register or qualify all
the Registrable Stock covered by such Registration Statement under such other
securities or blue sky laws of such jurisdictions as each Seller shall
reasonably request, and use every reasonable effort to do any and all other acts
and things which may be necessary under such securities or blue sky laws to
enable such Seller to consummate the public sale or other disposition in such
jurisdiction of the Registrable Stock owned by such Seller covered by such
Registration Statement;
(E) notify each Seller at any time when a Prospectus relating
to the Registrable Stock of such Seller covered by such Registration Statement
is required to be
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delivered under the Securities Act, of the happening of any event as a result of
which the Prospectus included in such Registration Statement contains an untrue
statement of a material fact or omits any fact necessary to make the statements
therein not misleading, and at the request of Sellers holding a majority of the
Registrable Stock covered by such Registration Statement and subject to Section
5 below, prepare a supplement or amendment to such Prospectus so that, as
thereafter delivered to the purchasers of the Registrable Stock covered by such
Registration Statement, such Prospectus will not contain an untrue statement of
a material fact or omit to state any fact necessary to make the statements
therein not misleading;
(F) cause all such Registrable Stock covered by such
Registration Statement to be listed on each securities exchange on which
Securities of the same class are then listed;
(G) enter into such customary agreements (including an
underwriting agreement in customary form) and take all such other actions as the
Holders of a majority of the Registrable Stock included in such Registration
Statement pursuant to the provisions of this Agreement or underwriters, if any,
reasonably request in order to expedite or facilitate the disposition of such
Registrable Stock (including effecting a stock split or a combination of
shares);
(H) make available for inspection by any Seller, any
underwriter participating in any disposition pursuant to such Registration
Statement, and any attorney, accountant or other agent retained by any such
Seller who is the Holder of Registrable Stock included in such registration
pursuant to the provisions of this Agreement or underwriter, all financial and
other records, pertinent corporate documents and properties of the Company, and
cause the Company's officers, directors and employees to supply all information
reasonably requested by any such Seller, underwriter, attorney, accountant or
agent in connection with such Registration Statement;
(I) if such sale is pursuant to an underwritten offering, use
reasonable efforts to obtain a "cold comfort" letter and updates thereof from
the Company's independent public accountants in customary form and covering such
matters of the type customarily covered by "cold comfort" letters as the
managing underwriter or underwriters reasonably request; and
(J) provide, if such sale is pursuant to a firm commitment
underwriting, at the request of the Investor, a legal opinion of the Company's
independent counsel for purpose of such registration with respect to the
Registration Statement, each amendment and supplement thereto, the Prospectus
included therein (including any preliminary Prospectus) and such other documents
relating thereto in customary form and covering such matters of that type
customarily covered by legal opinions of such nature at the date thereof.
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5. Blackout Events.
(A) Notwithstanding any provision of this Agreement to the
contrary, during any period of up to 90 days' duration following the occurrence
of a Blackout Event (a "Blackout Period"), the Company shall not be required to
file, or cause to be declared effective, under the Securities Act any
Registration Statement hereunder, and the Holders of Registrable Stock will
discontinue the disposition of Common Stock pursuant to a Registration Statement
filed pursuant to this Agreement. The aggregate number of days during which one
or more Blackout Periods are in effect shall not exceed 180 days during any
12-month period.
(B) The Company shall promptly notify the Holders in writing
of any decision not to file a Registration Statement or not to cause a
Registration Statement to be declared effective or to discontinue sales of
Registrable Securities pursuant to this Section 6, which notice shall set forth
the reason for such decision (but not disclosing any nonpublic material
information) and shall include an undertaking by the Company promptly to notify
the Holders as soon as exchanges or sales, as applicable, may resume.
