EXHIBIT 99.1
STOCK PURCHASE AGREEMENT
THIS STOCK PURCHASE AGREEMENT (this "Agreement") is made and entered into
as of May 1, 2001, between Xxxxxxx & Co. International, a Delaware corporation
(the "Buyer"), and Little Switzerland, Inc., a Delaware corporation (the
"Company").
RECITALS:
A. The Company wishes to issue, sell and deliver to the Buyer, and the
Buyer wishes to purchase from the Company, 7,410,000 shares (the "Shares") of
the common stock, par value $0.01 per share of the Company (the "Common Stock"),
for a purchase price of $1.25 per share pursuant to the terms and conditions set
forth in this Agreement.
B. The Company and the Buyer desire to provide for a means for the Buyer to
maintain its relative share ownership of the Company in the future.
C. The Board of Directors of the Company has approved and deemed it
advisable for the Company to issue, sell and deliver the Shares to the Buyer and
enter into the other transactions (the "Transactions") contemplated by this
Agreement, the Registration Rights Agreement (as hereinafter defined), the
Stockholder Agreement (as hereinafter defined) and the Loan Documents (as
hereinafter defined) (collectively, the "Transaction Documents"), on the terms
and conditions set forth herein and therein.
D. Concurrent with the execution and delivery of this Agreement and as a
condition to the willingness of the Buyer to enter into this Agreement, the
Buyer and the Company will execute and deliver a Registration Rights Agreement,
substantially in the form attached hereto as Exhibit A (the "Registration Rights
Agreement").
E. Concurrent with the execution and delivery of this Agreement and as a
condition to the willingness of the Buyer to enter into this Agreement, the
Buyer, the Company, and Jewelcor (as defined herein) will execute and deliver a
Stockholder Agreement, substantially in the form attached hereto as Exhibit B
(the "Stockholder Agreement").
F. Concurrent with the execution and delivery of this Agreement and as a
condition to the willingness of the Buyer to enter into this Agreement, the
Buyer's Affiliate and the Company and certain of its Affiliates will execute and
deliver Loan Documents, substantially in the form attached hereto as Exhibit C
(the "Loan Documents").
NOW, THEREFORE, in consideration of the premises and the mutual covenants
herein contained and other good and valuable consideration, the receipt and
sufficiency of which are acknowledged, the Buyer and the Company, on the basis
of and in reliance on their respective representations, warranties, covenants,
obligations, indemnities and agreements set forth in this Agreement, and upon
the terms and subject to the conditions contained herein, agree as follows:
ARTICLE ONE
DEFINITIONS
SECTION 1.01. Definitions.
(a) The following terms have the following meanings for purposes of this
Agreement:
"Affiliate" means, as to a Person, any other Person that, directly or
indirectly, through one or more intermediaries controls, is controlled by or is
under common control with the first-mentioned Person. Notwithstanding the
foregoing, the Buyer and the Company shall not be considered Affiliates of each
other.
"Agreement" has the meaning ascribed to that term in the Preamble.
"Annual Balance Sheet" has the meaning ascribed to that term in Section
4.06(a)(i).
"Annual Balance Sheet Date" has the meaning ascribed to that term in
Section 4.06(a)(i).
"Annual Financial Statements" has the meaning ascribed to that term in
Section 4.06(a)(i).
"Applicable Law" means with respect to any Person, any international,
national, regional, federal, state or local treaty, statute, law, ordinance,
rule, administrative action, regulation, order, writ, injunction, judgment,
directive, decree or other requirement of any Governmental Authority, and any
requirements imposed by common law or case law, applicable to such Person or any
of its Affiliates or any of their respective properties, assets, officers,
directors, employees, consultants or agents in connection with their activities
on behalf of such Person or one of its Affiliates.
"BNS" has the meaning ascribed to that term in Section 2.02(b).
"Buyer" has the meaning ascribed to that term in the Preamble.
"Chase" has the meaning ascribed to that term in Section 2.02(a).
"Closing" has the meaning ascribed to that term in Section 3.01.
"Closing Date" has the meaning ascribed to that term in Section 3.01.
"Code" means the Internal Revenue Code of 1986, as amended.
"Common Stock" has the meaning ascribed to that term in the Recitals.
"Company" has the meaning ascribed to that term in the Preamble.
"Company Capacity" has the meaning ascribed to that term in Section 6.06.
"Company Securities Filings" has the meaning ascribed to that term in
Section 4.27.
"Consulting Agreements" has the meaning ascribed to that term in Section
6.03.
"Contracts" has the meaning ascribed to that term in Section 4.13(b).
"DGCL" has the meaning ascribed to that term in Section 4.05(c).
"Dilutive Securities" means any voting capital stock of the Company issued
after March 5, 2001, including any issuance upon the exercise of any warrant or
option or upon conversion or exercise of any convertible or exchangeable
securities. The term "Dilutive Securities" does not include any securities
issued (i) in connection with any stock split, stock dividend or similar event
in which all Stockholders participate on a pro rata basis; (ii) pursuant to any
Company employee stock option, employee purchase or similar plan; and (iii)
warrants issued to Chase to acquire up to 50,000 shares of Common Stock.
"Direct Claim" means (i) any claim for indemnity pursuant to Section
8.01(a) based on the breach of Sections 4.01, 4.02, 4.03, 4.04 or 4.05 hereof;
(ii) any claim for indemnity pursuant to Section 8.01(b) hereof; and (iii) any
claim for indemnity pursuant to Section 8.01 that relates to a claim against the
Indemnified Parties by any party.
"Employee Stock" has the meaning ascribed to that term in Section 2.03(b).
"Environmental Damages" means all claims, judgments, damages, losses,
penalties, fines, liabilities, encumbrances, liens, costs and expenses of
defense of a claim, good faith settlements of judgment and costs and expenses of
reporting, investigating, removing and/or remediating Hazardous Materials, of
whatever kind or nature, contingent or otherwise, matured or unmatured,
foreseeable or unforeseeable, including reasonable attorneys' fees and
disbursements and consultants' fees, any of which are incurred at any time
arising out of, based on or resulting from: (i) the presence or release of
Hazardous Materials in or into the environment, on or prior to the Closing Date,
in violation of applicable Environmental Requirements upon, beneath or from any
Real Property, Former Real Property or other location (whether or not owned by a
Company or a Subsidiary) where the Company or the Subsidiaries conducted
operations or generated, stored, sent, transported or disposed of Hazardous
Materials; or (ii) any violation of Environmental Requirements by the Company or
any Subsidiary on or prior to the Closing Date.
"Environmental Requirements" means all applicable statutes, laws (including
common law), regulations, rules, ordinances, codes, licenses, permits, orders,
approvals, authorizations and similar items of all Governmental Entities having
jurisdiction over the Company or any Subsidiary and all judicial and
administrative and regulatory decrees, judgments and orders applicable to the
Company or any Subsidiary and all covenants running with the land that relate
to: (i) occupational health or safety; (ii) the protection of health or the
environment; (iii) the existence, handling, manufacture, treatment, storage,
use, generation, release, discharge, refining, recycling, reclaiming or disposal
of Hazardous Materials; and (iv) the exposure of persons to Hazardous Materials.
"ERISA" means, with respect to U.S. persons and operations, the Employee
Retirement Income Security Act of 1974, as amended, and, with respect to
non-U.S. persons and operations, any similar statutes (and its analogous section
references, if any) of such other jurisdiction.
"ERISA Affiliate" has the meaning ascribed to that term in Section 4.24(a).
"ERISA Plans" means Pension Plans and Welfare Plans.
"Exchange Act" means the Securities Exchange Act of 1934, as amended.
"Financial Statements" has the meaning ascribed to that term in Section
4.06(a).
"Former Real Property" means any real property in which the Company or any
Subsidiary formerly held but no longer holds a fee, leasehold or other legal,
beneficial or equitable interest.
"GAAP" means U.S. generally accepted accounting principles.
"Governmental Authority" has the meaning ascribed to that term in Section
4.28.
"Governmental Consent" has the meaning ascribed to that term in Section
4.28.
"Hazardous Materials" means any substance: (i) the presence of which
requires reporting, investigation, removal or remediation under any
Environmental Requirement; (ii) that is defined as a "hazardous waste,"
"hazardous substance" or "pollutant" or "contaminate" under any Environmental
Requirement; (iii) that is toxic, explosive, corrosive, flammable, ignitable,
infectious, radioactive, reactive, carcinogenic, mutagenic or otherwise
hazardous and is regulated under any Environmental Requirement; (iv) the
presence of which causes or threatens to cause a nuisance, trespass or other
tortious condition or poses a hazard to the health or safety of persons; or (v)
that contains gasoline, diesel fuel or other petroleum hydrocarbons, PCBs,
asbestos or urea formaldehyde foam insulation.
"Impairments" has the meaning ascribed to that term in Section 4.09(e).
"Indemnified Parties" means the Buyer and its Affiliates and their
officers, directors, stockholders, employees, agents and servants.
"Indemnity Interest" means interest on cash expenditures made by an
Indemnified Party in connection with a Loss at the annual rate of 6.0%, from the
day following day notice of such expenditure is provided to the indemnifying
parties until the Indemnified Parties are reimbursed by the indemnifying
parties.
"Indemnity Lien" has the meaning ascribed to that term in Section 8.02.
"Indirect Claim" means any claim for indemnity pursuant to Section 8.01
other than a Direct Claim.
"Intellectual Property" has the meaning ascribed to that term in Section
4.11(a).
"IRS" means the Internal Revenue Service.
"Jewelcor" means collectively Xxxxxxx Xxxxxxxx, his siblings, spouse,
lineal descendants and any trusts for the benefit of the foregoing, Jewelcor
Management, Inc., a Nevada corporation, and its Affiliates. "Jewelcor" shall not
include Xxxx Xxxxxxxx, Xxxxxx Xxxxxxxx or Xxxxxxx Xxxxxxxx Xxxxxx.
"Knowledge" means actual knowledge after reasonable inquiry.
"Latest Balance Sheet" has the meaning ascribed to that term in Section
4.06(a)(ii).
"Latest Balance Sheet Date" has the meaning ascribed to that term in
Section 4.06(a)(ii).
"Latest Financial Statements" has the meaning ascribed to that term in
Section 4.06(a)(ii).
"Leased Property" has the meaning ascribed to that term in Section 4.09(a).
"Lien Assets" has the meaning ascribed to that in term in Section 8.02.
"Loan Documents" has the meaning ascribed to that term in the Recitals.
"Loss" or "Losses" means all liabilities, claims, losses, damages, costs,
judgments, penalties, fines and expenses (including reasonable fees and expenses
of counsel, advisors and experts, travel and other out-of-pocket expenses of
employees or agents and any other fees and expenses paid or due and owing in
connection with any of the foregoing), together with Indemnity Interest.
"Market Price" means, as to any security on a given day, the average of the
closing prices of such security's sales on all domestic securities exchanges on
which such security at the time may be listed, or, if there have been no sales
on any such exchange on such day, the average of the highest bid and lowest
asked prices on all such exchanges at the end of such day, or, if on any day
such security is not so listed, the average of the representative bid and asked
prices quoted in the NASDAQ National Market as of 4:00 P.M., New York time, on
such day, or, if on any day such security is not quoted in the NASDAQ National
Market, the average of the highest bid and lowest asked prices on such day in
the domestic over-the-counter market as reported by the National Quotation
Bureau, Incorporated, or any similar successor organization. If at any time the
Common Stock is not listed on any domestic securities exchange or quoted in the
NASDAQ National Market or the domestic over-the-counter market, the "Market
Price" shall be the fair value thereof determined jointly by the Company and the
Buyer or. if the Company and the Buyer are unable to agree on the fair value,
the Market Price will be determined by an appraiser jointly selected by the
Company and the Buyer.
"Material Adverse Effect" means a material adverse effect on the business,
properties, prospects, financial condition or results of operations of the
Company and the Subsidiaries, taken as a whole.
"Non-ERISA Plans" has the meaning ascribed to that term in Section 4.23(a).
"OSHA" means the Occupational Safety and Health Act, as amended.
"Owned Property" has the meaning ascribed to that term in Section 4.09(a).
"Pension Plans" has the meaning ascribed to that term in Section 4.24(a).
"Percentage Interest" has the meaning ascribed to that term in Section
2.03(e).
"Permits" has the meaning ascribed to that term in Section 4.18.
"Person" means an individual, corporation, partnership, limited liability
company, association, trust, unincorporated organization or other legal entity.
"Personal Property" has the meaning ascribed to that term in Section
4.10(a).
