UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
SCHEDULE 13D
Under the Securities Exchange Act of 1934
(Amendment No. ___)*
INNOVO GROUP INC.
(Name of Issuer)
Common Stock, Par Value $.01 Per Share
(Title of Class of Securities)
457954 50 1
(CUSIP Number)
Gilbert H. Davis, Esq.
Sims Moss Kline & Davis LLP
400 Northpark Town Center, Suite 310
1000 Abernathy Road
Atlanta, Georgia 30328
(770) 481-7200
(Name, Address and Telephone Number of Persons
Authorized to Receive Notices and Communications)
August 13, 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.<PAGE>
13D
CUSIP No. 457954 50 1
______________________________________________________________________________
1 NAME OF REPORTING PERSON:
Lecil Earnest Smith
______________________________________________________________________________
2 CHECK THE APPROPRIATE BOX IF A MEMBER OF A GROUP* (a) [ ]
(b) [X]
______________________________________________________________________________
3 SEC USE ONLY
______________________________________________________________________________
4 SOURCE OF FUNDS: PF
_____________________________________________________________________________
5 CHECK BOX IF DISCLOSURE OF LEGAL PROCEEDINGS IS REQUIRED PURSUANT
TO ITEMS 2(d) or 2(e) [ ]
_____________________________________________________________________________
6 CITIZENSHIP OR PLACE OF ORGANIZATION: United States
_____________________________________________________________________________
NUMBER OF 7 SOLE VOTING POWER: 3,238,668
SHARES ___________________________________________________________
BENEFICIALLY 8 SHARED VOTING POWER: NONE
OWNED BY ___________________________________________________________
EACH 9 SOLE DISPOSITIVE POWER: 3,238,668
REPORTING ___________________________________________________________
PERSON 10 SHARED DISPOSITIVE POWER: NONE
_____________________________________________________________________________
11 AGGREGATE AMOUNT BENEFICIALLY OWNED BY EACH REPORTING PERSON: 3,238,668
_____________________________________________________________________________
12 CHECK BOX IF THE AGGREGATE AMOUNT IN ROW (11) EXCLUDES CERTAIN SHARES*
[ ]
_____________________________________________________________________________
13 PERCENT OF CLASS REPRESENTED BY AMOUNT IN ROW (11): 7.3%
_____________________________________________________________________________
14 TYPE OF REPORTING PERSON: IN
_____________________________________________________________________________
<PAGE>
Item 1. Security and Issuer.
This Statement relates to shares of the common stock, par value
$.01 per share (the "Common Stock"), of Innovo Group Inc., a
Delaware corporation (the "Company"). The Company has its
principal executive offices at 27 North Main Street, Springfield,
Tennessee 37172.
Item 2. Identity and Background.
This Statement is filed by Lecil Earnest Smith ("Smith"), a
resident of the State of Tennessee whose business address is 27
North Main Street, Springfield, Tennessee 37172. Smith's principal
occupation since joining the Company on August 13, 1997 has been
serving as a Director and the Chairman and Chief Executive Officer
of the Company. Smith is a United States citizen.
To the extent set forth in this Statement, Smith has acted
together with the following persons in connection with the Common
Stock:
(a) John Eric Hendrickson ("Hendrickson"), a resident of the
State of Tennessee whose business address is 27 North Main Street,
Springfield, Tennessee 37172. Hendrickson's principal occupation
since joining the Company on August 13, 1997 has been serving as a
Director, a Vice President and the Treasurer of the Company.
Hendrickson is a United States citizen.
(b) Herb J. Newton ("Newton"), a resident of the State of
Georgia whose residence address if 2865 Camp Branch Road, Buford,
Georgia 30519. Newton's principal occupation is the management of
his personal investments. Newton became a Director of the Company
on August 13, 1997. Newton is a United States citizen.
(c) Daniel Allen Page ("Page"), a resident of the State of
Tennessee whose business address is 27 North Main Street,
Springfield, Tennessee 37172. Page's principal occupation since
joining the Company on August 13, 1997 has been serving as a
Director and the Chief Operating Officer of the Company. Page is
a United States citizen.