6. Expenses. To the fullest extent allowable under applicable
state securities and blue sky laws, all expenses incurred in effecting the
registrations provided for in Sections 2(A) and 3 hereof, including all
registration and filing fees, printing expenses, fees and disbursements of
counsel for the Company, reasonable fees and disbursements of one law firm
serving as counsel for the Sellers (who shall be selected by Sellers holding a
majority of the Registrable Stock being offered and shall be a firm of
nationally recognized standing or which has been approved by the Company, which
consent shall not be unreasonably withheld), underwriting expenses (other than
underwriting discounts and commissions with respect to the Registrable Stock
being sold, which shall be the responsibility of the Sellers), expenses of any
audits incident to or required by any such registration and expenses of
complying with the securities or blue sky laws of any jurisdictions pursuant to
Subsection (D) of Section 4 hereof, shall be borne and paid by the Company;
provided, however, that the Company shall not be required to pay for any
out-of-pocket expenses described above (which amount shall in no event include
any allocation of overhead) directly related to any registration began pursuant
to Section 2 hereof if the registration request is subsequently withdrawn at the
request of the Holders of a majority of the Registrable Stock to be registered,
if any (in which case all participating Holders shall bear such out-of-pocket
expenses pro rata), unless the Holders of at least 80% of the then existing
Registrable Stock agree to forfeit their right to one registration pursuant to
Section 2 of this Agreement. If a registration request is withdrawn at the
request of the Holders of a majority of the Registrable Stock to be registered,
such participating Holders shall have 30 days after the Company has delivered an
itemized statement setting forth in reasonable detail the out-of-pocket expenses
incurred by the Company and made available to such Holders appropriate back-up
documentation to pay such expenses in accordance with the proviso to the
preceding sentence or to notify the Company in writing of their decision to
forfeit their right to one registration pursuant to Section 2 of this Agreement;
and provided further, however, that if at the time of such withdrawal, the
Holders have learned of a
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material adverse change in the condition, business, or prospects of Empire from
that known to the Holders at the time of their request and have withdrawn the
request with reasonable promptness following disclosure by Empire of such
material adverse change, then the Holders shall retain their rights pursuant to
Section 2(A).
7. Indemnification.
(A) In the event of any registration of any Registrable Stock
under the Securities Act pursuant to this Agreement, the Company, to the extent
permitted by law, shall indemnify and hold harmless the Seller of such
Registrable Stock, each trustee, partner, officer, director and agent of such
Seller ("Seller Representatives"), each underwriter (as defined in the
Securities Act), each other Person who participates in the offering of such
Registrable Stock, and each other Person, if any, who controls (within the
meaning of the Securities Act) such Seller, Seller Representatives, underwriter
or participating Person, against any losses, claims, damages or liabilities,
joint or several, to which such Seller, Seller Representatives, underwriter,
participating Person or controlling Person may become subject under the
Securities Act or any other statute or at common law, insofar as such losses,
claims, damages or liabilities (or actions in respect thereof) arise out of or
are based upon: (1) any alleged untrue statement of any material fact contained,
on the effective date thereof, in any Registration Statement under which such
Registrable Stock was registered under the Securities Act, any preliminary
Prospectus or final Prospectus contained therein, or any summary Prospectus
issued in connection with any Registrable Stock being registered, or any
amendment or supplement thereto; or (2) any alleged omission to state in any
such document a material fact required to be stated therein or necessary to make
the statements therein not misleading, and shall reimburse each such Seller,
Seller Representatives, or any such underwriter, participating Person or
controlling Person for any legal or other expenses reasonably incurred by such
Seller, Seller Representatives, underwriter, participating Person or controlling
Person in connection with investigating or defending any such loss, claim,
damage, liability or action; provided, however, that the Company shall not be
liable to any Seller, or any such Seller Representatives, underwriter,
participating Person, or controlling Person in any such case to the extent that
any such loss, claim, damage or liability arises out of or is based upon any
alleged untrue statement or alleged omission made in such Registration
Statement, preliminary Prospectus, summary Prospectus, final Prospectus, or
amendment or supplement thereto in reliance upon and in conformity with written
information furnished to the Company by such Seller, specifically for use
therein.
(B) Each Holder of Registrable Stock, by acceptance thereof,
severally and not jointly, indemnifies and holds harmless each other Holder of
Registrable Stock, the Company, its directors and officers, each underwriter (as
defined in the Securities Act), each other Person who participates in the
offering of such Registrable Stock, and each other Person, if any, who controls
(within the meaning of the Securities Act) the Company, any underwriter,
participating Person or any Holder, against any losses, claims, damages, or
liabilities, joint or several, to which any such other Holder, the Company, any
such director or officer, any such underwriter, or any such participating Person
or controlling Person may become subject under the Securities Act or any other
statute or at common law, insofar as
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such losses, claims, damages or liabilities (or actions in respect thereof)
arise out of or are based upon: (1) any alleged untrue statement of any material
fact contained, on the effective date thereof, in any Registration Statement
under which Registrable Stock was registered under the Securities Act at the
request of such Holder, any preliminary Prospectus or final Prospectus contained
therein, or any summary Prospectus issued in connection with any Registrable
Stock being registered, or any amendment or supplement thereto; or (2) any
alleged omission to state in any such document a material fact required to be
stated therein or necessary to make the statements therein not misleading, in
either case to the extent, and only to the extent, that such alleged untrue
statement or alleged omission was made in such Registration Statement,
preliminary Prospectus, summary Prospectus, final Prospectus, amendment or
supplement in reliance upon and in conformity with written information furnished
to the Company by such Holder specifically for use therein, and then only to the
extent that such alleged untrue statements or alleged omissions by such Holder
were not based on the authority of an expert as to which such Holder had no
reasonable ground to believe, and did not believe, that the statements made on
the authority of such expert were untrue or that there was an omission to state
a material fact. Each such Holder severally and not jointly shall reimburse each
such other Holder of Registrable Stock, the Company, its directors and officers,
or any such underwriter, participating Person or controlling Person for any
legal or other expenses reasonably incurred by such other Holder of Registrable
Stock, the Company, its directors and officers, or any such underwriter,
participating Person or controlling Person in connection with investigating or
defending any such loss, claim, damage, liability or action. Notwithstanding the
foregoing provisions of this Subsection (B), no Holder shall be required to pay
under such provisions an amount in excess of the proceeds (net of brokerage or
underwriting commissions, discounts or the like) received by such Holder in
payment for the Registrable Stock sold by such Holder pursuant to the
Registration Statement.
