As filed with the Securities and Exchange Commission on June 8, 1999
Registration No. 333-_____
================================================================================
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM S-8
REGISTRATION STATEMENT UNDER THE SECURITIES ACT OF 1933
SAMUELS JEWELERS, INC.
(Exact name of Registrant as specified in its charter)
DELAWARE 95-3746316
(State or other jurisdiction of (I.R.S. Employer Identification No.)
incorporation or organization)
2914 MONTOPOLIS DRIVE, SUITE 200
AUSTIN, TEXAS 78741
(Address, including zip code, of Registrant's principal executive offices)
SAMUELS JEWELERS, INC. 1998 STOCK OPTION PLAN
SAMUELS JEWELERS, INC. 1998 STOCK OPTION PLAN FOR NON-EMPLOYEE DIRECTORS
SAMUELS JEWELERS, INC. 1998 EMPLOYEE STOCK PURCHASE PLAN
RESTRICTED STOCK ISSUANCES TO CERTAIN MEMBERS OF MANAGEMENT
(Full title of the plans)
----------------------------------
<TABLE>
<S> <C>
E. PETER HEALEY COPY TO:
EXECUTIVE VICE PRESIDENT, CHIEF FINANCIAL OFFICER SECRETARY AND
TREASURER CHARLES E. HARRELL, ESQ.
SAMUELS JEWELERS, INC. WEIL, GOTSHAL & MANGES LLP
2914 MONTOPOLIS DRIVE, SUITE 200 700 LOUISIANA, SUITE 1600
AUSTIN, TEXAS 78741 HOUSTON, TEXAS 77002
(512) 369-1400 (713) 546-5000
(Name, address and telephone number, including area code, of agent for
service)
</TABLE>
CALCULATION OF REGISTRATION FEE
<TABLE>
<CAPTION>
- -------------------------------------------------------------------------------------------------------------------------
Proposed maximum Proposed maximum
Title of securities to be Amount to be offering price per aggregate offering Amount of registration
registered registered share (2) price (2) fee
- -------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
Common Stock, par
value $.001 per share 1,200,000 shares(1) $ 4.50 $ 5,400,000.00 $ 1,501.20
- -------------------------------------------------------------------------------------------------------------------------
</TABLE>
(1) 500,000 of such shares are issuable upon the exercise of options available
for grant under the Samuels Jewelers, Inc. 1998 Stock Option Plan, 250,000 of
such shares are issuable upon the exercise of outstanding options granted or
options available for grant under the Samuels Jewelers, Inc. 1998 Stock Option
Plan for Non-Employee Directors, 200,000 of such shares are issuable upon the
purchase of such shares under the Samuels Jewelers, Inc. Employee Stock Purchase
Plan and 250,000 of such shares were issued to certain members of management as
restricted stock.
(2) Estimated solely for the purposes of calculating the registration fee in
accordance with Rule 457(h) under the Securities Act of 1933, as amended, and
based on the average of the bid and asked prices ($4 1/2) of the Registrant's
Common Stock as given on the Nasdaq OTC Bulletin Board (R) on June 3, 1999.
================================================================================
HO1:\72674\12\1K2Q12!.DOC\21901.0001
<PAGE>
EXPLANATORY NOTE
Pursuant to General Instruction C of Form S-8, this Registration
Statement contains a prospectus that has been prepared in accordance with the
requirements of Part I of Form S-3 and that relates to reofferings and resales
of shares of Common Stock that have been or may be acquired pursuant to the
Samuels Jewelers, Inc. 1998 Stock Option Plan, the Samuels Jewelers, Inc. 1998
Stock Option Plan for Non-Employee Directors, the Samuels Jewelers, Inc.
Employee Stock Purchase Plan and the issuances of restricted stock to certain
members of management.
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PART I.
INFORMATION REQUIRED IN THE SECTION 10(A) PROSPECTUS
ITEM 1. PLAN INFORMATION.
The documents containing the information specified in Part I
of this Registration Statement will be sent or given to employees as specified
by rule 428(b)(1). Such documents are not required to be and are not filed with
Securities and Exchange (the "Commission") either as part of this Registration
Statement or as prospectuses or prospectus supplements pursuant to Rule 424.
These documents and the documents incorporated by reference in this Registration
Statement pursuant to item 3 of Part II of this Form S-8, taken together,
constitute a prospectus that meets the requirements of Section 10(a) of the
Securities Act of 1933, as amended (the "Securities Act").
ITEM 2. REGISTRANT INFORMATION AND EMPLOYEE PLAN ANNUAL INFORMATION.
Upon written or oral request, any of the documents
incorporated by reference in Item 3 of Part II of this Registration Statement
(which documents are incorporated by reference in this Section 10(a)
Prospectus), other documents required to be delivered to eligible employees
pursuant to Rule 428(b) or additional information about the Samuels Jewelers,
Inc. 1998 Stock Option Plan, the Samuels Jewelers, Inc. 1998 Stock Option Plan
for Non-Employee Directors, the Samuels Jewelers, Inc. Employee Stock Purchase
Plan and the issuances of restricted stock to certain members of management
(collectively, the "Plans") are available to participants in the Plans without
charge by contacting:
Samuels Jewelers, Inc.
2914 Montopolis Drive, Suite 200
Austin, Texas 78741
(512) 369-1400
Attention: E. Peter Healey, Executive Vice President,
Chief Financial Officer, Secretary and Treasurer
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<PAGE>
PART II
INFORMATION REQUIRED IN THE REGISTRATION STATEMENT
ITEM 3. INCORPORATION OF DOCUMENTS BY REFERENCE.
The following documents are incorporated by reference in this
Registration Statement:
(a) Barry's Jewelers, Inc.'s (Registrant's predecessor in
interest) Annual Report on Form 10-K for the fiscal year ended May 30,
1998, filed with the Commission pursuant to the Exchange Act on August
28, 1998 (File No. 0-15017), and including any amendment or report
filed for the purpose of updating the report;
(b) the description of the Registrant's Common Stock contained
in the Company's Current Report on Form 8-K filed on October 6, 1998
(File No. 0-15017), including any amendment or report filed for the
purpose of updating such description; AND
(c) all other reports filed by the Registrant, including its
predecessor in interest Barry's Jewelers, Inc., pursuant to Sections
13(a) or 15(d) of the Exchange Act since May 30, 1998.
