Exhibit 10.6
LOAN AGREEMENT
THIS LOAN AGREEMENT is made as of the 1st day of May, 2001, by and
among L.S. HOLDING (USA), INC., an Alaska corporation, whose mailing address and
principal place of business is 236 and 000 Xxxxx Xxxxxxxx, Xxxxxx, Xxxxxx 00000
(the "Borrower" or "L.S. USA"), LITTLE SWITZERLAND, INC., a Delaware
corporation, whose mailing address and principal place of business is 161-B
Crown Bay, St. Xxxxxx, U.S. Virgin Islands 00802 ("Little Switzerland" or the
"Guarantor"), and THE CHASE MANHATTAN BANK, a commercial banking institution
having a mailing address of X.X. Xxx 000000, Xx. Xxxxxx, X.X. Xxxxxx Xxxxxxx
00000 (the "Lender").
WHEREAS, the Borrower is a direct wholly-owned subsidiary of L.S.
Holding, Inc., a U.S. Virgin Islands corporation ("L.S. Holding"), which is a
direct wholly-owned subsidiary of Little Switzerland;
WHEREAS, L.S. Wholesale, Inc., a Massachusetts corporation and a direct
wholly-owned subsidiary of Little Switzerland ("L.S. Wholesale"), is indebted to
the Lender (the "Original Indebtedness") pursuant to the terms of: (a) (i) a
loan agreement dated February 24, 1996, between the Lender and L.S. Wholesale,
Little Switzerland and L.S. Holding, and (ii) the promissory note or notes and
other evidences of indebtedness referenced therein or issued pursuant thereto
(collectively, the "Term Loan Documents"); and (b) (i) a letter agreement dated
January 7, 1999, between the Lender and L.S. Wholesale as amended by letter
agreement dated March 3, 1999, and (ii) the promissory note or notes and other
evidences of indebtedness referenced therein or issued pursuant thereto
(collectively, the "Line of Credit Documents," and together with the Term Loan
Documents, the "Original Loan Documents");
WHEREAS, the payment of the Original Indebtedness is guaranteed by the
Guarantor pursuant to a Guaranty (Unlimited Amount) dated September 22, 1997
executed by Guarantor;
WHEREAS, the Lender, Bank of Nova Scotia ("BNS"), L.S. Wholesale, L.S.
Holding, the Borrower, the Guarantor and certain affiliates of the Borrower are
parties to a Forbearance Agreement dated May 7, 1999, as thereafter amended,
providing for the forbearance of collection of the Original Indebtedness and
other outstanding indebtedness to the Lender and BNS (collectively, the
"Forbearance Agreement");
WHEREAS, the Lender, BNS, L.S. Wholesale, L.S. Holding, the Borrower,
the Guarantor and certain affiliates of the Borrower are parties to a Letter
Agreement dated April 7, 2000, as
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thereafter amended, and a Letter Agreement dated July 28, 2000, as thereafter
amended, providing for further forbearance of collection of the Original
Indebtedness and other outstanding indebtedness to the Lender and BNS
(collectively, the "Letter Agreements," and, together with the Forbearance
Agreement, the "Forbearance Documents");
WHEREAS, to further secure L.S. Wholesale's indebtedness to the Lender
and BNS and in consideration for the forbearance provided under the Forbearance
Documents, certain security interests have been granted to the Lender and BNS
pursuant to the following agreements: (a) Security Agreement dated May 7, 1999
(the "1999 Security Agreement"); (b) First Priority Leasehold Mortgage dated
April 14, 2000 and filed with the Office of the Recorder of Deeds for the
District of St. Xxxxxx and St. Xxxx (the "Recorder") on May 8, 2000 as Document
No. 2000002138 (the "Mortgage"); and (c) Assignment of Lease dated April 14,
2000 and filed with the Recorder on May 8, 2000 as Document No. 2000002139 (the
"Assignment");
WHEREAS, Guarantor acknowledges that Guarantor will benefit from the
Lender's continuing extension of the Facility (as hereinafter defined in
SUBSECTION 2.1) to the Borrower pursuant to the terms hereof;
WHEREAS, all indebtedness outstanding to BNS, including without
limitation all principal, interest, letters of credit, letters of guaranty,
charges, attorneys' fees, costs, and any other amounts outstanding to BNS, shall
have been paid in full prior to execution of this Agreement;
WHEREAS, BNS has executed a Receipt and Release of even date herewith
evidencing receipt of all indebtedness outstanding to BNS and its release, or
agreement to release, all collateral security held as security for such
indebtedness, except as specifically set forth therein;
WHEREAS, the Borrower and Guarantor have requested that a portion of
the Original Indebtedness continue, but be separately borrowed as follows: (a)
indebtedness of Borrower under a revolving credit facility in the amount of
$100,000, (b) indebtedness of L.S. Holding under a revolving credit facility in
the amount of $2,950,000, and (c) indebtedness of L.S. Wholesale under a
revolving credit facility in the amount of $700,000, which the Lender is willing
to accommodate subject to the terms and conditions of this Agreement with
respect to the indebtedness of Borrower, and subject to the terms and conditions
of two separate loan agreements with respect to the indebtedness of L.S. Holding
and L.S. Wholesale (collectively, the "Related Loan Agreements");
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NOW, THEREFORE, in consideration of the mutual covenants and agreements
herein contained and for other good and valuable consideration, the receipt and
sufficiency of which is hereby acknowledged, the parties hereto agree as
follows:
1. REPRESENTATIONS. As an inducement to the Lender to enter into this
Agreement and to lend under the terms hereof, the Borrower and the Guarantor
jointly and severally represent, covenant and warrant to the Lender that:
1.1 RECITALS. The foregoing recitals are acknowledged as true and
correct and are incorporated herein by this reference.
1.2 CORPORATE EXISTENCE, GOOD STANDING AND POWER. Each of the
Borrower, the Guarantor and their Subsidiaries (as defined in SUBSECTION 3.3) is
a corporation or other formally recognized entity duly organized, validly
existing and in good standing under the laws of the state, territory or other
jurisdiction of organization (other than L.S. Holding (Aruba), N.V., which is
awaiting issuance of a business license following the updating of its directors
(the "Aruba License")), and is qualified to do business and is in good standing
in each jurisdiction in which it is so required, except where the lack of such
qualification would not reasonably be expected to have a material adverse effect
on the business, properties, prospects, financial condition or results of
operations of the Borrower, the Guarantor and their respective Subsidiaries,
taken as a whole (hereinafter referred to as a "Material Adverse Effect"). Each
of the Borrower and the Guarantor has the requisite corporate power to make this
Agreement and to perform the obligations of such entity provided for herein.
1.3 CORPORATE AUTHORITY. The making and performance by the Borrower
and Guarantor of this Agreement have been duly authorized by all necessary
corporate action and will not violate any provision of law or of their
respective Articles of Incorporation or Bylaws or result in the breach of, or
constitute a default under, or, except as hereinafter provided, result in a
default under or the creation of any lien, charge or encumbrance upon any
property or assets of the Borrower or Guarantor pursuant to any indenture or
loan or credit agreement, or other agreement or instrument to which Borrower or
any Guarantor is a party or by which either or their property may be bound or
affected.