(C) Indemnification similar to that specified in Subsections
(A) and (B) of this Section 7 shall be given by the Company and each Seller
(with such modifications as shall be appropriate) covered by any registration or
other qualification of Registrable Stock under any federal or state securities
law or regulation other than the Securities Act with respect to any such
registration or other qualification effected pursuant to this Agreement.
(D) Any Person which proposes to assert the right to be
indemnified under Subsection (A), (B) or (C) of this Section 7 shall, promptly
after receipt of notice of commencement of any action, suit or proceeding
against such Person in respect of which a claim is to be made against an
indemnifying Person under such Subsection (A), (B) or (C), notify each such
indemnifying Person of the commencement of such action, suit or proceeding,
enclosing a copy of all papers served. The omission to notify the indemnifying
Person promptly of the commencement of any such action shall not relieve the
indemnifying Person of any liability to indemnify the Person claiming
indemnification under Section 7 hereof, except to the extent that the
indemnifying Person shall suffer any loss by reason of such failure to give
notice and shall not relieve the indemnifying Person of any other liabilities
which it may have under this Agreement or otherwise. The indemnifying Person
shall have the right, if such indemnifying Person so notifies the Person
claiming
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indemnification within ten days after receipt of such notice, to investigate and
defend any such loss, claim, damage, liability or action and to employ separate
counsel reasonably satisfactory to the Person claiming indemnification in any
such action and to control the defense thereof. The Person claiming
indemnification shall have the right to participate in the defense of any such
loss, claim, damage, liability or action, and so long as the indemnifying Person
is defending such claim in good faith, the person claiming indemnification will
be responsible for any of the fees and expenses of its own counsel in connection
with such participation; provided, however, that notwithstanding the foregoing,
in any case when indemnification is sought against the Company and (i) the
Person seeking indemnification has been advised by counsel that its defenses may
be different from those of the Company, or (ii) the Company has not proceeded in
a timely or good faith manner to effect such defense, then the reasonable fees
and expenses of counsel for such Person shall be paid by the Company and the
indemnified Person shall have the right to control the defense of such action,
suit or proceeding as it effects such Person. In no event shall a Person against
whom indemnification is sought be obligated to indemnify any Person for any
settlement of any claim or action effected without the indemnifying Person's
consent, which consent shall not be unreasonably withheld.
(E) The indemnification provided for under this Section 7
will remain in full force and effect regardless of any investigation made by or
on behalf of the indemnified Person or any officer, director or controlling
Person of such indemnified Person and will survive the transfer of Registrable
Stock.
(F) If the indemnification provided for in this Section 7 is
held by a court of competent jurisdiction to be unavailable to an indemnified
Person with respect to any loss, liability, claim, damage, or expense referred
to herein, then the indemnifying Person, in lieu of indemnifying such
indemnified Person hereunder, shall contribute to the amount paid or payable by
such indemnified Person as a result of such loss, liability, claim, damage, or
expense in such proportion as is appropriate to reflect the relative fault of
the indemnifying Person on the one hand and of the indemnified Person on the
other in connection with the statements or omissions that resulted in such loss,
liability, claim, damage or expense as well as any other relevant equitable
consideration. The relative fault of the indemnifying Person and of the
indemnified Person shall be determined by reference to, among other things,
whether the untrue or alleged untrue statement of the material fact or the
omission to state a material fact relates to information supplied by the
indemnifying Person or by the indemnified Person, the parties' relative intent,
knowledge, access to information, and opportunity to correct or prevent such
statement or omission.