All documents subsequently filed by the Registrant pursuant to
Sections 13(a), 13(c), 14 and 15(d) of the Exchange Act, prior to the filing of
a post-effective amendment to this Registration Statement which indicates that
all of the shares of the Registrant's Common Stock offered hereby have been sold
or which deregisters all of such shares then remaining unsold, shall be deemed
to be incorporated by reference in this Registration Statement and to be a part
hereof from the date of filing of such documents.
Any statement or information contained herein or in any
document all or part of which is incorporated or deemed to be incorporated by
reference in this Registration Statement shall be deemed to be modified or
superseded for purposes of this Registration Statement to the extent that a
statement or information contained herein or in any other subsequently filed
document which also is or is deemed to be incorporated by reference in this
Registration Statement modifies or supersedes such statement or information. Any
such statement or information so modified or superseded shall not be deemed,
except as so modified or superseded, to constitute a part of this Registration
Statement.
ITEM 4. DESCRIPTION OF SECURITIES.
Not applicable.
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ITEM 5. INTERESTS OF NAMED EXPERTS AND COUNSEL.
Not applicable.
ITEM 6. INDEMNIFICATION OF DIRECTORS AND OFFICERS.
The Registrant's Certificate of Incorporation (the
"Certificate of Incorporation") provides that each person who was or is made a
party to any threatened, pending or completed action, suit or proceeding by
reason of the fact that he or she is or was a director or officer of the
Registrant will be indemnified by the Registrant, to the full extent permitted
by the Delaware General Corporation Law (the "DGCL").
Under Section 145 of the DGCL, a corporation may indemnify a
director, officer, employee or agent of the corporation against expenses
(including attorneys' fees), judgments, fines and amounts paid in settlement
actually and reasonably incurred by him or her if he or she acted in good faith
and in a manner he or she reasonably believed to be in or not opposed to the
best interests of the corporation and, with respect to any criminal action or
proceeding, had no reasonable cause to believe his or her conduct was unlawful.
In the case of an action brought by or in the right of a corporation, a
corporation may indemnify a director, officer, employee or agent of the
corporation against expenses (including attorneys' fees) actually and reasonably
incurred by him or her if he or she acted in good faith and in a manner he or
she reasonably believed to be in or not opposed to the best interests of the
corporation, except that no indemnification shall be made in respect of any
claim, issue or matter as to which such person shall have been adjudged to be
liable to the corporation unless a court finds that, in view of all the
circumstances of the case, such person is fairly and reasonably entitled to
indemnity for such expenses as the court shall deem proper.
The Certificate of Incorporation provides that a director of
the Registrant shall not be liable to the Registrant or its stockholders for
monetary damages for breach of fiduciary duty as a director, except (i) for
breaches of the director's duty of loyalty to the corporation or its
stockholders, (ii) for acts or omissions not in good faith or involving
intentional misconduct or known violations of law, (iii) for the payment of
unlawful dividends or unlawful stock purchases or redemptions, or (iv) for
transactions in which the director received an improper personal benefit. The
Certificate of Incorporation further provides that neither amendment nor repeal
of such provision nor the adoption of any term of the Certificate of
Incorporation inconsistent with such provision shall eliminate or reduce the
effect of such provision in respect of any matter occurring, or any cause of
action, suit or claim that, but for such provision, would accrue or arise, prior
to such amendment, repeal or adoption of such inconsistent provision.
The Registrant maintains a standard form of officers' and
directors' liability insurance policy that provides coverage to the Registrant
and the officers and directors of the Registrant for certain liabilities.
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<PAGE>
The foregoing summaries are necessarily subject to the
complete text of the statutes, the Certificate of Incorporation, the
indemnification agreements and the insurance policy referred to above and are
qualified in their entirety by reference thereto.
ITEM 7. EXEMPTION FROM REGISTRATION CLAIMED.
Not applicable.
ITEM 8. EXHIBITS.
The Exhibits to this Registration Statement are listed in the
Index to Exhibits on page 10 of this Registration Statement, which Index is
incorporated herein by reference.
ITEM 9. UNDERTAKINGS.
(a) The undersigned Registrant hereby undertakes:
(1) To file, during any period in which offers or sales
are being made, a post-effective amendment to this
Registration Statement:
(i) To include any prospectus required by Section
10(a)(3) of the Securities Act of 1933, as amended;
(ii) 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.
Notwithstanding the foregoing, any increase or decrease
in the volume of securities offered (if the total dollar
value of securities offered would not exceed that which
was registered) and any deviation from the low or high
end of the estimated maximum offering range may be
reflected in the form of prospectus filed with the
Commission pursuant to Rule 424(b) if, in the aggregate,
the changes in volume and price represent no more than
20 percent change in the maximum aggregate offering
price set forth in the "Calculation of Registration Fee"
table in the effective registration statement;
(iii) 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;
provided, however, that paragraphs (a)(1)(i) and (a)(1)(ii) do
not apply if the information required to be included in a
post-effective amendment by those paragraphs is contained in
periodic reports filed with or furnished to the Securities and
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<PAGE>
Exchange Commission by the Registrant pursuant to Section 13
or Section 15(d) of the Securities Exchange Act of 1934, as
amended, that are incorporated by reference in the
Registration Statement.
(2) That, for the purpose of determining any liability
under the Securities Act of 1933, as amended, 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.
(3) 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.
(b) The undersigned Registrant hereby undertakes that, for
purposes of determining any liability under the Securities Act of 1933, as
amended, each filing of the Registrant's annual report pursuant to Section 13(a)
or Section 15(d) of the Securities Exchange Act of 1934, as amended (and, where
applicable, each filing of an employee benefit plan's annual report pursuant to
Section 15(d) of the Securities Exchange Act of 1934, as amended), that is
incorporated by reference in the Registration Statement 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.
(c) Insofar as indemnification for liabilities arising under
the Securities Act of 1933, as amended, may be permitted to directors, officers
and controlling persons of the Registrant pursuant to the provisions described
in Item 6 above 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 Securities Act of 1933, as amended,
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 Securities Act of 1933, as amended, and will be
governed by the final adjudication of such issue.