1.4 FINANCIAL CONDITION. The unaudited consolidated balance sheet of
Little
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Switzerland and its Subsidiaries as of February 27, 2001 (the "Balance Sheet
Date") and the related unaudited consolidated statements of income and cash
flows of Little Switzerland and the Subsidiaries for the nine-month period then
ended (collectively, the "Financial Statements") heretofore furnished to the
Lender, are complete and correct in all material respects and fairly present the
financial condition of the Borrower and Guarantor and the results of operations
for the period(s) specified therein. To the best of the Borrower's and
Guarantor's knowledge and belief, neither the Borrower nor any Guarantor has
contingent obligations, liabilities for taxes, or unusual forward or long term
commitments, except as herein specifically mentioned on SCHEDULE 1.4, not
disclosed by, or reserved against, in said financial statements, and, at the
present time, there are no material unrealized or anticipated losses from any
unfavorable commitments of the Borrower or Guarantor. Said financial statements
have been prepared in accordance with generally accepted accounting principles
and practices consistently maintained by the Borrower and Guarantor throughout
the period involved. Since the Balance Sheet Date, there have been no material
adverse changes in the financial condition of the Borrower or Guarantor from
that set forth in the Financial Statements.
1.5 LITIGATION. Except as provided in SCHEDULE 1.5 attached hereto
and made a part hereof, there are no suits or proceedings pending, or, to the
knowledge of the Borrower or Guarantor, threatened, against or affecting the
Borrower, any Guarantor or any of the Subsidiaries (as defined in SUBSECTION
3.3), which, if adversely determined, would have a Material Adverse Effect.
Except as provided in SCHEDULE 1.5, There are no proceedings by or before any
governmental commission, bureau or other administrative agency pending, or to
the knowledge of the Borrower or Guarantor threatened, against the Borrower, any
Guarantor or any of the Subsidiaries.
1.6 TITLES; LIENS. The Borrower and Guarantor have exclusive good
and marketable title to each of the fixed properties and assets reflected in the
Financial Statements free and clear of all mortgages, liens and encumbrances,
except (a) liens, if any, for current taxes, assessments and governmental
charges not delinquent or whose validity is being contested at the time in good
faith and by appropriate proceedings, and covenants, restrictions, rights,
easements, liens, encumbrances and minor irregularities in title which do not
and will not interfere with the occupation, use and enjoyment of such properties
and assets in the normal course of business as presently conducted or planned or
materially impair the value of such properties and assets for the
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purpose of such business, (b) mortgages, liens and encumbrances in favor of the
Lender, (c) mortgages, liens and encumbrances in favor of Xxxxxxx & Co.
("Tiffany's), all of which are subordinate to the mortgages, liens and
encumbrances in favor of the Lender; and (d) mortgages, liens and encumbrances
in favor of other third parties notice of which the Lender has been provided in
writing and which have been approved in writing by the Lender.
1.7 GOVERNMENTAL LICENSES AND PERMITS. The Borrower and Guarantor
possess all licenses and permits necessary for the operation of their businesses
in all jurisdictions in which they are located and are engaging in business
without substantial known conflict with the rights of others, except for those
licenses and permits the failure of which to possess would not cause a Material
Adverse Effect.
1.8 ENVIRONMENTAL COMPLIANCE. The Borrower has duly complied with,
and Borrower's and Guarantor's business operations and property, are, and shall
continue to be, in compliance with the provisions of all federal, state and
territorial environmental, health, and safety laws, codes and ordinances, and
all rules and regulations promulgated thereunder, except where the failure to so
comply would not cause a Material Adverse Effect. The Borrower and Guarantor
have been issued and will maintain all material federal, state and territorial
permits, licenses, certificates, and approvals relating to environmental, health
and safety matters. Neither the Borrower nor any Guarantor has received any
notice of, or has any actual knowledge of, facts that could reasonably be
expected to constitute any violation of any federal or territorial
environmental, health, or safety laws, codes or ordinances, and any rules or
regulations promulgated thereunder with respect to the Borrower's or Guarantor's
business operations or property. There has been no written complaint, order,
directive, claim, citation, or notice by any governmental authority or any
person or entity with respect to environmental, health or safety matters
affecting the Borrower, Guarantor, or Borrower's or Guarantor's business
operations or other property. Neither the Borrower nor any Guarantor has any
indebtedness, known obligation or liability, absolute or contingent, matured or
not matured, with respect to the storage, treatment, cleanup, or disposal of any
solid wastes, hazardous wastes, or other toxic or hazardous substances
(including without limitation any such indebtedness, obligation or liability
with respect to any current regulation, law or statute regarding such storage,
treatment, cleanup, or disposal), which has not been previously disclosed to the
Lender in writing.
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1.9 ENFORCEABILITY. This Agreement, the Note (as hereinafter defined
in SUBSECTION 2.4), and the Security Instruments (as hereinafter defined in
SECTION 3) are the legal, valid and binding obligations of the Borrower and the
Guarantor, enforceable against the Borrower or the Guarantor, as the case may
be, in accordance with their respective terms.
1.10 USE OF PROCEEDS. The proceeds of the Facility shall be used for
those purposes specifically set forth in SUBSECTION 2.5 and no part of the
proceeds shall be used directly or indirectly for any other purpose.
2. THE LOAN.
2.1 AMOUNT OF THE LOAN. The Lender agrees, on the terms and
conditions of this Agreement, to provide to the Borrower a revolving line of
credit not to exceed the principal sum of $100,000 (the "Facility") payable as
hereinafter provided. All or part of the Facility may be advanced and funded on
the date hereof as a partial credit against the Original Indebtedness. Upon such
advance of all or part of the Facility, any default or event of default in
respect of the Original Indebtedness, if any, shall be deemed irrevocably
waived. As a revolving line of credit, provided that the Facility and Borrower's
right to draw thereunder shall not have expired or been terminated, any
principal sums previously advanced by the Lender that shall have been repaid by
the Borrower may subsequently be redrawn by the Borrower subject to the terms of
this Agreement. Any subsequent advance under the Facility shall be evidenced by
a draw request executed by the Borrower and delivered to and approved by the
Lender; provided, that the aggregate sums advanced and outstanding under the
Facility shall not exceed the maximum principal amount thereof.
2.2 REPAYMENT. If not earlier repaid or terminated pursuant to this
Agreement, the Borrower shall repay the entire outstanding principal balance of
the Facility, together with all accrued and unpaid interest, charges and other
fees thereon, in full on June 1, 2002 (the "Maturity Date"). All payments
received from the Borrower shall be applied by the Lender first to late charges,
if any, second to accrued interest and the remainder to the outstanding
principal balance of the Facility. Prepayment is permitted at any time in whole
or in part without penalty, fee or premium.
2.3 INTEREST. The principal sum outstanding under the Facility shall
bear interest at a variable rate per annum equal to LIBOR (as defined in the
Note) plus three percent (3.0%), calculated daily on a three hundred sixty (360)
day basis for the actual number of days occurring in
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the period for which such interest is payable. Notwithstanding the foregoing,
during any period in which an Event of Default (as hereinafter defined) has
occurred and is continuing, the Facility shall accrue interest at a variable
rate per annum equal to LIBOR plus six percent (6.0%). Interest accrued at the
rate hereinabove specified shall be due and payable on the first day of each
month following the date hereof.
