<PAGE>
OMB APPROVAL
OMB Number: 3235-0145
Expires: December 31, 1997
Estimated average burden
hours per response.... 14.90
UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
SCHEDULE 13D
Under the Securities Exchange Act of 1934
(Amendment No._________)*
Empire of Carolina, Inc.
- -------------------------------------------------------------------------------
(Name of Issuer)
Common Stock, par value $.10 per share
- -------------------------------------------------------------------------------
(Title of Class of Securities)
292007-10-1
- -------------------------------------------------------------------------------
(CUSIP Number)
Edmund H. Shea, Jr., 655 Brea Canyon Road, Walnut, CA 91789
- -------------------------------------------------------------------------------
(Name, Address and Telephone Number of Person Authorized to Receive
Notices and Communications)
June 19, 1997
- -------------------------------------------------------------------------------
(Date of Event which Requires Filing of this Statement)
If the filing person has previously filed a statement on Schedule 13G to report
the acquisition which is the subject of this Schedule 13D, and is filing this
schedule because of Rule 13d-1(b)(3) or (4), check the following box [ ].
Note: Six copies of this statement, including all exhibits, should be filed with
the Commission. See Rule 13d-1(a) for other parties to whom copies are to be
sent.
(Continued on the following page(s))
Page 1 of 24 Pages
<PAGE>
- -------------------------------------------------------------------------------
CUSIP No. 292007-10-1 13D Page 2 of 24 Pages
- -------------------------------------------------------------------------------
1 NAME OF REPORTING PERSON
S.S OR I.R.S. IDENTIFICATION NO. OF ABOVE PERSON
J.F. Shea Co., Inc.
94-1530032
- ------------------------------------------------------------------------------
2 CHECK THE APPROPRIATE BOX IF A MEMBER OF A GROUP* (a) [ ]
(b) [ ]
- ------------------------------------------------------------------------------
3 SEC USE ONLY
- ------------------------------------------------------------------------------
4 SOURCE OF FUNDS*
WC
- ------------------------------------------------------------------------------
5 CHECK BOX IF DISCLOSURE OF LEGAL PROCEEDING IS REQUIRED
PURSUANT TO ITEM 2(d) OR 2(e) [ ]
- ------------------------------------------------------------------------------
6 CITIZENSHIP OR PLACE OR ORGANIZATION
Nevada
- ------------------------------------------------------------------------------
NUMBER OF | 7 | SOLE VOTING POWER
SHARES | |
BENEFICIALLY | 8 | SHARED VOTING POWER
OWNED BY | | 900,000
EACH | |
REPORTING | 9 | SOLE DISPOSITIVE POWER
PERSON WITH | |
| 10 | SHARED DISPOSITIVE POWER
| | 900,000
- ------------------------------------------------------------------------------
11 AGGREGATE AMOUNT BENEFICIALLY OWNED BY EACH REPORTING PERSON
900,000
- ------------------------------------------------------------------------------
12 CHECK BOX IF THE AGGREGATE AMOUNT IN ROW (11) EXCLUDES
CERTAIN SHARES* [ ]
- ------------------------------------------------------------------------------
13 PERCENT OF CLASS REPRESENTED BY AMOUNT IN ROW (11)
9.5%
- ------------------------------------------------------------------------------
14 TYPE OF REPORTING PERSON*
CO
- ------------------------------------------------------------------------------
*SEE INSTRUCTIONS BEFORE FILLING OUT!
<PAGE>
- -------------------------------------------------------------------------------
CUSIP No. 292007-10-1 13D Page 3 of 24 Pages
- -------------------------------------------------------------------------------
1 NAME OF REPORTING PERSON
S.S OR I.R.S. IDENTIFICATION NO. OF ABOVE PERSON
John F. Shea
- ------------------------------------------------------------------------------
2 CHECK THE APPROPRIATE BOX IF A MEMBER OF A GROUP* (a) [ ]
(b) [ ]
- ------------------------------------------------------------------------------
3 SEC USE ONLY
- ------------------------------------------------------------------------------
4 SOURCE OF FUNDS*
00
- ------------------------------------------------------------------------------
5 CHECK BOX IF DISCLOSURE OF LEGAL PROCEEDING IS REQUIRED
PURSUANT TO ITEM 2(d) OR 2(e) [ ]
- ------------------------------------------------------------------------------
6 CITIZENSHIP OR PLACE OR ORGANIZATION
U.S.A.