Hendrickson, Newton, Page and Smith are referred to herein
collectively as the "Investor Group."
During the past five years, none of the persons listed above has
been convicted in a criminal proceeding (excluding traffic
violations or similar misdemeanors), or has 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.
Item 3. Source and Amount of Funds or Other Consideration.
Smith used personal funds to acquire the shares reported as
owned by him in this Statement. In the event any member of the
Investor Group determines himself to purchase additional shares of
Company stock, it is currently contemplated that they will use
their respective personal funds. As of the date of this Statement,
no arrangements with third parties have been made by any member of
the Investor Group with respect to financing the acquisition of
additional Company shares.
Item 4. Purpose of Transaction.
On August 13, 1997, the Company issued 6,750,000 shares of
Common Stock to the Investor Group. The Investor Group paid
$1,350,000 for such shares of Common Stock. The purchase by the
Investor Group was made pursuant to a Stock Purchase Agreement
dated August 13, 1997 (the "Stock Purchase Agreement") by and among
the members of the Investor Group, the Company, and Patricia
Anderson-Lasko. The Stock Purchase Agreement is incorporated
herein by reference as Exhibit 7.1, and the description of its
terms herein is qualified in its entirety by reference to the Stock
Purchase Agreement.
The net proceeds to the Company, after the payment of the costs
of the transaction, were approximately $1,300,000. The Company
utilized $150,000 of the net proceeds to repurchase and cancel its
outstanding Class I Common Stock purchase warrants. The Class I
Common Stock purchase warrants had been issued in fiscal 1996 to
the placement agent for certain debt and equity private placements,
and was exercisable through August, 2001 for the purchase of
1,220,588 shares of Common Stock at a price of $.17 per share. The
remaining net proceeds of approximately $1,150,000 were used to
reduce operating liabilities and add to the Company's working
capital.
Under the terms of the Stock Purchase Agreement, each of the
members of the Investor Group were elected to the Company's board
of directors. Concurrently, Scott Parliament, a member of the
board of directors, resigned. As a result, the board of directors
is now comprised of the following eight individuals: Smith, Page,
Hendrickson, Newton, Patricia Anderson-Lasko, Alexander Miller,
Eleanor Schwartz and Marvin Williamson. The Stock Purchase
agreement also provides that the Company will nominate these eight
individuals as the Company's nominees for directors for its next
annual stockholders' meeting.
Concurrently and as a condition to the execution of the Stock
Purchase Agreement, the Company executed employment contracts with
each of Smith, Page and Hendrickson, and also executed new
employment contracts with Patricia Anderson-Lasko and Alexander
Miller. Smith became the chief executive officer of the Company
under a two year employment contract that provides for an annual
salary of $30,000 and the grant to Mr. Smith of 1,600,000 non-
qualified stock options. Page became the chief operating officer
of the Company under a two year employment contract that provides
for an annual salary of $30,000 and the grant to Page 1,200,000
non-qualified stock options. Hendrickson became the vice-
president and treasurer on the Company under a two year employment
contract that provides for an annual salary of $70,000. The new
employment contract for Ms. Anderson-Lasko employs her for a two
year term as the Company's president, and as the president of the
Company's Innovo Inc. and NP International, Inc. subsidiaries, at
an annual salary of $157,500. The new employment contract for Mr.
Miller employs him for a two year term as the Company's manager of
investor relations at an annual salary of $48,000 and grants Mr.
Miller 125,000 non-qualified stock options.
Each of the employment contracts of Messrs. Smith, Page,
Hendrickson, Miller and Ms. Anderson-Lasko (i) provide that the
contract shall automatically renew for successive one year terms
unless terminated by either party, and (ii) provide for the payment
of a termination benefit equal to one year's salary, payable in
twelve monthly installments, upon the termination of employment,
for any reason, during the term of the contract. The employment
contracts of Messrs. Smith, Page and Hendrickson, and of Ms.
Anderson-Lasko and Mr. Miller, are incorporated herein by reference
as exhibits (Exhibits 7.2, 7.3, 7.4, 7.5 and 7.6, respectively),
and the descriptions of their terms herein is qualified in its
entirety by reference to the contracts.