7
<PAGE>
REOFFER PROSPECTUS
1,200,000 Shares of Common Stock
SAMUELS JEWELERS, INC.
-----------------------------
This prospectus (the "Prospectus") relates to the offer and
sale of up to 1,200,000 shares of Common Stock, par value $.001 per share
("Common Stock"), of Samuels Jewelers, Inc., a Delaware corporation (the
"Company"). The shares offered hereby (the "Offered Shares") have been or may be
acquired by Controlling Stockholders (as named herein under "Controlling
Stockholders") pursuant to:
o the Samuels Jewelers, Inc. 1998 Stock Option Plan (the "1998 Stock
Option Plan")
o the Samuels Jewelers, Inc. 1998 Stock Option Plan for Non-Employee
Directors (the "1998 Director Plan")
o the Samuels Jewelers, Inc. Employee Stock Purchase Plan (the "Stock
Purchase Plan")
o the issuances of restricted stock to certain members of management (the
"Restricted Stock Issuances")
The Offered Shares are being offered and sold by and for the
account of the Controlling Stockholders. All expenses incurred in connection
with the registration of the Offered Shares will be paid by the Company, with
certain exceptions. See "Controlling Stockholders." The Company will not receive
any of the proceeds from the sale hereby of the Offered Shares by any
Controlling Stockholder.
The Controlling Stockholders may offer and sell any or all of
the Offered Shares from time to time in the following methods:
o one or more transactions on the Nasdaq OTC Bulletin Board(R)
o one or more brokerage transactions
o one or more privately negotiated transactions
The prices at which the Offered Shares shall be sold may be determined in any
one of the following ways:
o at market prices prevailing at the time of sale
o at prices related to such prevailing market prices
o at negotiated prices or at fixed prices
The Offered Shares may be offered and sold from time to time in any manner
permitted by law. To the extent required, a Prospectus Supplement will be
distributed, which will set forth the number of Offered Shares being offered
thereunder and the terms of such offering. See "Plan of Distribution."
The Common Stock is listed on the Nasdaq OTC Bulletin
Board(R). On June 3, 1999, the last reported sale price of the Common Stock on
the NASD Bulletin Board was $ 4 1/2 per share.
-----------------------------
SEE "RISK FACTORS" BEGINNING ON PAGE 4 OF THIS PROSPECTUS FOR
CERTAIN INFORMATION THAT SHOULD BE CONSIDERED BY PROSPECTIVE INVESTORS.
-----------------------------
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 June 8, 1999
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This Prospectus contains or incorporates by reference "forward-looking
statements" within the meaning of Section 27A of the Securities Act of 1933, as
amended (the "Securities Act"), and Section 21E of the Securities Exchange Act
of 1934, as amended (the "Exchange Act"). The words "anticipate," "believe,"
"expect," "intend," "will," "could," "may" and similar expressions are intended
to identify certain forward-looking statements. Such statements reflect the
Company's current views with respect to future events and financial performance
and involve risks and uncertainties, including, without limitation, the risks
described under the caption "Risk Factors." Should one or more of these risks or
uncertainties occur, or should underlying assumptions prove incorrect, actual
results may vary materially and adversely from those anticipated, believed or
otherwise indicated. Consequently, all of the forward-looking statements made or
incorporated by reference in this Prospectus are qualified by these cautionary
statements and there can be no assurance that the actual results or developments
anticipated by the Company will be realized or, even if substantially realized,
that they will have the expected consequences to or effects on the Company or
its business or operations.
AVAILABLE INFORMATION
The Company is subject to the informational requirements of
the Exchange Act. In accordance with the Exchange Act, the Company files
reports, proxy statements and other information with the Securities and Exchange
Commission (the "Commission"). Such reports, proxy statements and other
information may be inspected and copied at the public reference facilities that
the Commission maintains at Room 1024, 450 Fifth Street, N.W., Washington, D.C.
20549, and at the following regional offices of the Commission: Seven World
Trade Center, 13th Floor, New York, New York 10048; Citicorp Atrium Center,
Suite 1400, 500 West Madison Street, Chicago, Illinois 60661. The Commission
maintains a Web site at http://www.sec.gov that contains reports, proxy and
information statements and other information regarding registrants that file
electronically with the Commission. Copies of these materials may be obtained at
prescribed rates from the Public Reference Section of the Commission at the
principal offices of the Commission, 450 Fifth Street, N.W., Washington, D.C.
20549.
The Company has filed with the Commission a registration
statement on Form S-8 (the "Registration Statement") under the Securities Act
with respect to the Offered Shares. This Prospectus, which constitutes a part of
the Registration Statement, does not contain all the information set forth in
the Registration Statement, certain items of which are contained in schedules
and exhibits to the Registration Statement as permitted by the rules and
regulations of the Commission. Statements made in this Prospectus concerning the
contents of any documents referred to herein are not necessarily complete. With
respect to each such document filed with the Commission as an exhibit to the
Registration Statement, reference is made to the exhibit for a more complete
description, and each such statement shall be deemed qualified in its entirety
by such reference.
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The Common Stock is listed on the Nasdaq OTC Bulletin
Board(R). Reports, proxy statements and other information concerning the Company
may be inspected at the offices of the Nasdaq Bulletin Board(R).
INCORPORATION OF CERTAIN DOCUMENTS BY REFERENCE
The following documents filed by the Company with the
Commission under the Exchange Act are hereby incorporated by reference into this
Prospectus:
(a) Barry's Jewelers, Inc.'s (the Company's predecessor in
interest) Annual Report on Form 10-K for the fiscal year ended May 30,
1998, filed with the Commission pursuant to the Exchange Act on August
28, 1998, and including any amendment filed for the purpose of updating
the report;
(b) the description of the Company's Common Stock contained in
the Company's Current Report on Form 8-K filed on October 6, 1998 (File
No. 0-15017), including any amendment or report filed for the purpose
of updating such description; and
(c) all other reports filed by the Company, including its
predecessor in interest Barry's Jewelers, Inc., pursuant to Sections
13(a) or 15(d) of the Exchange Act since May 30, 1998.
All documents filed by the Company pursuant to Sections 13(a),
13(c), 14 and 15(d) of the Exchange Act subsequent to the date of this
Prospectus and prior to the termination of the offering of the Offered Shares
shall be deemed to be incorporated by reference into this Prospectus and to be a
part hereof from the respective dates of filing of such documents.