8. Participation in Underwritten Registrations. No Person may
participate in any underwritten registration hereunder unless such Person (a)
agrees to sell such Person's Registrable Stock on the basis provided in any
underwriting arrangements approved by the Persons entitled hereunder to approve
such arrangements and (b) completes and executes all questionnaires, powers of
attorney, indemnities, underwriting agreements and other documents required
under the terms of such underwriting arrangements; provided, however, that no
Holder of Registrable Stock shall be required to make any representations or
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warranties or to provide information in the Registration Statement relating to
such registration except, in either case, with respect to itself and its
intended method of disposition of Registrable Stock.
9. Marketing Restrictions.
(A) If:
(1) any Holder of Registrable Stock is entitled and
wishes to register any Registrable Stock in a registration made
pursuant to Section 2 hereof, and
(2) the offering proposed to be made by the
Holder or Holders for whom such registration is to be made is to be an
underwritten public offering, and
(3) the Company or one or more Holders of Securities
other than Registrable Stock wishes to register Securities in such
registration, and
(4) the managing underwriters of such public
offering furnish a written opinion that the total amount of Securities
to be included in such offering would exceed the maximum amount of
Securities (as specified in such opinion) which can be marketed at a
price reasonably related to the then current market value of such
Securities and without otherwise materially and adversely affecting
such offering,
then the relative rights to participate in such offering of the Holders of
Registrable Stock, the Holders of other Securities having the right to include
such Securities in such registration, and the Company shall be in the following
order of priority:
FIRST: The Holders of Registrable Stock shall be entitled to
participate in accordance with the number of shares of Registrable
Stock which each such Holder shall request to be registered, such
participation to be pro rata in accordance with the number of shares
which each such Holder shall request be registered if, pursuant to
clause 4 of this Subsection (A), the total amount of Securities to be
included in the offering will be less than the number of shares of
Registrable Stock that all of such Holders shall request be registered;
and then
SECOND: The Company and all Holders of other Securities
having the right to include such Securities in such registration shall
be entitled to participate in accordance with the relative priorities,
if any, as shall exist among them;
and no Securities (issued or unissued) other than those registered and included
in the underwritten offering shall be offered for sale or other disposition by
the Company or any Holder of Registrable Stock in a transaction which would
require registration under the Securities Act until the expiration of 180 days
after the effective date of the Registration Statement filed pursuant to Section
2 hereof, or such earlier time consented to by the managing underwriters.
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(B) If:
(1) any Holder of Registrable Stock entitled to do
so requests registration of Registrable Stock under Section 3 hereof,
and
(2) the offering proposed to be made is to be an
underwritten public offering, and
(3) the managing underwriters of such public
offering furnish a written opinion that the total amount of Securities
to be included in such offering would exceed the maximum amount of
Securities (as specified in such opinion) which can be marketed at a
price reasonably related to the then current market value of such
Securities and without materially and adversely affecting such
offering,
then the relative rights to participate in such offering of the Holders of
Registrable Stock, the Holders of other Securities having the right to include
such Securities in such registration, and the Company shall be in the following
order of priority:
FIRST: The Person or Persons (including the Company in the
case of an offering initiated by the Company) requesting such
registration shall be entitled to participate in accordance with the
relative priorities, if any, as shall exist among them; and then
SECOND: If such registration shall have been requested by a
Person or Persons other than the Company, the Company shall be entitled
to include Securities in such registration; and then
THIRD: The Holders of Registrable Stock and all other Holders
of Securities, if any, having the right to include such Securities in
such registration shall be entitled to participate pro rata among
themselves in accordance with the number of shares of Common Stock
which each such Holder shall have requested be registered (for the
purposes of this clause, Securities convertible into or exchangeable or
exercisable for Common Stock shall be treated as if they were so
converted or exchanged or exercised immediately prior to the filing of
the Registration Statement covering such registration), except to the
extent that the Registration Rights Agreement held by holders of the
Series A Preferred Stock pursuant to the Subscription Agreement
therefore relating to the acquisition thereof and the rights of warrant
holders pursuant to the Warrant Agreement dated as of June 17, 1997, in
each case as in effect on the date hereof, specifically provides that
the rights of holders named therein (including their transferees) take
precedence over the Piggyback Rights held by the holder hereunder;
and no Securities (issued or unissued) other than those registered and included
in the underwritten offering shall be offered for sale or other disposition by
the Company or any Holder of Registrable Stock in a transaction which would
require registration under the
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Securities Act until the expiration of 180 days after the effective date of the
Registration Statement in which Registrable Stock was included pursuant to
Section 3 hereof, or such earlier time consented to by the managing
underwriters.
10. Assignability of Registration Rights. The registration
rights set forth in this Agreement shall accrue to each subsequent Holder of
Registrable Stock who consents in writing to be bound by the terms and
conditions of this Agreement.
