-----BEGIN PRIVACY-ENHANCED MESSAGE----- Proc-Type: 2001,MIC-CLEAR Originator-Name: webmaster@www.sec.gov Originator-Key-Asymmetric: MFgwCgYEVQgBAQICAf8DSgAwRwJAW2sNKK9AVtBzYZmr6aGjlWyK3XmZv3dTINen TWSM7vrzLADbmYQaionwg5sDW3P6oaM5D3tdezXMm7z1T+B+twIDAQAB MIC-Info: RSA-MD5,RSA, Ls0cnUU0cEP6tCH3wbcPqHMgIIvXUjmlz22LhCN8u36DZpzwpdyENl3SeJPDqtUA A/ezvEoMQteLw0uHY62h7w== 0000950142-97-000529.txt : 19970703 0000950142-97-000529.hdr.sgml : 19970703 ACCESSION NUMBER: 0000950142-97-000529 CONFORMED SUBMISSION TYPE: SC 13D PUBLIC DOCUMENT COUNT: 9 FILED AS OF DATE: 19970702 SROS: AMEX GROUP MEMBERS: PINTO JAMES J GROUP MEMBERS: TELCOM PARTNERS LP SUBJECT COMPANY: COMPANY DATA: COMPANY CONFORMED NAME: EMPIRE OF CAROLINA INC CENTRAL INDEX KEY: 0000312840 STANDARD INDUSTRIAL CLASSIFICATION: GAMES, TOYS & CHILDREN'S VEHICLES (NO DOLLS & BICYCLES) [3944] IRS NUMBER: 132999480 STATE OF INCORPORATION: DE FISCAL YEAR END: 1231 FILING VALUES: FORM TYPE: SC 13D SEC ACT: 1934 Act SEC FILE NUMBER: 005-32501 FILM NUMBER: 97635135 BUSINESS ADDRESS: STREET 1: 501 DANIEL ST STREET 2: PO BOX 4000 CITY: TARBORO STATE: NC ZIP: 27886-4000 BUSINESS PHONE: 9198234111 MAIL ADDRESS: STREET 1: P O BOX 4000 CITY: TARBORO STATE: NC ZIP: 27886 FILED BY: COMPANY DATA: COMPANY CONFORMED NAME: PINTO JAMES J CENTRAL INDEX KEY: 0000933688 STANDARD INDUSTRIAL CLASSIFICATION: [] FILING VALUES: FORM TYPE: SC 13D BUSINESS ADDRESS: STREET 1: 235 SUNRISE STREET 2: STE 3224 CITY: PALM BEACH STATE: FL ZIP: 33480 MAIL ADDRESS: STREET 1: 235 SUNRISE AVE STREET 2: STE 3224 CITY: PALM BEACH STATE: FL ZIP: 33480 SC 13D 1 SCHEDULE 13D UNITED STATES SECURITIES AND EXCHANGE COMMISSION Washington, D.C. 20549 SCHEDULE 13D Under the Securities Exchange Act of 1934 EMPIRE OF CAROLINA, INC. (Name of Issuer) Common Stock, par value $0.10 per share (Title of Class of Securities) 292007101 (CUSIP Number) EDWIN C. LAURENSON, ESQ. Paul, Weiss, Rifkind, Wharton & Garrison 1285 Avenue of the Americas New York, New York 10019-6064 (212) 373-3000 (Name, Address and Telephone Number of Person Authorized to Receive Notices and Communications) June 17, 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 to this Schedule 13D, and is filing this schedule because of Rule 13d-(b)(3) or (4), check the following box [ ]. 2 CUSIP No. 292007101 1 NAME OF REPORTING PERSON James J. Pinto 2 CHECK THE APPROPRIATE BOX IF A MEMBER OF A GROUP (a) [X] (b) [ ] 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 OR ORGANIZATION DELAWARE 7 SOLE VOTING POWER NUMBER OF 2,736,752 SHARES 8 SHARED VOTING POWER BENEFICIALLY -0- OWNED BY 9 SOLE DISPOSITIVE POWER EACH 2,736,752 REPORTING 10 SHARED DISPOSITIVE POWER PERSON -0- WITH 11 AGGREGATE AMOUNT BENEFICIALLY OWNED BY EACH REPORTING PERSON 3,078,252 12 CHECK BOX IF THE AGGREGATE AMOUNT IN ROW (11) EXCLUDES CERTAIN SHARES [ ] 13 PERCENT OF CLASS REPRESENTED BY AMOUNT IN ROW (11) 26.34% 14 TYPE OF REPORTING PERSON IN 3 CUSIP No. 292007101 1 NAME OF REPORTING PERSON TelCom Partners L.P. 2 CHECK THE APPROPRIATE BOX IF A MEMBER OF A GROUP (a) [X] (b) [ ] 3 SEC USE ONLY 4 SOURCE OF FUNDS AF 5 CHECK BOX IF DISCLOSURE OF LEGAL PROCEEDINGS IS REQUIRED PURSUANT TO ITEMS 2(D) OR 2(E) [ ] 6 CITIZENSHIP OR PLACE OR ORGANIZATION Delaware 7 SOLE VOTING POWER NUMBER OF 562,500 SHARES 8 SHARED VOTING POWER BENEFICIALLY -0- OWNED BY 9 SOLE DISPOSITIVE POWER EACH 562,500 REPORTING 10 SHARED DISPOSITIVE POWER PERSON -0- WITH 11 AGGREGATE AMOUNT BENEFICIALLY OWNED BY EACH REPORTING PERSON 562,500 12 CHECK BOX IF THE AGGREGATE AMOUNT IN ROW (11) EXCLUDES CERTAIN SHARES [ ] 13 PERCENT OF CLASS REPRESENTED BY AMOUNT IN ROW (11) 6.85% 14 TYPE OF REPORTING PERSON PN 4 SCHEDULE 13D 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 into Common Stock 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 James J. Pinto and TelCom Partners L.P., a limited partnership ("TelCom") of which James J. Pinto is the sole general partner. James J. Pinto is President of Private Finance Group Corp., 235 Sunrise Avenue, Palm Beach Florida 33480, whose principal business address is also at that location. TelCom is an investment partnership with the same address. Mr. Pinto's present principal occupation is to act as a private investor. Mr. Pinto is a citizen of the United States. TelCom is a limited partnership organized under the laws of the State of Delaware. The response to Items 2(d) and (e) of Schedule 13D is negative with respect to Mr. Pinto and TelCom. ITEM 3. SOURCE AND AMOUNT OF FUNDS OR OTHER CONSIDERATION. The total original purchase price for the Series A Preferred Stock and Warrants owned by Mr. Pinto and TelCom was $1,250,000. Such amount was provided by Mr. Pinto from his personal funds as a capital contribution to HPA Associates, LLC ("HPA") in connection with the purchase by HPA of a $2,500,000 bridge note (the "Bridge Note") on May 6, 1997 pursuant to the Securities Purchase Agreement (as further described in Item 4). 1,352,752 of the Warrants now held directly by Mr. Pinto, and all 62,500 Warrants held by TelCom, were issued at the time of HPA's purchase of the Bridge Note and were transferred to Mr. Pinto and TelCom, at HPA's direction, at the time of the closing of the Additional Investment under the Securities Purchase Agreements. The Series A Preferred Stock held by 5 Mr. Pinto (24,500 shares) and by TelCom (62,500 shares) was obtained by them at the direction of HPA, upon HPA's conversion of the Bridge Note into Series A Preferred Stock at the closing of the Principal Financing under the Securities Purchase Agreement. In connection with the Additional Investment, Mr. Pinto agreed, through HPA, to the reallocation of 38,000 shares of Series A Preferred Stock and 38,000 Warrants to other investors, which shares and Warrants were transferred to the Company for reissuance to such other investors in return for total consideration to Mr. Pinto, payed by such other investors, of $380,000. See Exhibit 6 to this Statement. In addition, in connection with the Additional Investment under the Securities Purchase Agreement, HPA was entitled to receive 1,250,000 Warrants, 625,000 of which were issued directly to Mr. Pinto without receipt of additional consideration. ITEM 4. PURPOSE OF TRANSACTION. The purpose of the transaction was to provide funds necessary to finance the Company's continued operation, to strengthen the Company's management and to make a