"Preferred Stock" has the meaning ascribed to that term in Section 4.01(a).
"Property Leases" has the meaning ascribed to that term in Section 4.09(b).
"Purchase Price" has the meaning ascribed to that term in Section 2.02
"Real Property" has the meaning ascribed to that term in Section 4.09(a).
"Registration Rights Agreement" has the meaning ascribed to that term in
the Recitals.
"Securities Act" means the Securities Act of 1933, as amended.
"Shares" has the meaning ascribed to that term in the Recitals.
"Stockholder Agreement" has the meaning ascribed to that term in the
Recitals.
"Subscription Right" has the meaning ascribed to that term in Section
2.03(a).
"Subsidiary" means each corporation, partnership, limited liability company
and other entity with respect to which the Company (i) beneficially owns,
directly or indirectly, 10% or more of the outstanding stock or other equity
interests; (ii) otherwise controls, directly or indirectly, because of factors
or relationships other than the percentage of equity interests owned or (iii) is
required to account for its ownership under the equity method.
"Tax Return" includes any material report, statement, form, return or other
document or information required to be supplied by a federal, state, local or
foreign taxing authority in connection with Taxes.
"Tax" means any federal, state, local and foreign income or gross receipts
tax, alternative or add-on minimum tax, sales and use tax, customs duty and any
other tax, charge, fee, levy or other assessment including property, transfer,
occupation, service, license, payroll, franchise, excise, withholding, ad
valorem, severance, stamp, premium, windfall profit, employment, rent or other
tax, governmental fee or like assessment or charge of any kind, together with
any interest, fine or penalty thereon, addition to tax, additional amount,
deficiency, assessment or governmental charge imposed by any federal, state,
local or foreign taxing authority.
"Title Documents" has the meaning ascribed to that term in Section 4.09(b).
"Transactions" has the meaning ascribed to that term in the Recitals.
"Transaction Documents" has the meaning ascribed to that term in the
Recitals.
"Welfare Plans" has the meaning ascribed to that term in Section 4.24(a).
ARTICLE TWO
SALE AND PURCHASE OF THE SHARES; SUBSCRIPTION RIGHTS
SECTION 2.01. Transfer of Shares. On the Closing Date, the Company will
sell, transfer, assign and deliver to the Buyer, against payment therefor as
provided in Section 2.02, a certificate or certificates representing the Shares
duly issued to the Buyer.
SECTION 2.02. Purchase Price. The Buyer shall pay the Company $1.25 per
share as consideration for the Shares, for an aggregate purchase price of
$9,262,500 (the "Purchase Price"). On the Closing Date, the Buyer shall deliver
the Purchase Price as follows:
(a) $2,015,563.46 to the Company by wire transfer of immediately available
funds to an account designated in writing by the Company prior to the Closing
Date;
(b) $7,246,936.54 to the Company's bank account with The Chase Manhattan
Bank, N.A. ("Chase") by wire transfer of immediately available funds which will
be debited by Chase as full satisfaction of the amounts owed by the Company and
its affiliates to Chase; and
(c) $1,566,986.93 to The Bank of Nova Scotia ("BNS") by wire transfer of
immediately available funds as full satisfaction of the amounts owed by the
Company and its affiliates to BNS.
SECTION 2.03. Subscription Rights. As further consideration to induce the
Buyer to purchase the Shares, the Company grants to the Buyer the right to
purchase additional shares of Common Stock on the terms, and subject to the
conditions, set forth in this Section 2.03.
(a) In order to maintain its Percentage Interest in the Company, the Buyer
will have the right (the "Subscription Right") to purchase shares of Common
Stock from the Company, at the per share price set forth in Section 2.03(b) or
2.03(c), upon the issuance by the Company from time to time of Dilutive
Securities. The number of shares that the Buyer may purchase will be that number
of shares necessary to restore the Buyer to its Percentage Interest or, in the
Buyer's discretion, any fewer number of shares of Common Stock. Pursuant to the
Subscription Right, the Buyer may purchase shares of Common Stock on the same
terms (other than price to the extent provided in Section 2.03(d)) as the
issuance of the Dilutive Securities that gave rise to the Subscription Right.
(b) To the extent that the Subscription Right arises out of the issuance of
Dilutive Securities to employees, officers, directors, contractors, advisors or
consultants of the Company pursuant to incentive agreements or incentive plans
approved by the Board of Directors and the stockholders of the Company
("Employee Stock"), the price per share at which such Common Stock will be sold
to the Buyer will be the average Market Price of the Common Stock over the ten
trading days immediately preceding the date on which the Buyer elects to
purchase such Common Stock.
(c) To the extent that the Subscription Right arises out of any issuance of
Dilutive Securities other than Employee Stock, the price per share at which such
Common Stock will be sold to the Buyer will be the price at which such Dilutive
Securities were issued. In the event that the issuance of any Dilutive
Securities occurs upon the exercise, conversion or exchange of other securities,
the per share price at which such Dilutive Securities shall be deemed to have
been issued will be the sum of (A) the per share amount paid upon such exercise,
conversion or exchange and (B) the per share amount previously paid for the
securities so exercised, converted or exchanged, adjusted for any stock split,
stock dividend or other similar event.
(d) In the event that Dilutive Securities were issued for consideration
other than cash, the per share amounts paid for such Dilutive Securities shall
be determined jointly by the Company and the Buyer.
(e) A Stockholder's "Percentage Interest" for purposes of the Subscription
Right shall be determined by dividing the number of shares of Common Stock held
by the Buyer as of the Closing Date into the total number of voting securities
of the Company outstanding on the Closing Date.
(f) Prior to the issuance of any Dilutive Securities, the Company will give
at least five days written notice to the Buyer describing the number of Dilutive
Securities proposed to be issued and the terms upon which the Company proposes
to issue such Dilutive Securities. The Buyer may exercise its Subscription Right
at any time during the 30-day period following the issuance of the Dilutive
Securities.
ARTICLE THREE
CLOSING
SECTION 3.01. Time, Date and Place of Closing. The closing of the
Transactions (the "Closing") will take place at the offices of Xxxxxx, Xxxx &
Xxxxxxxx LLP, 000 Xxxx Xxxxxx, Xxx Xxxx, Xxx Xxxx at 10:00 a.m. local time, on
the date hereof. All proceedings to take place at the Closing will take place
simultaneously, and no delivery will be considered to have been made until all
such proceedings have been completed. The time and date of the Closing is
referred to as the "Closing Date".
SECTION 3.02. Required Documents. All certificates, instruments,
agreements, consents, approvals and other documents required by Article Seven as
closing deliveries will be delivered to the Buyer and the Company at the
Closing.
ARTICLE FOUR
REPRESENTATIONS AND WARRANTIES OF THE COMPANY
The Company represents and warrants to the Buyer as follows:
SECTION 4.01. Capitalization.
(a) As of the date hereof, the authorized capital stock of the Company
consists of (i) 20,000,000 shares of common stock, par value $0.01 per share, of
which 9,056,268 shares are issued and are outstanding; and (ii) 5,000,000 shares
of preferred stock, par value $0.01 per share (the "Preferred Stock"), none of
which is issued and outstanding. Each share of common stock is entitled to one
vote per share. The Company has sufficient authorized and unissued Common Stock
to allow for the issuance of the Shares as of the date hereof.
(b) All of the outstanding shares of capital stock of the Company have been
duly authorized and validly issued, and are fully paid and nonassessable. None
of the capital stock of the Company was issued in violation of any preemptive
rights. All capital stock of the Company was issued in conformity with
Applicable Law. Except as set forth on Schedule 4.01(b), no person to whom any
capital stock of the Company was issued and no person claiming through any such
person has any claim against the Company in respect of any such issuance,
including any claim based upon an alleged misstatement of a material fact in
connection with such issuance or an omission to state a material fact necessary
to make the statements of fact stated in connection with such issuance not
misleading.
(c) On the date hereof, upon issuance, sale and delivery of the
certificates representing the Shares to the Buyer and payment of the Purchase
Price for those Shares pursuant to Section 2.01: (i) each Share shall be duly
authorized and validly issued, fully paid and nonassessable; (ii) none of the
Shares shall have been issued in violation of any preemptive rights or any other
covenant, condition, restriction or voting arrangement affecting the Company or
the capital stock thereof; (iii) each Share will be entitled to one vote, voting
together with the other shares of common stock as a single class; and (iv) each
Share shall have been issued in conformity with Applicable Law.
(d) On the date hereof, upon issuance, sale and delivery of the
certificates representing the Shares to the Buyer and payment of the Purchase
Price for those Shares pursuant to Section 2.01, the Company will transfer good
and marketable title to the Shares, free and clear, except as required by
applicable state or federal securities laws or as otherwise provided in this
Agreement and the Stockholder Agreement, of any covenant, condition,
restriction, voting arrangement, lien, charge, encumbrance, security agreement,
option or adverse claim, to the Buyer.
(e) On the date hereof, upon issuance, sale and delivery of the
certificates representing the Shares to the Buyer and payment of the Purchase
Price for those Shares pursuant to Section 2.01, the Shares shall constitute 45%
of the total number of outstanding shares of capital stock of the Company.
(f) Except as set forth on Schedule 4.01(f), there are no outstanding
subscriptions, options, rights, warrants, convertible securities or other
agreements or commitments obligating the Company or any Subsidiary to issue or
to transfer from its treasury any shares of capital stock or other ownership
interests. No unissued shares of capital stock or ownership interests of the
Company or any Subsidiary are subject to any preemptive rights (other than
pursuant to the Stockholder Agreement). There are no outstanding contractual
obligations to repurchase, redeem or otherwise acquire any outstanding shares of
capital stock of or other ownership interest in the Company.
SECTION 4.02. Conflicts, Defaults. The execution and delivery of this
Agreement and the other agreements and instruments contemplated hereby by the
Company do not, and the performance of the Company's obligations hereunder and
thereunder and the consummation by the Company of the Transactions will not: (i)
violate, conflict with or constitute a breach or default under the certificate
of incorporation or bylaws or equivalent organizational document of the Company
or any Subsidiary; (ii) require any authorization, approval, consent,
registration, declaration or filing (other than a Report on Form 8-K and a
filing of a Form D) with, from or to any Governmental Authority; (iii) violate
any Applicable Law; (iv) result in the creation of any lien, security interest,
charge or encumbrance upon (A) the Shares or (B) any of the properties or assets
of the Company or any Subsidiary; or (v) after giving effect to the payments to
be made pursuant to Sections 2.02(b) and (c), conflict with or result in a
breach of, create an event of default (or event that, with the giving of notice
or lapse of time or both, would constitute an event of default) under, or give
any third party the right to terminate, cancel or accelerate any obligation
under, any contract, agreement, note, bond, guarantee, deed of trust, loan
agreement, mortgage, license, lease, indenture, instrument, order, arbitration
award, judgment or decree to which the Company or any Subsidiary is a party or
by which the Company or any Subsidiary is bound. There is no pending or, to the
Knowledge of the Company, threatened action, suit, claim, proceeding, inquiry or
investigation before or by any Governmental Authority against or affecting the
Company or any Subsidiary, involving or seeking to restrain or prevent the
consummation of the Transactions or that reasonably might be expected to affect
the right of the Buyer to acquire or own the Shares.
SECTION 4.03. Organization and Good Standing.
(a) The Company is a corporation duly organized, validly existing and in
good standing under the laws of the State of Delaware. The Company is qualified
to do business and is in good standing in each jurisdiction in which the
ownership of property or the conduct of business requires it to be so qualified,
except where the lack of such qualification would not reasonably be expected to
have a Material Adverse Effect. True and complete copies of the articles of
incorporation and bylaws of the Company have been delivered to the Buyer. The
Company has all requisite corporate power and authority to own or lease and
operate its properties and assets and to carry on its business as now conducted.
(b) The minute books, stock ledgers and stock transfer records of the
Company furnished to the Buyer for review are accurate and complete in all
material respects. Such minute books contain the minutes of all meetings of the
stockholders and board of directors of the Company. All such meetings were duly
called and held, and a quorum was present and acting throughout each such
meeting or action was taken by unanimous written consent in lieu of a meeting.
Such stock ledgers and stock transfer records reflect all issuances and
registrations of transfer of all shares of capital stock of the Company.
SECTION 4.04. Subsidiaries.
