July 28, 0000
Xxxxxx Xxxxxxxxxxx, Inc.
161-B Crown Bay
X.X. Xxx 000
Xx. Xxxxxx, X.X. Xxxxxx Xxxxxxx 00000
Attn: Xxxxxx X. Xxxxxxxxxxx, President
Re: Extension to Standstill for Completion of Almod Transactions
Dear Xx. Xxxxxxxxxxx:
This letter agreement shall document agreements and understandings of
the parties arising out of the recent discussions between The Chase Manhattan
Bank and the Bank of Nova Scotia (the "Lenders") with Little Switzerland, Inc.
(the "Company") regarding the proposed transactions of the Company and its
related entities with Almod Diamonds Limited ("ADL"). In the interest of
allowing the Company and ADL to complete the proposed transactions within the
agreed time frames, the Lenders are willing to extend the standstill until
September 30, 2000 (the "Standstill Period") with respect to the outstanding
indebtedness to the Lenders subject to the following terms and conditions:
1. The Lenders agree to release the mortgage over the fee simple
real property in St. Maarten owned by the Company or its
subsidiary upon the sale of such property to ADL and the
funding of an account in the amount of $900,000 from the sale
proceeds, to be held in escrow at The Chase Manhattan Bank
pursuant to this letter agreement. If all of the following
occur before August 18, 2000: (a) the sale of either (i) the
Company's Barbados subsidiary for not less than $2,300,000 or
(ii) receivables due to the Company by the Barbados subsidiary
for not less than $1,900,000; and (b) the delivery of the
greater of $1,150,000 or 50% of such proceeds to the Lenders;
and (c) the cancellation and discharge by the Government of
Barbados of all letters of credit from the Bank of Nova
Scotia, then the funds held in escrow shall be released to the
Company. If such sale and delivery of funds shown as (a) and
(b) above have occurred before August 18, 2000, but the
cancellation of letters of credit shown as (c) above has
occurred before August 18, 2000, such $900,000 shall continue
to be held in escrow and, if on or before September 30, 2000,
(c) shall have occurred, then the funds held in escrow shall
be released to the Company. On August 18, 2000, if the
conditions have not been met for either the release of the
escrow funds or the continued holding in escrow of the escrow
funds pursuant to the foregoing, The Chase Manhattan Bank
shall pay the escrow funds to the Lenders for application to
amounts due to the Lender by the Company and its subsidiaries.
If, on or
Letter dated July 28, 2000
Page 2
following August 18, 2000 and such payment to the Lenders of
the escrow funds, the following occur before September 30,
2000: (a) the sale of either (i) the Company's Barbados
subsidiary for not less than $2,300,000 or (ii) receivables
due to the Company by the Barbados subsidiary for not less
than $1,900,000; and (b) the delivery of the greater of
$1,150,000 or 50% of such proceeds to the Lenders of which
such amount less $900,000 shall be applied to amounts due the
Lenders by the Company or its subsidiaries and $900,000 shall
be transferred into an escrow account to be held at The Chase
Manhattan Bank as follows: if the cancellation and discharge
by the Government of Barbados of all letters of credit from
the Bank of Nova Scotia occur on or before September 30, 2000,
then such escrow funds shall be released to the Company. On
September 30, 2000, if the conditions have not been met for
the release of the escrow funds to the Company pursuant to the
foregoing, The Chase Manhattan Bank shall pay such escrow
funds to the Lenders for application to amounts due the
Lenders by the Company or its subsidiaries.
2. One half of any gross sales proceeds from the sale of the
Company's Barbados subsidiary or any interest therein or
assets thereof, but in no event less than $1,150,000 of such
proceeds, shall immediately be delivered to the Lenders. In
addition, upon any such sale or upon the closure of the
Barbados store(s), the Company will provide to and obtain from
the Government of Barbados all documentation necessary to
cause the official discharge of all letters of credit from the
Bank of Nova Scotia.
3. The Security Agreement dated May 7, 1999 (the "Security
Agreement") and all security instruments and other documents
executed and/or filed under the laws of any foreign
jurisdiction to evidence and/or perfect the Lenders' security
interest granted under the Security Agreement shall continue
in full force and effect.
4. The Company shall pay to the Lenders, immediately upon receipt
by the Company, the lesser of $500,000 or 50% of the net
proceeds (gross receipts less out-of-pocket costs) of any
business interruption insurance received under claims filed as
a result of Hurricanes Xxxx and Xxxxx.
5. Upon ADL's purchase of the newly issued shares of stock of the
Company, which shall occur no later than September 15, 2000,
50% of the proceeds realized by the Company from such stock
sale shall immediately be delivered to the Lenders for
application to amounts due the Lenders by the Company or its
subsidiaries.
6. The Company shall pay all reasonable costs and expenses of the
Lenders incurred in connection with the Forbearance Agreement,
the Security Agreement and this
Letter dated July 28, 2000
Page 3
letter agreement, including the documentation and perfection
of the security interests granted to Lenders pursuant to the
Forbearance Agreement and the Security Agreement and the
release of mortgage agreed to in this letter agreement.
7. The Company shall continue to provide to the Lenders on a
weekly basis a schedule of inventory by store location. The
Company shall further provide to the Lenders on a monthly
basis no later than the last day of the following month copies
of its consolidated and consolidating reports of operations,
including balance sheets, profit and loss statements and a
narrative review of the monthly operations for the prior
month; provided, however, that such financial statements for
June may be provided on or before August 31, 2000. Audited
year-end financial statements shall be provided on or before
August 31, 2000.