Any statement or information contained herein or in any
document all or part of which is 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 or information contained herein
or in any other subsequently filed document which also is or is deemed to be
incorporated by reference herein modifies or supersedes such statement or
information. Any such statement or information 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 any person to whom
this Prospectus is delivered, upon the written or oral request of such person, a
copy of any or all of the foregoing documents incorporated herein by reference
(other than certain exhibits to such documents). Requests for such copies should
be directed to E. Peter Healey, Executive Vice President, Chief Financial
Officer, Secretary and Treasurer, Samuels Jewelers, Inc., 2914 Montopolis Drive,
Suite 200, Austin, Texas 78741, telephone number (512) 369-1400.
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RISK FACTORS
You should carefully consider the risks described below before
making an investment decision. The risks and uncertainties below are not the
only ones facing the Company. Additional risks and uncertainties not presently
known to us, or that we currently deem immaterial, may also impair our business
operations. If any of the following risks actually occur, our business,
financial condition or results of operations could be materially and adversely
affected. In that case, the trading price of our common stock could decline, and
you may lose all or part of your investment.
RECENT EMERGENCE FROM CHAPTER 11/HISTORY OF OPERATING LOSSES
The Company is the successor corporation to Barry's Jewelers,
Inc. ("Barry's"), which emerged on October 2, 1998 from bankruptcy proceedings
that Barry's had instituted on May 11, 1997. Barry's had also emerged from prior
bankruptcy proceedings just over six years ago in 1992. We believe that Barry's
lack of success may be attributed to the following:
o failed merchandising programs
o poor credit underwriting practices
o cash flow constraints
o excessive collection costs
o poor inventory controls and below average percentage of consignment
inventory
o executive attrition
o restrictive financing arrangements
o ineffective investments in technology and resulting excessive
administrative costs
INDEBTEDNESS OF THE COMPANY
On October 2, 1998, the Company entered into a three year, $50
million financing agreement with Foothill Capital Corporation. As of February
27, 1999, we have approximately $42.1 million of long-term debt and $7.9 million
available for borrowing under the financing agreement. The Company heavily
relies on this source of funding and would likely suffer significant financial
difficulty if restrictions were imposed on its ability to receive further
amounts under the financing agreement or were it to suffer an event of default
under the financing agreement. See "Restrictions Imposed By Terms of
Indebtedness."
The Company has significant operating lease obligations
related to our stores.
RESTRICTIONS IMPOSED BY TERMS OF INDEBTEDNESS
Our revolving loan agreement contains certain covenants that
limit our activities with regard to the following:
o incurrence of additional indebtedness
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o the payment of dividends
o the redemption of capital stock
o the making of certain investments
o the issuance of guarantees
o transactions with affiliates
o asset sales
o certain mergers and consolidations.
In addition, the revolving loan agreement contains other
restrictive covenants which require us to satisfy certain financial tests. Our
ability to comply with such covenants and to satisfy such financial tests may be
affected by events beyond our control.
A breach of any of the covenants under our revolving loan
agreement could result in an event of default. In the event of a default under
the revolving loan agreement, the lenders could elect to declare all amounts
borrowed, together with accrued interest, to be immediately due and payable and
could terminate all commitments thereunder.
IMPACT OF GENERAL ECONOMIC CONDITIONS
Jewelry purchases are discretionary for consumers and may be
particularly affected by adverse trends in the general economy. The success of
our operations depends to a significant extent upon a number of factors relating
to discretionary consumer spending, including economic conditions that affect
disposable consumer income such as:
o employment
o wages and salaries
o business conditions
o interest rates
o availability of credit
o taxation
We may be affected by these factors even if they exist only in the regional and
local markets where we operate. There can be no assurance that consumer spending
will not be adversely affected by general economic conditions and negatively
impact our results of operations or financial conditions.
In addition, we are a mall-based jewelry retail chain and are
dependent upon the continued popularity of malls as a shopping destination. We
are also dependent on the ability of malls, their tenants and other mall
attractions to generate customer traffic for its stores. There can be no
assurance that mall traffic will not decrease and negatively impact our
business.
Any significant deterioration in general economic conditions
or increases in interest rates may inhibit consumers' use of credit and cause a
material adverse affect on our net sales and profitability. Furthermore, any
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downturn in general or local economic conditions in the markets in which we
operate could materially adversely affect our collection of outstanding customer
accounts receivables.
COMPETITION
We operate in a highly competitive retail jewelry market.
Numerous other companies, including publicly and privately held independent
stores and small retail chains, department stores, catalog showrooms, direct
mail suppliers and television home shopping networks, compete against us on both
national and regional levels. Certain of our competitors are much larger than us
and have greater financial resources.
The malls and shopping centers in which we operate generally
contain several other national chain or independent jewelry stores, as well as
one or more jewelry departments located in the "anchor" department stores.
Factors beyond our control often affect our competitive
environment, such factors including consumer preferences, economic conditions,
population/demographics and traffic patterns.
SEASONALITY
We greatly depend on the success of our "Christmas selling
season" for our success. The success of our Christmas season depends on many
factors beyond our control, including general economic conditions and industry
competition. Sales during the Christmas selling season typically account for
approximately 25% of net sales and almost all of annual earnings. Net sales were
$30.2 million during our 1998 Christmas selling season.
Barry's experienced significant operating losses during the
1997 fiscal year, including an operating loss of $6.8 million for its third
quarter, which included the Christmas selling season. Although we had operating
income of $3.8 million for the third quarter of fiscal 1999, which included the
1998 Christmas selling season, such results cannot be considered predictive of
future success.
SUPPLY AND PRICE FLUCTUATIONS
The marketing arm of DeBeers Consolidated Mines, Ltd., the
Central Selling Organization ("CSO"), possesses considerable influence over the
world supply and price of diamonds, supplying approximately 80% of the world's
demand for rough diamonds over the past several years.
The continued availability of diamonds to our suppliers is
materially dependent on the political and economic situation in South Africa.
While several other countries also supply diamonds, we cannot predict with
certainty the effect on the overall supply or price of diamonds in the event of
an interruption of diamond supply from South Africa or CSO.