(a) Set forth on Schedule 4.04 is a complete list of every Subsidiary of
the Company. Except as set forth on Schedule 4.04, the Company owns 100% of the
equity of each of its Subsidiaries. Schedule 4.04 sets forth the extent to which
the Company may be liable under any circumstances for the payment of additional
amounts with respect to the Subsidiaries, whether in the form of subscription
obligations, assessments, capital calls, installment payments, general partner
liability, guarantees or otherwise. Except as set forth on Schedule 4.04, the
Company does not own, directly or indirectly, an equity interest in any other
corporation, partnership, limited liability company, joint venture or other
entity.
(b) The capitalization of each Subsidiary is set forth on Schedule 4.04.
The shares of capital stock or other ownership interests so issued by the
Subsidiaries have been duly authorized and validly issued, and are fully paid
and nonassessable. Except as set forth on Schedule 4.04, all such shares of
capital stock or other ownership interests are owned by the Company as record
owner thereof free and clear of all liens, charges, encumbrances, equities and
claims whatsoever. There is no outstanding or authorized option, subscription,
warrant, call, right, commitment or other agreement of any character obligating
the Company or any Subsidiary to issue, sell, transfer, pledge or otherwise
encumber any share of capital stock or other ownership interest of any
Subsidiary or any security or other instrument convertible into or exercisable
for or evidencing the right to subscribe for any such share of capital stock or
other ownership interest.
(c) Each Subsidiary is an entity duly organized, validly existing and in
good standing (to the extent the jurisdiction of organization of any such
Subsidiary recognizes such a concept) under the laws of the jurisdiction of its
formation indicated on Schedule 4.04. Each Subsidiary is qualified to do
business and is in good standing in each jurisdiction in which the ownership of
property or the conduct of business requires it to be so qualified, except where
the lack of such qualification would not reasonably be expected to have a
Material Adverse Effect. True and complete copies of the certificate of
incorporation and bylaws of each Subsidiary have been delivered to the Buyer.
(d) The minute books, stock ledgers and stock transfer records of each
Subsidiary furnished to the Buyer for review are accurate and complete in all
material respects. Except as set forth in Schedule 4.04, such minute books
contain the minutes of all meetings of the stockholders and board of directors
of such Subsidiary. All such meetings were duly called and held, and a quorum
was present and acting throughout each such meeting. Such stock ledgers and
stock transfer records reflect all issuances and registrations of transfer of
all shares of capital stock of such Subsidiary.
SECTION 4.05. Corporate Power and Authorization.
(a) The Company has all requisite and legal corporate power to execute and
deliver this Agreement, to issue, sell and deliver the Shares to the Buyer as
provided hereunder and to carry out and perform its other obligations under this
Agreement and the Transactions.
(b) All corporate action on the part of the Company and its directors
necessary for the sale and issuance of the Shares and the performance of its
other obligations under the Transaction Documents have been taken. The
Transaction Documents are legal, valid and binding obligations of the Company,
enforceable in accordance with their terms. The sale of the Shares to the Buyer
and the Transactions do not require the consent of the stockholders of the
Company. The Company has provided its stockholders with any notice of the
Transaction required by Applicable Law.
(c) The Board of Directors of the Company, in good faith and upon
reasonable consideration, has taken all action necessary to approve the purchase
of the Shares by the Buyer and the Transactions so that neither Article V,
Section 1 of the Company's Certificate of Incorporation nor Section 203(a) of
the Delaware General Corporation Law (the "DGCL") will be applicable to the
Buyer or any of its Affiliates. No action by the stockholders of the Company is
necessary so that neither Article V, Section 1 of the Company's Certificate of
Incorporation nor Section 203(a) of the DGCL will be applicable to the Buyer or
any of its Affiliates.
SECTION 4.06. Financial Statements.
(a) The Company has provided the Buyer with the following financial
statements of the Company and its Subsidiaries (collectively, the "Financial
Statements"):
(i) the audited consolidated balance sheet of the Company and the
Subsidiaries as of May 27, 2000 (the "Annual Balance Sheet," and such date, the
"Annual Balance Sheet Date"), and the related audited consolidated statements of
income and cash flows of the Company and the Subsidiaries for the fiscal year
then ended (together with the Annual Balance Sheet, the "Annual Financial
Statements"), and
(ii) the unaudited consolidated balance sheet of the Company and the
Subsidiaries as of February 27, 2001 (the "Latest Balance Sheet," and such date,
the "Latest Balance Sheet Date"), and the related unaudited consolidated
statements of income and cash flows of the Company and the Subsidiaries for the
nine-month period then ended (together with the Latest Balance Sheet, the
"Latest Financial Statements").
(b) The Financial Statements: (i) have been prepared in all material
respects in accordance with the books and records of the Company and the
Subsidiaries; (ii) have been prepared in accordance with GAAP; (iii) reflect and
provide adequate reserves and disclosures in respect of all liabilities of the
Company and the Subsidiaries, including all contingent liabilities; and (iv)
present fairly the consolidated combined financial position of the Company and
the Subsidiaries at such dates and the results of operations and cash flows of
the Company and the Subsidiaries for the periods then ended.
(c) The Company: (i) keeps books, records and accounts that, in reasonable
detail, accurately and fairly reflect the transactions and dispositions of
assets; and (ii) maintains a system of internal accounting controls sufficient
to provide reasonable assurance that (A) transactions are executed in accordance
with management's general or specific authorization; (B) transactions are
recorded as necessary to permit preparation of financial statements in
accordance with GAAP to maintain accountability for assets; (C) access to assets
is permitted only in accordance with management's general or specific
authorizations; and (D) the recorded accountability for assets and inventory is
compared with existing assets and inventory at reasonable intervals and
appropriate action is taken with respect to any differences.
SECTION 4.07. Changes in Circumstances. Except as set forth on Schedule
4.07, since the Annual Balance Sheet Date, the Company has used its commercially
reasonable best efforts to preserve the business organization of the Company and
the Subsidiaries intact, to keep available to the Company and the Subsidiaries
the services of all officers and employees and to preserve the goodwill of the
suppliers, customers, employees and others having business relations with the
Company and the Subsidiaries. Except as set forth on Schedule 4.07, since the
Annual Balance Sheet Date, no supplier to, or cruise line or other business
partner of, the Company or any Subsidiary has indicated any plan or intention to
reduce or terminate or change the nature or way of doing its business with the
Company or any Subsidiary or has been given any increase in its rates or
charges. Except as set forth on Schedule 4.07, since the Annual Balance Sheet
Date, the Company and the Subsidiaries have conducted their business in the
ordinary course, have maintained their rates and charges without reduction and
have maintained their assets and properties in at least as good order and
condition as existed on such date, ordinary wear and tear excepted, and as is
necessary to continue to conduct their business. Except as set forth on Schedule
4.07, since the Annual Balance Sheet Date there has not been:
(a) any transaction by the Company or any Subsidiary not in the ordinary
and usual course of business;
(b) the incurrence of any indebtedness for borrowed money by the Company or
any Subsidiary, or the incurrence by the Company or any Subsidiary of any other
liability or obligation (accrued, absolute, contingent or otherwise), except for
liabilities or obligations incurred in the ordinary course of business and as
expressly permitted by this Agreement;
(c) any material decrease in the amount of net assets, or material adverse
change in the financial condition, assets, liabilities or business or prospects
of the Company and the Subsidiaries taken as a whole;
(d) any material damage, destruction or loss, whether or not covered by
insurance, affecting the Company or any Subsidiary;
(e) any material alteration in the manner in which the Company and the
Subsidiaries keep their books, accounts or records, or in the accounting
principles and practices therein reflected;
(f) a termination or threatened termination or substantial modification of
the relationship between the Company or any Subsidiary and a key employee or a
material customer or supplier;
(g) a lease of, or commitment to acquire or lease, any realty or any
substantial item of machinery or equipment;
(h) any mortgage, pledge or lien, charge or other encumbrance placed upon
any of the assets or properties of the Company or any Subsidiary;
(i) a sale, assignment or transfer of any asset, property or business or
cancellation of any debt or claim or waiver of any right, except in the ordinary
course of business;
(j) the forgiveness of any loan to any stockholder, officer, director or
employee of the Company or any Subsidiary, or any dividend or distribution to
any stockholders or other payment to any stockholders other than salary or other
compensation for services rendered as officers, directors or employees of the
Company;
(k) any loan to any stockholder, officer, director or employee of the
Company or any Subsidiary or any Affiliate of the Company;
(l) any increase or decrease, in an aggregate amount not in excess of
$25,000, in the salary or other compensation payable or to become payable to any
key employee, officer, director of the Company or any Subsidiary, or the
declaration, payment or commitment of any kind for the payment of a bonus or
other compensation or benefit;
(m) any increase or decrease in the salary or other compensation payable or
to become payable, other than in the ordinary course and consistent with past
practice, to any non-key employee, officer, director of the Company or any
Subsidiary, or the declaration, payment or commitment of any kind for the
payment of a bonus or other compensation or benefit;
(n) any commitment for capital expenditures in excess of $25,000;
(o) any issuance of any security of the Company or any Subsidiary or any
agreement to issue any security of the Company or any Subsidiary; or
(p) in general, any change in the financial condition, operations,
business, properties or assets or manner of conducting the business of the
Company or any Subsidiary, other than changes in the ordinary and usual course
of business consistent with prior practice, none of which, individually or in
the aggregate, has had or reasonably could be expected to have a Material
Adverse Effect.
SECTION 4.08. Ownership and Adequacy of Assets. Except as set forth on
Schedule 4.08, the Company and the Subsidiaries have good and marketable title
to all of the assets that they purport to own, including all assets shown on or
reflected in the Latest Financial Statements and all assets acquired since the
dates thereof, free and clear of all liens, charges, encumbrances, equities and
claims, other than inventory sold in the ordinary course of business. Such
assets, together with the properties leased to the Company and the Subsidiaries
and described in the Schedules to this Agreement, are all the assets necessary
to conduct the business of the Company and the Subsidiaries as conducted prior
to the date hereof. All facilities and equipment that are owned or leased by the
Company or any Subsidiary are in good working condition (ordinary wear and tear
excepted) and in a state of reasonable maintenance and repair and are available
for the continued operation of the business of the Company and the Subsidiaries
in the ordinary course consistent with past practice.
SECTION 4.09. Real Property.
(a) Set forth on Schedule 4.09 is (i) a complete list of all real property
that the Company or any Subsidiary currently owns, or in which the Company or
any Subsidiary currently has legal or equitable title (such real property,
together with all rights, title privileges and appurtenances of the Company and
the Subsidiaries pertaining thereto, is referred to as the "Owned Property");
and (ii) a description of each lease of real property under which the Company or
any Subsidiary is a lessee, lessor, sublessee or sublessor (the "Leased
Property"). The Owned Property and the Leased Property collectively are referred
to as the "Real Property."
(b) True and complete copies of all deeds, title insurance policies,
surveys, mortgages, agreements and other documents granting to the Company or
any Subsidiary title to or an interest in any Real Property (the "Title
Documents"), including all leases, licenses or other occupancy agreements,
including amendments and supplements thereto, to which the Company or any
Subsidiary is a party respecting any Real Property and all other instruments
granting such leasehold interests, rights, options or other interests (the
"Property Leases") have been delivered to the Buyer.
(c) With respect to the Property Leases, no breach or event of default on
the part of the Company, any Subsidiary, or any other party to any of the
Property Leases, and no event that, with the giving of notice or lapse of time
or both, would constitute such breach or event of default by the Company or any
Subsidiary or, to the Knowledge of the Company or any Subsidiary, any other
party to any of the Property Leases, has occurred and is continuing unremedied,
which breach or event of default would give rise to any right to terminate or
alter the material terms of any such Property Lease. Each Property Lease is in
full force and effect and is valid and enforceable against the relevant Company
or Subsidiary and, to the knowledge of the Company, the other party thereto in
accordance with its terms. All rental and other payments due under each of the
Property Leases have been paid. The sale of the Shares to the Buyer and the
consummation of the Transactions do not require the consent of any party to,
constitute an event of default under or trigger any options to terminate or
change the existing terms of any, Property Lease.
(d) With respect to the Title Documents, no breach or event of default on
the part of the Company, any Subsidiary or any other party thereto and no event
that, with the giving of notice or lapse of time or both, would constitute such
breach or event of default on the part of the relevant Company, Subsidiary or,
to the knowledge of the Company, any other party thereto, under any term,
covenant or condition of such Title Documents, have occurred and are continuing
unremedied, which breach or event of default would give rise to any right to
terminate or alter the material terms of any such Title Documents.