profitable investment. The text of Item 5 of the Company's filing on Form 8-K, filed on June 30, 1997, is hereby incorporated herein by reference (and attached hereto) to describe the components of the transaction pursuant to which the Series A Preferred Stock and Warrants were issued by the Company. In addition to the matters described therein, pursuant to the Securities Purchase Agreement described therein the Company has committed to cause its certificate of incorporation to be amended to provide that the Company's Board of Directors shall consist of no more than eight persons, as specified from time to time by the Company's Board of Directors. Pursuant to the Subscription Agreement that governed the purchase of Series A Preferred Stock and Warrants in the private placement thereof, the purchasers of Series A Preferred Stock are obligated to vote, and have granted a proxy over their shares to Mr. Pinto and Charles S. Holmes (who is, with Mr. Pinto, also a Managing Director of HPA) to vote (the "Proxy"), their Shares of Series A Preferred Stock in favor of such proposal. In addition, Mr. Pinto intends to vote the shares of Series A Preferred Stock held by him and TelCom in favor of such proposal. The Certificate of Designation of the Series A Preferred Stock provides that any expansion of the Company's Board of Directors beyond five must be approved by the holders of the Series A Preferred Stock. Following the closing of the purchase of the Bridge Note under the Securities Purchase Agreement, Charles S. Holmes and Lenore Schupak were named directors of the Company (Ms. Schupak at HPA's request but to serve as an independent director of the Company), and Mr. Holmes was appointed to a committee made up of Mr. Holmes and Steven A. Geller, then Chairman and Chief Executive Officer of then Company, that was given the responsibility for the approval of expenditures by the Company. Mr. Holmes was elected Chairman of the Company's Board of Directors, replacing Steven A. Geller in 6 that office, on June 24, 1997. In addition, prior to the execution of the Securities Purchase Agreement, the Company approved a general plan to reduce its costs and expenses by approximately $8 million substantially in a form that had been proposed by HPA. It is also anticipated that, at the Company's annual meeting of the stockholders, the holders of Company's Series A Preferred Stock will be asked to approve an expansion of the number of the Company's directors to six and that Mr. Pinto will be nominated to be elected to the Board of Directors. Mr. Pinto intends to vote his shares of Series A Preferred Stock held by him and TelCom in favor of such increase in board size and in favor of his election as a director. The Company does not currently have available sufficient shares of Common Stock to issue such shares to all persons who are entitled thereto upon the conversion of currently outstanding preferred stock and exercise of the Warrants. Accordingly, the Company has agreed to propose, at its next annual meeting of stockholders, an increase in the number of shares of Common Stock authorized for issuance to 60,000,000 shares. Pursuant to the Proxy, purchasers of Series A Preferred Stock in the Private Placement are required to vote such shares in favor of such increase in authorized Common Stock, and Mr. Pinto expects to vote the shares of Series A Preferred Stock held by him and TelCom in favor of such increase. Also in connection with the Securities Purchase Agreement, the Company amended its Rights Agreement to permit investments by HPA and affiliates thereof, as described in the answer to Item 5 of the Company's current report on Form 8-k filed on May 8, 1997, which is attached hereto and incorporated herein by reference. Other than as set forth above or in the materials incorporated herein by reference, Mr. Pinto and TelCom have no plans with respect to any matter specified in Item 4 of Schedule 13D or any similar action to those enumerated therein. ITEM 5. INTEREST IN SECURITIES OF THE ISSUER. (a) Mr. Pinto has the right to acquire 196,000 shares, and TelCom has the right to acquire 500,000 shares, of Common Stock at any time upon conversion of all or any portion of the 24,500 and 62,500 shares of Series A Preferred Stock held respectively by them. In addition, Mr. Pinto and TelCom have the respective rights, as owners of Warrants, to acquire all or any portion of 1,982,752 and 62,500 shares of Common Stock at a price of $1.375 per share at any time prior to the expiration of the Warrants on May 6, 2003. Accordingly, based upon calculations made in accordance with Rule 13d-3(d) and information provided by the Company that 7,653,564 shares of Common Stock are currently outstanding, Mr. Pinto has sole voting and/or dispositive power over the equivalent of 2,736,752 shares of Common Stock (or 26.34% of the Common Stock), and TelCom has sole voting and/or dispositive power over the equivalent of 562,500 shares of Common Stock (or 6.85% of the Common Stock). There are currently 1,600,000 shares of Series A 7 Preferred Stock outstanding, with respect to which Mr. Pinto has voting and dispositive power over 87,000 shares (or 5.44% of the class) (including TelCom's shares) and TelCom has voting and dispositive power over 62,500 shares (or 3.91% of the class). The currently outstanding shares of Series A Preferred Stock may be converted into 12,800,000 shares of Common Stock, with the result that Mr. Pinto has voting power, when the currently outstanding Series A Preferred Stock is combined with the currently outstanding Common Stock, over 3.41% of the combined classes and TelCom has voting power over 2.45% of the combined classes. (b) Mr. Pinto has sole power to vote and dispose of the Series A Preferred Stock and Warrants held by him and by TelCom, in the latter case on behalf of TelCom, which also has the sole power, acting through Mr. Pinto as general partner, to vote and dispose of all Warrants and Shares of Series A Preferred Stock held by it. In addition, with respect to matters governed by the Proxy only, Mr. Pinto shares with Charles S. Holmes the right to vote 1,138,000 shares of Series A Preferred Stock, which confer voting power over the equivalent of 9,104,000 shares of Common Stock. Calculated in accordance with Rule 13d-3(d), such shares constitute 54.33% of the class of Common Stock; and such shares possess 44.51% of the combined voting power held by all currently outstanding shares of Common Stock and Series A Preferred Stock. Mr. Pinto disclaims any other beneficial ownership over such shares and disclaims any agreement, arrangement or understanding to act jointly with Mr. Holmes except with respect to voting the shares of Series A Preferred Stock governed by the Proxy in favor of the matters that are the subject thereof. (c) See Items 3 and 4 above. Paragraphs (d) and (e) of Item 5 of Schedule 13D are not applicable to this filing. ITEM 6. CONTRACTS, ARRANGEMENTS, UNDERSTANDINGS OR RELATIONSHIPS WITH RESPECT TO SECURITIES OF THE ISSUER. See Items 3 and 4 above. ITEM 7. MATERIAL TO BE FILED AS EXHIBITS. 