As filed with the Securities and Exchange Commission on January 23, 1995
Registration Statement No. 33-_____
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
----------
FORM S-2
REGISTRATION STATEMENT
UNDER
THE SECURITIES ACT OF 1933
------------
TOWN & COUNTRY CORPORATION
(Exact Name of Registrant as Specified in its Charter)
Massachusetts 04-2384321
(State or other jurisdiction of (I.R.S. Employer Identification Number)
incorporation or organization)
------------
C. WILLIAM CAREY
President
Town & Country Corporation
25 Union Street 25 Union Street
Chelsea, Massachusetts 02150 Chelsea, Massachusetts 02150
(617) 884-8500 (617) 884-8500
(Address, including zip code, (Name, address, including zip code, and
and telephone number, and telephone, including area code of
including area code, of registrant's agent for service)
principal executive offices)
Copies to:
RICHARD E. FLOOR, P.C.
Goodwin, Procter & Hoar
Exchange Place
Boston, MA 02109
(617) 570-1000
------------
Approximate date of commencement of proposed sale to the public: As soon as
practicable after this Registration Statement becomes effective.
If any of the securities being registered on this form are to be offered on
a delayed or continuous basis pursuant to Rule 415 under the Securities Act of
1933, check the following box. X
If the registrant elects to deliver its latest annual report to security
holders, or a complete and legible facsimile thereof, pursuant to Item 11(a)(1)
of this form, check the following box.
CALCULATION OF REGISTRATION FEE
<TABLE>
<CAPTION>
Proposed
maximum Proposed
Title of each Amount aggregate maximum
class of securities to be offering price aggregate Amount of
to be registered registered per share offering price registration fee
<S> <C> <C> <C> <C>
Convertible Preferred Stock,
par value $1.00 per share 4,000,000 $1.69(1) $6,760,000 $2,331.00(2)
Class A Common Stock, par
value $.01 per share 8,000,000 (3) (3) (3)
</TABLE>
(1) Estimated solely for the purpose of calculating the registration fee
pursuant to Rule 457 under the Securities Act of 1933.
(2) Pursuant to Rule 457(a), (c) and (i) under the Securities Act of 1933, the
registration fee has been calculated based upon the average of the high and
low prices per share of Class A Common Stock on the American Stock Exchange
on January 18, 1995.
(3) Class A Common Stock issued upon conversion of the Convertible Preferred
Stock will be issued for no additional consideration and no additional
registration fee is required with respect to the registration thereof.
<PAGE>
TOWN & COUNTRY CORPORATION
CROSS REFERENCE SHEET
Pursuant to Item 501(b) of Regulation S-K
Showing Location in Prospectus and Proxy Statement
of Information Required by Items of Form S-2
Form S-2 Item Number of Caption Location or Heading in Prospectus
A. INFORMATION ABOUT THE TRANSACTION
<TABLE>
<C> <C> <C>
1. Forepart of Registration Statement
and Outside Front Cover Page of Prospectus Outside Front Cover Page
2. Inside Front and Outside Back
Cover Pages of Prospectus Available Information; Inside Front and Outside Back
Cover Pages of Prospectus; Table of Contents
3. Summary Information, Risk Factors
and Ratio of Earnings to Fixed Charges Risk Factors; Pro Forma Condensed Consolidated
Financial Data; Selected Historical and Supplemental
Consolidated Financial Data
4. Use of Proceeds Selling Shareholders
5. Determination of Offering Price *
6. Dilution *
7. Selling Security Holders Selling Shareholders
8. Plan of Distribution Plan of Distribution
9. Description of Securities to be Registered Description of the Convertible Preferred Stock;
Description of Capital Stock
10. Interests of Named Experts and Counsel Legal Opinions; Experts
11. Information With Respect to the Registrant The Company
12. Incorporation of Certain Information by
Reference Incorporation of Certain Documents by Reference
13. Disclosure of Commission Position on
Indemnification for Securities Act Liabilities *
- ----------------
* Omitted since the Item is not applicable.
</TABLE>
<PAGE>
Subject to Completion Dated January 23, 1995
PROSPECTUS
Town & Country Corporation
4,000,000 Shares of Convertible Preferred Stock
and
8,000,000 Shares of Class A Common Stock
----------------------
This Prospectus relates to the sale by certain shareholders (the
"Selling Shareholders") of Town & Country Corporation (the "Company") of (i) up
to 4,000,000 shares of the Company's convertible redeemable preferred stock, par
value $1.00 per share (the "Convertible Preferred Stock") and (ii) up to
8,000,000 shares of the Company's Class A Common Stock, par value $0.01 per
share (the "Class A Common Stock"), issuable upon conversion of the Convertible
Preferred Stock. In a private placement completed on November 23, 1994 (the
"Issuance Date"), an aggregate of 2,381,038 shares of Convertible Preferred
Stock were issued to the Selling Shareholders to induce them to exercise their
right to exchange their shares of the Company's exchangeable preferred stock,
par value $1.00 per share (the "Exchangeable Preferred Stock"), for shares of
common stock, par value $0.01 per share, of Little Switzerland, Inc. (the
"Little Switzerland Common Stock") held in a trust for the benefit of the
holders of the Exchangeable Preferred Stock. Because additional shares of
Convertible Preferred Stock may be issued by the Company in lieu of the payment
of cash dividends on such stock, this Prospectus covers the resale both of
shares of Convertible Preferred Stock issued to the Selling Shareholders on the
Issuance Date and shares of Convertible Preferred Stock which may be issued in
the future in lieu of cash dividend payments, as well as the shares of Class A
Common Stock into which all such shares of Convertible Preferred Stock are
convertible (all such shares of Convertible Preferred Stock together with the
shares of Class A Common Stock issuable upon conversion thereof are hereinafter
referred to as the "Securities").
----------------------
THE SECURITIES OFFERED HEREBY INVOLVE A HIGH DEGREE OF RISK.
"SEE RISK FACTORS."
----------------------
THESE SECURITIES HAVE NOT BEEN APPROVED OR DISAPPROVED BY THE SECURITIES
AND EXCHANGE COMMISSION OR ANY STATE SECURITIES COMMISSION NOR HAS THE
SECURITIES AND EXCHANGE COMMISSION OR ANY STATE SECURITIES COMMISSION
PASSED UPON THE ACCURACY OR ADEQUACY OF THIS PROSPECTUS. ANY
REPRESENTATION TO THE CONTRARY IS A CRIMINAL OFFENSE.
----------------------
The date of this Prospectus is _________, 1995
<PAGE>
The Recapitalization
As a result of financial difficulties which the Company experienced
during its fiscal years ended February 29, 1992 and February 28, 1993, the
Company proposed a recapitalization (the "Recapitalization") which was
consummated on May 14, 1993. The Recapitalization consisted of the following
components: (i) the execution of a new revolving credit agreement with Foothill
Capital Corporation ("Foothill") which provides the Company with senior secured
financing in an amount of up to $30,000,000 (the "New Credit Agreement"); (ii)
the execution of new gold consignment agreements (the "New Gold Agreements,"
together with the New Credit Agreement, the "Revised Debt Agreements") with its
gold suppliers (the "Gold Suppliers") which provided the Company with an
aggregate gold consignment availability of up to 100,000 troy ounces; (iii) the
sale (the "Secured Debt Offering") of $30 million principal amount of the
Company's 11 1/2% Senior Secured Notes due September 15, 1997 (the "New Senior
Secured Notes") for cash to holders of the Company's 13% Senior Subordinated
Notes due December 15, 1998 (the "Old 13% Notes") and the Company's 10 1/4%
Subordinated Notes due July 1, 1995 (the "Old 10 1/4% Notes"); (iv) the offer to
exchange (a) $478.96 principal amount of the Company's 13% Senior Subordinated
Notes due May 31, 1998 (the "New Senior Subordinated Notes"), $331.00 of
Exchangeable Preferred Stock, and 89.49 shares of the Company's Class A Common
Stock, for each $1,000 principal amount of outstanding Old 13% Notes and (b)
$408.11 principal amount of New Senior Subordinated Notes, $282.04 of
Exchangeable Preferred Stock and 76.25 shares of Class A Common Stock for each
$1,000 principal amount of outstanding Old 10 1/4% Notes (the "Exchange
Offers"); (v) the solicitation of consents to amend certain terms of the
indentures pursuant to which the Old 13% Notes and the Old 10 1/4% Notes were
issued; (vi) the amendment of certain provisions of the Industrial Revenue Bonds
(the "IRBs") related to the Company's manufacturing facility in New York, New
York and (vii) the approval by the Company's stockholders of (a) an amendment to
the Company's Articles of Organization to increase the number of authorized
shares of Class A Common Stock from 20,000,000 to 40,000,000, (b) pursuant to
the requirements of the American Stock Exchange on which the Class A Common
Stock is listed, the issuance of up to 11,399,905 shares of Class A Common Stock
as part of the Recapitalization and (c) the issuance by the Company of options
to purchase an aggregate of 1,500,000 shares of Class A Common Stock at an
exercise price of $2.75 per share to members of senior management in connection
with the consummation of the Recapitalization as required by the AMEX rules.
Holders of $89,590,000 or 92.8% of the aggregate principal amount of Old 13%
Notes and holders of $25,905,000 or 98.3% of the aggregate principal amount of
Old 10 1/4% Notes tendered their notes pursuant to the Exchange Offers. Thus, in
connection with the Exchange Offers, the Company issued $53,480,900 of New
Senior Subordinated Notes, $36,960,190.45 (2,533,255 shares) of Exchangeable
Preferred Stock and 9,992,648 shares of Class A Common Stock to holders of Old
Notes.
The Company recently entered into an amendment to the New Gold
Agreements to reduce the aggregate gold consignment availability under such
agreements to approximately 73,000 troy ounces as of February 1, 1995. See "The
Revised Debt Agreements--New Gold Agreements." Pursuant to the terms of the New
Senior Secured Notes, the Company has redeemed an aggregate of $14 million in
principal amount of New Senior Secured Notes. At January 1, 1995, approximately
$16 million in aggregate principal amount of New Senior Secured Notes were
outstanding. See "Description of Outstanding Debt Securities--New Senior Secured
Notes." Pursuant to the terms of the New Senior Subordinated Notes, the Company
has paid the first three semiannual installments of interest, and currently
intends to pay the fourth installment, on the New Senior Subordinated Notes
through the issuance of such additional New Senior Subordinated Notes. At
January 1, 1995, approximately $65 million in aggregate principal amount of New
Senior Subordinated Notes were outstanding. See "Description of Outstanding Debt
Securities--New Senior Subordinated Notes."
The Private Placement
On November 4, 1994, the Company made an offer to certain holders of
Exchangeable Preferred Stock to issue to such holders one share of Convertible
Preferred Stock for each share of Exchangeable Preferred Stock which they
exchanged for shares of Little Switzerland Common Stock. Holders of 2,381,038
shares of Exchangeable Preferred Stock, representing approximately 94% of the
outstanding shares of Exchangeable Preferred Stock, accepted this offer and
exchanged their shares of Exchangeable Preferred Stock for an aggregate of
2,381,038 shares of Little Switzerland Common Stock. In connection with such
exchange, the Company issued to such holders an aggregate of 2,381,038 shares of
Convertible Preferred Stock in a private placement pursuant to Section 4(2) of
the Securities Act of 1933, as amended (the "Securities Act"), and Rule 506
promulgated thereunder. As part of this private placement, the Company agreed to
file a registration statement under the Securities Act with respect to the
shares of Convertible Preferred Stock (and the shares of Class A Common Stock
into which such shares are convertible) issued to the Selling Shareholders.
(Cover continued on next page)
(ii)
<PAGE>
The Convertible Preferred Stock
Pursuant to the certificate of vote of directors establishing the
Convertible Preferred Stock (the "Certificate of Designation"), the Board of
Directors of the Company is authorized initially to issue up to 2,533,255 shares
of Convertible Preferred Stock and thereafter may issue additional shares of
Convertible Preferred Stock solely as payment in lieu of cash dividends payable
thereon. Each share of Convertible Preferred Stock has a liquidation preference
of $6.50, plus accrued and unpaid dividends (the "Liquidation Value"), as
adjusted to reflect subdivisions, combinations, reclassifications, stock
dividends, stock splits or similar events relating to the Convertible Preferred
Stock. The Convertible Preferred Stock is senior to all Junior Stock (as
defined) including Class A Common Stock and the Company's Class B Common Stock,
par value $0.01 per share, is junior to the Exchangeable Preferred Stock and is
subordinate in right of payment to all indebtedness of the Company. As of
January 1, 1995, there were 152,217 shares of Exchangeable Preferred Stock
outstanding. As of January 1, 1995, the Convertible Preferred Stock was
subordinate to approximately $114 million of indebtedness of the Company
(excluding indebtedness to trade creditors). As of January 1, 1995, the amount
of such outstanding indebtedness to trade creditors was approximately $18
million. The Convertible Preferred Stock also is subordinate to additional
indebtedness of up to $30,000,000 under the New Credit Agreement and of up to
approximately 92,000 troy ounces under the New Gold Agreements. As of January 1,
1995, the amount of indebtedness outstanding under the New Credit Agreement and
New Gold Agreements was approximately $24 million and approximately 67,000 troy
ounces, respectively. See "Description of the Convertible Preferred
Stock--Ranking."
Holders of the shares of Convertible Preferred Stock are entitled to
receive, when and as declared by the Board of Directors of the Company,
cumulative cash dividends at the rate of 6% per annum of the Liquidation Value
thereof. Dividends on the Convertible Preferred Stock are payable semiannually
on each March 1st and September 1st after the issuance date. The amount of
accrued and unpaid dividends is added to the Liquidation Value. Because the
Company is prohibited from paying cash dividends on the Convertible Preferred
Stock by the terms of the Revised Debt Agreements, the New Senior Secured Notes,
the New Senior Subordinated Notes and the Exchangeable Preferred Stock, the
Company shall issue additional shares of Convertible Preferred Stock in lieu of
cash dividends. See "Risk Factors--Dividend Restrictions" and "Description of
the Convertible Preferred Stock--Dividends."
Except as set forth below, the Company may not redeem the Convertible
Preferred Stock until November 23, 1995, the first anniversary of the Issuance
Date (the "First Anniversary Date"). Thereafter, the Company may redeem the
Convertible Preferred Stock, in whole at any time or in part from time to time,
at a price equal to 104% of Liquidation Value, if redeemed during the twelve
month period beginning on the First Anniversary Date, and thereafter at prices
declining annually to 100% of Liquidation Value on or after November 23, 1997.
The Company shall pay the redemption price by delivering cash, but may elect to
pay accrued but unpaid dividends on shares of Convertible Preferred Stock to be
redeemed by delivering additional shares of Convertible Preferred Stock in lieu
of cash dividends, which shares automatically shall be converted into shares of
Class A Common Stock. The Revised Debt Agreements, the New Senior Secured Notes,
the New Senior Subordinated Notes and the Exchangeable Preferred Stock place
restrictions on the Company's ability to redeem shares of Convertible Preferred
Stock. See "Description of the Convertible Preferred Stock--Redemption."
At any time, a holder of a share of Convertible Preferred Stock may
convert such share into two shares of Class A Common Stock (the "Conversion
Rate"). In the event that the Sale Price (as defined) of Class A Common Stock
shall equal or exceed $3.25 per share for 30 consecutive trading days, the
Company may require that all outstanding shares of Convertible Preferred Stock
be converted into shares of Class A Common Stock at the then-applicable
Conversion Rate. See "Description of the Convertible Preferred
Stock--Conversion."
A holder of a share of Convertible Preferred Stock is entitled to vote
on all matters on which the holders of Class A Common Stock are entitled to
vote. Each share of Convertible Preferred Stock shall have the number of votes
equal to the number of shares of Class A Common Stock into which such share is
then convertible. See "Description of the Convertible Preferred Stock--Voting
Rights."
Holding Company Structure
The New Senior Secured Notes, the New Senior Subordinated Notes, the
Exchangeable Preferred Stock and the Convertible Preferred Stock are obligations
of the Company. Because a significant portion of the operations of the Company
are, and in the future are likely to be, conducted through subsidiaries, the
cash flow and the
(Cover continued on next page)
(iii)
<PAGE>
consequent ability to service debt of the Company, including the New Senior
Secured Notes, the New Senior Subordinated Notes, the Exchangeable Preferred
Stock and the Convertible Preferred Stock, will be dependent upon the earnings
of the Company or the payment of dividends to the Company by its subsidiaries.
The payment of dividends and the making of loans and advances to the Company by
its subsidiaries may be subject to statutory or contractual restrictions, are
contingent upon the earnings of those subsidiaries and are subject to various
business considerations.
The Convertible Preferred Stock is subordinate in all respects (including
upon any voluntary or involuntary bankruptcy, liquidation, dissolution, or
winding up of the Company) to all existing and future indebtedness of the
Company. See "Description of the Convertible Preferred Stock--Ranking."
(End of cover page)
(iv)
<PAGE>
AVAILABLE INFORMATION
The Company has filed a Registration Statement on Form S-2 (the
"Registration Statement") with the Securities and Exchange Commission (the
"Commission") under the Securities Act of 1933, as amended (the "Securities
Act"), with respect to the securities offered hereby. As permitted by the rules
and regulations of the Commission, this Prospectus which constitutes part of the
Registration Statement, omits certain information, exhibits and undertakings
contained (or to be contained) in the Registration Statement. Such additional
information, exhibits and undertakings can be inspected at and obtained from the
Commission in the manner set forth below. For further information with respect
to the securities offered hereby and the Company, reference is made to the
Registration Statement, and the financial schedules and exhibits filed as a part
thereof. Statements contained in this Prospectus as to the terms of any contract
or other document are not necessarily complete, and, in each case, reference is
made to the copy of each such contract or other document that has been filed as
an exhibit to the Registration Statement, each such statement being qualified in
all respects by such reference.
The Company is subject to the informational and reporting requirements
of the Securities Exchange Act of 1934, as amended (the "Exchange Act"), and, in
accordance therewith, files periodic reports, proxy and information statements
and other information with the Commission. Such reports, proxy and information
statements and other information filed with the Commission, as well as the
Registration Statement, and the exhibits thereto, can be inspected and copied at
the public reference facilities maintained by the Commission at 450 Fifth
Street, N.W., Room 1024, Washington, D.C. 20549, and at the Commission's
regional offices located at Northwestern Atrium Center, 500 West Madison Street,
Suite 1400, Chicago, Illinois 60661, and 7 World Trade Center, New York, New
York 10048. Copies of such material also can be obtained from the Public
Reference Section of the Commission at Room 1024, 450 Fifth Street, N.W.,
Washington, D.C. 20549 at prescribed rates. The shares of the Company's Class A
Common Stock are listed and traded on the American Stock Exchange. Thus, such
reports, proxy and information statements and other information concerning the
Company also can be inspected at the American Stock Exchange offices at 86
Trinity Place, New York, NY 10006-1881. Such reports, proxy and information
statements, and other information may also be obtained from the Company, 25
Union Street, Chelsea, Massachusetts 02150, telephone number (617) 884-8500;
Attention: Manager of Corporate Communications.
<PAGE>
INCORPORATION OF CERTAIN DOCUMENTS BY REFERENCE
The Company's Annual Report on Form 10-K for the fiscal year ended
February 27, 1994, the Company's Quarterly Report on Form 10-Q for the fiscal
quarter ended November 27, 1994, and all other reports filed by the Company
pursuant to Section 13(a) or 15(d) of the Exchange Act since February 27, 1994,
are hereby incorporated by reference into this Prospectus.
Any statement contained in a document incorporated or deemed to be
incorporated by reference herein shall be deemed to be modified or superseded
for purposes of this Prospectus to the extent that a statement contained herein
or in any other subsequently filed document which is incorporated by reference
herein modifies or supersedes such statement. Any such statement so modified or
superseded shall not be deemed, except as so modified or superseded, to
constitute a part of this Prospectus.
The Company will provide without charge to each person to whom a copy of
this Prospectus is delivered, upon the written or oral request of any such
person, a copy of any or all of the documents referred to above which have been
incorporated into this Prospectus by reference (other than exhibits to such
documents). Requests for such copies should be directed to the Company, 25 Union
Street, Chelsea, Massachusetts 02150, Attention: Manager of Corporate
Communications, telephone number (617) 884-8500.
<PAGE>
TABLE OF CONTENTS
Page
THE COMPANY. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 5
RISK FACTORS . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 7
Financial Considerations . . . . . . . . . . . . . . . . . . . . . . 7
Certain Bankruptcy Law Considerations. . . . . . . . . . . . . . . . 8
Lack of Established Market . . . . . . . . . . . . . . . . . . . . . 8
Dividend Restrictions. . . . . . . . . . . . . . . . . . . . . . . . 8
Ranking of Convertible Preferred Stock . . . . . . . . . . . . . . . 9
Holding Company Structure. . . . . . . . . . . . . . . . . . . . . . 9
PRO FORMA CONDENSED CONSOLIDATED FINANCIAL DATA. . . . . . . . . . . . . 11
DESCRIPTION OF CONVERTIBLE PREFERRED STOCK . . . . . . . . . . . . . . . 23
General. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 23
Ranking. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 23
Certain Bankruptcy Limitations . . . . . . . . . . . . . . . . . . . 23
Dividends. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 23
Liquidation Rights . . . . . . . . . . . . . . . . . . . . . . . . . 24
Redemption . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 24
Conversion . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 25
Consolidation, Merger, and Sale of Assets. . . . . . . . . . . . . . 26
Voting Rights. . . . . . . . . . . . . . . . . . . . . . . . . . . . 26
Other Miscellaneous Matters. . . . . . . . . . . . . . . . . . . . . 27
THE REVISED DEBT AGREEMENTS. . . . . . . . . . . . . . . . . . . . . . . 28
New Credit Agreement . . . . . . . . . . . . . . . . . . . . . . . . 28
New Gold Agreements. . . . . . . . . . . . . . . . . . . . . . . . . 28
DESCRIPTION OF OUTSTANDING DEBT SECURITIES . . . . . . . . . . . . . . . 29
New Senior Secured Notes . . . . . . . . . . . . . . . . . . . . . . 29
New Senior Subordinated Notes. . . . . . . . . . . . . . . . . . . . 29
Exchangeable Preferred Stock . . . . . . . . . . . . . . . . . . . . 30
SELLING SHAREHOLDERS . . . . . . . . . . . . . . . . . . . . . . . . . . 33
PLAN OF DISTRIBUTION . . . . . . . . . . . . . . . . . . . . . . . . . . 36
DESCRIPTION OF CAPITAL STOCK . . . . . . . . . . . . . . . . . . . . . . 37
Preferred Stock. . . . . . . . . . . . . . . . . . . . . . . . . . . 37
Common Stock . . . . . . . . . . . . . . . . . . . . . . . . . . . . 37
Registration Rights. . . . . . . . . . . . . . . . . . . . . . . . . 38
Massachusetts Anti-Takeover Laws and Certain Provisions of the
Articles and By-Laws . . . . . . . . . . . . . . . . . . . . . . . . 38
Indemnification; Limitation of Liability . . . . . . . . . . . . . . 39
MATERIAL FEDERAL INCOME TAX CONSEQUENCES . . . . . . . . . . . . . . . . 40
General. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 40
Tax Consequences of Holding Stock. . . . . . . . . . . . . . . . . . 40
<PAGE>
LEGAL OPINIONS . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 47
EXPERTS. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 48
<PAGE>
--------------
No person is authorized to give any information or to make any
representation in connection with the Recapitalization other than those
contained in this Prospectus and, if given or made, such information or
representation must not be relied upon. This Prospectus does not constitute an
offer to sell or an offer to exchange or a solicitation of an offer to sell or
exchange any securities, other than the securities covered by this Prospectus,
by the Company or any other person or any offer to sell, or an offer to exchange
or solicitation of an offer to sell or exchange such securities, or the
solicitation of any consent, in any jurisdiction to or from any person to whom
it is unlawful to make such offer or solicitation. Neither the delivery of this
Prospectus nor any sale or exchange made hereunder shall, under any
circumstances, create an implication that there has been no change in the
affairs of the Company or in the information set forth herein since the date
hereof.
<PAGE>
THE COMPANY
Town & Country Corporation, a Massachusetts corporation (collectively
with its consolidated subsidiaries unless the context otherwise requires, the
"Company"), designs, manufactures, and markets an extensive collection of fine
jewelry and recognition products in the United States and internationally. The
Company consists of six operating entities: the parent company, Town & Country
Corporation, headquartered in Chelsea, Massachusetts; its majority-owned
subsidiary Essex International Company Limited, a Thailand company, and its
affiliates ("Essex"); and the Company's wholly-owned subsidiaries, Anju Jewelry
Limited, a Hong Kong company and its subsidiaries ("Anju"); Gold Lance, Inc.
("Gold Lance"), located in Houston, Texas; L.G. Balfour Company, Inc.
("Balfour"), headquartered in North Attleboro, Massachusetts; and Town & Country
Fine Jewelry Group, Inc. ("T&C Fine Jewelry"), located in Chelsea,
Massachusetts. The Company was incorporated under the laws of the Commonwealth
of Massachusetts in 1965 and has been a public company since 1985. Its principal
executive offices are located at 25 Union Street, Chelsea, Massachusetts 02150,
and its telephone number at that location is (617) 884-8500.
Additional information with respect to the Company, including audited
financial statements for the fiscal year ended February 27, 1994, may be found
in the Company's Annual Report on Form 10-K for the fiscal year ended February
27, 1994, and the Company's Quarterly Report on Form 10-Q for the fiscal quarter
ended November 27, 1994, copies of which are being delivered herewith.
Commencing in the fiscal year ended February 28, 1991 ("fiscal 1991"),
the operations and financial results of the Company were materially and
adversely affected by factors influencing the jewelry industry in general and
the Company in particular. The decline in the Company's net sales from fiscal
1991 through the fiscal year ended February 28, 1993 ("fiscal 1993"), was due
primarily to the economic recession, which had a negative impact on the retail
sector of the jewelry industry that the Company supplies. During that period,
several of the Company's important customers experienced financial difficulties,
including the Company's largest customer, Zale Corporation (together with its
subsidiaries and affiliates, the "Zale Companies"), which filed for bankruptcy
in January 1992. As a result of the foregoing factors, the Company experienced
declining net sales and operating results during fiscal 1991, fiscal 1992, and
fiscal 1993. In this regard, the Company experienced a net loss of approximately
$19 million for the fiscal year ended February 29, 1992 ("fiscal 1992"), and a
net loss of approximately $47 million for fiscal 1993.
The Company's financial performance for fiscal 1992 and fiscal 1993 and
the requirement to reclassify and revalue its exposure to the Zale Companies as
a result of the Zale Companies' bankruptcy caused the Company to be in default
under its then existing revolving credit agreement (the "Old Credit Agreement")
and its then existing gold consignment agreements (the "Old Gold Agreements").
In addition, as a result of its financial difficulties, the Company did not make
the interest payments due on December 15, 1992 on its 13% Senior Subordinated
Notes due December 15, 1998 (the "Old 13% Notes") and on January 1, 1993 on its
10 1/4% Subordinated Notes due July 1, 1995 (the "Old 10 1/4% Notes," together
with the Old 13% Notes, the "Old Notes"), and was thus in default under the
indentures for the Old Notes.
As a result of the financial difficulties which the Company experienced
during fiscal 1992 and fiscal 1993, the Company proposed a recapitalization (the
"Recapitalization") which was consummated on May 14, 1993. The Recapitalization
consisted of the following components: (i) the execution of a new revolving
credit agreement with Foothill Capital Corporation ("Foothill") which provides
the Company with senior secured financing in an amount of up to $30,000,000 (the
"New Credit Agreement"); (ii) the execution of new gold consignment agreements
(the "New Gold Agreements," together with the New Credit Agreement, the "Revised
Debt Agreements") with its gold consignors (the "Gold Suppliers") which provided
the Company with an aggregate gold consignment availability of up to 100,000
troy ounces; (iii) the sale of $30 million principal amount of the Company's 11
1/2% Senior Secured Notes due September 15, 1997 (the "New Senior Secured
Notes") for cash to holders of Old Notes (the "Secured Debt Offering"); (iv) the
offer to exchange (a) $478.96 principal amount of the Company's 13% Senior
Subordinated Notes due May 31, 1998 (the "New Senior Subordinated Notes"),
$331.00 of the Company's Exchangeable Preferred Stock, par value $1.00 per share
(the "Exchangeable Preferred Stock"), and 89.49 shares of the Company's Class A
Common Stock, par value $0.01 per share (the "Class A Common Stock"), for each
$1,000 principal amount of outstanding Old 13% Notes and (b) $408.11 principal
amount of New Senior Subordinated Notes, $282.04 of Exchangeable Preferred Stock
and 76.25 shares of Class A Common Stock for each $1,000 principal amount of
outstanding
<PAGE>
Old 10 1/4% Notes (the "Exchange Offers"); (v) the solicitation of consents to
amend certain terms of the indentures pursuant to which the Old 13% Notes and
the Old 10 1/4% Notes were issued; (vi) the amendment (the "IRB Amendments") of
certain provisions of the Industrial Revenue Bonds (the "IRBs") related to the
Company's manufacturing facility in New York, New York; and (vii) the approval
by the Company's stockholders of (a) an amendment to the Company's Articles of
Organization to increase the number of authorized shares of Class A Common Stock
from 20,000,000 to 40,000,000, (b) pursuant to the requirements of the American
Stock Exchange (the "AMEX") on which the Class A Common Stock is listed, the
issuance of up to 11,399,905 shares of Class A Common Stock as part of the
Recapitalization, and (c) the issuance by the Company of options to purchase an
aggregate of 1,500,000 shares of Class A Common Stock at an exercise price of
$2.75 per share to members of senior management in connection with the
consummation of the Recapitalization as required by the AMEX rules. Holders of
$89,590,000 or 92.8% of the aggregate principal amount of Old 13% Notes and
holders of $25,905,000 or 98.3% of the aggregate principal amount of Old 10 1/4%
Notes tendered their notes pursuant to the Exchange Offers. Thus, in connection
with the Exchange Offers, the Company issued $53,480,900 of New Senior
Subordinated Notes, $36,960,190.45 (2,533,255 shares) of Exchangeable Preferred
Stock, and 9,992,648 shares of Class A Common Stock to holders of Old Notes.
To address seasonality needs, during the fiscal year ending February 26,
1995 the Company entered into an amendment to the New Credit Agreement to
increase the maximum amount available under the New Credit Agreement from
$30,000,000 to $35,000,000 during the months of August through December 1994.
The Company also entered into an amendment to the New Credit Agreement and the
New Gold Agreements to modify the consolidated tangible net worth covenant
contained in those agreements. This covenant previously provided that the
Company was required to maintain consolidated tangible net worth of $38,000,000
through February 27, 1994 and $43,000,000 thereafter. As amended, the covenant
provides that the Company will maintain consolidated tangible net worth of
$40,000,000 from July 1, 1994 through November 26, 1994, and $43,000,000
thereafter. Finally, the Company recently entered into an amendment to the New
Gold Agreements to reduce the aggregate gold consignment availability under such
agreements to approximately 73,000 troy ounces as of February 1, 1995.
Pursuant to the terms of the New Senior Secured Notes, the Company has
redeemed an aggregate of $14 million principal amount of New Senior Secured
Notes since their issuance on May 14, 1993. At January 1, 1995, approximately
$16 million in aggregate principal amount of New Senior Secured Notes were
outstanding. See "Description of Outstanding Debt Securities--New Senior Secured
Notes." Pursuant to the terms of the New Senior Subordinated Notes, the Company
has paid the first three semiannual installments of interest, and currently
intends to pay the fourth installment, on the New Senior Subordinated Notes
through the issuance of additional New Senior Subordinated Notes. At January 1,
1995, approximately $65 million in aggregate principal amount of New Senior
Subordinated Notes were outstanding. See "Description of Outstanding Debt
Securities--New Senior Subordinated Notes."
On November 4, 1994, the Company made an offer to certain holders of the
Exchangeable Preferred Stock to issue to such holders one share of the Company's
convertible preferred stock, par value $1.00 per share (the "Convertible
Preferred Stock"), for each share of Exchangeable Preferred Stock which they
exchanged for shares of common stock of Little Switzerland, Inc. (the "Little
Switzerland Common Stock"). Holders of 2,381,038 shares of Exchangeable
Preferred Stock, representing approximately 94% of the outstanding shares of
Exchangeable Preferred Stock, accepted this offer and exchanged their shares of
Exchangeable Preferred Stock for an aggregate of 2,381,038 shares of Little
Switzerland Common Stock. In connection with such exchange, the Company issued
to such holders (the "Selling Shareholders") an aggregate of 2,381,038 shares of
Convertible Preferred Stock in a private placement (the "Private Placement")
pursuant to Section 4(2) of the Securities Act of 1933, as amended (the
"Securities Act"), and Rule 506 promulgated thereunder. As part of this private
placement, the Company agreed to file a registration statement under the
Securities Act with respect to the shares of Convertible Preferred Stock and the
shares of Class A Common Stock into which such shares are convertible
(collectively, the "Securities") issued to the Selling Shareholders.
<PAGE>
RISK FACTORS
The purchase of Convertible Preferred Stock and Class A Common Stock is
subject to a number of material risks, including those enumerated below. Before
purchasing any shares of Convertible Preferred Stock or Class A Common Stock, a
person should carefully consider the following risk factors, together with all
of the other information set forth in this Prospectus.
Financial Considerations
Changing Industry.
In recent years, the jewelry industry has undergone numerous changes.
The number of traditional retail jewelry outlets, such as mall-based stores, is
being reduced as alternative distribution channels (e.g., television shopping
networks, warehouse clubs, and discount department stores) have gained market
share. In addition, the jewelry industry is sensitive to general economic
conditions and has been materially and adversely affected by the recent economic
recession. This recession led to a decrease in consumer spending for jewelry
and reduced purchases by large jewelry retailers and other customers of the
Company. Several of the Company's important customers have experienced severe
financial difficulties due to the economic recession and sought to reduce
inventory purchases in an effort to conserve cash. In addition, a significant
portion of the Company's business is with companies with high debt to equity
ratios. These factors adversely affected the Company's business and results
of operations during recent years and may continue to do so in the future.
Operating Results.
For the nine months ended November 27, 1994, the Company's net sales
were $222 million, as compared to $210 million for the corresponding period in
fiscal 1994 and $209 million for the corresponding period in fiscal 1993. The
Company's loss from operations during the first nine months of fiscal 1995 was
$88,000 and the Company's income from operations during the corresponding
periods in fiscal 1994 and fiscal 1993 was $14 million and $13 million,
respectively. Although net sales for the first three quarters of fiscal 1995
have increased over the corresponding periods in fiscal 1994 and fiscal 1993,
the increases have been in lower margin fine jewelry sales to discount
department stores and the Company's operations have been adversely affected by
decreasing sales and higher operating costs in its direct response distribution
business of licensed sports and other specialty products.
The Company's net sales were $277 million in fiscal 1994, $270 million
in fiscal 1993, and $272 million in fiscal 1992. The Company's income from
operations was $17 million in fiscal 1994, $280,000 in fiscal 1993, and a loss
from operations of $49 million in fiscal 1992. This operating loss for fiscal
1992 included restructuring expenses and a Zale bankruptcy charge totaling $44
million, consisting of a charge-off of $13 million associated with the Company's
receivable and consigned merchandise exposure to the Zale Companies and charges
of $31 million associated with the restructuring of the Company's operations.