- ------------------------------------------------------------------------------
NUMBER OF | 7 | SOLE VOTING POWER
SHARES | |
BENEFICIALLY | 8 | SHARED VOTING POWER
OWNED BY | | 900,000
EACH | |
REPORTING | 9 | SOLE DISPOSITIVE POWER
PERSON WITH | |
| 10 | SHARED DISPOSITIVE POWER
| | 900,000
- ------------------------------------------------------------------------------
11 AGGREGATE AMOUNT BENEFICIALLY OWNED BY EACH REPORTING PERSON
900,000
- ------------------------------------------------------------------------------
12 CHECK BOX IF THE AGGREGATE AMOUNT IN ROW (11) EXCLUDES
CERTAIN SHARES* [ ]
- ------------------------------------------------------------------------------
13 PERCENT OF CLASS REPRESENTED BY AMOUNT IN ROW (11)
9.5%
- ------------------------------------------------------------------------------
14 TYPE OF REPORTING PERSON*
IN
- ------------------------------------------------------------------------------
*SEE INSTRUCTIONS BEFORE FILLING OUT!
<PAGE>
- -------------------------------------------------------------------------------
CUSIP No. 292007-10-1 13D Page 4 of 24 Pages
- -------------------------------------------------------------------------------
1 NAME OF REPORTING PERSON
S.S OR I.R.S. IDENTIFICATION NO. OF ABOVE PERSON
Edmund H. Shea, Jr.
###-##-####
- ------------------------------------------------------------------------------
2 CHECK THE APPROPRIATE BOX IF A MEMBER OF A GROUP* (a) [ ]
(b) [ ]
- ------------------------------------------------------------------------------
3 SEC USE ONLY
- ------------------------------------------------------------------------------
4 SOURCE OF FUNDS*
00
- ------------------------------------------------------------------------------
5 CHECK BOX IF DISCLOSURE OF LEGAL PROCEEDING IS REQUIRED
PURSUANT TO ITEM 2(d) OR 2(e) [ ]
- ------------------------------------------------------------------------------
6 CITIZENSHIP OR PLACE OR ORGANIZATION
U.S.A.
- ------------------------------------------------------------------------------
NUMBER OF | 7 | SOLE VOTING POWER
SHARES | |
BENEFICIALLY | 8 | SHARED VOTING POWER
OWNED BY | | 900,000
EACH | |
REPORTING | 9 | SOLE DISPOSITIVE POWER
PERSON WITH | |
| 10 | SHARED DISPOSITIVE POWER
| | 900,000
- ------------------------------------------------------------------------------
11 AGGREGATE AMOUNT BENEFICIALLY OWNED BY EACH REPORTING PERSON
900,000
- ------------------------------------------------------------------------------
12 CHECK BOX IF THE AGGREGATE AMOUNT IN ROW (11) EXCLUDES
CERTAIN SHARES* [ ]
- ------------------------------------------------------------------------------
13 PERCENT OF CLASS REPRESENTED BY AMOUNT IN ROW (11)
9.5%
- ------------------------------------------------------------------------------
14 TYPE OF REPORTING PERSON*
IN
- ------------------------------------------------------------------------------
*SEE INSTRUCTIONS BEFORE FILLING OUT!