(e) Except as set forth on Schedule 4.09(e), the Company and the
Subsidiaries have good and marketable title in fee to the Owned Property, and
the right to use and occupy the Leased Property, and to all plants, buildings
and improvements thereon, free and clear of any mortgages, liens, security
interests, claims, charges, imperfections of title, encroachments, easements,
rights-of-way,squatters' rights, encumbrances, covenants, conditions or
restrictions ("Impairments"), except for any such Impairments which do not
materially interfere with the use of such Owned Property or Leased Property by
the Company or its Subsidiaries.
(f) The buildings and improvements owned or leased by the Company or any
Subsidiary, and the operation or maintenance thereof as presently operated and
maintained, do not (i) violate in any material respect any zoning or building
law or ordinance or other administrative regulation regarding real property,
including those relating to zoning, land division, building, fire, health and
safety or (ii) violate in any material respect any restrictive covenant or
similar provision of federal, state, local or foreign law regarding real
property in any material respect.
(g) There is no pending or, to the Knowledge of the Company, threatened
condemnation or eminent domain proceeding with respect to, or that is reasonably
likely to affect, any Real Property.
SECTION 4.10 Tangible Personal Property.
(a) Set forth on Schedule 4.10 is a complete list of all personal property
owned with a book value in excess of $25,000 or leased, with obligations in
excess of $20,000 per year in the aggregate to any single lessor, by the Company
or any Subsidiary or used in their business (the "Personal Property") and a list
and brief description of each lease relating to any leased Personal Property.
All such leases are valid and enforceable against the relevant Company,
Subsidiary and, to the knowledge of the Company, the other party thereto in
accordance with their respective terms. There is no breach or default under any
of such leases on the part of the Company, any Subsidiary or, to the knowledge
of the Company, on the part of any other party thereto, or any condition or
event that, with the giving of notice or lapse of time or both, would constitute
such a breach or default on the part of the Company, any Subsidiary or on the
part of any other party thereto, which breach or event of default would give
rise to any right to terminate or alter the material terms of any such lease.
True and complete copies of each such lease have been delivered to the Buyer.
The issuance and sale of the Shares to the Buyer does not require the consent of
any party to, and will not constitute an event of default under or permit any
party to terminate or change the existing terms of, any such lease.
(b) Except as set forth on Schedule 4.10, the Company and the Subsidiaries
have good and marketable title to each item of Personal Property free and clear
of all liens, leases, encumbrances, claims under bailment and storage
agreements, equities, conditional sales contracts, security interests, charges
and restrictions, except for liens for personal property taxes that are not
delinquent. All material items of Personal Property are in good condition and in
a reasonable state of repair, reasonable wear and tear excepted. Material
maintenance on such items of Personal Property has not been deferred beyond a
reasonable time period.
SECTION 4.11. Intangible Property.
(a) Schedule 4.11 sets forth: (i) a complete identification of all material
trademarks, tradenames, copyrights, patents and other items of intellectual
property and any application in respect thereof (the "Intellectual Property")
used in the business of the Company and the Subsidiaries; (ii) a true and
complete list of all contracts and other agreements to which the Company or any
Subsidiary is a party either as licensee or licensor for each such item of
Intellectual Property; and (iii) a description of all confidential and material
inventions, processes, designs, trade secrets, computer programs, software and
formulae owned by or used in the business of the Company and the Subsidiaries.
(b) Except as set forth on Schedule 4.11, the Company and the Subsidiaries
are the owners of all right, title and interest in and to each item of
Intellectual Property free and clear of all liens, security interests and
encumbrances and without obligation to make any royalty, license or other
payment with respect thereto.
(c) Except as set forth on Schedule 4.11, there have not been any claims,
actions or judicial or other adversary proceedings involving the Company or any
Subsidiary concerning any item of Intellectual Property and there is no basis
for, or known threat of, any such action or proceeding.
(d) The Company and the Subsidiaries have the right and authority to use
each item of Intellectual Property and, to the knowledge of the Company, such
use does not conflict with, infringe upon or violate any proprietary right of
any other person.
SECTION 4.12. Receivables. The accounts receivable of the Company and the
Subsidiaries have arisen from bona fide transactions or for sales of merchandise
in the ordinary course of business consistent with past practice, represent bona
fide indebtedness incurred by the applicable account debtor, are collectible in
full in accordance with their terms in accordance with the past custom and
practice of the Company and the Subsidiaries, subject only to the reserve for
bad debts set forth on the Latest Financial Statements as adjusted for
operations and transactions through the Closing Date and, to the Knowledge of
the Company, are not subject to any defense or offset.
SECTION 4.13. Contracts and Commitments.
(a) Set forth on Schedule 4.13 is a complete list of each written or oral
agreement or instrument to which the Company or any Subsidiary is a party, of
the type or nature described below:
(i) agreement or contract not made in the ordinary course of
business, other than the Transaction Documents;
(ii) consulting agreement, independent contractor agreement,
bonus agreement, commission agreement or contract for the employment
of any employee or other person on a full-time, part-time or
consulting basis;
(iii) contract or collective bargaining agreement with any labor
union;
(iv) contract for the purchase or sale of Real Property or capital
or fixed assets in excess of $25,000;
(v) agreement or contract for the purchase of materials,
supplies, equipment or services in excess of normal requirements, in each
case, which require or could be reasonably expected to require expenditures
by the Company or any Subsidiary in excess of $25,000 per annum;
(vi) agreement or contract with a cruise line or other business
entity designed to introduce customers to the Company's stores;
(vii) agreement or contract that is (A) is with a significant
customer or supplier, (B) is not terminable upon notice of 30 days or less
without cost or liability resulting from such termination, or (C) any
distribution agreement with a merchandise supplier;
(viii) agreement, mortgage, indenture, loan or credit agreement,
security agreement or other agreement or instrument relating to the borrowing
or lending of money or extension of credit or providing for the mortgaging or
pledging of, or otherwise placing a lien, security interest or encumbrance
on, any of the assets of the Company or any Subsidiary;
(ix) option, warrant or other contract for the purchase of any
debt or equity security of any corporation or entity, or for the issuance,
sale or registration for sale of any debt or equity security, other
than the Registration Rights Agreement, or for the conversion of any
obligation, instrument or security into debt or equity securities, of the
Company or any Subsidiary;
(x) guaranty or indemnity of or with respect to any obligation for
borrowed money, credit or otherwise, excluding endorsements made for
collection in the ordinary course of business;
(xi) settlement agreement of any administrative or judicial
proceedings within the past five years;
(xii) contracts and other agreements containing covenants under
which the Company, any Subsidiary, any key employee of the Company or any
Subsidiary may not compete in a line of business, with a particular person
or entity (other than the Company or any Subsidiary), or in a particular
geographic area;
(xiii) license agreement for any intellectual property,
including trademarks, trade names and service marks; or
(xiv) any other contract or agreement which is material to the
business, business prospects or assets of the Company or the termination of
which would have or could be reasonably expected to have a Material Adverse
Effect (other than Property Leases and Title Documents).
(b) Neither the Company nor any Subsidiary is in breach of or in default
under any agreement or instrument listed in Schedule 4.13 (collectively, the
"Contracts"), and no event has occurred that, with the giving of notice or lapse
of time or both, would constitute such a breach or default by the Company, any
Subsidiary or any other party thereto, except, in each case, any such breach or
default which would not give rise to a right to terminate or alter the material
terms of any such Contract. True and complete copies of the Contracts have been
delivered to the Buyer.
SECTION 4.14. Inventory. The inventory set forth in the Latest Balance
Sheet has been valued in accordance with GAAP consistently applied with prior
periods. The inventory is adequate and appropriate for the conduct of the
business of the Company and the Subsidiaries as it is currently being conducted.
Inventory levels are not in excess of the normal operating requirements of the
Company and the Subsidiaries in the ordinary course of business consistent with
past practice. The value at which the inventory is carried on the Latest Balance
Sheet reflects the normal inventory policy of the Company and the Subsidiaries
and is consistent with the Annual Balance Sheet.
SECTION 4.15. Personnel.
(a) Set forth on Schedule 4.15 is a complete list of:
(i) the name of each person employed by the Company or any
Subsidiary, other than hourly employees, whose total compensation for s
services rendered, including bonuses and deferred compensation, for the
fiscal year ended May 27, 2000 was in excess of the rate of $50,000 per
year, the title or job classification of each such person, the name of the
Company or the Subsidiary by which such person is employed and the current
compensation of each such person;
(ii) the name of each person, if any, holding tax or other
powers of attorney from the Company or any Subsidiary and a summary of the
terms thereof;
(iii) all employment contracts, confidentiality agreements or
non-compete agreements to which the Company or any Subsidiary is a party;
(iv) the name and title or job description of each director and
officer, and each other key employee, of each Company and each Subsidiary; and
(v) a list of each employee of each Company and each Subsidiary
and a description of any noncompetition arrangements, including duration,
scope and geographic area, between each such employee and the Company or any
Subsidiary.
(b) The Company has furnished to the Buyer true and complete copies of all
employment contracts, collective bargaining agreements, confidentiality
agreements and non-compete agreements, along with a manual describing the
material provisions of all employee benefit plans relating to employees of the
Company or any Subsidiary.
(c) Since the Annual Balance Sheet Date, there has been no material change
in the rate of total compensation for services rendered, including bonuses and
deferred compensation, for any of the employees listed on Schedule 4.15, and the
bonuses and deferred compensation established for the fiscal year ending May 26,
2001 are consistent with the past practices of the Company and the Subsidiaries
for the fiscal year ended May 27, 2000 for similar employees in similar
situations.
SECTION 4.16. Labor Matters.
(a) Neither the Company nor any of the Subsidiaries is a party to any
contract or collective bargaining agreement with any labor organization. No
organizing effort or question concerning representation question is pending
respecting the employees of the Company or any Subsidiary, and no such question
has been raised within the preceding three years.
(b) All reasonably anticipated material obligations of the Company or any
Subsidiary, whether arising by operation of law, contract, past custom or
otherwise, for unemployment compensation benefits, pension benefits, salaries,
wages, bonuses and other forms of compensation payable to the officers,
directors and other employees and independent contractors of the Company or any
Subsidiary have been paid or adequate accruals therefor have been made in the
Latest Balance Sheet in accordance with GAAP.
(c) To the Company's knowledge, except as set forth on Schedule 4.16, there
is no basis for any material claim, grievance, arbitration, negotiation, suit,
action or charge of or by the employees of the Company or any Subsidiary, and no
such material charge or complaint is pending against the Company or any
Subsidiary before the National Labor Relations Board, the Equal Employment
Opportunity Commission or any other federal, state or local agency with
jurisdiction over employment matters.
(d) Each Company and each Subsidiary has withheld and paid to the
appropriate Governmental Authorities or is withholding for payment not yet due
to such authorities all amounts required to be withheld from the employees of
the Company and the Subsidiaries. Neither the Company nor any Subsidiary is
liable for any arrears of such amounts or penalties thereon for failure to
comply with any of the foregoing. The Company and the Subsidiaries have complied
in all material respects with all Applicable Laws relating to the employment of
labor, including those relating to wages, hours, collective bargaining and the
payment and withholding of Taxes and other amounts as required by appropriate
Governmental Authorities.
(e) No key employee of the Company or any Subsidiary, to the Knowledge of
any such entity, plans to retire or resign during the 12-month period following
the Closing Date or otherwise be unavailable as an employee of such Company or
such Subsidiary after the Closing Date at compensation substantially similar to
such employee's present rate of compensation plus bonuses similar to amounts
paid in prior years.
SECTION 4.17. Compliance with Law. The Company and its Subsidiaries are in
compliance in all material respects with all Applicable Law; provided, however,
for purposes of the preceding sentence, "Applicable Law" shall not include those
Applicable Laws referred to in Section 4.16, 4.20, 4.21, 4.22, 4.23, 4.24 and
4.27. Neither the Company nor any Subsidiary has received any notification of
any asserted present or past failure to comply with Applicable Law.
SECTION 4.18. Permits. Set forth on Schedule 4.18 is a complete list of all
material franchises, licenses, permits, certificates and other authorizations
from Governmental Authorities (collectively, the "Permits") issued to the
Company, any Subsidiary or any employee of the Company or any Subsidiary to act
on behalf of the Company or any Subsidiary. Such Permits constitute all material
franchises, licenses, permits, certificates and other authorizations from any
Governmental Authorities that are necessary for the conduct of the business of
the Company and the Subsidiaries as presently conducted. All such Permits are in
full force and effect, and no material violations have been recorded in respect
of the Permits. No proceeding is pending or, to the Knowledge of the Company,
threatened to revoke, withdraw or limit any Permit. To the Company's knowledge,
there is no fact, error or omission relevant to any Permit that would permit the
revocation, withdrawal or limitation or result in the threatened revocation,
withdrawal or limitation of such Permit. The Company has no reason to believe
that any such proceeding will be brought in the future or that any such Permit
will be revoked, withdrawn, limited or not extended or renewed. The issuance and
sale of the Shares to the Buyer and the consummation of the Transactions does
not require the consent of any Governmental Authority with respect to, and will
not constitute an event of default under or permit the termination of or an
adverse change to the existing terms of, any Permit.