For fiscal 1993, the Company had a net loss of $47 million as a result of a $5
million charge related to the New York facility, a $14.5 million charge related
to the disposal of certain assets, and a $14.4 million charge related to the
recapitalization. Net income in fiscal 1992 included a net gain on nonrecurring
items of $51 million.
Zale Bankruptcy.
The Company's largest customer for a number of years has been the Zale
Corporation and its affiliated companies, including Gordon Jewelry Corporation.
Sales to the Zale Companies were approximately $33 million or 12% of
consolidated sales in fiscal 1994 compared to $38 million or 14% of consolidated
sales in fiscal 1993 and $44 million or 16% of consolidated sales in fiscal
1992. On July 30, 1993, this group of companies completed a reorganization under
Chapter 11 of the United States Bankruptcy Code in the United States Bankruptcy
Court and emerged from bankruptcy as Zale Delaware, Inc. ("Zale").
The Company reached agreement on most issues with the new Zale
concerning the Company's claim of approximately $40 million, filed with the
Bankruptcy Court, representing the net outstanding balance of trade accounts
receivable and the wholesale value of the consignment inventory as of the date
of Zale's bankruptcy petition.
<PAGE>
The Company's Consolidated Financial Statements at February 28, 1992,
originally reflected a net valuation for the claim of approximately $13 million,
which was classified as Other Assets in the Consolidated Balance Sheets, due to
the uncertainty of the timing of a final settlement. The Company has
subsequently received proceeds from Zale and from liquidation of claim assets of
approximately $11.7 million. The Consolidated Financial Statements at November
27, 1994, reflect a net valuation of approximately $1.3 million, representing
management's estimate of the value of the remaining claim related assets.
The Company continues to conduct business with Zale.
Certain Bankruptcy Law Considerations
If the Company were to seek protection or become the subject of a filing
of an involuntary petition for relief under the Bankruptcy Code, the ability of
the holders of Convertible Preferred Stock and Class A Common Stock to recover
their investment could be significantly impaired. Given the risks inherent in
the bankruptcy process, including the potential deterioration of the business of
a company during a bankruptcy case and the additional administrative expenses
associated with a bankruptcy case, it is not possible to determine what
percentage, if any, of their investment holders of the various securities would
be likely to recover in a bankruptcy case. Ultimate recovery would depend, among
other things, on whether the Company is reorganized or liquidated, the impact of
a bankruptcy case upon the business of the Company, the treatment of the debt
and preferred stock in a plan of reorganization, and the length of time
necessary to complete the reorganization process or the liquidation.
The Convertible Preferred Stock and the Class A Common Stock, as with
all other classes and series of capital stock of the Company, are subordinate
with respect to the distribution of assets of the Company upon any voluntary or
involuntary bankruptcy, liquidation, dissolution or winding up of the Company,
to all existing and future indebtedness of the Company, and its subsidiaries,
including indebtedness under the Revised Debt Agreements, the IRBs, the New
Senior Secured Notes, the New Senior Subordinated Notes, and the Old Notes, and
are subordinate to the Exchangeable Preferred Stock.
Lack of Established Market
The Convertible Preferred Stock is not listed on any securities
exchange, and there can be no assurance that a market will develop for the
Convertible Preferred Stock or, if a market develops, that such market will be
liquid. To the knowledge of the Company, no person intends to make a market in
the Convertible Preferred Stock. In addition, no person is obligated to do so,
and any person who does so may discontinue such activity at any time without
notice. Accordingly, no assurance can be given that a holder of the Convertible
Preferred Stock will be able to sell such stock in the future or as to the price
at which such sale may occur. Moreover, to the extent that it trades at all, the
Convertible Preferred Stock may trade at a substantial discount from its
liquidation value. The extent to which the Convertible Preferred Stock trades at
a discount from its liquidation value will depend on, among other things, the
financial performance of the Company. In addition, because the Convertible
Preferred Stock is convertible under certain circumstances for shares of Class A
Common Stock, the prices at which the Convertible Preferred Stock may trade in
the market, if it trades at all, is likely to be affected by the market price
from time to time of Class A Common Stock.
Dividend Restrictions
The payment of cash dividends on the Convertible Preferred Stock is
prohibited by the Revised Debt Agreements, the New Senior Secured Notes, the New
Senior Subordinated Notes, the IRB Amendments, and the Exchangeable Preferred
Stock. In lieu of the payment of cash dividends on the Convertible Preferred
Stock, the Company is authorized to issue additional shares of Convertible
Preferred Stock having an aggregate liquidation value equal to the amount of
such cash dividends. See "Description of the Convertible Preferred
Stock--Dividends." The payment of dividends on the Company's Class A Common
Stock and Class B Common Stock, par value $0.01 per share (the "Class B Common
Stock" and, together with the Class A Common Stock, the "Common Stock"), is
prohibited by the Revised Debt Agreements, the New Senior Secured Notes, the New
Senior Subordinated Notes, the IRB Amendments, the Exchangeable Preferred Stock,
and the Convertible Preferred Stock. No dividends have ever been declared on
shares of Common Stock, and as a result of the foregoing restrictions and the
Company's financial condition, the Company does not anticipate paying cash
dividends on shares of Common Stock in the foreseeable future.
<PAGE>
Ranking of Convertible Preferred Stock
The Convertible Preferred Stock is subordinate to the prior payment when
due of the principal and premium, if any, and interest on all future and
existing indebtedness of the Company and is subordinate, with respect to payment
of dividends and distribution of assets on liquidation, to the Exchangeable
Preferred Stock. As of January 1, 1995, the Convertible Preferred Stock was
subordinate to approximately $114 million of indebtedness (excluding
indebtedness to trade creditors) of the Company. As of January 1, 1995, the
amount of indebtedness to trade creditors outstanding was approximately $18
million. The Convertible Preferred Stock also is subordinate to additional
indebtedness of up to $30,000,000 and of up to approximately 92,000 troy ounces
under the New Credit Agreement and the New Gold Agreements, respectively. As of
January 1, 1995, the amount of indebtedness outstanding under the New Credit
Agreement and the New Gold Agreements was approximately $24 million and 67,000
ounces, respectively. As of January 1, 1995, there were 152,217 shares of
Exchangeable Preferred Stock outstanding. See "Description of the Convertible
Preferred Stock--Ranking."
Upon any bankruptcy, liquidation, dissolution, or winding up of the
Company, the holders of any indebtedness and the holders of Exchangeable
Preferred Stock are entitled to receive payment in full of all amounts due
before the holders of Convertible Preferred Stock are entitled to receive any
payment. In such circumstances, by reason of such subordination, holders of
Convertible Preferred Stock may receive substantially less than the face amount
of their securities.
Holding Company Structure
The New Senior Secured Notes, the New Senior Subordinated Notes, the
Exchangeable Preferred Stock and the Convertible Preferred Stock are obligations
of the Company. Because a significant portion of the operations of the Company
are, and in the future are likely to be, conducted through subsidiaries, the
cash flow and the consequent ability to service debt of the Company, including
the New Senior Secured Notes, the New Senior Subordinated Notes, the
Exchangeable Preferred Stock and the Convertible Preferred Stock, will
<PAGE>
be dependent upon the earnings of the Company or the payment of dividends to the
Company by its subsidiaries. The payment of dividends and the making of loans
and advances to the Company by its subsidiaries may be subject to statutory or
contractual restrictions, are contingent upon the earnings of those subsidiaries
and are subject to various business considerations.
<PAGE>
PRO FORMA CONDENSED CONSOLIDATED FINANCIAL DATA
The following pro forma condensed consolidated balance sheets and condensed
consolidated statements of operations of the Company present the effects of (i)
the Recapitalization based on the May 14, 1993 sale of $30,000,000 of New Senior
Secured Notes and the issuance of $53,481,000 of New Senior Subordinated Notes,
$36,960,000 (2,533,000 shares) of Exchangeable Preferred Stock, and 9,992,700
shares of Class A Common Stock to holders of Old 13% Notes and holders of Old 10
1/4% Notes who tendered their Old Notes in the Exchange Offers (the
"Recapitalization Adjustments") and (ii) the November 23, 1994 exchange of
2,381,038 shares of Exchangeable Preferred Stock for 2,381,038 shares of common
stock of Little Switzerland, Inc. and the issuance of 2,381,038 shares of
Convertible Preferred Stock (the "Little Switzerland Exchange"), as if those
transactions had occurred on March 1, 1993, for statement of operations purposes
and February 27, 1994, for balance sheet purposes. The Pro Forma Statements do
not purport to represent what the Company's financial position or results of
operations would actually have been if such transactions in fact had occurred on
such dates or at the beginning of the period indicated or to project the
Company's financial position or results of operations for any future date or
period.
If the above pro forma transaction had taken place by February 27, 1994,
net income attributable to common stockholders for the nine-month period ended
November 27, 1994 would have increased by approximately $69,000 due to (i) a
decrease of approximately $576,000 in income from affiliates, (ii) a decrease in
accretion of dividends on Exchangeable Preferred Stock of approximately
$1,341,000 and (iii) an increase in Convertible Preferred Stock dividends of
approximately $696,000. As the Company's consolidated balance sheet as of
November 27, 1994, included in the Company's quarterly report on Form 10-Q for
the fiscal quarter ended November 27, 1994, reflects the pro forma adjustments,
no pro forma consolidated balance sheet is presented herein for the interim
fiscal 1995 period.
The pro forma condensed consolidated balance sheets and statements of
operations and accompanying notes should be read in conjunction with the
"Material Federal Income Tax Consequences" included elsewhere in this Prospectus
and the Company's Consolidated Financial Statements and related notes thereto
included in the Company's Annual Report on Form 10-K delivered herewith.
<PAGE>
TOWN & COUNTRY CORPORATION AND SUBSIDIARIES
PRO FORMA CONDENSED CONSOLIDATED BALANCE SHEET
AT FEBRUARY 27, 1994
(In thousands, except per share amounts)
Pro Forma
Little for the
Switzerland Little
Exchange Switzerland
Actual Adjustments Exchange
-------- ---------- ---------
ASSETS
CURRENT ASSETS:
Cash and cash equivalents . . . . $ 3,274 $-- $ 3,274
Restricted cash . . . . 38 -- 38
Accounts receivable . . 55,623 -- 55,623
Inventories . . . . . . 75,029 -- 75,029
Prepaid expenses and other current assets . 3,992 -- 3,992
-------- -------- ---------
Total current assets. 137,956 -- 137,956
-------- -------- ---------
PROPERTY, PLANT AND
EQUIPMENT, net. . . . . 45,705 -- 45,705
INVESTMENTS IN AFFILIATES. . . . . 27,038 (11,733)(1) 15,305
OTHER ASSETS . . . . . . 13,221 -- 13,221
-------- -------- ---------
Total assets. . . . . $223,920 $(11,733) $212,187
======== ======== =========
LIABILITIES AND
STOCKHOLDERS' EQUITY
CURRENT LIABILITIES:
Current portion of long-term debt . . . $ 1,480 $ -- $ 1,480
Accounts payable. . . . 12,727 -- 12,727
Accrued expenses. . . . 19,956 -- 19,956
Accrued and currently deferred
income taxes. . . . . 874 -- 874
-------- -------- ---------
Total current liabilities . . . 35,037 -- 35,037
-------- -------- ---------
LONG-TERM DEBT:
Senior debt . . . . . . 20,542 -- 20,542
New Senior Subordinated Notes . . 56,977 -- 56,977
Unamortized interest on New Senior
Subordinated 13% Notes. . . . . 6,971 -- 6,971
Old 13% Notes . . . . . 6,903 -- 6,903
Old 10 1/4% Notes . . . . . 434 -- 434
-------- -------- ---------
Total long-term debt. 91,827 -- 91,827
======== ======== =========
LONG-TERM DEFERRED INCOME
TAXES AND OTHER LIABILITIES . . . $ 2,094 $ -- $ 2,094
MINORITY INTEREST. . . . 3,843 -- 3,843
--------- -------- ---------
Total liabilities and minority interest . 132,801 -- 132,801
--------- -------- ---------
<PAGE>
<TABLE>
<CAPTION>
Pro Forma
Little for the
Switzerland Little
Exchange Switzerland
Actual Adjustments Exchange
-------- ------------ -----------
<S> <C> <C> <C>
EXCHANGEABLE PREFERRED STOCK,
$1.00 par value; Authorized--
2,700,000 shares actual, 200,000 shares
pro forma; issued and
outstanding--2,533,255 shares actual,
152,217 shares pro forma. . . . . 35,785 (33,638)(1) 2,147
-------- ------------ -----------
STOCKHOLDERS' EQUITY:
Preferred Stock, $1.00 par value; authorized
and unissued--2,300,000 shares actual,
2,266,745 shares pro forma -- -- --
Convertible Preferred Stock, $1.00 par value,
$6.50 preference value; Authorized--
2,533,255 shares pro forma; issued and
outstanding-- 2,381,038 shares pro forma . -- 2,381(1) 2,381
Class A Common Stock, $.01 par value;
authorized--40,000,000 shares;
issued and outstanding--
20,755,901 shares . . 208 -- 208
Class B Common Stock, $.01 par value;
authorized-8,000,000 shares;
issued and outstanding--2,670,693
shares. . . . . . . . 27 -- 27
Additional paid-in capital. . . . 69,909 2,976(1) 72,885
-------- ------------ ----------
Retained earnings (deficit) . . . (14,810) 16,548(1) 1,738
-------- ------------ ----------
Total stockholders' equity. . . 55,334 21,905 77,239
Total liabilities and stockholders'
equity. . . . . . . $ 223,920 $ (11,733) $ 212,187
========= ============ ==========
BOOK VALUE PER COMMON
SHARE(2). . . . . . . . $ 2.36 $ 2.74
========= ==========
</TABLE>
<PAGE>
TOWN & COUNTRY CORPORATION AND SUBSIDIARIES
PRO FORMA CONDENSED CONSOLIDATED STATEMENT OF OPERATIONS
FOR THE FISCAL YEAR ENDED FEBRUARY 27, 1994 (In thousands,
except per share amounts, ratios, and percentages)
<TABLE>
<CAPTION>
Pro Forma
Pro Forma Little for the
Recapital- for the Switzerland Little
ization Recapital- Exchange Switzerland
Actual Adjustments ization Adjustments Exchange(1)
--------- ----------- --------- ----------- -----------
<S> <C> <C> <C> <C> <C>
Net sales. . . . $ 277,750 $ -- $ 277,750 $ -- $ 277,750
Cost of sales. . 180,356 -- 180,356 -- 180,356
--------- ----------- --------- ----------- -----------
Gross profit . 97,394 -- 97,394 -- 97,394
Selling, general and
administrative expenses . 80,221 -- 80,221 -- 80,221
--------- ----------- --------- ----------- -----------
Income from
operations. . 17,173 -- 17,173 -- 17,173
Interest expense (14,045) 1,505(3) (12,540) -- (12,540)
Interest and other income. 699 699 -- 699
Equity and investment
income, net . . 1,262 -- 1,262 (1,106)(5) 156
Minority interest. . (941) -- (941) -- (941)
Income (loss) before
income taxes. 4,148 1,505 5,653 (1,106) 4,547
Provision for income taxes . 1,010 -- 1,010 -- 1,010
--------- ----------- --------- ----------- -----------
Net income . . . . 3,138 1,505 4,643 (1,106) 3,537
Dividend on Convertible
Preferred Stock -- -- -- (929)(6) (929)
Accretion of discount on
Exchangeable Preferred
Stock . . . . . (1,454) (410) (1,864) 1,752(4) (112)
---------- ------------ --------- ---------- -----------
Net income attributable
to common stockholders. . $ 1,684 $ 1,095 $ 2,779 $ (283) $ 2,496
========== ============ ========= ========== ===========
Net income per common
share -- primary(7) . . . $ 0.08 -- $ 0.12 -- $ 0.11
========== ============ ========= ========== ===========
Weighted average common
shares outstanding(7) . . 21,206 23,419 23,419
========== ========= ===========
Net income per common
share -- fully diluted(7) . $ 0.08 $ 0.12 $ 0.11
Weighted average common
shares outstanding(7) . . 21,206 23,419 23,419
========== ========= ===========
Ratio of earnings to fixed
charges(8). . . 1.21x 1.35x 1.35x
========== ========= ===========
Ratio of earnings to fixed
charges, exchangeable
preferred stock dividends
and accretion and
convertible preferred
stock dividends(9). . . . 1.11x 1.18x 1.25x
==== ==== ====
</TABLE>
<PAGE>
<TABLE>
<CAPTION>
Pro Forma
Pro Forma Little for the
Recapital- for the Switzerland Little
ization Recapital- Exchange Switzerland
Actual Adjustments ization Adjustments Exchange(1)
--------- ----------- --------- ----------- -----------
<S> <C> <C> <C> <C> <C>
Other Data:
Ratio of EBITDA to
interest expense(10). . . 1.67x 1.87x 1.87x
Ratio of EBITDA to cash
interest expense(10). . . 3.85x 4.28x 4.28x
Depreciation and
amortization . . . . $ 5,628 $ (201) $ 5,427 $ -- $ 5,427
Capital expenditures . . . $ 4,056 $ -- $ 4,056 $ -- $ 4,056
Long-term debt as a
percentage of capitalization,
excluding unamortized
interest on new senior
subordinated notes(11). . 61% 61% 53%
</TABLE>
<PAGE>
TOWN & COUNTRY CORPORATION AND SUBSIDIARIES
NOTES TO PRO FORMA FINANCIAL STATEMENTS
(Dollars in thousands, except per share amounts, ratios, and percentages)
(1) Reflects the exchange of approximately 94% of the Company's Exchangeable
Preferred Stock in exchange for approximately 88% of the Company's
investment in Little Switzerland, Inc. Common Stock and shares of the
Company's Convertible Preferred Stock, including the net gain realized on
the transaction, as outlined in the following table:
Exchange of Exchangeable
Preferred Stock for shares of
Little Switzerland, Inc. Common Little
Stock and Convertible Preferred Switzerland
Stock Inducement Actual Exchange
------------------------------- ------- ---------
Exchangeable Preferred Stock. . $35,785 $ 33,638
Investment in Little Switzerland. (13,304) (11,733)
Convertible Preferred Stock . . (5,357)
---------
Gain on Little Switzerland,
Inc. Exchange . . . $ 16,548
=========
The assumed gain of approximately $16.5 million has not been included in
the pro forma statement of operations as it is a nonrecurring gain.
(2) Historical and pro forma book value per common share are calculated by
dividing the outstanding shares of Class A and Class B Common Stock, as
well as, for pro forma purposes, the number of shares of Class A Common
Stock into which the Convertible Preferred Stock converts as of February
27, 1994, into stockholders' equity as of February 27, 1994.
These calculations do not include the potential effect of outstanding stock
options for 2,348,400 shares of Class A Common Stock as of February 27,
1994, or stock options for 1,500,000 shares of Class A Common Stock issued
to senior management of the Company in connection with the
Recapitalization. The calculations also exclude warrants to purchase
125,000 shares of Class A Common Stock issued to the Financial Advisors in
connection with the Recapitalization. The pro forma book value per share
calculations include the effects of the issuance to the Fidelity Funds of
750,000 shares of Class A Common Stock as a commitment fee in connection
with the Secured Debt Offering and the issuance to the holders of Old Notes
of approximately 9,992,700 shares of Class A Common Stock in connection
with the Exchange Offers.
(3) Reflects the reduction in interest expense as a result of the
Recapitalization taking place March 1, 1993, rather than May 14, 1993. The
Old 13% Notes and the Old 10 1/4% Notes have effective interest rates of
approximately 14% and 15%, respectively, versus an assumed effective
interest rate of approximately 12% for the New Senior Subordinated Notes.
The interest savings on other debt reflects the assumed reduction in senior
debt as a result of the lower assumed cash interest/dividend payments on
the New Securities.
Interest savings were allocated as follows:
Year Ended
February 27, 1994
-----------------
Savings on Old 13% Notes. . . . . . $ 2,475
Savings on Old 10 1/4% Notes. . . . 718
Interest on New Senior Subordinated Notes . . (1,525)
Interest on New Senior Debt . . . . (854)
Savings on Senior Debt. . . . . . . 691
-------
Total Interest Savings. . . . . . . $ 1,505
=======
(4) Reflects the accretion at an effective rate of approximately 7%, of the
discount and dividend associated with the Exchangeable Preferred Stock.
(5) Reflects the effect of reducing investment income by the amount of equity
income related to the Little Switzerland investment which would be
eliminated upon exchange. Does not reflect the nonrecurring gain related to
the exchange of the Exchangeable Preferred Stock for Little Switzerland
Common Stock and Convertible Preferred Stock of $16.5 million.
(6) Reflects the cumulative dividend earned on the Convertible Preferred Stock
as if the Convertible Preferred Stock had been issued at the beginning of
fiscal 1994. Cumulative dividends accrue at 6% of the Convertible Preferred
Stock liquidation value of $6.50 per share.
(7) The pro forma weighted average shares used in the calculation of net income
per common share assume that the (i) 750,000 shares of Class A Common Stock
issued to the Fidelity Funds in payment of the commitment fee in connection
with the Secured Debt Offering and (ii) approximately 9,992,700 shares of
Class A Common Stock issued to the holders of Old Notes in connection with
the Exchange Offers were issued on March 1, 1993. The pro forma weighted
average shares excludes options to purchase 1,500,000 shares of Class A
Common Stock which were issued to senior management of the Company,
warrants for 125,000 shares of Class A Common Stock which were issued to
the Financial Advisors in connection with the Recapitalization and the
shares of Class A Common Stock issuable upon conversion of the Company's
Convertible Preferred Stock (4,762,076 shares of Class A Common Stock), as
they are assumed to be dilutive. If the shares of Convertible Preferred
Stock had converted to shares of Class A Common Stock on March 1, 1993, the
pro forma earnings per share would have been $.13 per share.
(8) Earnings used in computing the historical and pro forma ratio of earnings
to fixed charges consist of income (loss) before income taxes and
extraordinary gains plus fixed charges. Fixed charges are defined as
interest expense plus amortization of deferred financing costs plus one
third of operating lease rental expense. For the nine month periods ended
November 28, 1993 and November 27, 1994, the Company's ratios of earnings
to fixed charges were 1.23% and 1.86%, respectively.
(9) Earnings used in the computation of the pro forma ratio of earnings to
fixed charges, Exchangeable Preferred Stock dividends and Convertible
Preferred Stock dividends consist of income (loss) attributable to common
stockholders plus income taxes, extraordinary gains and fixed charges.
Fixed charges are defined as interest expense plus amortization of deferred
financing costs plus one third of operating lease rental expense plus
accretion of discount and dividends on Exchangeable Preferred Stock and
dividends on Convertible Preferred Stock.
(10) The ratios of earnings before interest, taxes, depreciation, and
amortization ("EBITDA") to interest expense and cash interest expense are
computed by dividing EBITDA by interest expense and cash interest expense,
respectively. EBITDA is defined as income from operations before
recapitalization and other charges plus depreciation and amortization,
excluding amortization of original issue discount and deferred financing
costs. The pro forma ratios of EBITDA to cash interest expense assume that
all interest on the New Senior Subordinated Notes for the periods presented
is paid via the issuance of New Senior Subordinated Interest Notes.
(11) Long-term debt as a percentage of capitalization, excluding unamortized
interest on New Senior Subordinated Notes, is computed by dividing total
long-term debt (including current portion) less unamortized interest on New
Senior Subordinated Notes, by total long-term debt (including current
portion), less unamortized interest on the New Senior Subordinated Notes
plus stockholders' equity. The Exchangeable Preferred Stock is not included
in this ratio computation.
<PAGE>
SELECTED HISTORICAL AND SUPPLEMENTAL
CONSOLIDATED FINANCIAL DATA
The selected historical summary consolidated financial information
presented below for each of the five years in the period ended February 27,
1994, has been derived from the Company's consolidated financial statements
which have been audited by Arthur Andersen LLP, independent public accountants.
The historical information includes the consolidated results of the Company as
reported in the audited financial statements.
<TABLE>
<CAPTION>
Fiscal Year Ended
-------------------------------------------------------------
Feb. 28, Feb. 28, Feb. 29, Feb. 28, Feb. 27,
1990 1991 1992 (1) 1993 1994
--------- --------- --------- --------- ---------
(In thousands, except per share data,
ratios, and percentages)
<S> <C> <C> <C> <C> <C>
Statement of Operations Data:
Net Sales. . . . . . . $ 423,939 $ 410,402 $ 272,194 $ 270,364 $ 277,750
Cost of sales. . . . . 275,520 267,801 185,446 179,834 180,356
--------- --------- --------- --------- ---------
Gross profit . . . . 148,419 142,601 86,748 90,530 97,394
Selling, general and
administrative expenses . . 114,491 115,168 92,456 85,250 80,221
Restructuring and Zale Bankruptcy
charges(2). . . . . . -- -- 43,619 5,000 --
--------- --------- --------- --------- ---------
Income (loss) from operations. . . 33,928 27,433 (49,327) 280 17,173
Interest expenses, net (25,991) (27,498) (21,810) (19,412) (13,346)
Loss on assets held for sale or disposal(10) . -- -- -- (14,500) --
Recapitalization costs(6). . -- -- -- (14,440) --
Net gain on nonrecurring items(3). -- -- 50,872 -- --
Equity and investment income, net. 1,510 1,220 3,773 1,732 321
--------- --------- --------- --------- ---------
Income (loss) before income
taxes and extraordinary gain. . . 9,447 1,155 (16,492) (46,340) 4,148
Provision for income taxes . 2,834 1,791 3,252 956 1,010
--------- --------- --------- --------- ---------
Income (loss) before extraordinary gain. . $ 6,613 $ (636) $ (19,744) $ (47,296) $ 3,138
Extraordinary gain from debt
extinguishment. . . . -- $ 1,885 $ 726 -- --
--------- --------- --------- --------- ---------
Net income (loss). . . $ 6,613 $ 1,249 $ (19,018) $ (47,296) $ 3,138
Accretion of discount and dividends on
exchangeable preferred stock. . . $ -- $ -- -- -- $ 1,454
Net income (loss) attributable to
common stock. . . . . 6,613 1,249 (19,018) (47,296) 1,684
========= ========= ======== ======== =========
Net income (loss) per common
share(4). . . . . . . $ 0.56 $ 0.10 $ (1.58) $ (3.80) $ 0.08
Weighted average shares
outstanding(4). . . . 11,849 11,909 12,006 12,450 21,206
Ratio of earnings to fixed charges(5). 1.34x 1.04x -- -- 1.21x
</TABLE>
<PAGE>
<TABLE>
<CAPTION>
Fiscal Year Ended
----------------------------------------------------------------
Feb. 28, Feb. 28, Feb. 29, Feb. 28, Feb. 27,
1990 1991 1992 (1) 1993 1994
-------- -------- ------- -------- --------
(In thousands, except per share data,
ratios, and percentages)
<S> <C> <C> <C> <C> <C>
Balance Sheet Data:
Working capital. . . . $152,876 $188,628 $ 87,602 $ 84,646 $102,919
Total assets . . . . . 327,780 397,804 262,288 246,858 223,921
Current portion of long-term debt(6) . 1,020 1,017 737 3,668 1,480
Notes payable to banks(6). . -- 42,810 17,000 7,250 --
Long-term debt(6):
Senior. . . . . . . . 50,006 86,659 5,687 32,021 20,542
Subordinated--
New 13% Notes . . . . -- -- -- -- 63,948
Old 13% Notes . . . . 103,662 97,882 95,516 95,633 6,903
Old 10 1/4 Notes . . . . 24,137 23,395 23,981 24,652 434
-------- -------- ------- -------- --------
Total subordinated debt . . 127,799 121,277 119,497 120,285 71,285
-------- -------- ------- -------- --------
Total long-term debt, less current
portion. . . . . . . 177,805 207,936 125,184 152,306 91,827
Stockholders' equity . $ 87,933 $ 89,456 $ 70,709 $ 24,744 $ 55,334
Book value per common share(7) . . $ 7.40 $ 7.48 $ 5.87 $ 1.95 $ 2.36
Other Data:
Ratio of EBITDA to interest expense(8) . . 1.65x 1.28x .16x .63x 1.67x
Ratio of EBITDA to cash interest
expense(8). . . . . . 1.71x 1.33x .17x 1.44x 3.85x
Depreciation and amortization. . . $ 10,952 $ 10,302 $ 10,936 $ 8,668 $ 5,628
Capital expenditures . $ 12,736 $ 8,660 $ 3,053 $ 3,519 $ 4,056
Long-term debt as a percentage of
capitalization (9). . 67% 70% 64% 85% 61%
</TABLE>
<PAGE>
On July 25, 1991, a subsidiary of the Company sold approximately 68% of the
shares of Little Switzerland, a wholly-owned subsidiary of the Company, in a
public offering. The sale of this stock resulted in the deconsolidation of
Little Switzerland in the Company's fiscal 1992 financial statements. Financial
statements for prior years have not been retroactively adjusted. However, for
comparative analysis purposes, the unaudited supplemental selected financial
data below reflects Little Switzerland accounted for on the equity method for
all years.
<TABLE>
<CAPTION>
Fiscal Year Ended
-------------------------------------------------------------
Feb. 28, Feb. 28, Feb. 29, Feb. 28, Feb. 27,
1990 1991 1992 (1) 1993 1994
--------- --------- --------- --------- ---------
(In thousands, except per share data)
(Unaudited)
<S> <C> <C> <C> <C> <C>
Statement of Operations Data:
Net sales. . . . . . . $ 375,156 $ 356,564 $ 272,194 $ 270,364 $ 277,750
Cost of sales. . . . . 248,439 238,587 185,446 179,834 180,356
--------- --------- --------- --------- ---------
Gross profit. . . . . $ 126,717 $ 117,977 $ 86,748 $ 90,530 $ 97,394
Selling, general and administrative
expenses. . . . . . . 95,599 98,257 92,456 85,250 80,221
Restructuring and Zale Bankruptcy
charges(2). . . . . . -- -- 43,619 5,000 --
--------- --------- --------- --------- ---------
Income (loss) from operations. . . $ 31,118 $ 19,720 $ (49,327) $ 280 $ 17,173
Interest expense, net. (25,782) (27,309) (21,810) (19,412) (13,346)
Loss on assets held for sale or
disposal(10). . . . . -- -- -- (14,500) --
Recapitalization costs(6). . -- -- -- (14,440) --
Net gain on nonrecurring items(3). -- -- 50,872 -- --
Equity and investment income, net. 3,338 7,062 3,773 1,732 321
--------- --------- --------- --------- ---------
Income (loss) before income taxes and
extraordinary gain. . $ 8,674 $ (527) $ (16,492) $ (46,340) $ 4,148
Provision for income taxes . 2,061 109 3,252 956 1,010
--------- --------- --------- --------- ---------
Income (loss) before extraordinary gain. . $ 6,613 $ (636) $ (19,744) $ (47,296) $ 3,138
Extraordinary gain from debt
extinguishment. . . . -- 1,885 726 -- --
--------- --------- --------- --------- ---------
Net income (loss). . . $ 6,613 $ 1,249 $ (19,018) $ (47,296) $ 3,138
Accretion of discount and dividends on
exchangeable preferred stock. . . $ -- $ -- -- -- $ 1,454
Net income (loss) per common share(4). $ 0.56 $ 0.10 $ (1.58) $ (3.80) $ 0.08
</TABLE>
<PAGE>
<TABLE>
<CAPTION>
Fiscal Year Ended
--------------------------------------------------------
Feb. 28, Feb. 28, Feb. 29, Feb. 28, Feb. 27,
1990 1991 1992 (1) 1993 1994
--------- --------- --------- --------- --------
(In thousands, except per share data)
(Unaudited)
<S> <C> <C> <C> <C> <C>
Balance Sheet Data:
Working capital. . . . $135,137 $176,667 $ 87,602 $ 84,646 $102,919
Total assets . . . . . 314,935 386,455 262,288 246,858 223,921
Current portion of long-term debt (6). 1,020 1,017 737 3,668 1,480
Notes payable to banks(6). . -- 38,300 17,000 7,250 --
Long-term debt (6):
Senior. . . . . . . . 46,546 86,659 5,687 32,021 20,542
Subordinated. . . . . 127,799 121,277 199,497 120,285 71,285
Stockholders' equity . 87,933 89,456 70,709 24,744 55,334
Book value per share (7) . . $ 7.40 $ 7.48 $ 5.87 $ 1.95 $ 2.36
Other Data:
Depreciation and amortization. . . $ 9,090 $ 8,935 $ 10,936 $ 8,668 $ 5,628
Capital expenditures . $ 8,438 $ 8,227 $ 3,053 $ 3,519 $ 4,056
</TABLE>
<PAGE>
NOTES TO SELECTED HISTORICAL AND SUPPLEMENTAL
CONSOLIDATED FINANCIAL DATA
(1) See Note 5 to Consolidated Financial Statements for information regarding
the Company's recapitalization and see Note 1 to Consolidated Financial
Statements for a discussion regarding the deconsolidation of Little
Switzerland.
(2) See Notes 3 and 6 to Consolidated Financial Statements.
(3) See Note 6 to Consolidated Financial Statements.
(4) Net income (loss) per common share is computed based on the weighted
average number of common and common equivalent shares outstanding, where
dilutive, during each period. See Notes 7 and 10 to Consolidated Financial
Statements.
(5) Earnings used in the computation of the ratio of earnings to fixed charges
consist of income (loss) before income taxes and extraordinary gains plus
fixed charges. Fixed charges are defined as interest expense plus
amortization of deferred financing costs plus one third of operating lease
rental expense. For the nine month periods ended November 28, 1993 and
November 27, 1994, the Company's ratios of earnings to fixed charges were
1.23% and 1.86%, respectively.
(6) See Note 5 to Consolidated Financial Statements.
(7) Historical and supplemental book value per share were computed based on
total consolidated stockholders' equity at the end of each period divided
by the total shares of Common Stock outstanding at the end of each period.
The computation does not include the potential effect of outstanding stock
options or warrants for any of the periods presented. As of February 27,
1994, the Company had outstanding stock options for 2,348,400 shares of
Class A Common Stock and outstanding warrants for 125,000 shares of Class A
Common Stock.
(8) The ratios of earnings before interest, taxes, depreciation, and
amortization ("EBITDA") to interest expense and cash interest expense are
computed by dividing EBITDA by interest expense and cash interest expense,
respectively. EBITDA is defined as income (loss) from operations before
recapitalization and other charges plus depreciation, and amortization,
excluding amortization of original issue discount and deferred financing
costs. EBITDA for fiscal 1992 excludes the nonrecurring restructuring and
Zale bankruptcy charges of approximately $44 million. EBITDA to cash
interest expense for the twelve months ended February 28, 1993, excludes
approximately $10.0 million of interest expense related to the Old Notes
that will not be paid due to the fact that such interest has been included
as part of the consideration in the Recapitalization.
(9) Long-term debt as a percentage of capitalization is computed by dividing
total long-term debt (including current portion), by total long-term debt
(including current portion) plus stockholders' equity.
(10) See Note 2 to Consolidated Financial Statements.
