-----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, PJzChKzHQSiDeBQi6j/pFgGgWgNTUsYNNEibAB8yNvTTyy1rEGwIG345zx1zT5Xi UfLsWSboAFgfzVlOHq2QeA== 0000950109-96-003401.txt : 19960525 0000950109-96-003401.hdr.sgml : 19960525 ACCESSION NUMBER: 0000950109-96-003401 CONFORMED SUBMISSION TYPE: 8-K/A PUBLIC DOCUMENT COUNT: 3 CONFORMED PERIOD OF REPORT: 19960501 ITEM INFORMATION: Other events FILED AS OF DATE: 19960524 SROS: NASD FILER: COMPANY DATA: COMPANY CONFORMED NAME: CARVER CORP CENTRAL INDEX KEY: 0000766177 STANDARD INDUSTRIAL CLASSIFICATION: HOUSEHOLD AUDIO & VIDEO EQUIPMENT [3651] IRS NUMBER: 911043157 STATE OF INCORPORATION: WA FISCAL YEAR END: 1231 FILING VALUES: FORM TYPE: 8-K/A SEC ACT: 1934 Act SEC FILE NUMBER: 000-14482 FILM NUMBER: 96572462 BUSINESS ADDRESS: STREET 1: 20121 48TH AVE W STREET 2: P O BOX 1237 CITY: LYNNWOOD STATE: WA ZIP: 98036 BUSINESS PHONE: 2067751202 MAIL ADDRESS: STREET 1: 20121 48TH AVE CITY: LYNNWOOD STATE: WA ZIP: 98036 8-K/A 1 FORM 8-K SECURITIES AND EXCHANGE COMMISSION WASHINGTON, D.C. 20549 FORM 8-K CURRENT REPORT PURSUANT TO SECTION 13 OR 15(D) OF THE SECURITIES EXCHANGE ACT OF 1934 Date of Report (Date of earliest event reported): May 1, 1996 ------------ CARVER CORPORATION - ------------------------------------------------------------------------------- (Exact name of registrant as specified in its charter) Washington 0-14482 91-1043157 - ---------- ------- ---------- (State or other jurisdiction (Commission (I.R.S. Employer of incorporation or organization) File Number) Identification No.)
20121 48th Avenue W., Lynnwood, Washington 98036 - ------------------------------------------------------------------------------- (Address of principal executive offices) Registrant's telephone number, including area code: (206) 775-1202 --------------------------- - ------------------------------------------------------------------------------- (Former name or former address, if changed since last report.) Exhibit Index Appears on Page 4 Page 1 of 17 Pages ITEM 5. Other Events. On May 1, 1996, Carver Corporation (the "Company") entered into a non- binding Agreement in Principal with Renwick Capital Management ("Renwick") whereby Renwick would purchase shares of preferred stock and warrants from the Company on the terms and conditions set forth in such non-binding Agreement in Principal filed herewith as Exhibit 99.1. The proposed financing is summarized in a letter to the Company's shareholders, a copy of which is filed herewith as Exhibit 99.2. Closing of the proposed financing is subject to completion by Renwick to its satisfaction of business and legal due diligence review of the Company, negotiation and approval by Renwick and the Company of definitive agreements and the absence of any material adverse changes in the business or financial condition of the Company. The Company and Renwick have targeted closing for the first week of June, but there can be no assurance closing will actually occur. Page 2 SIGNATURES Pursuant to the requirements of the Securities Exchange Act of 1934, the registrant has duly caused this report to be signed on its behalf by the undersigned hereunto duly authorized. CARVER CORPORATION By: /s/ John P. World ---------------------------------- John P. World Executive Vice President and General Manager (Principal Accounting Officer) DATE: May 23, 1996 Page 3 EXHIBIT INDEX
EXHIBIT DESCRIPTION SEQUENTIAL ------- ----------- PAGE NO. ---------- 99.1 Non-Binding Agreement in Principle, between Carver 6 Corporation and Renwick Capital Management, dated May 1, 1996. 99.2 Letter to Shareholders of Carver Corporation 14
Page 4 EX-99.1 2 NON-BINDING AGRMT. IN PRIN. BETW. CARVER & RENWICK CAP. MGMNT. EXHIBIT 99.1 ------------ Page 5 [Renwick Capital Management Letterhead] May 1, 1996 Carver Corporation 20121 48th Avenue West Lynnwood, Washington 98036 Attention: Stephen M. Williams, President and Chief Executive Officer Dear Mr. Williams: We are pleased to inform you of our proposal to have one or more of our affiliates (collectively, "Renwick") purchase up to 1,411,764 shares of Carver Corporation (the "Company") Preferred Stock and warrants to purchase up to 300,000 shares of the Company's Common Stock. We understand that the purchase of the Preferred Stock and the Common Stock will be in accordance with the Summary of Principal Terms attached hereto. Our commitment to enter into the transaction described above (the "Transaction") is contingent upon (1) completion of our business and legal due diligence review of the Company and our satisfaction with the results thereof, (2) the preparation, execution and delivery of legal documentation for our purchase, all in form and substance satisfactory to us, to you, and to your respective counsel, and (3) the absence of any material adverse change in the business or financial condition of the Company from March 31, 1996 to the date of Closing. Pending the consummation of the Transaction and the execution and delivery of definitive legal documentation memorializing the transaction and as an inducement for Renwick to proceed with its legal and business due