11. Severability. Whenever possible, each provision of this
Agreement will be interpreted in such manner as to be effective and valid under
applicable law. However, in the event that any court or any governmental
authority or agency declares all or any part of any Section of this Agreement to
be unlawful or invalid, such unlawfulness or invalidity shall not serve to
invalidate any other Section of this Agreement, and in the event that only a
portion of any Section is so declared to be unlawful or invalid, such
unlawfulness or invalidity shall not serve to invalidate the balance of such
Section.
12. Descriptive Headings. The descriptive headings of this
Agreement are inserted for convenience only and do not constitute a part of this
Agreement.
13. Notices. All notices required or permitted hereunder shall be
in writing and shall be: (a) sent by telex or facsimile transmission (to be
effective when receipt is acknowledged unless sent after 5:00 p.m. on any
business day, in which event notice shall be deemed received on the next
business day); (b) personally delivered; (c) sent by certified mail, return
receipt requested; or (d) sent by a nationally recognized commercial overnight
delivery service with provisions for a receipt, postage or delivery charges
prepaid and, except as otherwise provided in Section 13(a) above, shall be
deemed given when personally delivered or within three business days after such
mailing, and addressed to the Party, to the Investors at their address on the
books and records of the Company, and to the Company as follows:
To the Company: Empire of Carolina, Inc.
5150 Linton Boulevard
Delray Beach, Florida 33484
Attn.: Lawrence Geller,
Vice President and General Counsel
Facsimile: (561) 498-0722
with a copy to: Sonnenschein Nath & Rosenthal
8000 Sears Tower
Chicago, Illinois 60606
Attn: Kenneth G. Kolmin
Facsimile: (312) 876-7934
Such addresses may be changed by any such Party by providing like notice to the
other Parties in accordance with this Section.
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14. Rule 144. The Company hereby covenants that after the Company
shall have filed a registration statement pursuant to the requirements of
Section 12 of the Exchange Act (or a registration statement on Form S-4), the
Company will file in a timely manner all reports required to be filed by it
under the Securities Act and the Exchange Act (or, if the Company is not
required to file such reports, it will, upon the reasonable request of the
Holder, make publicly available other information so long as necessary to permit
sales by the Holder under Rule 144 under the Securities Act), and it will take
such further action as the Holder may reasonably request, all to the extent
required from time to time to enable the Holder to sell Registrable Securities
without registration under the Securities Act within the limitation of the
exemptions provided by (i) Rule 144 under the Securities Act, as such Rule may
be amended from time to time, or (ii) any similar rule or regulation hereafter
adopted by the Securities and Exchange Commission. Upon the request of the
Holder, the Company will deliver to such Holder a written statement as to
whether it has complied with such requirements.
15. Counterparts. This Agreement may be executed in two or more
counterparts, each of which shall be deemed an original but all of which shall
together constitute one and the same document.
16. Entire Agreement. This Agreement contains the entire
agreement and understanding of the Parties concerning the subject matter hereof,
and supersedes and replaces all prior and contemporaneous negotiations, proposed
agreements and agreements, written and oral, relating to such subject matter.
There are no agreements, representations or warranties between the Parties as to
the subject matter hereof other than those provided herein. Each of the Parties
agrees and acknowledges that this Agreement replaces and terminates any and all
registration rights provided for in the WPG Registration Rights Agreement.
17. Amendments and Governing Law. This Agreement may be amended,
modified or supplemented only by a written instrument executed by the Company
and Holders of a majority of the then existing shares of Registrable Stock. Any
term, covenant, agreement or condition in this Agreement may be waived (either
generally or in particular instances and either retroactively or prospectively)
by written instruments signed by the Company and Holders of a majority of the
existing shares of Registrable Stock. Any such waiver shall be limited to its
express terms and shall not be deemed a waiver of any other term, covenant,
agreement or condition. This Agreement shall be governed by and construed in
accordance with the laws of the State of Delaware applicable to contracts made
and to be performed in that state. Any amendment or waiver effected in
accordance with this Section shall be binding upon each Holder of Registrable
Stock then outstanding, each future Holder of such Registrable Stock and the
Company.
18. Further Assurances. Each Party agrees to take all such
steps, execute and deliver such further documents and perform such acts as may
be reasonably requested by any other Party in order to effectuate the
transactions contemplated by this Agreement.
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IN WITNESS WHEREOF, each of the parties hereto has duly executed this Agreement
as of the date first above written.
WPG CORPORATE DEVELOPMENT EMPIRE OF CAROLINA, INC.
ASSOCIATES IV, L.P.