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The Company is subject to other supply risks, including
fluctuations in the prices of precious gems and metals. Presently, we do not
engage in any activities to hedge against possible fluctuations in the prices of
precious gems and metals. If fluctuations in these prices are unusually large or
rapid and result in prolonged higher or lower prices, we cannot assure that the
necessary retail price adjustments can be made quickly enough to prevent us from
being adversely affected.
DEPENDENCE ON KEY PERSONNEL
In 1997, Barry's hired Randy N. McCullough, our President and
Chief Executive Officer and we have retained or recruited a number of other
senior executives and other key employees. We are dependent on these personnel,
who have been instrumental in designing and implementing our recent initiatives
and are involved in the strategies, for our future growth and profitability.
The loss of services of Mr. McCullough could have a material
adverse effect on our results of operations and financial condition. There can
be no assurance that we will be able to attract and retain additional qualified
personnel as needed in the future. We do not maintain key-man life insurance on
our senior executives or other key employees.
REGULATION
Our operations are affected by numerous federal and state laws
that impose disclosure and other requirements upon the origination, servicing
and enforcement of credit accounts. The laws also place limitations on the
maximum amount of finance charges that may be charged by a credit provider.
Credit providers do not generally possess recourse rights against us in
situations where our customers fail to make their credit payments. Any change in
the regulation of credit could adversely affect our results of operations or
financial condition.
Our practices are also subject to review in the ordinary
course of business by the Federal Trade Commission. We believe that we are
currently in material compliance with all applicable state and federal
regulations. However, there can be no assurance that a failure to comply with
applicable regulations will not have a material adverse effect on us.
A substantial amount of merchandise in the retail jewelry
industry is commonly sold at a discount to the "regular" or "original" price. A
number of states in which we operate have regulations which require that the
retailers offering merchandise at discounted prices must offer the merchandise
at the regular or original prices for stated periods of time. We believe that we
are in compliance with all such applicable laws.
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MARKET FOR THE SHARES
Initially, our common stock may lack a healthy market because
we have undergone two separate Chapter 11 reorganizations in the last six years.
These two bankruptcy proceedings may create a lack of confidence in our future
performance and, correspondingly, in the market for our shares.
Nasdaq National Market suspended trading in Barry's common
stock on July 11, 1997. Neither Barry's nor the Company's common stock has
traded on a national exchange or on Nasdaq's National Market or Small Cap
markets since that time. Barry's traded on the "pink sheets" following its
delisting until it was merged into the Company. While our common stock now
trades on Nasdaq's OTC Bulletin Board(R), we cannot ensure that the market for
our common stock will be as liquid as if it traded on a national exchange or on
Nasdaq's National Market or Small Cap markets.
YEAR 2000 COMPLIANCE
Many existing computer systems and applications use only two
digits to identify a year in the date field without considering the impact of
the upcoming change in the century. As a result, such systems and applications
could fail or create erroneous results unless corrected so that they can process
data related to the year 2000 and beyond. The Company is planning to contract
with a third party with a year 2000 compliant operating system to provide
billing and collections for the Company. The Company is also currently exploring
the feasibility of licensing other existing collection systems should the
Company be unable to outsource the billing and collections functions by the year
2000. If the Company should fail to find compliance solutions for its billing
and collection functions as set forth, it could pose significant operational
problems or result in costs that would have a material adverse impact on its
financial condition or results of operations.
TAX LOSS CARRYFORWARDS
In the event of an ownership change of a corporation, the Internal Revenue Code
places potential limitations on the new owner's use of the net operating losses
that the corporation incurred prior to the ownership change. This may limit the
Company's use of net operating losses previously recorded by Barry's.
P-8
<PAGE>
THE COMPANY
The Company is a chain of specialty retail jewelry stores
generally located in regional shopping malls. The Company's stores offer fine
jewelry items in a wide range of styles and prices, with a principal emphasis on
diamond and gemstone jewelry. As of May 1, 1999, the Company operated 115 retail
jewelry stores, principally in California, Texas, Arizona, Utah, North Carolina,
Colorado, Idaho, Montana and Indiana. As measured by the number of retail
locations, the Company is one of the larger specialty retailers of fine jewelry
in the country. The Company's principal executive offices are located at 2914
Montopolis Drive, Suite 200, Austin, Texas 78741, and its telephone number is
(512) 369-1400.
The Company changed its fiscal year end during 1998 from May
31 to the Saturday closest to May 31. The Company's fiscal year ended May 30,
1998 may be referred to herein as such, or, where it is more convenient for
comparison with the prior fiscal year, it may be described as the fiscal year
ended May 31, 1998.
Either description references the actual fiscal year ended May 30, 1998.
EMERGENCE FROM CHAPTER 11 REORGANIZATION
Barry's filed a plan of reorganization on April 30, 1998 with
the bankruptcy court, and the bankruptcy court confirmed the plan, with certain
modifications, on September 16, 1998. The Company emerged from the bankruptcy
proceedings on October 2, 1998. The plan provided for the following:
o payment in full of certain administrative claims, tax claims,
bank secured claims and other allowed secured claims
o distribution of 2.5 million shares of our common stock to
Barry's bondholders in exchange for their allowed claims
o distribution of 2.25 million shares of our common stock in
exchange for $15 million in a new equity cash infusion
o payment of allowed claims of general unsecured creditors at a
rate of $0.15 for each dollar of their allowed claims
o issuance of 263,158 warrants to purchase our common stock to
stockholders in exchange for their shares of Barry's common
stock
o merger of Barry's into our company, changing its name to
Samuels Jewelers, Inc. and reincorporating as a Delaware
corporation.
In addition, Foothill Capital Corporation agreed to provide
the Company with a new fully secured line of credit of up to $50,000,000. On
October 2, 1998, the Company drew down approximately $32 million from this line
of credit. These borrowings along with the $15 million new cash equity infusion
were used to pay off Barry's previous line of credit balance with Bank Boston.
P-9
<PAGE>
USE OF PROCEEDS
The Company will not receive any of the proceeds from the sale
of shares which may be sold for the respective accounts of the Controlling
Shareholders pursuant to this Prospectus. All such proceeds, net of brokerage
commissions, if any, will be received by the Controlling Stockholders. See
"Controlling Stockholders" and "Plan of Distribution."