2.4 THE NOTE. The Facility shall be evidenced by a Revolving Credit
Note in the amount of the Facility dated the date hereof, due and payable to the
order of the Lender as herein and therein provided (the "Note").
2.5 PURPOSE. The purpose of the Facility is to extend a portion of
the Original Indebtedness; provided, however, that subsequent advances under the
Facility may be made for purposes of working capital.
3. SECURITY. Repayment of the Facility and the Borrower's and
Guarantor's other obligations hereunder shall be secured pursuant to the terms
of the following agreements and instruments satisfactory in form and substance
to the Lender and its counsel (collectively, the "Security Instruments"):
3.1 GUARANTY. The Guarantor shall have executed and delivered to the
Lender an unconditional and unlimited Guaranty guaranteeing the performance of
the Borrower and Guarantor of all of their obligations under this Agreement, the
Note and the other Security Instruments.
3.2 STOCK PLEDGE. Borrower and Little Switzerland (collectively, the
"Pledgors") shall pledge or cause to be pledged 65% of the issued and
outstanding stock or equivalent equity interest (the "Pledged Stock") of all
Subsidiaries (as defined below) of the Pledgors by execution of the Stock Pledge
Agreement of even date herewith (the "Pledge Agreement"). The term
"Subsidiaries" means each corporation or other formally organized entity with
respect to which a Pledgor beneficially owns, directly or indirectly, a
controlling interest, and shall specifically include, but not be limited to, the
Borrower, L.S. Wholesale, L.S. Holding, World Gift Imports, N.V., a Netherlands
Antilles corporation, Montres et Bijoux, S.A.R.L., a St. Xxxxxx company, L.S.
Holding (Aruba), N.V., an Aruba company, and L.S. Holding (Curacao), N.V., a
Curacao corporation. The Subsidiaries other than L.S. Wholesale and L.S. USA
shall be collectively referred to as the "Foreign
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Subsidiaries." Notwithstanding the foregoing, World Gift Imports (Barbados)
Limited, a Barbados company, shall not be included in the term "Subsidiaries"
and no ownership interest in such entity shall be pledged, and the Pledged Stock
shall include 100% of Little Switzerland's equity interest in L.S. Wholesale.
3.3 SECURITY AGREEMENT. The Borrower and Guarantor shall have
executed and delivered a Security Agreement, which agreement shall continue the
first priority security interest of the Lender as security for the Facility in
all right, title and interest of the Borrower and Guarantor in and to all
inventory, general intangibles arising therefrom and all products and proceeds
thereof located in the U.S. Virgin Islands, Alaska and elsewhere in the United
States (collectively, the "Collateral").
4. CONDITIONS PRECEDENT TO CLOSING. The Lender shall close and fully
fund the Facility, subject to the fulfillment to the satisfaction of the Lender
of the following conditions and all other applicable terms of this Agreement:
4.1 INTENTIONALLY OMITTED.
4.2 DOCUMENTS. The Lender shall have received fully executed
originals of the Agreement, the Note, the Security Instruments, the Related Loan
Documents and all documents referenced therein.
4.3 CURRENT INDEBTEDNESS TO THE LENDER AND BNS. The Original
Indebtedness and all outstanding indebtedness owed to BNS shall be paid in full.
4.4 ACQUISITION BY TIFFANY'S. The acquisition by Tiffany's of not
less than 44% of the issued and outstanding corporate shares of Little
Switzerland resulting in additional paid-in capital of not less than
$7,000,000.00 into Little Switzerland (the "Tiffany's Stock Purchase").
4.5 COLLATERAL VALUES. The minimum aggregate net book value of the
Collateral located in Alaska shall equal not less than $1 million.
4.6 INTENTIONALLY OMITTED.
4.7 LIEN AND JUDGMENT SEARCHES. The Lender shall have received
satisfactory results of UCC and lien searches in Alaska and the U.S. Virgin
Islands for all names and trade names of the Borrower and Guarantor, which also
shall confirm the Lender's first priority security interest
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in the Collateral.
4.8 EXPENSES. The Borrower and Guarantor shall reimburse the Lender
for (i) all expenses incurred by the Lender in connection with this Agreement,
including reasonable attorneys' fees, and (ii) any outstanding costs and
expenses related to the Forbearance Documents, the Mortgage, the Assignment, the
1999 Security Agreement, and any other document or transaction by and among the
parties hereto.
4.9 PROOF OF CORPORATE ACTION; REPRESENTATIONS AND WARRANTIES. The
Lender shall have received for each of the Borrower and the Guarantor
Secretary's Certificates certifying as to the officers, directors, ownership
(except as to Little Switzerland) and trade names of each such corporation. The
Lender shall have received for each of the Borrower and the Guarantor certified
copies of all corporate action taken to authorize the execution and delivery of
this Agreement, the Note and the Security Instruments and the agreements made
thereunder, Certificates of Good Standing, certified Articles of Incorporation
and Bylaws, current business licenses, and such other papers and documents as
the Lender shall reasonably request. The Lender also shall have received for
each of the Borrower and the Guarantor a statement executed by the President and
attested by the Secretary of such entity certifying that each of the
representations and warranties set forth in SECTION 1 of this Agreement is true
and correct.
4.10 TIFFANY'S LOAN; SUBORDINATION AGREEMENT. Tiffany's shall have
extended, and the L.S. Wholesale, L.S. Holding and L.S. USA, respectively, shall
have accepted the following revolving line of credit facilities: a $475,000.00
revolving line of credit to L.S. Wholesale, a $1,950,000.00 revolving line of
credit facility to L.S. Holding, and a $75,000.00 revolving line of credit to
L.S. USA, each such facility accruing interest at a variable rate not greater
than LIBOR plus three percent (3%) per annum (collectively, the "Tiffany's
Loan"). The Tiffany's Loan shall be fully drawn prior to the closing and funding
of the Facility, and shall be fully subordinated to the Facility with respect to
payments. Any security interest of Tiffany's in the Collateral, the Mortgaged
Property (as defined in the Related Loan Agreements) or the Pledged Stock shall
be fully subordinated to the security interest of the Lender therein. Tiffany's,
the Lender, L.S. Wholesale, L.S. Holding and L.S. USA shall execute a
subordination agreement subordinating the Tiffany's
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Loan to the Facility substantially in the form attached hereto and made a part
hereof as EXHIBIT A (the "Subordination Agreement").
4.11 FINANCIAL CONDITION. The financial condition of Borrower and
Guarantor shall not have adversely changed in any material respect and the
Borrower shall not have provided the Lender with any false or misleading
information or signature at any time in connection with the Facility.
4.12 INSURANCE. The Lender shall have received evidence reasonably
satisfactory to the Lender of the following insurance coverage procured through
agencies licensed to do business in the jurisdiction in which the Borrower and
Guarantor are located, which agencies shall be financially sound, reputable and
reasonably satisfactory to the Lender:
(a) SMP insurance coverage with respect to the Collateral, providing
for payment to the Lender as secured party/loss payee against loss or damage by
fire, earthquake, windstorm, and all other risks now embraced by the so-called
broad form extended coverage endorsement, in amounts not less than the full
insurable value of such Collateral.
(b) Appropriate workers' compensation insurance covering any and all
employees of Borrower and Guarantor.