The non-qualified stock options granted to Messrs. Smith, Page
and Miller vest and become exercisable in 24 equal monthly
installments over the two year terms of their employment contracts.
Unvested options are forfeited at any termination of employment.
However, the vesting of any unvested and unforfeited options will
accelerate, and vest immediately, upon (i) the market price of the
Company's Common Stock reaching $1.00, or (ii) a change in the
control of the Company which is not approved by the Company's board
of directors. For the purposes of the employment contracts, a
change in control is defined as the acquisition by any person or
group of shares of Common Stock representing 25 percent of the
Company's outstanding Common Stock. Vested options remain
exercisable until August, 2002 at a price of $.3315 per share,
which represents the market price of the Company's Common Stock at
the time the terms of the employment contracts and options were
agreed to in a letter of intent signed by the Investor Group, the
Company, and Ms. Anderson-Lasko.
As a condition to Stock Purchase Agreement, Ms. Anderson-Lasko
entered into a voting agreement (the "Voting Agreement") and a
resale and right of first refusal agreement (the "Resale and Right
of First Refusal Agreement") with the Investor Group.
Under the Voting Agreement Ms. Anderson-Lasko has agreed to
vote, in the manner directed by the Investor Group, such number of
shares of Common Stock as to which she has sole voting power as
equals one-half of the excess, if any, of the number of shares of
Common Stock as to which Ms. Anderson-Lasko has sole voting power
over the number of shares of Common Stock as to which the Investor
Group has sole or shared voting power. However, Ms. Anderson-Lasko
is not required to vote any shares as directed by the Investor
Group if the Company's net income, as determined under generally
accepted accounting principles and as reported in the reports filed
by the Company under the Securities Exchange Act of 1934 (the "1934
Act"), is for the twelve month period ending as of the latest
fiscal quarter for which a quarterly report or annual report has
been filed by the Company with the Securities and Exchange
Commission under the 1934 Act as of the applicable voting date, not
greater than (or net loss is not less than) the net income or loss
for the comparable twelve month period of the prior year.
Additionally, Ms. Anderson-Lasko is not required to vote as
directed by the Investor Group if such vote would be contrary to a
recommendation of the Company's board of directors. The Voting
Agreement has a term of two years. As of the date of this Current
Report on Form 8-K, Ms. Anderson-Lasko would, under the formula in
the Voting Agreement, not be required to vote any shares as
directed by the Investor Group. The Voting Agreement is
incorporated herein by reference as Exhibit 7.7, and the
description of its terms herein is qualified in its entirety by
reference to the Voting Agreement.
Under the Resale and Right of First Refusal Agreement Ms.
Anderson-Lasko agreed that until the later of (i) 90 days following
the termination of her employment or other affiliation with the
Company (except for affiliation resulting only from the ownership
of Common Stock), or (ii) one year from the date of the agreement,
she would not reoffer or resell any of 4,000,000 shares of Common
Stock purchased by her as the result of her exercise, in August,
1997, of the 1997 Stock Purchase Right Award (the "Award Shares"),
except for (a) offers and sales of Award Shares up to an aggregate
of 500,000 Award Shares during each six month period commencing
with the six month period that begins on the first anniversary of
the agreement, (b) offers and sales affected through privately
negotiated transactions, provided that the purchaser in any such
privately negotiated transaction agrees to be bound by the terms of
the Resale and Right of First Refusal Agreement, including such
portion of the semi-annual 500,000 share sale limit as may be
allocated to it in negotiation between the purchaser and Ms.
Anderson-Lasko, and (c) a sale of any of the Award Shares in
response to an offer made generally to all stockholders of the
Company in connection with a proposed or intended acquisition of a
controlling interest in the Company. Ms. Anderson-Lasko also
granted first to the Investor Group and second to the Company a
right of first refusal to purchase any of the Award Shares that she
might propose to offer or sell, exercisable generally on terms
equal to those of the intended offer or sale. The Resale and Right
of First Refusal Agreement is incorporated herein by reference as
Exhibit 7.8, and the description of its terms herein is qualified
in its entirety by reference to the Resale and Right of First
Refusal Agreement.