By: WPG PRIVATE EQUITY PARTNERS,
L.P., its sole General Partner By: /s/ Lawrence Geller
-----------------------------------
By: /s/ Steven Hutchinson By: Lawrence Geller
----------------------------- -----------------------------------
Its: Its: Vice President-General Counsel
------------------------- ------------------------------
WEISS, PECK & GREER, as Trustee under WPG CORPORATE DEVELOPMENT
Craig Whiting IRA ASSOCIATES IV (OVERSEAS), LTD.
WPG CDA IV (OVERSEAS) LTD.,
By: /s/ Robert Rodriguez GENERAL PARTNER
-----------------------------
Its:
-------------------------
By: /s/ illegible
-----------------------------------
Its: Director
------------------------------
WEISS, PECK & GREER, as Trustee under WESTPOOL INVESTMENT TRUST PLC
Nora Kerppola IRA
By: /s/ Robert Rayne
-----------------------------------
By: /s/ Robert Rodriguez Its: Investment Director
----------------------------- ------------------------------
Its:
-------------------------
GLENBROOK PARTNERS, L.P.
/s/ Peter B. Pfister
-----------------------------------
Peter B. Pfister
By: /s/ Pico Sagan
-----------------------------
Its: Executive Vice President /s/ Eugene M. Matalene, Jr.
------------------------ -----------------------------------
Eugene M. Matalene, Jr.
/s/ Richard H. Hochman
-----------------------------------
Richard Hochman
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EXHIBIT 10.46
AGREEMENT
This AGREEMENT ("Agreement") is made and entered into as of this 17th
day of June, 1997 by and among EMPIRE OF CAROLINA, INC., a Delaware corporation
("Empire"), and WPG CORPORATE DEVELOPMENT ASSOCIATES IV, L.P. ("CDA IV"), WPG
CORPORATE DEVELOPMENT ASSOCIATES IV (OVERSEAS), LTD. ("CDA IV Overseas"), WEISS,
PECK & GREER, as trustee under Craig Whiting IRA, Peter B. Pfister, WEISS, PECK
& GREER, as Trustee under Nora Kerppola IRA, WESTPOOL INVESTMENT TRUST PLC,
EUGENE M. MATALENE, JR., RICHARD HOCHMAN and GLENBROOK PARTNERS, L.P. (each a
"Releasor" and, collectively, the "Releasors").
RECITALS
A. Empire and the Releasors are parties to a Debenture Purchase
Agreement dated December 22, 1994 ("Debenture Purchase Agreement") and a
Registration Rights Agreement dated December 22, 1994 ("Registration Rights
Agreement"). The Debenture Purchase Agreement and the Registration Rights
Agreement are sometimes collectively referred to herein as the "WPG Agreements."
B. Pursuant to the WPG Agreements, Releasors are entitled, among other
things, to certain payments and registration rights.
C. Releasors desire to release Empire of its obligations and
liabilities under the WPG Agreements and to exchange their currently outstanding
9% convertible debentures in return for non-voting Class C Series Preferred
Stock of Empire in the event that Empire issues at least $11 million of Series A
Preferred Stock (the "Issuance") as contemplated by that certain Securities
Purchase Agreement, dated as of May 5, 1997, by and between HPA Associates, LLC,
EMP Associates LLC and Empire (the "Securities Purchase Agreement").
NOW, THEREFORE, in consideration of the mutual covenants and agreements
contained herein, and other good and valuable consideration, the receipt and
sufficiency of which are hereby acknowledged, the parties hereto agree as
follows:
1. Upon the closing of the Issuance, Empire shall immediately deliver
to Releasors a certificate representing $15 million of newly issued, Class C
Series Preferred Stock of Empire pursuant to the form of Certificate of
Designation attached hereto as Exhibit 1 ("Class C Series Preferred Stock");
2. Upon receipt of, and in exchange for, the Class C Preferred Stock
set forth in paragraph 1 herein:
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a) Releasors will deliver to the Company all of the
convertible debentures issued pursuant to the
Debenture Purchase Agreement;
b) Releasors, for themselves and on behalf of their
agents, representatives, attorneys, successors or
assigns (collectively, "WPG Releasors"), hereby
fully and forever release and discharge Empire and
each and every one of its successors, predecessors
and assigns, as well as each and every one of their
past and present directors, officers, agents,
employees, attorneys, partners, trustees, divisions,
subsidiaries, and their successors, predecessors,
heirs and assigns from all manner of actions,
causes, causes of action, complaints, suits,
litigation, debts, liens, sums of money, accounts,
reckonings, bills, contracts, agreements, promises,
liabilities, damages, losses, costs, judgments,
attorneys' fees, claims and demands, whatsoever, in
law or in equity, whether known or unknown, which
Releasors now have, had or may hereafter have
arising out of, resulting from, relating to or based
upon facts, circumstances or events occurring in
connection with the WPG Agreements (except as set
forth in Section 2(c) below) or any of the
transactions or other matters expressly provided for
therein or expressly contemplated thereby;
including, but not limited to:
(i) any and all payments to Releasors
due pursuant to Section 2.5 of the
Debenture Purchase Agreement or the
convertible debentures issued
pursuant to the Debenture Purchase
Agreement;
(ii) any and all approval rights of
Releasors pursuant to Section 5.2 or
5.4 of the Debenture Purchase
Agreement;
(iii) any and all demand and "piggyback"
registration rights granted pursuant
to Section 1 of the Registration
Rights Agreement;
(iv) any and all rights to limit
registration rights or subsequent
registration rights granted pursuant
to Section 1 or 2 of the
Registration Rights Agreement; and
(v) any and all notice rights under the
WPG Agreements; and
c) Notwithstanding anything to the contrary set forth
herein, the indemnification provisions set forth in
Section 9.5.2 of the Debenture Purchase Agreement
shall survive and shall not be released by the
provisions of this Agreement except that the
provisions of such Section 9.5.2 shall not apply or
be applicable to any and all losses, claims,
damages, liabilities and expenses (including,
without limitation, reasonable fees and
disbursements of counsel) that arise (i) out of the
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transactions set forth in this Agreement or (ii) are
contemplated by the Securities Purchase Agreement.