<PAGE>
DESCRIPTION OF CONVERTIBLE PREFERRED STOCK
General
In the Private Placement, the Company issued 2,381,038 shares of
Convertible Preferred Stock to holders of Exchangeable Preferred Stock who
exercised their right to exchange their shares of Exchangeable Preferred Stock
for shares of Little Switzerland Common Stock. The following is a summary of
certain provisions of the Convertible Preferred Stock. This summary does not
purport to be complete and is subject to, and qualified in its entirety by, the
provisions of the Company's Articles of Organization and the certificate of
designation for the Convertible Preferred Stock (the "Certificate of
Designation"). Copies of the Articles of Organization and the Certificate of
Designation, which have been filed as exhibits to the Registration Statement of
which this Prospectus forms a part, are available from the Company, 25 Union
Street, Chelsea, Massachusetts 02150, telephone number (617) 884-8500;
Attention: Manager of Corporate Communications.
Each share of Convertible Preferred Stock has a liquidation preference
of $6.50, plus accrued and unpaid dividends (the "Liquidation Value"), as
adjusted to reflect subdivisions, combinations, reclassifications, stock
dividends, stock splits or similar events relating to the Convertible Preferred
Stock. The Convertible Preferred Stock is available only in registered form,
without coupons.
Ranking
The Convertible Preferred Stock, as with all other classes and series
of capital stock of the Company, is subordinated with respect to the payment of
dividends, if any, and to the distribution of assets of the Company upon any
voluntary or involuntary bankruptcy, liquidation, dissolution or winding up of
the Company to all existing and future indebtedness of the Company and its
subsidiaries, including, without limitation, indebtedness under the Revised Debt
Agreements, the New Senior Secured Notes, the IRBs, the New Senior Subordinated
Notes, and the Old Notes, and is likewise subordinated to the Exchangeable
Preferred Stock. As of January 1, 1995, the Convertible Preferred Stock was
subordinate to approximately $114 million of indebtedness (excluding
indebtedness to trade creditors) of the Company. As of January 1, 1995, the
amount of indebtedness to trade creditors outstanding was approximately $18
million. The Convertible Preferred Stock also is subordinate to additional
indebtedness of up to $30,000,000 under the New Credit Agreement and of up to
approximately 92,000 troy ounces under the New Gold Agreements. As of January 1,
1995, the amount of indebtedness under the New Credit Agreement and New Gold
Agreements was approximately $24 million and approximately 67,000 troy ounces,
respectively. As of January 1, 1995, there were 152,217 shares of Exchangeable
Preferred Stock outstanding. The Convertible Preferred Stock ranks senior to the
Company's Class A Common Stock, Class B Common Stock and all other Junior Stock
(as defined) with respect to dividends and to the distribution of assets of the
Company upon any voluntary or involuntary bankruptcy, liquidation, dissolution
or winding up of the Company.
While any shares of Convertible Preferred Stock are outstanding, the
Company may not authorize or create any class or series of stock that is senior
to or pari passu with the Convertible Preferred Stock with respect to dividends
or liquidation without the consent of the holders of 75% of the outstanding
shares of Convertible Preferred Stock voting together as a separate class.
Certain Bankruptcy Limitations
The Convertible Preferred Stock and the Class A Common Stock, as with
all other classes and series of capital stock of the Company, are subordinate
with respect to the distribution of assets of the Company upon any voluntary or
involuntary bankruptcy, liquidation, dissolution or winding up of the Company,
to all existing and future indebtedness of the Company, and its subsidiaries,
including indebtedness under the Revised Debt Agreements, the IRBs, the New
Senior Secured Notes, the New Senior Subordinated Notes, and the Old Notes, and
are subordinate to the Exchangeable Preferred Stock. See "Risk Factors--Certain
Bankruptcy Law Considerations."
Dividends
Holders of the shares of Convertible Preferred Stock are entitled to
receive when and as declared by the Board of Directors of the Company,
cumulative cash dividends at the rate of 6% per annum of the Liquidation Value
thereof. Dividends on the Convertible Preferred Stock are payable semiannually
on each
<PAGE>
March 1st and September 1st after November 23, 1994 (the "Issuance Date"). Each
such dividend will be payable to holders of record as they appear on the stock
records of the Company at the close of business on the record date, not
exceeding 60 days preceding the payment date, as shall be fixed by the Board of
Directors of the Company. Dividends shall accrue from the Issuance Date and will
be cumulative from such date, whether or not in any dividend period or periods
there shall be funds of the Company legally available for the payment of such
dividends. Dividends payable on the Convertible Preferred Stock shall be
computed on the basis of a 360-day year consisting of twelve 30-day months.
Because the Revised Debt Agreements, the New Senior Secured Notes, the
New Senior Subordinated Notes and the Exchangeable Preferred Stock prohibit the
payment of cash dividends on the Convertible Preferred Stock, the Company shall
pay such dividends by issuing additional shares of Convertible Preferred Stock
having an aggregate Liquidation Value equal to the amount of such dividend
payments. The issuance of additional shares of Convertible Preferred Stock in
lieu of cash dividends shall be deemed to have satisfied for all purposes the
Company's obligation to pay such dividends and such dividends shall cease to
accrue upon the issuance of such additional shares of Convertible Preferred
Stock. If at any time the Company pays a portion of any dividends in cash and a
portion in additional shares of Convertible Preferred Stock, the cash portion
and the share portion of such dividend payment shall be distributed ratably
among the holders of Convertible Preferred Stock based upon the aggregate
dividends payable on the shares of Convertible Preferred Stock held by such
holders.
The Company shall not declare, pay or set apart for payment any
dividend or other distribution with respect to any Junior Stock (as defined)
unless the Company shall have deposited with its transfer agent sufficient funds
to pay the then-applicable redemption price for all outstanding shares of
Convertible Preferred Stock plus all accrued but unpaid dividends thereon. As
long as shares of Convertible Preferred Stock are outstanding, the Company also
shall not redeem, retire, purchase or otherwise acquire any shares of Junior
Stock.
As used herein, (i) the term "dividend" does not include dividends
payable solely in shares of Junior Stock, or options, warrants or rights to
holders of Junior Stock to subscribe for or purchase any Junior Stock, and (ii)
the term "Junior Stock" means Class A Common Stock, Class B Common Stock and any
other class or capital stock of the Company now or hereafter issued and
outstanding that ranks junior as to dividends or liquidation to the Convertible
Preferred Stock.
Liquidation Rights
In the event of any liquidation, dissolution or winding up of the
Company, a holder of Convertible Preferred Stock will be entitled to receive the
Liquidation Value thereof before the distribution of any assets to the holders
of Junior Stock.
Redemption
Shares of Convertible Preferred Stock may not be redeemed by the
Company prior to the first anniversary of the Issuance Date (the "First
Anniversary Date"). On and after such date, Convertible Preferred Stock may be
redeemed at the option of the Company, in whole at any time or in part from time
to time, at the redemption price (expressed as a percentage of the Liquidation
Value) set forth below if redeemed during the twelve-month period beginning on
November 23 of the year indicated below:
Year Percentage
----------------------------------------------------
1995............................... 104%
1996............................... 102
1997 and thereafter................ 100
The Company shall pay such redemption price by delivering cash. The
Company may pay cash in respect of any accrued and unpaid dividends on shares of
Convertible Preferred Stock which are being redeemed or, in lieu of cash, the
Company may pay such dividends by issuing additional shares of Convertible
Preferred Stock having an aggregate Liquidation Value equal to the amount of
such accrued but unpaid dividends. In the event that the Company elects to pay
such accrued but unpaid dividends with shares of
<PAGE>
Convertible Preferred Stock, immediately upon issuance such shares automatically
shall be converted into shares of Class A Common Stock at the then-applicable
Conversion Rate (as defined). See "--Conversion."
If Convertible Preferred Stock is called for redemption, the holder may
convert it into shares of Class A Common Stock at any time before the close of
business on the redemption date.
If less than all of the shares of Convertible Preferred Stock are to be
redeemed, the number of shares of Convertible Preferred Stock to be redeemed
from each holder shall be the number of shares determined by multiplying the
total number of shares of Convertible Preferred Stock to be redeemed by a
fraction, the numerator of which shall be the total number of shares of
Convertible Preferred Stock held by such holder and the denominator of which
shall be the total number of shares of Convertible Preferred Stock then
outstanding. Notice of redemption will be mailed not less than 45 days nor more
than 60 days before the redemption date to each holder of record of shares of
Convertible Preferred Stock to be redeemed at the address shown on the books of
the Company. Each notice of redemption will specify, among other things, the
date of redemption, the redemption price, and the type of consideration being
paid in connection with the redemption. On and after the date fixed for
redemption, provided that the redemption price has been duly paid or provided
for, dividends shall cease to accrue on the Convertible Preferred Stock called
for redemption, such shares shall no longer be deemed to be outstanding, and all
rights of the holders of such shares as stockholders of the Company shall cease
except the right to receive the consideration payable upon such redemption upon
surrender of the certificates evidencing such shares.
The Revised Debt Agreements, the New Senior Secured Notes, the New
Senior Subordinated Notes, and the Exchangeable Preferred Stock place
restrictions on the Company's ability to redeem the Convertible Preferred Stock.
Conversion
Conversion at the Option of the Holder. A holder of Convertible
Preferred Stock may convert such stock into shares of Class A Common Stock at
any time, at the then-current conversion rate (a "Holder Optional Conversion").
Initially, each holder of a share of Convertible Preferred Stock shall be
entitled to receive two shares of Class A Common Stock for each share of
Convertible Preferred Stock surrendered for conversion, subject to adjustment to
reflect a subdivision, combination, reclassification, stock dividend, stock
option, or similar event relating to the Convertible Preferred Stock or the
Class A Common Stock (the "Conversion Rate").
In order to convert shares of Convertible Preferred Stock, a holder must
surrender such shares of Convertible Preferred Stock to the Company's transfer
agent by physical delivery, duly assigned or endorsed for transfer to the
Company, accompanied by written notice of conversion (the "Conversion Notice")
and, if required, payment for all transfer or similar taxes. The Conversion
Notice shall specify (i) the number of shares of Convertible Preferred Stock to
be converted, (ii) the name or names in which the holder wishes the certificate
or certificates for Class A Common Stock and for any Convertible Preferred Stock
not to be converted to be issued and (iii) the address to which the holder
wishes delivery of such new certificates to be issued upon such conversion.
Pursuant to the Certificate of Designation, the date on which the Conversion
Notice and the Convertible Preferred Stock shall have been received by the
Company's transfer agent is the conversion date. Such Conversion Notice shall be
irrevocable and may not be withdrawn by a holder for any reason.
In connection with a Holder Optional Conversion, the Company shall be
required to pay any accrued and unpaid dividends on the shares of Convertible
Preferred Stock so converted. Such dividends may be paid in cash or in shares of
Convertible Preferred Stock having an aggregate Liquidation Value equal to the
amount of such accrued but unpaid dividends. In the event that the Company
elects to pay such accrued but unpaid dividends with shares of Convertible
Preferred Stock, immediately upon issuance such shares automatically and without
further action by the Company or a holder shall be converted into shares of
Class A Common Stock at the then-applicable Conversion Rate.
Conversion at the Option of the Company. In the event that at any time
after the Issuance Date, the Sale Price (as defined) of Class A Common Stock
equals or exceeds $3.25 per share for 30 consecutive trading days, the Company
may require the holders of the Convertible Preferred Stock, in whole but not in
<PAGE>
part, to convert their shares of Convertible Preferred Stock into shares of
Class A Common Stock at the then-applicable Conversion Rate (a "Company Optional
Conversion").
In the event of a Company Optional Conversion, the Company shall provide
written notice (the "Company Optional Conversion Notice") to the holders that
the requirements for a Company Optional Conversion have been met and that the
Company is requiring the conversion of all outstanding shares of Convertible
Preferred Stock. The Company Optional Conversion Notice shall be accompanied by
a letter of transmittal describing the procedures by which the holders shall
deliver all of their shares of Convertible Preferred Stock for conversion into
Class A Common Stock. As of the date of the Company Optional Conversion Notice,
(i) all outstanding shares of Convertible Preferred Stock shall be deemed to
have been converted into shares of Class A Common Stock, dividends on the
Convertible Preferred Stock shall cease to accrue, and (iii) all rights of the
holders of Convertible Preferred Stock (except the right to receive from the
Company shares of Class A Common Stock) shall cease.
In connection with a Company Optional Conversion, the Company shall pay
the amount of any accrued and unpaid dividends on the shares of Convertible
Preferred Stock so converted in shares of Convertible Preferred Stock having an
aggregate Liquidation Value equal to the amount of such accrued but unpaid
dividends. Immediately upon issuance, such shares automatically and without
further action by the Company or a holder shall be converted into shares of
Class A Common Stock at the then-applicable Conversion Rate.
The shares of Class A Common Stock into which shares of Convertible
Preferred Stock are convertible have been registered under the Securities Act
pursuant to the Registration Statement of which this Prospectus forms a part.
The Company has agreed to use its best efforts to keep such registration
statement effective until the date on which the Selling Shareholders no longer
own any of the Securities or all holders can sell their shares of Convertible
Preferred Stock or Class A Common Stock pursuant to Rule 144(k) promulgated
under the Securities Act.
Consolidation, Merger, and Sale of Assets
The Company may not consolidate with or merge into, or transfer all or
substantially all of its assets to, another corporation, person or entity
(unless it is the surviving entity and the Convertible Preferred Stock is
unchanged) unless (i) the surviving entity is a corporation organized under the
laws of the United States, any state thereof or the District of Columbia, or a
corporation or comparable legal entity organized under the laws of a foreign
jurisdiction and whose equity securities are listed on a national securities
exchange in the United States or authorized for quotation on NASDAQ, and (ii)
the Company shall make effective provision such that the holders of the
Convertible Preferred Stock shall receive upon the consummation of such
transaction convertible preferred stock of the surviving entity having
substantially identical terms (including as to conversion) as the Convertible
Preferred Stock.
Voting Rights
A holder of a share of Convertible Preferred Stock is entitled to vote
on all matters on which the holders of Class A Common Stock are entitled to
vote. Each share of Convertible Preferred Stock shall have the number of votes
equal to the number of shares of Class A Common Stock into which such share is
then convertible.
The affirmative vote of the holders of 100% of the outstanding shares of
Convertible Preferred Stock, voting together as a separate class, is required in
order to change (i) the amount of the Liquidation Value or the dividend rate of,
or other provisions relating to the calculation of the dividend on, the
Convertible Preferred Stock, (ii) any provision relating to the optional
redemption of the Convertible Preferred Stock; (iii) any provision relating to
the conversion of Convertible Preferred Stock into Class A Common Stock; and
(iv) any provisions relating to the voting rights of the Convertible Preferred
Stock. The affirmative vote of the holders of at least 75% of the outstanding
shares of Convertible Preferred Stock, voting together as a separate class, is
required in order (i) to change, by amendment to the Company's Articles of
Organization or otherwise, any other term or provision of the Convertible
Preferred Stock so as to affect adversely any right, preference or voting power
of the holders thereof or (ii) authorize the issuance of any class or series of
stock of the Company that is senior to or pari passu with the Convertible
Preferred Stock with respect to dividends or liquidation.
<PAGE>
Other Miscellaneous Matters
To the knowledge of the Company, no person presently is making a market
in the Convertible Preferred Stock. No person will be obligated to make a market
in the Convertible Preferred Stock and any market making activity undertaken by
any person may be discontinued at any time. There can be no assurance that an
active public market for the Convertible Preferred Stock will develop and
continue. See "Risk Factors--Lack of Established Market."
Because the Convertible Preferred Stock is convertible into shares of
Class A Common Stock, the prices at which the Convertible Preferred Stock may
trade in the market, if it trades at all, will likely be affected by the market
price from time to time of Class A Common Stock.
<PAGE>
THE REVISED DEBT AGREEMENTS
New Credit Agreement
In connection with the Recapitalization, the Company and certain of its
subsidiaries (collectively, the "Borrowers") entered into a New Credit Agreement
with Foothill which provided senior secured financing in an aggregate amount of
up to $30,000,000. This credit facility consists of revolving lines of credit to
the Borrowers based upon the value of the Borrowers' aggregate accounts
receivable and inventory. The revolving lines of credit mature on May 14, 1996,
and shall be automatically renewed for successive two (2) year renewal periods
thereafter, unless terminated by the Company or Foothill. The loans bear
interest at a rate per annum equal to the greater of (a) two percent above the
reference rate announced from time to time by major money center banks selected
by Foothill, or (b) 8%. The New Credit Agreement contains standard covenants for
facilities of this type including, without limitation, financial covenants
relating to minimum net worth, minimum working capital, debt to net worth, and
current ratios and limitations on indebtedness, liens, dividends and
distributions, dispositions of assets, transactions with affiliates, and capital
expenditures. The New Credit Agreement is secured by first priority security
interests in substantially all of the assets of the Borrowers. The obligations
of the Borrowers, including the Company, in respect of the New Credit Agreement
are fully and unconditionally and jointly and severally guaranteed by each of
the other Borrowers. Indebtedness under the New Credit Agreement is senior in
right of payment to the New Senior Subordinated Notes, the Old Notes, the
Exchangeable Preferred Stock, and the Convertible Preferred Stock.
To address seasonality needs, during the fiscal year ending February 26,
1995 the Company entered into an amendment to the New Credit Agreement to
increase the maximum amount available under the New Credit Agreement from
$30,000,000 to $35,000,000 during the months of August through December 1994.
The Company also entered into an amendment to the New Credit Agreement to modify
the consolidated tangible net worth covenant contained in that agreement. This
covenant previously required the Company to maintain consolidated tangible net
worth of $38,000,000 through February 27, 1994 and $43,000,000 thereafter. As
amended, the covenant provides that the Company will maintain consolidated
tangible net worth of $40,000,000 from July 1, 1994 through November 26, 1994,
and $43,000,000 thereafter.
New Gold Agreements
In connection with the consummation of the Recapitalization, the Company
also entered into New Gold Agreements with its Gold Suppliers which provided the
Company with an aggregate gold consignment availability of up to approximately
100,000 troy ounces. The Company recently entered into an amendment to the New
Gold Agreements to reduce the aggregate gold consignment availability under such
agreements to approximately 73,000 troy ounces as of February 1, 1995. This
modification is consistent with the Company's expected business requirements.
The Company also entered into an amendment to the New Gold Agreements which
modified the consolidated tangible net worth covenant as in the New Credit
Agreement.
The New Gold Agreements are terminable by the Gold Suppliers or the
Company upon thirty days' written notice, and contain standard covenants for
facilities of this type including, without limitation, financial covenants
relating to minimum net worth, minimum working capital, debt to net worth, and
current ratios, and limitations on dividends and distributions, dispositions of
assets, and capital expenditures. The New Gold Agreements are secured by gold
and other precious metals inventory of the Borrowers and second or third
priority security interests in substantially all of the other assets of the
Borrowers. The obligations of the Borrowers, including the Company, in respect
of the New Gold Agreements are fully and unconditionally and jointly and
severally guaranteed by each of the other Borrowers. The indebtedness under the
New Gold Agreements is senior in right of payment to the New Senior Subordinated
Notes, the Old Notes, the Exchangeable Preferred Stock, and the Convertible
Preferred Stock.
<PAGE>
DESCRIPTION OF OUTSTANDING DEBT SECURITIES
New Senior Secured Notes
In connection with the consummation of the Recapitalization, the Company
sold $30,000,000 of New Senior Secured Notes to holders of Old Notes for cash.
These funds were used to repay indebtedness under the Old Credit Agreement. At
January 1, 1995, approximately $16 million in aggregate principal amount of New
Senior Secured Notes were outstanding.
The New Senior Secured Notes are senior secured obligations of the
Company which mature on September 15, 1997, and bear interest from May 14, 1993
(the "Recapitalization Date"), to maturity at the rate of 11 1/2% per annum. The
New Senior Secured Notes are secured by security interests of varying priority
in substantially all of the assets of each of the Borrowers. The New Senior
Secured Notes are senior in right of payment to the New Senior Subordinated
Notes and the Old Notes. As of January 1, 1995, approximately $7 million and $65
million in aggregate principal amount of Old Notes and New Senior Subordinated
Notes, respectively, was outstanding. At January 1, 1995, the aggregate amount
of all other outstanding indebtedness of the Company (excluding the New Senior
Secured Notes and indebtedness under the New Credit Agreement and the New Gold
Agreements) was approximately $18 million. The obligations of the Company under
the New Senior Secured Notes are fully and unconditionally and jointly and
severally guaranteed by each of the Subsidiary Guarantors.
The New Senior Secured Notes may be redeemed at the option of the
Company, in whole at any time or in part from time to time, at a redemption
price of 100% of the principal amount thereof, together with accrued interest
thereon. Following receipt by the Company of certain payments from the Company's
investment in Solomon Brothers, Inc. and/or from the Zale Companies with respect
to the Zale Bankruptcy Claim, the Company is required to redeem an amount of the
New Senior Secured Notes equal to the amount of such cash payments at a
redemption price equal to 100% of the principal amount thereof plus accrued
interest, if any. The Company also is required to use its excess cash flow to
fund redemptions of New Senior Secured Notes at a redemption price equal to 100%
of the principal amount thereof plus accrued interest, if any. In the event that
the Company's consolidated net worth declines below certain specified amounts,
the Company is required to make an offer to redeem 7.5% of the aggregate
principal balance of the then outstanding New Senior Subordinated Notes and New
Senior Secured Notes, at a redemption price equal to 100% of the principal
amount thereof plus accrued interest, if any. As of January 1, 1995,
approximately $14 million in aggregate principal amount of New Senior Secured
Notes have been redeemed.
Upon the occurrence of a change of control of the Company, each holder
of New Senior Secured Notes will have the right to require the Company to
purchase all or any part, at such holder's option, of such holder's New Senior
Secured Notes at a purchase price in cash equal to 100% of the principal amount
thereof, together with accrued interest thereon.
The New Senior Secured Notes are obligations of the Company. Because a
significant portion of the operations of the Company are or may in the future be
conducted through subsidiaries, the Company's cash flow and its consequent
ability to service its indebtedness, including the New Senior Secured Notes,
will be dependent upon the earnings of its subsidiaries and the distribution of
those earnings to the Company or upon loans or other payments by those
subsidiaries to the Company. The payment of dividends and the making of loans
and advances to the Company by its subsidiaries may be subject to statutory or
contractual restrictions, are contingent upon the earnings of those subsidiaries
and are subject to various business considerations. See "Risk Factors--Holding
Company Structure."
The New Senior Secured Notes contain various covenants, including,
without limitation, limitations on dividends and distributions, indebtedness,
dispositions of assets, and transactions with affiliates.
New Senior Subordinated Notes
In connection with the Exchange Offers completed as a part of the
Recapitalization, the Company issued $53,480,900 of New Senior Subordinated
Notes. The New Senior Subordinated Notes are senior subordinated obligations of
the Company which mature on May 31, 1998, and bear interest from the
Recapitalization Date to maturity at the rate of 13% per annum. At the Company's
option, any of the first four semiannual installments of interest on the New
Senior Subordinated Notes may be paid through the issuance of additional
<PAGE>
New Senior Subordinated Notes in an original principal amount equal to such
interest, dated and accruing interest from the applicable interest payment date,
and otherwise generally having the same terms as the New Senior Subordinated
Notes issued on the Recapitalization Date. The Company has paid the first three
semiannual installments of interest, and currently intends to pay the fourth
installment, on the New Senior Subordinated Notes through the issuance of such
additional New Senior Subordinated Notes. At January 1, 1995, approximately $65
million in aggregate principal amount of New Senior Subordinated Notes were
outstanding.
The New Senior Subordinated Notes are secured by security interests of
varying priority in substantially all of the assets of each of the Borrowers.
The New Senior Subordinated Notes are subordinate in right of payment to all
indebtedness of the Company under the New Credit Agreement, the New Senior
Secured Notes and the IRBs and obligations of the Company under the New Gold
Agreements. The obligations of the Company under the New Senior Subordinated
Notes are fully and unconditionally and jointly and severally guaranteed on a
subordinated basis by each of the Subsidiary Guarantors.
The New Senior Subordinated Notes are obligations of the Company.
Because a significant portion of the operations of the Company are or may in the
future be conducted through subsidiaries, the cash flow and the consequent
ability to service debt of the Company, including the New Senior Subordinated
Notes, will be dependent upon the earnings of its subsidiaries and the
distribution of those earnings to the Company or upon loans or other payments of
funds by those subsidiaries to the Company. The payment of dividends and the
making of loans and advances to the Company by its subsidiaries may be subject
to statutory or contractual restrictions, are contingent upon the earnings of
those subsidiaries and are subject to various business considerations. See "Risk
Factors--Holding Company Structure."
The New Senior Subordinated Notes are redeemable after the third
anniversary of the Recapitalization Date at the option of the Company, in whole
at any time or in part from time to time, at a price equal to 106% of the
principal amount of the New Senior Subordinated Notes, if redeemed during the
twelve months beginning on May 14, 1996, and thereafter at prices declining
annually to 100% of principal amount on or after May 14, 1998, in each case
together with accrued interest to the redemption date. In the event that the
Company's consolidated net worth declines below certain specified amounts, the
Company is required to make an offer to redeem an aggregate principal amount of
New Senior Subordinated Notes equal to the sum of (i) 7.5% of the aggregate
principal amount of the then outstanding New Senior Secured Notes and New Senior
Subordinated Notes, minus (ii) the aggregate principal amount of New Senior
Secured Notes redeemed by the Company as a result of such decline in
consolidated net worth at a redemption price equal to 100% of the principal
amount thereof plus accrued interest, if any.
The Revised Debt Agreements and the New Senior Secured Notes place
restrictions on the Company's ability to redeem the New Senior Subordinated
Notes prior to their maturity.
Upon the occurrence of a change of control of the Company and subject to
compliance by the Company with its requirements under the Revised Debt
Agreements, the IRBs and the New Senior Secured Notes, each holder of New Senior
Subordinated Notes will have the right to require the Company to purchase all or
any part, at such holder's option, of such holder's New Senior Subordinated
Notes at a purchase price in cash equal to 100% of the principal amount thereof,
together with accrued interest thereon.
The Revised Debt Agreements, the IRBs, and the New Senior Secured Notes
place restrictions on the Company's ability to purchase the New Senior
Subordinated Notes upon a change of control of the Company.
The New Senior Subordinated Notes contain various covenants, including,
without limitation, limitations on dividends and distributions, indebtedness,
dispositions of assets, and transactions with affiliates.
Exchangeable Preferred Stock
In connection with the consummation of the Recapitalization, the Company
issued 2,533,255 shares of Exchangeable Preferred Stock to holders of Old Notes
who tendered their Old Notes pursuant to the Exchange Offers. The Company also
established a trust (the "Little Switzerland Trust") for the benefit of the
Company and the holders of the Exchangeable Preferred Stock to secure the
performance of the Company's obligations under the certificate of designation
for the Exchangeable Preferred Stock. In connection with the establishment of
the Little Switzerland Trust, the Company entered into a Trust Agreement with
<PAGE>
BayBank, N.A., as Trustee, pursuant to which the Company conveyed to the Little
Switzerland Trust the shares of Little Switzerland Common Stock which are being
held solely for the use and benefit of the Company and the holders of
Exchangeable Preferred Stock. Shares of Exchangeable Preferred Stock are
exchangeable, at the option of the holder, for shares of Little Switzerland
Common Stock and other property, if any, held in the Little Switzerland Trust.
Holders of 2,381,038 shares of Exchangeable Preferred Stock have exercised their
right to exchange such shares for shares of Little Switzerland Common Stock held
in the Little Switzerland Trust. At January 1, 1995, there were 152,217 shares
of Exchangeable Preferred Stock outstanding.
Each share of Exchangeable Preferred Stock has a liquidation preference
of $14.59, plus accrued and unpaid dividends, as adjusted to reflect
subdivisions, combinations, reclassifications, stock dividends, stock splits or
similar events relating to the Exchangeable Preferred Stock (the "Liquidation
Preference").
The Exchangeable Preferred Stock, as with all other classes and series
of capital stock of the Company, is subordinated with respect to the payment of
dividends, if any, and to the distribution of assets of the Company upon any
voluntary or involuntary bankruptcy, liquidation, dissolution or winding up of
the Company to all existing and future indebtedness of the Company and its
subsidiaries, including, without limitation, indebtedness under the Revised Debt
Agreements, the New Senior Secured Notes, the IRBs, the New Senior Subordinated
Notes, and the Old Notes. The Exchangeable Preferred Stock ranks senior to the
Convertible Preferred Stock, Class A Common Stock, Class B Common Stock and all
other Junior Stock (as defined) with respect to dividends and to the
distribution of assets of the Company upon any voluntary or involuntary
bankruptcy, liquidation, dissolution or winding up of the Company. In the event
of any liquidation, dissolution or winding up of the Company, a holder of
Exchangeable Preferred Stock will be entitled to receive the Liquidation
Preference thereof before the distribution of any assets to the holders of
Junior Stock.
While any shares of Exchangeable Preferred Stock are outstanding, the
Company may not authorize or create any class or series of stock that is senior
to or pari passu with the Exchangeable Preferred Stock with respect to dividends
or liquidation without the consent of the holders of 75% of the outstanding
shares of Exchangeable Preferred Stock voting together as a separate class.
No dividends will be paid on the Exchangeable Preferred Stock until
after May 14, 1995. Thereafter, holders of the shares of Exchangeable Preferred
Stock will be entitled to receive when and as declared by the Board of Directors
of the Company, cumulative cash dividends at the rate of 6% per annum of the
Liquidation Preference thereof, payable semiannually. Dividends shall accrue
from May 15, 1995 and will be cumulative from such date.
The Company shall not declare, pay or set apart for payment any dividend
or other distribution with respect to any Junior Stock (as defined) or, unless
(A) all accrued dividends with respect to the Exchangeable Preferred Stock at
the time such dividends are payable have been paid or funds have been set apart
for payment of such dividends and (B) sufficient funds have been set apart for
the payment of the dividends for the current dividend period with respect to the
Exchangeable Preferred Stock. As long as shares of Exchangeable Preferred Stock
are outstanding, the Company also shall not (i) issue or authorize the issuance
of any shares of Exchangeable Preferred Stock other than those issued on the
date of issuance; (ii) create or issue any class of capital stock which is
exchangeable into shares of Little Switzerland Common Stock; or (iii) redeem,
retire, purchase or otherwise acquire any shares of Junior Stock.
As used herein, (i) the term "dividend" does not include dividends
payable solely in shares of Junior Stock, or options, warrants or rights to
holders of Junior Stock to subscribe for or purchase any Junior Stock, and (ii)
the term "Junior Stock" means Class A Common Stock, Class B Common Stock of the
Company and any other class or capital stock of the Company now or hereafter
issued and outstanding that ranks junior as to dividends or liquidation to the
Exchangeable Preferred Stock.
The Revised Debt Agreements, New Senior Secured Notes, and New Senior
Subordinated Notes place restrictions on the Company's ability to pay dividends
on the Exchangeable Preferred Stock.
The Company is required to redeem all outstanding shares of Exchangeable
Preferred Stock on December 31, 2000 at a price per share equal to the
Liquidation Preference thereof. Except as set forth below, Exchangeable
Preferred Stock may not be redeemed by the Company prior to May 15, 1995. On and
<PAGE>
after such date, Exchangeable Preferred Stock may be redeemed at the option of
the Company, in whole at any time or in part from time to time, at a price equal
to 106% of the Liquidation Preference if redeemed during the twelve-month period
beginning on May 15, 1995, and thereafter at prices declining annually to 100%
of Liquidation Preference on or after May 14, 1998. In the event that during the
period from the Recapitalization Date until the second anniversary thereof, the
closing sale price for Little Switzerland Common Stock equals or exceeds $18.75
per share for 30 consecutive trading days, the Company may redeem the
Exchangeable Preferred Stock in whole at a price per share equal to 100% of the
Liquidation Preference.
The Revised Debt Agreements, New Senior Secured Notes, and New Senior
Subordinated Notes place restrictions on the Company's ability to redeem the
Exchangeable Preferred Stock.
Upon the occurrence of a change of control of the Company and subject to
compliance by the Company with its requirements under the Revised Debt
Agreements, the IRBs, the New Senior Secured Notes, and the New Senior
Subordinated Notes, each holder of Exchangeable Preferred Stock will have the
right to require the Company to purchase all or any part, at such holder's
option, of such holder's Exchangeable Preferred Stock at a purchase price in
cash equal to the Liquidation Preference thereof.
The Revised Debt Agreements, the IRBs, the New Senior Secured Notes, and
the New Senior Subordinated Notes place restrictions on the Company's ability to
purchase shares of Exchangeable Preferred Stock upon a change of control of the
Company.
Except under the limited circumstances described below and as required
by applicable law, the holders of Exchangeable Preferred Stock have no voting
rights. If and whenever two semi-annual dividend payments on the Exchangeable
Preferred Stock are in arrears, then during the period (hereinafter called the
"Class Voting Period") commencing with such time and ending when all arrearages
in dividends on the Exchangeable Preferred Stock shall have been paid, the
holders of the Exchangeable Preferred Stock, voting together as a separate
class, are entitled to elect one or more additional directors equal to 30% of
the entire Board of Directors and each share of Exchangeable Preferred Stock is
entitled to one vote in such election of directors. The term of any director so
elected shall expire at the end of the Class Voting Period.
<PAGE>
SELLING SHAREHOLDERS
The following table provides certain information with respect to the
Securities held and to be offered under this Prospectus (the "Offering") from
time to time by each Selling Shareholder. Because the Selling Shareholders may
sell all or part of their Securities pursuant to this Prospectus, no estimate
can be given as to the number and percentage of shares of Convertible Preferred
Stock and Class A Common Stock that will be held by each Selling Shareholder
upon termination of the Offering.
<TABLE>
<CAPTION>
Shares of Shares of Shares of
Convertible Preferred Class A Common Class A Common
Stock Offered Stock Offered Stock Beneficially
Pursuant to this Pursuant to this Owned Prior
Selling Shareholder Prospectus1 Prospectus to Offering2
- ------------------ ------------------- ---------------- ------------------
<S> <C> <C> <C>
Kevin L. Brosh 226 452 7,394
MetLife - State Street Research
High Income Fund 94,263 188,526 371,830
KS Capital, L.P. 26,089 52,178 0
KS International 6,806 13,612 0
Roy B. McEndre, IRA 226 452 0
International Nederlanden (U.S.)