In connection with the above described transactions, Smith, Page
and Hendrickson also executed an agreement (the "Williams
Agreement") with William T. Williams, an unaffiliated stockholder
of the Company. Under the Williams Agreement, the Investor Group
will purchase 500,000 shares of Common Stock beneficially owned by
Mr. Williams. Additionally, Mr. Williams agreed, as to 1,500,000
shares of Common Stock beneficially owned by him, not to reoffer or
resell any of such 1,500,000 shares for a period of one year
(except for sales in response to an offer made generally to all
stockholders of the Company in connection with a proposed or
intended acquisition of a controlling interest in the Company) and
granted, first to the Investor Group and second to the Company, a
right of first refusal to purchase any of such 1,500,000 shares
that he might propose to offer or sell, exercisable generally on
terms equal to those of the intended offer or sale. The Williams
Agreement is incorporated herein by reference as Exhibit 7.9, and
the description of its terms herein is qualified in its entirety by
reference to the Williams Agreement.
While each member of the Investor Group reserves the right to
develop plans or proposals in the future regarding the following
items, at the present time none of the persons identified in
response to Item 2 of this Statement has any plans or proposals
which relate to or would result in any of the following except as
discussed above in this Item 4:
(1) An extraordinary corporate transaction, such as a merger,
reorganization or liquidation, involving the Company or any of its
subsidiaries;
(2) Sale or transfer of a material amount of assets of the
Company or of any of its subsidiaries;
(3) Any change in the present board of directors or
management of the Company, including any plans or proposals to
change the number or term of directors or to fill any existing
vacancies on the board;
(4) Any material change in the present capitalization or
dividend policy of the Company;
(5) Any other material change in the Company's business or
corporate structure;
(6) Changes in the Company's charter, bylaws or instruments
corresponding thereto or other actions which may impede the
acquisition of control of the Company by any person;
(7) Causing a class of securities of the Company to be
delisted from a national securities exchange or cease to be
authorized to be quoted in an inter-dealer quotation system of a
registered national securities association;
(8) A class of equity securities of the Company becoming
eligible for termination of registration pursuant to Section
12(g)(4) of the Securities Exchange Act of 1934, as amended; or
(9) Any action similar to any of those enumerated above.
Item 5. Interest in Securities of the Issuer.
Under the rules and regulations of the Securities and Exchange
Commission ("SEC"), the members of Investor Group own beneficially
the following numbers of shares of Common Stock: (a) Hendrickson -
- - 500,000 shares (1.1% of outstanding shares); (b) Newton --
2,308,335 (5.2% of outstanding shares); (c) Page -- 2,238,330 (5.1%
of outstanding shares); and (d) Smith -- 3,238,668 (7.3% of
outstanding shares). Of the shares beneficially owned by Page,
100,000 shares are subject to options that become exercisable
within 60 days of the date of this Statement under the terms of the
non-qualified stock options granted to him as described above in
Item 4 above. Of the shares beneficially owned by Smith, 133,333
shares are subject to options that become exercisable within 60
days of the date of this Statement under the terms of the non-
qualified stock options granted to him as described above in Item
4 above.
Each of Hendrickson, Newton, Page and Smith disclaims any
beneficial interest in the shares of Common Stock owned by the
other members of the Investor Group and has sole voting and
dispositive power with respect to all shares of Common Stock
indicated above as owned by him.
The percentages of outstanding shares of Common Stock set out
above are computed based on a total of 37,311,422 shares of Common
Stock indicated as outstanding as of August 13, 1997 in the Stock
Purchase Agreement, as increased by the 6,750,000 shares sold to
the Investor Group pursuant to the Stock Purchase Agreement (for a
total outstanding of 44,061,422 shares outstanding).