3. Empire, for itself and on behalf of its agents, representatives,
attorneys, successors or assigns (collectively, "Empire Releasors"), hereby
fully and forever releases and discharges the Releasors and each and every one
of its successors, predecessors and assigns, as well as each and every one of
their past and present directors, officers, partners, trustees, agents,
employees, attorneys, divisions, subsidiaries, and their successors,
predecessors, heirs and assigns from all manner of actions, causes, causes of
action, complaints, suits, litigation, debts, liens, sums of money, accounts,
reckonings, bills, contracts, agreements, promises, liabilities, damages,
losses, costs, judgments, attorneys' fees, claims and demands, whatsoever, in
law or in equity, whether known or unknown, which Releasors now have, had or may
hereafter have arising out of, resulting from, relating to or based upon facts,
circumstances or events occurring in connection with the WPG Agreements or any
of the transactions or other matters expressly provided for therein or expressly
contemplated thereby.
4. The Company represents and warrants to the Releasors, after giving
effect to the transactions contemplated by this Agreement, each share of Class C
Series Preferred Stock will be duly authorized and validly issued fully paid and
nonassessable, and free and clear of any security interest, lien, pledge, or
adverse claim imposed by the Company.
5. This Agreement contains the entire agreement and understanding
concerning the subject matters hereof between the parties, and supersedes and
replaces all prior negotiations, proposed agreements and agreements, whether
written or oral, between the parties hereto with respect to the subject matter
hereof.
6. No change, amendment, alteration, modification, waiver or
termination of this Agreement, or any part thereof, shall be valid unless set
forth in writing and signed by or on behalf of all parties hereto.
7. This Agreement shall inure to the benefit of and be binding upon
Empire's and Releasors' respective successors and assigns.
8. From time to time, at the request of either of the parties to this
Agreement, without further consideration and within a reasonable period of time
after request hereunder is made, the other party hereby agrees to execute and
deliver any and all further documents and instruments and to do all other acts
that any of the parties to this Agreement may reasonably request which may be
necessary or appropriate to fully implement the provisions of this Agreement.
9. This Agreement may be executed in one or more counterparts, all of
which, when taken together, shall constitute one original Agreement.
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IN WITNESS WHEREOF, each of the parties hereto has duly executed this Agreement
as of the date first above written.
WPG CORPORATE DEVELOPMENT EMPIRE OF CAROLINA, INC.
ASSOCIATES IV, L.P.
By: WPG PRIVATE EQUITY PARTNERS,
L.P., its sole General Partner By: /s/ Lawrence Geller
-----------------------------------
By: /s/ Steven Hutchinson By: Lawrence Geller
----------------------------- -----------------------------------
Its: Its: Vice President-General Counsel
------------------------- ------------------------------
WEISS, PECK & GREER, as Trustee under WPG CORPORATE DEVELOPMENT
Craig Whiting IRA ASSOCIATES IV (OVERSEAS), LTD.
WPG CDA IV (OVERSEAS) LTD.,
By: /s/ Robert Rodriguez GENERAL PARTNER
-----------------------------
Its:
-------------------------
By: /s/ illegible
-----------------------------------
Its: Director
------------------------------
WEISS, PECK & GREER, as Trustee under WESTPOOL INVESTMENT TRUST PLC
Nora Kerppola IRA
By: /s/ Robert Rayne
-----------------------------------
By: /s/ Robert Rodriguez Its: Investment Director
----------------------------- ------------------------------
Its:
-------------------------
GLENBROOK PARTNERS, L.P.