Finance Corporation 233,688 467,376 0
American Life and Casualty
Insurance Company 68,060 136,120 0
Northeast Investors
Trust 273,659 547,318 1,079,455
E. Mark Noonan 5,000 10,000 7,000
O'Connor & Associates 24,000 48,000 0
Loeb Partners Corporation1 2,687 25,374 0
The Brinson Trust Company, as
Trustee of the Brinson Trust
Company Collective Investment
Trust for Pensions and Profit
Sharing Trusts - The High
Yield U.S. Bond Fund 19,331 38,662 0
Watson Strategic Investments,
L.P. 185,000 370,000 623,700
Credit Research &
Trading LLC 14,960 29,920 0
Variable Insurance Products Fund:
High Income Portfolio 4,000 8,000 0
Fidelity Capital &
Income Fund 634,076 1,268,152 0
Fidelity Puritan Fund 112,098 224,196 0
</TABLE>
<PAGE>
<TABLE>
<CAPTION>
Shares of Shares of Shares of
Convertible Preferred Class A Common Class A Common
Stock Offered Stock Offered Stock Beneficially
Pursuant to this Pursuant to this Owned Prior
Selling Shareholder Prospectus1 Prospectus to Offering2
- ------------------ ------------------- ---------------- ------------------
<S> <C> <C> <C>
Fidelity High Yield Bond
Collective Trust,
by Fidelity Management
Trust Company, as
trustee 2,711 5,422 0
Lehman Brothers, Inc. 45,373 90,746 301,480
CPI Securities, L.P. 23,750 47,500 19,100
GRS Partners II 31,750 63,500 0
Value Realization Fund,
L.P. 62,500 125,000 0
Corporate Rebuilding
Managers, L.P. 19,331 38,662 76,250
Scraggy Neck Investors,
L.P. 23,197 46,394 91,500
CARPS IV Ltd. 22,686 45,372 89,490
The SC Fundamental
Value Fund, L.P. 205,677 411,354 254,678
SC Fundamental Value
BVI, LTD. 83,869 167,738 101,657
Certain Funds managed by SC
Fundamental Inc.,
as agent 8,500 17,000 10,500
George Donald Boyer 113 226 0
Mary Ross Gilbert 2,000 4,000 0
Dunlap-Swain Tire 1,134 2,268 0
First Boston Corp. 55,000 110,000 0
Executive Life Insurance
Co. of New York in
Rehabilitation 9,278 18,556 245,700
Bell Atlantic MPT-
Restructuring A/C 70,000 140,000 0
--------- -------
Total 2,381,038 4,762,076
- ------------------------
</TABLE>
1 All shares of Convertible Preferred Stock offered pursuant to this
Prospectus were owned by the respective Selling Shareholders prior to the
Offering.
2 Does not include shares of Class A Common Stock offered pursuant to this
Prospectus.
The Company will not receive any of the proceeds from the sale of the
Securities by the Selling Shareholders.
<PAGE>
PLAN OF DISTRIBUTION
The Securities may be sold from time to time to purchasers directly by any
of the Selling Shareholders. Alternatively, any of the Selling Shareholders may
from time to time offer the Securities through underwriters, dealers or agents
who may receive compensation in the form of underwriting discounts, concessions
or commissions from the Selling Shareholders and/or the purchasers of the
Securities for whom they may act as agent. The Selling Shareholders and any such
underwriters, dealers or agents who participate in the distribution of the
Securities may be deemed to be underwriters, and any profits on the sale of the
Securities by them and any discounts, commissions or concessions received by any
such underwriters, dealers or agents might be deemed to be underwriting
discounts and commissions under the Securities Act.
The Company has been advised by each Selling Shareholder that the Selling
Shareholders may sell their Securities from time to time in transactions on the
American Stock Exchange, in negotiated transactions, by writing options on the
Securities or by a combination of these methods, at fixed prices which may be
changed, at varying prices determined at the time of sale, at market prices at
the time of sale, at prices related to market prices or at negotiated prices.
Such prices will be determined by the Selling Shareholders or by agreement
between the Selling Shareholders and underwriters or dealers. The Selling
Shareholders may effect these transactions by selling the Securities to or
through broker-dealers, who may receive compensation in the form of discounts,
concessions or commissions from the Selling Shareholders or the purchasers of
the Securities for whom the broker-dealer may act as an agent or to whom they
may sell the Securities as a principal, or both. The compensation to a
particular broker-dealer may be in excess of customary commissions.
In connection with the Private Placement, the Company entered into a
Registration Rights Agreement with the Selling Shareholders. Pursuant to this
agreement, the Company agreed to use its best efforts (i) to file a registration
statement covering the resale of the Securities held by the Selling Shareholders
within 60 days after the Issuance Date and (ii) to keep such registration
statement effective until the earlier of (x) the date on which the Selling
Shareholders notify the Company that they may dispose of the Securities which
were acquired pursuant to the Private Placement pursuant to rule 144(k) under
the Securities Act or (y) the date on which the Selling Shareholders no longer
own any of such Securities. Under this agreement, if such registration statement
is not continuously effective for 120 days during any six month period, the
Company will make a cash payment to the Selling Shareholders equal to the
product of (x) .00125 and (y) the aggregate liquidation value of the Securities
owned by the Selling Shareholders as of the date of such payment which were
acquired pursuant to the Private Placement (the "Illiquidity Payment"). In the
event that the Company fails to satisfy this test for four consecutive months,
the amount of the cash payment required to be made by the Company will be
increased by 100% of the Illiquidity Payment for such calendar month and for
each consecutive calendar month thereafter in which the Company is obligated to
make an Illiquidity Payment.
Pursuant to the Registration Rights Agreement, the Company has agreed to
indemnify each Selling Shareholder against all liabilities, including
liabilities under the Securities Act, caused by any untrue statement of a
material fact in this Prospectus or by any omission to state a material fact
required to be stated in this Prospectus or necessary to make any statement in
this Prospectus not misleading, except insofar as such liabilities are caused by
any untrue statement or omission in any written information furnished to the
Company by the Selling Shareholder for use in this Prospectus.
In order to comply with certain states' securities laws, if applicable, the
Securities will be sold in such jurisdictions only through registered or
licensed brokers or dealers. In certain states the Securities may not be sold
unless the Securities have been registered or qualified for sale in such state,
or unless an exemption from registration or qualification is available and is
obtained.
<PAGE>
DESCRIPTION OF CAPITAL STOCK
Preferred Stock
The Company is currently authorized to issue up to 5,000,000 shares of
preferred stock, par value $1.00 per share (the "Preferred Stock"). Pursuant to
the Company's Articles, the Board of Directors is authorized, without further
stockholder approval, to issue shares of Preferred Stock in one or more series.
Each such series of Preferred Stock shall have such rights, preferences,
privileges and restrictions, including voting rights, dividend rights,
conversion rights, redemption privileges and liquidation preferences, as
determined by the Board of Directors. Any such Preferred Stock issued by the
Company may rank prior to the Common Stock as to dividend rights, liquidation
preference or both. In connection with the consummation of the Recapitalization,
the Company filed a certificate of designation authorizing the issuance of up to
2,700,000 shares of Exchangeable Preferred Stock and issued 2,533,255 shares of
such stock. On November 23, 1994, holders of 2,381,038 shares of Exchangeable
Preferred Stock exchanged such stock (the "Exchange") for an aggregate of
2,381,038 shares of Little Switzerland Common Stock. Pursuant to the certificate
of designation for the Exchangeable Preferred Stock, all such shares of
Exchangeable Preferred Stock which were exchanged for shares of Little
Switzerland Common Stock were restored to the status of authorized but unissued
shares of Preferred Stock, without designation as to series. Subsequent to the
Exchange and prior to the issuance of the Convertible Preferred Stock, the
Company filed the Certificate of Designation authorizing the issuance of up to
2,533,255 shares of Convertible Preferred Stock.
The issuance of Preferred Stock, while providing desirable flexibility
in connection with a possible investment in the Company, possible acquisitions
by the Company and other corporate purposes, could have the effect of making it
more difficult for a third party to acquire, or of discouraging a third party
from acquiring the Company.
As of January 13, 1995, there were 3 holders of record of Exchangeable
Preferred Stock and 32 holders of record of Convertible Preferred Stock. The
transfer agent for the Exchangeable Preferred Stock and the Convertible
Preferred Stock is State Street Bank and Trust Company.
Common Stock
The Company is authorized to issue up to 40,000,000 shares of Class A
Common Stock and 8,000,000 shares of Class B Common Stock. Except as noted
below, holders of both classes of Common Stock are entitled to receive ratably,
such dividends as may be declared by the Board of Directors. In the event of a
liquidation, dissolution or winding up of the Company, holders of both classes
of Common Stock have the right to a ratable portion of assets remaining after
payment of liabilities and distribution of liquidation preferences to holders of
any outstanding shares of Preferred Stock. See "--Preferred Stock." The holders
of Common Stock have no preemptive rights or, except in the case of the Class B
Common Stock, rights to convert their Common Stock into any other securities and
such holders are not subject to future calls or assessments by the Company. All
outstanding shares of Common Stock are fully paid and non-assessable. The
transfer agent for the Common Stock is State Street Bank and Trust Company.
Class A Common Stock
Each share of Class A Common Stock entitles the holder thereof to one
vote on all matters submitted to the stockholders of the Company generally. All
actions submitted to a vote of stockholders will be voted on by holders of Class
A Common Stock and of Class B Common Stock voting together, provided however,
that twenty-five percent (25%) of the Directors of the Company are Class A
Directors and are elected by a majority vote of the holders of Class A Common
Stock voting separately as a class. Except for the aforementioned election of
Directors and as otherwise provided by law, there is no separate class voting on
any matters. The Class A Common Stock also is entitled to a dividend preference
over the Class B Common Stock. See "--Class B Common Stock." As of January 13,
1995, there were approximately 1001 record holders of the Class A Common Stock.
Class B Common Stock
Each share of Class B Common Stock entitles the holder thereof to ten
(10) votes on all matters submitted to stockholders. All actions submitted to a
vote of stockholders will be voted on by holders of Class
<PAGE>
A Common Stock and of Class B Common Stock voting together except as noted
above. See "--Class A Common Stock." Except for the aforementioned election of
Directors and as otherwise provided by law, there is no separate class voting on
any matters.
As of the date of this Prospectus, the Class B Common Stock represents
9.45% of the Company's outstanding equity, but has 51.07% of the combined voting
power of the Company's outstanding Class A Common Stock, Class B Common Stock
and Convertible Preferred Stock (voting on an as-converted basis). Holders of
the Class B Common Stock will be able to elect 75% of the directors of the
Company as long as they hold at least 9.09% of the Company's outstanding equity
(assuming no change in the total number of outstanding shares of Common Stock).
In addition, such holders of Class B Common Stock will have the ability to
approve or disapprove acquisitions, mergers, consolidations and similar
extraordinary transactions requiring a vote of stockholders. See
"--Massachusetts Anti-Takeover Laws and Certain Provisions of the Articles and
By-Laws."
Cash dividends may be declared and paid on Class B Common Stock only if
a dividend of an amount of cash at a quarterly rate no less than $.025 per share
in excess of the dividend on Class B Common Stock will be paid on Class A Common
Stock. The Board in its discretion also may declare and pay a dividend in stock
of the Company, provided, however, that such dividend shall be declared pro rata
on both Class A Common Stock and Class B Common Stock.
Each share of Class B Common Stock is convertible at any time, at the
option of the holder, into one share of Class A Common Stock.
As of January 13, 1995, there were 29 record holders of the Class B
Common Stock.
Registration Rights
In connection with the Recapitalization, the Company entered into a
registration effectiveness agreement with certain securityholders which requires
the Company to keep effective a registration statement covering the New Senior
Secured Notes, New Senior Subordinated Notes and Class A Common Stock owned by
such securityholders. The Company is required to bear all expenses of such
registration, other than certain expenses of the securityholders.
The warrants (the "Warrants") granted to the Financial Advisors in
connection with the Recapitalization provide the Financial Advisors with the
right to have the shares of Class A Common Stock issued upon exercise of the
Warrants registered by the Company in certain circumstances. Capitalized terms
used in this paragraph and not otherwise defined herein are defined in the
Warrants. Pursuant to the Warrants, if, at any time after the date on which the
Warrants are granted, the Company proposes to register any Class A Common Stock
under the Securities Act in connection with the public offering of such
securities for its own account or the account of a security holder or holders
exercising their respective demand rights, other than certain offerings, the
holders of Registerable Securities shall be entitled to include such
Registerable Securities in such registration. If such registration is an
underwritten public offering, the underwriter may exclude from registration some
or all of the Registerable Securities if the underwriter determines that
marketing factors so require. The Company generally is required to bear all
expenses of any registration pursuant to the Warrants, other than certain
expenses of the holders of Registerable Securities.
Massachusetts Anti-Takeover Laws and Certain Provisions of the Articles
and By-Laws
A number of provisions of the Articles and By-Laws deal with matters of
corporate governance and the rights of stockholders. Certain of these
provisions, as well as certain sections of the Massachusetts General Laws, the
Company's two classes of Common Stock, which have unequal voting rights, and the
ability of the Board of Directors to issue shares of Preferred Stock and to set
the voting rights, preferences and other terms thereof, may be deemed to have an
anti-takeover effect and may discourage takeover attempts not first approved by
the Board of Directors (including takeovers which certain stockholders may deem
to be in their best interests). To the extent takeover attempts are discouraged,
temporary fluctuations in the market price of Class A Common Stock, which may
result from actual or rumored takeover attempts, may be inhibited. These
provisions, together with classified Board of Directors, the two classes of
Common Stock and the ability of the Board to issue Preferred Stock without
further stockholder action, also could delay or frustrate the removal of
incumbent Directors or the assumption of control by stockholders, even if such
removal or assumption would be beneficial to stockholders of the Company. These
provisions also could discourage or
<PAGE>
make more difficult a merger, tender offer or proxy contest, even if they could
be favorable to the interests of stockholders, and could potentially depress the
market price of Class A Common Stock. The Board of Directors of the Company
believes that these provisions are appropriate to protect the interests of the
Company and all of its stockholders. The Board of Directors has no present plans
to adopt any other measures or devices which may be deemed to have an
"anti-takeover effect."
Under Chapter 110F of the Massachusetts General Laws, a Massachusetts
corporation like the Company with more than 200 stockholders may not engage in a
"business combination" (as defined below) with an "interested stockholder" (as
defined below) for a period of three years after the date of the transaction in
which the person becomes an interested stockholder, unless (i) the interested
stockholder obtains the approval of the Board of Directors prior to becoming an
interested stockholder, (ii) the interested stockholder acquires 90% of the
outstanding voting stock of the corporation (excluding shares held by certain
affiliates of the corporation) at the time it becomes an interested stockholder
or (iii) the business combination is approved by both the Board of Directors and
the holders of two-thirds of the outstanding voting stock of the corporation
(excluding shares held by the interested stockholder). An "interested
stockholder" generally is a person who, together with affiliates and associates,
owns (or at any time within the prior three years did own) 5% or more of the
outstanding voting stock of the corporation. A "business combination" includes a
merger, a stock or asset sale, and certain other specified transactions
resulting in a financial benefit to the interested stockholder.
Under Chapter 110D of the Massachusetts General Laws, any person
(hereinafter, the "acquirer") who makes a bona fide offer to acquire, or
acquires, shares of stock of a Massachusetts corporation like the Company that
when combined with shares already owned, would increase the acquirer's ownership
to at least 20%, 33 1/3%, or a majority of the voting stock of such company,
must obtain the approval of a majority of shares held by all stockholders except
the acquirer and the officers and inside Directors of the corporation in order
to vote the shares acquired.
The Articles contain a super majority voting provision, pursuant to
which 90% of the votes entitled to be voted thereon are required for the
approval of certain business combinations (including mergers, consolidations,
sale of substantially all of the Company's assets, and liquidations), if the
business combination has not been approved by a majority of the Directors then
in office.
The Articles contain a super majority voting provision, pursuant to
which 90% of the votes entitled to be voted thereon are required for the
approval by the stockholders of any amendments, alterations, change, or repeal
of the Articles and By-Laws if such action has not been first approved by the
Company's Board of Directors then in office.
In addition to the above-described provisions, the Articles provide that
Directors may not be removed, with or without cause, except by vote of 90% of
the votes entitled to be voted thereon, or by vote of a majority of the members
of the Board of Directors then in office. The Articles divide the Board of
Directors into three equal classes, with members of each class to serve for
three years. In addition, the By-Laws set forth certain notice and informational
requirements and time limitations on any Director nomination which a stockholder
wishes to propose for consideration at an annual or special meeting of
stockholders.
Indemnification; Limitation of Liability
The By-Laws provide that the Directors and officers of the Company shall
be indemnified by the Company to the fullest extent authorized by Massachusetts
law, as it now exists or may in the future be amended, against all expenses and
liabilities reasonably incurred in connection with service for or on behalf of
the Company. In addition, the Articles provide that the Directors of the Company
will not be personally liable for monetary damages to the Company for certain
breaches of their fiduciary duty as Directors, unless they violated their duty
of loyalty to the Company or its stockholders, acted in bad faith, knowingly or
intentionally violated the law, authorized illegal dividends or redemptions or
derived an improper personal benefit from their actions as Directors.
<PAGE>
MATERIAL FEDERAL INCOME TAX CONSEQUENCES
General
The discussion set forth below is a summary of the material federal
income tax consequences associated with the ownership and disposition of
Convertible Preferred Stock and Class A Common Stock. The following discussion
represents the opinion of Goodwin, Procter & Hoar, counsel to the Company ("Tax
Counsel"), on the matters associated with such consequences that are material.
The federal income tax discussion set forth below does not purport to be a
complete analysis or listing of all potential tax considerations that may be
relevant to a decision to purchase Convertible Preferred Stock or Class A Common
Stock. The discussion is applicable only to investors who will hold the
Convertible Preferred Stock and Class A Common Stock as "capital assets"
(generally property held for investment within the meaning of Section 1221 of
the Code). It does not address either the tax consequences that may be relevant
to particular categories of investors subject to special treatment under certain
federal income tax laws, such as dealers in securities, banks, insurance
companies, tax-exempt organizations and foreign investors, or any tax
consequences arising under the laws of any state, locality or foreign
jurisdiction. The discussion is based upon currently existing provisions of the
Internal Revenue Code of 1986, as amended (the "Code"), existing and proposed
Treasury Regulations promulgated thereunder and current administrative rulings
and court decisions. All of the foregoing are subject to change, and any such
change could affect the continuing validity of this discussion.
Tax Consequences of Holding Stock
Dividends
Dividends paid to holders of Convertible Preferred Stock or Class A
Common Stock in cash or in additional shares of Convertible Preferred Stock will
be taxable as ordinary income to the extent of the Company's current or
accumulated earnings and profits for tax purposes. In the case of dividends paid
in additional shares of Convertible Preferred Stock, the amount of the taxable
income recognized by a holder will be the fair market value of such additional
shares on the date of distribution. The holder's tax basis in such additional
shares of Convertible Preferred Stock will be the fair market value of the
shares on the distribution date.
To the extent that the amount of any distribution on the Convertible
Preferred Stock or Class A Common Stock, in cash or additional shares of
Convertible Preferred Stock (the amount of such stock distribution being equal
to the fair market value of such stock on the date of distribution), exceeds the
Company's current accumulated earnings and profits for tax purposes, such
distributions will be treated as a return of capital (rather than as ordinary
income) and will be applied against and reduce the adjusted basis of the
Convertible Preferred Stock in the hands of each holder, thus increasing the
amount of gain (or reducing the amount of loss) which may be realized by such
holder upon the sale of such Convertible Preferred Stock. The amount of any
distribution which exceeds the adjusted basis of the Convertible Preferred Stock
in the hands of the holder as of the distribution date will be taxed as capital
gain (provided the Convertible Preferred Stock is held as a capital asset).
Under Section 243 of the Code, distributions received by corporate
holders on the Convertible Preferred Stock or Class A Common Stock, to the
extent of the Company's current or accumulated earnings and profits, will
qualify for the 70% dividends received deduction. However, under Section 246A of
the Code, to the extent that a holder incurs indebtedness "directly
attributable" to the purchase of Convertible Preferred Stock, the deduction for
dividends received on such stock is proportionately disallowed. In addition,
under Section 246(c) of the Code, the dividends received deduction will not be
available with respect to stock which is held for 45 days or less (90 days or
less in the case of a dividend on Convertible Preferred Stock attributable to a
period or periods aggregating more than 366 days). A taxpayer's holding period
for these purposes is reduced by periods during which the taxpayer has an option
to sell, is under a contractual obligation to sell, has made (but not closed) a
short sale of substantially identical stock or securities or is the grantor of
an option to purchase substantially identical stock or securities. A taxpayer's
holding period also is reduced where the taxpayer's risk of loss with respect to
the stock is considered diminished by reason of the taxpayer holding one or more
positions in substantially similar or related property. Proposed regulations
issued on May 26, 1993 offered guidance on the application of this rule. These
proposed regulations are prospective, except for certain specified transactions,
including a short sale of common stock when the taxpayer holds convertible
preferred stock of the same issuer and the price changes of the common stock are
related to price changes on the convertible preferred stock. Further, the
dividends received deduction will also not be available if the taxpayer is under
an obligation to make related payments with respect to positions in
substantially similar or related property. Potential corporate purchasers of the
Convertible Preferred Stock should consult their tax advisors to determine how
these limitations might apply to them.
<PAGE>
Special rules may apply to a corporate holder of Convertible Preferred
Stock or Class A Common Stock who receives a dividend with respect to such stock
that is considered to be an "extraordinary dividend" within the meaning of
Section 1059 of the Code. If a corporate holder receives such an extraordinary
dividend with respect to the Convertible Preferred Stock or Class A Common
Stock, and if the holder has not held such stock for more than two years before
the Company declares, announces, or agrees to the amount or payment of such
dividend, whichever is earliest, then the holder's basis in the stock will be
reduced (but not below zero) by any nontaxed portion of the dividend, which
generally is the amount of the dividends received deduction. For purposes of
determining if the Convertible Preferred Stock or Class A Common Stock has been
held for more than two years, rules similar to those that are applicable to
determining how long such stock has been held for purposes of the dividends
received deduction will apply. Upon the sale or disposition of the Convertible
Preferred Stock or Class A Common Stock, any part of the nontaxed portion of an
extraordinary dividend that has not been applied to reduce basis because of the
limitation on reducing basis below zero will be treated as gain from the sale or
exchange of such stock.
An "extraordinary dividend" on the Convertible Preferred Stock or Class
A Common Stock generally will include a dividend received by a holder that: (i)
equals or exceeds either five percent (for preferred stock) or ten percent (for
common stock) of the holder's adjusted basis in the stock, treating all
dividends having ex-dividend dates within an 85-day period as one dividend; or
(ii) exceeds 20 percent of the holder's adjusted basis in the stock (determined
without regard to any reduction for the nontaxed portion of other extraordinary
dividends), treating all dividends having ex-dividend dates within a 365-day
period as one dividend. A holder may elect to use the fair market value of the
stock, rather than its adjusted basis, for purposes of applying the five or ten
percent and 20 percent limitations, if the holder is able to establish such fair
market value to the satisfaction of the Internal Revenue Service (the "IRS"). An
"extraordinary dividend" will also include any amount treated as a dividend upon
a redemption of the Convertible Preferred Stock or Class A Common Stock that is
either part of a partial liquidation of the Company under Section 302(e) of the
Code or not pro rata as to all shareholders, and the basis reduction and gain
recognition rules described in the preceding paragraph will apply to such an
extraordinary dividend without regard to the period the holder held the stock.
A dividend on the Convertible Preferred Stock received by a holder
generally will be a "qualified preferred dividend" if: (i) the stock was not in
arrears as to dividends when acquired by the holder; and (ii) the holder's
actual rate of return on such stock, as determined under Section 1059(e)(3) of
the Code, does not exceed 15 percent. Where a qualified preferred dividend
received with respect to the Convertible Preferred Stock would otherwise be
treated as an extraordinary dividend: (i) the basis reduction rules generally
applicable to extraordinary dividends will not apply if the holder holds the
stock for more than five years; and (ii) if the holder disposes of the stock
before it has been held for more than five years, the aggregate reduction in
basis under such basis reduction rules will not exceed the excess of the
qualified preferred dividends paid on such stock during the period held by the
taxpayer over the qualified preferred dividends which would have been paid
during such period on the basis of the stated rate of return on such stock as
determined under Section 1059(e)(3) of the Code. For purposes of determining if
the Convertible Preferred Stock has been held for more than five years, rules
similar to those that are applicable to determining how long such stock has been
held for purposes of the dividends received deduction will apply.
In addition to the foregoing rules which limit the dividends received
deduction, a corporate holder of the Convertible Preferred Stock in general may,
for purposes of computing its alternative minimum tax liability, be required to
include in its alternative minimum taxable income the amount of any dividends
received deduction allowed in computing regular taxable income.
Adjustment of Conversion Price
Holders of the Convertible Preferred Stock may be deemed to have
received a constructive distribution of stock that is taxable as a dividend if,
among other things, the conversion price of the Convertible Preferred Stock is
adjusted to reflect a cash or property distribution with respect to outstanding
common stock. However, an adjustment to the conversion price made pursuant to a
bona fide reasonable adjustment formula which has the effect of preventing the
dilution of the interests of the holders generally will not be considered to
result in a constructive stock dividend. If a nonqualifying adjustment were
made, the holders of the Convertible Preferred Stock, as indicated above, might
be deemed to have received a taxable stock dividend.
<PAGE>
Any such constructive dividends may constitute (and cause other
dividends to constitute) "extraordinary dividends" to corporate holders. Any
such extraordinary dividends would be subject to the rules relating to such
dividends described above.
Redemption Premium
If the redemption price of redeemable preferred stock exceeds its issue
price, all or a portion of the excess may constitute an unreasonable redemption
premium, taxable as a dividend to the extent of the issuing corporation's
current or accumulated earnings and profits over the period during which the
preferred stock cannot be redeemed. In the case of redeemable preferred stock
that the issuer is not required to redeem at a specified time, a premium is
considered to be reasonable if it is in the nature of a penalty for a premature
redemption and if the premium does not exceed the amount the issuer would be
required to pay for the redemption right under market conditions existing at the
time of issuance of the preferred stock. If the redemption premium payable on
the Convertible Preferred Stock is considered unreasonable under the foregoing
rules, a holder of Convertible Preferred Stock would take the amount of such
premium (the excess of the redemption price over the issue price) into income
over the period during which the stock cannot be called for redemption under an
economic accrual method. The Revenue Reconciliation Act of 1990 authorized the
Treasury Department to promulgate new regulations to govern the federal income
tax treatment of redemption premiums on preferred stock. Under proposed
regulations (the "Proposed 305 Regulations") that would not apply to stock
issued before publication of final regulation, and thus would not by their terms
apply to the Convertible Preferred Stock, in the case of redeemable preferred
stock that the issuer is not required to redeem at a specified time, the premium
may be taxable as a dividend only if redemption pursuant to the issuer's call
right is more likely than not to occur. The Proposed 305 Regulations provide
that a redemption is not treated as more likely than not to occur if (i) the
issuer and the holder are not related within the meaning of Section 267(b) or
Section 707(b) of the Code, (ii) there are no arrangements that effectively
required the issuer to redeem the stock, and (iii) the exercise of the right to
redeem would not reduce the yield of the stock. Even if the redemption is more
likely than not to occur, the premium will not be taxable as a dividend if the
premium is solely in the nature of a penalty for premature redemption. A penalty
for premature redemption is a premium paid as a result of changes in economic or
market conditions over which neither the issuer nor the holder has control.
There can be no assurance final regulations will not differ from the Proposed
305 Regulations and have retroactive effect.
Redemption
A redemption of Convertible Preferred Stock for cash will be treated as
a distribution that is taxable as a dividend to the extent of the Company's
current or accumulated earnings and profits unless the redemption (a) is "not
essentially equivalent to a dividend" with respect to the holder under Section
302(b)(1) of the Code; (b) is "substantially disproportionate" with respect to
the holder under Section 302(b)(2) of the Code; or (c) results in a "complete
redemption" of the holder's stock interest in the Company under Section
302(b)(3) of the Code. In determining whether any of these tests have been met,
ownership of all shares of stock of the Company (including common stock and
other equity interests actually owned, as well as shares considered to be owned
by the holder by reason of certain constructive ownership rules set forth in
Section 318 of the Code) must generally be taken into account. If any of the
foregoing tests is met, then, except with respect to declared and unpaid
dividends, if any, the redemption of shares of Convertible Preferred Stock for
cash will result in taxable capital gain or loss equal to the difference between
the amount of cash received and the holder's tax basis in the redeemed shares.
Any capital gain or loss will be long-term capital gain or loss if the
shareholder's holding period exceeds one year. Based on a published IRS ruling,
the redemption of a shareholder's Convertible Preferred Stock for cash will be
treated as "not essentially equivalent to a dividend" if, taking into account
the constructive ownership rules, (a) the shareholder's relative stock interest
in the Company is minimal, (b) the shareholder exercises no control over the
Company's affairs, and (c) there is a reduction in the holder's proportionate
interest in the Company.
If a redemption of Convertible Preferred Stock is treated as
distribution that is taxable as a dividend, as opposed to consideration received
in a sale or exchange, the amount of the distribution will be measured by the
amount of cash received by the holder. The holder's adjusted tax basis in the
Convertible Preferred Stock will be transferred to any remaining stock holdings
in the Company. If the holder does not retain any stock ownership in the
Company, it is unclear whether the holder will lose the basis entirely. Under
Section 1059 of the Code, the term "extraordinary dividend" includes any
redemption of stock that is treated as a dividend and that is non-pro rata as to
all stock, including holders of common stock, irrespective of holding period.
Consequently, to the extent on exchange of Convertible Preferred Stock for cash
constitutes a distribution taxable as a dividend, it may constitute an
"extraordinary dividend" to a corporate shareholder.
Each prospective investor should consult with his tax advisor as to
whether a redemption for cash will be treated as a dividend.
<PAGE>
Conversion of Convertible Preferred Stock into Class A Common Stock
No gain or loss generally will be recognized upon conversion of shares
of Convertible Preferred Stock into shares of Class A Common Stock, except with
respect to any cash paid in lieu of fractional shares of Class A Common Stock,
which generally will be capital gain. Additionally, if the conversion takes
place when there is a dividend arrearage on the Convertible Preferred Stock and
the fair market value of the Class A Common Stock exceeds the issue price of the
Convertible Preferred Stock, a portion of the Class A Common Stock received
might be treated as a dividend distribution, taxable as ordinary income. The tax
basis of the Class A Common Stock received upon conversion will be equal to the
tax basis of the shares of Convertible Preferred Stock (assuming the conversion
is not treated as resulting in the payment of a dividend) converted, and the
holding period of the Class A Common Stock will include the holding period of
the shares of Convertible Preferred Stock converted. The tax basis of any Class
A Common Stock treated as a dividend will be equal to its fair market value on
the date of the distribution.
Other Disposition of Convertible Preferred Stock or Class A Common Stock
Upon the sale of shares of Convertible Preferred Stock or Class A Common
Stock to or with a person other than the Company, a holder will recognize
capital gain or loss equal to the difference between the amount realized on such
sale and the holder's adjusted basis in such stock. Any capital gain or loss
recognized will generally be treated as long-term capital gain or loss if the
holder held such stock for more than one year. For this purpose, the period for
which the Convertible Preferred Stock was held would be included in the holding
period of the Class A Common Stock received upon conversion.
Backup Withholding
Under Section 3406 of the Code and applicable regulations thereunder, a
holder of the Convertible Preferred Stock or Class A Common Stock may be subject
to backup withholding at the rate of 31% with respect to dividends paid on, or
the proceeds of a sale or redemption of, the Convertible Preferred Stock or
Class A Common Stock. If: (i) the holder ("payee") fails to furnish or certify a
taxpayer identification number to the payor; (ii) the Service notifies the payor
that the taxpayer identification number furnished by the payee is incorrect;
(iii) there has been a "notified payee underreporting" described in Section
3406(c) of the Code; or (iv) there has been a "payee certification failure"
described in Section 3406(d) of the Code, then the Company generally will be
required to withhold an amount equal to 31% of any dividend or redemption
payment made with respect to the Convertible Preferred Stock or Class A Common
Stock. Any amounts withheld under the backup withholding rules from a payment to
a holder will be allowed as a credit against the holder's federal income tax
liability or as a refund.
THE FOREGOING SUMMARY OF THE MATERIAL FEDERAL INCOME TAX CONSEQUENCES OF THE
ACQUISITION AND DISPOSITION OF CONVERTIBLE PREFERRED STOCK AND CLASS A COMMON
STOCK IS NOT INTENDED AS A SUBSTITUTE FOR CAREFUL TAX PLANNING ON AN INDIVIDUAL
BASIS. A PARTICULAR HOLDER S DECISION TO ACQUIRE CONVERTIBLE PREFERRED STOCK AND
CLASS A COMMON STOCK MAY REQUIRE CONSIDERATION OF FEDERAL INCOME TAX CONCERNS OR
ISSUES WHICH ARE NOT DISCUSSED ABOVE. MOREOVER, IN ADDITION TO THE FEDERAL
INCOME TAX CONSEQUENCES DISCUSSED ABOVE, THE ACQUISITION AND DISPOSITION OF
CONVERTIBLE PREFERRED STOCK AND CLASS A COMMON STOCK MAY HAVE SIGNIFICANT STATE,
LOCAL OR FOREIGN INCOME TAX CONSEQUENCES WHICH ARE NOT DISCUSSED ABOVE.
ACCORDINGLY, PROSPECTIVE PURCHASERS OF CONVERTIBLE PREFERRED STOCK AND CLASS A
COMMON STOCK ARE URGED TO CONSULT THEIR OWN TAX ADVISOR CONCERNING THE TAX
CONSEQUENCES OF SUCH PURCHASE TO SUCH HOLDER, WITH SPECIFIC REFERENCE TO THE
EFFECT OF ITS OWN PARTICULAR FACTS AND CIRCUMSTANCES ON THE MATTERS DISCUSSED
HEREIN.
<PAGE>
LEGAL OPINIONS
The legality of the Convertible Preferred Stock, and the shares of Class A
Common Stock issuable upon conversion thereof, has been passed upon for the
Company by Goodwin, Procter & Hoar, Boston, Massachusetts. All material federal
income tax consequences associated with the purchase, ownership and disposition
of the Convertible Preferred Stock has been passed upon by Goodwin, Procter &
Hoar. Richard E. Floor, a Director and Clerk of the Company, is the beneficial
owner of 133,000 shares of Class A Common Stock and his professional corporation
is a partner in the firm of Goodwin, Procter & Hoar. Mr. Floor is also
co-trustee of certain trusts for the benefit of Mr. Carey's minor children which
own, in the aggregate, 186,000 shares of Class A Common Stock and 140,253 shares
of Class B Common Stock.
<PAGE>
EXPERTS
The audited financial statements and schedules in the Company's Annual
Report on Form 10-K for the fiscal year ended February 27, 1994 (a copy of which
is incorporated herein by reference), have been audited by Arthur Andersen LLP,
independent public accountants, as indicated in their reports with respect
thereto and are included herein in reliance upon the authority of said firm as
experts in giving said reports.
<PAGE>
PART II
Information Not Required in Prospectus
Item 14. Other Expenses of Issuance and Distribution
The following table sets forth an itemized statement of all expenses
expected to be incurred in connection with the issuance and distribution of the
securities being registered (all of which are estimated).
All expenses in connection with the registration and distribution of the
securities shall be borne by the Company.