CONTROLLING STOCKHOLDERS
This Prospectus relates to shares of Common Stock that have
been or may be acquired by certain directors and key current employees of the
Company (collectively, the "Controlling Stockholders"), certain of whom may be
deemed to be an "affiliate" of the Company, pursuant to (1) the exercise of
stock options granted to such persons under the 1998 Stock Option Plan, the 1998
Director Plan and the Stock Purchase Plan, and/or (2) restricted stock awards
granted to such persons under separate Restricted Stock Agreements.
P-10
<PAGE>
The following table sets forth, as of the date hereof, (1) the
name of each Controlling Stockholder, and such Controlling Stockholder's office
or position with the Company (or former office or position if no longer employed
by the Company), (2) the number of shares of Common Stock beneficially owned by
the Controlling Stockholder prior to the offering of the Offered Shares hereby,
(3) the number of shares of Common Stock that may be offered hereby and (4) the
number of shares of Common Stock beneficially owned by the Controlling
Stockholder after the completion of the offering and sale of the Offered Shares
(assuming that all Offered Shares are sold). Such number of shares of Common
Stock beneficially owned by each Controlling Stockholder prior to the offering
of the Offered Shares is based on information furnished to the Company by such
Controlling Stockholder and/or set forth in the Company's Common Stock ledger.
<TABLE>
<CAPTION>
SHARES OF COMMON STOCK
NAME OF CONTROLLING STOCKHOLDER SHARES OF COMMON STOCK SHARES OF COMMON STOCK BENEFICIALLY OWNED
AND OFFICE OR POSITION WITH THE BENEFICIALLY OWNED THAT MAY BE OFFERED AFTER COMPLETION OF
COMPANY PRIOR TO THE OFFERING HEREBY THE OFFERING (1)
------------------------------- ------------------ ------------------- -------------------
<S> <C> <C> <C>
Randy N. McCullough 111,000+ 100,000+ 0
President and Chief
Executive Officer
E. Peter Healey 77,000+ 75,000+ 0
Executive Vice President,
Chief Financial Officer,
Secretary and Treasurer
Chad C. Haggar 25,000+ 25,000+ 0
Vice President - Operations
Bill R. Edgel 25,000+ 25,000+ 0
Vice President - Marketing
Paul Hart 25,000+ 25,000+ 0
Vice President - MIS
David Barr*.................. 0 0 0
David J. Breazzano*.......... 1,792,439(2) 0 0
Ken D'Amato*................. 0 0 0
David H. Eisenberg*.......... 0 0 0
Jerry Winston*............... 0 0 0
</TABLE>
- -----------------------------------
* Director
(1) Assumes that all Offered Shares are sold.
P-11
<PAGE>
(2) With respect to all of such shares, Mr. Breazzano shares voting and
dispositive power as a member of DDJ Capital Management, LLC, who owns all of
such shares, but as to which he disclaims beneficial ownership.
+ Only 25% of the shares that may be offered hereby are currently vested.
The remaining amount will vest 25% on each of the next three anniversary dates
from the date of grant (October 2, 1998).
The Company may at any time and from time to time suspend,
permanently or temporarily, or otherwise prohibit any offering or sale of the
Offered Shares pursuant to this Prospectus. In connection with the registration
of the Offered Shares under the Securities Act, and the offering and sale
thereof hereby, each Controlling Stockholder will be deemed to have agreed with
and represented to the Company that (1) the number of shares of Common Stock
represented to be beneficially owned by such Controlling Stockholder is correct,
(2) from and after such Controlling Stockholder's receipt of notice from the
Company that the Company is suspending or prohibiting the offering or sale of
the Offered Shares pursuant to this Prospectus, such Controlling Stockholder may
not and will not use this Prospectus to offer or sell any of such Controlling
Stockholder's then unsold Offered Shares and will forthwith discontinue
disposition of its Offered Shares pursuant to the Registration Statement until
such time, if any, as the Company notifies such Controlling Stockholder that
such offers and sales may be recommenced, and (3) any purchase or sale of the
Offered Shares by or for the account of such Controlling Stockholder will be
effected in compliance with all applicable federal and state securities laws,
including the Securities Act and the applicable rules and regulations
promulgated thereunder.
All expenses incurred in connection with the registration
under the Securities Act of the Offered Shares will be paid by the Company,
except that the Company will not be liable for any selling or other fees or
expenses incurred by the Controlling Stockholders.
PLAN OF DISTRIBUTION
Any or all of the Offered Shares owned by a Controlling
Stockholder may be offered and sold from time to time by and for the account of
such Controlling Stockholder. The Company will not receive any of the proceeds
from the sale hereby of the Offered Shares by any Controlling Stockholder.
The Controlling Stockholders may offer and sell any or all of
the Offered Shares from time to time in one or more transactions on the Nasdaq
OTC Bulletin Board(R), in one or more brokerage transactions or in one or more
privately negotiated transactions, at market prices prevailing at the time of
sale, at prices related to such prevailing market prices, at negotiated prices
or at fixed prices. The Offered Shares may be offered and sold from time to time
in any manner permitted by law, including directly to one or more purchasers and
to or through underwriters, brokers, dealers or agents, who may receive
compensation in the form of discounts, concessions or commissions from the
Controlling Stockholders or the purchasers of Offered Shares for whom such
P-12
<PAGE>
underwriters, brokers, dealers and agents may act as agent or to whom they may
sell as principal, or both. As of the date of this Prospectus, the Company is
not aware of any agreement, arrangement or understanding between any broker or
dealer and any Controlling Stockholder with respect to the offering and sale of
the Offered Shares. The Controlling Stockholder and any underwriters, brokers,
dealers or agents to or through whom sales of the Offered Shares are made
hereunder may be deemed to be "underwriters" within the meaning of Section 2(11)
of the Securities Act, and any commissions or discounts or other compensation
paid to such persons and any profit realized by such persons on the resale of
Offered Shares as principals may be deemed to be underwriting compensation under
the Securities Act.
To the extent required, a Prospectus Supplement will be
distributed, which will set forth the number of Offered Shares being offered
pursuant thereto and the terms of such offering, including the names of the
underwriters, any discounts, concessions, commissions and other items
constituting compensation to underwriters, brokers, dealers or agents, the
public offering price of the Offered Shares and any discounts, concessions or
commissions allowed or reallowed or paid by underwriters to dealers.