/s/ Peter B. Pfister
-----------------------------------
Peter B. Pfister
By: /s/ Pico Sagan
-----------------------------
Its: Executive Vice President /s/ Eugene M. Matalene, Jr.
------------------------ -----------------------------------
Eugene M. Matalene, Jr.
/s/ Richard H. Hochman
-----------------------------------
Richard Hochman
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EXHIBIT 99.1
FOR IMMEDIATE RELEASE
EMPIRE OF CAROLINA ANNOUNCES CLOSING OF $16 MILLION INVESTMENT
Delray Beach, FL, June 19, 1997 -- Empire of Carolina, Inc. (AMEX: EMP)
today announced that investors have purchased a total of $16 million of
securities pursuant to the terms of the Securities Purchase Agreement with HPA
Associates, LLC and EMP Associates LLC. The $16 million includes $5 million from
the conversion of a Bridge Loan.
As previously reported, an amendment to the Securities Purchase
Agreement provides that the Company may also sell up to another $5 million of
securities, on the same terms and conditions as the $16 million investment,
subject to shareholder approval. If this additional sale is approved, the total
investment may reach up to $21 million. Also in connection with the transaction,
$15 million of outstanding convertible debentures are being exchanged for newly
issued Series C Preferred Stock.
Steven Geller, Chairman and Chief Executive Officer, commented, "We are
very happy to announce the closing of this transaction. With these funds, we
have satisfied our lenders' requirement to obtain additional financing and are
able to move forward with our operating plan."
He continued, "We appreciate the patience and support that we have
received from our lenders and customers. With these funds in place, we can focus
our resources on our business plans, which include the continued turnaround of
our Tarboro manufacturing facility, the development of new product lines, and
improved customer service."
This press release contains various forward-looking statements and
information that are based on management's beliefs as well as assumptions made
by and information currently available to management, including statements
regarding future economic performance and financial condition, liquidity and
capital resources, and management's plans and objectives. Such statements are
subject to various risks and uncertainties which could cause actual results to
vary materially from those stated. Should one or more of these risks or
uncertainties materialize or should underlying assumptions prove incorrect
actual results may vary materially from those anticipated, estimated, expected
or projected. Such risks and uncertainties include the Company's ability to
manage inventory, production and costs, to meet potential increases or decreases
in demand, potential adverse customer impact due to delivery delays including
effects on existing and future orders, competitive practices in the toy and
decorative holiday products industries, changing consumer preferences and risks
associated with consumer acceptance of new product introductions, potential
increases in raw material prices, potential delays or production problems
associated with foreign sourcing of production and the impact of pricing
policies including providing discounts and allowances. Certain of these as well
as other risks and uncertainties are described in more detail in the Company's
Registration Statement on Form S-1
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filed under the Securities Act of 1933, Registration No. 333-4440, and the
Company's Annual Report on Form 10-K for the year ended December 31, 1996. The
Company undertakes no obligation to update any such factors or to publicly
announce the result of any revisions to any of the forward-looking statements
contained herein to reflect future events or developments.
Empire of Carolina, Inc. designs, develops, manufactures and markets a
broad range of basic plastic children's toys. Its Holiday Products Division
produces and markets decorative seasonal items including Christmas, Halloween
and Easter illuminated products. The Company's full line of basic toys includes
the Big Wheel(R) line of ride-on toys, Grand Champions(R) collectible horses,
Buddy L(R) cars and trucks, and Power Driver(R) ride-ons.
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EXHIBIT 99.2
FOR IMMEDIATE RELEASE
EMPIRE OF CAROLINA ANNOUNCES ELECTION OF NEW CHAIRMAN
DELRAY BEACH, FL, June 24, 1997 -- Empire of Carolina (AMEX: EMP) today
announced that, following the recently completed $16 million investment, Charles
S. Holmes has been elected to replace Steve Geller as Chairman of the Board of
Directors of Empire of Carolina, Inc. Mr. Geller will continue to serve as a
member of the Board and as Chief Executive Officer of the Company and its
operating subsidiary, Empire Industries, Inc.
Empire of Carolina, Inc. designs, develops, manufactures and markets a
broad range of basic plastic children's toys. Its Holiday Products Division
produces and markets decorative seasonal items including Christmas, Halloween
and Easter illuminated products. The Company's full line of basic toys includes
the Big Wheel(R) line of Ride-On toys, Grand Champions(R) collectible horses,
Buddy L(R) cars and trucks, and Power Driver(R) ride-ons.
137
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