SECTION 4.19. Litigation. Except as set forth on Schedule 4.19, there is no
pending or, to the Knowledge of the Company, threatened litigation, action,
suit, proceeding, arbitration, claim, investigation or administrative
proceeding, by or before any Governmental Authority or dispute resolution panel,
involving or affecting the Company or any Subsidiary, or the assets, properties
or business of the Company or any Subsidiary, or relating to or involving the
Transactions. No litigation, action, suit, proceeding, arbitration, claim,
investigation or administrative proceeding, whether or not set forth on Schedule
4.19, reasonably could be expected to have a Material Adverse Effect or to
result in the imposition of a material lien, security interest or other
encumbrance on any of the assets of the Company or any Subsidiary. Neither the
Company nor any Subsidiary has received any opinion or memorandum or legal
advice or notice from legal counsel to the effect that it is exposed, from a
legal standpoint, to any liability or disadvantage that may be material to its
assets, properties, business or business prospects. Neither the Company nor any
Subsidiary is in default with respect to any material order, writ, injunction or
decree known to or served upon the Company or such Subsidiary. Except as set
forth on Schedule 4.19, there is no pending action or suit brought by the
Company or any Subsidiary against others.
SECTION 4.20. Tax Matters.
(a) Except as set forth on Schedule 4.20, the Company and the Subsidiaries
in a timely manner have filed all Tax Returns required to have been filed and
have paid all Taxes shown due on such returns. All such returns are true,
correct and complete in all material respects. The Company and the Subsidiaries
have paid in full or set up adequate reserves in accordance with GAAP in respect
of all material Taxes for the periods covered by such returns, as well as all
other material Taxes that have become due or payable, including all Taxes that
the Company or any Subsidiary is obligated to withhold from amounts paid or
payable to or benefits conferred upon employees, creditors and third parties.
(b) Set forth on Schedule 4.20 is a complete list of income and other Tax
Returns filed by the Company or any Subsidiary that have been examined or
audited by the IRS or other appropriate authority during the preceding five
years and a list of all adjustments resulting from each such examination or
audit. Except as set forth on Schedule 4.20, no Tax examination or audit is in
progress. All deficiencies proposed as a result of such examinations or audits
have been paid or finally settled. Any material adjustments resulting from any
settlement of any proposed deficiency are reflected in the Annual Balance Sheet
to the extent required by GAAP. Schedule 4.20 sets forth the years for which any
assessment against the Company or any Subsidiary may be made by the IRS or other
appropriate authority has not expired. There are no grounds for any further
material Tax liability with respect to the years that have not been examined or
audited. There is no outstanding agreement or waiver made by or on behalf of the
Company or any Subsidiary for the extension of time for any applicable statute
of limitations. Except as set forth on Schedule 4.20, neither the Company nor
any of the Subsidiaries has requested any extension of time in which to file any
Tax Return.
(c) Except for statutory liens for Taxes that are not yet due, there is no
Tax lien, whether imposed by any federal, state, local or foreign taxing
authority, outstanding against any of the assets or properties of the Company or
any Subsidiary.
(d) None of the Company or any of its Subsidiaries is, and none was on any
"determination date" (as defined in Section 1.897-2(c) of the Treasury
Regulations) that occurred in the five-year period preceding the Closing Date, a
United States Real Property Holding Corporation within the meaning of Section
897 of the Code.
(e) Neither the Company nor any Subsidiary has executed any closing
agreement pursuant to Section 7121 of the Code or any predecessor provision
thereof, or any similar provision of state, local or foreign law.
(f) Neither the Company nor any Subsidiary has filed a consent pursuant to
Section 341(f) of the Code or agreed to have Section 341(f)(2) of the Code apply
to any disposition of a subsection (f) asset (as such term is defined in Section
341(f)(4) of the Code) owned by the Company or any Subsidiary.
(g) None of the assets owned by the Company or any Subsidiary is property
that is required to be treated as owned by any other person pursuant to Section
168(f)(8) of the Internal Revenue Code of 1954, as in effect immediately prior
to the enactment of the Tax Reform Act of 1986, or is "tax-exempt use property"
within the meaning of Section 168(h) of the Code.
(h) Neither the Company nor any Subsidiary is a party to a Tax sharing
agreement or similar arrangement.
(i) Neither the Company nor any Subsidiary has agreed or is required to
make any adjustments pursuant to Section 481(a) of the Code or any similar
provision of state, local or foreign law by reason of a change in accounting
method. Neither the Company nor any Subsidiary has any Knowledge that the IRS
has proposed any such adjustment or change in accounting method. There is no
application pending with any taxing authority requesting permission for any
changes in accounting methods by the Company or any Subsidiary.
(j) Neither the Company nor any Subsidiary has participated in or
cooperated with an international boycott within the meaning of Section 999 of
the Code.
(k) Except as set forth on Schedule 4.20, no foreign Subsidiary has, or at
any time has had, an investment in "United States property" within the meaning
of Section 956(c) of the Code.
(l) No foreign Subsidiary is, or at any time has been, a passive foreign
investment company within the meaning of Section 1297 of the Code, and neither
the Company nor any Subsidiary is a shareholder, directly or indirectly, in a
passive foreign investment company.
(m) No foreign Subsidiary is, or at any time has been, engaged in the
conduct of a trade or business within the United States or treated as or
considered to be so engaged.
SECTION 4.21 Environmental Matters. Except as set forth on Schedule 4.21:
(a)(i) The Company and the Subsidiaries have obtained all Permits that are
required under applicable Environmental Requirements; (ii) the Company and the
Subsidiaries are in compliance in all material respects with the material terms
and conditions of all such Permits; and (iii) the Company and the Subsidiaries
are in compliance in all material respects with all other limitations,
restrictions, conditions, standards, requirements, schedules and timetables
required or imposed under applicable Environmental Requirements.
(b) Neither the Company, any Subsidiary nor any previous owner, tenant,
occupant, operator or user of any Real Property or Former Real Property or any
other person, has engaged in or permitted any operation or activity at or upon,
or any use or occupancy of, any Real Property or Former Real Property for the
purpose of or in any way involving the handling, manufacture, treatment,
storage, use, generation, release, discharge, refining, reclaiming, recycling,
dumping or disposal (whether legal or illegal, accidental or intentional,
integral or incidental to the operations at the affected site) of any Hazardous
Materials in violation of any Environmental Requirement, or in a manner that has
given or would reasonably be expected to give rise to Environmental Damages
being imposed on the Company or any Subsidiary. No Hazardous Materials currently
are incorporated in any construction on any Real Property.
(c) No Hazardous Materials have migrated or are threatening to migrate from
any Real Property or Former Real Property upon or beneath other properties and,
to the Company's Knowledge, no Hazardous Materials have migrated or are
threatening to migrate from other properties upon, about or beneath any Real
Property.
(d) (i) Either no underground improvement, including treatment or storage
tank or gas or oil well, is or ever has been located on any Real Property or
Former Real Property or all such underground treatment and storage tanks have
been exhumed and disposed of; and (ii) all portions of the Real Property or
Former Real Property, as the case may be, and all groundwater contaminated by
any Hazardous Materials contained therein, have been remediated in compliance in
all material respects with Environmental Requirements and to a degree that any
remaining concentrations of Hazardous Materials are below maximum contaminate
levels or other regulatory limits set forth in applicable or relevant
Environmental Requirements.
(e) All Real Property and all Former Real Property, and all current and, to
the Knowledge of the Company, all past activities thereon, including the use,
maintenance and operation of all Real Property and all Former Real Property, and
all activities and conduct of business related thereto, currently comply and, to
the Knowledge of the Company, at all times in the past during the Company's use
thereof have complied, in all material respects with all applicable
Environmental Requirements, except for such failures to comply that individually
or in the aggregate would not reasonably be expected to result in a Material
Adverse Effect. Neither the Company, any Subsidiary nor any current or prior
owner or occupant of any Real Property or Former Real Property, is required to
take any action related to any such property in order to place such property or
the improvements located thereon in compliance with all applicable Environmental
Requirements, which action would reasonably be expected to result in a Material
Adverse Effect.
(f) Neither the Company, any Subsidiary nor, to the Knowledge of the
Company, any current or prior owner or occupant of any Real Property or Former
Real Property has received any written notice or other written communication
concerning (i) any violation or alleged violation of Environmental Requirements,
whether or not corrected or (ii) any alleged liability for Environmental
Damages. There exists no basis for any lawsuit, claim, proceeding, citation,
directive, investigation related to clause (i) or (ii) being instituted or
filed, except for any such violation or liability that individually or in the
aggregate would not reasonably be expected to result in a Material Adverse
Effect. No writ, injunction, decree, order or judgment relating to the foregoing
is outstanding that would reasonably be expected to result in a Material Adverse
Effect. Neither the Company nor any Subsidiary has been ordered by any
Governmental Entity to take any step to investigate or remedy any condition on
any property, whether or not constituting a violation of Environmental
Requirements. Neither the Company nor any Subsidiary has been named a
"potentially responsible party" with respect thereto.
SECTION 4.22. Occupational Safety and Health. Except as set forth on
Schedule 4.22, no citations have been issued to the Company or any Subsidiary
under OSHA or any similar statutory scheme applicable to the Company or any
Subsidiary based on their operations in countries outside the United States. The
Company and the Subsidiaries are in compliance with OSHA and the rules and
regulations promulgated thereunder and all similar statutory schemes applicable
to the Company or any Subsidiary based on their operations in countries outside
the United States. The Buyer has received true, correct and complete copies of
all loss control surveys conducted by the Company's insurance carriers and
copies of all recommendations made by such insurance carriers. The Company and
the Subsidiaries have implemented all recommendations made by all such insurance
carriers based upon any such loss control surveys.
SECTION 4.23. Non-ERISA Plans.
(a) Set forth on Schedule 4.23 is a list of all current and unexpired
employment contracts or consulting agreements entered into by the Company or any
Subsidiary, or by which the Company or any Subsidiary is bound, and all deferred
compensation, bonus, incentive compensation, restricted stock, stock option,
employee stock purchase, savings, unexpired severance or termination pay
agreement or plan or any other employee benefit plan, agreement, arrangement or
commitment, whether formal or informal, maintained, entered into or contributed
to, or which is required to be maintained, entered into or contributed to, by
the Company or any Subsidiary for the benefit of any current or former director,
officer or employee of the Company or any Subsidiary (the "Non-ERISA Plans").
Non-ERISA Plans do not include any ERISA Plans described in Section 4.24. The
Company has provided the Buyer with copies of all Non-ERISA Plans.
(b) Each Non-ERISA Plan is in material compliance with all Applicable Law.
The benefits under the Non-ERISA Plans are as represented in such plan
documents. Except as reflected in the Latest Balance Sheet, neither the Company
nor any Subsidiary has any obligation or liability with respect to any Non-ERISA
Plan, including under any collective bargaining agreement to which the Company
or any Subsidiary is a party or by which it is bound.
(c) Neither the Company nor any Subsidiary is in default in any material
respect under any Non-ERISA Plan listed on Schedule 4.23. No benefit under any
Non-ERISA Plan has been increased subsequent to the date as of which documents
have been provided to the Buyer. Neither the Company nor any Subsidiary has any
plan, arrangement or commitment to create any additional ERISA Plan or Non-ERISA
Plan that would affect any current or former employee of the Company or any
Subsidiary. There is no action, suit or claim, other than routine claims for
benefits, pending or to the Knowledge of the Company threatened with respect to
any Non-ERISA Plan or the fiduciaries thereof, or against the assets of any
Non-ERISA Plan, the Company or any Subsidiary that reasonably could be expected
to have a Material Adverse Effect.
(d) Except as set forth on Schedule 4.23, no agreement, commitment or
obligation exists to increase any benefits under any Non-ERISA Plan, and no
Non-ERISA Plan provides for post-employment health, life insurance or other
welfare benefit coverage.
SECTION 4.24. ERISA Plans.