1. Certificate of Designation relating to Series A Preferred Stock, incorporated by reference to the Company's filing on Form 8-K, dated June 30, 1997. 2. Certificate of Designation relating to Series C Preferred Stock, incorporated by reference to the Company's filing on Form 8-K, dated June 30, 1997. 8 3. Form of Warrant Certificate to purchase common stock of the Company, issued May 6, 1997, incorporated by reference to the Company's Quarterly Report on Form 10-Q for the fiscal quarter ended March 31, 1997. 4. Warrant Amendment dated as of May 6, 1997 to Warrant Certificate issued May 6, 1997 among the Company, HPA and EMP Associates, LLC ("EMP"), incorporated by reference to the Company's filing on Form 8-K, dated June 30, 1997. 5. 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 the Company's filing on Form 8-K, dated June 30, 1997. 6. First Amendment dated as of May 5, 1997 to Rights Agreement, dated as of September 11, 1996 between the Company and American Stock Transfer Company as Rights Agents incorporated by reference to the Company's filing on Form 8-K, dated May 8, 1997. 7. Second Amendment dated as of June 12, 1997, to Rights Agreement, dated as of September 11, 1996, between the Company and American Stock Transfer & Trust Company as Rights Agent, incorporated by reference to the Company's filing on Form 8-K, dated June 30, 1997. 8. Form of Promissory Note from the Company to Smedley Industries, Inc. Liquidating Trust in the amount of $2,500,000, incorporated by reference to the Company's filing on Form 8-K, dated June 30, 1997. 9. Securities Purchase Agreement dated as of May 5, 1997 among the Company, HPA and EMP, incorporated by reference to the Company's Quarterly Report on Form 10-Q for the fiscal quarter ended March 31, 1997. 10. 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 the Company's filing on Form 8-K, dated June 30, 1997. 11. Buddy L Settlement Agreement, dated as of June 17, 1997 between the Company and Smedley Industries, Inc. Liquidating Trust, incorporated by reference to the Company's filing on Form 8-K, dated June 30, 1997. 12. 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 the Company's filing on Form 8-K, dated June 30, 1997. 9 13. Buddy L Registration Rights Agreement dated as of June 17, 1997 between the Company and Smedley Industries, Inc. Liquidating Trust, incorporated by reference to the Company's filing on Form 8-K, dated June 30, 1997. 14. WPG Registration Rights Agreement dated as of June 17, 1997 between the Company and WPG Corporate Development Associates IV, L.P., WPG Corporate Development Associates IV (Overseas), Ltd., Weiss, Peck & Greer, as trustee under Craig Whiting IRA, Peter B. Pfister, Weiss, Peck & Greer, as Trustee under Nora Kerppola IRA, Westpool Investment Trust Plc. Eugene M. Matalene, Jr., Richard Hochman, and Glenbrook Partners, L.P. (collectively, the "WPG-Affiliated Entities), incorporated by reference to the Company's filing on Form 8-K, dated June 30, 1997. 15. WPG Release Agreement dated as of June 17, 1977 between the Company and the WPG-Affiliated Entities, incorporated by reference to the Company's filing on Form 8-K, dated June 30, 1997. 16. Warrant Allocation Agreement, dated as of May 24, 1997, by and between HPA, EMP, Pellinore Securities Corp. and Axiom Capital Management, Inc. 17. Warrant Allocation Letter, dated June 3, 1997, between HPA and Commonwealth Associates, Inc. 18. Designation Letter dated June 18, 1997 relating to the issuance of Series A Preferred Stock and Warrants at the direction of HPA. 19. Letter Agreement dated June 18, 1997 between the Company, Commonwealth Associates, Inc. and HPA with regard an allocation of 38,000 shares of Preferred Stock and 38,000 Warrants to customers purchasing shares of Series A Preferred Stock and Warrants in private placement. 20. Form of Supplement to Subscription Agreement, setting forth the Proxy. 10 SIGNATURE After reasonable inquiry and to the best of my knowledge and belief, I certify that the information set forth in the statement is true, complete and correct. Date: June 30, 1997 /s/ James J. Pinto ------------------------------- James J. Pinto TELCOM PARTNERS L.P. /s/ James J. Pinto ------------------------------- James J. Pinto General Partner 11 EXHIBIT INDEX Exhibit No. The Company's Response to Item 5 of Form 8-K, filed May 8, 1 1997. The Company's Response to Item 5 of Form 8-K, filed June 30, 2 1997. Warrant Allocation Agreement, dated as of May 24, 3 1997, by and between HPA, EMP, Pellinore Securities Corp. and Axiom Capital Management, Inc. Warrant Allocation Letter, dated June 3, 1997, between HPA 4 and Commonwealth Associates, Inc. Designation Letter dated June 18, 1997, relating to the 5 issuance of Series A Preferred Stock and Warrants at the direction of HPA. Letter Agreement dated June 18, 1997 between the Company, 6 Commonwealth Associates, Inc. and HPA with regard an allocation of 38,000 shares of Preferred Stock and 38,000 Warrants to customers purchasing shares of Series A Preferred Stock and Warrants in private placement. Form of Supplement to Subscription Agreement 7 Joint Filing Agreement 8 EX-1 2 ITEM 5 OF FORM 8-K FILED 05/08/97 EXHIBIT 1 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. EX-2 3 ITEM 5 OF FORM 8-K FILED 06/30/97 EXHIBIT 2 ITEM 5. OTHER EVENTS. On June 17, 1997, pursuant to a Securities Purchase Agreement dated as of May 5, 1997, as amended by Amendment No. 1 to the Securities Purchase Agreement, dated as of June 5, 1997 (the "Securities Purchase Agreement"), among Empire of Carolina, Inc., a Delaware corporation (the "Company"), HPA Associates, LLC ("HPA") and EMP Associates, LLC ("EMP"), the Company issued to HPA, EMP and other accredited investors (as defined in Rule 501 under the Securities Act of 1933, as amended) ("Accredited Investors") 1,100,000 shares of the Company's Series A preferred stock, $.01 par value per share, $10 face value per share (the "Series A Preferred Stock") and 5,000,000 warrants to purchase shares of the Company's common stock, $.10 par value per share (the "Common Stock") (the "Principal Investment"). On June 18, 1997, the Company issued to HPA and other Accredited Investors an additional 500,000 shares of the Series A Preferred Stock and an additional 2,500,000 warrants (the "Additional Investment"). The investors in the Principal Investment and Additional Investment are collectively referred to herein as the "Purchasers". The total shares of Series A Preferred Stock issued to Purchasers in connection with the foregoing was 1,600,000 and the total number of warrants issued was 7,500,000. The total gross proceeds from the sale of such securities was $16,000,000 (the "Purchase Price"). $5,000,000 of the Purchase Price was non-cash consideration represented by the conversion of $5 million of 12% bridge notes funded by HPA and EMP in May 1997 in connection with the execution of the Securities Purchase Agreement. The Series A Preferred Stock is convertible into Common Stock at an initial conversion price of $1.25 per share (subject to adjustment in certain circumstances) and the exercise price per share of the warrants is $1.375 per share (subject to adjustment in certain circumstances). The Series A Preferred Stock has the right, as a class of stock of the Company, to designate two directors and is entitled to vote on all matters presented to stockholders on an as if converted basis. Purchasers also received certain registration rights. The Certificate of Designation relating to the Series A Preferred Stock, the Warrant Amendment to Warrant Certificate, the related Warrant Agreement, and the Letter of the Company regarding the registration rights and provisions affecting the Series A Preferred Stock are being filed herewith as Exhibits 3.5, 4.7, 4.8, and 10.43, respectively, and are incorporated herein by reference. Pursuant to the Securities Purchase Agreement, all closing conditions set forth in the Securities Purchase Agreement were met or waived prior to the Principal Investment, including the following: o The Company's 9% convertible debentures issued to affiliates of Weiss, Peck & Greer in the original principal amount of $15 million were exchanged by the holders thereof for newly-issued shares of Series C Preferred Stock of the Company with an aggregate Stated Value (as defined) of $15 million. Such holders also released, among other things, their claims to accrued and unpaid interest, fees and expenses. Each share of Series C Preferred Stock is convertible at any time, at the option of the holder thereof, into fully paid and nonassessable shares of Common Stock at a rate of one share of Common Stock for each $2.00 of Stated Value of Series C Preferred Stock (subject to adjustment in certain circumstances). Except as otherwise expressly provided in the Charter or the By-laws of the Company, the Certificate of Designation relating to the Series C Preferred Stock, or as may otherwise be required by law, the Series C Stockholders, by virtue of their ownership thereof, have no voting rights. The Certificate of Designation relating to the Series C Preferred Stock, the WPG Release Agreement and the WPG Registration Rights Agreement are being filed herewith as Exhibits 3.6, 10.45 and 10.46, respectively, and are incorporated herein by reference. o The successor to the seller under the Company's agreement to purchase the assets of Buddy L waived or released the claim to certain earn out, price protection and registration rights in exchange for: (i) $100,000 in cash; (ii) 250,000 shares of Common Stock of the Company; (iii) a $2.5 million 9% note from the Company's major subsidiary, and guaranteed by the Company, providing for $625,000 principal payments on the first four anniversaries of the closing date of the Preferred Stock Investment (which note includes certain affirmative and negative covenants which could in certain circumstances accelerate payments with respect to such note); and (iv) certain other benefits, including registration rights. The Buddy L Settlement Agreement, the Buddy L Promissory Note and the Buddy L Registration Rights Agreement are being filed herewith as Exhibits 10.42, 4.10 and 10.44, respectively, and are incorporated herein by reference. o The bank lenders under the Company's Credit Agreement were to have agreed to certain amendments to the Credit Agreement as a closing condition. This condition was waived by HPA. The Company's senior lenders agreed, however, to extend the May 31, 1997 deadline for receipt of $6 million of additional equity financing to June 30, 1997 (which deadline was satisfied upon the closing of the Principal Investment), and have orally advised the Company that they will agree to the adoption of a proposed amendment to the Credit Agreement to convert the current portion of the term loan to a one year and a day obligation and have agreed to engage in further discussions with the Company following the completion of the Principal Investment. On June 12, 1997, the Company and American Stock Transfer & Trust Company, a New York corporation, as Rights Agent (the "Rights Agent"), adopted the Second Amendment (the "Second Amendment") to the Rights Agreement dated as of September 11, 1996 (the "Rights Agreement") between the Company and the Rights Agent, as amended by the First Amendment thereto dated as of May 5, 1997. The Second Amendment, among other things, amends the definition of "Acquiring Person" in Section 1(a) of the Rights Agreement to base the 15% threshold specified therein on the aggregate number of "Fully- Diluted Common Shares" (as defined in the Second Amendment) of the Company. The Second Amendment is attached as Exhibit 4.9 hereto, and is incorporated herein by reference. On June 19, 1997, the Company issued the press release attached hereto as Exhibit 99.1, which press release is hereby incorporated by reference herein, announcing the closing of the Principal Investment and the Additional Investment. As of May 23, 1997, the Company had 7,403,564 shares of Common Stock