During the period beginning 60 days prior to August 13, 1997 and
through the date of filing of this Statement, the parties filing
this Statement engaged in the transactions with respect to the
numbers of shares indicated below on the dates and at the indicated
transaction prices per share:
No. Of Shares Price
Date Party Purchased/(Sold) per Share
06/23/97 Smith 50,000 $.22
06/23/97 Smith 27,000 $.23
06/24/97 Smith 100,000 $.34
07/02/97 Smith 10,000 $.25
07/03/97 Smith 10,000 $.25
07/09/97 Smith 25,000 $.25
07/10/97 Smith 75,000 $.25
07/10/97 Smith 100,000 $.25
08/13/97 Smith 2,208,335 $.20
08/25/97 Smith 500,000 $.135
All purchases and sales except the purchase on August 13, 1997,
which was a purchase of original issue shares directly from the
Company pursuant to the Stock Purchase Agreement, and the purchase
on August 25, 1997, which was made through a private transaction
pursuant to the Williams Agreement, were effected through brokers
in open market transactions via the Nasdaq SmallCap Market.
Item 6. Contracts, Arrangements, Understandings or Relationships
with Respect to Securities of the Issuer.
The members of the Investor Group have agreed orally among
themselves that any purchases of Common Stock pursuant to the
Resale and Right of First Refusal Agreement or the Williams
Agreement will be funded by them as they determine at the time,
with any shares so purchased to be divided among the Investor Group
members based on their contributions of funds. In addition, Smith
will determine how to vote any of Ms. Anderson's shares as to which
they may direct voting in the future under the terms of the Voting
Agreement.
Except as described in this Statement, the parties filing this
Statement are not parties to any contract, arrangement,
understanding or relationships with any other person with respect
to shares of Company stock, including but not limited to transfer
or voting of any of the securities, finder's fees, joint ventures,
loan or option arrangements, puts or calls, guarantees of profits,
divisions of profits or loss, or the giving or withholding of
proxies.
Item 7. Material to be Filed as Exhibits.
Incorporated by reference or filed as exhibits hereto are the
following:
7.1 Stock Purchase Agreement by and between L. E. Smith, Dan Page,
J. Eric Hendrickson and Herb Newton and Innovo Group Inc. and
Patricia Anderson-Lasko (incorporated by reference to Exhibit
10.1 to Innovo Group Inc. Current Report on Form 8-K dated
August 13, 1997)
7.2 Employment Agreement of L. E. Smith (incorporated by reference
to Exhibit 10.2 to Innovo Group Inc. Current Report on Form 8-
K dated August 13, 1997)
7.3 Employment Agreement of Dan Page (incorporated by reference to
Exhibit 10.3 to Innovo Group Inc. Current Report on Form 8-K
dated August 13, 1997)
7.4 Employment Agreement of J. Eric Hendrickson (incorporated by
reference to Exhibit 10.4 to Innovo Group Inc. Current Report
on Form 8-K dated August 13, 1997)
7.5 Employment Agreement of Patricia Anderson-Lasko (incorporated
by reference to Exhibit 10.5 to Innovo Group Inc. Current
Report on Form 8-K dated August 13, 1997)
7.6 Employment Agreement of Alexander Miller (incorporated by
reference to Exhibit 10.6 to Innovo Group Inc. Current Report
on Form 8-K dated August 13, 1997)
7.7 Common Stock Voting Agreement by and between L. E. Smith, Dan
Page, J. Eric Hendrickson and Herb Newton and Patricia
Anderson-Lasko (incorporated by reference to Exhibit 10.7 to
Innovo Group Inc. Current Report on Form 8-K dated August 13,
1997)
7.8 Common Stock Resale and Right of First Refusal Agreement by
and between L. E. Smith, Dan Page, J. Eric Hendrickson and
Herb Newton and Patricia Anderson-Lasko (incorporated by
reference to Exhibit 10.8 to Innovo Group Inc. Current Report
on Form 8-K dated August 13, 1997)
7.9 Common Stock Purchase and Right of First Refusal Agreement by
and between L. E. Smith, Dan Page, J. Eric Hendrickson and
Herb Newton and William T. Williams, Sr., Virginia C.
Williams, William T. Williams, Jr. and Allison Williams ITTN
(incorporated by reference to Exhibit 10.9 to Innovo Group
Inc. Current Report on Form 8-K dated August 13, 1997)
<PAGE>
Signatures
After reasonable inquiry and to the best of my knowledge and
belief, I certify that the information set forth in this statement
is true, complete and correct.
Date: August 25, 1997 /s/L. E. Smith
_________________________ _________________________
L. E. Smith
