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):
February 11, 1997
Serengeti Eyewear, Inc.
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(Exact name of Registrant as Specified in Charter)
New York 0-26022 11-2396918
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(State or Other Jurisdiction (Commission (IRS Employer
of Incorporation) File Number) Identification No.)
8125 25th Court East
Sarasota, Florida 34243
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(Address of Principal Executive Offices) (Zip Code)
Registrant's telephone number, including area code: (941) 359-3599
Solar-Mates, Inc.
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(Former Name or Former Address, if Changed Since Last Report)
Item 2. Acquisition or Disposition of Assets.
On February 13, 1997, Serengeti Eyewear, Inc. (formerly known as
Solar-Mates, Inc.), a New York corporation (the "Company"), acquired (the
"Acquisition") certain of the assets of the Serengeti Eyewear division of
Corning Incorporated ("Corning") used in the design, manufacture and
distribution of Serengeti brand sunglasses. The Company acquired the Serengeti
assets for a purchase price of $27.5 million. The Company financed the purchase
price and related transaction expenses with the net proceeds from the sale of
shares of its Preferred Stock (as hereinafter defined), as well as borrowings
under its New Credit Facility (as hereinafter defined). See Items 5 and 9. The
Company's Board of Directors has received an opinion dated October 4, 1996 from
Barrington Business & Engineering Solutions to the effect that, based upon and
subject to the various considerations set forth in such opinion, as of October
29, 1996, the date the acquisition agreement was entered into, the terms of the
transaction were fair, from a financial point of view, to the Company.
Serengeti raw lens blanks are currently manufactured by Corning in the
United States or Brazil and then shipped to Japan and other locations overseas
for finishing. Among the purchased assets are the manufacturing equipment
located at the Serengeti facility in Fukui, Japan which are used to apply a
unique process on the lenses known as hydrogen firing. Completed sunglasses are
sent to a warehouse facility in Horseheads, New York for distribution. The
Company intends to continue to utilize its warehouse facility in Sarasota,
Florida for the warehousing of all of its finished sunglasses including the
finished Serengeti sunglasses and to phase out the Horseheads facility. The
Company also intends to utilize its relationships overseas with existing lens
manufacturers for the finishing of all lenses, including the hydrogen firing
process.
Concurrently with the closing of the Acquisition, the Company changed
its name from Solar-Mates, Inc. to Serengeti Eyewear, Inc.
Item 4. Changes in Registrant's Certifying Accountant.
On February 11, 1997, Winter, Scheifley & Associates, P.C. declined to
stand for re-election as the Company's independent auditors, and on the same
date the Company appointed Bartnick, P.A. as its new independent auditors
commencing with the audit of the Company's consolidated financial statements for
the year ended December 31, 1996. The Company's financial statements for the
past two fiscal years did not contain an adverse opinion or disclaimer of
opinion, nor were they modified as to uncertainty, audit scope or accounting
principles. The decision to change auditors was approved by the Company's Board
of Directors at a meeting duly held on February 6, 1997. There were no
disagreements with such former auditors on any matters of accounting principles
or practices, financial statement disclosure or auditing scope or procedure
during the past two fiscal years. The Company did not consult with its new
independent auditors regarding any matters relating to periods prior to their
engagement. The Company has requested from its former auditors a letter
addressed to the Securities and Exchange Commission (the "Commission") stating
their agreement with the statements made by the Company in response to this Item
4. Such letter is attached hereto as Exhibit 16.
Item 5. Other Events.
Concurrently with the closing of the Acquisition, the Company entered
into a Revolving Line of Credit and Term Loan Agreement with SunTrust Bank,
Central Florida, National Association, individually and as agent, and
Creditanstalt-Bankverein pursuant to which the Company refinanced its then
existing senior credit facility (the "Old Credit Facility") with a new senior
credit facility (the "New Credit Facility") which provides the Company with the
ability to borrow up to $17.5 million in the form of (i) a three year revolving
credit facility in the amount of $7.5 million (the "Revolver Facility") and (ii)
a five year amortizing term loan facility in the amount of $10.0 million (the
"Term Facility").