<PAGE>
- -------------------------------------------------------------------------------
CUSIP No. 292007-10-1 13D Page 5 of 24 Pages
- -------------------------------------------------------------------------------
1 NAME OF REPORTING PERSON
S.S OR I.R.S. IDENTIFICATION NO. OF ABOVE PERSON
Peter O. Shea
- ------------------------------------------------------------------------------
2 CHECK THE APPROPRIATE BOX IF A MEMBER OF A GROUP* (a) [ ]
(b) [ ]
- ------------------------------------------------------------------------------
3 SEC USE ONLY
- ------------------------------------------------------------------------------
4 SOURCE OF FUNDS*
OO
- ------------------------------------------------------------------------------
5 CHECK BOX IF DISCLOSURE OF LEGAL PROCEEDING IS REQUIRED
PURSUANT TO ITEM 2(d) OR 2(e) [ ]
- ------------------------------------------------------------------------------
6 CITIZENSHIP OR PLACE OR ORGANIZATION
U.S.A.
- ------------------------------------------------------------------------------
NUMBER OF | 7 | SOLE VOTING POWER
SHARES | |
BENEFICIALLY | 8 | SHARED VOTING POWER
OWNED BY | | 900,000
EACH | |
REPORTING | 9 | SOLE DISPOSITIVE POWER
PERSON WITH | |
| 10 | SHARED DISPOSITIVE POWER
| | 900,000
- ------------------------------------------------------------------------------
11 AGGREGATE AMOUNT BENEFICIALLY OWNED BY EACH REPORTING PERSON
900,000
- ------------------------------------------------------------------------------
12 CHECK BOX IF THE AGGREGATE AMOUNT IN ROW (11) EXCLUDES
CERTAIN SHARES* [ ]
- ------------------------------------------------------------------------------
13 PERCENT OF CLASS REPRESENTED BY AMOUNT IN ROW (11)
9.5%
- ------------------------------------------------------------------------------
14 TYPE OF REPORTING PERSON*
IN
- ------------------------------------------------------------------------------
*SEE INSTRUCTIONS BEFORE FILLING OUT!
<PAGE>
- -------------------------------------------------------------------------------
CUSIP No. 292007-10-1 13D Page 6 of 24 Pages
- -------------------------------------------------------------------------------
1 NAME OF REPORTING PERSON
S.S OR I.R.S. IDENTIFICATION NO. OF ABOVE PERSON
James G. Shontere
- ------------------------------------------------------------------------------
2 CHECK THE APPROPRIATE BOX IF A MEMBER OF A GROUP* (a) [ ]
(b) [ ]
- ------------------------------------------------------------------------------
3 SEC USE ONLY
- ------------------------------------------------------------------------------
4 SOURCE OF FUNDS*
OO
- ------------------------------------------------------------------------------
5 CHECK BOX IF DISCLOSURE OF LEGAL PROCEEDING IS REQUIRED
PURSUANT TO ITEM 2(d) OR 2(e) [ ]
- ------------------------------------------------------------------------------
6 CITIZENSHIP OR PLACE OR ORGANIZATION
U.S.A.
- ------------------------------------------------------------------------------
NUMBER OF | 7 | SOLE VOTING POWER
SHARES | |
BENEFICIALLY | 8 | SHARED VOTING POWER
OWNED BY | | 900,000
EACH | |
REPORTING | 9 | SOLE DISPOSITIVE POWER
PERSON WITH | |
| 10 | SHARED DISPOSITIVE POWER
| | 900,000
- ------------------------------------------------------------------------------
11 AGGREGATE AMOUNT BENEFICIALLY OWNED BY EACH REPORTING PERSON
900,000
- ------------------------------------------------------------------------------
12 CHECK BOX IF THE AGGREGATE AMOUNT IN ROW (11) EXCLUDES
CERTAIN SHARES* [ ]
- ------------------------------------------------------------------------------
13 PERCENT OF CLASS REPRESENTED BY AMOUNT IN ROW (11)
9.5%
- ------------------------------------------------------------------------------
14 TYPE OF REPORTING PERSON*
IN
- ------------------------------------------------------------------------------
*SEE INSTRUCTIONS BEFORE FILLING OUT!
<PAGE>
Page 7 of 24 Pages
------- ------
Item 1. Security and Issuer.