outstanding. Immediately following the closing of the Additional Investment, the Company had 7,653,564 shares of Common Stock outstanding and the Purchasers in the aggregate represent approximately 63% of the total voting power on matters presented to the Company's stockholders, in each case without giving effect to the exercise of any warrants, stock options or other derivative securities issued by the Company. If all of the Series A Preferred Stock and Series C Preferred Stock issued pursuant to the Securities Purchase Agreement were converted, all outstanding warrants and stock options were exercised and all authorized shares of Common Stock under the Company's employee benefit plans were issued, the Purchasers in the aggregate would represent approximately 53% of the total voting power on matters presented to the Company's stockholders. However, to the knowledge of the Company, immediately following the consummation of the Additonal Investment, no Purchaser beneficially owns securities representing 10% or more of the voting power on matters to be presented to the Company's stockholders or would have such voting power on a fully-diluted basis. On June 24, 1997, the Company issued the press release attached hereto as Exhibit 99.2, which press release is hereby incorporated by reference herein, announcing the election of Charles S. Holmes to replace Steve Geller as Chairman of the Board of Directors of the Company. In addition to the securities offered in connection with the Principal Investment and Additional Investment, the Company intends to offer for sale 500,000 additional shares of Series A Preferred Stock and 500,000 warrants to purchase shares of Common Stock) at an initial exercise price of $1.375 per share. In connection with the sale of such additional securities, an additional 2,000,000 warrants to purchase shares of Common Stock will be allocated as follows: 750,000 warrants to the placement agents who place the additional securities in addition to a 6% cash commission payable upon closing of the sale of such additional securities and 1,250,000 warrants to HPA. The additional securities will be offered pending and conditioned upon receiving stockholder approval. The offering of such additional securities will have a significant dilutive effect upon stockholders of the Company, including the Purchasers. There can be no assurance that the sale of such additional securities will be approved by the stockholders or consummated. Reference is made to Amendment No. 1 to the Securities Purchase Agreement filed as Exhibit 10.41 hereto for additional information regarding the sale of such additional securities, which exhibit is incorporated herein by reference. The foregoing descriptions of documents are summaries that do not purport to be complete and are qualified in their entirety by reference to the actual terms and provisions of such documents filed as exhibits hereto. EX-3 4 WARRANT ALLOCATION AGREEMENT EXHIBIT 3 EXECUTION VERSION WARRANT ALLOCATION AGREEMENT Agreement dated as of June 5, 1997 by and between HPA Associates, LLC ("HPA"), EMP Associates LLC ("EMP"), Pellinore Securities Corp. ("Pellinore") and Axiom Capital Management Inc. ("Axiom") (Pellinore and Axiom hereinafter being collectively referred to as the "Pellinore Placement Agents"), in connection with the placement of $6,000,000 of Series A Preferred Stock ("Series A Preferred Stock") to be issued by Empire of Carolina, Inc. ("Empire"). HPA and EMP are parties to a Securities Purchase Agreement with Empire dated as of May 5, 1997 (as it may be amended from time to time, the "Securities Purchase Agreement"). Defined terms used in this Agreement that are not otherwise defined have the meanings given to them in the Securities Purchase Agreement. Pursuant to the Securities Purchase Agreement and Empire's exercise of the option to obtain the Additional Financing specified thereunder, and subject to the terms and conditions thereof, HPA and EMP have agreed to purchase, or identify purchasers for, $11,000,000 of Series A Preferred Stock (including Series A Preferred Stock to be acquired upon conversion of the Notes issued in the Bridge Financing, as defined below) at the closing of the Permanent Financing. In conjunction with the sale of the Series A Preferred Stock and the provision of earlier financing, effective May 6, 1997 (the "Bridge Financing"), pursuant to which HPA and EMP purchased the Notes of and from Empire, HPA and EMP received 5,000,000 Warrants to purchase common stock of Empire at a price of $1.375 per share (the "Initial Warrants"). 2 HPA, EMP and the Pellinore Placement Agents desire to allocate the Initial Warrants, in the manner herein provided, upon the occurrence of the Permanent Financing. Now, therefore, in consideration of the premises, the parties hereto hereby agree as follows: 1. ALLOCATION OF INITIAL WARRANTS TO EMP. 1.1 Provided that, pursuant to the Securities Purchase Agreement, HPA's and EMP's right to retain the Initial Warrants is not forfeited as a result of a failure of the Permanent Financing to occur under the circumstances specified in Section 2.2.1.3 of the Securities Purchase Agreement, upon the closing of the Permanent Financing EMP shall be entitled to retain 841,734 of the Initial Warrants. 1.2 The Pellinore Placement Agents shall undertake, in accordance with a placement agency agreement to be entered into between them and Empire (as further described in Section 3), to use their best efforts to obtain purchasers for $6,000,000 stated amount of Series A Preferred Stock (the "Pellinore Placement"). A total of 600,000 Initial Warrants ("Incentive Warrants") shall be sold to purchasers pursuant to the Pellinore Placement, allocated at the ratio of 100 Warrants for each $1,000 of stated amount of Series A Preferred Stock purchased. If HPA or any Pellinore Placement Agent (or any affiliated party of any of them) purchases Series A Preferred Stock in the Pellinore Placement for its own account, such purchaser shall be entitled to receive the same allocation of Incentive Warrants as any other purchaser of Series A Preferred Stock in the Pellinore Placement. 