Securities and Exchange Commission
filing fee. . . . . . . $2,331
American Stock Exchange filing fee. . . 17,500
Legal fees and expenses . 40,000
Accounting fees and expenses. . . . 12,500
Blue sky fees and expenses. . . . . 2,000
Miscellaneous . . . . . . 1,000
-------
$75,331
Item 15. Indemnification of Directors and Officers
Section 67 of the Business Corporation Law of the Commonwealth of
Massachusetts provides that indemnification of directors, officers, employees or
other agents may be provided by a corporation. Section 13(b)(11/2) of the
Business Corporation Law of the Commonwealth of Massachusetts provides that a
certificate of incorporation may contain a provision eliminating or limiting the
personal liability of a director to the corporation or its stockholders for
monetary damages for breach of fiduciary duty as a director provided that such
provision shall not eliminate or limit the liability of a director (i) for any
breach of the director's duty of loyalty to the corporation or its stockholders,
(ii) for acts or omissions not in good faith or which involve intentional
misconduct or a knowing violation of law, (iii) under Sections 61 or 62 of the
Massachusetts Business Corporation Law, or (iv) for any transaction from which
the director derived an improper personal benefit.
The Company's Articles of Organization contain a provision which limits the
personal liability of directors to the Company or its stockholders for monetary
damages for breach of fiduciary duty as a director to the extent permitted
above.
Article 9 of the Company's By-Laws provides:
(1) Indemnification. Definitions, for purposes of this section:
(a) A "Director" or "Officer" means any person serving as
a director of the corporation or in any other office filled by
appointment or election by the directors or the stockholders
and also includes (i) a Director or Officer of the corporation
serving at the request of the corporation as a director,
officer, employee, trustee, partner or other agent of another
organization, and (ii) any person who formerly served as a
Director or Officer;
(b) "Expenses" means (i) all expenses (including
attorneys' fees and disbursements) actually and reasonably
incurred in defense of a Proceeding, in being a witness in a
Proceeding, or in successfully seeking indemnification under
this Article, (ii) such expenses incurred in connection with a
Proceeding initiated by a Director or Officer as may be
approved by the Board of Directors, and (iii) any judgments,
awards, fines or penalties paid by a Director or Officer in
connection with a Proceeding or reasonable amounts paid in
settlement of a Proceeding; and
<PAGE>
(c) A "Proceeding" means any threatened, pending or
completed action, suit or proceeding, whether civil, criminal,
administrative or investigative, and any claim which could be
the subject of a Proceeding.
(2) Right to Indemnification. Except as limited by law, the
corporation shall indemnify its Directors and Officers against
all Expenses incurred by them in connection with any
Proceedings in which they are involved as a result of their
service as a Director or Officer, except that (i) no
indemnification shall be provided for any Director or Officer
regarding a matter as to which it shall be determined pursuant
to Section 5 of this Article or adjudicated that he did not
act in good faith and in the reasonable belief that his action
was in the best interests of the corporation, or with respect
to a criminal matter, that he had reasonable cause to believe
that his conduct was unlawful, and (ii) no indemnification
shall be provided for any Director or Officer with respect to
any Proceeding by or in the right of the corporation or
alleging that a Director or Officer received an improper
personal benefit if he is adjudged liable to the corporation
in such Proceeding or, in the absence of such an adjudication,
if he is determined to be ineligible for indemnification under
the circumstances pursuant to Section 5 of this Article;
provided, however, that indemnification of Expenses incurred
by a Director or Officer in successfully defending a
Proceeding alleging that he received an improper personal
benefit as a result of his status as such may be paid if and
to the extent authorized by the Board of Directors.
(3) Settled Proceedings. If a Proceeding is compromised or settled
in a manner which imposes any liability or obligation upon a
Director or Officer, (i) no indemnification shall be provided
to him with respect to a Proceeding by or in the right of the
corporation unless a court having jurisdiction determines that
indemnification is reasonable and proper under the
circumstances, and (ii) no indemnification shall be provided
to him with respect to any other type of Proceeding if it is
determined pursuant to Section 5 of this Article on the basis
of the circumstances known at that time (without further
investigation) that said Director or Officer is ineligible for
indemnification.
(4) Advance Payments. Except as limited by law, Expenses incurred
by a Director or Officer in defending any Proceeding,
including a Proceeding by or in the right of the corporation,
shall be paid by the corporation to said Director or Officer
in advance of final disposition of the Proceeding upon receipt
of his written undertaking to repay such amount if he is
determined pursuant to Section 5 of this Article or
adjudicated to be ineligible for indemnification, which
undertaking shall be an unlimited general obligation but need
not be secured and may be accepted without regard to the
financial ability of such person to make repayment; provided,
however, that no such advance payment of Expenses shall be
made if it is determined pursuant to Section 5 of this Article
on the basis of the circumstances known at that time (without
further investigation) that said Director or Officer in
ineligible for indemnification.
(5) Determinations; Payments. The determination of whether a
Director or Officer is eligible or ineligible for
indemnification under this Article shall be made in each
instance by (a) a majority of the Directors or a committee
thereof who are not parties to the Proceeding in question, (b)
independent legal counsel appointed by a majority of such
Directors, or if there are none, by a majority of the
Directors in office, or (c) a majority vote of the
stockholders who are not parties to the Proceeding in
question. Notwithstanding the foregoing, a court having
jurisdiction (which need not be the court in which the
Proceeding in question was brought) may grant or deny
indemnification in each instance under the provisions of law
and this Article. The corporation shall be obliged to pay
indemnification applied for by a Director or Officer unless
there is an adverse determination (as provided above) within
45 days after the application. If indemnification is denied,
the applicant may seek an independent determination of his
right to indemnification by a court, and in such event the
corporation shall have the burden of proving that the
applicant was ineligible for indemnification under this
Article.
(6) Insurance. The corporation shall have power to purchase and
maintain insurance on behalf of any agent, employee, director
or officer against any liability or cost incurred by him in
<PAGE>
any such capacity or arising out of his status as such,
whether or not the corporation would have power to indemnify
him against such liability or cost.
(7) Responsibility With Respect to Employee Benefit Plan. If the
corporation or any of its Directors or Officers sponsors or
undertakes any responsibility as a fiduciary with respect to
an employee benefit plan, then for purposes of indemnification
of such persons under this Article (i) a "Director" or
"Officer" shall be deemed to include any Director or Officer
of the corporation who serves at its request in any capacity
with respect to said plan, (ii) such Director or Officer shall
not be deemed to have failed to act in good faith in the
reasonable belief that his action was in the best interests of
the corporation if he acted in good faith in the reasonable
belief that his action was in the best interests of the
participants or beneficiaries of said plan, and (iii)
"Expenses" shall be deemed to include any taxes or penalties
imposed on such Director or Officer with respect to said plan
under applicable law.
(8) Heirs and Personal Representatives. The indemnification
provided by this Article shall inure to the benefit of the
heirs and personal representatives of a Director or Officer.
(9) Non-Exclusivity. The provisions of this Article shall not be
construed to limit the power of the corporation to indemnify
its Directors or Officers to the full extent permitted by law
or to enter into specific agreements, commitments or
arrangements for indemnification permitted by law. In
addition, the corporation shall have power to indemnify any of
its agents or employees who are not Directors or Officers on
any terms not prohibited by law which it deems to be
appropriate. The absence of any express provision for
indemnification herein shall not limit any right of
indemnification existing independently of this Article.
(10) Amendment. The provisions of this Article may be amended or
repealed by the stockholders; however, no amendment or repeal
of such provisions which adversely affects the rights of a
Director or Officer under this Article with respect to his
acts or omissions at any time before or after such amendment
or repeal, shall apply to him without his consent.
Item 16. Exhibits
<TABLE>
<C> <S> <C>
4.1 Certificate of Vote of Directors Establishing the Convertible Preferred Filed
Stock, par value $1.00 per share, dated as of November 23, 1994. Herewith
4.3 Indenture governing 10 1/4% Subordinated Notes due 1995 (the "Old *1*(4.1)
10 1/4 Notes"), dated as of July 1, 1985 from Town & Country Jewelry Mfg.
Corporation to The First National Bank of Boston, as Trustee.
4.4 Supplemental Indenture relating to the Old 10 1/4% Notes, dated as of *9*(4.3)
dated as of May 14, 1993, from Town & Country Corporation
to The Bank of New York, as Trustee.
4.5 Amended and Restated Indenture governing the Old 10 1/4% Notes, *9*(4.1)
dated as of May 14, 1993, from Town & Country Corporation to The Bank
of New York, as Trustee.
4.6 Indenture governing 13% Senior Subordinated Notes due #3#(4.2)
December 15, 1998 (the "Old 13% Notes"), dated as of December 16, 1988,
from Town & Country Corporation to Bank of New England, N.A., as
Trustee.
4.7 Supplemental Indenture relating to the Old 13% Notes, dated as *9*(4.4)
of May 14, 1993, from Town & Country Corporation to State
Street Bank and Trust Company, as Trustee.
<PAGE>
4.8 Amended and Restated Indenture governing the Old 13% Notes, *9*(4.2)
dated as of May 14, 1993, from Town & Country Corporation to
State Street Bank and Trust Company, as Trustee.
4.9 Indenture governing 11 1/2% Senior Secured Notes due *9*(4.5)
September 15, 1997 dated as of May 14, 1993, from Town & Country
Corporation to Shawmut Bank, N.A., as Trustee, including form of New
Senior Secured Note due September 15, 1997.
4.10 Indenture governing 13% Senior Subordinated Notes due *9*(4.6)
May 31,1997, dated as of May 14, 1993, from Town & Country Corporation
to Bankers Trust Company, as Trustee, including form of 13% Senior
Subordinated Note due May 31, 1998.
4.11 Certificate of Vote of Directors Establishing the Exchangeable *9*(4.7)
Preferred Stock, par value $1.00 per share, dated as of May
14, 1993.
5. Opinion of Goodwin, Procter & Hoar. Filed
Herewith
10.1 1989 Employee Stock Purchase Plan of Town & Country Corporation #1#(10.21)
10.2 Non-Qualified Stock Option dated July 19, 1989, from Town & Country #3#(10.31)
Corporation to Jerome Peterson.
10.3 1985 Amended and Restated Stock Option Plan of Town & Country *2*(10.1)
Corporation.
10.4 Lease Agreement between Town & Country Corporation and Carey *1*(10.2)
Realty Trust dated September 1, 1984.
10.5 Amendment dated July 1, 1989, to the Lease Agreement between *5*(10.8)
Town & Country Corporation and Carey Realty Trust.
10.6 Amendment dated July 27, 1989, to the Lease Agreement between *3*(10.3)
Town & Country Corporation and Carey Realty Trust.
10.7 Lease dated September 1, 1985, between the New York City Industrial #3#(10.30)
Development Agency and Feature Enterprises, Inc.
10.8 Registration Rights Agreement dated as of July 17, 1991, between *8*(10.13)
Little Switzerland, Inc. and Switzerland Holding, Inc.
10.9 Executive Employment Agreement between Town & Country #4#(10.20)
Corporation and C. William Carey effective as of February 28, 1994.
10.10 Executive Employment Agreement between Town & Country #4#(10.21)
Corporation and Francis X. Correra effective as of February 28, 1994.
10.11 Key Man Life Insurance Policy for C. William Carey. #5#(10.22)
10.12 Form of 1993 Management Option. #6#(10.23)
10.13 Trust Agreement dated as of May 14, 1993, by and between *9*(10.22)
Town & Country Corporation and BayBank.
10.14 First Amendment to Lease Agreement dated as of May 1, 1993, *9*(10.8)
between the New York City Industrial Development Agency and Town &
Country Fine Jewelry Group, Inc.
<PAGE>
10.15 Amended and Restated Consignment Agreement dated as of *9*(10.9)
May 14, 1993, by and among Town & Country Corporation, L.G. Balfour
Company, Inc., Gold Lance, Inc., and Town & Country Fine Jewelry
Group, Inc. and Fleet Precious Metals, Inc.
10.16 Amended and Restated Consignment Agreement dated as of *9*(10.10)
May 14, 1993, by and among Town & Country Corporation, L.G. Balfour
Company, Inc., Gold Lance, Inc., and Town & Country Fine Jewelry
Group, Inc. and Rhode Island Hospital Trust National Bank.
10.17 Amended and Restated Consignment Agreement dated as of *9*(10.11)
May 14, 1993, by and among Town & Country Corporation, L.G. Balfour
Company, Inc., Gold Lance, Inc., and Town & Country Fine Jewelry
Group, Inc. and ABN Amro Bank, N.V.
10.18 Amended and Restated Consignment Agreement dated as of *9*(10.12)
May 14, 1993, by and among Town & Country Corporation, L.G. Balfour
Company, Inc., Gold Lance, Inc. and Town & Country Fine Jewelry
Group, Inc. and Republic National Bank of New York.
10.19 Letter Agreement dated as of May 6, 1993, between Little Switzerland, *9*(10.14)
Inc. and Town & Country Corporation relating to the Switzerland
Holding, Inc. Registration Rights Agreement.
10.20 Loan Agreement dated as of May 14, 1993, by and among Town & *9*(10.15)
Country Corporation, L.G. Balfour Company, Inc., Gold Lance, Inc.,
and Town & Country Fine Jewelry Group, Inc. and Foothill Capital
Corporation.
10.21 Form of Letter dated as of November 4, 1994, to Certain Holders of Filed
Town & Country Exchangeable Preferred Stock from Town & Country Herewith
relating to the offer by Town & Country to issue shares of Convertible
Preferred Stock.
10.22 Form of Registration Rights Agreement dated as of November 23, 1994 Filed
between Town & Country Corporation and the holders of Town & Country Herewith
Convertible Preferred Stock signatory thereto.
10.23 Form of Letter Agreement dated as of November 15, 1994 by and among Filed
Town & Country Corporation, L.G. Balfour Company, Inc., Gold Lance, Herewith
Inc. and Town & Country Fine Jewelry Group, Inc. and Fleet Precious
Metals, Inc., Rhode Island Hospital Trust National Bank, ABN-AMRO
Bank, N.V. and Republic National Bank of New York.
10.24 Registration Effectiveness Agreement dated as of May 14, 1993, *9*(10.23)
between Town & Country Corporation and Certain Funds
managed by Fidelity Management & Research Company.
10.25 Collateral Agency and Intercreditor Agreement dated as of *9*(10.16)
May 14, 1993, between Town & Country Corporation, Town &
Country Fine Jewelry Group, Inc., Gold Lance, Inc., L.G. Balfour
Company, Inc., Foothill Capital Corporation, Fleet Precious Metals,
Inc., Rhode Island Hospital Trust National Bank, Republic National
Bank, ABN AMRO Bank, N.V., Bankers Trust Company, Shawmut
Bank, N.A., and Chemical Bank.
11 Earnings Per Share Computations. Filed
Herewith
12.1 Historical and Pro Forma Ratios of Earnings to Fixed Charges. Filed
Herewith
12.2 Pro Forma Ratio of Earnings to Fixed Charges and Exchangeable Filed
Preferred Stock Dividends and Accretion. Herewith
13. Quarterly Report on Form 10-Q for the fiscal quarter ended Filed
November 27, 1994. Herewith
23.1 Consent of Goodwin, Procter & Hoar. (included as part of Filed
Exhibit 5 hereto) Herewith
<PAGE>
23.2 Consent of Arthur Andersen LLP relating to Town & Country Filed
Corporation. Herewith
23.3 Consent of Goodwin, Procter & Hoar regarding certain tax matters. Filed
Herewith
25.1 Power of Attorney for Town & Country Corporation (included in Filed
Part II of this Registration Statement). Herewith
99 Specimen Stock Certificate for Convertible Preferred Stock. Filed
Herewith
</TABLE>
- ---------------
*1* Incorporated by reference to the designated exhibit of the Registration
Statement on Form S-1 No. 2-97557 filed June 21, 1985.
*2* Incorporated by reference to the designated exhibit in the Annual Report on
Form 10-K, Commission File number 0-14394 filed May 26, 1987.
*3* Incorporated by reference to the designated exhibit in the Annual Report on
Form 10-K, Commission File number 0-14394 filed May 18, 1988.
*4* Incorporated by reference to the designated exhibit in the Annual Report on
Form 10-K, Commission File number 0-14394 filed May 26, 1989.
*5* Incorporated by reference to the designated exhibit in the Annual Report on
Form 10-K, Commission File number 0-14394 filed May 25, 1990.
*6* Incorporated by reference to the designated exhibit in the Annual Report on
Form 10-K, Commission File number 0-14394 filed June 13, 1991.
*7* Incorporated by reference to the designated exhibit in the Current Report on
Form 8-K, Commission File number 0-14394 filed November 21, 1991.
*8* Incorporated by reference to the designated exhibit of the Annual Report on
Form 10-K, Commission File number 0-14394 filed July 6, 1992.
*9* Incorporated by reference to the designated exhibit of the Annual Report on
Form 10-K, Commission File number 0-14394 filed May 28, 1993.
#1# Incorporated by reference to the designated exhibit of the Registration
Statement on Form S-2 No. 33-25092 filed October 20, 1988.
#2# Incorporated by reference to the designated exhibit of Amendment No. 1 to
the Registration Statement on Form S-2 No. 33-25092 filed November 8, 1988.
#3# Incorporated by reference to the designated exhibit of Amendment No. 2 to
the Registration Statement on Form S-2 No. 33-25437 filed December 12, 1988.
<PAGE>
#4# Incorporated by reference to the designated exhibit of Post-Effective
Amendment No. 2 to the Registration Statement on Form S-2 No. 33-49028
filed July 26, 1994.
#5# Incorporated by reference to the designated exhibit of Amendment No. 2 to
the Registration Statement on Form S-4 No. 33-49028 filed
September 15, 1992.
#6# Incorporated by reference to the designated exhibit of Amendment No. 6 to
the Registration Statement on Form S-4 No. 33-49028 filed March 12, 1993.
<PAGE>
Item 17. Undertakings
The undersigned Registrant hereby undertakes as follows:
(a) (1) The undersigned registrant hereby undertakes:
(i) To file, during any period in which offers or sales are being
made, a post-effective amendment to this registration statement;
(A) To include any prospectus required by Section 10(a)(3) of
the Securities Act of 1933;
(B) To reflect in the prospectus any facts or events arising
after the effective date of the registration statement (or the most
recent post-effective amendment thereof) which, individually or in the
aggregate, represent a fundamental change in the information set forth
in the registration statement;
(C) To include any material information with respect to the plan
of distribution not previously disclosed in the registration statement
or any material change to such information in the registration
statement;
(ii) That, for the purpose of determining any liability under the
Securities Act of 1933, each such post-effective amendment shall be
deemed to be a new registration statement relating to the securities
offered therein, and the offering of such securities at that time
shall be deemed to be the initial bona fide offering thereof.
(iii) To remove from registration by means of a post-effective
amendment any of the securities being registered which remain unsold
at the termination of the offering.
(iv) If the registrant is a foreign private issuer, to file a
post-effective amendment to the registration statement to include any
financial statements required by Rule 3-19 of Regulation S-X at the
start of any delayed offering or throughout a continuous offering.
Financial statements and information otherwise required by Section
10(a)(3) of the Act need not be furnished, provided, that the
registrant includes in the prospectus, by means of a post-effective
amendment, financial statements required pursuant to this paragraph
(a)(1)(iv) and other information necessary to ensure that all other
information in the prospectus is at least as current as the date of
those financial statements.
(b) Insofar as indemnification for liabilities arising under the Securities
Act of 1933 may be permitted to directors, officers and controlling persons of
the registrant pursuant to the foregoing provisions, or otherwise, the
registrant has been advised that in the opinion of the Securities and Exchange
Commission such indemnification is against public policy as expressed in the Act
and is, therefore, unenforceable. In the event that a claim for indemnification
against such liabilities (other than the payment by the registrant of expenses
incurred or paid by a director, officer or controlling person of the registrant
in the successful defense of any action, suit or proceeding) is asserted by such
director, officer or controlling person in connection with the securities being
registered, the registrant will, unless in the opinion of its counsel the matter
has been settled by controlling precedent, submit to a court of appropriate
jurisdiction the question whether such indemnification by it is against public
policy as expressed in the Act and will be governed by the final adjudication of
such issue.
<PAGE>
SIGNATURES
Pursuant to the requirements of the Securities Act, the Registrant has duly
caused this Registration Statement to be signed on its behalf by the
undersigned, thereunto duly authorized, in the City of Chelsea, State of
Massachusetts, on January 20, 1995.
TOWN & COUNTRY CORPORATION
By:/s/ Francis X. Correra
_____________________________________
Francis X. Correra
Senior Vice President and Chief Financial
Officer
KNOW ALL MEN BY THESE PRESENTS that each person whose signature appears
below constitutes and appoints C. William Carey, Richard E. Floor and Francis X.
Correra, and each of them, his true and lawful attorneys-in-fact and agents,
with full power of substitution, for him and in his name, place and stead, in
any and all capacities, to sign any and all amendments or post-effective
amendments to this Registration Statement and to file the same and all exhibits
thereto and other documents in connection therewith, with the Securities and
Exchange Commission, granting unto said attorneys-in-fact and agents and each of
them, full power and authority to do and perform each and every act and thing
which they, or any of them, may deem necessary or advisable to be done in
connection with said Registration Statement, as fully to all intents and
purposes as he might or could do in person, hereby ratifying and confirming all
that said attorneys-in-fact and agents or any of them, or any substitute or
substitutes for any or all of them, may lawfully do or cause to be done by
virtue hereof.
Pursuant to the requirements of the Securities of 1933, this Registration
Statement has been duly signed by the following persons in the capacities and on
the date set forth above.
Signature
Title
/s/ C. William Carey
-------------------- President, Treasurer, and January 20, 1995
C. William Carey Director (Principal Executive
Officer)
/s/ Francis X. Correra
--------------------- Senior Vice President and January 20, 1995
Francis X. Correra Chief Financial Officer
(Principal Financial and
Accounting Officer)
/s/ Richard E. Floor
-------------------- Director January 20, 1995
Richard E. Floor
/s/ Charles Hill
-------------------- Director January 20, 1995
Charles Hill
/s/Mone Anathan III
-------------------- Director January 20, 1995
Mone Anathan III
/s/ William Schawbel
-------------------- Director January 20, 1995
William Schawbel
VOTE OF DIRECTORS
ESTABLISHING SERIES OF
CONVERTIBLE REDEEMABLE PREFERRED STOCK
OF
TOWN & COUNTRY CORPORATION
Pursuant to Section 26 of Chapter 156B of the General Laws of the Commonwealth
of Massachusetts:
VOTED, that as a result of the reacquisition by Town & Country
Corporation (the "Corporation") of shares of the Corporation's exchangeable
preferred stock, par value $1.00 per share (the "Exchangeable Preferred Stock"),
the Board of Directors of the Corporation, pursuant to Section 21A of Chapter
156B of the General Laws of the Commonwealth of Massachusetts and pursuant to
the Certificate of Vote of Directors Establishing a Series of a Class of Stock
dated May 14, 1993 establishing the Exchangeable Preferred Stock, hereby
restores such reacquired shares of Exchangeable Preferred Stock to the status of
authorized but unissued shares of Preferred Stock of the Corporation and reduces
the number of shares of Exchangeable Preferred Stock authorized for issuance by
the Corporation from 2,700,000 shares to 200,000 shares.
VOTED, that pursuant to authority conferred upon the Board of Directors
by the Corporation's Articles of Organization, as amended as of the date hereof
(the "Articles"), the Board of Directors hereby establishes and designates a
series of Preferred Stock of the Corporation, and hereby fixes and determines
the relative rights and preferences of the shares of such series, in addition to
those set forth in the Articles of Organization, as follows:
Section 1. Designation, Amount and Liquidation Value.
The shares of the series of Preferred Stock shall be designated as
"Convertible Redeemable Preferred Stock," and the number of shares constituting
such series initially shall be 2,533,255; provided that pursuant to the terms of
this Certificate of Designation, the Corporation shall be authorized to issue
from time to time additional shares of Convertible Redeemable Preferred Stock
solely as payment in lieu of cash dividends payable on the Convertible
Redeemable Preferred Stock. Each share of Convertible Redeemable Preferred Stock
shall have a liquidation value equal to the sum of $6.50 (as adjusted to reflect
any stock dividend, subdivision, reclassification, distribution or similar event
relating to the Convertible Redeemable Preferred Stock) plus the amount of
accrued and unpaid dividends thereon (the "Liquidation Value").
Section 2. Definitions.
"AMEX" means the American Stock Exchange.
"Board of Directors" means the Board of Directors of the
Corporation.
"Business Day" means any day other than a Saturday, a Sunday
or a day on which banking institutions in the City of Boston or the
Commonwealth of Massachusetts or the State of New York are authorized
or obligated by law or executive order to close.
"Capital Stock" means any and all shares, interests, rights to
purchase, warrants, options, participations or other equivalents of or
interests in (however designated and whether voting or nonvoting)
corporate stock.
"Certificate of Designation" means the Certificate of Vote of
Directors Establishing a Series of a Class of Stock of the Corporation
pursuant to Section 26 of Chapter 156B of the General Laws of the
Commonwealth of Massachusetts, of which these votes form a part,
creating the Convertible Redeemable Preferred Stock and setting forth
the terms, rights and preferences thereof.
"Class A Common Stock" means the Class A Common Stock of the
Corporation, $.01 par value per share.
"Class B Common Stock" means the Class B Common Stock of the
Corporation, $.01 par value per share.
"Closing Date" means the date on which the shares of Convertible
Redeemable Preferred Stock are first issued.
"Conversion Notice" shall have the meaning set forth in Section
5(c) hereof.
"Conversion Rate" shall have the meaning set forth in Section
5(a) hereof, as adjusted from time to time pursuant to the provisions of
Section 5(d) hereof.
"Convertible Redeemable Preferred Stock" means the convertible
redeemable preferred stock of the Corporation, $1.00 par value per
share, established pursuant to this Certificate of Designation.
"Corporation Optional Conversion" shall have the meaning set
forth in Section 5(b) hereof.
"Corporation Optional Conversion Date" shall have the meaning set
forth in Section 5(c)(ii) hereof.
"Corporation Optional Conversion Notice" shall have the meaning
set forth in Section 5(c)(ii) hereof.
"Corporation Optional Redemption" shall have the meaning set
forth in Section 4(a) hereof.
"Dividend Period" shall mean the semi-annual periods commencing
on March 1 and September 1 of each year after the Closing Date and
ending on and including the day preceding the first day of the next
succeeding Dividend Period, provided that the Dividend Period for March
1, 1995 shall include the period from the Closing Date up to March 1,
1995.
"Exchange Act" means the Securities Exchange Act of 1934, as
amended.
"Exchangeable Preferred Stock" means the exchangeable preferred
stock of the Corporation, $1.00 par value per share.
"Fair Market Value" means the average of the Sale Price of a
share of Class A Common Stock for the 30 Trading Days immediately
preceding the date on which the Transfer Agent received a Conversion
Notice or written notice of a redemption, as the case may be.
"Holder" means the person in whose name shares of Convertible
Redeemable Preferred Stock are registered on the books of the
Corporation.
"Junior Stock" means Class A Common Stock, Class B Common Stock,
and any other class or series of Capital Stock of the Corporation now or
hereafter issued and outstanding that ranks junior as to dividends
and/or liquidation to the Convertible Redeemable Preferred Stock.
"Lien" means any interest in property securing an obligation owed
to, or a claim by, a person other than the owner of the property,
whether such interest is based on the common law, statute or contract
and including, without limitation, any lien, security interest,
mortgage, encumbrance, pledge, charge, claim, hypothecation, assignment
for security, deposit arrangement, conditional sale or trust receipt, a
lease, consignment or bailment for security purposes or other security
agreement of any kind or nature whatsoever. The term "Lien" shall
include stockholder agreements, voting trust agreements, buy-back
agreements and all similar arrangements.
"Liquidation Value" shall have the meaning set forth in Section
1 hereof.
"NASDAQ" means the National Association of Securities Dealers
Automated Quotation System.
"New Senior Secured Notes" means the Corporation's 11 1/2%
Senior Secured Notes due September 15, 1997.
"New Senior Subordinated Notes" means the Corporation's 13%
Senior Subordinated Notes due May 31, 1998.
"Officer" means the Chairman of the Board, the President, any
Vice President, the Chief Financial Officer, the Treasurer or the Clerk
of the Corporation.
"Officers' Certificate" means a certificate signed by two
Officers, one of whom must be the Chairman of the Board, the President,
the Chief Financial Officer, the Treasurer or a Vice President of the
Corporation.
"Optional Conversion Date" shall have the meaning set forth in
Section 5(c)(i) hereof.
"Person" means an individual, a corporation, a partnership, a
joint venture, an association, a joint-stock company, a trust, a
business trust, a government or any agency or any political subdivision,
any unincorporated organization, or any other entity.
"Redemption Date" means the date on which shares of Convertible
Redeemable Preferred Stock are to be redeemed pursuant to Section 4.
"Revised Debt Agreements" means, collectively, the Credit
Agreement dated as of May 14, 1993 by and among the Corporation and
certain of its subsidiaries and Foothill Capital Corporation, and each
of the amended and restated consignment agreements dated as of May 14,
1993 by and between the Corporation and each of its gold suppliers in
each such case, as the same may be amended, modified or supplemented in
accordance with their respective terms from time to time, and any
credit, consignment or other agreement pursuant to which the Corporation
or any of its subsidiaries replaces, renews, refunds, refinances or
extends borrowings under such credit agreement or any of such
consignment agreements.
"Sale Price" means, with respect to Class A Common Stock, for any
given day, the closing sale price (or, if no closing sale price is
reported, the average of the bid and ask prices or if more than one in
either case, the average of the average bid and ask prices on such day)
of a share of such security as reported by AMEX or, in the event that
such security is not traded on AMEX, such other national or regional
securities exchange or automated quotations system upon which such
security is listed and principally traded or, if no such price is
available, the per share market value of such security as determined by
a nationally recognized investment banking firm or other nationally
recognized financial adviser retained by the Corporation for such
purpose; provided, however, that if any such date shall not be a Trading
Day, the Sale Price shall be based on the specified price on the Trading
Day preceding such date.
"First Anniversary Date" means the first anniversary of the
Closing Date.
"Securities Act" means the Securities Act of 1933, as amended.
"Significant Subsidiary" of any Person means any subsidiary or
group of subsidiaries which would, individually or in the aggregate, be
a "Significant Subsidiary" as defined in Rule 1.02 of Regulation S-X
under the Securities Act.
"subsidiary" means, as to any particular parent corporation, any
corporation, association, partnership or other business entity of which
more than 50% of the Voting Stock or other interests (including
partnership interests) entitled (without regard to the occurrence of any
contingency) to vote in the election of directors, managers or trustees
thereof is at the time owned or controlled, directly or indirectly, by
such parent corporation.
"Trading Day" means each day on which AMEX or such other
securities exchange or automated quotations system on which shares of
Class A Common Stock are traded is open for the transaction of business
or, if such securities are not listed or admitted for trading on AMEX,
any other securities exchange or NASDAQ, a Business Day.
"Transfer Agent" means State Street Bank & Trust Company as
transfer agent for the Convertible Redeemable Preferred Stock until a
successor replaces it in accordance with the terms of the Transfer Agent
Agreement and, thereafter, means such successor.
"Voting Stock" with respect to any Person means all classes of
Capital Stock of such Person then outstanding and normally entitled to
vote for the election of directors of such Person. Any reference to a
percentage of Voting Stock shall refer to the percentage of votes
eligible to be cast for the election of directors which are attributable
to the applicable shares of Voting Stock.
Section 3. Dividends.
(a) Payment of Dividends. After the Closing Date, the Holders of
Convertible Redeemable Preferred Stock shall be entitled to receive, when and as
declared by the Board of Directors, cash dividends at the rate per annum of 6%
of the Liquidation Value. Notwithstanding anything to the contrary set forth
herein, the Corporation shall not be obligated to declare or pay cash dividends
on the Convertible Redeemable Preferred Stock if (i) the Corporation does not
have sufficient funds legally available to pay such dividends; (ii) directors of
the Corporation could be held jointly and severally liable for the payment of
such dividends under Massachusetts law; or (iii) the payment of such dividends
is prohibited by the certificate of designation for the Exchangeable Preferred
Stock, the indenture for the New Senior Secured Notes, the indenture for the New
Senior Subordinated Notes or the Revised Debt Agreements (provided that, in the
case of any credit, gold consignment or other agreement pursuant to which the
Corporation or any of its subsidiaries replaces, renews, refinances or extends
borrowings under any of the Revised Debt Agreements, such dividend restriction
is no more restrictive than the dividend restriction set forth in such Revised
Debt Agreement entered into on May 14, 1993); provided, however, that dividends
on the Convertible Redeemable Preferred Stock shall accrue (whether or not
declared) from and including the Closing Date to and including the date on which
the Liquidation Value is paid on such shares or on which such shares are
converted or redeemed and, to the extent not paid for any Dividend Period, will
be cumulative. If the Corporation is prohibited from paying cash dividends on
the Convertible Redeemable Preferred Stock, then in lieu of any cash payment due
to the Holders in respect of such dividends, the Corporation shall issue
additional shares of Convertible Redeemable Preferred Stock having an aggregate
Liquidation Value equal to the amount of such dividend payments. Notwithstanding
anything to the contrary set forth herein, the issuance of additional shares of
Convertible Redeemable Preferred Stock (and the issuance of shares of Class A
Common Stock upon the automatic conversion of such shares of Convertible
Redeemable Preferred Stock as set forth in Section 5(c)(i) and Section 5(c)(ii)
hereof) in lieu of cash dividends for any Dividend Period shall be deemed to
have satisfied for all purposes the Corporation's requirement to pay such
dividends for such Dividend Period and such dividends shall cease to accrue upon
such issuance. If at any time the Corporation pays a portion of any dividends in
cash and a portion in additional shares of Convertible Redeemable Preferred
Stock, the cash portion and the share portion of such dividend payment shall be
distributed ratably among the Holders of Convertible Redeemable Preferred Stock
based upon the aggregate dividends payable on the shares of Convertible
Redeemable Preferred Stock held by such Holders. Dividends on the Convertible
Redeemable Preferred Stock, whether paid in cash or in shares of Convertible
Redeemable Preferred Stock, shall be payable semiannually, when and as declared
by the Board of Directors, on each March 1 and September 1 after the Closing
Date. Each such dividend shall be payable to Holders of Convertible Redeemable
Preferred Stock at the close of business on the record date, which record date
shall be not more than 60 days prior to the date fixed for payment thereof.
Dividends payable on the Convertible Redeemable Preferred Stock shall be
computed on the basis of a 360-day year consisting of twelve 30-day months.
(b) Distribution of Partial Dividend Payments. Except as
otherwise provided herein, if at any time the Corporation pays less than the
total amount of dividends then accrued with respect to the Convertible
Redeemable Preferred Stock, such payment shall be distributed ratably among the
Holders of Convertible Redeemable Preferred Stock based upon the aggregate
accrued but unpaid dividends on the shares of Convertible Redeemable Preferred
Stock held by such Holders.
(c) Certain Restrictions. So long as any shares of Convertible
Redeemable Preferred Stock are outstanding, no dividends or other distributions
shall be declared or paid or set apart for payment on any class or series of
Junior Stock unless the Corporation shall have deposited with the Transfer Agent
cash sufficient to pay the then-applicable redemption price for all shares of
Convertible Redeemable Preferred Stock then outstanding plus cash sufficient to
pay all accrued but unpaid dividends thereon; provided, however, that
notwithstanding the foregoing, the Corporation shall be able to make any
required payments under (i) the Registration Effectiveness Agreement, dated as
of May 14, 1993, by and between the Corporation and certain funds managed by
Fidelity Research & Management Company and Fidelity Management Trust Company and
(ii) the Registration Rights Agreement, dated as of the Closing Date, by and
between the Corporation and the Holders.
