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
May 8, 1997
Date of Report (Date of earliest event reported)
Empire of Carolina, Inc.
(Exact name of registrant as specified in its charter)
Delaware 1-7909 13-2999480
(State or other jurisdiction (Commission (IRS Employer
of incorporation) File Number) Identification No.)
5150 Linton Boulevard, 5th Floor, Delray Beach, Florida 33484
(Address of principal executive offices) (Zip Code)
(561) 498-4000
(Registrant's telephone number)
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ITEM 5. OTHER EVENTS.
On May 8, 1997, the Registrant issued the press release attached hereto
as Exhibit 99, which press release is hereby incorporated by reference herein,
announcing the execution of a definitive securities purchase agreement with
private investors to invest up to $16 million for newly issued convertible
preferred stock, the funding by such private investors of a short-term $5
million bridge loan, the adoption of an amendment to the Registrant's
Stockholder Rights Agreement to facilitate such investment and certain related
matters. The American Stock Exchange has advised the Company that the proposed
transaction does not require stockholder approval under applicable Exchange
rules. The First Amendment to the Registrant's Stockholder Rights Agreement is
attached hereto as Exhibit 4.6, and is hereby incorporated by reference herein.
ITEM 7. FINANCIAL STATEMENTS AND EXHIBITS.
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Exhibit
Number Description
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4.6 First Amendment dated as of May 5, 1997, to Rights Agreement, dated as
of September 11, 1996, between Empire of Carolina, Inc. and American
Stock Transfer & Trust Company as Rights Agent.
99 Press Release, dated May 8, 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
Name: Lawrence Geller
Title: Vice President and
General Counsel
Date: May 8, 1997
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EXHIBIT INDEX
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<CAPTION>
Exhibit
Number Description
<S> <C>
4.6 First Amendment dated as of May 5, 1997, to Rights Agreement, dated as
of September 11, 1996, between Empire of Carolina, Inc. and American
Stock Transfer & Trust Company as Rights Agent.
99 Press Release, dated May 8, 1997.
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EXHIBIT 4.6
FIRST AMENDMENT TO RIGHTS AGREEMENT
THIS FIRST 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 5th day of May 1997.
WHEREAS, the Company, HPA Associates, L.L.C., a Delaware limited
liability company ("HPA"), and EMP Associates L.L.C., a Delaware limited
liability company (collectively with HPA, the "Investors") propose to enter into
that certain Securities Purchase Agreement dated as of May 5, 1997 between the
Company and the Investors (the "Securities Purchase Agreement"), and following
the consummation of the transactions contemplated thereby the Investors will be
significant stockholders of the Company; 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
the words "and (iii)" from the second sentence thereof and substituting the
following therefor:
(iii) no Person who or which was an Exempt Person prior to the adoption
of the First Amendment dated as of May 5, 1997 (the "Amendment") to the
Rights Agreement shall be deemed to be an "Acquiring Person" for
purposes of this Agreement; provided, however, that if any such Person
ceases to be an Exempt Person following the adoption of the Amendment,
after 5:00 p.m., New York time, on May 7, 1997, (A) acquires beneficial
ownership of any additional Common Shares and (B) beneficially owns
after such acquisition 15% or more of the aggregate number of Common
Shares of the Company then outstanding, then such Person shall be
deemed to be an "Acquiring Person," and (iv)
2. Section 1(k) of the Rights Agreement is hereby amended by deleting
Section 1(k) thereof in its entirety and substituting the following therefor:
(k) "Exempt Person" means (i) the Company; (ii) any Subsidiary
of the Company; (iii) any employee benefit plan of the Company or any
Subsidiary of the Company, or any entity holding Common Shares of the
Company for or
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pursuant to the terms of any such plan or related trust; (iv) Steven E.