3 1.3 In addition, the Pellinore Placement Agents shall be entitled to be reallocated Initial Warrants, out of those held by HPA, in connection with the Pellinore Placement at the rate of 56,377 Initial Warrants ("Further Warrants") for each $1,000,000 stated amount of Series A Preferred Stock placed by them, PROVIDED that Series A Preferred Stock shall not be deemed to have been placed by the Pellinore Placement Agents to the extent that HPA Referred Parties (as defined in Section 1.4) purchase, together with purchases, if any, by HPA, Charles S. Holmes or James J. Pinto (the "HPA Parties") acting as principals, more than $2,000,000 of Series A Preferred Stock in the Pellinore Placement. 1.4 The HPA Parties shall refer potential purchasers ("HPA Referred Parties") of Series A Preferred Stock to the Pellinore Placement Agents until such time as HPA Referred Parties have committed to purchase at least $2,000,000 stated amount of Series A Preferred Stock through the Pellinore Placement Agents, PROVIDED that the Pellinore Placement Agents shall not be required to accept such referrals. The Pellinore Placement Agents acknowledge, however, that no warranty of any kind is offered by the HPA Parties that any such referrals will lead to the placement of shares of Series A Preferred Stock to HPA Referred Parties. The Pellinore Placement Agents shall be entitled to receive all placement agency fees payable and Further Warrants to be reallocated in connection with such placements of Series A Preferred Stock to HPA Referred Parties, PROVIDED that the Pellinore Placement Agents acknowledge that HPA Referred Parties may be represented by securities brokers unaffiliated with HPA and that the Pellinore Placement Agents agree to pay a portion of the Placement Fee (as defined in Section 3) to such 4 securities brokers, in order to place sales of Series A Preferred Stock to HPA Preferred Parties, of 1% of the 6% commission for the $2,000,000 so referred. 1.5 Pursuant to the terms of the Securities Purchase Agreement and the Notes, EMP has the right to convert all or any portion of the $2,500,000 Note purchased by it in the Bridge Financing (the "EMP Note") into Series A Preferred Stock on a dollar-for-dollar basis. EMP shall be obligated to so convert the full amount of the EMP Note at the earliest time that EMP is permitted to do so under the Securities Purchase Agreement, and upon doing so EMP shall be entitled to an allocation of 312,500 Initial Warrants. 2. ALLOCATION OF BALANCE OF WARRANTS. The balance of the Initial Warrants, as well as all Additional Warrants issuable pursuant to the Securities Purchase Agreement, shall be either retained by HPA or allocated to other placement agents, for division among purchasers of Series A Preferred Stock and such placement agents, in HPA's discretion, PROVIDED that HPA acknowledges that it currently intends to allocate 1,250,000 Warrants to Commonwealth Associates, which is expected to serve as placement agent in the sale of $5,000,000 of Series A Preferred Stock in the Additional Financing. 3. COMMISSIONS AND FEES. 3.1 PAYMENT OF COMMISSIONS. The Pellinore Placement Agents shall enter into a placement agency agreement with Empire providing, in accordance with the terms of the Securities Purchase Agreement, for the payment by Empire of a placement agency fee equal to 6% of the dollar amount of Series A Preferred Stock sold through the Pellinore Placement Agents (the "Placement Fee"), 5 including the Series A Preferred Stock that may be received upon conversion of the EMP Note in the amount of $2,500,000. 3.2 COUNSEL FEES. Out of the proceeds of the Placement Fee so payable to the Pellinore Placement Agents, they shall pay Empire's counsel, Sonnenschein Nath & Rosenthal, $20,000 in consideration of such counsel's legal services to Empire in connection exclusively with the placement of the Series A Preferred Stock. 4. VOTING OF INITIAL WARRANTS UNTIL THE PERMANENT FINANCING. The parties acknowledge that at the closing of the Bridge Financing, a certificate representing 1,562,500 Initial Warrants was issued to EMP and a certificate representing 3,437,500 Initial Warrants was issued to HPA (the "Initial Warrant Certificates"). If any matter is submitted to a vote of holders of the Initial Warrants prior to the closing of the Permanent Financing, EMP and HPA shall each be entitled to vote the number of Warrants represented by the Initial Warrant Certificates. 5. FAILURE OF PERMANENT FINANCING TO OCCUR DUE TO FAILURE TO MEET CERTAIN CLOSING CONDITIONS. If, in accordance with section 2.2.1.1 of the Securities Purchase Agreement, Permanent Financing Stock Purchasers are ready, willing and able to purchase $11,000,000 of Series A Preferred Stock (including through the conversion of the Notes issued in the Bridge Financing) in the Permanent Financing, but such purchase is not closed as a result of a failure of other closing conditions provided in section 3 of the Securities Purchase Agreement to be met, HPA and EMP shall be entitled to retain the 5,000,000 Initial Warrants pursuant to the terms of the Securities Purchase Agreement. If such circumstances occur, HPA shall be entitled to 6 retain 3,437,500 Initial Warrants and EMP shall be entitled to retain 1,562,500 Initial Warrants, as represented by the Initial Warrant Certificates currently held by each of them. 6. RESTRICTIONS ON, AND REQUIREMENTS OF, TRANSFER. Until the earlier of (i) the failure of the Permanent Financing to close as described in Section 5 or (ii) the occurrence of the closing of the Permanent Financing and the reallocation of the Initial Warrants in accordance with the provisions of this Agreement, EMP shall not sell, pledge, hypothecate or otherwise in any way transfer ("Transfer") ownership, or any incident thereof, of any Initial Warrants represented by the Initial Warrant Certificate held by it, and HPA shall not Transfer ownership, or any incident thereof, of 529,996 of the Initial Warrants represented by the Initial Warrant Certificate held by it (it being understood that such restriction upon HPA is imposed because the maximum number of Initial Warrants to which EMP and the Pellinore Placement Agents are entitled pursuant hereto (either for their own account or for transmission to third parties) is 2,092,496, or 529,996 greater than the 1,562,500 Initial Warrants represented by the Initial Warrant Certificate held by EMP). HPA and EMP shall transfer, between each other or to third parties, such number of Initial Warrants represented by their Initial Warrant Certificates as may be necessary to effectuate the allocations provided hereby. 