diligence efforts, for a period of 30 days commencing the date hereof neither the Company nor any director, employee or agent of the Company will directly or indirectly solicit, encourage or conduct any discussions or negotiations with, provide any information to, or consummate any transaction with, any entity or person other than Renwick and its representatives and other person approved by Renwick with respect to the sale by the Company of any of its securities except in the ordinary course pursuant to the Company's existing employee benefit plans. If the Nasdaq National Market denies the Company's request for a waiver of the requirement that shareholder approval be obtained in order to complete the Transaction, the foregoing obligation will expire the earlier of five days after such denial or at the end of the 30 day period. In such Page 6 event, Renwick shall be entitled to propose an alternative plan of financing that will not require shareholder approval. If the foregoing is in accordance with your understanding, please evidence acceptance of such conditions and your obligations hereunder by having a copy of this letter executed below by a duly authorized officer of the Company. Very truly yours, RENWICK CAPITAL MANAGEMENT By: \s\ Rai K. Bhatia ----------------------------------- Rai K. Bhatia Accepted and agreed to: CARVER CORPORATION By: \s\ John P. World --------------------------- Title: Executive Vice President ------------------------ Date: May 1, 1996 ------------------------ Page 7 [Renwick Capital Management Letterhead] CARVER CORPORATION Sale of Preferred Stock and Warrants to Purchase Common Stock Summary of Principal Terms -------------------------- May 1, 1996 Issuer: Carver Corporation (the "Company"). Investors: Renwick Capital Management (collectively, "Renwick"). Securities: Up to 1,411,764 Shares of convertible Preferred Stock and Warrants to acquire up to 300,000 shares of Common Stock. Aggregate Investment Size: $3,000,000 million to be drawn in three tranches over a 90 day period, at the option of the Company. The first tranche will consist of $1,000,000 for 470,588 shares of Preferred Stock and warrants to purchase up to 100,000 shares of Common Stock of the Company for a price per share equal to $1.50 per share, the second tranche will consist of $1,000,000 for 470,588 shares of Preferred Stock and warrants to acquire up to 100,000 shares of Common Stock and the third tranche will consist of $1,000,000 for 470,588 shares of Preferred Stock and warrants to purchase 100,000 shares of Common Stock. First Closing: On or before May 20, 1996. Management Incentive Stock Options: Up to ten percent of the outstanding Common Stock of the Company, to be issued to members of management of the Company, subject to the judgment and approval of the Compensation Committee of the Board of Directors of the Company. Page 8 The Preferred Stock ------------------- Shares of Preferred Stock: Up to 1,411,764 shares of Convertible Preferred Stock. Face Value: $2.125 per share (the "Purchase Price"). Conversion: The Convertible Preferred Stock may be converted at any time, at the option of the holder, into shares of Common Stock at a ratio of one share of Common Stock for each share of Convertible Preferred Stock. The conversion price will be subject to standard anti- dilution adjustment, that will be mutually acceptable to the Company and Renwick. Liquidation Preference: In the event of any liquidation of the Company, the holders of the Convertible Preferred Stock shall be entitled to receive the Face Value, plus any accrued but unpaid dividends, in preference over any amounts due or payable to the holders of any other class or series of capital stock of the Company, and second only to the commercial debt of the Company. A sale of all or substantially all of its assets by the Company or a merger by the Company with or into another entity in which 50% or more of the voting control is transferred will be treated as a liquidation. Dividend: The Preferred Stock will be entitled to an 8% compounding annual dividend which will be paid currently for one year following the Closing on a quarterly basis, in shares of Common Stock of the Company at a rate per share equal to the greater of the Purchase Price or the average of the Closing Bid Price for the Common Stock for the thirty days prior to the dividend date, and thereafter, on a quarterly basis in cash, in shares of Common Stock or a combination thereof, at the option of the Company, in accordance with the above formula. Forced Conversion: The Preferred Stock shall be automatically converted into shares of Common Stock immediately after the earlier of (i) a firm commitment underwritten offering or (ii) the third anniversary of the Closing, at the option of the Company at the then current conversion value plus accrued and unpaid dividends. Page 9 Voting Rights: The Preferred Stock shall vote on a one-for- one basis with the shares of Common Stock on all matters for which the approval of the shareholders of the Company may be required. Separate consent of a two-thirds majority in interest of the Preferred