8. During the Standstill Period, the Company shall have no
obligation to make payments to the Lenders, other than (a)
regularly scheduled interest payments; (b) such payments to
the Lenders; and (c) payments of all reasonable costs and
expenses of the Lenders incurred in connection with this
letter agreement, the Mortgages and the release of the St.
Maarten Mortgage, the Security Agreement and any collateral
documentation filed in or executed pursuant to the laws of any
jurisdiction in which the collateral pledged to the Lenders
under the Security Agreement is located.
9. Notwithstanding the foregoing, the Standstill Period shall
terminate prior to September 30, 2000, in the event of an
earlier Termination Event. Each of the following shall
constitute a Termination Event:
a. The Company shall fail to make any regularly
scheduled interest payment when due (subject to any
application notice and cure period in the loan
documents evidencing and governing the indebtedness
of the Company and its subsidiaries to Lenders), time
being of the essence with respect to any and all such
payments.
b. The Company or any subsidiary otherwise shall fail to
comply with any term of this letter agreement, the
Security Agreement, the mortgage over the St. Xxxxxx
leasehold property or any other document executed in
connection with the indebtedness of the Company or a
related entity to the Lenders or either of them
(subject to any applicable notice and cure period
therein).
c. The rendition by any court of a final judgment
against the Company or any subsidiary in a stated
amount in excess of $250,000.00 (or more than one
Letter dated July 28, 2000
Page 4
such judgement shall be entered against any one or
more of them in an aggregate stated amount in excess
of $250,000.00); or the attachment of any property of
the Company or any subsidiary not bonded or insured
against or remedied within sixty (60) days.
d. The filing of a tax lien against the Company or any
subsidiary by the Internal Revenue Service or the
taxing authority having authority over the
jurisdiction in which any such entity is located not
remedied within thirty (30) days.
e. The commencement of any action or proceeding against
any one or both of the Lenders by the Company or any
subsidiary or other entity affiliated with,
controlled by or under common control with the
Company.
f. The commencement of any bankruptcy or insolvency
proceeding by or against the Company or any
subsidiary.
At any time five (5) days after either of the Lenders shall
have made written demand on the Company following the
occurrence of a Termination Event described in subparagraphs
a, b, c or d above, and immediately upon the occurrence of a
Termination Event described in subparagraphs e or f above,
each Lender may, at its option, acting alone or together with
the other Lender: (i) terminate the Standstill Period
described above; (ii) declare all amounts outstanding to be
due and payable forthwith, whereupon the same shall be
immediately due and payable; and (iii) take any other action
which the Lenders or either of them deems necessary or
appropriate to collect the outstanding obligations and to
enforce the rights and remedies under the documents
evidencing, governing and/or securing the indebtedness of the
Company and its subsidiaries to the Lenders, the Security
Agreement, any document executed or filed in connection with
or pursuant to the Security Agreement, and under applicable
law.
If the Company and its subsidiaries are in agreement with the
foregoing, please sign as indicated below and return a signed original of this
letter to the Lenders.
THE CHASE MANHATTAN BANK
By: /s/ X. Xxxxx
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THE BANK OF NOVA SCOTIA
Letter dated July 28, 2000
Page 5
By: /s/ X. Xxxxxxx
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The foregoing is acknowledged and agreed to by:
LITTLE SWITZERLAND, INC., a Delaware corporation
By: /s/ Xxxxxx X. Xxxxxxxxxxx
-------------------------------------------------
Xxxxxx X. Xxxxxxxxxxx, President
L.S. WHOLESALE, INC., a Massachusetts corporation
By: /s/ Xxxxxx X. Xxxxxxxxxxx
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Xxxxxx X. Xxxxxxxxxxx, President
L.S. HOLDING, INC., a U.S. Virgin Islands corporation
By: /s/ Xxxxxx X. Xxxxxxxxxxx
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Xxxxxx X. Xxxxxxxxxxx, President
WORLD GIFT IMPORTS (BARBADOS) LIMITED, a Barbados company
By: /s/ X.X. Xxxxxx
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Xxxxxxx X. Xxxxxx, Director
WORLD GIFT IMPORTS, N.V., a St. Maarten Netherlands Antilles limited liability
company
By: /s/ X.X. Xxxxxx
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Xxxxx X. Xxxxxx, Managing Director
S.A.R.L. MONTRES ET BIJOUX, a St. Xxxxxx company
By: /s/ X.X. Xxxxxx
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Letter dated July 28, 2000
Page 6
LITTLE SWITZERLAND, N.V., an Aruba limited liability company
By: L.S. HOLDING (ARUBA), N.V., Managing Director
By: /s/ Xxxxxx X. Xxxxxxxxxxx
-------------------------------------------------
Xxxxxx Xxx Xxxxxxxxxxx, President of the Managing Board
L.S. HOLDING (ARUBA), N.V., an Aruba limited liability company
By: /s/ Xxxxxx X. Xxxxxxxxxxx
-------------------------------------------------
Xxxxxx Xxx Xxxxxxxxxxx, President of the Managing Board
L.S. HOLDING CURACAO, N.V., a Curacao limited liability company
By: /s/ Xxxxxx X. Xxxxxxxxxxx
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Xxxxxx X. Xxxxxxxxxxx, President and Managing Director
L.S. HOLDING (USA), INC., an Alaska corporation
By: /s/ Xxxxxx X. Xxxxxxxxxxx
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Xxxxxx X. Xxxxxxxxxxx, President