This statement relates to the common stock, par value $.10 per share
("Common Stock"), of Empire of Carolina, Inc., a Delaware corporation
(the "Company"). The address of the Company's principal executive
office is 5150 Linton Boulevard, Delray Beach, Florida 33484. The
shares of Common Stock that are the subject of this statement are
issuable upon conversion of shares of the Company's Series A
Preferred Stock, par value $.01 per share (the "Series A Preferred
Stock"), initially at a conversion rate of one share of Common Stock
for each $1.25 Stated Amount of Series A Preferred Stock, and
warrants (the "Warrants") to purchase shares of Common Stock at a
price of $1.325 per share, subject to adjustment in certain
instances.
Item 2. Identity and Background.
This statement is filed jointly by J.F. Shea Co., Inc., John F. Shea,
Edmund H. Shea, Jr., Peter O. Shea and James G. Shontere (the
"Reporting Persons"). (J.F. Shea Co., Inc. ("J.F. Shea")), a
corporation organized under the laws of Nevada, whose business
address is 655 Brea Canyon Road, Walnut, California 91789. J.F.
Shea's principal business is heavy construction and residential and
commercial construction. During the past five years, J.F. Shea has
not been convicted in a criminal proceeding nor has it been a party
to a civil proceeding of a judicial or administrative body of
competent jurisdiction and as a result of such proceeding, was or is
subject to a judgment, decree or final order enjoining future
violations of, or prohibiting or mandating activities subject to,
federal or state securities laws or finding any violation with
respect to such laws.
John F. Shea is a Director and President of J.F. Shea, Edmund H.
Shea, Jr. is a Director and Vice President of J.F. Shea., Peter O.
Shea is a Director and Vice President of J.F. Shea and James G.
Shontere is a Director, Treasurer and Secretary of J.F. Shea. The
business address for each of the foregoing Reporting Persons is 655
Brea Canyon Road, Walnut, California 91789. Each of Messrs. John F.
Shea, Edmund H. Shea, Jr., Peter O. Shea and James G. Shontere is a
citizen of the United States. During the past five years, each of
Messrs. John F. Shea, Edmund H. Shea, Jr., Peter O. Shea and James G.
Shontere have not been convicted in a criminal proceeding (excluding
traffic violations or similar misdemeanors), nor have such Reporting
Persons been a party to a civil proceeding of a judicial or
administrative body of competent jurisdiction and as a result of such
proceeding, was or is subject to a judgement, decree or final order
enjoining future violations of, or prohibiting or mandating
activities subject to, federal or state securities laws or finding
any violation with respect to such laws.
<PAGE>
Page 8 of 24 Pages
------- ------
Item 3. Source and Amount of Funds or Other Consideration.
J.F. Shea acquired the Series A Preferred Stock and Warrants from the
Company for a purchase price of $1,000,000 with funds provided from
working capital. In no case were any funds borrowed.
Item 4. Purpose of Transaction.
The Series A Preferred Stock and Warrants were purchased from the
Company in a private placement (the "Private Placement") to
accredited investors. The Series A Preferred Stock and Warrants where
acquired by J.F. Shea solely for investment purposes and not for the
purpose of acquiring control of the Company.
The Reporting Persons have no present plans or proposals which relate
to, or could result in, any of the matters referred to in paragraphs
(a) through (j), inclusive, of Item 4 of Schedule 13D except to the
extent described in Item 6 hereof, to which reference is hereby made.
The Reporting Persons may, at any time and from time to time, review
or reconsider their position and formulate plans or proposals with
respect thereto, but have no present intention of doing so.
Item 5. Interest in Securities of the Issuer.
(a) J.F. Shea is the beneficial owner of a total of 900,000 shares
of Common Stock, consisting of (i) 800,000 shares of Common
Stock issuable upon conversion of 1,000,000 shares of Series A
Preferred Stock and (ii) 100,000 shares of Common Stock
issuable upon exercise of the Warrants, representing
approximately 9.5% of the issued and outstanding shares of
Common Stock of the Company. Messrs. John F. Shea, Edmund H.
Shea, Jr., Peter O. Shea and James G. Shontere, in their
capacity as directors of J.F. Shea, share voting and
dispositive power with respect to such securities and may be
deemed to be the beneficial owners of such securities.
The percentage of outstanding shares of Common Stock of the
Company set out in the preceding paragraph is computed based
on a total of 8,553,564 shares of Common Stock outstanding.