Stock will be required for (i) any liquidation, acquisition of the Company or any of its subsidiaries, merger or sale of the Company or any of its subsidiaries or all or substantially all of its (or its subsidiaries') assets, in each case, for consideration per share that is less the $.50 per share, (ii) the reclassification of any securities of the Company or any of its subsidiaries, and (iii) the payment of dividends (other than to the Preferred Stock) or other distributions of assets or the redemption or repurchase of their capital stock. Separate consent of a majority in interest of the Preferred Stock will be required for (i) amendment of the articles of incorporation of the Company or any of its subsidiaries, (ii) any change in the number of directors, (iii) participation by the Company or any of its subsidiaries in any businesses other than the high fidelity audio business, (iv) the authorization or issuance (other than those excluded from preemptive rights below) of any additional equity securities by the Company or any of its subsidiaries; and (v) the incurrence of any indebtedness for borrowed money by the Company or any of its subsidiaries in excess of the indebtedness for borrowed money to which the Company is currently subject or other than pursuant to existing credit agreements as currently in effect or as they may be renewed (under substantially the same terms). The Common Stock Purchase Warrants ---------------------------------- Warrants to Purchase Shares of Common Stock: Warrants to purchase up to 300,000 shares of Common Stock. Exercise Price: $1.50 per share, if exercised from the date of Closing through the date two years from the date of Closing, $1.75 for the next year, $2.00 for the next year and $2.125 for the final year. The exercise price will be subject to standard anti-dilution adjustment that will be mutually acceptable to the Company and Renwick. Page 10 Expiration Date: 5 years from the first closing date. Registration Rights: All shares of Common Stock issuable upon exercise of the Warrants (and upon conversion of the Convertible Preferred Stock) will be deemed to be Registrable Securities. For a period of five years, holders of the Registrable Securities will have the right to require the Company to use its best efforts to register their registrable securities on Form S-1 or Form SB-2. The Company will not be obligated to effect more than two such registrations. The holders of Registrable Securities will also be entitled to "piggy- back" registration rights on registration of the Company's securities and customary unlimited S-3 registration rights (for a period of ten years). The registration expenses of all registrations and piggy-backs will be borne by the Company. Other Terms ----------- Nomination/ Election of Directors: Renwick will have the right to designate two of the Company's seven directors. At least one Renwick designee shall serve on each Board of Director's committee. Pre-emptive Right to Purchase New Securities: If the Company proposes to offer additional equity shares other than (i) in connection with an underwritten public offering, (ii) pursuant to options or under employee benefit plans that are outstanding as of the date of the Closing, and (iii) with respect to a number of shares of Common Stock not to exceed 10% of the outstanding shares of Common Stock of the Company that may be offered and sold to strategic partners, the Company will first offer all such shares to Renwick pro rata, according to its percentage ownership on a fully-diluted basis. Investment Banking Agreement: The Company will enter into an investment banking agreement with Renwick pursuant to which Renwick will receive an annual fee of $50,000 (payable monthly) per year for three years and certain additional fees relating to transactions introduced to the Company by Renwick. Page 11 Closing Expenses: The Company will pay all of Renwick's reasonable expenses (including without limitation legal fees and expenses), not to exceed $50,000, arising out of, relating to or incidental to, the discussion, evaluation, negotiation and documentation of the transaction contemplated hereby. Additional Provisions: In addition to definitive financial and business covenants, closing conditions (including legal opinions of Company's counsel), financial reporting requirements, representations and warranties as to the financial conditions, liabilities and business affairs of the Company and its subsidiaries, additional provisions will include without limitation appropriate provisions relating to maintenance of corporate existence, property, payment of charges, and compliance with ERISA, environmental laws and other federal and local statutes. Transferability: Renwick will be permitted to transfer the Convertible Preferred Stock and the Warrants to purchase Common Stock, subject to applicable securities laws. The transferees of the Preferred Stock and the Warrants to purchase Common Stock will retain all of the rights (to the extent transferred) of Renwick then in effect with respect to the Preferred Stock or the Warrants. This summary of