(c) If it is determined from the FEMA Flood Hazard Certification
that any Collateral is located in a designated flood prone area, Federal Flood
Insurance naming the Lender as mortgagee / secured party / loss payee up to the
maximum amount available covering such Collateral.
(d) Such other insurance with respect to the Borrower, the Guarantor
and the Collateral in such amounts and against such insurable hazards as the
Lender from time to time may reasonably require.
(e) The foregoing insurance policies shall provide that they may not
be canceled, or the amount(s) of coverage provided reduced, for any reason until
not less than thirty (30) days written notice shall have been give to the Lender
of the insurance company's intention to cancel or reduce the amount(s) of
coverage provided under such policy or policies, during which time the Borrower
shall replace said policy or policies with new, substitute or successor policies
to comply with the requirements of this SUBSECTION 4.12.
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4.13 FACILITY FEE. The Lender shall have received from the Borrower
a facility fee in the amount of $2,333.33.
4.14 TAXES. The Lender shall have received such evidence as it may
reasonably require that all applicable taxes, assessments and other governmental
charges levied and assessed against the Borrower, the Guarantor or the
Collateral, due or past due, have been duly satisfied, except to the extent the
same is being contested diligently and in good faith by Borrower and/or the
Guarantor.
4.15 APPROVAL BY LENDER'S COUNSEL. All legal matters incident to the
transactions hereby contemplated shall be reasonably satisfactory to counsel for
the Lender.
4.16 OPINION OF COUNSEL FOR BORROWER AND GUARANTOR. The Lender shall
have received from counsel for the Borrower and Guarantor one or more favorable
opinion letters dated the same date hereof addressed to the Lender and
substantially in the form attached hereto and made a part hereof as EXHIBIT B
and as to such other matters as the Lender may reasonably request.
4.17 TRADE NAME. The Borrower and Guarantor shall have furnished
certified copies of the registration of trade names for all trade names used or
registered by the Borrower and Guarantor to the extent possible, and the
Secretary of each of the Borrower and Guarantor shall certify as to each trade
name used by such entity.
4.18 BNS RELEASES. BNS shall have executed and delivered releases of
its interests in the Security Instruments and such other documentation as shall
be reasonably required by the Lender to evidence the full payment of Borrower's
obligations to BNS.
5. FUTURE ADVANCES. Subject to the Borrower's satisfaction of the
following conditions and other applicable terms of this Agreement, the Borrower
may request advances of any amounts available under the Facility and the Lender
shall make such advances:
5.1 REPRESENTATIONS; NO DEFAULT. The Lender shall have received a
statement of the authorized officer of each of the Borrower and the Guarantor
dated the date of the advance certifying that (a) the representations and
warranties contained in SECTION 1 of this Agreement are true and correct as of
such date; (b) no Event of Default has occurred and is continuing; and (c) no
event has occurred that would constitute an Event of Default but for the passage
of time or a requirement of notice, or both.
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5.2 OTHER REQUIRED APPROVALS / CONSENTS. The Lender shall have
received such other documentation, certificates, authorizations, approvals,
consents and information as the Lender may reasonably request.
5.3 TIME AND AMOUNT. Subject to such conditions precedent and other
requirements, the Lender shall make advances upon not less than three (3)
business days prior written request from the Borrower to the Lender, not more
frequently than weekly, and in amounts not less than $100,000. The Lender shall
have no obligation to make a requested advance unless and until the Borrower and
Guarantor have complied to the reasonable satisfaction of the Lender and its
counsel with all applicable terms and conditions of this Agreement, the Note and
the Security Instruments.
6. RELEASE OF FOREIGN SECURITY / DOCUMENTATION FOR STOCK PLEDGE. Within
thirty (30) days of the execution of this Agreement, the Borrower and Guarantor
shall deliver to the Lender (a) the original share certificates representing all
of the Pledged Stock, together with stock powers executed in blank, and/or such
other documentation as is required in the jurisdiction in which such Pledged
Stock is issued, and (b) such other documentation as may be required under the
Pledge Agreement or reasonably required by the Lender to evidence and perfect
the Lender's security interest in the Pledged Stock. In exchange for the
perfection of the security interest effected at such time of delivery of the
Pledged Stock in compliance with this Agreement and the Pledge Agreement, Lender
shall release any and all security interests in inventory and other property
located outside of the United States and the U.S. Virgin Islands and agrees to
execute such documents and take such actions as is reasonably requested by the
Borrower or Guarantor to effect and evidence such release.
7. AFFIRMATIVE COVENANTS. The Borrower and the Guarantor agree that so
long as credit shall remain available hereunder and until payment in full of the
Facility, unless the Lender shall otherwise consent in writing, they will:
7.1 APPLICATION OF LOAN PROCEEDS. Apply, and allow the Lender to
apply on behalf of the Borrower, the proceeds of the Facility only for the
specific purposes agreed to herein.
7.2 VALUE OF COLLATERAL. Maintain the minimum aggregate net book
value of the
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Collateral at an amount equal to not less than $1 million.
7.3 FURNISH STATEMENTS AND OTHER DOCUMENTS. Furnish, or cause to be
furnished, to the Lender, (a) within thirty (30) days of the end of each month,
the monthly unaudited financial statements of the Borrower and Guarantor; (b)
within forty-five (45) days of the end of each of the first three quarters of
each fiscal year, unaudited quarterly financial statements of the Borrower and
Guarantor; (c) within ninety (90) days after the end of each fiscal year of the
Borrower and the Guarantor, audited consolidated financial statements of the
Borrower and Guarantor for such year, prepared by an independent accountant
reasonably acceptable to the Lender, (d) upon filing with the U.S. Internal
Revenue Service or the V.I. Bureau of Internal Revenue or other taxing
authority, but in no event later than one hundred twenty (120) days following
the end of the fiscal year of the Borrower and Guarantor, unless the filing
thereof has been properly extended, the income tax returns of the Borrower and
the Guarantor, (e) upon filing, copies of all quarterly, annual and other
filings filed with the U.S. Securities and Exchange Commission, (f) upon the
approval of Little Switzerland's board of directors, but in no event later than
thirty (30) days prior to the end of the current fiscal year, the approved and
authorized business plan for Little Switzerland for the following fiscal year,
and (g) such further information, documentation and filings regarding the
business affairs and financial condition of the Borrower and the Guarantor as
may be reasonably requested by the Lender, which shall be prepared in such form
and manner and by such persons as are reasonably acceptable to the Lender.
7.4 INVENTORY REPORTS. The Borrower shall deliver a report on or
before the 15th day of each calendar month certifying as to the amount, type and
value of the Collateral as of the end of the preceding calendar month, including
reasonable detail of inventory by store location, type, amount and book value.
7.5 PAYMENT OF TAXES AND OTHER CHARGES. Pay and discharge or cause
to be paid and discharged (a) all taxes, assessments and governmental charges or
liens imposed upon Borrower, Guarantor or upon any property belonging thereto,
prior to the date on which penalties attach thereto, and (b) all lawful claims
and amounts which, if unpaid, might become a lien or charge upon the Collateral,
the Pledged Stock or other property of the Borrower or Guarantor, and submit
evidence thereof to the Lender upon request; provided, however, that the
Borrower and Guarantor shall not
LOAN AGREEMENT
PAGE 14
be required to pay any such tax, assessment, charge, amounts, levy or claim the
payment of which is being contested in good faith and by proper judicial or
administrative proceedings.