To comply with the securities laws of certain states, if
applicable, the Offered Shares will be offered and sold in such jurisdictions
only through registered or licensed brokers or dealers.
The Controlling Stockholders may agree to indemnify any
underwriter, broker, dealer or agent that participates in transactions involving
sales of the Offered Shares against certain liabilities, including liabilities
arising under the Securities Act.
Any or all of the Offered Shares may be offered and sold
pursuant to Rule 144 promulgated under the Securities Act rather than pursuant
to this Prospectus.
EXPERTS
The financial statements of Barry's Jewelers, Inc. as of May
31, 1998 and 1997 and for each of the three years in the period ended May 31,
1998, and the related financial statement schedule incorporated in this
Prospectus by reference from the Company's Annual Report on Form 10-K have been
audited by Deloitte & Touche LLP, independent auditors, as stated in their
report, which is incorporated herein by reference (which report expresses an
unqualified opinion and includes explanatory paragraphs referring to Barry's
Jewelers, Inc.'s ability to continue as a going concern as a result of the
filing for reorganization under Chapter 11 of the Federal Bankruptcy Code), and
have been so incorporated in reliance upon the report of such firm given upon
their authority as experts in accounting and auditing.
LEGAL MATTERS
The validity of the Offered Shares offered hereby will be
passed upon for the Company by Weil, Gotshal & Manges LLP, Houston, Texas.
--------------------
P-13
<PAGE>
No person has been authorized to give any information or to
make any representations other than those contained in this Prospectus, and, if
given or made, such information or representations must not be relied upon as
having been authorized by the Company, the Controlling Stockholders or any other
person. This Prospectus does not constitute an offer to sell or the solicitation
of an offer to buy any securities other than the securities to which it relates
nor any offer to sell or the solicitation of an offer to buy such securities in
any circumstances in which such offer or solicitation is unlawful. Neither the
delivery of this Prospectus nor any offer or sale made hereunder shall, under
any circumstances, create any implication that there has been no change in the
affairs of the Company since the date hereof or that the information contained
herein is correct as of any time subsequent to the date hereof.
-------------------------------------
TABLE OF CONTENTS
Page
----
Available Information............................................P-2
Incorporation of Certain Documents by Reference..................P-3
Risk Factors.....................................................P-4
The Company......................................................P-9
Use of Proceeds.................................................P-10
Controlling Stockholders........................................P-10
Plan of Distribution............................................P-12
Experts.........................................................P-13
Legal Matters...................................................P-13
1,200,000
SHARES
OF COMMON STOCK
SAMUELS JEWELERS, INC.
-------------------------------------------
REOFFER PROSPECTUS
------------------------------------------
P-14
<PAGE>
SIGNATURES
Pursuant to the requirements of the Securities Act of 1933, as
amended, the Registrant certifies that it has reasonable grounds to believe that
it meets all of the requirements for filing on Form S-8 and has duly caused this
Registration Statement to be signed on its behalf by the undersigned, thereunto
duly authorized, in the City of Austin, State of Texas, on June 7, 1999.
SAMUELS JEWELERS, INC.
By: /s/ Randy N. McCullough
--------------------------------------
Randy N. McCullough
President and Chief Executive Officer
POWER OF ATTORNEY
Each person whose signature appears below hereby constitutes
and appoints Randy N. McCullough and E. Peter Healey, and each of them, his true
and lawful attorneys-in-fact and agents with full power of substitution and
resubstitution, for him and in his name, place and stead, and in any and all
capacities, to sign any and all amendments (including post-effective amendments)
to this Registration Statement, and to file the same, with all exhibits thereto,
and other documents in connection therewith, with the Securities and Exchange
Commission, and hereby grants to such attorneys-in-fact and agents, and each of
them, full power and authority to do and perform each and every act and thing
requisite and necessary to be done, 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 his or their substitute or
substitutes may lawfully do or cause to be done by virtue hereof.
8
<PAGE>
Pursuant to the requirements of the Securities Act of 1933, as
amended, this Registration Statement has been signed by the following persons in
the capacities and on the dates indicated.
<TABLE>
<CAPTION>
Signature Title Date
--------- ----- ----
<S> <C> <C>
/s/ Randy N. McCullough President and June 7, 1999
- ----------------------------------------- Chief Executive Officer
Randy N. McCullough (principal executive officer
/s/ E. Peter Healey Executive Vice President, June 7, 1999
- ----------------------------------------- Chief Financial Officer
E. Peter Healey and Secretary
(principal financial officer)
/s/ Robert J. Herman Vice President and Controller June 7, 1999
- ----------------------------------------- (principal accounting officer)
Robert J. Herman
/s/ David Barr . Director June 7, 1999
- -----------------------------------------
David Barr
/s/ David J. Breazzano Director June 7, 1999
- -----------------------------------------
David J. Breazzano
/s/ Ken D'Amato Director June 7, 1999
- -----------------------------------------
Ken D'Amato
/s/ David H. Eisenberg Director June 7, 1999
- -----------------------------------------
David H. Eisenberg
/s/ Jerry Winston. Director June 7, 1999
- -----------------------------------------
Jerry Winston
</TABLE>
9
<PAGE>
INDEX TO EXHIBITS
Exhibit
Number Exhibit
- ------ -------
4.1 Certificate of Incorporation of the Registrant (incorporated herein
by reference to Exhibit 3.1 to the Registrant's Current Report on
Form 8-K dated September 16, 1998 (File No. 0-15017)).
4.2 Bylaws of the Registrant (incorporated herein by reference to
Exhibit 3.2 to the Registrant's Current Report on Form 8-K dated
September 16, 1998 (File No. 0-15017)).
5.1 Opinion of Weil, Gotshal & Manges LLP.
10.1 Samuels Jewelers, Inc. 1998 Stock Option Plan (incorporated herein
by reference to Annex A to the Registrant's Proxy Statement on
Schedule 14A dated October 21, 1998 (the "1998 Proxy Statement").
10.2 Samuels Jewelers, Inc. 1998 Stock Option Plan for Non-Employee
Directors (incorporated herein by reference to Annex B to the 1998
Proxy Statement).