7 IN WITNESS WHEREOF this agreement is executed as set forth below as of the date first written above. HPA ASSOCIATES, LLC By: /s/ Charles S. Holmes ---------------------------------- Name: Charles S. Holmes Title: Managing Director EMP ASSOCIATES LLC By: EMP Management LLC as Managing Member By: /s/ J. Richard Messina ---------------------------------- Name: J. Richard Messina Title: Manager PELLINORE SECURITIES CORP. By: /s/ J. Richard Messina ---------------------------------- Name: J. Richard Messina Title: President AXIOM CAPITAL MANAGEMENT INC. By: /s/ Mark D. Martino ---------------------------------- Name: Mark D. Martino Title: Managing Director EX-4 5 WARRANT ALLOCATION LETTER EXHIBIT 4 COMMONWEALTH ASSOCIATES 733 Third Avenue, New York, NY 10017 212 297-5600 Investment Banking Via Facsimile Mr. Charles S. Holmes President HPA Associates, LLC 328 El Vedado Road Palm Beach, FL 33480 June 3, 1997 Dear Mr. Holmes: This will confirm that Commonwealth Associates ("Commonwealth") intends to act as placement agent for Empire of Carolina ("Empire"). In its capacity as agent, Commonwealth is entering into this agreement with HPA Associates, LLC, its affiliates, successors, subsidiaries or assigns (collectively the "Company" or "HPA"), who has previously entered into a Securities Purchase Agreement with Empire whereby, among other points and conditions, Empire has agreed to issue warrants to HPA. In its capacity as agent in a proposed private placement of Preferred Stock and detachable warrants in a placement of $5,000,000 (the "Transaction"), Commonwealth is to receive 150,000 Empire Warrants from HPA for every $1,000,000 it raises. HPA will also ensure that the investors introduced by Commonwealth will receive 100,000 warrants for each $1,000,000 invested in the Transaction. The Transaction is to be placed by Commonwealth on a best efforts basis to accredited investors. The terms and conditions of the Transaction are substantially defined and set forth in Exhibit I attached hereto. Fees - ---- In consideration for the provision of its services, the Company agrees to pay Commonwealth the following fees (the "Transaction Fees"): (i) Warrants to purchase the number of shares as agreed to on the attached Exhibit 1 (150,000 per $1,000,000 raised). The exercise price of such warrant price shall be equal to $1 3/8; Additionally, HPA acknowledges that Commonwealth will receive a cash fee equivalent to 6% of the gross proceeds raised (i.e., 6% of up to $5,000,000). Such cash fee is to be paid from the proceeds raised by Commonwealth. In this Transaction, Commonwealth shall be responsible for its own expenses. No fees shall be paid to any other broker or finder with the exception of Pellinore Securities Corp., Axiom Capital Management, Inc. and (the "Co-Brokers") brokers referred to the Co-Brokers by HPA. Commonwealth will agree to accept such reasonable funds referred to it by HPA; on such funds, Commonwealth will pay a referral fee of 1.6% of gross proceeds to such entity controlled by Francis Bodkin (d/b/a Westminster Securities). Should Commonwealth raise $5,000,000 in escrow, and the Company elects to not use those funds raised by Commonwealth, HPA acknowledges that Commonwealth shall be entitled to receive the Transaction Fees (i.e. the Warrants noted above) on the monies in escrow, whether or not the Transaction results from the efforts of Commonwealth, the Company, or third parties. Additionally, if HPA consummates any equity or debt financing on or after the date hereof, but in any event within twelve months from the date of this Agreement, with any party Commonwealth introduces to the Company or the Transaction, then Commonwealth shall be entitled to receive 6% of the gross proceeds of any such investment in the Company by such party (a partial listing of such investors is attached as Exhibit 2). Resolution of Disputes - ---------------------- This Agreement shall be interpreted and governed by the laws of the State of New York. Any dispute arising out of or relating to this Agreement or the alleged breach of it, shall be discussed between the parties in a good faith effort to arrive at a mutual settlement of any such controversy. If such dispute cannot be promptly so resolved, such dispute shall be settled by binding arbitration in accordance with the commercial arbitration rules of the American Arbitration Association, and judgment upon the award may be entered in any court having jurisdiction of the controversy. The arbitrator shall be selected by the mutual agreement of the parties. If they cannot so agree within twenty (20) days, the arbitrator shall be selected by the American Arbitration Association. Unless otherwise agreed by the parties, the place of any arbitration proceedings shall be New York, New York. The costs of the proceedings shall be shared equally by the disputing parties. Please confirm that the foregoing is in accordance with our understanding by signing and returning to Commonwealth the enclosed copy of this Agreement. Very truly yours, By: /s/ Michael S. Falk By: /s/ Robert Beuret ---------------------- ----------------------- Michael S. Falk Robert Beuret Chairman Vice Chairman Confirmed and Agreed to this 3rd day of June, 1997 HPA Associates, LLC By: /s/ Charles S. Holmes ------------------------ Name: Mr. Charles S. Holmes Title: EX-5 6 DESIGNATION LETTER EXHIBIT 5 HPA ASSOCIATES, LLC c/o Asset Management Associates of New York, Inc. P.O. Box 2850 Southampton, NY 11969 June 18, 1997 EMPIRE OF CAROLINA, INC. 5150 Linton Blvd Delray Beach, FL 33484 Attention: Lawrence Geller, General Counsel and Secretary Securities Purchase Agreement, dated as of May 5, 1997, as amended by and among Empire of Carolina, Inc., HPA Associates, LLC and EMP Associates LLC Direction of Issuance -------------------------------------------------------------------- Gentlemen: We refer to the above-captioned agreement (the "Securities Purchase Agreement") and to the following documents and instruments issued in connection with the closings thereunder (terms used below that are defined in the Securities Purchase Agreement having the same meaning herein). 