7.6 INSPECTION AND MAINTENANCE. Allow the Lender or its duly
authorized representatives to inspect the Collateral and the books, records,
assets, property, and operations of the Borrower and the Guarantor at any
reasonable time on reasonable notice and maintain said books, records, assets,
property and operations of the Borrower and the Guarantor to the reasonable
satisfaction of the Lender.
7.7 NOTICE OF LITIGATION. Promptly give notice in writing to the
Lender of all litigation and of all proceedings by or before any governmental
regulatory agency, against or affecting the Borrower and/or any Guarantor, where
the amount involved is in excess of $100,000.00 or which, if adversely
determined, would otherwise have a Material Adverse Effect.
7.8 INSURANCE. Maintain, or cause to be maintained, the insurance
specified in SUBSECTION 4.12 .
7.9 ENVIRONMENTAL COMPLIANCE. Be and remain in compliance with the
provisions of all federal, state, and local environmental, health and safety
laws, codes and ordinances, and all rules and regulations issued thereunder,
except where the failure to so comply would not result in a Material Adverse
Effect; notify the Lender immediately of any notice of a material hazardous
discharge or environmental complaint received from any governmental agency or
any other party; notify the Lender immediately of any material hazardous
discharge from or affecting the Borrower's or Guarantor's property; immediately
contain and remove the same, in compliance with all applicable laws; promptly
pay any fine or penalty assessed in connection therewith; and at the Lender's
request, and at the Borrower's expense, provide a report of a qualified
environmental engineer, satisfactory in scope, form, and content to the Lender,
and such other and further assurances reasonably satisfactory to the Lender that
the condition has been corrected.
7.10 TIFFANY'S LOAN AND SHAREHOLDER LOANS. Subordinate the Tiffany's
Loan and all existing loans and/or advances from any shareholder of Borrower or
Guarantor and all future shareholders' loans and/or advances to the Facility.
7.11 LICENSES. Obtain and promptly renew from time to time all
material consents, licenses, approvals, permits, registrations and
authorizations as may be required under any applicable
LOAN AGREEMENT
PAGE 15
law or regulation for the Collateral, the Pledged Stock, the Borrower's business
operations, the Guarantor's business operations and the making, performance,
validity and enforceability of the Security Instruments.
8. NEGATIVE COVENANTS. The Borrower and the Guarantor agree that so
long as credit shall remain available hereunder and until payment in full of the
Facility, and all other credit advanced by the Lender to the Borrower hereunder,
without the prior written consent of the Lender, the Borrower and the Guarantor
will not:
8.1 LIMITATION OF LIENS. Mortgage, pledge, hypothecate, assign,
transfer, suffer to exist, or voluntarily or involuntarily subject to any lien
or encumbrance to secure any indebtedness, any interest in or any part of the
Collateral or the Pledged Stock, now owned or hereafter acquired; excluding,
however, from the operation of this covenant (a) liens, mortgages or
encumbrances in favor of the Lender; (b) liens, mortgages or encumbrances in
favor of Tiffany's and subordinate to the liens, mortgages and encumbrances of
the Lender; (c) liens for taxes, assessments and other governmental charges or
levies not yet due or as to which the period of grace (not to exceed thirty (30)
days), if any, related thereto has not expired or which are being contested
diligently and in good faith by appropriate proceedings; (d) the claims of
materialmen, mechanics, carriers, warehousemen, processors or landlords for
labor, materials, supplies or rentals incurred in the ordinary course of
business, (i) which are not overdue for a period of more than ninety (90) days
or (ii) which are being contested diligently and in good faith by appropriate
proceedings; (e) liens consisting of deposits or pledges made in the ordinary
course of business in connection with, or to secure payment of, obligations
under workers' compensation, unemployment insurance or similar legislation; (f)
liens constituting encumbrances in the nature of zoning restrictions, easements
and rights or restrictions of record on the use of real property, which in the
aggregate are not substantial in amount and which do not, in any case, detract
from the value of such property or impair the use thereof in the ordinary
conduct of business; and (g) existing liens described on SCHEDULE 8.1, if any,
and the continuance or renewal of any such liens in connection with any
refinancing, renewals or extensions of the debt secured thereby.
8.2 DISPOSITION OF ASSETS. Lend, sell, lease, transfer or otherwise
dispose of any of the Collateral or the Pledged Stock, whether now owned or
hereafter acquired, except in the
LOAN AGREEMENT
PAGE 16
ordinary and regular course of the Borrower's and Guarantor's business and
except that the Borrower and the Guarantor may dispose of obsolete, outmoded and
outdated equipment, furniture and fixtures, which have been replaced by
appropriate substitutes.
9. EXPENSES. The Borrower agrees to pay all reasonable expenses
(including reasonable legal expenses and attorneys' fees) payable in connection
with the execution and delivery of this Agreement, the Note and the Security
Instruments or payable in connection with any prior negotiation and/or
documentation of transactions between the Lender and the Borrower or Guarantor,
as well as all expenses (including reasonable legal expenses and attorneys'
fees) of every kind incidental to the collection of the Facility or enforcement
of this Agreement, the Note or the Security Instruments; and the Borrower and
Guarantor shall indemnify the Lender against all reasonable claims for such
fees, charges and commissions arising in connection with the transaction
contemplated by this Agreement, excluding any gross negligence or willful
misconduct by the Lender or its representatives or agents acting in the course
and scope of this Agreement.