The Company borrowed the entire $10.0 million of availability under the
Term Facility to finance a portion of the Acquisition purchase price, to repay
in full the outstanding principal indebtedness and accrued interest
(approximately $1.5 million) under the Old Credit Facility and to pay related
fees and expenses.
The Revolver Facility has a $2 million sublimit for the issuance of
stand-by letters of credit. Pursuant to the Revolver Facility, the Company is
able to borrow up to 85% of eligible accounts receivable and up to 50% of the
value of the Company's eligible inventory. Undrawn amounts under the Revolver
Facility are available for the working capital and general corporate needs of
the Company.
The New Credit Facility is secured by a first priority lien on all of
the assets of the Company and its subsidiaries, as well as by the pledge of all
the stock of certain material subsidiaries of the Company.
Pursuant to the New Credit Facility, interest is payable at the LIBOR
rate or the "Base Rate." In addition to applicable margins, the Company pays a
floating percentage tied to the Company's ratio of funded debt to "EBITDA".
The New Credit Facility requires the Company to maintain certain
financial ratios. Pursuant to the New Credit Facility, the Company is required
to apply 75% of its "Excess Cash Flow" for the preceding completed fiscal year,
the net proceeds from any sale of assets other than in the ordinary course and
the net proceeds of certain equity issuances and permitted debt issuances to
prepay outstanding amounts under the Term Facility. The New Credit Facility also
contains a number of customary covenants, including, among others, limitations
on liens, affiliate transactions, mergers, acquisitions, asset sales, dividends
and advances.
Item 7. Financial Statements, Pro Forma Financial Information and Exhibits.
(a) Financial Statements of Business Acquired.
Appendix A to the Company's definitive Notice of and Proxy Statement for
Special Meeting of Shareholders filed with the Commission on January 10,
1997 in connection with the Company's Special Meeting of Shareholders held
on February 6, 1997 is incorporated herein by reference.
(b) Pro Forma Financial Information.
Pages 8 through 12 of the Company's definitive Notice of and Proxy Statement
for Special Meeting of Shareholders filed with the Commission on January 10,
1997 in connection with the Company's Special Meeting of Shareholders held
on February 6, 1997 is incorporated herein by reference.
(c) Exhibits.
Exhibit Number Exhibit Description
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10 Revolving Line of Credit and Term Loan
Agreement dated as of February 13, 1997 by
and among the Company, SunTrust Bank, Central
Florida, National Association, individually
and as agent, and Creditanstalt-Bankverein
(Exhibits omitted; Registrant agrees to
furnish supplementally a copy of any exhibits
to the Commission upon request)
16 Letter on change in certifying accountant
Item 9. Sales of Equity Securities Pursuant to Regulation S.
On October 4, 1996, the Company issued 7,500 shares of its Series A
6.5% Convertible Preferred Stock, $.001 par value (the "Series A Shares"), to
RBB Bank Aktiengesellschaft ("RBB"), a banking institution whose principal
offices are located in Austria, in a private offshore offering pursuant to
Regulation S under the Securities Act of 1933, as amended. RBB purchased the
Series A Shares for a purchase price equal to their aggregate stated value of
$7.5 million. Concurrently with the closing of the Acquisition, RBB purchased,
pursuant to said Regulation S, 7,500 shares of the Company's Series B 6%
Convertible Preferred Stock, $.001 par value (the "Series B Shares"), and 7,500
of the Company's Series C 6% Convertible Preferred Stock, $.001 par value (the
"Series C Shares"; together with the Series A Shares and the Series B Shares,
the "Preferred Shares"), for a purchase price equal to their aggregate stated
value of $15.0 million. The proceeds to the Company from the sale of the
Preferred Shares was an aggregate amount of approximately $20.9 million (net of
commissions and the estimated expenses of such sale).