1. Certificate for 2,887,504 Warrants issued to HPA on June 17, 1997; 2. Certificate for 20,000 Warrants issued to HPA on June 17, 1997; 3. Instruction Letter, dated June 18, 1997, pursuant to which HPA has been allocated 1,176,250 Warrants in connection with the closing under the Additional Financing; 4. Instruction Letter, dated June 18, 1997, pursuant to which HPA has been allocated 73,750 Warrants in connection with the closing under the Additional Financing; 5. Certificate for 230,000 shares of Series A Preferred Stock issued to HPA on June 17, 1997; EMPIRE OF CAROLINA, INC. 2 6. Certificate for 20,000 shares of Series A Preferred Stock issued to HPA on June 17, 1997; and 7. Letter Agreement, dated June 18, 1997, by and between HPA, the Company and Commonwealth Associates, Inc. ("Commonwealth") pursuant to which, at the request of Commonwealth, HPA has agreed to transfer 38,000 shares of Series A Preferred Stock and 38,000 Warrants to the Company for retransfer at the direction of Commonwealth. Pursuant to such documents and instruments described above, HPA is entitled to receive 4,119,504 Warrants. You are hereby directed to issue certificates for such Warrants as follows: 2,078,752 Warrants in the name of Charles S. Holmes, 1,978,252 Warrants in the name of James J. Pinto and 62,500 Warrants in the name of TelCom Partners L.P. Pursuant to such documents and instruments described above, HPA is also entitled to receive 212,000 shares of Series A Preferred Stock. You are hereby directed to reissue, upon cancellation of the certificates for Series A Preferred Stock referred to in items 5 and 6 above, certificates for shares of Series A Preferred Stock as follows: 125,000 shares in the name of Charles S. Holmes, 62,500 shares in the name of TelCom Partners L.P. and 24,500 shares in the name of James J. Pinto. Very truly yours, HPA ASSOCIATES, LLC By: /s/ James J. Pinto ---------------------------------- James J. Pinto Managing Director EX-6 7 LETTER AGREEMENT EXHIBIT 6 HPA ASSOCIATES, LLC c/o Asset Management Associates of New York, Inc. P.O. Box 2850 Southampton, NY 11969 June 18, 1997 EMPIRE OF CAROLINA, INC. 5150 Linton Blvd Delray Beach, FL 33484 Attention: Lawrence Geller, General Counsel and Secretary COMMONWEALTH ASSOCIATES, INC. 733 Third Avenue New York, NY 10017 Securities Purchase Agreement, dated as of May 5, 1997, as amended by and among Empire of Carolina, Inc., HPA Associates, LLC and EMP Associates LLC -------------------------------------------------------------------- Gentlemen: We refer to the above-captioned agreement (the "Securities Purchase Agreement"); terms that are defined in the Securities Purchase Agreement are used with the same meaning in this letter. In the Additional Financing pursuant to the Securities Purchase Agreement, the Company has previously agreed to issue 500,000 shares of the Company's Series A Preferred Stock to the Additional Preferred Stock Purchasers for a total consideration, before the deduction of commissions and other expenses, of $5 million in a private placement with respect to which Commonwealth Associates, Inc. ("Commonwealth") is serving as placement agent. In connection with the closing of the Permanent Financing under the Securities Purchase Agreement, HPA has agreed to convert its Note, in the amount of $2,500,000, into 250,000 shares of Series A Preferred Stock and will receive certain allocations of Warrants in that connection and otherwise. In consideration of the Company's and Commonwealth's agreement to allocate an additional $200,000 of Series A Preferred Stock (or 20,000 shares of Series A Preferred Stock), plus 20,000 Warrants, to Sintra Fund Ltd., an additional $80,000 of Series A Preferred Stock (or 8,000 shares of Series A Preferred Stock), plus 8,000 Warrants, to Mr. John Shaw and $100,000 of Series A Preferred Stock (or 10,000 shares of Series A Preferred Stock), plus 10,000 Warrants, to Worldwide Fabrics L.P. in the Additional Financing, HPA agrees that at the final closing of the Additional Financing, HPA shall, at Commonwealth's request, transfer up to 38,000 shares of Series A Preferred Stock, and up to 38,000 Warrants (at a ratio of 1 Warrant for each share of Series A Preferred Stock), to the Company for reissuance to such persons as the Company and Commonwealth designate as purchasers thereof 2 pursuant to the Company's Placement Agency Agreement with Commonwealth, in consideration of the receipt of $10 for each such share and Warrant transferred, payable either by the Company or Commonwealth as they may determine. If you are in agreement with the foregoing, please countersign this letter below. Very truly yours, HPA ASSOCIATES, LLC By: /s/ Charles S. Holmes ----------------------------- Name: Title:Managing Director AGREED TO AND ACCEPTED: EMPIRE OF CAROLINA, INC. By: /s/ Lawrence Geller ----------------------------- Lawrence Geller Secretary and General Counsel COMMONWEALTH ASSOCIATES, INC. By: /s/ Keith Rosenbloom ----------------------------- Name: Keith Rosenbloom Title: Managing Director EX-7 8 FORM OF SUPPLEMENT TO SUBSCRIPTION AGMT. 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 Attn: 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. I to the Memorandum dated June 10, 1997 and the Memorandum; (ii) acknowledges that Supplement No. I 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 necessary in order to approve the matters 2 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 therefor, 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) EX-8 9 JOINT FILING AGREEMENT Exhibit 8 Joint Filing Agreement In accordance with rule 13d-1(f) under the Securities Exchange Act of 1934, the undersigned hereby agrees to the joint filing with all other Reporting Persons (as such term is defined in the Schedule 13D referred to below) on behalf of each of them of a statement on Schedule 13D (including amendments thereto) with respect to the Common Stock, par value $0.10 per share, of Empire of Carolina, Inc. and that this Agreement be included as an Exhibit to such joint filing. This Agreement may be executed in any number of counterparts, and in differing counterparts, each of which shall be deemed an original and all of which, taken together, shall constitute one and the same instrument. IN WITNESS WHEREOF, the undersigned hereby execute this Agreement this 30th day of June, 1997. /s/ James J. Pinto ---------------------------- James J. Pinto TelCom Partners L.P. By: /s/ James J. Pinto ------------------------- Name: James J. Pinto Title: General Partner -----END PRIVACY-ENHANCED MESSAGE-----