10. EVENTS OF DEFAULT. If any one of the following (each an "Event of
Default") shall occur:
10.1 if any representation or warranty made to the Lender by the
Borrower, the Guarantor or any Subsidiary of the Borrower or Guarantor in this
Agreement, the Security Instruments, the Related Loan Agreements or the
Subordination Agreement or in connection with the Facility proves to have been
incorrect in any material respect as of the date hereof or as of the date on
which it is made, or any statement, certificate or data heretofore or hereafter
furnished to the Lender by the Borrower, the Guarantor or any Subsidiary of the
Borrower or Guarantor to the Lender in connection with the application for the
Facility or in the administration of this Agreement proves to have been
incorrect in any material respect as of the date when the facts therein set
forth were stated or certified; or
10.2 if the Borrower, the Guarantor or any Subsidiary of the
Borrower or Guarantor fails to perform or comply with any covenant or agreement
in this Agreement, the Security Instruments, the Related Loan Agreements or the
Subordination Agreement (other than failure to timely pay indebtedness to the
Lender governed by SUBSECTION 10.3 below), which failure shall remain unremedied
for thirty (30) days after written notice from the Lender to the Borrower
thereof;
LOAN AGREEMENT
PAGE 17
or
10.3 if the Borrower fails to pay principal of or interest on the
Note, or any other indebtedness, which term shall be construed to mean any
obligation or liability for borrowed money, owing by the Borrower to the Lender
now existing or hereafter incurred, for ten (10) days after the same shall be
due, without further notice or opportunity to cure; or
10.4 if any Security Instrument shall cease to be a valid and
perfected security interest, except that the Stock Pledge may be unperfected for
thirty (30) days following the date hereof; or
10.5 if an event of default shall have occurred under any document
executed in connection with the Tiffany's Loan or the Tiffany's Stock Purchase;
or
10.6 if an event of default shall have occurred under any Related
Loan Agreement or any note or documents referenced therein or executed in
connection therewith; or
10.7 if the Collateral, the Pledged Stock or any part or interest
thereof or therein be transferred (other than in the ordinary course of
Borrower's and Guarantor's business) or encumbered in any way without the
consent of the Lender, whether by operation of law or otherwise; or
10.8 if the Lender or the Lender's representative not be permitted,
at all reasonable times and upon reasonable prior notice, to enter upon the
business or other premises at which the Collateral is located, to inspect the
same; or
10.9 a judgment for the payment of money in excess of $100,000 shall
be rendered against the Borrower or the Guarantor and any such judgment shall
remain unsatisfied and in effect for any period of sixty (60) consecutive days
without a stay of execution; or
10.10 the Borrower or the Guarantor shall (i) apply for or consent
to the appointment of a receiver, trustee or liquidator of the Borrower or the
Guarantor or of all or a substantial part of the assets of the Borrower or the
Guarantor, (ii) be unable, or admit in writing, the inability to pay debts as
they mature, (iii) make a general assignment for the benefit of creditors; (iv)
be adjudicated a bankrupt or insolvent, or (v) file a voluntary petition in
bankruptcy or a petition or an answer seeking reorganization or an arrangement
with creditors or to take advantage of any insolvency law or an answer admitting
the material allegations of a petition filed against the Borrower or the
LOAN AGREEMENT
PAGE 18
Guarantor in any bankruptcy, reorganization or insolvency law or an answer
admitting the material allegations of a petition filed against the Borrower or
the Guarantor in any bankruptcy proceeding, reorganization or insolvency
proceeding, or corporate action shall be taken by the Borrower or the Guarantor
for the purpose of effecting any of the foregoing; or
10.11 an order, judgment or decree shall be entered, without the
application, approval or consent of the Borrower or the Guarantor, by any court
of competent jurisdiction, approving a petition seeking reorganization of the
Borrower or the Guarantor or appointing a receiver, trustee or liquidator of the
Borrower or the Guarantor or of all or a substantial part of the assets of the
Borrower or the Guarantor, and such order, judgment or decree shall continue
unstayed and in effect for any period of one hundred eighty (180) consecutive
days;
THEN, the Lender may by written notice to the Borrower (i)
immediately terminate the Facility and the obligations of the Lender hereunder,
and (ii) declare the principal of and interest accrued on the Note, and all
other liabilities of the Borrower to the Lender to be forthwith due and payable,
whereupon the same shall become forthwith due and payable.
11. NO WAIVER; REMEDIES CUMULATIVE. No failure to exercise, and no
delay in exercising, any right hereunder shall operate as a waiver thereof; nor
shall any single or partial exercise of any right hereunder preclude any other
or further exercise thereof or the exercise of any other right. The remedies
herein provided are cumulative and are not exclusive of any remedies provided by
law.
12. ENTIRE AGREEMENT. The Borrower and Guarantor understand and agree
that this Agreement, along with the Note, Security Instruments and other
documents executed simultaneously herewith, constitute the entire agreement of
the parties with respect to the subject matter hereof, and supersede any and all
prior agreements, written or oral, among the parties concerning the subject
matter hereof.
13. AMENDMENT TO LOAN AGREEMENT. This Loan Agreement may not be changed
orally, but only by an agreement in writing signed by all parties to this Loan
Agreement.
14. COUNTERPARTS. This Agreement may be executed in multiple
counterparts, each of which will be deemed an original for all purposes and all
of which will be deemed collectively to be one agreement.
LOAN AGREEMENT
PAGE 19
15. WAIVER OF RIGHT TO TRIAL BY JURY. THE BORROWER AND THE GUARANTOR
HEREBY KNOWINGLY, VOLUNTARILY AND INTENTIONALLY WAIVE THE RIGHT ANY OF THEM MAY
HAVE TO A TRIAL BY JURY WITH RESPECT TO ANY LITIGATION BASED ON, ARISING OUT OF,
UNDER OR IN CONNECTION WITH THIS AGREEMENT, THE NOTE OR THE SECURITY
INSTRUMENTS, AND/OR ANY AGREEMENT CONTEMPLATED TO BE EXECUTED IN CONJUNCTION
THEREWITH, OR ANY COURSE OF CONDUCT, COURSE OF DEALING, STATEMENTS (WHETHER
VERBAL OR WRITTEN) OR ACTIONS BY ANY PARTY. THIS PROVISION IS A MATERIAL
INDUCEMENT FOR THE LENDER'S PERFORMANCE UNDER THIS AGREEMENT. FURTHER, THE
BORROWER AND THE GUARANTOR HEREBY CERTIFY THAT NO REPRESENTATIVE OR AGENT OF THE
LENDER, NOR THE LENDER'S COUNSEL, HAS REPRESENTED, EXPRESSLY OR OTHERWISE, THAT
THE LENDER WOULD NOT, IN THE EVENT OF SUCH LITIGATION, SEEK TO ENFORCE THIS
WAIVER OF RIGHT TO JURY TRIAL PROVISION. NO REPRESENTATIVE OR AGENT OF THE
LENDER, NOR THE LENDER'S COUNSEL HAS THE AUTHORITY TO WAIVE, CONDITION, OR
MODIFY THIS PROVISION.
16. INTENTIONALLY OMITTED.
17. EXERCISE OF REMEDIES. THE BORROWER AND THE GUARANTOR FURTHER AGREE
TO THE MAXIMUM EXTENT PERMITTED UNDER APPLICABLE LAW THAT UPON THE OCCURRENCE OF
ANY EVENT OF DEFAULT, THE BORROWER AND THE GUARANTOR SHALL TAKE, OR CAUSE TO BE
TAKEN, ANY AND ALL ACTIONS NECESSARY: (I) TO PERMIT THE LENDER TO PROCEED WITH
ANY AND ALL ENFORCEMENT ACTIONS UNDER THIS AGREEMENT AND THE SECURITY
INSTRUMENTS, AND (II) TO PERMIT THE LENDER TO INITIATE AND/OR PROCEED WITH ANY
AND ALL FORECLOSURES ON (WHETHER JUDICIAL OR NON-JUDICIAL), AND REALIZATION OF,
ANY AND ALL OF THE COLLATERAL, THE PLEDGED STOCK AND ANY OTHER PROPERTY HELD AS
SECURITY FOR THE OBLIGATIONS OF THE BORROWER AND THE GUARANTOR.
LOAN AGREEMENT
PAGE 20
18. RECEIVER. If an Event of Default shall have occurred and be
continuing, the Lender shall, as a matter of right, to the extent permitted by
applicable law, be entitled to the appointment of a receiver for all or any part
of the Collateral and the Pledged Stock, whether such receivership be incidental
to a proposed sale of the Collateral and/or the Pledged Stock or otherwise, and
the Borrower and Guarantor hereby consent to the appointment of such a receiver
and shall not oppose any such appointment.
19. MISCELLANEOUS.
19.1 ACCOUNTING TERMS. Any accounting term used herein shall, unless
the context otherwise specifies, be defined as most commonly defined in
accordance with generally accepted accounting principles.