(b) Number of shares as to which such person has:
(i) sole power to vote or to direct the vote:
---------
<PAGE>
Page 9 of 24 Pages
------- ------
(ii) shared power to vote or to direct the vote:
Messrs. John F. Shea, Edmund H. Shea, Jr., Peter O.
Shea and James G. Shontere share the power to vote or
to direct the vote of those shares owned by J.F.
Shea.
(iii) sole power to dispose or to direct the disposition
of:
---------
(iv) shared power to dispose of or to direct the
disposition of:
Messrs. John F. Shea, Edmund H. Shea, Jr., Peter O.
Shea and James G. Shontere share the power to dispose
of or to direct the disposition of those shares owned
by J.F. Shea.
(c) Inapplicable
(d) Inapplicable
(e) Inapplicable
Item 6. Contracts, Arrangements, Understandings or Relationships with Respect
to Securities of the Issuer.
Except as contemplated by the Securities Purchase Agreement, as
amended, (the "Securities Purchase Agreement"), among the Company,
HPA Associates, LLC ("HPA") and EMP Associates LLC ("EMP"), and the
Warrant Agreement dated as of June 17, 1997 between the Company and
the holders from time to time of the Warrants (the "Warrant
Agreement"), and to the extent described in this Item 6 below, there
are no contracts, arrangements, understandings or relationships
(legal or otherwise) among the Reporting Persons and between any of
such Reporting Persons and any other person with respect to any
securities of the Company (including, but not limited to, any
contract, arrangement, understanding or relationship involving the
transfer or voting of any securities, finder's fee, joint ventures,
loan or option arrangements, puts or calls, guarantees of profits,
divisions or loss, or the giving or withholding of proxies).
Under the terms of the Warrant Agreement and the subscription
agreements between the Company and the purchasers of Series A
Preferred Stock in the Private Placement, the Company is required to
prepare and file a registration statement with the Securities and
Exchange Commission (the "SEC") with respect to the Series A
Preferred Stock, the Warrants and the shares of Common Stock
underlying the Warrants and the Series A Preferred Stock. The
Certificate of Designation of the Series A Preferred Stock provides
<PAGE>
Page 10 of 24 Pages
-------- ------
that holders of Series A Preferred Stock shall have the right, voting
separately as a class, to elect two members of the Board of Directors
of the Company and to approve any expansion of the Company's Board of
Directors beyond five members. In addition, purchasers of the Series
A Preferred Stock have agreed to vote in favor of, and have granted a
proxy to Charles S. Holmes and James Pinto (principals of HPA) to
vote in favor of, a proposal to amend the Certificate of
Incorporation of the Company to increase the number of authorized
shares of Common Stock of the Company from 30 million to 60 million
and to provide that the Company's Board of Directors shall consist of
up to eight members.
Item 7. Materials to be Filed as Exhibits.
(1) Certificate of Designation relating to Series A Preferred
Stock, incorporated by reference to Exhibit 3.5 of the
Company's Current Report on Form 8-K filed with the SEC on
June 30, 1997.
(2) Warrant Agreement dated as of June 17, 1997 between the
Company and the holders from time to time of the Warrants,
incorporated by reference to Exhibit 4.8 of the Company's
Current Report on Form 8-K filed with the SEC on June 30,
1997.
(3) Securities Purchase Agreement dated as of May 5, 1997 among
the Company, HPA and EMP, incorporated by reference to Exhibit
10.40 of the Company's Quarterly Report on Form 10-Q for its
fiscal quarter ended March 31, 1997.
(4) Amendment No. 1 dated as of June 5, 1997 to Securities
Purchase Agreement dated as of May 5, 1997 among the Company,
HPA and EMP, incorporated by reference to Exhibit 10.41 of the
Company's Current Report on Form 8-K filed with the SEC on
June 30, 1997.
(5) 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, incorporated by reference to Exhibit
10.43 of the Company's Current Report on Form 8-K filed with
the SEC on June 30, 1997.