(a) Set forth on Schedule 4.24 is a complete list of each employee pension
benefit plan (the "Pension Plans") as defined in Section 3(2) of ERISA and each
employee welfare benefit plan (the "Welfare Plans") as defined in Section 3(1)
of ERISA established, maintained or contributed to by the Company, and
Subsidiary or any ERISA Affiliate or to which the Company, any Subsidiary or any
ERISA Affiliate had an obligation to contribute during the five years preceding
the date hereof. As used herein, the term "ERISA Affiliate" means a corporation
which is a member of a controlled group of corporations with the Company or any
Subsidiary within the meaning of Section 414(b) of the Code, a trade or business
(including a sole proprietorship, partnership, trust, estate or corporation)
which is under common control with the Company or any Subsidiary within the
meaning of Section 414(c) of the Code, or a member of an affiliated service
group with the Company or any Subsidiary within the meaning of Section 414(m) or
Section 414(o) of the Code.
(b) The Company has provided the Buyer, to the extent applicable, with true
and correct copies of the following documents:
(i) each ERISA Plan listed on Schedule 4.24 and all amendments
thereto;
(ii) each trust agreement, annuity contract or insurance policy
(or any other funding instrument) pertaining to any of the ERISA Plans,
including all amendments to such documents;
(iii) the most recent determination letter issued by the IRS with
respect to each of the Pension Plans that are subject to the requirements
of Section 401(a) of the Code;
(iv) the three most recent actuarial valuation reports for each
ERISA Plan for which an actuarial valuation report is required to be prepared
by ERISA or the Code; and
(v) the two most recent Annual Reports (IRS Forms 5500 series),
including Schedules A and B, if applicable, required to be filed with
respect to each ERISA Plan and for which the due date for filing (including
extensions thereof) precedes the Closing Date.
(c) Neither the Company, any Subsidiary nor any ERISA Affiliate maintains
or has maintained a defined benefit plan as defined in Section 3(35) of ERISA.
No non-exempt prohibited transaction within the meaning of Sections 406 and 408
of ERISA or Section 4975 of the Code has occurred with respect to any Pension
Plan.
(d) None of the Company, any Subsidiary or ERISA Affiliate is contributing
or has an obligation to contribute, or has ever contributed or has had an
obligation to contribute, to a "Multiemployer Plan" as defined in Section 3(37)
of ERISA.
(e) There is no action, suit or claim pending (other than routine claims
for benefits) or that reasonably could be expected to be asserted against any
ERISA Plan or the assets of any ERISA Plan that would have a Material Adverse
Effect. No civil or criminal action brought pursuant to the provisions of Title
I, Subtitle B, Part 5 of ERISA is pending or, to the Knowledge of the Company,
threatened against any fiduciary of any ERISA Plan that reasonably could be
expected to have a Material Adverse Effect. None of the ERISA Plans or any
fiduciary thereof has been the direct or indirect subject of an audit
investigation or examination by any governmental or quasi-governmental agency
during the past three years.
(f) All of the ERISA Plans currently materially comply, and have
substantially complied in the past, both as to form and operation, in all
material respects with the terms of such ERISA Plans and with the applicable
provisions of ERISA, the Code and other Applicable Law. The IRS has made a
favorable determination as to the qualification under Section 401(a) of the Code
of each of the Pension Plans that is intended to be qualified. Neither the
Company nor any Subsidiary has or maintains any Welfare Plans with trusts that
are intended to be qualified under Section 501(a) of the Code. Except for
amendments to the Code, ERISA and the regulations thereunder for which the
remedial amendment time period has not expired, nothing has occurred since the
date of each such determination or recognition letter that could reasonably be
expected to adversely affect such qualification.
(g) No agreement, commitment or obligation exists to increase any benefits
under any ERISA Plan or to adopt any new ERISA Plan.
(h) No ERISA Plan provides for post-employment health, life insurance or
other welfare benefit coverage, other than as may be required under COBRA
pursuant to Part VI of Title I of ERISA or under Applicable Law.
(i) Except as set forth on Schedule 4.24, no contract, agreement, plan or
other arrangement exists, whether or not an ERISA Plan, pursuant to which the
execution of this Agreement, or the consummation of the Transactions, would
trigger an obligation by the Company or any Subsidiary to pay any amount or
provide any property, or accelerate any such payment or the provision of any
such property, to any employee, officer or director of the Company or any
Subsidiary.
SECTION 4.25. Insurance. Schedule 4.25 sets forth a true and correct list
of (i) all insurance policies of any nature whatsoever maintained by the Company
and the Subsidiaries during the three years prior to the date hereof; (ii) the
maximum insured losses under each policy (per occurrence and in the aggregate);
(iii) the annual or other premiums payable or deductibles owed under each such
policy; and (iv) the amount of all claims made by the Company and the
Subsidiaries under such insurance policies during the past three years. All such
insurance is on an occurrence basis and will continue to provide coverage to the
Company and the Subsidiaries after the Closing Date for occurrences prior to the
Closing Date. Notwithstanding the disclosures on Schedule 4.25, all such
insurance policies are (i) valid, outstanding and enforceable; (ii) will
continue in full force and effect after the Closing Date; (iii) do not provide
for retrospective premium adjustment or other experience-based liability on the
part of the Company or any Subsidiary; and (iv) when taken together provide
adequate insurance coverage, similar in scope and amount to insurance coverage
maintained by comparable companies, for all risks that would reasonably be
expected to be insured against by a Person or entity (whether by third party
insurance, self insurance or otherwise) engaging in the same business as the
Company, including directors and officers liability coverage. There are no
outstanding requirements or recommendations by any insurance company that issued
any such policy or by any Board of Fire Underwriters or other similar body
exercising similar functions or by any Governmental Authority exercising similar
functions which requires or recommends any changes in the conduct of the
business of, or any repairs or other work to be done on or with respect to any
of the properties or assets of, the Company or any Subsidiary. All such policies
are outstanding and in full force and effect, the sale of the Shares to the
Buyer and the consummation of the Transactions will not cause a cancellation or
reduction in the coverage of such policies. To the Company's Knowledge, there
was no material inaccuracy in any application for any such insurance coverage.
Except as set forth on Schedule 4.25, neither the Company nor any Subsidiary has
received any notice or other communication from any such insurance company
within the three years prior to the date hereof suggesting that such insurance
does not cover certain potential risks or canceling or materially amending or
materially increasing the annual or other premiums payable under any of such
insurance policies, and to the Knowledge of the Company, no such rejection of
coverage, cancellation, amendment or increase of premiums is threatened.
SECTION 4.26. Absence of Undisclosed Liabilities. Neither the Company nor
any Subsidiary has any material indebtedness or liability, whether accrued,
fixed or contingent, whether or not required by GAAP to be disclosed on the
Latest Balance Sheet, other than (a) liabilities reflected in the Latest Balance
Sheet; (b) liabilities, none of which individually or in the aggregate is
material to the assets, properties, business or business prospects of the
Company or any Subsidiary; and (c) liabilities incurred in the ordinary course
of business of the Company and the Subsidiaries (consistent with past practice
in terms of both frequency and amount) subsequent to the Latest Balance Sheet
Date.
SECTION 4.27. Securities Filings. The Company has made available to the
Buyer true and complete copies of (a) its Annual Reports on Form 10-K, as
amended for the latest three fiscal years as filed with the SEC; (b) its proxy
statements relating to all of the meetings of stockholders (whether annual or
special) of the Company since January 1, 1998 as filed with the SEC; (c) its
Quarterly Report on Form 10-Q for the quarterly periods ended August 26, 2000,
November 25, 2000 and February 24, 2001 as filed with the SEC; and (d) all other
reports, statements and registration statements and amendments thereto filed by
the Company with the SEC since May 27, 2000. The reports and statements set
forth in clauses (a) through (d) are collectively referred to herein as the
"Company Securities Filings"). As of their respective dates, or as of the date
of the last amendment thereof, if amended after filing, each of the Company
Securities Filings was prepared in all respects in accordance with the
requirements of the Exchange Act, as the case may be, and none of the Company
Securities Filings contained any untrue statement of a material fact or omitted
to state a material fact required to be stated therein or necessary to make the
statements contained therein, in light of the circumstances under which they
were made, not misleading.
SECTION 4.28. Governmental Approvals. No material consent, approval, waiver
or authorization of, notice to or declaration of filing with (each a
"Governmental Consent") any nation or government, any state or other political
subdivision thereof or any entity, authority or body exercising executive,
legislative, judicial or regulatory functions of or pertaining to government,
including any governmental or regulatory authority, agency, department, board,
commission or instrumentality, any court or tribunal (each a "Governmental
Authority"), on the part of the Company or any Subsidiary is required in
connection with the execution of this Agreement, the issuance and sale of the
Shares pursuant to this Agreement or the consummation of the Transactions.
SECTION 4.29. Corporate Name. "Little Switzerland, Inc." and the other
names set forth on Schedule 4.29 constitute all of the corporate names used by
the Company and the Subsidiaries. Set forth on Schedule 4.29 is a list of all
jurisdictions, and the locations in such jurisdictions, in which such names or
any variation thereof are used by the Company or any Subsidiary. To the
knowledge of the Company, the Company and the Subsidiaries have the full legal
right to use such names in each of such jurisdictions and locations. There is no
actual or, to the Knowledge of the Company, threatened claim by any third party
with respect to the use of such names or of any actual or proposed use of such
names or any variations thereof by any third party in conflict with the use
thereof by the Company and the Subsidiaries. To the knowledge of the Company,
the use by the Company and the Subsidiaries of such names or any variations
thereof do not infringe upon the rights of any third party. Neither the Company
nor any Subsidiary has granted any third party any right to use such name or any
variations thereof.
SECTION 4.30. Transactions with Related Parties.
(a) Except as set forth on Schedule 4.30, there is no outstanding note
payable to, accounts receivable from or advances by the Company or any
Subsidiary to, and no Company or Subsidiary is otherwise a creditor of, any
director of the Company, officer of the Company, holder of 5% or more of the
Company's outstanding capital stock, or any relative or Affiliate thereof. Since
the Annual Balance Sheet Date, neither the Company nor any Subsidiary has
incurred any obligation or liability to, or become a creditor of, any director
of the Company, officer of the Company, holder of 5% or more of the Company's
outstanding capital stock, or any relative or Affiliate thereof.
(b) Since the Annual Balance Sheet Date, the Company has not declared or
paid any dividend to any holder of 1% or more of the Company's outstanding
capital stock.
(c) Except as set forth on Schedule 4.30, neither the Company nor any
Subsidiary has purchased or leased real property from any holder of 1% or more
of the Company's outstanding capital stock or any relative or Affiliate thereof
during the past five years
SECTION 4.31 Competitive Activities. The Company and the Buyer have not
been and are not in competition with each other for the purposes of Article II,
Section 17 of the Company's by-laws. The Board of Directors of the Company has,
in good faith and upon reasonable consideration, determined that, based upon the
differing geographic areas in which the Company and the Buyer conduct operations
and the other distinct characteristics of the businesses of each, the Buyer and
the Company shall not be deemed to be in competition with each other for the
purposes of Article II, Section 17 of the Company's by-laws.
SECTION 4.32. Brokers, Finders and Agents. Neither the Company nor any
Subsidiary is directly or indirectly obligated to anyone as a broker, finder,
agent or in any other similar capacity in connection with this Agreement or the
Transactions.
SECTION 4.33. Expenses. The Company has provided the Seller with a good
faith written estimate of all costs and expenses paid, payable or to be payable
to third parties by the Company in connection with the Transactions. The total
amount of the costs and expenses paid, payable or to be payable by the Company
to Jewelcor as reimbursement for Jewelcor's actual expenses incurred pursuant to
the Consulting Agreement will not exceed an aggregate of $75,000, all of which
shall solely be with respect to the Transactions.
SECTION 4.34. Other Information. The information provided and to be
provided or made available by the Company to the Buyer in or pursuant to this
Agreement or in or pursuant to the Schedules or Exhibits does not and will not
contain any untrue or misleading statement of a material fact, and does not and
will not omit to state a material fact necessary to make the statements or facts
contained therein not untrue or misleading. Copies of all financial statements,
reports, documents and other materials heretofore or hereafter delivered or made
available to the Buyer pursuant hereto are true, complete and accurate copies of
such financial statements, reports, documents and other materials.
ARTICLE FIVE
REPRESENTATIONS AND WARRANTIES OF THE BUYER
The Buyer represents and warrants to the Company that:
SECTION 5.01. Organization and Good Standing; Power and Authority. The
Buyer is a corporation duly organized and validly existing under the laws of the
State of Delaware. The Buyer has the corporate power and authority to execute
and deliver this Agreement and to perform its obligations hereunder and to
consummate the Transactions.