19.2 NOTICE. Any notice required herein shall be deemed to have been
properly served if sent by United States first class registered or certified
mail, postage prepaid, return receipt requested, addressed as follows (or to
such other address as such party shall have furnished to the other party in
writing), if to the Lender:
THE CHASE MANHATTAN BANK
000 Xxxxxxx Xxxxxx, 0xx Xxxxx
Xxx Xxxx, Xxx Xxxx 00000-0000
Attn: Xxxxx Xxxxx, Managing Director
with a copy to:
The Chase Manhattan Bank
P.O. Box 309600
St. Xxxxxx, U.S. Virgin Islands 00803
Attn: Xxxxxx Xxxxxxx
with a copy to:
George H.T. Xxxxxx
Xxxxxx, Topper and Feuerzeig
X.X. Xxx 000
Xx. Xxxxxx, X.X. Xxxxxx Xxxxxxx 00000
and if to the Borrower or any Guarantor:
LOAN AGREEMENT
PAGE 21
L.S. HOLDING (USA), INC.
c/o L.S. WHOLESALE, INC.
000-X Xxxxx Xxx
Xx. Xxxxxx, X.X. Xxxxxx Xxxxxxx 00000
Attn: Xxxxxxx Xxxxxx
with a copy to:
Xxxx X. Xxxxxxx, Esq.
Proskauer Rose LLP
0000 Xxxxxxxx
Xxx Xxxx, Xxx Xxxx 00000-0000
19.3 CONSTRUCTION. This Agreement shall be construed in accordance
with the laws of the United States Virgin Islands.
IN WITNESS WHEREOF, the parties hereto have set their hands and seals
the day and year first above written.
L.S. HOLDING (USA), INC., Borrower
By: /s/ Xxxxxxx X. Xxxxxx
------------------------------
Xxxxxxx X. Xxxxxx, Senior Vice President
(SEAL)
Attest: /s/ Xxxxxxxx Xxxxxx Xxxxxxx
-----------------------------------
Xxxxxxxx Xxxxxx Holland, Secretary
LITTLE SWITZERLAND, INC., Guarantor
By: /s/ Xxxxxxx X. Xxxxxx
---------------------------------------
Xxxxxxx X. Xxxxxx, Senior Vice President
(SEAL)
Attest: /s/ Xxxxxxx X. Xxxxxx, Secretary
------------------------------
Xxxxxxx X. Xxxxxx, Secretary
THE CHASE MANHATTAN BANK, Lender
By: /s/ Xxxxx Xxxxx
------------------------------
Xxxxx Xxxxx, Managing Director
(SEAL)
SCHEDULE 1.4
CONTINGENT OBLIGATIONS, ETC.
SCHEDULE 1.5
LITIGATION
SCHEDULE 8.1
EXISTING LIENS
EXHIBIT A
SUBORDINATION AGREEMENT
EXHIBIT B
FORM OF OPINION LETTER
Reference is made to that certain Loan Agreement dated as of May 1, 2001 by
and among L.S. Holding (USA), Inc. , as Borrower, Little Switzerland, Inc.
("Little Switzerland"), as Guarantor, and The Chase Manhattan Bank
("Chase"), as Lender (the "Agreement"). Capitalized terms used herein shall
have the meaning ascribed thereto in the Agreement.
SCHEDULE 1.4
FINANCIAL CONDITION
Federal tax filings for February 15, 2001 for L.S. Holding, Inc., L.S.
Wholesale, Inc., Little Switzerland, and L.S. Holding (USA), Inc. have been
delayed past the extension date.
Chase and The Bank of Nova Scotia ("BNS") debt secured by foreign collateral has
created a Section 956 investment.
Little Switzerland is a party to a profit sharing and utilization of Tax NOL's
agreement. See the Barbados Restructuring on Schedule 8.1 below.
SCHEDULE 1.5
LITIGATION
1. CLASS ACTION LAWSUIT
On March 22, 1999, a class action complaint was filed in the United States
District Court for the District of Delaware (Civil Action No. 99-176)
against Little Switzerland, Inc. ("Little Switzerland") certain of its
former officers and directors, DRHC and Xxxxxxx X.X. Xxxxx. The complaint
alleges that such defendants violated federal securities laws by failing
to disclose that DRHC's financing commitment to purchase Little
Switzerland's shares expired on April 30, 1998 before Little Switzerland's
stockholders were scheduled to vote to approve the proposed merger between
Little Switzerland and DRHC at the May 8, 1998 special meeting of
stockholders (the "Financing Disclosure Allegations"). The plaintiffs are
seeking monetary damages, including, without limitation, reasonable
expenses in connection with this action. The plaintiffs amended their
complaint on November 10, 1999 and Little Switzerland filed a motion to
dismiss the plaintiff's amended complaint on December 7, 1999. On January
28, 2000, the plaintiffs filed their opposition to the motion to dismiss.
In March 2001, the District Court, among other things, granted Little
Switzerland's motion to dismiss with respect to certain allegations in the
amended complaint that the defendants violated federal securities laws by
failing to disclose the status of Little Switzerland's relationship with a
particular watch vendor; however, the District Court denied the motion to
dismiss with respect to the Financing Disclosure Allegations. In addition,
the District Court dismissed the claims against defendants DRHC and
Xxxxxxx X.X. Xxxxx. Little Switzerland has entered into discussions to
settle this action. However, there can be no assurance that these
discussions will result in a settlement of this action, or that any
settlement will be on terms favorable to Little Switzerland.
2. NXP
On Xxxxxxxx 00, 0000, Xxxxxx Xxxxxxxxxxx and NXP-Jewels Corporation
("NXP") entered into a settlement agreement and mutual general release
from the litigation arising between Little Switzerland and NXP with
respect to their general obligations under a letter of intent to sell
Little Switzerland's Barbados operations to NXP. Little Switzerland, as
part of the settlement, agreed to refund a $100,000 deposit currently held
in escrow and make a $5,000 settlement payment. Both the $100,000 escrow
deposit and the $5,000 settlement payment by Little Switzerland were paid
to NXP in March 2001.
3. LABOR MATTERS
Name: Xxxxxx, Xxxxxxxx
Position: Former DVP Human Resources - St. Xxxxxx
Action: Charge of defamation relating to e-mail messages that
she alleges originated from Little Switzerland
employees.
Name: Loopstock, Xxxxxxxxx
Position: Service Clerk/Admin. Clerk - Aruba
Action: Improper Re-alignment of functions.
Name: Xxxxx, Xxxxxxx
Position: Former Vice President Merchandising - St Xxxxxx
Action: Xx. Xxxxx claims Wrongful Discharge.
Xx. Xxxxx was terminated for cause pursuant to
Section 5(b)(iv) of his employment contract as a
result of conduct that was considered to be either
gross negligence or willful misconduct on his part.
Name: Punjabi, Xxxxxx Xxxxxxx
Position: Sales Associate - Philipsburg, St. Maarten
Action: Mr. Punjabi brought charges against Little
Switzerland in regards to the calculation of his
vacation pay. He had been paid based on his base
salary, not on his base salary plus commission.
Status: On March 20, 2001, a court ruled in Mr. Punjabi's
favor ordering a payment of Nafl 25,072.00 (approx.