Concurrently with the issuance of the Series A Shares, the Company also
issued to RBB a Series A Warrant of the Company (the "Series A Warrant") to
purchase up to an aggregate of 150,000 shares of Common Stock at an exercise
price of $5.5625 per share. The Series A Warrant is exercisable at any time
commencing January 1, 1999 and on or prior to December 31, 2002. In addition,
concurrently with the issuance of the Series B Shares and the Series C Shares,
the Company issued to RBB a Series B Warrant of the Company (the "Series B
Warrant") and a Series C Warrant of the Company (the "Series C Warrant"), each
of which entitles RBB to purchase up to an aggregate of 300,000 shares of the
Company's Common Stock, $.001 par value ("Common Stock"), at a per share
exercise price of (i) $7.50 with respect to the Series B Warrant and (ii) $10.00
with respect to the Series C Warrant. Each of the Series B Warrant and the
Series C Warrant is exercisable at any time commencing January 1, 1999 and on or
prior to December 31, 2002.
The Company has also issued, as part of the commission payable to a
third party in connection with the sale of the Series A Shares, a Series D
Warrant of the Company (the "Series D Warrant"; together with the Series A
Warrant, the Series B Warrant and the Series C Warrant, the "Warrants") to
purchase up to an aggregate of 200,000 shares of Common Stock at an exercise
price of $5.50 per share. The Series D Warrant is immediately exercisable and
expires on or prior to September 30, 2001.
In accordance with the corporate governance rules of the National
Association of Securities Dealers, Inc. relating to issuers listed on The Nasdaq
National Market, such as the Company, the Company obtained shareholder approval
for the issuance of (i) shares of Common Stock issuable upon conversion of the
Series A Shares and upon exercise of the Series A Warrant and the Series D
Warrant, (ii) the Series B Shares and the Series C Shares, and (iii) the Series
B Warrant and the Series C Warrant.
Each of the Series A Shares may be converted by the holder thereof into
shares of Common Stock at any time. Each Series A Share is convertible into such
number of shares of Common Stock as is determined by dividing its stated value
of $1,000 by a conversion rate equal to the lower of (i) $5.50 and (ii) 80% of
the average Market Price for the 10 consecutive trading days ending three days
prior to the giving by the holder of such Series A Shares of a notice of
conversion.
Each of the Series B Shares may be converted by the holder thereof into
shares of Common Stock at any time. Each Series B Share is convertible into such
number of shares of Common Stock as is determined by dividing the stated value
of $1,000 by a conversion rate equal to the lower of (i) $6.75 and (ii) 80% of
the average Market Price for the 10 consecutive trading days ending three days
prior to the giving by the holder of such Series B Shares of a notice of
conversion.
Each of the Series C Shares may be converted by the holder thereof into
shares of Common Stock at any time after July 1, 1997. Each Series C Share is
convertible into such number of shares of Common Stock as is determined by
dividing the stated value of $1,000 by a conversion rate equal to the lower of
(i) $8.25 and (ii) 80% of the average Market Price for the 10 consecutive
trading days ending three days prior to the giving by the holder of such Series
C Shares of a notice of conversion.
For purposes of the conversion rates for the Preferred Shares, "Market
Price" has the following meaning. As long as the Common Stock is listed on The
Nasdaq National Market, "Market Price" will be equal to the closing high bid
price of the Common Stock, as reported by the National Association of Securities
Dealers Automated Quotation System ("NASDAQ"). If the Common Stock is no longer
listed on The Nasdaq National Market, "Market Price" will be equal to the
closing bid price of the Common Stock, as reported by NASDAQ (assuming that the
Common Stock is listed on The Nasdaq SmallCap Market or is included in the "pink
sheets" or other inter-dealer quotation service or publication) or the closing
price for the Common Stock (assuming that the Common Stock is listed on a
national securities exchange). On February 18, 1997, the closing high bid price
for the Common Stock was $5.75 per share.
The terms of the Preferred Shares and Warrants include customary anti-
dilution protections. At any time after September 30, 2000, the Company will
have the right, in its sole and absolute discretion, to force the conversion
into Common Stock of all outstanding Preferred Shares.
SIGNATURES
Pursuant to the requirements of the Securities Exchange Act of 1934,
the Registrant has caused this report to be signed on its behalf by the
undersigned hereunto duly authorized.
Dated: February 19, 1997 SERENGETI EYEWEAR, INC.
By: /s/ Stephen Nevitt
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Stephen Nevitt
President