(d) Exceptions. As used in this Section 3, the term "dividend"
shall not include dividends payable solely in shares of Junior Stock, or
options, warrants or rights to subscribe for or purchase shares of any Junior
Stock.
Section 4. Redemption.
(a) Optional Redemption. Shares of Convertible Redeemable
Preferred Stock may not be redeemed by the Corporation prior to the First
Anniversary Date. On and after the First Anniversary Date, to the extent
permitted by law, by the Revised Debt Agreements, by the indentures for the New
Senior Secured Notes and the New Senior Subordinated Notes, and by the
certificate of designation for the Exchangeable Preferred Stock, the Corporation
may redeem shares of Convertible Redeemable Preferred Stock in whole at any time
or in part from time to time at a redemption price per share set forth below
(expressed as a percentage of the Liquidation Value) if redeemed during the
twelve-month period beginning November 23 of the year indicated below (a
"Corporation Optional Redemption"):
Year Percentage
---- ----------
1995 104%
1996 102
1997 and thereafter 100
(b) Procedures for Redemption.
(i) If fewer than all the shares of Convertible Redeemable
Preferred Stock are to be redeemed, the number of shares of Convertible
Redeemable Preferred Stock to be redeemed from each Holder thereof in
redemptions hereunder shall be the number of shares determined by
multiplying the total number of shares of Convertible Redeemable
Preferred Stock to be redeemed by a fraction, the numerator of which
shall be the total number of shares of Convertible Redeemable Preferred
Stock held by such Holder and the denominator of which shall be the
total number of shares of Convertible Redeemable Preferred Stock then
outstanding. Upon surrender of a stock certificate of Convertible
Redeemable Preferred Stock that is redeemed in part, the Corporation
shall execute and deliver or have delivered to a Holder (at the
Corporation's expense) a new stock certificate representing an amount
equal to the unredeemed portion of the stock certificate surrendered.
(ii) At least 45 days but not more than 60 days before the
Redemption Date, the Corporation or, at the Corporation's request, the
Transfer Agent shall mail a notice of redemption by first-class mail to
each Holder. This notice shall identify the shares of Convertible
Redeemable Preferred Stock to be redeemed and shall, among other things,
state:
(A) the Redemption Date;
(B) the redemption price and the amount and
type of consideration being paid in connection with the
redemption;
(C) the name and address of the Transfer Agent;
(D) that the shares of Convertible Redeemable
Preferred Stock called for redemption must be surrendered to the
Transfer Agent to collect the redemption price;
(E) if fewer than all of the outstanding shares of
Convertible Redeemable Preferred Stock are to be redeemed, the
identification and amounts of the shares of Convertible
Redeemable Preferred Stock to be redeemed, and that after the
applicable Redemption Date, upon surrender of such shares of
Convertible Redeemable Preferred Stock, a new stock certificate
equal to the unredeemed portion will be issued; and
(F) the Conversion Rate and the date established
pursuant to Section 5(c)(iv) on which the right to convert the
shares of Convertible Redeemable Preferred Stock into Class A
Common Stock shall expire and instructions for converting the
Convertible Redeemable Preferred Stock, including the requirement
that the shares of Convertible Redeemable Preferred Stock to be
converted must be delivered to the Transfer Agent to receive the
Class A Common Stock.
In the event that the Corporation shall mail the redemption notice to
Holders, a copy of such notice shall also be simultaneously mailed to
the Transfer Agent. Failure to give notice or any defect in the notice
to any Holder shall not affect the validity of the notice given to any
other Holder.
(iii) In the case of a Corporation Optional Redemption
made pursuant to Section 4(a), the Corporation shall pay such redemption
price in cash. Not later than two (2) Business Days prior to the
Redemption Date, the Corporation shall deposit with the Transfer Agent
cash sufficient to pay the redemption price for all shares of
Convertible Redeemable Preferred Stock to be redeemed and any accrued
and unpaid dividends thereon, whether or not declared; provided that in
lieu of paying cash in respect of such accrued and unpaid dividends, the
Corporation may pay such dividends in shares of Convertible Redeemable
Preferred Common Stock having an aggregate Liquidation Value equal to
the amount of such accrued but unpaid dividends. In the event that the
Corporation elects to pay such accrued but unpaid dividends with shares
of Convertible Redeemable Preferred Stock, immediately upon issuance
such shares of Convertible Redeemable Preferred Stock shall
automatically and without further action by the Corporation or the
Holder be converted into shares of Class A Common Stock at the
then-applicable Conversion Rate.
(iv) As long as the Corporation has complied with the
requirements set forth in this Section 4(b), from and after the
Redemption Date, dividends on the shares of Convertible Redeemable
Preferred Stock so called for redemption shall cease to accrue, such
shares shall be cancelled and shall no longer be deemed to be
outstanding, and all rights of the Holders thereof as stockholders of
the Corporation (except the right to receive from the Corporation the
redemption price and payment of all accrued but unpaid dividends) shall
cease.
Section 5. Conversion of Convertible Redeemable Preferred Stock.
(a) Conversion at Option of the Holder. At any time and from time
to time after the Closing Date, a Holder of Convertible Redeemable
Preferred Stock may surrender such stock, in whole or in part, for
shares of Class A Common Stock during the time periods set forth in
Section 5(c)(iv). Initially a Holder of Convertible Redeemable Preferred
Stock shall receive two shares of Class A Common Stock for each share of
Convertible Redeemable Preferred Stock surrendered for conversion
subject to adjustment as set forth in Section 5(d) (the "Conversion
Rate").
(b) Conversion at Option of the Corporation. In the event that at
any time after the Closing Date, the Sale Price of Class A Common Stock
shall equal or exceed $3.25 per share (as adjusted to reflect any stock
dividend, subdivision, combination, reclassification, distribution or
similar event relating to the shares of Class A Common Stock) for 30
consecutive Trading Days, the Corporation may require the Holders of the
Convertible Redeemable Preferred Stock in whole but not in part to
convert their shares of Convertible Redeemable Preferred Stock into
shares of Class A Common Stock at the then-applicable Conversion Rate (a
"Corporation Optional Conversion").
(c) Procedures and Method of Conversion.
(i) In order to convert shares of Convertible Redeemable
Preferred Stock, a Holder must surrender such shares of Convertible
Redeemable Preferred Stock to the Transfer Agent by physical delivery to
the office of the Transfer Agent maintained for that purpose, duly
assigned or endorsed for transfer to the Corporation (or accompanied by
duly executed stock powers relating thereto), accompanied by written
notice of conversion (the "Conversion Notice") and, to the extent
required by Section 5(g) hereof, payment for all transfer and similar
taxes. Such Conversion Notice shall specify (i) the number of shares of
Convertible Redeemable Preferred Stock to be converted, (ii) the name or
names in which such Holder wishes the certificate or certificates for
Class A Common Stock and for any Convertible Redeemable Preferred Stock
not to be so converted to be issued and (iii) the address to which such
Holder wishes delivery to be made of such new certificates to be issued
upon such conversion. Any conversion shall be deemed to have been
effected on the date on which all such requirements set forth in the
preceding sentence have been satisfied (the "Optional Conversion Date").
Once received by the Transfer Agent, a Conversion Notice shall be
irrevocable and may not be withdrawn by a Holder for any reason. The
Transfer Agent shall promptly notify the Corporation of receipt by it of
any Conversion Notice. No later than five (5) Business Days following
the Optional Conversion Date, the Corporation shall deliver to the
Transfer Agent (for redelivery to the Holder) accrued and unpaid
dividends on the Convertible Redeemable Preferred Stock through and
including the Optional Conversion Date which such dividends may be paid
in cash or in shares of Convertible Redeemable Preferred Common Stock
having an aggregate Liquidation Value equal to the amount of such
accrued but unpaid dividends. In the event that the Corporation elects
to pay such accrued but unpaid dividends with shares of Convertible
Redeemable Preferred Stock, immediately upon issuance such shares of
Convertible Redeemable Preferred Stock shall automatically and without
further action by the Corporation or the Holder be converted into shares
of Class A Common Stock at the then-applicable Conversion Rate. In
addition, the Transfer Agent shall deliver to the Holder the Class A
Common Stock (at the Conversion Rate then in effect) which such Holder
is entitled to receive in accordance with the provisions of this
Certificate of Designation. Such conversion shall be deemed to have been
effected on the close of business on the Optional Conversion Date, and
at such time all rights of the Holder of such Convertible Redeemable
Preferred Stock as a Holder of Convertible Redeemable Preferred Stock
(other than the right to receive Class A Common Stock and accrued and
unpaid dividends on the Convertible Redeemable Preferred Stock) shall
cease and the Holder shall, as between such Holder and the Transfer
Agent and the Corporation, be deemed to have become the holder of record
of the Class A Common Stock represented thereby. Delivery of such
certificate or certificates or execution of such transfer, as the case
may be, and delivery of immediately available funds for any cash in
payment of accrued and unpaid dividends on the shares of Convertible
Redeemable Preferred Stock being converted (subject to the Corporation's
right to pay such accrued and unpaid dividends in shares of Convertible
Redeemable Preferred Stock) as aforesaid may be delayed for a reasonable
time at the request of the Corporation in order to effectuate the
calculation of adjustments of the Conversion Rate pursuant to Section
5(d) or to make any governmental filings or obtain any necessary
governmental approvals required to be made or obtained by the
Corporation or the Holder converting its shares of Convertible
Redeemable Preferred Stock. If, between any Optional Conversion Date and
the related date of delivery of applicable Class A Common Stock, a
record date or effective date of a transaction described in Section 5(d)
or 5(e) shall occur, the Holder entitled to receive such Class A Common
Stock shall be entitled only to receive such Class A Common Stock as so
modified on the date of the delivery, and the Corporation and the
Transfer Agent shall not be otherwise liable with respect to the
modification of such Class A Common Stock from such Optional Conversion
Date to the date of such delivery.
(ii) In the event of a Corporation Optional Conversion,
the Corporation shall provide written notice (the "Corporation Optional
Conversion Notice") to the Holders that the requirements of Section 5(b)
have been met and that the Corporation is requiring the conversion of
all outstanding shares of Convertible Redeemable Preferred Stock. For
purposes of this Section 5(c)(ii), the date of the Corporation Optional
Conversion Notice shall be the "Corporation Optional Conversion Date."
The Corporation Optional Conversion Notice shall be accompanied by a
letter of transmittal describing the procedures by which the Holders
shall deliver all of their shares of Convertible Redeemable Preferred
Stock for conversion into Class A Common Stock. As of the Corporation
Optional Conversion Date and without any further action by the
Corporation and without any further notice, (i) all outstanding shares
of Convertible Redeemable Preferred Stock shall be deemed to have been
converted into shares of Class A Common Stock at the then-applicable
Conversion Rate and such shares shall be cancelled and shall no longer
be deemed to be outstanding, (ii) dividends on the Convertible
Redeemable Preferred Stock shall cease to accrue, and (iii) all rights
of the Holders of the Convertible Redeemable Preferred Stock (except the
right to receive from the Corporation the shares of Class A Common
Stock) shall cease. In the event of a Corporation Optional Conversion,
the Corporation shall pay the amount of accrued but unpaid dividends on
such shares of Convertible Redeemable Preferred Stock in shares of
Convertible Redeemable Preferred Stock having an aggregate Liquidation
Value equal to the amount of such accrued but unpaid dividends, which
such shares of Convertible Redeemable Preferred Stock shall
automatically and without further action by the Corporation or the
Holder be converted into shares of Class A Common Stock at the
then-applicable Conversion Rate.
(iii) If any Holder converts less than all of its shares
of Convertible Redeemable Preferred Stock, upon such conversion the
Corporation shall execute and deliver or have delivered to the Holder
thereof, at the expense of the Corporation, a new stock certificate or
certificates representing an amount equal to the unconverted shares of
Convertible Redeemable Preferred Stock.
(iv) With respect to any shares of Convertible Redeemable
Preferred Stock called for redemption, the right to convert such shares
for Class A Common Stock shall expire on the close of business on the
day preceding the Redemption Date if such shares have been called for
redemption pursuant to Section 4(a) and the Corporation shall have
deposited with the Transfer Agent cash sufficient to pay the redemption
price for the shares to be redeemed in accordance with the provisions of
Section 4(b)(iii) hereof.
(d) Adjustment of Conversion Rate.
The Conversion Rate shall be subject to adjustment as follows:
(i) If at any time any shares of Convertible Redeemable
Preferred Stock are outstanding, the Corporation shall (A) pay a
dividend or make a distribution on Class A Common Stock in shares of
such stock, (B) subdivide outstanding shares of Class A Common Stock
into a greater number of shares of such stock, (C) combine outstanding
shares of Class A Common Stock into a smaller number of shares of such
stock, or (D) issue, by reclassification of shares of Class A Common
Stock, any shares of any series of the Corporation's Capital Stock, the
Conversion Rate in effect immediately prior thereto shall be
proportionately adjusted so that the Holder of any Convertible
Redeemable Preferred Stock thereafter converted shall be entitled to
receive upon such conversion the number of shares of Class A Common
Stock or other Capital Stock as such Holder would have owned or would
have been entitled to receive immediately after the happening of any of
the events described above, had such Convertible Redeemable Preferred
Stock been converted immediately prior to the record date (or if there
is no record date, the effective date) of such event. Such adjustments
shall be made whenever any of the events listed above shall occur and
shall become effective as of immediately after the close of business on
the record date in the case of a stock dividend and on the effective
date in the case of a subdivision or combination or reclassification.
Any Holder converting any Convertible Redeemable Preferred Stock after
such record date or such effective date, as the case may be, shall be
entitled to receive shares of Class A Common Stock or other Capital
Stock at the Conversion Rate as so adjusted pursuant to this Section
5(d)(i).
(ii) All calculations under this Section 5(d) shall be
made to the nearest one-one-thousandth (.001) of a share.
(iii) Whenever the Conversion Rate is adjusted as herein
provided, the Corporation shall determine the adjusted Conversion Rate
in accordance with the provisions of this Section 5(d) and shall prepare
a certificate setting forth such adjusted Conversion Rate and showing in
detail the facts upon which such adjustment is based, and such
certificate shall forthwith be filed with the Transfer Agent. A notice
stating that the Conversion Rate has been adjusted and setting forth the
adjusted Conversion Rate shall as soon as practicable be mailed by the
Corporation or, at the Corporation's request, the Transfer Agent to the
Holders at their last addresses as they shall appear upon the books of
the Corporation.
(e) Distributions by Corporation. If at any time any shares of
Convertible Redeemable Preferred Stock are outstanding, the Corporation shall
distribute to all holders of its Class A Common Stock any of its assets or debt
securities, or rights, including purchase rights, options, warrants or
convertible or exchangeable securities of the Corporation (including securities
for cash, but excluding distributions of Capital Stock referred to in subsection
5(d)(i) above), then in each such case, the Holders of Convertible Redeemable
Preferred Stock shall be entitled to receive such rights, options, warrants or
convertible or exchangeable securities as such Holders would have been entitled
to receive had they converted their shares of Convertible Redeemable Preferred
Stock for shares of Class A Common Stock prior to the record date of any such
distribution.
(f) Fractional Interest. At its option, the Corporation may
deliver fractional shares of Class A Common Stock upon conversion of Convertible
Redeemable Preferred Stock or may instruct the Transfer Agent, on behalf of the
Corporation, to pay a cash adjustment in respect of such fractional interest in
an amount equal to the same fraction of the Fair Market Value per share of Class
A Common Stock. If more than one certificate representing shares of Convertible
Redeemable Preferred Stock shall be surrendered for conversion at one time by
the same Holder, the number of full shares of Class A Common Stock that shall be
delivered upon conversion shall be computed on the basis of the aggregate number
of shares of Convertible Redeemable Preferred Stock (or specified portion
thereof to the extent permitted hereby) so surrendered. In the event that the
Corporation shall elect to pay cash in lieu of any fractional interest, the
Corporation shall, upon conversion of any shares of Convertible Redeemable
Preferred Stock, provide cash to the Transfer Agent in an amount equal to the
cash adjustment payable with respect to any fractional shares of Class A Common
Stock deliverable upon conversion of such shares of Convertible Redeemable
Preferred Stock, and receive in consideration therefor such fractional shares.
(g) Taxes. The Corporation will pay any and all documentary,
stamp, transfer or similar taxes that may be payable in respect of the transfer
and delivery of Class A Common Stock pursuant hereto; provided, however, that
the Corporation shall not be required to pay any such tax that may be payable in
respect of any transfer involved in the delivery of Class A Common Stock in a
name other than that in which the shares of Convertible Redeemable Preferred
Stock so converted were registered, and no such transfer or delivery shall be
made unless and until the Person requesting such transfer has paid to the
Corporation the amount of any such tax, or has established, to the satisfaction
of the Corporation, that such tax has been paid.
(h) Shares Free and Clear. The Corporation hereby warrants that,
upon conversion of Convertible Redeemable Preferred Stock pursuant to this
Certificate of Designation, including upon conversion of shares of Convertible
Preferred Stock issued in lieu of payment of cash dividends, the Holders of
Convertible Redeemable Preferred Stock shall receive fully paid and
nonassessable shares of Class A Common Stock free and clear of any and all
Liens.
(i) Status upon Conversion. From and after the Optional
Conversion Date or the Corporation Optional Conversion Date, as the case may be,
dividends on the shares of Convertible Redeemable Preferred Stock so converted
shall cease to accrue, such shares shall be cancelled and shall no longer be
deemed to be outstanding, and all rights of the Holders thereof as stockholders
of the Corporation (except the right to receive the Class A Common Stock) shall
cease.
(j) Assistance by Corporation. The Corporation shall assist and
cooperate with any Holder in making any governmental filings or obtaining
governmental approval required to be made or obtained by such Holder in
connection with any conversion of shares of Convertible Redeemable Preferred
Stock hereunder (including, without limitation, making any filings required to
be made by the Corporation).
(k) Reservation of Shares. The Corporation shall reserve, free
from any preemptive rights, out of its authorized but unissued Class A Common
Stock sufficient shares of Class A Common Stock to provide for the conversion of
all shares of Convertible Redeemable Preferred Stock from time to time
outstanding, including shares of Convertible Redeemable Preferred Stock issued
in lieu of cash dividend payments.
Section 6. Consolidation, Merger and Sale of Assets, etc.
The Corporation shall not consolidate with or merge into, or transfer
all or substantially all of its assets to, another Person unless (i) the
Corporation is the surviving entity and the Convertible Redeemable Preferred
Stock is unchanged or (ii) (A) the surviving, resulting or acquiring Person is a
Person organized under the laws of the United States, any state thereof or the
District of Columbia, or a Person organized under the laws of a foreign
jurisdiction whose equity securities are listed on a national securities
exchange in the United States or authorized for quotation on NASDAQ, and (B) the
Corporation shall make effective provision such that, upon consummation of such
transaction, the Holders of Convertible Redeemable Preferred Stock shall receive
stock of the surviving entity having substantially identical terms (including
the conversion rights for the Class A Common Stock set forth in Section 5) as
the Convertible Redeemable Preferred Stock.
Section 7. Voting Rights of Convertible Redeemable Preferred Stock.
(a) General. Except as otherwise expressly provided herein or as
required by law, the Holder of each share of Convertible Redeemable Preferred
Stock shall be entitled to vote on all matters on which the holders of Class A
Common Stock are entitled to vote. Each share of Convertible Redeemable
Preferred Stock shall entitle the Holder thereof to such number of votes per
share as shall equal the number of shares of Class A Common Stock into which
each share of Convertible Redeemable Preferred Stock is then convertible. Except
as provided in Section 7(b) hereof or as required by law, the holders of shares
of the Convertible Redeemable Preferred Stock and the Class A Common Stock shall
vote together as a single class on all matters.
(b) Certain Amendments. So long as any shares of Convertible
Redeemable Preferred Stock remain outstanding:
(i) the affirmative vote of the Holders of 100% of the
outstanding shares of Convertible Redeemable Preferred Stock, voting
together as a separate class, shall be required in order to change (A)
the amount of the Liquidation Value or the dividend rate of, or any
provision of Section 3 hereof relating to the calculation of the
dividend on, the Convertible Redeemable Preferred Stock or (B)
subsection 4(a), any provision of Section 5 hereof relating to the
conversion rights of Holders of Convertible Redeemable Preferred Stock,
or this Section 7; and
(ii) the affirmative vote of the Holders of at least 75%
of the outstanding shares of Convertible Redeemable Preferred Stock,
voting together as a separate class, shall be required in order to (A)
amend, alter or repeal any of the provisions of the Articles or this
Certificate of Designation so as to adversely affect any right,
preference or voting power of the Convertible Redeemable Preferred Stock
or (B) authorize, create or issue any class or series of stock of the
Corporation that is senior to or pari passu with the Convertible
Redeemable Preferred Stock with respect to dividends or the distribution
of assets upon dissolution, liquidation or winding up of the
Corporation.
The foregoing voting provisions shall not apply if, at or prior
to the time when the action with respect to which such vote would
otherwise be required to be effected, all outstanding shares of
Convertible Redeemable Preferred Stock (i) shall have been redeemed or
notice of redemption shall have been provided and sufficient funds shall
have been delivered to the Transfer Agent to effect such redemption
and/or (ii) shall have been converted into shares of Class A Common
Stock.
Section 8. Certain Restrictions.
So long as any shares of Convertible Redeemable Preferred Stock are
outstanding, the Corporation shall not redeem, retire, purchase or otherwise
acquire any shares of Junior Stock.
Section 9. Transfer Agent.
Simultaneously with the creation and issuance of the Convertible
Redeemable Preferred Stock in accordance with the terms of this Certificate of
Designation, the Corporation is amending its existing agreement with the
Transfer Agent to provide that the Transfer Agent shall also act as the Transfer
Agent for the Convertible Redeemable Preferred Stock. The duties of the Transfer
Agent and certain rights of the Corporation and the Holders of Convertible
Redeemable Preferred Stock with respect to the transfer of shares of Convertible
Redeemable Preferred Stock and the redemption of shares of Convertible
Redeemable Preferred Stock for cash by the Corporation are set forth in the
transfer agent agreement, as so amended.
Section 10. Transfers; Replacement of Certificates.
(a) Transfers. Subject to any restrictions on transfer under
applicable securities or other laws, shares of Convertible Redeemable Preferred
Stock may be transferred on the books of the Corporation by the surrender to the
Transfer Agent of the certificate therefor properly endorsed or accompanied by a
written assignment and power of attorney properly executed, with transfer stamps
(if necessary) affixed, and such proof of the authenticity of signature as the
Corporation or the Transfer Agent may reasonably require.
(b) Replacement of Certificates. If any mutilated certificate
representing shares of Convertible Redeemable Preferred Stock is surrendered to
the Transfer Agent, or if a Holder claims the certificate representing shares of
Convertible Redeemable Preferred Stock has been lost, destroyed or willfully
taken, the Corporation shall issue and the Transfer Agent shall countersign a
replacement certificate of like tenor and date if (i) the Holder provides an
indemnity bond or other security sufficient, in the judgment of the Transfer
Agent, to protect the Corporation, the Transfer Agent, and any authenticating
agent and any of their officers, directors, employees or representatives from
any loss which any of them may suffer if a certificate representing shares of
Convertible Redeemable Preferred Stock is replaced and (ii) the Holder satisfies
any other reasonable requirements of the Transfer Agent.
Section 11. Liquidation.
Upon any liquidation, dissolution or winding up of the Corporation, the
Holders of shares of Convertible Redeemable Preferred Stock shall be entitled to
receive, out of the assets or surplus funds of the Corporation available for
distribution, cash equal to the Liquidation Value per share of each outstanding
share of Convertible Redeemable Preferred Stock. No distribution in respect of
any such liquidation, dissolution or winding up shall be made (A) to the holders
of shares of Junior Stock unless, prior thereto, the Holders of shares of
Convertible Redeemable Preferred Stock shall have been paid in cash the
Liquidation Value for each outstanding share of Convertible Redeemable Preferred
Stock or (B) to the holders of any other class or series of stock ranking on a
parity (either as to dividends or upon liquidation, dissolution or winding up)
with the Convertible Redeemable Preferred Stock, except distributions made
ratably on the Convertible Redeemable Preferred Stock and all other such parity
stock in proportion to the total amounts to which the holders of all such shares
are entitled upon such liquidation, dissolution or winding up. If the assets or
surplus funds to be distributed to the Holders of Convertible Redeemable
Preferred Stock upon any such liquidation, dissolution or winding up are
insufficient to permit the payment to such Holders of their full preferential
amount, the assets and surplus funds legally available for distribution shall be
distributed ratably among the Holders of Convertible Redeemable Preferred Stock
in proportion to the full preferential amount each such Holder is otherwise
entitled to receive.
Neither the consolidation of nor merging of the Corporation with or into
any other Person, nor the sale or other transfer of all or substantially all of
the assets of the Corporation to another Person, shall be deemed to be a
liquidation, dissolution or winding up of the Corporation within the meaning of
this Section 11.
Section 12. Rank.
All shares of Convertible Redeemable Preferred Stock shall rank junior,
both as to payment of dividends and as to distributions of assets upon
liquidation, dissolution or winding up of the Corporation, whether voluntary or
involuntary, to all shares of Exchangeable Preferred Stock.
January 20, 1995
Town & Country Corporation
25 Union Street
Chelsea, MA 02150
Re: Registration Statement on Form S-2
Ladies and Gentlemen:
We have acted as counsel to Town & Country Corporation (the "Company") in
connection with the preparation and filing with the Securities and Exchange
Commission of a Registration Statement on Form S-2 (the "Registration
Statement") involving the resale by certain shareholders of the Company of up to
4,000,000 shares of the Company's Convertible Preferred Stock, par value $1.00
per share and up to 8,000,000 shares of the Company's Class A Common Stock, par
value $.01 per share (collectively, the "Securities"). Defined terms used
without definition herein shall have the meaning given to such terms in the
Registration Statement.
We have been furnished with and have examined originals or copies, certified
or otherwise identified to our satisfaction, of all such records of the Company,
agreements and other instruments, certificates of officers and representatives
of the Company, certificates of public officials and other documents as we have
deemed necessary to require as a basis for opinions hereinafter expressed.
In rendering the opinions hereinafter expressed, we have assumed the
genuineness of all signatures and the authenticity of all items submitted to us
as originals, the conformity with originals of all items submitted to us as
copies, and the legal capacity of all natural persons. In examining documents
executed by persons other than the Company, we have assumed that each other
person has the power to enter into and perform all its obligations thereunder
and we have also assumed the due authorization by each such person of all
requisite action and the due execution and delivery of such documents by each
such person.
The opinions set forth below are qualified in that enforceability of the
Company's obligations under the Certificate of Designation may be limited by
applicable bankruptcy, insolvency, moratorium, reorganization, fraudulent
transfer, or similar laws from time to time in effect and by equitable
limitations (whether raised at a proceeding in law or in equity) on the
availability of certain rights and remedies including specific enforcement.
Based upon the foregoing, we are of the opinion that:
1. The shares of Convertible Preferred Stock have been legally issued and
are fully paid and non-assessable.
2. Upon the issuance of the certificates representing the Class A Common
Stock by the Company pursuant to the Certificate of Designation, the Class A
Common Stock will be legally issued, fully paid and non-assessable.
We hereby consent to the use of our name in the Registration Statement and
under the caption "Legal Opinions" in the related Prospectus, and consent to the
filing of this opinion as an exhibit to the Registration Statement. In giving
such consent, we do not thereby admit that we are within the category of persons
whose consent is required by Section 7 of the Securities Act of 1933, as
amended, and the rules and regulations thereunder.
Very truly yours,
/s/ Goodwin, Procter & Hoar
GOODWIN, PROCTER & HOAR
Town & Country corporation Letterhead
November 4, 1994
RE: EXCHANGEABLE PREFERRED, CUSIP NO. 892027 30 1
[FORMAL][FIRST_NAME][LAST_NAME]
[TITLE]
[COMPANY]
[ADDRESS]
[CITY],[STATE][ZIP]
RE: EXCHANGEABLE PREFERRED CUSIP NO. 892027 30 1
Dear [FORMAL.][LAST_NAME.]
Town & Country Corporation ("Town & Country" or the "Company") has reached
the conclusion that the demands of its business are such that it must
substantially reduce its involvement with Little Switzerland, Inc. ("Little
Switzerland"). In order to permit us to do this, however, it is necessary for
Twon & Country to reduce its exposure to the financial and market performance
of Little Switzerland.
In light of this, Town & Country has determined to make the following offer
to you and other accredited investors (the "Holders") who hold shares of Town
& Country's Exchangeable Preferred Stock (the "Exchangeable Preferred"),
CUSIP No. 892027 30 1, who Town & Country believes hold a majority of the
2,533,255 shares of Exchangeable Preferred outstanding. This offer supersedes
any and all previous offers.
The offer-To exchange one (1) share of Exchangeable Preferred for one (1)
share of Little Switzerland Common Stock (the "LS Common") and as an
inducement to participate in this offer, Town & country will also issue one
(1) share of New Convertible Preferred Stock ("the New Convertible
Preferred") for each share of Exchangeable Preferred tendered under the
following conditions:
a) At least 1,660,000 (subject to reduction if we determine it is in Town &
Country's best interest to proceed at a smaller number) shares of
Exchangeable Preferred must be committed for Exchange pursuant to the
procedures outlined below on November 4, 1994 (the "Minimum Exchange
Amount").
b) Each Holder must commit to exchange all shares of Exchangeable Preferred
held by such Holder.
The following is a description of the New Convertible Preferred:
> Maturity: Perpetual
> Stated Value: Variable:
*4 $6.00 per share, if Minimum Exchange Amount
*4 $6.50 per share, if maximum number of shares
is exchanged (2,075,000 shares)
*Variable value per share between $6.00 and
$6.50 when number of shares is between Minimum
Exchange Amount and maximum exchanged.
Page 2
>Dividend *6% Payable in cash, semi-annually, if allowed
by the Company's Indentures and Agreements
or P.I.K., if prohibited.
>Preference: Junior to existing Exchangeable Preferred
>Conversion *2 shares of Town & Country Class A Common
(the "T&C Common") for each share of New
Convertible Preferred.
*4 At option of the Company when the market
value of T&C Common is at least 50% of the
stated value of the New Convertible Preferred.
*Any time at the option of the Holder
>Voting Based on underlying T&C Common
>Redemption: At the option of the Company:
*During the second year @ 104% of stated value
*During the third year @ 102% of stated value
*Thereafter, @ 100% of stated value
>Registration
Rights: The Company will register the underlying T&C
Common.
Other No cash distribution or dividends payable to
T&C Common unless the New Convertible
Preferred has been redeemed or exchanged.
Holder will have the right to a similar position
in the new or surviving entity if the Company
is acquired or there is a merger in which the
Company is not the surviving entity (same
provision as in the existing Exchangeable
Preferred).
If you have not already received a package, under separate cover I will send
to you a copy of Town & Country's Annual Report to Stockholders for the
fiscal year ended February 27, 2994, a Form 10-K for such fiscal year, Form
10-Q's for the quarters ended May 29, 1994, and August 28, 1994, and a proxy
statement for its 1994 Annual Meeting of Stockholders which was held on July
21, 1994.
By signing this letter you represent and agree as follows:
1. You are an "accredited investor" as such term is defined in Rule 501(a)
under the Securities Act of 1933, as amended.
2. This offer has not been publicly made or disclosed. To the extent that its
existence constitutes material non-public information, you acknowledge
that you are aware of the obligations of a person having material
non-public information with respect to an issuer when purchasing or
selling securities of such issuer.
3. Upon your receipt from Town & country of written notification that the
Minimum Exchange Amount has been reached, you agree on November 4, 1994,
that you will cause the record holder of the shares of Exchangeable
Preferred of which you are the beneficial owner to comply with the
procedures for submitting your shares of Exchangeable Preferred to
Baybank, N.A. (the "Trustee") set forth in the certificate of designation
for the Exchangeable Preferred.
4. Set forth below is the number of shares of Exchangeable Preferred of which
you are the beneficial owner and, if different, the name and address of
the nominee holder of such shares.
Page 3
When Town & Country has received commitments from Holders aggregating to the
Minimum Exchange Amount, Town & Country will issue to you that number of
shares of New Convertible Preferred to which you may be entitled pursuant to
the terms of this letter on or before November 23, 1994.
We will advise you immediately upon our receiving commitments from Holders
aggregating to the Minimum Exchange Amount.
Please feel free to call me should you have any questions about this offer.
Please acknowledge your acceptance of the offer contained in this letter and
your acceptance of its terms and conditions by signing below and returning
the enclosed copy of this letter to my attention at Towne & Country
Corporation, 25 Union street, Chelsea, Massachusetts 02150, and transmitting
a facsimile copy hereof to 617-889-6707.
Very truly yours,
TOWN & COUNTRY CORPORATION
By:_______________________
Francis X. Correra
Senior Vice President
sdb
ACCEPTED AND AGREED:
By: ______________________
Name:
Title:
Organization:
We hold __________shares of Exchangeable Preferred which we
commit to exchange on the terms described herein. The name and address of the
nominee holder of such shares is:
_________________________________________________________________
_________________________________________________________________
Dated:,___________________________ 1994
REGISTRATION RIGHTS AGREEMENT
This Registration Rights Agreement (this "Agreement") dated as of
November 23, 1994, is by and among Town & Country Corporation, a Massachusetts
corporation (the "Company"), and the persons who have executed signature pages
attached hereto (individually a "Holder" and collectively the "Holders").
WHEREAS, the Company has duly authorized the issuance of, and
contemporaneously herewith is issuing, up to 2,533,255 shares (the "Initial
Shares") of the Company's convertible redeemable preferred stock, $1.00 par
value per share (the "Convertible Preferred"), without registration under the
Securities Act of 1933, as amended (the "Securities Act"), pursuant to a letter
agreement dated November 4, 1994 by and between the Company and each of the
Holders (the "Letter Agreements");
WHEREAS, the Company from time to time after the date hereof may issue
additional shares (the "Dividend Shares" and, together with the Initial Shares,
the "Shares") of Convertible Preferred as payment in lieu of cash dividends
payable on the Convertible Preferred pursuant to the Certificate of Vote of
Directors Establishing a Series of a Class of Stock with respect to the
Convertible Preferred (the "Certificate of Designation"); and
WHEREAS, the execution of this Agreement is a condition to the Holders'
agreement to consummate the transactions pursuant to which they will receive the
Shares.
NOW, THEREFORE, in consideration of the mutual benefits to be derived
from this Agreement, the parties hereto hereby agree as follows:
1. Registration; Obligations of the Company. Within 60 days following
the date that the Shares are issued to the Holders by the Company, the Company
(at its own expense) shall file a registration statement (the "Registration
Statement") on Form S-2 (or such other form which the Company is then entitled
to use) under the Securities Act covering (i) the Shares, (ii) the shares of the
Company's Class A common stock, $.01 par value per share (the "Class A Common"),
into which the Shares are convertible, and (iii) such number of additional
shares of Convertible Preferred and Class A Common as may be issued from time to
time in lieu of dividend payments on the Convertible Preferred (the "Dividend
Securities") (the Shares, the Class A Common into which such Shares are
convertible, and the Dividend Securities are hereinafter collectively referred
to as the "Securities"). The Company will use its best efforts to cause the
Registration Statement to be declared effective by the Securities and Exchange
Commission ("SEC") within 120 days after the date on which the Registration
Statement is filed with the SEC and to keep the Registration Statement
effective, including filing as promptly as practicable any post-effective
amendments, as required, for the period (the "Effective Period") commencing on
the earliest date on which any of the Securities are issued and ending on the
earlier of (a) the date on which each of the Holders has notified the Company
that such Holder may dispose of all of the Securities owned by it pursuant to
Rule 144(k) under the Securities Act and (b) the date on which the Holders and
all Affiliates (as defined below) of the Holders no longer own any Securities.