(6) Joint Statement on Schedule 13D, as required by Rule
13d-1(f)(1) under the Exchange Act.
(7) Supplement to Subscription Agreement regarding purchase of the
Company's Series A Preferred Stock dated as of June 10, 1997,
with Registration Rights attached.
<PAGE>
Page 11 of 24 Pages
-------- ------
SIGNATURES
After reasonable inquiry and to the best of my knowledge and belief,
the undersigned certify that the information set forth in this statement is
true, complete and correct.
Dated: July 31, 1997 J. F. Shea Co., Inc.
Walnut, California
By: /s/ Edmund H. Shea, Jr.
-------------------------
Edmund H. Shea, Jr.,
Vice President
Dated: July 31, 1997
Walnut, California /s/ John F. Shea
------------------------------------
John F. Shea
Dated: July 31, 1997
Walnut, California /s/ Edmund H. Shea, Jr.
------------------------------------
Edmund H. Shea, Jr.
Dated: July 31, 1997
Walnut, California /s/ Peter O. Shea
------------------------------------
Peter O. Shea
Dated: July 31, 1997
Walnut, California /s/ James G. Shontere
------------------------------------
James G. Shontere
<PAGE>
Page 12 of 24 Pages
-------- ------
EXHIBIT INDEX
Exhibit No. Page
(1) Certificate of Designation relating to Series A
Preferred Stock, incorporated by reference to
Exhibit 3.5 of the Company's Current Report on Form
8-K filed with the SEC on June 30, 1997.
(2) Warrant Agreement dated as of June 17, 1997 between
the Company and the holders from time to time of the
Warrants, incorporated by reference to Exhibit 4.8
of the Company's Current Report on Form 8-K filed
with the SEC on June 30, 1997.
(3) Securities Purchase Agreement dated as of May 5,
1997 among the Company, HPA and EMP, incorporated by
reference to Exhibit 10.40 of the Company's
Quarterly Report on Form 10-Q for its fiscal quarter
ended March 31, 1997.
(4) Amendment No. 1 dated as of June 5, 1997 to
Securities Purchase Agreement dated as of May 5,
1997 among the Company, HPA and EMP, incorporated by
reference to Exhibit 10.41 of the Company's Current
Report on Form 8-K filed with the SEC on June 30,
1997.
(5) 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,
incorporated by reference to Exhibit 10.43 of the
Company's Current Report on Form 8-K filed with the
SEC on June 30, 1997.
(6) Joint Statement on Schedule 13D, as required by Rule
13d-1(f)(1) under the Exchange Act.
(7) Supplement to Subscription Agreement regarding
purchase of the Company's Series A Preferred Stock
dated as of June 10, 1997, with Registration Rights
attached.
<PAGE>
Page 13 of 24 Pages
-------- ------
EXHIBIT 6
AGREEMENT
JOINT FILING OF SCHEDULE 13D
The undersigned hereby agree to jointly prepare and file with
regulatory authorities a Schedule 13D and any future amendments thereto
reporting each of the undersigned's ownership of securities of Empire of
Carolina, Inc. and hereby affirm that such Schedule 13D is being filed on behalf
of each of the undersigned.
Dated: July 31, 1997 J. F. Shea Co., Inc.
Walnut, California
By: /s/ Edmund H. Shea, Jr.
-----------------------------
Edmund H. Shea, Jr.,
Vice President
Dated: July 31, 1997
Walnut, California /s/ John F. Shea
---------------------------------
John F. Shea
Dated: July 31, 1997
Walnut, California /s/ Edmund H. Shea
---------------------------------
Edmund H. Shea, Jr.
Dated: July 31, 1997
Walnut, California /s/ Peter O. Shea
---------------------------------
Peter O. Shea
Dated: July 31, 1997
Walnut, California /s/ James G. Shontere
---------------------------------
James G. Shontere
<PAGE>
Page 14 of 24 Pages
-------- ------
EXHIBIT 7
Name of Subscriber ___________________
Investment Amount: $__________________
EMPIRE OF CAROLINA, INC.
SUPPLEMENT TO SUBSCRIPTION AGREEMENT
As of June 10, 1997
Empire of Carolina, Inc.