terms is provided for discussion purposes only. It shall not be construed to bind any person or entity with respect to all or any of its terms. In any event, prior to any closing of the transactions contemplated herein, the following conditions must be met: (i) Renwick's business due diligence review of the Company must be completed, (ii) documentation for the contemplated transactions must be completed in form and substance satisfactory to Renwick and its counsel, (iii) there shall have been no material adverse change in the Company's business or financial condition from March 31, 1996 to the date of the Closing and (iv) such other conditions as may be determined by Renwick. The Company represents and warrants that Renwick will not incur any liability in connection with the consummation of the transaction contemplated herein to any third party with whom the Company, its officers, directors, shareholders or its agents have had discussions regarding a similar or related transaction, and the Company agrees to indemnify, defend and hold harmless Renwick, its officers, directors, stockholders, lenders and affiliates from any claims by or liabilities to such third parties, including any reasonable legal or other expenses incurred in connection with the defense of such claims. The foregoing indemnity shall not extend to any Page 12 claims or liabilities attributable to the indemnified person's gross negligence, intentional torts or willful misconduct and the Company's obligations under this paragraph shall be conditioned on the indemnified party giving written notice of any claim for which indemnity will be sought hereunder promptly after learning thereof and the indemnified party fully cooperating with the Company and giving it full control over the defense and settlement of the claim. The covenants of the Company in this paragraph will survive the termination of this letter of intent. Page 13 EX-99.2 3 LTR. TO SHAREHOLDERS OF CARVER CORP. EXHIBIT 99.2 Page 14 May 22, 1996 To Our Shareholders: Carver Corporation has entered into a non-binding agreement in principal with Renwick Capital Management ("Renwick"), a New York based investment fund which, if consummated, would provide for the infusion of up to approximately $3.5 million in capital. This is the latest development in a process that began in January 1995 when the Company's Board of Directors began to investigate strategic alternatives to improve the Company's market position and enhance shareholder value. These alternatives included strategic relationships, outside investment and the potential sale or merger of all or part of the Company. As part of this strategy, we completed the sale of the Company's Professional Product Line in November 1995 and concluded a distribution agreement with Circuit City in December 1995. After operating for most of 1995 under severe cash constraints, the sale of the Professional Product Line provided the Company with much needed cash and allowed it to focus its activities solely on its Consumer Products Line. With over 350 retail outlets, Circuit City offers the Company potentially greater sales and heightened national brand awareness. To capitalize on the opportunities available to it and to sustain continuing operations, the Company is dependent upon obtaining substantial additional working capital immediately. At April 30, 1996, the Company had borrowed approximately $1.9 million of the approximately $2.0 million then available under its revolving line of credit of which the Company is required to pay down $250,000 by May 31, 1996. Furthermore, we believe that the Company's trade creditors and sourced product vendors may not allow the Company to significantly delay payment and that our major suppliers may change payment terms to require prepayment of letters of credit which would further restrict our working capital and delay our ability to produce and source products. Available sources of working capital are not sufficient to fund operations. As a result the Company has not paid certain invoices nor met certain other financial commitments and the Company believes that it is unlikely that it will be able to satisfy a number of its financial obligations in May 1996 without obtaining additional capital. If this continues to occur, the Company's projected sales for 1996 will decrease materially. As a result, the Company has developed an operating plan designed to return the Company to profitability and has been actively seeking additional working capital to finance this turnaround for the past several months. These efforts culminated early this month in the execution of the agreement in principal with Page 15 Renwick for an equity investment (the "Proposed Financing"). The agreement in principal contemplates that the Company will sell to Renwick or its affiliates up to 1,411,764 shares of Convertible Preferred Stock (the "Preferred Stock") and five year warrants to acquire up to 300,000 shares of Common Stock (the "Warrants"). The Proposed Financing is to be made over a 90 day period in three tranches each consisting of 470,588 shares of Preferred Stock and warrants