$14,000 US), plus interest and legal fees. Little
Switzerland is considering appealing this decision.
Name: Xxxxx, Xxxxxx
Position: Operations Manager - Curacao
Action: Wrongful Discharge.
Status: The court ruled that her responsibilities were not
made clear to her prior to the new manager being
hired. Xx. Xxxxx had until March 23, 2001 to decide
between a monetary award of Afl's $10,000.00
($5,555.55 US) or returning to work. Xx. Xxxxx has
some physical ailments that prevent her from climbing
stairs and feels that Little Switzerland should make
accommodations for her prior to returning (an
elevator and a bathroom on the street level). The
court has yet to make a ruling in this regard.
Name: Xxxxxxxxx, Xxxx
Position: Former Assistant Watch Buyer
Action: On or about Xxxxx 0, 0000, Xxxxxx Xxxxxxxxxxx received a
letter from the Virgin Islands Department of Labor notifying
Little Switzerland that a Charge of Discrimination has been
filed by Xxxx Xxxxxxxxx, a former employee of Little
Switzerland. The letter states that an officer of the Virgin
Islands Department of Labor will contact Little Switzerland
for more information and requests that Little Switzerland
respond in writing to the charges within 15 days.
4. AMERICANS WITH DISABILITIES ACT
The Americans with Disabilities Act Ad Hoc Advocacy Committee filed an action
against several retail entities including L.S. Holding, Inc. relating to
reconstruction of entrances and
restroom facilities and construction of access ramps to make them suitable for
the physically disabled. A proposed program of construction was initially
reviewed and agreed by all parties; however, plaintiffs now insist that ramps be
built at Little Switzerland's Emancipation Garden location.
5. EMPLOYEE DEFALCATION
On March 11, 1998, the Company filed a civil action in the Territorial Court of
the Virgin Islands (Civil Action No. 98-229) against Xxxxxxxx Xxxxxx, a former
employee of the Company, Xxxxx Xxxxxx and Bon Voyage Travel, Inc. The Company
alleges that such parties were involved in the employee defalcation that
management believes occurred during the Company's fiscal year ended May 31,
1997. The Company is seeking a preliminary injunction and damages against the
former employee and the other parties allegedly involved in the theft against
the Company. On January 19, 1999, the defendant, Xxxxx Xxxxxx, filed a petition
for Bankruptcy (Chapter 7) in the United States Bankruptcy Court, District of
St. Xxxxxx. A Notice of Appearance was filed on February 2, 1999 on behalf of
the Company. A trustee was appointed, but due to a conflict of interest, he has
withdrawn from the case. Xxxx Paieonsky was appointed as trustee in this matter
at the meeting of the creditors held on May 20, 1999.
SCHEDULE 8.1
EXISTING LIENS
All assets are subject to liens in favor of Chase and BNS; provided, however,
that the liens of Chase will be released as provided in (i) Section 6 of that
certain Loan Agreement by and among L.S. Wholesale, Inc., as Borrower, Little
Switzerland, as Guarantor, and Chase, (ii) Section 6 of that certain Loan
Agreement by and among L.S. Holding, Inc., as Borrower, Little Switzerland, as
Guarantor, and Chase and (iii) Section 6 of that certain Loan Agreement by and
among L.S. Holding (USA), Inc., as Borrower, Little Switzerland, as Guarantor,
and Chase, when payment is made to Chase pursuant to Section 2.02 of the Stock
Purchase Agreement dated as of May 1, 2001 by and between Little Switzerland
and Xxxxxxx & Co. International (the "Purchase Agreement"), and the liens of BNS
will be released in full when payment is made to BNS pursuant to Section 2.02 of
the Purchase Agreement. (The existing liens in favor of Chase and BNS and the
provisions setting forth the terms under which such liens will be released, and
the extent of such releases, are hereinafter referred to as the "Existing
Secured Liens and Partial Release Thereof.")
The St. Xxxxxx Xxxxx Bay Facility is subject to a ground lease between L.S.
Wholesale. Inc. and the Port Authority dated 7/17/89, extended by agreement
dated 12/2/99 and 3/25/99.
The St. Xxxxxx Xxxxx Bay Facility is subject to the Existing Secured Liens
and Partial Release Thereof.
BARBADOS RESTRUCTURING
Little Switzerland completed restructuring its business in Barbados in March
2001.
In November 2000, World Gift Imports (Barbados) LTD. entered into the
following agreements in restructuring its Barbados business.
1. Agreement: Share Purchase Agreement ("SPA")
Parties: World Gift Imports (Barbados) LTD.
Diamonds International Limited ("DI")
L.S. Holdings, Inc. ("LSH")
Date: November 14, 2000
Remaining
Conditions: Foreign Exchange Control Permission
Amendment of Articles of Incorporation
Re-classification of 52,916 LSH shares to Class A Common
Terms: Sale to DI of 23,774 Common Shares at a price of $300,000
Sale to DI of 31,302 Preferred Shares at a price of $300,000
2. Agreement: Sale of Debt and Security Agreement ("SDSA")
Parties: L.S. Wholesale, Inc. ("LSW")
Almod Diamonds Ltd. ("Almod")
World Gift Imports (Barbados) LTD.
Date: November 14, 2000
Remaining
Conditions: All remaining conditions in SPA
Subscription of shares by DI
Terms: Sale, assignment and transfer of $2.0 million in LSW debt,
payable, without interest, on or before 12/31/03;
first priority lien on $2.0 million of inventory;
any cash sent to LSW requires equivalent pay-down on loan;
can operate only under name Little Switzerland in Barbados
3. Agreement: Unanimous Shareholder Agreement
Parties: LSH
DI
World Gift Imports (Barbados) LTD.
Date: November 7, 2000
Remaining
Conditions: All remaining conditions in SPA
Terms: Same terms in SPA
Same terms as in SDSA
Profit sharing of 50% of EBITDA of $1.5 million by 12/31/05
a. Can include tax loss benefits in excess of $.7m
b. Limits on head office allocations
Preferred convertible to Common if:
a. Subscription of shares by DI not completed by 12/31/03
b. Profit sharing is not paid by 12/31/05
Preferred shares are redeemable along with all Common upon:
a. Subscription of shares by DI being fully paid.
b. Profit sharing being fully paid.
DI to provide Little Switzerland with a customs bond
4. Agreement: Management Agreement (For Bridgetown Port Store) ("MA")
Parties: World Gift Imports (Barbados) LTD.
DI
Date: November 7, 2000
Remaining
Conditions: None
Terms: Little Switzerland has given full right of operation indefinitely to
DI of its Port store, and all profits associated with this store.
5. Agreement: Trademark License Agreement
Parties: L.S. Wholesale, Inc.
DI
Date: November 14, 2000
6. Agreement: Authority to Hold Funds on Deposit
Parties: Little Switzerland, Inc.
Bank of Nova Scotia
Date: April 19, 2001
Terms: Agreement to hold the equivalent of US $150,000 as security until
release of the bond in the amount of BBD $500,000 by the
Barbados Customs Department
Such restructuring contemplated by the above-referenced agreements is
hereinafter referred to as the Barbados Restructuring. The brief summary
descriptions of the terms of the above-referenced agreements are qualified in
their entirety by reference to the above-referenced agreements.