Geller ("Geller"), WPG Corporate Development Associates IV, L.P., a
Delaware limited partnership, WPG Corporate Development Associates IV
(Overseas), L.P., a Cayman Islands limited partnership, Westpool
Investment Trust plc, Glenbrook Partners, L.P. and any Affiliate of any
of the foregoing Persons; (v) Geller and any descendant of Geller, or
any spouse, widow or widower of Geller or of any such descendant
(Geller and any such descendants, spouses, widows and widowers
collectively defined as the "Family Members"); (vi) any trust of which
Geller is a trustee; (vii) any estate of a Family Member, or any trust
established by or for the benefit directly or indirectly of one or more
Family Members provided that one or more Family Members or charitable
organizations which qualify as exempt organizations under Section
501(c) of the Internal Revenue Code of 1986, as amended ("Charitable
Organizations") collectively are the beneficiaries of at least 50% of
the actuarially-determined beneficial interest in such estate or trust;
(viii) any Charitable Organization which is established by one or more
Family Members (a "Family Charitable Organization"); (ix) any
corporation of which a majority of the voting power or a majority of
the equity interest is held, directly or indirectly, by or for the
benefit of one or more Family Members, estates or trusts described in
clause (vii) above, or Family Charitable Organizations; (x) any
partnership, limited liability company or other entity or arrangement
of which a majority of the voting interest or a majority of the
economic interest is held, directly or indirectly, by or for the
benefit of one or more Family Members, estates or trusts described in
clause (vii) above, or Family Charitable Organizations; (xi) HPA
Associates, L.L.C., a Delaware limited liability company ("HPA"), and
EMP Associates, L.L.C., a Delaware limited liability company
(collectively with HPA, the "Investors"), and their respective
Affiliates, from and after the execution of that certain Securities
Purchase Agreement between the Company and the Investors to be dated as
of May 5, 1997 (the "Securities Purchase Agreement"); provided that (A)
if the Investors or their respective Affiliates acquires beneficial
ownership of any Common Shares other than in a transaction with the
Company or with the written consent of the Company from and after the
execution of the Securities Purchase Agreement and prior to the
consummation of the investment by the Investors contemplated by the
Securities Purchase Agreement, then the Investors and their Affiliates
shall not be deemed to be "Exempt Persons" at any time after such
acquisition of beneficial ownership, or (B) if the investment by the
Investors contemplated by the Securities Purchase Agreement is not
consummated, then the Investors and their respective Affiliates shall
not be deemed to be "Exempt Persons" at any time after the Securities
Purchase Agreement terminates in accordance with its terms, and (xii)
any trustee, executor, direct or indirect managing or general partner
or other Person who has or shares voting and/or investment power over
Common Shares beneficially owned by any of the foregoing Persons solely
in their capacities as such.
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3. Capitalized terms used but not defined herein shall have the meaning
assigned to such terms in the Rights Agreement.
4. Except as expressly amended hereby, the Rights Agreement remains in
full force and effect.
5. 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.
6. 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.
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 99
FOR IMMEDIATE RELEASE
EMPIRE OF CAROLINA COMMENTS ON PROPOSED INVESTMENT
Delray Beach, FL, May 8, 1997 -- Empire of Carolina, Inc. (AMEX: EMP)
announced today that it has signed a definitive securities purchase agreement
with private investors to invest up to $16 million for newly issued convertible
preferred stock of Empire. The Company also reported that the investors, HPA
Associates, LLC and EMP Associates LLC, have funded a $5 million bridge loan to
provide the Company with additional liquidity during the period prior to the
closing of the preferred stock investment. The bridge loan is repayable upon the
closing of the preferred stock investment in accordance with the securities
purchase agreement.
The principals of HPA Associates, LLC, Charles S. Holmes and James J.
Pinto, have substantial experience with investments in publicly traded
companies. Mr. Holmes, along with other HPA employees, will provide the Company
with financial and operational support to help continue the turnaround of the
Company's manufacturing facility in Tarboro, North Carolina.
Steven Geller, Chairman and Chief Executive Officer, commented, "We are
excited to announce the signing of the agreement and the funding of the bridge
loan. We remain committed to the turn-around of our manufacturing facility and
improvements in our financial performance."
The securities purchase agreement provides that the investors will
purchase $11 million of newly issued convertible preferred stock on or before
June 5, 1997, and that the Company may elect to sell an additional $5 million of
the preferred stock to the investors within 180 days. The preferred stock, which
bears no dividend, will be convertible into common stock at $1.25 per share and
will vote on all matters on an as if converted basis. Upon funding of the bridge
loan, the investors received 5 million warrants to purchase common stock at
$1.375 per share, which warrants are forfeitable under certain circumstances if
the $11 million preferred stock investment is not completed. If the Company
elects to issue the additional $5 million of the preferred stock described
above, the investors will be issued an additional 2.5 million warrants upon
closing. Also pursuant to the securities purchase agreement, Charles Holmes and
Lenore Shupeck will assume two of five seats on the Company's Board of
Directors.
Upon completion of the investment, the investors will own securities
convertible into or exercisable for a substantial majority of the Company's
outstanding stock. The Company also announced that it has adopted an amendment
to its Stockholder Rights Agreement in order to facilitate the proposed
investment.
The preferred stock transaction is subject to certain closing conditions
which are specified in the securities purchase agreement. The Company can give
no assurance that the preferred stock transaction will be consummated, and, in
the event that it is not consummated, there can
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be no assurance that cash generated from operations will be sufficient to fund
the Company's continued operations.
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. 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
close the proposed transaction, 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 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. It's 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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