to purchase up to 100,000 shares of Carver Corporation Common Stock. The price of the Preferred Stock would be $2.125 per share and each share of Preferred Stock will be convertible at any time at the option of the holder into one share of Common Stock, subject to certain potential antidilution adjustments to be triggered by the issuance of additional shares of Common Stock at less than the lesser of the then current market price or $2.125. The Preferred Stock will be entitled to an 8% compounding annual dividend payable quarterly. In the first year such dividend will be paid with shares of Common Stock. In years two and three (the Preferred Stock will automatically be converted into Common Stock on the third anniversary of issuance, thereby terminating the accruing dividend) the Company has the option of paying the dividend either in cash or with shares of Common Stock. If paid with Common Stock, the number of shares will be based on the greater of $2.125 per share or the average of the closing bid prices for the Common Stock for the 30 days prior to the dividend payment date. The Preferred Stock will entitle the holders to one vote for each share of Common Stock into which the Preferred Stock is convertible. The size of the Company's board will be increased to up to seven and the holders of the Preferred Stock will be entitled to elect two representatives to the board. Certain actions by the Company, such as a merger or liquidation, the sale of substantially all of its assets, payment of dividends, amendment of the Company's articles of incorporation, the issuance of additional securities or the incurrence of certain indebtedness, will require the approval of at least a majority of the Preferred Stock. The Agreement in Principal also contemplates that the investors will have preemptive rights to subscribe for additional shares issued by the Company and rights to have the Company register shares of Common Stock issued upon conversion of the Preferred Stock or exercise of the Warrants. The exercise price of the Warrants will be $1.50 per share of Common Stock, if exercised from the date of the closing of the Proposed Financing (the "Closing") through the date two years from the date of Closing, $1.75 for the next year, $2.00 for the next year, and $2.125 for the final year, again subject to certain potential antidilution adjustments. The number of shares of Common Stock potentially issuable upon conversion of the Preferred Stock and exercise of the warrants (assuming no antidilution adjustment becomes necessary) are 1,411,764 and 300,000, respectively, for a potential cumulative total of 1,711,764. These represent 38.3%, 8.1% and 46.4% of the 3,687,080 shares of Common Stock outstanding at March 26, 1996, respectively. The Page 16 number of shares of Common Stock which might be issued in payment of the mandatory dividend cannot be determined at this time as such number will vary with the market price of the Common Stock. Closing of the Proposed Financing is subject to completion by Renwick to its satisfaction of business and legal due diligence review of the Company, negotiation and approval by Renwick and the Company of definitive agreements and the absence of any material adverse changes in the business or financial condition of the Company. The Company and Renwick have targeted closing for the first week of June, but there can be no assurance closing will actually occur. The foregoing is a summary of the Agreement in Principal. A complete copy of the Agreement in Principal has been filed with the Securities and Exchange Commission with a Current Report on Form 8-K. By virtue of the fact that the Company's common stock is traded on the Nasdaq National Market , the Company is required to seek shareholder approval prior to the sale of additional shares of common stock equal to 20% or more of its outstanding common stock at a price which may be less than current book or market value. However,applicable regulation provides that the NASD may grant an exemption from this shareholder approval requirement if (i) the delay of securing shareholder approval would seriously jeopardize the financial viability of a company, (ii) the company's audit committee expressly approves the company's reliance on such an exception and (iii) the company mails to its shareholders not later than 10 days before issuance of the new securities a letter alerting them to its omission to seek shareholder approval that would otherwise be required. On May 10, 1996, the Audit Committee of the Board of Directors of Carver Corporation expressly approved reliance on the exception to the shareholder approval requirements of the NASD By-Laws and the NASD has also approved reliance on the exception. This letter serves as notice of the Company's omission to seek shareholder approval in connection with the proposed issuance of securities to Renwick. We believe that the proposed transaction with Renwick is in the best interest of the Company and its shareholders. CARVER CORPORATION /s/ Stephen M. Williams Stephen M. Williams President & CEO Page 17 -----END PRIVACY-ENHANCED MESSAGE-----