5150 Linton Boulevard
Delray Beach, Florida 33484
Attention: President
Ladies & Gentlemen:
Reference is made to a Subscription Agreement executed by the
undersigned (the "Subscriber") for Unit(s) offered pursuant to the Private
Offering Memorandum dated May 23, 1997 ("Memorandum") of Empire of Carolina,
Inc. (the "Company") covering the offering of up to 160 Units, at $100,000 per
Unit. Each of the Units consists of 10,000 shares of Series A Preferred Stock
convertible into Common Stock and a Warrant for 10,000 shares of Common Stock of
the Company.
The Subscriber:
(i) acknowledges that such Subscriber has received and read Supplement
No. 1 to the Memorandum dated June 10, 1997 and the Memorandum;
(ii) acknowledges that Supplement No. 1 describes material changes from
information set forth in the Memorandum;
(iii) hereby affirms its subscription as set forth in the Subscription
Agreement and consents to the acceptance of its subscription and
issuance and sale to it of Unit(s) at the initial or any subsequent
closing of the Offering in accordance with the Memorandum as amended by
Supplement No. 1. If any Subscriber does not wish to affirm its
subscription, such Subscriber must so advise the Placement Agents and
the Company in writing by 5:00 p.m. E.D.T. on Thursday, June 12, 1997;
(iv) shall be obligated, upon acquisition of shares of Series A
Preferred Stock pursuant hereto, to exercise the voting rights
pertaining to such shares, at the next annual meeting of the
stockholders of the Company or such subsequent stockholder meetings as
may be
<PAGE>
Page 15 of 24 Pages
-------- ------
necessary in order to approve the matters specified hereafter, to amend
the Company's certificate of incorporation to provide that the Company
may issue up to 60,000,000 shares of Common Stock and to provide that
the Company's Board of Directors shall consist of up to eight members,
as may be determined by the Board of Directors from time to time. In
furtherance thereof, the Subscriber hereby appoints Charles Holmes and
James Pinto, and each of them, as proxies, with full power of
substitution, to vote the shares of Series A Preferred Stock being
acquired by the Subscriber pursuant hereto as specified in the
preceding sentence, and to attend any meeting of stockholders required
therefore, hereby acknowledging that the proxy granted pursuant hereto
is coupled with an interest and is irrevocable;
(vi) if a U.S. Subscriber, has completed Internal Revenue Service form
W-9 and attached the original hereto;
(vii) if a non-U.S. Subscriber, has completed Internal Revenue Service
Form W-8 and attached the original hereto; and
(viii) acknowledges receipt and agrees to be bound by the terms of the
Registration Rights with respect to the Series A Preferred Stock,
appended hereto.
--------------------------------------
Name of Subscriber (please print)
-------------------------------------
Signature
-------------------------------------
Capacity in which signed (if not an individual)
<PAGE>
Page 16 of 24 Pages
-------- ------
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 __, 2000 and the date upon which
the right to 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 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
<PAGE>
Page 17 of 24 Pages
-------- ------
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 required),
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
Holder hereunder, it being 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
<PAGE>
Page 18 of 24 Pages
-------- ------
(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),
or (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 of 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 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
<PAGE>
Page 19 of 24 Pages
-------- ------
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 corporation 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 or 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,
<PAGE>
Page 20 of 24 Pages
-------- ------
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 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
<PAGE>
Page 21 of 24 Pages
-------- ------
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 n
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 of 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 limitation, (a) all Commission, stock exchange or
market and National Association of 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,
<PAGE>
Page 22 of 24 Pages
-------- ------
liabilities and expenses caused by any untrue or alleged untrue statements 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 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 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 underwriter
(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
<PAGE>
Page 23 of 24 Pages
-------- ------
defense of the action, with counsel reasonable 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 indemnifying 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, expect with the
consent of the indemnified party (which consent shall not be unreasonably
withheld), consent to entry of any judgement 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 action, but
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 advise 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
of 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 or 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
<PAGE>
Page 24 of 24 Pages
-------- ------
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.