SECTION 5.02. Corporate Authorization. The execution, delivery and
performance of this Agreement and all other agreements and instruments executed
and delivered by the Buyer in connection herewith and the consummation of the
Transactions have been duly and validly authorized by all necessary corporate
action on the part of the Buyer. This Agreement and the other agreements and
instruments to be executed and delivered by the Buyer in connection herewith
have been duly executed and delivered by the Buyer and constitute the valid,
legal and binding obligations of the Buyer, enforceable against the Buyer in
accordance with their respective terms.
SECTION 5.03. Conflicts; Defaults. The execution and delivery of this
Agreement and the other agreements and instruments executed or to be executed in
connection herewith by the Buyer do not, and the performance by the Buyer of its
obligations hereunder and thereunder and the consummation by the Buyer of the
Transactions, will not: (i) violate, conflict with, or constitute a breach or
default under any of the terms of its certificate of incorporation or bylaws;
(ii) require any authorization, approval, consent, registration, declaration or
filing with, from or to any Governmental Authority other than filings that may
be required under Section 13(d) of the Exchange Act; (iii) violate any
Applicable Law; or (iv) conflict with or result in a breach of, create an event
of default (or event that, with the giving of notice or lapse of time or both,
would constitute an event of default) under, or give any third party the right
to terminate, cancel or accelerate any obligation under, any contract,
agreement, note, bond, guarantee, deed of trust, loan agreement, mortgage,
license, lease, indenture, instrument, order, arbitration award, judgment or
decree to which the Buyer is a party or by which such party is bound and which
would affect the consummation of the Transactions. There is no pending or, to
the Knowledge of the Buyer, threatened action, suit, claim, proceeding, inquiry
or investigation before or by any Governmental Authorities, involving or to
restrain or prevent the consummation of the Transactions.
SECTION 5.04. Brokers, Finders and Agents. The Buyer is not directly or
indirectly obligated to anyone as a broker, finder, agent or in any other
similar capacity in connection with this Agreement or the Transactions.
SECTION 5.05. Securities Laws.
(a) The Shares are being acquired by the Buyer for its own account and not
for any other Person, and for investment only and with no intention of
distributing or reselling the Shares or any part thereof or any interest therein
in any transaction that would be in violation of the securities laws of the
United States or any state thereof; without prejudice, however, to the rights of
the Buyer at all times to sell or otherwise dispose of all or any part of the
Shares under an effective registration statement or applicable exemption from
registration under the Securities Act and any applicable state securities laws.
(b) The Buyer is an "accredited investor" as that term is defined in Rule
501 promulgated under the Securities Act and has such knowledge and experience
in financial and business matters that it is capable of evaluating the merits
and risks of an investment in the Shares.
(c) The representations and warranties contained in this Section 5.05 are
made for the purposes of compliance with the exemptions from registration under
the Securities Act and shall not in any way affect the rights of the Buyer in
connection with this Agreement, including the Buyer's ability to rely on the
representations and warranties of the Company set forth in Article Four of this
Agreement.
SECTION 5.06. Governmental Approvals. The Buyer is not required to obtain
any Governmental Consent from any Governmental Authority in connection with the
execution of this Agreement, the issuance and purchase of the Shares pursuant to
this Agreement or the consummation of the Transactions.
ARTICLE SIX
COVENANTS
SECTION 6.01. Confidentiality. Except as required by law, neither the
Company nor the Buyer may issue any press release or otherwise make any public
statement with respect to the issuance and sale of the Shares or the
Transactions without first consulting with the other party and obtaining the
written consent thereof. The Company will not disclose as to the Buyer and the
Buyer will not disclose as to the Company, directly or indirectly, any
documents, work papers or other material of a confidential or proprietary
nature, and will keep all such information confidential for five years following
the Closing Date; provided, however, that (i) a party may disclose any such
information which is publicly available by means other than such party's
disclosure; and (ii) to the extent that a party may become legally compelled to
disclose any of such information, such party may disclose such information but
only after such party shall have used all reasonable efforts to afford the other
party the opportunity to obtain an appropriate protective order, or other
satisfactory assurance of confidential treatment, for the information required
to be so disclosed. This Section 6.01 supersedes any other confidentiality
agreement between the parties.
SECTION 6.02. Further Assurance. The Company, at any time and from time to
time after the Closing Date, upon request of the Buyer and without further cost
or expense to the Buyer, will execute and deliver such instruments of conveyance
and assignment and take such action as the Buyer reasonably may request to
transfer to and vest in the Buyer, and to put the Buyer in possession of, all of
the Shares as contemplated by this Agreement.
SECTION 6.03. Termination of Consulting Agreement. The Company shall
terminate the Consulting Agreement, dated January 15, 2001, between the Company
and Jewelcor (the "Consulting Agreement") without payment to Jewelcor of a
Transaction Fee (as defined in the Consulting Agreement). The Company may
reimburse Jewelcor for up to $75,000 of Jewelcor's actual expenses incurred in
accordance with the Consulting Agreement as documented in writing and delivered
to the Buyer prior to the Closing Date.
SECTION 6.04. Use of Purchase Price. As of the Closing Date, the Company
shall, as provided in Section 2.02, use a portion of the Purchase Price to (i)
partially satisfy the indebtedness of the Company and its affiliates to Chase
for borrowed money, so that no more than $3,750,000 of such indebtedness remains
outstanding after the Closing Date and (ii) fully satisfy all other indebtedness
of the Company and its affiliates for borrowed money other than the $2,000,000
obligation of World Gift Imports (Barbados) LTD. owed to Almod Diamonds Ltd.
After payment of such indebtedness, any remaining portion of the Purchase Price
shall be used by the Company as working capital.
SECTION 6.05. Similar Business Activities. The Company acknowledges that
the Buyer and its Affiliates may from time to time engage in the same or similar
business activities or lines of business as the Company. The Buyer and its
Affiliates shall have the right to (a) engage in the same or similar business
activities or lines of business as the Company; (b) do business with any
supplier, contractor or customer of the Company; and (c) employ or otherwise
engage any officer, director or employee of the Company. Notwithstanding the
foregoing, neither party hereto shall directly approach or solicit for hire any
employee of another party hereto.
SECTION 6.06. Business Opportunities. In the event that (a) the Buyer or
any of its Affiliates or (b) any officer, director or employee of the Company or
any Subsidiary who is also an officer, director or employee of the Buyer or an
Affiliate thereof, acquires knowledge of a potential transaction which may be a
business opportunity for both the Company and the Buyer or any of its
Affiliates, such business opportunity shall belong to the Buyer and not to the
Company, and any such officer, director or employee of the Company shall treat
such business opportunity as belonging only to the Buyer and not to the Company,
provided however, with respect to clause (b) of the preceding sentence, the
Buyer shall determine in good faith whether, based on the circumstances under
which such officer, director or employee acquired his knowledge, such business
opportunity was offered to such person solely in his capacity as an officer,
director or employee of the Company ("Company Capacity"). For the purposes of
the foregoing determination, there shall be a presumption that such business
opportunity was offered to such person in his capacity as an officer, director
or employee of the Buyer or an Affiliate thereof. In the event that the Buyer
determines that it was so offered to such person in his Company Capacity, such
business opportunity shall belong only to the Company and not to the Buyer and
such officer, and the director or employee shall treat such business opportunity
as belonging only to the Company and not to the Buyer. With respect to any
business opportunity belonging to the Buyer pursuant to this Section 6.06, the
Buyer shall decide how to allocate and pursue such business opportunity based on
its sole determination of what is in the best interests of the Buyer's
stockholders. The Buyer's good faith determination of the allocation of business
opportunities pursuant to this Section 6.06 shall be conclusive and binding for
all purposes.
ARTICLE SEVEN
CLOSING DELIVERIES
SECTION 7.01. Closing Deliveries of the Company. On the date hereof, the
Company shall deliver the following to the Buyer. Unless the following are
delivered on the date hereof the Buyer shall have no obligations under this
Agreement (the Buyer may waive in writing its right, in whole or part, to
receive any of the following):
(a) Certificates representing the Shares as set forth in Section 2.01.
(b) The Registration Rights Agreement executed by the Company.
(c) The Loan Documents executed by all parties thereto other than the
Buyer's Affiliates.
(d) The Stockholder Agreement executed by Jewelcor and the Company.
(e) A certificate of the Secretary of State of the State of Delaware, dated
as of a date not more than five business days prior to the date hereof,
attesting to the organization, qualifications to do business and good standing
of the Company.
(f) A certificate of the Secretary of the Company, certifying to the
certificate of incorporation and by-laws of the Company and the resolutions of
the Board of Directors and stockholders of the Company approving the issuance
and sale of the Shares to the Buyer and the consummation of the Transactions.
(g) Evidence, in form and substance reasonably satisfactory to the Buyer,
of the consents of third parties required to consummate the Transactions,
including all those necessary to maintain in full force and effect all Property
Leases of the Company after the Closing Date.
(h) Executed consents from and copies of all filings with Governmental
Authorities required by Applicable Law for the issuance and sale of the Shares
to the Buyer and consummation of the Transactions in form and substance
reasonably satisfactory to the Buyer.
(i) An opinion of counsel substantially in the form attached hereto as
Exhibit D.
(j) Evidence that directors and officers insurance coverage, in form and
substance satisfactory to the Buyer, has been obtained by the Company and is in
effect.
(k) Evidence, in form and substance reasonably satisfactory to the Buyer,
of the termination of the Consulting Agreement without payment to Jewelcor of a
Transaction Fee (as defined in the Consulting Agreement), provided that, the
Company may reimburse Jewelcor for up to $75,000 of Jewelcor's actual expenses
incurred in accordance with the Consulting Agreement as set forth in Section
6.03.
(l) Evidence, in form and substance reasonably satisfactory to the Buyer,
of (i) payment in full of all amounts owing to BNS and of reduction of the
amounts owing to Chase to no more than $3,750,000, (ii) of receipt by Chase and
BNS of the amounts paid to them pursuant to Section 2.02, and (iii) evidence of
the release of all liens securing such repaid indebtedness.
(m) Resignation of Xxxx X. Xxxxxx, Xxxxxxx X. Xxxxxx and Xxxxx X. XxXxxxxx
as directors of the Company.
(n) Evidence, in form and substance satisfactory to the Buyer, of the
resolutions of the Board of Directors of the Company referenced in Sections
4.05(c) and 4.31.
(o) Such other certificates, documents, and instruments as the Buyer may
reasonably request in connection with this Agreement and the consummation of the
Transactions.
SECTION 7.02. Deliveries of the Buyer. On the date hereof, the Buyer shall
deliver the following. Unless the following are delivered on the date hereof the
Company shall have no obligations under this Agreement (the Company may waive in
writing its right, in whole or part, to receive any of the following):
(a) To the Company, Chase and BNS, the Purchase Price as set forth in
Section 2.02.
(b) To the Company, the Registration Rights Agreement executed by the
Buyer.
(c) To the Company, the Loan Documents executed by the Buyer's Affiliates.
(d) To the Company, the Stockholder Agreement executed by the Buyer.
(e) To the Company, a certificate of the Secretary of State of the State of
Delaware, dated as of a date not more than five business days prior to the date
hereof, attesting to the organization, qualifications to do business and good
standing of the Buyer.
(f) To the Company, such other certificates, documents, and instruments as
the Buyer may reasonably request in connection with this Agreement and the
consummation of the Transaction.
ARTICLE EIGHT
INDEMNIFICATION
SECTION 8.01. General Indemnification. From and after the Closing Date, the
Company will indemnify the Indemnified Parties, and hold them harmless from,
against and in respect of all Losses that may be incurred by, imposed upon or
asserted against the Company or the Indemnified Parties arising from or relating
to:
(a) any inaccuracy in any representation or warranty contained (A) in this
Agreement; (B) any Exhibit or Schedule to this Agreement; or (C) any
certificate, agreement, document or instrument delivered pursuant to this
Agreement or in connection with the Transactions; or
(b) any breach of any covenant, obligation or agreement of the Company
contained herein or in any document or instrument to be delivered pursuant
hereto.
SECTION 8.02. Security. (a) All claims for indemnification made under this
Article Eight shall be secured by a lien (the "Indemnity Lien") on all of the
presently owned or subsequently acquired inventory and accounts receivable of
the Company and its Subsidiaries (the "Lien Assets"). The Indemnity Lien shall
be junior to the lien provided for pursuant to the Loan Documents and any other
indebtedness which is senior or pari passu to the indebtedness arising under the
Loan Documents and shall be senior to all other existing or future liens on the
Lien Assets. On the Closing Date, the Company shall deliver to the Buyer
financing statements accurately describing the Lien Assets for filing in every
state, county and other jurisdiction necessary to establish a valid and
perfected lien in favor of the Buyer in all of the Lien Assets. The Company
shall make such further filings, including the filing of continuation
statements, to maintain such valid and perfected lien.