In addition, the Company shall:
(a) Prepare and file with the SEC such amendments and
supplements to the Registration Statement and the prospectus used in connection
with the Registration Statement, and use its best efforts to cause each such
amendment to become effective, as may be necessary to comply with the provisions
of the Securities Act; and
(b) Furnish to each Holder such reasonable number of copies of
a prospectus, in conformity with the requirements of the Securities Act, as it
may reasonably request in order to facilitate the disposition of Securities
owned by it.
2. State Securities Laws. Subject to the conditions set forth
in this Agreement, the Company shall, upon filing of the Registration Statement,
file such documents as may be necessary to either register or qualify or satisfy
an exemption from registration or qualification of the Securities under the
securities or "Blue Sky" laws of the States of California and New York and the
Commonwealth of Massachusetts and such other states as the Holders may
reasonably request, and the Company shall use its best efforts to cause such
filings to become effective; provided, however, that the Company shall not be
obligated to qualify as a foreign corporation to do business under the laws of
any such state in which it is not then qualified or to file any general consent
to service of process in any such state. Once effective, the Company shall use
its best efforts to keep such filings effective until the earlier of (a) the
expiration of the Effective Period pursuant to Section 1 hereof or (b) in the
case of a particular state, each Holder that requested registration in such
state has notified the Company that it no longer requires an effective filing in
such state in accordance with its original request for filing. The Company shall
promptly notify the Holders of, and confirm in writing, the receipt by the
Company of any notification with respect to the suspension of the qualification
of the Securities for sale under the securities or "Blue Sky" laws of any
jurisdiction or the initiation or threat of any proceeding for such purpose.
3. Obligations of the Holders.
(a) The Company shall have no obligation to register Securities
on behalf of any Holder if such Holder has not furnished in writing to the
Company such information regarding itself, the Securities (and any other shares
of Convertible Preferred or Class A Common) held by it, and the intended method
of disposition of the Securities as shall be required to effect the registration
of its Securities.
(b) To the extent required by the Securities Act and the rules
and regulations promulgated thereunder, each of the Holders agrees to deliver or
cause delivery of the prospectus contained in the Registration Statement and any
amendment or supplement thereto to any purchaser of the Securities from the
Holders.
4. Expenses. The Company shall bear all expenses incurred in connection
with the registration of the Securities pursuant to this Agreement. Such
expenses shall include, without limitation, all printing, legal and accounting
expenses incurred by the Company and all registration and filing fees imposed by
the SEC, any state securities commission or the American Stock Exchange. Each of
the Holders shall be responsible for any brokerage or underwriting commissions
and taxes of any kind (including, without limitation, transfer taxes) with
respect to any disposition, sale or transfer of the Securities held by it and
for any legal, accounting and other expenses incurred by it.
5. Suspension of Registration Statement. After the Registration
Statement initially has been declared effective, if at any time during the
Effective Period either (i) the effectiveness of the Registration Statement has
been suspended or has otherwise lapsed for any reason or (ii) the Company
instructs the Holders in writing not to sell any Securities covered by the
Registration Statement, which instruction shall be deemed for purposes of this
Agreement to be a suspension of the effectiveness of the Registration Statement,
the Company will (a) within five days notify the Holders in writing of such
cessation and (b) in the case of a suspension or lapse pursuant to clause (i)
above, promptly (at its own expense) use its best efforts to cause the
Registration Statement to be declared effective or to file such supplement or
post-effective amendment as may be required to rectify such lapse or (c) in the
case of a suspension pursuant to clause (ii) above, promptly inform the Holders
when they may recommence effecting sales of the Securities pursuant to the
Registration Statement.
6. Illiquidity Payment. If at the end of any calendar month (a
"Determination Date") the Registration Statement was not continuously effective
for at least 120 days during the preceding six calendar month period, the
Company shall within 15 days after the end of each such month pay to each Holder
in cash an illiquidity payment (the "Illiquidity Payment") which initially shall
be equal to the Initial Illiquidity Payment (as defined below) and shall be
increased as provided in Section 7 below, if applicable; provided, however, that
the Company will not be required to make an Illiquidity Payment under this
Section 6 with respect to any Determination Date if an Illiquidity Payment was
made by the Company with respect to either of the two Determination Dates
immediately preceding such Determination Date. The Initial Illiquidity Payment
shall be equal to the product of .00125 times the aggregate liquidation value of
all Convertible Preferred owned by such Holder as of the Determination Date,
which Convertible Preferred was acquired by such Holder on the date hereof, or,
in the event that such Convertible Preferred has been converted into shares of
Class A Common, the aggregate Fair Market Value of such shares of Class A Common
owned by such Holder as of the Determination Date.
For purposes of this Agreement, "Fair Market Value" of a share of Class
A Common shall mean the average of the closing sale price (or, if no closing
sale price is reported, the average of the bid and ask price or, if more than
one in either case, the average of the average bid and average ask prices on
such day) of a share of Class A Common on the American Stock Exchange Inc.
("AMEX") for the 15 Trading Days (as defined below) immediately preceding the
date on which Fair Market Value is determined or, in the event that the Class A
Common is not traded on AMEX, such other national securities or regional
securities exchange upon which the Class A Common is listed and principally
traded or, if no such price is available, the per share market value of the
Class A Common as determined by a recognized financial advisor retained by the
Company (at the Company's expense) for the purpose of such valuation. For
purposes of this Agreement, "Trading Day" shall mean each day on which AMEX or
such other securities exchange or automated quotations system on which shares of
Class A Common are traded is open for the transaction of business or, if the
Class A Common is not listed or admitted for trading on AMEX or any securities
exchange or automated quotations system, any day other than a Saturday, a Sunday
or a day on which banking institutions in the City of Boston or The Commonwealth
of Massachusetts are authorized or obligated by law or executive order to close.
7. Additional Illiquidity Payment. In the event the Company would have
been obligated to make an Illiquidity Payment pursuant to Section 6 above
(without regard to the proviso contained in the first sentence of Section 6) for
three consecutive calendar months and on the fourth consecutive calendar month
(the "Fourth Month") the Registration Statement was not continuously effective
for at least 120 days during the preceding six calendar month period, the
Illiquidity Payment on the Fourth Month shall be increased by 100% of the
Initial Illiquidity Payment for such Fourth Month and for each consecutive
calendar month thereafter (without regard to the proviso contained in the first
sentence of Section 6) on which the Company is obligated pursuant to this
Agreement to make an Illiquidity Payment.
8. Representations of the Company. The Company represents and warrants
to the Holders that the execution and delivery of this Agreement have been duly
authorized by all necessary corporate action on the part of the Company and will
not conflict with, result in any breach which would constitute a default under,
or result in the creation or imposition of any lien upon any of the assets of
the Company or its subsidiaries pursuant to the terms of, any agreement,
indenture or instrument, to which the Company or any of its subsidiaries is a
party or by which any of the property or assets of the Company or any of its
subsidiaries is subject, or result in a violation of the corporate charter or
by-laws of the Company or any of its subsidiaries (the effect of which conflict,
lien, default or violation would result in a material adverse effect on the
Company or would materially and adversely affect the ability of the Company to
perform its obligations under this Agreement), nor will the performance by the
Company of its obligations under this Agreement violate any law, rule,
administrative regulation or decree of any court or governmental agency having
jurisdiction over the Company or any of its subsidiaries or any of their
properties. The Company further represents and warrants to the Holders that the
Shares and the Class A Common into which such Shares are convertible have been
duly authorized and, when issued pursuant to the Certificate of Designation,
will be validly issued, fully-paid and non-assessable. Assuming the accuracy of
the representations made by each Holder in its respective Letter Agreement, the
Company represents and warrants to the Holders that the issuance of the Shares
to the Holders does not require registration of the Shares under the Securities
Act or the securities or "Blue Sky" laws of any state.
9. No Conflicting Agreements. The Company agrees that it will
not enter into any agreement, indenture or instrument the terms of which would
conflict with the terms of this Agreement.
10. Accrual of Payments. In the event that the Company is not permitted
by law, governmental rule or regulation to make any payment required to be made
hereunder, such payment shall accrue as an obligation of the Company and shall
be paid as soon as the restriction on the making of such payment is removed.
11. Benefit of Obligations. The obligations of the Company
hereunder are for the benefit of each Holder and each Affiliate (as defined
below) of such Holder to which such Holder transfers any of the Securities.
For purposes of this Agreement, "Affiliate" means, with respect to any person,
any other person directly or indirectly controlling or controlled by or under
direct or indirect common control with such person. In addition, "Affiliate"
with respect to Fidelity Management and Research Company or Fidelity Management
Trust Company includes the funds listed on Schedule A hereto and any other fund
managed by Fidelity Management and Research Company or Fidelity Management Trust
Company or any Affiliate of any such fund and/or Fidelity Management and
Research Company or Fidelity Management Trust Company. For the purposes of the
definition of Affiliate, "control" when used with respect to any person means
the power to direct the management and policies of such person, directly or
indirectly, whether through the ownership of voting securities, by contract or
otherwise, and the terms "controlling" and "controlled" have meanings
correlative to the foregoing.
12. Indemnification.
(a) The Company will indemnify and hold harmless each Holder,
each of its Affiliates and each person, if any, who controls such Holder against
any losses, claims, damages or liabilities to which such Holder, such Affiliate
or such controlling person may become subject under the Securities Act or
otherwise, insofar as such losses, claims, damages or liabilities (or actions or
proceedings in respect thereof) arise out of or are based upon (i) any untrue
statement or alleged untrue statement of any material fact contained in the
Registration Statement, the prospectus contained in the Registration Statement
(the "Prospectus") or any amendment or supplement thereto, or (ii) the omission
or alleged omission to state therein a material fact required to be stated
therein or necessary to make the statements therein not misleading, and will
reimburse such Holder, each such Affiliate and each such controlling person for
any legal or other expense reasonably incurred by such Holder, its Affiliates or
such controlling person in connection with investigating or defending any such
loss, claim, damage, liability, action or proceeding; provided, however, that
the Company will not be liable in any such case to the extent that any such
loss, claim, damage or liability arises out of or is based upon an untrue
statement or alleged untrue statement, or omission or alleged omission made in
the Registration Statement, the Prospectus, or such amendment or supplement, in
reliance upon and in conformity with written information furnished to the
Company by or through such Holder specifically for use in the preparation
thereof. This indemnity agreement will be in addition to any liability which the
Company may otherwise have.
(b) Each Holder will indemnify and hold harmless the Company, each of
its directors, each of its officers who have signed the Registration Statement
and each person, if any, who controls the Company within the meaning of the
Securities Act, against any losses, claims, damages or liabilities to which the
Company or any such director, officer or controlling person may become subject
under the Securities Act or otherwise, insofar as such losses, claims, damages
or liabilities (or actions or proceedings in respect thereof) arise out of or
are based upon any untrue statement or alleged untrue statement of any material
fact contained in the Registration Statement, the Prospectus or any amendment or
supplement thereto, or arise out of or are based upon the omission or the
alleged omission to state therein a material fact required to be stated therein
or necessary to make the statements therein not misleading in the light of the
circumstances under which they were made; and will reimburse any legal or other
expenses reasonably incurred by the Company or any such director, officer or
controlling person in connection with investigating or defending any such loss,
claim, damage, liability, action or proceeding; provided, however, that such
Holder will be liable in each case to the extent, but only to the extent, that
such untrue statement or alleged untrue statement or omission or alleged
omission has been made in the Registration Statement, the Prospectus or such
amendment or supplement, in reliance upon and in conformity with written
information furnished to the Company by or through such Holder specifically for
use in the preparation thereof. This indemnity agreement will be in addition to
any liability which such Holder may otherwise have.
(c) In case any proceeding (including any governmental investigation)
shall be instituted involving any person in respect of which indemnity may be
sought pursuant to this Section 11, such person (the "indemnified party") shall
promptly notify the person against whom such indemnity may be sought (the
"indemnifying party") in writing. No indemnification provided for in Section
11(a) or (b) shall be available to any party who shall fail to give notice as
provided in this Section 11(c) if the party to whom notice was not given was
unaware of the proceeding to which such notice would have related and was
prejudiced by the failure to give such notice, but the failure to give such
notice shall not relieve the indemnifying party or parties from any liability
which it or they may have to the indemnified party for contribution or otherwise
than on account of the provisions of Section 11(a) or (b). In case any such
proceeding shall be brought against any indemnified party and it shall notify
the indemnifying party of the commencement thereof, the indemnifying party shall
be entitled to participate therein and, to the extent that it shall wish to
assume the defense thereof, with counsel satisfactory to such indemnified party
and shall pay as incurred the fees and disbursements of such counsel related to
such proceeding. In any such proceeding, any indemnified party shall have the
right to retain its own counsel at its own expense. Notwithstanding the
foregoing, the indemnifying party shall pay as incurred the fees and expenses of
the counsel retained by the indemnified party in the event (i) the indemnifying
party and the indemnified party shall have mutually agreed to the retention of
such counsel or (ii) the named parties to any such proceeding (including any
impleaded parties) include both the indemnifying party and the indemnified party
and both the indemnifying party and the indemnified party have reasonably
concluded that representation of both parties by the same counsel would be
inappropriate due to actual or potential differing interests between them. It is
understood that the indemnifying party shall not, in connection with any
proceeding or related proceedings in the same jurisdiction, be liable for the
reasonable fees and expenses of more than one separate firm for all such
indemnified parties. Such firm shall be designated in writing by the Holders in
the case of parties indemnified pursuant to Section 11(a) and by the Company in
the case of parties indemnified pursuant to Section 11(b). The indemnifying
party shall not be liable for any settlement of any proceeding effected without
its written consent but if settled with such consent or if there be a final
judgement for the plaintiff, the indemnifying party agrees to indemnify the
indemnified party from and against any loss or liability by reason of such
settlement or judgment.
(d) If the indemnification provided for in this Section 11 is
unavailable to or insufficient to hold harmless an indemnified party under
Section 11(a) or (b) above in respect of any losses, claims, damages or
liabilities (or actions or proceedings in respect thereof) referred to therein,
then each indemnifying party shall contribute to the amount paid or payable by
such indemnified party as a result of such losses, claims, damages or
liabilities (or actions or proceedings in respect thereof) in such proportion as
is appropriate to reflect the relative benefits received by the Company on the
one hand and the Holders on the other from the issuance of the Convertible
Preferred. If, however, the allocation provided by the immediately preceding
sentence is not permitted by applicable law or if the indemnified party failed
to give the notice required under Section 11(c) above, then each indemnifying
party shall contribute to such amount paid or payable by such indemnified party
in such proportion as is appropriate to reflect not only such relative benefits
but also the relative fault of the Company on the one hand and the Holders on
the other in connection with the statements or omissions which resulted in such
losses, claims, damages or liabilities (or actions or proceedings in respect
thereof), as well as any other relevant equitable considerations. The relative
benefits received by the Company on the one hand and the Holders on the other
shall be deemed to be in the same proportion as the total net income from the
issuance of the Convertible Preferred (before deducting expenses) received by
the Company bear to the total net proceeds received by the Holders on the resale
of the Convertible Preferred. The relative fault shall be determined by
reference to, among other things, whether the untrue or alleged untrue statement
of a material fact or the omission or alleged omission to state a material fact
relates to information supplied by the Company on the one hand or the Holders on
the other and the parties' relative intent, knowledge, access to information and
opportunity to correct or prevent such statement or omission.
The Company and the Holders agree that it would not be just and
equitable if contributions pursuant to this Section 11(d) were determined by pro
rata allocation (even if the Holders were treated as one entity for such
purpose) or by any other method of allocation which does not take account of the
equitable considerations referred to above in this Section 11(d). The amount
paid or payable by an indemnified party as a result of the losses, claims,
damages or liabilities (or actions or proceedings in respect thereof) referred
to above in this Section 11(d) shall be deemed to include any legal or other
expenses reasonably incurred by such indemnified party in connection with
investigating or defending any such action or claim. Notwithstanding the
provisions of this subsection (d), (i) no Holder shall be required to contribute
any amount in excess of the total net proceeds received by such Holder on the
resale of the Securities, and (ii) no person guilty of fraudulent
misrepresentation (within the meaning of Section 11(f) of the Securities Act)
shall be entitled to contribution from any person who was not guilty of such
fraudulent misrepresentation.
(e) In any proceeding relating to the Registration Statement, the
Prospectus or any supplement or amendment thereto, each party against whom
contribution may be sought under this Section 11 hereby consents to the
jurisdiction of any court having jurisdiction over any other contributing party,
agrees that process issuing from such court may be served upon him or it by any
other contributing party and consents to the service of such process and agrees
that any other contributing party may join him or it as an additional defendant
in any such proceeding in which such other contributing party is a party.
13. Reports Under Securities Exchange Act of 1934. With a view to
making available to the Holders the benefits of Rule 144 promulgated under the
Securities Act and any other rule or regulation of the SEC that may at any time
permit the Holders to sell securities of the Company to the public without
registration, the Company agrees to:
(i) use its best efforts to file with the SEC in a timely
manner all reports and other documents required of the Company under
the Securities Act and the 1934 Act; and
(ii) furnish to the Holders, so long as the Holders own any
Securities, forthwith upon request (i) a written statement by the
Company as to its compliance with the reporting requirements of Rule
144, the Securities Act and the 1934 Act, (ii) a copy of the most
recent annual or quarterly report of the Company and such other reports
and documents so filed by the Company, and (iii) such other publicly
available information as may be reasonably requested in availing the
Holders of any rule or regulation of the SEC which permits the selling
of any such securities without registration or pursuant to such form.
14. No Other Obligation to Register. Except as provided in this
Agreement, the Company shall have no obligation to the Holders to register the
Securities under the Securities Act or any state "Blue Sky" or securities laws.
15. Amendments and Waivers. The provisions of this Agreement may
not be amended, modified or supplemented without the prior written consent of
the Company and Holders of not less than a majority of the Securities then
subject to this Agreement.
16. Notices. Any notices hereunder shall be in writing and
delivered in person or mailed by first-class mail addressed as follows, unless
another address is specified to the other parties hereto:
If to the Company: Town & Country Corporation
25 Union Street
Chelsea, MA 02150
Attn: C. William Carey, President
With copies to: Goodwin, Procter & Hoar
Exchange Place
Boston, MA 02109
Attn: Richard E. Floor, P.C.
If to a Holder: At the address set forth on such
Holder's signature page attached hereto
17. Termination. This Agreement shall terminate and be of no
further force or effect upon expiration of the Effective Period.
18. Counterparts. The parties may sign any number of copies of
this Agreement. Each signed copy shall be an original, but all of them
together represent the same agreement. One complete signed copy is enough
to prove this Agreement.
19. Governing Law. This Agreement shall be governed by,
and construed in accordance with, the laws of The Commonwealth of Massachusetts
but without giving effect to applicable principles of conflicts of law to
the extent that the application of the laws of another jurisdiction would be
required thereby.
IN WITNESS WHEREOF, the parties hereto have executed this Agreement as
of the date first written above.
TOWN & COUNTRY CORPORATION
By: ____________________
Name:
Title:
121883.c6
<PAGE>
REGISTRATION RIGHTS AGREEMENT
HOLDER SIGNATURE PAGE
No. of Shares: __________ Holder:
-----------------------------
Name:
Title:
Address for Notice:
-----------------------------
-----------------------------
-----------------------------
Name and Address of
Registered Holder (if
different):
-----------------------------
-----------------------------
-----------------------------
121883.c6
<PAGE>
SCHEDULE A TO REGISTRATION RIGHTS AGREEMENT
FIDELITY FUNDS*
Fidelity Capital & Income Fund
Fidelity Asset Manager
Spartan High Income Fund
Fidelity Puritan Fund
Fidelity Advisor High Yield Portfolio
Certain Funds Managed by Fidelity Management
Trust Company
- -----------------------------
* Certificate may be registered in the name of a nominee.
121883.c6
November 15, 1994
Town & Country Corporation
Town & Country Fine Jewelry Group, Inc.
L.G. Balfour Company, Inc.
Gold Lance, Inc.
25 Union Street
Chelsea, Massachusetts 02150
Attention: Mr. Robert Hammon
Chief Financial Officer
Re: Amended and Restated Collateral Sharing Agreement dated as of May 14,
1983, by and among Fleet Precious Metals Inc. ("Fleet") and various
consignors (the "Collateral Sharing Agreement") and the Consignment
Agreements (as defined in the Collateral Sharing Agreement).
Gentlemen:
Reference is made herein to the Consignment Agreements and to a certain
letter dated October 18, 1994 (the "Termination Notice") sent by Rhode Island
Hospital Trust National Bank ("RIHT") to Town & Country Corporation, Town &
Country Fine Jewelry Group, Inc., L.G. Balfour Company, Inc. and Gold Lance,
Inc. (collectively, the "Company") whereby RIHT indicated that it intended to
terminate the Consignment Agreement between RIHT and the Company (the "RIHT
Consignment Agreement"). This letter will confirm our understanding that RIHT
has advised the Company and Fleet, as Agent under the Collateral Sharing
Agreement that it intends to rescind said Termination Notice and that RIHT
and the other consignors hereby agree that in the absence of the occurrence
of an Event of Default (as defined in the consignment Agreements), the
Consignors shall not terminate the Consignment Agreements on or before
February 1, 1995, provided the following terms and conditions are met:
1. The Company shall reduce the outstanding balance of gold on consignment
under each of the Consignment Agreements to the amounts specified as the of
the dates specified:
<TABLE>
<CAPTION>
Fleet RIHT ABN Republic
<S> <C> <C> <C> <C>
December 1, 1994 38,402 fto 24,500 fto 9,013 fto 6,215 fto
January 1, 1995 37,227 fto 23,750 fto 8,692 fto 6,105 fto
February 1, 1995 36,051 fto 23,000 fto 8,461 fto 5,835 fto
</TABLE>
2. On or before February 1, 1995, the Company shall supply to the Consignors
a business plan for L.G. Balfour Company, Inc. which is reasonable
satisfactory in all respect to the Consignors.
3. On or before February 1, 1995, the Company agrees to meet with the
Consignors to discuss terms of their consignment arrangements for the future
year.
Except as expressly provided herein, this letter agreement is entered into by
the parties without prejudice to all rights and remedies Consignors have
under their respective Consignment Agreements, any documents securing the
obligations and indebtedness of the Company to Consignors or at law and
nothing contained in this letter nor in any other communication between or
among the Company and any one or more of the Consignors shall constitute a
waiver of any such rights and remedies.
To evidence your consent to the foregoing, please execute this letter in the
spaces provided below. This letter is effective if signed in counterparts.
Very truly yours,
FLEET PRECIOUS METALS INC.,
individually and as Agent for the
Consignors
By: /s/ Anthony J. Capuano
Title: President
Accepted and Agreed:
TOWN & COUNTRY CORPORATION RHODE ISLAND HOSPITAL TRUST
NATIONAL BANK
By: Francis X. Correra By: Jerry Zimmerman
Title: Senior Vice President Title: Vice President
and CFO
TOWN & COUNTRY FINE JEWELRY ABN-AMRO BANK, N.V.
GROUP, INC.
By: Francis X. Correra By: Jeffrey Sarfaty
Title: Vice President and Title: Vice President
Treasurer
L.G. BALFOUR COMPANY, INC. REPUBLIC NATIONAL BANK OF NEW YORK
By: Francis X. Correra By: Daniel Mahni
Title: Executive Vice President Title: Senior Vice President
and Treasurer
GOLD LANCE, INC.
By: Francis X. Correra
Title: Treasurer
EXHIBIT 11
TOWN & COUNTRY CORPORATION AND SUBSIDIARIES
<TABLE>
<CAPTION>
Earnings Per Share Computations
(Unaudited)
For the Three Months Ended For the Nine Months Ended
-------------------------- -------------------------
November 27, 1994 November 28, 1993 November 27, 1994 November 28, 1993
----------------------------------- -----------------------------------
PRIMARY EPS:
<S> <C> <C> <C> <C>
Net income $16,424,043 $5,906,260 $6,776,653 $2,316,484
Accretion of dividend on preferred stock 479,551 455,154 1,426,299 986,308
----------- ---------- ---------- ----------
Net income for EPS calculation $15,944,492 $5,451,106 $5,350,354 $1,330,176
=========== ========== ========== ==========
Weighted average common shares outstanding 23,432,449 23,421,576 23,429,811 20,466,322
Weighted shares issued from exercise
and assumed exercise of:
warrants -- -- -- --
options -- -- -- --
----------- ---------- ---------- ----------
Shares for EPS calculation 23,432,449 23,421,576 23,429,811 20,466,322
=========== ========== ========== ==========
REPORTED EPS:
Net income $0.70 $0.25 $0.29 $0.11
Accretion of dividend on preferred stock (0.02) (0.02) (0.06) (0.05)
----- ----- ---- ----
Net income per common share: $0.68 $0.23 0.23 0.06
===== ===== ==== ====
</TABLE>
FULLY DILUTED EPS:
For the periods presented in this exhibit, there is no dilution from Primary
EPS.
<TABLE>
<CAPTION>
EXHIBIT 12.1
TOWN & COUNTRY CORPORATION AND SUBSIDIARIES
HISTORICAL AND PRO FORMA RATIOS OF EARNINGS TO FIXED CHARGES
Historical Ratio of Earnings to Fixed Charges
(in thousands)
Fiscal year Ended Nine Months Ended
(Unaudited) (Unaudited)
------------------------------------------------------------------------------
2/28/90 2/28/91 2/29/92 2/28/93 2/27/94 11/28/93 11/27/94
------- ------- ------- ------- ------- -------- --------
<S> <C> <C> <C> <C> <C> <C> <C>
Fixed charges:
Interest expense (including
amortization of debt
discount and expense) ..... $ 26,662 $ 28,561 $ 25,067 $ 20,093 $ 14,045 $ 11,067 $ 8,823
Interest element of
rental expense ............. 908 910 338 430 363 312 304
------- ------- ------- ------- ------- -------- --------
Total ........................ $ 27,570 $ 29,471 $ 25,405 $20,523 $14,408 $ 11,379 $ 9,127
======== ======== ======== ======= ======= ========= ========
Earnings:
Net income (loss) ........... $ 6,613 $ 1,249 $(19,018) $(47,296) $ 3,138 $ 2,316 $ 6,777
Extraordinary gain ........... -- (1,885) (726) -- -- -- --
Equity in net income of
Little Switzerland(1) ..... -- -- (1,487) (1,914) (1,106) (249) (576)
Provision for income
taxes ...................... 2,834 1,791 3,252 956 1,010 554 1,643
Fixed charges ................ 27,570 29,471 25,405 20,523 14,408 11,379 9,127
------- ------- ------- ------- ------- -------- --------
Total ........................ $ 37,017 $ 30,626 $ 7,426 $(27,731) $ 17,450 $14,000 $16,971
======== ======== ======== ======== ======== ======== ========
Ratio of earnings to
fixed charges(2) ........... 1.34x 1.04x - - 1.21x 1.23x 1.86x
</TABLE>
<PAGE>
EXHIBIT 12.1
TOWN & COUNTRY CORPORATION AND SUBSIDIARIES
HISTORICAL AND PRO FORMA RATIOS OF EARNINGS TO FIXED CHARGES
(Continued)
Pro Forma Ratio of Earnings to Fixed Charges
(in thousands)
Fiscal Year Ended
February 27, 1994
(Unaudited)
-----------------------------------------------
Pro Forma
Pro Forma for the Little Switzerland
Recapitalization Exchange
---------------- ------------------
Fixed charges:
Interest expense (including
amortization of debt discount
and expense). . . . . . . $12,540 $ 12,540
Interest element of rental expense . 363 363
------ --------
Total. . . . . . . . . . . $12,903 $ 12,903
======= ========
Earnings:
Net income . . . . . . . . $ 4,643 $ 3,603
Equity in net income of Little
Switzerland(1). . . . . . (1,106) 0
Provision for income taxes . . 1,010 1,010
Fixed charges. . . . . . . 12,903 12,903
------- --------
Total. . . . . . . . . . . $17,450 $ 17,450
======= ========
Ratio of earnings to fixed
charges(2). . . . . . . . 1.35 1.35
- -------------
(1) Reflects equity in net income of Little Switzerland, Inc. subsequent to
the sale by the Company of 68% of its ownership interest.
(See Note 1 of Notes to Consolidated Financial Statements).
(2) Calculated by dividing total earnings by total fixed charges for the
period. For the years-ended February 29, 1992, and February 28, 1993, the
Company's earnings before fixed charges were insufficient to cover fixed
charges by approximately $18.0 million and $48.3 million, respectively.
<PAGE>
EXHIBIT 12.2
TOWN & COUNTRY CORPORATION AND SUBSIDIARIES
HISTORICAL AND PRO FORMA RATIO OF EARNINGS TO FIXED CHARGES,
EXCHANGEABLE PREFERRED STOCK DIVIDENDS AND ACCRETION
AND CONVERTIBLE PREFERRED STOCK DIVIDENDS
<TABLE>
<CAPTION>
Pro Forma Ratio of Earnings
to Fixed Charges
(in thousands)
Historical Fiscal Year Ended
February 27, 1994
(Unaudited)
----------------- ------------- ------------- --------------
Pro Forma for
Fiscal Year Ended Nine Months Pro Forma the Little
February 27, 1994 November 27, for the Re- Switzerland
(Unaudited) (Unaudited) capitalization Exchange
<S> <C> <C> <C> <C>
Fixed charges:
Interest expense (including amortization of
debt discount and expense). . $ 12,540 $ 8,823 $ 12,540 $ 12,540
Interest element of rental expense . . 397 304 363 363
-------- -------- -------- --------
Total fixed charges. . . . . . $ 12,937 $ 9,127 $ 12,903 $ 12,903
-------- -------- -------- --------
Dividends on Convertible Preferred Stock . . . -- 929
Accretion of discount and dividends on
preferred stock . . . . . . . 1,454 1,426 1,864 112
-------- -------- -------- --------
Total fixed charges and preferred stock
dividends . . . . . . . . . . $ 14,391 $10,553 $ 14,767 $ 13,944
======== ======== ======== ========
Earnings:
Net income attributable to common stockholders $ 1,684 $ 6,777 $ 2,779 $ 2,496
Equity in net income of Little Switzerland(1). (1,106) (576) (1,106) 0
Provision for income taxes . . 1,010 1,643 1,010 1,010
Fixed charges and preferred stock dividends. . 14,391 10,533 14,767 13,944
-------- -------- -------- --------
Total. . . . . . . . . . . . . $ 15,979 $18,397 $ 17,450 $ 17,450
======== ======== ======== ========
Ratio of earnings to fixed charges(2). 1.11 1.74 1.18 1.25
- -------
(1) Reflects equity in net income of Little Switzerland, Inc. subsequent to
the sale by the Company of 68% of its ownership interest. (See Note 1 of
Notes to Consolidated Financial Statements).
(2) Calculated by dividing total pro forma earnings by total fixed charges and
preferred stock dividends for the period. For the years-ended February 29,
1992, and February 28, 1993, the Company's earnings before fixed charges
and preferred stock dividends were insufficient to cover fixed charges by
approximately $18.0 million and $48.3 million, respectively. For the nine
month periods ended November 28, 1993 and November 27, 1994, the Company's
ratios of earnings to fixed charges and exchangeable preferred stock
dividends and accretion and convertible preferred stock dividends were
1.13% and 1.61%, respectively.
</TABLE>
EXHIBIT 13
TOWN & COUNTRY CORPORATION AND SUBSIDIARIES
Quarterly Report on Form 10-Q for the fiscal quarter ended November 27, 1994
10Q-94-11--10--AS FILED WITH THE SECURITIES AND EXCHANGE COMMISSION
FORM 10-Q
UNITED STATES SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
[ x ] QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE
SECURITIES EXCHANGE ACT OF 1934
For the quarterly period ended November 27, 1994
-----------------
OR
[ ] TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE
SECURITIES EXCHANGE ACT OF 1934
For the transition period from to
-------------------- --------------------
Commission File Number: 0-14394
TOWN & COUNTRY CORPORATION
--------------------------
(Exact name of Registrant as specified in its charter)
Massachusetts 04-2384321
---------------------------------------------
(State or other jurisdiction (I.R.S. Employer
of incorporation or Identification
organization) Number)
25 Union Street, Chelsea, Massachusetts 02150
---------------------------------------------
(Address of principal executive offices) (Zip Code)
Registrant's telephone number, including area code (617)884-8500
Indicate by check mark whether the registrant (1) has filed all reports required
to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during
the preceding 12 months (or for such shorter period that the registrant was
required to file such reports), and (2) has been subject to such filing
requirements for the past 90 days. Yes X No
---
On December 23, 1994, the Registrant had outstanding 20,767,523 shares of Class
A Common Stock, $.01 par value and 2,664,926 shares of Class B Common Stock,
$.01 par value.
<PAGE>
PART 1 - FINANCIAL INFORMATION
Item 1. Financial Statements
<TABLE>
<CAPTION>
CONSOLIDATED BALANCE SHEETS
November 27, February 27,
1994 1994
---- ----
(Unaudited)
<S> <C> <C>
ASSETS
CURRENT ASSETS:
Cash and cash equivalents $ 1,053,620 $ 3,273,876
Restricted cash 760,871 37,971
Accounts receivable--
Less allowances for doubtful
accounts of $7,143,000 at
11/27/94 and $5,510,000 at
2/27/94 89,573,992 55,623,418
Inventories (Note 4) 81,218,991 75,029,397
Prepaid expenses & other current
assets 3,702,030 3,991,883
Total current assets $ 176,309,504 $ 137,956,545
PROPERTY, PLANT & EQUIPMENT, at cost $ 82,438,375 $ 79,340,723
Less - Accumulated depreciation 38,010,257 33,636,099
$ 44,428,118 $ 45,704,624
INVESTMENT IN AFFILIATES (Notes 6 & 7) $ 15,373,717 $ 27,038,089
OTHER ASSETS (Note 2) $ 7,852,084 $ 13,221,467
$ 243,963,423 $ 223,920,725
</TABLE>
The accompanying notes are an integral part of these consolidated financial
statements.