(b) Notwithstanding anything herein to the contrary, (a) from and after the
earlier of (i) the first anniversary of the Closing Date or (ii) the refinancing
of the revolving credit line to be entered into between Chase and the Company on
or about the Closing Date, if any lender extending a revolving credit, term
loan, working capital or other credit facility to the Company requires, as a
condition to the extension of such credit, that the Indemnity Lien be released,
the Buyer shall promptly execute and deliver such agreements, documents and
instruments as may be necessary or appropriate to release the Indemnity Lien and
(b) the Indemnity Lien shall terminate and be of no further force or effect, and
the Buyer shall promptly execute and deliver such agreements, documents and
instruments as may be necessary or appropriate to release the Indemnity Lien, on
October 31, 2002, unless there exists on such date an unresolved claim for
indemnification by an Indemnified Party made in accordance with the terms of
this Agreement.
SECTION 8.03 Limitations. (a) The aggregate liability of the Company for
claims under Section 8.01 shall not exceed, in the aggregate, the Purchase
Price.
(b) Direct claims. The Indemnified Parties shall not be permitted to
enforce any Direct Claims that arise pursuant to Section 8.01(a) until the
aggregate of such claimed Losses exceeds $50,000, in which event, the
Indemnified Parties shall be permitted to pursue the entire amount of all such
Losses, including those below the aggregate of $50,000.
(c) Indirect claims. The Indemnified Parties shall not be permitted to
enforce any Indirect Claims pursuant to Section 8.01(a) until the aggregate of
such claimed Losses exceeds $300,000, in which event, the Indemnified Parties
shall be permitted to pursue the entire amount of all such Losses, including
those below the aggregate of $300,000, subject to clause (d) below.
(d) Pro rata. The amount of any Loss payable to any Indemnified Party in
respect of an Indirect Claim shall not exceed the product of the amount of such
Loss multiplied by a fraction, the numerator of which is the amount of shares of
Common Stock then owned by the Buyer and the denominator of which is the total
amount of Common Stock then outstanding. (As an illustrative example, if a Loss
occurs which gives rise to an Indirect Claim equal to $400,000, and if the
Indemnified Parties then own 45% of the outstanding shares of Common Stock, the
Indemnified Parties will be entitled to recover 45% of $400,000, which equals
$180,000.)
SECTION 8.04. Notification of Claim. Each Indemnified Party, within 15 days
after notice to such Indemnified Party of any matter as to which it asserts a
claim for indemnification, will notify the Company of such claim, the amount
thereof and a description, in reasonable detail, of the nature of such claim.
The failure by the Indemnified Parties to give such notification, however, will
not relieve the Company from any liability which they may have pursuant to the
provisions of this Article Eight, except to the extent the Company has been
prejudiced by any such delay in notification. If the Company does not respond in
writing to such notice within 15 days of receipt thereof, it shall have no
further right to contest the validity of such claim. Notice to an Indemnified
Party for the purpose of this Section 8.03 means the service of process on such
party in any legal action, receipt of any claim in writing or any similar form
of actual written notice.
SECTION 8.05. Manner of Indemnification. All claims for indemnification
under this Article Eight shall be effected by payment of cash in the amount of
the indemnification claim by wire transfer of immediately available funds to an
account designated by the Indemnified Parties.
ARTICLE NINE
MISCELLANEOUS
SECTION 9.01. Survival of Representations and Warranties.
(a) The representations and warranties contained in this Agreement, any
Exhibit or Schedule to this Agreement or any certificate, agreement, document or
instrument delivered pursuant to this Agreement or in connection with the
Transactions, will survive the Closing and any investigation on the part of the
parties hereto and will continue in full force and effect after the Closing Date
as follows:
(i) the representations and warranties set forth in Sections 4.01, 4.02
4.03, 4.04 and 4.05 will survive indefinitely;
(ii) the representations and warranties set forth in Sections 4.06 through
4.18 and 4.22 through 4.33 will survive until the date that is eighteen months
from the Closing Date, at which time they will expire and the representing and
warranting parties no longer will be liable with respect thereto, except as to
claims made in respect thereof in writing by any Indemnified Party on or before
the expiration of such period;
(iii) the representations and warranties set forth in Section 4.19 will
survive until the final non-appealable resolution of any litigation, action,
suit, proceeding, arbitration, claim, investigation or administrative proceeding
relating to any period ending on or prior to the Closing Date; and
(iv) the representations and warranties set forth in Sections 4.20 and 4.21
will survive until 90 days after the expiration of the applicable statute of
limitations, at which time they will expire and the representing parties no
longer will be liable with respect thereto, except as to claims made in respect
thereof in writing by any Indemnified Party on or before the expiration of such
period.
(b) The obligations of the Company to indemnify the Indemnified Parties for
Losses based upon the representations and warranties will remain in effect as
long as the relevant representations and warranties survive.
(c) The covenants and agreements of the parties hereto set forth in this
Agreement will not be affected by the expiration of any representation or
warranty and will survive such expiration for the duration of the applicable
statute of limitations period.
SECTION 9.02. Expenses. The Company and the Buyer shall each bear all of
its own costs and expenses in connection with the Transactions, provided
however, the Company will also be responsible for such costs incurred by
Jewelcor.
SECTION 9.03. Legends. So long as required by applicable securities laws,
certificates evidencing any of the Shares shall bear a legend
substantially similar to the following:
"THE SECURITIES REPRESENTED BY THIS CERTIFICATE HAVE NOT BEEN REGISTERED
UNDER THE UNITED STATES SECURITIES ACT OF 1933, AS AMENDED (THE "SECURITIES
ACT"), OR UNDER THE SECURITIES OR BLUE SKY LAWS OF ANY OTHER COUNTRY, STATE OR
OTHER JURISDICTION, AND MAY NOT BE OFFERED, SOLD, PLEDGED TRANSFERRED OR
OTHERWISE DISPOSED OF WITHIN THE UNITED STATES OR TO, OR FOR THE ACCOUNT OR
BENEFIT OF, UNITED STATES PERSONS, EXCEPT PURSUANT TO AN EFFECTIVE REGISTRATION
STATEMENT OR AN APPLICABLE EXEMPTION FROM REGISTRATION UNDER THE SECURITIES ACT
AND OTHER APPLICABLE LAWS OR PURSUANT TO AN EXEMPTION FROM SUCH ACT OR OTHER
LAWS."
SECTION 9.04. Notices. All notices, requests and other communications under
this Agreement will be in writing and will be deemed to have been duly given if
delivered personally, or sent by either certified or registered mail, return
receipt requested, postage prepaid, by overnight courier guaranteeing next day
delivery or by telecopier (with telephonic or machine confirmation by the
sender), addressed as follows:
(a) If to the Company:
Little Switzerland, Inc.
161-B Crown Bay
X.X. Xxx 000
Xx. Xxxxxx, X.X. Xxxxxx Xxxxxxx 00000
Attention: Xxxxxx X. Xxxxxxxxxxx
Tel: (000) 000-0000
Fax: (000) 000-0000
email: xxxxxxxxxxxx@xxxxxxxxxxxxxxxxx.xxx
With a copy to:
Xxxx X. Xxxxxxx, Esq.
Proskauer Rose LLP
0000 Xxxxxxxx
Xxx Xxxx, XX 00000
Tel: (000) 000-0000
Fax: (000) 000-0000
Email: xxxxxxxx@xxxxxxxxx.xxx
or at such other address or telecopy number as the Company may have advised
the Buyer in writing; and
(b) If to the Buyer:
Xxxxxxx & Co. International
000 Xxxxxxx Xxxxxx, Xxxxxx Xxxxx
Xxx Xxxx, XX 00000
Attention: Xxxxxxx X. Xxxxxx, Esq.
Tel: (000) 000-0000
Fax: (000) 000-0000
email: xxxxxxx@xxxxxxx.xxx
With a copy to:
Xxxxxx X. Xxxxxx, Esq.
Xxxxxx, Xxxx & Xxxxxxxx LLP
000 Xxxx Xxxxxx
Xxx Xxxx, XX 00000
Tel: (000) 000-0000
Fax: (000) 000-0000
email: xxxxxxx@xxxxxxxxxx.xxx
or at such other address or telecopy number as the Buyer may have advised the
Company in writing. All such notices, requests and other communications shall be
deemed to have been received on the date of delivery thereof (if delivered by
hand), on the third day after the mailing thereof (if mailed), on the next day
after the sending thereof (if by overnight courier) and when receipt is
confirmed as provided above (if telecopied).
SECTION 9.05. Waivers and Amendments. No amendment or waiver of any
provision of this Agreement, nor consent to any departure therefrom, will be
effective unless the same shall be in writing and signed by an officer of each
party hereto, and then such waiver or consent will be effective only in the
specific instance and for the specific purpose for which given. No failure on
the part of a party hereto to exercise, and no delay in exercising, any right
hereunder will operate as a waiver thereof; nor will 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 provided in this Agreement are
cumulative and, unless otherwise expressly provided herein, not exclusive of any
remedies provided by law.
SECTION 9.06. Binding Effect. This Agreement will be binding upon and inure
to the benefit of the parties and their respective heirs, executors,
administrators, personal representatives, successors and permitted assigns. No
party may assign his or its rights hereunder or any interest herein without the
prior written consent of the other parties and such attempted assignment shall
be void and without effect, provided, however, that the Buyer may assign, to one
or more of its Affiliates, all or any part of, or any interest in, the Buyer's
rights and benefits hereunder. To the extent of such assignment, such assignee
will have the same rights and benefits against the other parties as it would
have had if it were a named party hereunder. No party will be released of any of
its obligations under this Agreement by virtue of such assignment.
SECTION 9.07. Severability. If one or more provisions of this Agreement are
held to be unenforceable to any extent under Applicable Law, such provision
shall be interpreted as if it were written so as to be enforceable to the
maximum extent permitted by law so as to effectuate the parties' intent to the
maximum extent, and the balance of the Agreement shall be interpreted as if such
provision were so excluded and shall be enforceable in accordance with its terms
to the maximum extent permitted by Applicable Law.
SECTION 9.08. Exhibits and Schedules. The Exhibits and Schedules attached
hereto or referred to herein are incorporated herein and made a part hereof for
all purposes. As used herein, the expression "this Agreement" includes such
Exhibits and Schedules.
SECTION 9.09. GOVERNING LAW. This Agreement, the transactions contemplated
hereby, the rights and obligations of the parties hereto, and any disputes or
controversies arising therefrom shall be governed by and construed and enforced
in accordance with the laws of the State of New York, without regard to its
principles of conflict of laws that would provide for the application of any
other law.
SECTION 9.10. Captions. The captions, headings and arrangements used in
this Agreement are for convenience only and do not in any way affect, limit or
amplify the provisions hereof.
SECTION 9.11. Entirety. This Agreement contains the entire agreement and
understanding between the parties with respect to the matters addressed herein
and supersedes all prior representations, inducements, promises or agreements,
oral or otherwise, which are not embodied herein.
SECTION 9.12. 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. Execution may be
effected by delivery of facsimiles of signature pages, followed by delivery of
originals of such pages.
SECTION 9.13. Third Party Beneficiaries. Nothing contained herein, express
or implied, is intended to confer upon any person or entity other than the
parties and their heirs, executors, administrators, personal representatives,
successors and permitted assigns any rights or remedies under or by reason of
this Agreement, except as otherwise expressly provided in this Agreement.
IN WITNESS WHEREOF, the parties have caused their duly authorized
representatives to execute and deliver this Agreement as of the first date
written above.
XXXXXXX & CO INTERNATIONAL, a Delaware corporation
By: /s/ Xxxxxxx X. Xxxxxx
----------------------------------------------
Name: Xxxxxxx X. Xxxxxx
Title: Vice President and Secretary
LITTLE SWITZERLAND, INC., a Delaware corporation
By: /s/ Xxxxxx X. Xxxxxxxxxxx
--------------------------------------------
Name: Xxxxxx X. Xxxxxxxxxxx
Title: President
EXHIBIT A
Registration Rights Agreement
EXHIBIT B
Stockholder Agreement
EXHIBIT C
Loan Documents
EXHIBIT D
Form of the Company's Counsel's Opinion