<PAGE>
<TABLE>
<CAPTION>
CONSOLIDATED BALANCE SHEETS (Continued)
November 27, February 27,
1994 1994
---- ----
(Unaudited)
<S> <C> <C>
LIABILITIES AND STOCKHOLDERS' EQUITY
CURRENT LIABILITIES:
Notes payable (Note 3) $ 30,723,141 $ -
Current portion of long-term debt 1,362,260 1,479,590
Accounts payable 26,721,329 12,727,357
Accrued expenses 14,202,146 19,956,332
Accrued and currently deferred
income taxes 1,471,659 874,253
Total current liabilities $ 74,480,535 $ 35,037,532
LONG-TERM DEBT, less current portion
(Note 3) $ 94,731,417 $ 91,827,239
OTHER LONG-TERM LIABILITIES $ 1,923,897 $ 2,093,755
Total liabilities $ 171,135,849 $ 128,958,526
COMMITMENTS AND CONTINGENCIES (Note 2)
MINORITY INTEREST $ 4,535,606 $ 3,843,117
EXCHANGEABLE PREFERRED STOCK, $1.00
par value-
Authorized--200,000 shares and
2,700,000 shares, respectively
Issued and outstanding--152,217 and
2,533,255 shares, respectively $ 2,235,959 $ 35,785,399
(Notes 3 and 6)
STOCKHOLDERS' EQUITY (Note 3):
Preferred stock, $1.00 par value-
Authorized and unissued--2,266,745 shares
and 2,300,000 shares, respectively $ - $ -
Convertible preferred stock, $1.00 par
value, $6.50 preference value
Authorized--2,533,255 shares
Issued and outstanding--2,381,038 (Note 6) 2,381,038 -
Class A Common Stock, $ .01 par value-
Authorized--40,000,000 shares
Issued and outstanding--20,767,523
and 20,755,901 shares, respectively 207,675 207,559
Class B Common Stock, $.01 par value-
Authorized--8,000,000 shares
Issued and outstanding--2,664,926
and 2,670,693 shares, respectively 26,649 26,707
Additional paid-in capital 72,900,361 69,909,485
Retained deficit (9,459,714) (14,810,068)
Total stockholders' equity $ 66,056,009 $ 55,333,683
$ 243,963,423 $ 223,920,725
</TABLE>
The accompanying notes are an integral part of these consolidated financial
statements.
<PAGE>
<TABLE>
<CAPTION>
CONSOLIDATED STATEMENTS OF OPERATIONS
(Unaudited)
For the Three Months Ended For the Nine Months Ended
November 27, November 28, November 27, November 28,
1994 1993 1994 1993
---- ---- ---- ----
<S> <C> <C> <C> <C>
NET SALES $ 96,719,682 $ 94,346,432 $ 222,088,070 $ 209,535,199
COST OF SALES 67,887,824 62,714,041 153,900,409 136,881,202
Gross profit $ 28,831,858 $ 31,632,391 $ 68,187,661 $ 72,653,997
SELLING, GENERAL &
ADMINISTRATIVE
EXPENSES 25,399,922 21,680,010 68,275,433 58,730,197
Income (loss) from
operations $ 3,431,936 $ 9,952,381 $ (87,772)$ 13,923,800
INTEREST EXPENSE, (3,311,455) (3,184,917) (8,653,946) (10,402,992)
net
GAIN ON LITTLE
SWITZERLAND, INC.
EXCHANGE (NOTES 6 & 7) 17,277,988 - 17,277,988 -
INCOME FROM
AFFILIATES 193,049 7,303 576,049 253,601
MINORITY INTEREST (368,475) (416,507) (692,489) (903,925)
</TABLE>
The accompanying notes are an integral part of these consolidated financial
statements.
<PAGE>
<TABLE>
<CAPTION>
CONSOLIDATED STATEMENTS OF OPERATIONS (continued)
(Unaudited)
For the Three Months Ended For the Nine Months Ended
November 27, November 28, November 27, November 28,
1994 1993 1994 1993
---- ---- ---- ----
<S> <C> <C> <C> <C>
INCOME BEFORE
INCOME TAXES $ 17,223,043 $ 6,358,260 $ 8,419,830 $ 2,870,484
PROVISION FOR
INCOME TAXES 799,000 452,000 1,643,177 554,000
NET INCOME $ 16,424,043 $ 5,906,260 $ 6,776,653 $ 2,316,484
ACCRETION OF
DIVIDEND ON
PREFERRED STOCK 479,551 455,154 1,426,299 986,308
INCOME ATTRIBUTABLE
TO COMMON
STOCKHOLDERS $ 15,944,492 $ 5,451,106 $ 5,350,354 $ 1,330,176
INCOME PER COMMON
SHARE (Note 5): $ 0.68 $ 0.23 $ 0.23 $ 0.06
WEIGHTED AVERAGE
COMMON SHARES
OUTSTANDING
(Note 5): 23,432,449 23,421,576 23,429,811 20,466,322
</TABLE>
The accompanying notes are an integral part of these consolidated financial
statements.
<PAGE>
<TABLE>
<CAPTION>
CONSOLIDATED STATEMENTS OF CASH FLOWS
(Unaudited)
For the Nine Months Ended
November 27, November 28,
1994 1993
---- ----
<S> <C> <C>
CASH FLOWS FROM OPERATNG ACTIVITIES:
Net income $ 6,776,653 $ 2,316,484
Adjustments to reconcile net income
to net cash used in operating activities-
Depreciation and amortization 3,672,238 4,441,982
Loss (gain) on disposal of certain
assets 4,275 (99,963)
Gain on Little Switzerland, Inc. exchange (17,277,988) -
Ordinary dividends received from affiliates - 2,045,533
Undistributed earnings of affiliates,
net of minority interest 116,439 841,566
Interest paid with issuance of debt 7,647,666 3,495,571
Change in assets and liabilities--
Decrease (increase) in accounts
receivable (33,950,574) (35,659,410)
Decrease (increase) in inventory (6,189,594) (6,875,982)
Decrease (increase) in prepaid
expenses and other current assets 289,853 2,906,017
Decrease (increase) in other assets 5,064,340 1,654,928
Increase (decrease) in accounts
payable 13,993,972 9,859,404
Increase (decrease) in accrued
expenses (5,854,186) (2,002,686)
Increase (decrease) in accrued and
current deferred taxes 597,406 (15,417)
Increase (decrease) in other
liabilities (169,858) (91,264)
Net cash used in operating
activities (25,279,358) (17,183,237)
CASH FLOWS FROM INVESTING ACTIVITIES:
Capital expenditures (2,411,243) (2,863,277)
Proceeds from sale of certain assets 5,318 199,933
Proceeds from sale of investments - 3,485,999
Net cash provided by (used in)
investing activities (2,405,925) 822,655
</TABLE>
The accompanying notes are an integral part of these consolidated financial
statements.
<PAGE>
<TABLE>
<CAPTION>
CONSOLIDATED STATEMENTS OF CASH FLOWS (continued)
(Unaudited)
For the Nine Months Ended
November 27, November 28,
1994 1993
---- ----
<S> <C> <C>
CASH FLOWS FROM FINANCING ACTIVITIES:
Payments on revolving credit facilities $ (180,579,784) $ (118,638,725)
Proceeds from borrowings under
revolving credit facilities 209,280,999 142,108,860
Payments on long-term debt (4,549,851) (7,641,237)
Decrease (increase) in restricted cash (722,900) (113,179)
Proceeds from the issuance of common stock 14,637 19,815
Change in notes payable 2,021,926 1,985,957
Payments to retire credit facility - (37,250,000)
Proceeds from senior secured notes - 30,000,000
Payment of dividend by Essex - (534,617)
Payments for recapitalization expenses - (5,760,577)
Net cash provided by
financing activities $ 25,465,027 $ 4,176,297
NET DECREASE IN CASH AND CASH
EQUIVALENTS $ (2,220,256) $ (12,184,285)
CASH AND CASH EQUIVALENTS AT
BEGINNING OF PERIOD 3,273,876 15,353,259
CASH AND CASH EQUIVALENTS AT
END OF PERIOD $ 1,053,620 $ 3,168,974
SUPPLEMENTAL CASH FLOW DATA:
Cash paid during the period for:
Interest $ 3,089,777 $ 4,363,780
Income taxes 1,102,135 486,099
Supplemental Disclosure of Non-Cash Investing & Financing Activities (Notes 6 & 8)
</TABLE>
The accompanying notes are an integral part of these consolidated financial
statements.
<PAGE>
PART I - FINANCIAL INFORMATION
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
NOVEMBER 27, 1994
(1) Significant Accounting Policies
The unaudited consolidated financial statements presented herein have been
prepared by the Company and contain all adjustments (consisting of only normal
recurring adjustments) necessary to present fairly and on a basis consistent
with the consolidated financial statements for the year ended February 27, 1994,
the Company's financial position as of November 27, 1994, and the results of its
operations for the three- and nine-month periods ended November 27, 1994, and
November 28, 1993, and cash flows for the nine-month periods ended November 27,
1994, and November 28, 1993.
The significant accounting policies followed by the Company are set forth in
Note (1) of the Company's consolidated financial statements for the year ended
February 27, 1994, which have been included in the Annual Report on Form 10-K,
Commission File Number 0-14394, for the fiscal year ended February 27, 1994. The
Company has made no change in these policies during the nine months ended
November 27, 1994.
The consolidated financial statements include the accounts of subsidiary
companies more than fifty percent owned.
The results of operations for the nine-month period ended November 27, 1994, are
not necessarily indicative of the results to be expected for the year due to the
seasonal nature of the Company's operations.
(2) Commitments and Contingencies
Zale Bankruptcy
The Company's largest customer for a number of years has been the Zale
Corporation and its affiliated companies, including Gordon Jewelry Corporation.
On July 30, 1993, this group of companies completed a reorganization under
Chapter 11 of the United States Bankruptcy Code in the United States Bankruptcy
Court and emerged from bankruptcy as Zale Delaware, Inc. (Zale).
The Company has reached agreement with the new Zale concerning the Company's
claim of approximately $40 million, filed with the Bankruptcy Court,
representing the net outstanding balance of trade accounts receivable and the
wholesale value of the consignment inventory as of the date of Zale's bankruptcy
petition.
<PAGE>
The Company's Consolidated Financial Statements at February 28, 1992, originally
reflected a net valuation of approximately $13 million, which was classified as
Other Assets in the Consolidated Balance Sheets, due to the uncertainty of the
timing of a final settlement. The Company has subsequently received proceeds
from Zale and from liquidation of claim assets of approximately $11.7 million.
The Consolidated Financial Statements at November 27, 1994, reflect a net
valuation of approximately $1.3 million, representing management's estimate of
the value of the remaining claim related assets.
The Company continues to conduct business with Zale.
(3) Loan Arrangements
In order to significantly reduce the amount of the Company's cash interest and
principal requirements and to satisfy the Company's near-term and long-term
liquidity needs, the Company completed a major recapitalization on May 14, 1993.
This recapitalization revised the Company's consolidated capitalization,
including debt structure, to be consistent with the Company's current and
expected operating performance levels. The amount of debt outstanding was
reduced and a significant portion of the old subordinated debt was exchanged
for new debt, shares of Class A Common Stock and Exchangeable Preferred Stock.
The new debt structure consisted of a new revolving credit agreement which was
obtained from Foothill Capital Corporation to provide secured financing in an
aggregate amount of up to $30 million, new gold consignment agreements which
were obtained from the Company's gold suppliers to provide an aggregate gold
consignment availability of up to approximately 100,000 troy ounces, $30 million
principal amount of 11 1/2% Senior Secured Notes due September 15, 1997, which
were purchased by various investors, and approximately $53 million principal
amount of 13% Senior Subordinated Notes due May 31, 1998, issued as a component
of the exchange.
The results of the exchange offer were:
(a) holders of approximately 93% of the Company's existing 13% Senior
Subordinated Notes due December 15, 1998, exchanged each $1,000 principal amount
of those notes for $478.96 principal amount of the Company's 13% Senior
Subordinated Notes due May 31, 1998, $331.00 of the Company's Exchangeable
Preferred Stock, par value $1.00 per share, and 89.49 shares of the Company's
Class A Common Stock, par value $0.01 per share, and
<PAGE>
(b) holders of approximately 98% of the Company's existing 10 1/4% Subordinated
Notes due July 1, 1995, exchanged each $1,000 principal amount of those notes
for $408.11 principal amount of the Company's 13% Senior Subordinated Notes due
May 31, 1998, $282.04 of the Company's Exchangeable Preferred Stock, par value
$1.00 per share, and 76.25 shares of the Company's Class A Common Stock, par
value $0.01 per share.
The Company reached an agreement with Chemical Bank to change the terms of the
IRB financing for the Company's facility located in New York, New York. This
agreement includes, among other things, an accelerated payment schedule relative
to that which had previously been in place and the release of certain collateral
by Chemical Bank.
During the second quarter of fiscal 1995, the Company entered into an amendment
to the revolving credit agreement to increase the maximum amount available under
the agreement from $30,000,000 to $35,000,000 during the months of September
through December 1994 to address its seasonality needs. As of November 27, 1994,
approximately $28.7 million was outstanding under the revolving credit
agreement.
During fiscal 1995, the Company agreed to reduce its gold consignment facilities
from 94,000 ounces, the availability at November 27, 1994, to approximately
73,000 ounces. This reduction will take place beginning in December 1994 and
will be completed by February 1, 1995. As of November 27, 1994, approximately
76,000 ounces were on consignment under the gold agreements.
During the second quarter of fiscal 1995, modifications to the consolidated
tangible net worth covenant were made in the revolving credit and gold
agreements. The covenant previously provided that the Company was required
to maintain consolidated tangible net worth of $38,000,000 through February 27,
1994, and $43,000,000 thereafter. As amended, the covenant provides that the
Company will maintain consolidated tangible net worth of $40,000,000 from
July 1, 1994, through November 26, 1994, and $43,000,000 thereafter.
(4) Inventories
Inventories consisted of the following at November 27, 1994, and February 27,
1994:
November 27, February 27,
1994 1994
---- ----
Raw Materials $16,640,088 $16,753,865
Work-in-Process 10,052,379 7,154,300
Finished Goods 54,526,524 51,121,232
$81,218,991 $75,029,397
<PAGE>
(5) Earnings Per Common Share
Earnings per common share is computed by adjusting the Company's net income for
the accretion of dividends on Exchangeable Preferred Stock and Convertible
Preferred Stock and dividing by the weighted average number of common and common
equivalent shares, where dilutive, outstanding during each period.
(6) Exchange of Stock
On November 23, 1994, holders of approximately 94% of the Company's Exchangeable
Preferred Stock exchanged their shares for shares of Little Switzerland, Inc.
Common Stock on a share-for-share basis. Such an exchange was provided for by
the terms of the Exchangeable Preferred Stock. The Company offered to each
participant one share of new Convertible Preferred Stock with each share of
Little Switzerland, Inc. Common Stock to induce the holders to exercise their
exchange rights.
Since the carrying value of the Company's investment in Little Switzerland, Inc.
was substantially less than the recorded value of the Exchangeable Preferred
Stock, the transaction resulted in a nonrecurring, noncash gain of approximately
$17 million, net of the estimated fair value of the Convertible Preferred Stock
inducement.
The Company's remaining investment in Little Switzerland, Inc. consists of
318,962 shares and represents an approximate 4% interest in Little Switzerland.
Due to this decrease in percentage ownership, the Company will change its method
of accounting for this investment from the equity method to the cost method.
CONVERTIBLE PREFERRED STOCK
Each share of Convertible Preferred Stock is initially convertible, at the
option of the holder, into two shares of Class A Common Stock, subject to
adjustment in certain circumstances. In the event the market price of a share of
Class A Common Stock equals or exceeds $3.25 for 30 consecutive trading days,
the Company may require the holders of Convertible Preferred Stock to convert
such stock into shares of Class A Common Stock at the then-applicable conversion
rate. Beginning on November 23, 1995, the Company may redeem, in whole or in
part, shares of Convertible Preferred Stock at a price equal to 104% of the
liquidation value and thereafter at prices declining annually to 100% of the
liquidation value on or after November 23, 1997. The Convertible Preferred Stock
has a liquidation value of $6.50 per share and pays dividends at the rate of 6%
of the liquidation value per annum. The Company, at its option, may pay such
dividends in cash or in additional shares of Convertible Preferred Stock.
The Convertible Preferred Stock is subordinate on liquidation and with respect
to dividend payments to the outstanding shares of Exchangeable Preferred Stock
but senior to the Class A Common Stock and the Class B Common Stock. Holders of
shares of Convertible Preferred Stock shall be entitled to vote on all matters
on which the holders of Class A Common Stock are entitled to vote. Each share of
Convertible Preferred Stock shall entitle the holder to the number of votes per
share equal to the number of shares of Class A Common Stock into which each
share of Convertible Preferred Stock is then convertible.
<PAGE>
The Company has agreed with the holders of the Convertible Preferred Stock to
register such stock (and the Class A Common Stock into which it is convertible)
under the Securities Act and to keep such registration effective until the
earlier of (i) the date on which such holders no longer own any of such
securities or (ii) the date on which each of the holders has notified the
Company that such holder may dispose of all of its securities pursuant to Rule
144(k) under the Securities Act.
(7) Investment in Little Switzerland, Inc.
Presented below is summarized financial information (in thousands) for Little
Switzerland, Inc. as of and for the three months ended August 31, 1994, and
1993:
1994 1993
==== ====
Current Assets $ 37,678 $ 40,444
Noncurrent Assets 17,117 13,956
Current Liabilities 11,089 14,498
Noncurrent Liabilities 356 794
Total Equity 43,350 39,108
Sales $ 12,101 $ 11,489
Gross Profit 5,293 4,921
Net Income (Loss) (119) (210)
(8) Supplemental Disclosure of Non-Cash Investing & Financing
Activities
On May 14, 1993, the Company completed its recapitalization as described in
Note 3. As a result of this transaction, long-term debt with a carrying value of
$122.7 million, including accrued interest and deferred financing costs, was
retired. New debt with a carrying value of $61.5 million, Exchangeable Preferred
Stock valued at $34.3 million, and common stock valued at $26.9 million were
issued in exchange for the debt which was retired.
As payment for the commitment to purchase up to 100% of the Company's senior
secured notes, an investor received 750,000 shares of the Company's Class A
common stock with a value of $2 million at the time of issuance.
For the nine months ended November 27, 1994, and November 28, 1993, accretion of
dividends on preferred stocks has amounted to $1.4 million and $1.0 million,
respectively.
<PAGE>
On May 15, 1994, the Company issued approximately $3.7 million in new 13% Senior
Subordinated Notes due May 31, 1998, as payment-in-kind of the semiannual
interest installment. Approximately $2.2 million of this amount was classified
as accrued expenses in the February 27, 1994, Consolidated Balance Sheet. On
November 15, 1994, the Company issued approximately $3.9 million in new 13%
Senior Subordinated Notes due May 31, 1998, as payment-in-kind of the
semi-annual interest installment.
During September 1994, the Company had fixed asset additions of approximately
$.7 million funded by increases in capital lease obligations.
<PAGE>
Item 2. Management's Discussion and Analysis of Financial Condition and
Results of Operations
RESULTS OF OPERATIONS FOR THE NINE MONTHS ENDED NOVEMBER 27, 1994 COMPARED TO
THE NINE MONTHS ENDED NOVEMBER 28, 1993
On November 23, 1994, holders of approximately 94% of the Company's Exchangeable
Preferred Stock exchanged their shares for shares of Little Switzerland, Inc.
Common Stock on a share-for-share basis. Such an exchange was provided for by
the terms of the Exchangeable Preferred Stock. The Company offered to each
participant one share of new Convertible Preferred Stock with each share of
Little Switzerland, Inc. Common Stock to induce the holders to exercise their
exchange rights.
Since the carrying value of the Company's investment in Little Switzerland, Inc.
was substantially less than the recorded value of the Exchangeable Preferred
Stock, the transaction resulted in a nonrecurring, noncash gain of approximately
$17 million, net of the estimated fair value of the Convertible Preferred Stock
inducement.
Net sales for the nine months ended November 27, 1994, increased $12.6 million
or 6.0% from $209.5 million in fiscal 1994 to $222.1 million in fiscal 1995.
Current year sales of fine jewelry have increased approximately $16.8 million or
12.2% over the corresponding period in fiscal 1994. The majority of the
increases in fine jewelry sales have come from the Company's existing discount
department store customers as a result of emphasis by these customers on the
promotion of jewelry sales. Sales for the Company's direct response distribution
business of licensed sports and other specialty products have decreased
approximately $1.4 million or 12.8% from $10.9 million in fiscal 1994 to $9.5
million in fiscal 1995.
Gross profit for the nine months ended November 27, 1994, decreased $4.5 million
from $72.7 million in fiscal 1994 to $68.2 million in fiscal 1995. Gross profit
margin decreased 4.0% from 34.7% in fiscal 1994 to 30.7% in fiscal 1995. The
Company's sales increase has been primarily in the lower margin fine jewelry
product categories and this change in product mix has negatively impacted gross
profit margin by approximately 0.7%. In its effort to manage inventory levels,
the Company has also sold, or made provisions to sell, inventory in excess of
current requirements, at less than normal margins. These sales and provisions
negatively impacted margin by approximately 2.1%. The Company's inability to
reduce fixed overhead costs, while production requirements for direct response
and other specialty products were lower this year than last year, has
negatively impacted margin by approximately 1.2%. The division which
distributes these products moved to a new facility during the second quarter of
fiscal 1995. The Company believes this move will result in reducing overhead.
<PAGE>
Selling, general, and administrative expenses for the current period increased
approximately $9.6 million or 16.3% from $58.7 million in fiscal 1994 to $68.3
in fiscal 1995. As a percentage of net sales, selling, general, and
administrative expenses were approximately 2.7% more in the current year than
for the nine months ended November 28, 1993. Increases primarily relate to
higher costs associated with the Company's direct response distribution business
of licensed sports and other specialty products, particularly in advertising,
and the requirement for higher than anticipated provisions for uncollectible
accounts. Sales of these products have not materialized at the rate anticipated.
Net interest expense for the nine months ended November 27, 1994, decreased
approximately $2 million relative to the corresponding period in fiscal 1994.
This decrease is the result of the recapitalization that occurred on May 14,
1993. Approximately $115 million of the Company's long-term debt was exchanged
for approximately $53 million in new debt, approximately $37 million of
exchangeable preferred stock, and approximately 10 million shares of the
Company's Class A stock.
The Company has recorded a tax provision of approximately $1.6 million for the
nine months ended November 27, 1994. The tax provision was primarily due to the
Company's utilization of tax benefits from operating losses in certain
jurisdictions offset by state and foreign income taxes.
LIQUIDITY AND WORKING CAPITAL
Cash used in operating activities for the nine months ended November 27, 1994,
was $25 million compared with $17 million used during the corresponding period
in fiscal 1994, an $8 million increase in cash used. The Company had a loss
before the effect of the nonrecurring noncash gain from the Little Switzerland,
Inc. exchange of approximately $11 million compared with income of $2 million
for the similar period in fiscal 1994. The Company's increased loss was
therefore approximately $5 million greater than its increased cash usage. This
was as a result of having made higher provisions for operating reserves in the
current fiscal period.
Cash used in investing activities was $2.4 million for the nine months ended
November 27, 1994, compared with $.8 million of cash provided by investing
activities in the corresponding period in fiscal 1994. The change is primarily
the result of the $3.5 million partial redemption of the preferred share
investment in Solomon Brothers, Limited which took place in fiscal 1994.
Cash provided by financing activities was $25.5 million for the first nine
months in fiscal 1995 versus $4.2 million in the corresponding period in fiscal
1994. Net cash provided by financing activities in the current period has been
primarily used to fund current operations. In fiscal 1994, cash from financing
activities was used for costs associated with the recapitalization which took
place on May 14, 1993. Fiscal 1994 operations were primarily funded with
beginning period cash. Current period financing cash has been primarily provided
by the Company's revolving credit facility which had an outstanding balance of
$28.7 million at November 27, 1994, versus $23.5 million at November 28, 1993.
The Company is required to escrow net proceeds from the Zale claim and Solomon
investment for repayment of Senior Secured Notes. Fiscal 1995 operating cash
flow includes proceeds from the Zale bankruptcy claim of $5 million versus $2
million in fiscal 1994. Fiscal 1994 operating cash flows include $2 million of
cash proceeds from dividends related to the Company's investment in Solomon
Brothers, Limited. Approximately $3.4 million and $5.5 million of Senior Secured
Notes have been redeemed with such proceeds during the first nine months of
fiscal 1995 and fiscal 1994, respectively.
<PAGE>
The Company's net cash position decreased from approximately $3.3 million at
February 27, 1994, to approximately $1.1 million at November 27, 1994, compared
to a decrease from $15.4 million at February 28, 1993, to $3.2 million at
November 28, 1993.
To address seasonality needs, the Company entered into an amendment to the
revolving credit agreement to increase the maximum amount available under the
agreement from $30,000,000 to $35,000,000 during the months of September through
December 1994. During fiscal 1995, the Company agreed to reduce its gold
consignment facilities from 94,000 ounces, the availability at November 27,
1994, to approximately 73,000 ounces. This reduction will take place beginning
in December 1994 and will be completed by February 1, 1995. As of November 27,
1994, approximately 76,000 ounces were on consignment under the gold agreements.
The Company believes that it can meet its future working capital needs through
cash flow from operations and from its secured gold and revolving credit
facilities.
Item 6. Exhibits and Reports on Form 8-K
(a) Exhibits
11 Earnings Per Share Computations
27 Financial Data Schedule
(b) Reports on Form 8-K
The Registrant made two 8-K filings under Item 5 - Other Events dated
November 9, 1994, and November 30, 1994. The reports described the exchange by
holders of the Company's Exchangeable Preferred Stock, of their shares for
shares of Little Switzerland, Inc. Common Stock, and the issuance to such
holders of new shares of the Company's Convertible Preferred Stock.
<PAGE>
SIGNATURES
----------
Pursuant to the requirements of the Securities Exchange Act of 1934, the
Registrant has duly caused this Report to be signed on its behalf by the
undersigned thereunto duly authorized.
TOWN & COUNTRY CORPORATION
(Registrant)
Date: January 10, 1995 /s/ Francis X. Correra
------------------------
Francis X. Correra
Senior Vice President and
Chief Financial Officer
<PAGE>
TOWN & COUNTRY CORPORATION & SUBSIDIARIES
EXHIBIT 11
<TABLE>
<CAPTION>
Earnings Per Share Computations
(Unaudited)
For the Three Months Ended For the Nine Months Ended
November 27, November 28, November 27, November 28,
1994 1993 1994 1993
---- ---- ---- ----
<S> <C> <C> <C> <C>
PRIMARY EPS:
Net income $ 16,424,043 $ 5,906,260 $ 6,776,653 $ 2,316,484
Accretion of dividend on
preferred stock 479,551 455,154 1,426,299 986,308
Net income for EPS
calculation $ 15,944,492 $ 5,451,106 $ 5,350,354 $ 1,330,176
Weighted average common
shares outstanding 23,432,449 23,421,576 23,429,811 20,466,322
Weighted shares issued
from exercise and
assumed execise of:
warrants - - - -
options - - - -
Shares for EPS
calculation 23,432,449 23,421,576 23,429,811 20,466,322
REPORTED EPS:
Net income $ 0.70 $ 0.25 $ 0.29 $ 0.11
Accretion of dividend on
preferred stock (0.02) (0.02) (0.06) (0.05)
Net income per common
share: $ 0.68 $ 0.23 $ 0.23 $ 0.06
FULLY DILUTED EPS:
For the periods presented in this exhibit, there is no dilution from Primary
EPS.
</TABLE>
This exhibit should be reviewed in conjunction with Note 5 of Notes to
Consolidated Financial Statements.
<PAGE>
TOWN & COUNTRY CORPORATION EXHIBIT 27
<TABLE>
<CAPTION>
FINANCIAL DATA SCHEDULE
<S> <C>
Cash and cash items $ 1,053,620
Marketable securities 0
Notes and accounts receivable--
Trade 89,573,992
Allowances for doubtful accounts 7,143,000
Inventory 81,218,991
Total current assets 176,309,504
Property, plant and equipment 82,438,375
Accumulated depreciation (38,010,257)
Total assets 243,963,423
Total current liabilities 74,480,535
Bonds, mortgages, and similar debt 94,731,417
Preferred stock--
Mandatory redemption 2,235,959
No mandatory redemption 2,381,038
Common stock 234,324
Other stockholders' equity 63,440,647
Total liabilities and stockholders' equity 243,963,423
Net sales of tangible products 222,088,070
Total revenues 222,088,070
Cost of tangible goods sold 153,900,409
Total costs and expenses applicable to
sales and revenues 153,900,409
Other costs and expenses 0
Provision for doubtful accounts and notes 3,622,390
Interest and amortization of debt discount 8,653,946
Income before taxes and other items 8,419,830
Income tax expense 1,643,177
Income (loss) continuing operations 6,776,653
Discontinued operations 0
Extraordinary items 0
Cumulative effect--
Changes in accounting principles 0
Net income (loss) per common share 5,350,354
Earnings per share--
Primary $ 0.23
Fully diluted $ 0.23
</TABLE>
EXHIBIT 23.2
TOWN & COUNTRY CORPORATION AND SUBSIDIARIES
CONSENT OF INDEPENDENT PUBLIC ACCOUNTANTS
As independent public accountants, we hereby consent to the incorporation
of our reports and to all references to our Firm included in or made part of
this Registration Statement.
/s/ Arthur Andersen LLP
Arthur Andersen LLP
Boston, Massachusetts
January 18, 1995
January 20, 1995
Town & Country Corporation
25 Union Street
Chelsea, MA 02150
Ladies and Gentlemen:
We have acted as your tax counsel in connection with the Private Placement
and the preparation of a Registration Statement on Form S-2 (the "Registration
Statement"), which has been filed with the Securities and Exchange Commission
(the "Commission") under the Securities Act of 1933, as amended (the "Securities
Act"). Capitalized terms used and not otherwise defined herein shall have the
respective meanings ascribed to such terms in the Registration Statement.
In rendering our opinion, we have examined and relied upon the Registration
Statement and such other documents, materials and authorities as we have deemed
necessary in order to enable us to render our opinion.
As your tax counsel, we have advised you with respect to the material
federal income tax consequences of the Private Placement. Such advice has been
based on the facts and circumstances set forth in the Registration Statement and
has formed the basis for the description of material federal income tax
consequences of the Private Placement to the Company and to the Selling
Shareholders that appears under the heading "Material Federal Income Tax
Consequences" in the Registration Statement. The federal income tax discussion
appearing under such heading does not purport to be a complete analysis or
listing of all potential tax considerations. Such discussion is based upon
currently existing provisions of the Code, existing and proposed regulations
promulgated thereunder, and current administrative rulings and court decisions,
all of which are subject to changes that could affect the continuing validity of
our advice.
The opinions contained in the Registration Statement under the heading
"Material Federal Income Tax Consequences" are based on the facts and
circumstances set forth in the Registration Statement and in the other documents
reviewed by us. Our opinion as to the matters set forth therein could change as
a result of changes in facts and circumstances, changes in the terms of the
documents reviewed by us, or changes in the law subsequent to the date hereof.
We hereby consent to the filing of this letter as an exhibit to the
Registration Statement and to the reference to this firm under the heading
"Material Federal Income Tax Consequences" in the Registration Statement,
without admitting that we are "experts" within the meaning of the Securities Act
or the regulations of the Commission issued thereunder.
Very truly yours,
/s/ Goodwin, Proctor & Hoar
GOODWIN, PROCTER & HOAR
(Graphic description of Certificate of Stock
(Art--Eagle)
Town & Country Corporation
NUMBER
PCR
INCORPORATED UNDER THE LAWS OF THE COMMONWEALTH OF MASSACHUSETTS
THIS CERTIFICATE IS TRANSFERABLE IN BOSTON, MA OR NEW YORK, NY
SHARES
CONVERTIBLE REDEEMABLE PREFERRED STOCK
CUSIP 892027 40 0
THIS CERTIFIES THAT
SEE REVERSE FOR CERTAIN DEFINITIONS
is the owner of
FULLY-PAID AND NON-ASSESSABLE SHARES OF THE CONVERTIBLE REDEEMABLE PREFERRED
STOCK OF THE PAR VALUE OF ONE DOLLAR ($1.00) PER SHARE OF
TOWN & COUNTRY CORPORATION
Transferable on the books of the corporation by the holder hereof in person
or by duly authorized attorney upon surrender of this certificate properly
endorsed.
This Certificate is not valid unless countersigned and registered by the
Transfer Agent and Registrar.
WITNESS the facsimile seal of the Corporation and the facsimile signatures of
its duly authorized officers.
Dated:
TREASURER
PRESIDENT
COUNTERSIGNED AND REGISTERED:
STATE STREET BANK AND TRUST COMPANY
TRANSFER AGENT
AND REGISTRAR
AUTHORIZED SIGNATURE
(corporate Seal)
<PAGE>
TOWN & COUNTRY CORPORATION
THE SHARES REPRESENTED BY THIS CERTIFICATE HAVE NOT BEEN REGISTERED UNDER THE
SECURITIES ACT OF 1933, AS AMENDED, OR ANY STATE SECURITIES LAWS, AND MAY NOT
BE SOLD, PLEDGED OR OTHERWISE TRANSFERRED OR ENCUMBERED UNLESS REGISTERED
UNDER THE SECURITIES ACT OF 1933, AS AMENDED, AND ANY APPLICABLE STATE
SECURITIES LAWS OR UNLESS AN EXEMPTION IS AVAILABLE.
THE CORPORATION WILL FURNISH WITHOUT CHARGE TO EACH STOCKHOLDER WHO SO
REQUESTS A COPY OF THE CERTIFICATE OF THE VOTING POWERS, DESIGNATIONS,
PREFERENCES AND RELATIVE, PARTICIPATING OPTIONAL OR OTHER SPECIAL RIGHTS
THEREOF OF THE CONVERTIBLE REDEEMABLE PREFERRED STOCK, AND THE
QUALIFICATIONS, LIMITATIONS OR RESTRICTIONS OF SUCH PREFERENCES AND/OR
RIGHTS. SUCH REQUEST MAY BE MADE TO THE CORPORATION OR TO THE TRANSFER AGENT.
The following abbreviations, when used in the inscription on the face of this
certificate, shall be construed as though they were written out in full
according to applicable laws or regulations:
TEN COM-as tenants in common
TEN ENT-as tenants by the entireties
JT TEN-as joint tenants with right of survivorship and not as tenants in
common
UNIF TRANSFERS MIN ACT-_____________Custodian______________
(Cust) (Minor)
under Uniform Transfers to Minors
Act___________________________
(State)
Additional abbreviations may also be used through not in the above list.
For value received,______________________ hereby sell, assign and transfer unto
PLEASE INSERT SOCIAL SECURITY OR OTHER
IDENTIFYING NUMBER OF ASSIGNEE
(box)
_______________________________________________________________________
PLEASE PRINT OR TYPEWRITE NAME AND ADDRESS INCLUDING POSTAL ZIP CODE OF
ASSIGNEE
_______________________________________________________________________
_______________________________________________________________________
_______________________________________________________________________Shares
of the capital stock represented by the within Certificate, and do
hereby irrevocable constitute and appoint_____________________________________
______________________________________________________________________________
Attorney to transfer the said stock on the books of the within-names
Corporation with full power of substitution in the premises.
Dated._________________________________
____________________________________________
NOTICE: THE SIGNATURE TO THIS ASSIGNMENT MUST CORRESPOND WITH THE NAME AS
WRITTEN UPON THE FACE OF THE CERTIFICATE IN EVERY PARTICULAR, WITHOUT
ALTERATION OR ENLARGEMENT, OR ANY CHANGE WHATEVER.