10.3 Samuels Jewelers, Inc. Employee Stock Purchase Plan (incorporated
herein by reference to Annex C to the 1998 Proxy Statement).
10.4 Restricted Stock Agreement dated October 2, 1998 between Samuels
Jewelers, Inc. and Randy N. McCullough.
10.5 Restricted Stock Agreement dated October 2, 1998 between Samuels
Jewelers, Inc. and E. Peter Healey.
10.6 Restricted Stock Agreement dated October 2, 1998 between Samuels
Jewelers, Inc. and Chad C. Haggar.
10.7 Restricted Stock Agreement dated October 2, 1998 between Samuels
Jewelers, Inc. and Bill R. Edgel.
10.8 Restricted Stock Agreement dated October 2, 1998 between Samuels
Jewelers, Inc. and Paul Hart.
23.1 Consent of Weil, Gotshal & Manges LLP (contained in Exhibit 5.1).
23.2 Consent of Deloitte & Touche LLP.
24.1 Power of Attorney (set forth on the signature page to the
Registration Statement).
10
EXHIBIT 5.1
WEIL, GOTSHAL & MANGES LLP
700 LOUISIANA, SUITE 1600
HOUSTON, TEXAS 77002
(713) 546-5000
June 7, 1999
Samuels Jewelers, Inc.
2914 Montopolis Drive, Suite 200
Austin, Texas 78741
Ladies and Gentlemen:
We have acted as counsel to Samuels Jewelers, Inc., a Delaware
corporation (the "Company"), in connection with the preparation and filing by
the Company of its Registration Statement on Form S-8 (the "Registration
Statement") under the Securities Act of 1933, as amended, pertaining to (1) the
offering and sale from time to time, together or separately, of up to 500,000
shares (the "1998 Stock Option Plan Shares") of the Company's common stock, par
value $.001 per share ("Common Stock") pursuant to the Samuels Jewelers, Inc.
1998 Stock Option Plan (the "1998 Stock Option Plan"), up to 250,000 shares (the
"1998 Director Plan Shares") of the Common Stock pursuant to the Samuels
Jewelers, Inc. 1998 Stock Option Plan for Non-Employee Directors (the "1998
Director Plan"), up to 200,000 shares (the "Stock Purchase Plan Shares") of the
Common Stock issuable pursuant to the Samuels Jewelers, Inc. Employee Stock
Purchase Plan (the "Stock Purchase Plan"), and 250,000 shares (the "Restricted
Shares") of restricted Common Stock issued pursuant to certain Restricted Stock
Agreements between Samuels Jewelers, Inc. and certain executive officers (the
"Restricted Stock Agreements"), and (2) the reoffering and resale from time to
time, together or separately, by and for the account of the Controlling
Stockholders (the "Controlling Stockholders") named in the reoffering prospectus
(the "Prospectus") contained in the Registration Statement, of the 1998 Stock
Option Plan Shares, the 1998 Director Plan Shares, the Stock Purchase Plan
Shares and the Restricted Shares. The 1998 Stock Option Plan Shares, the 1998
Director Plan Shares, the Stock Purchase Plan Shares and the Restricted Shares
are herein collectively referred to as the "Offered Shares."
In so acting, we have examined originals or copies, certified
or otherwise identified to our satisfaction, of the Company's Certificate of
Incorporation and Bylaws, the resolutions adopted by the Board of Directors of
the Company authorizing the filing of the Registration Statement, and such other
corporate records, agreements, documents and other instruments, and such
certificates or comparable documents of public officials and of officers and
representatives of the Company, and have made such inquiries of such officers
and representatives, as we have deemed relevant and necessary as a basis for the
opinions hereinafter set forth.
HO1:\158716\01\3#GS01!.DOC\21901.0001
<PAGE>
In such examination, we have assumed the genuineness of all
signatures, the legal capacity of natural persons, the authenticity of all
documents submitted to us as originals, the conformity to original documents of
all documents submitted to us as certified or photostatic copies and the
authenticity of the originals of such latter documents. As to all questions of
fact material to this opinion that have not been independently established, we
have relied upon certificates or comparable documents of officers and
representatives of the Company.
Based on the foregoing, and subject to the qualifications
stated herein, we are of the opinion that the Offered Shares have been duly
authorized, and, when issued and delivered to and paid for by the Controlling
Stockholders pursuant to and in accordance with the terms and conditions of the
1998 Stock Option Plan, the 1998 Director Plan, the Stock Purchase Plan and the
Restricted Stock Agreements, as the case may be, will be validly issued, fully
paid and non-assessable.
The opinions expressed herein are limited to the corporate
laws of the State of Delaware and we express no opinion as to the effect on the
matters covered by this letter of the laws of any other jurisdiction.
The opinions expressed herein are rendered solely for your
benefit in connection with the transactions described herein. We hereby consent
to the filing of this opinion letter as an exhibit to the Registration Statement
and to the reference to our Firm under the caption "Legal Matters" in the
Prospectus contained therein.
Very truly yours,
/s/ Weil, Gotshal & Manges LLP
EXHIBIT 10.4
SAMUELS JEWELERS, INC.
2914 Montopolis Drive, Suite 200
Austin, Texas 78741
September 29, 1998
Mr. Randy N. McCullough
Dear Mr. McCullough:
Samuels Jewelers, Inc. ("Samuels") hereby grants to you, as of the
Effective Date (as hereinafter defined) and subject to the conditions
hereinafter set forth, One Hundred Thousand (100,000) shares of the Common Stock
(as hereinafter defined) of Samuels (the "Restricted Stock"). This letter
agreement (the "Restricted Stock Agreement") shall evidence such grant.
1. Date of Grant: This grant shall take effect on the Effective Date,
which for all purposes hereunder shall be deemed the Date of Grant.
2. Cost of Shares of Restricted Stock: This grant of Restricted Stock is
considered additional compensation, for the periods specified in paragraph 6,
and shall be at no cost to you.
3. Delivery of Restricted Stock: The Restricted Stock shall be issued to
you as a matter of record as of the Date of Grant but shall not be delivered to
you until certain specified conditions, hereinafter set forth, are met.
4. Dividend Rights: You shall have full dividend rights with respect to
each share of Restricted Stock, beginning with the Date of Grant, and shall
retain such rights so long as such share of Restricted Stock is not forfeited by
you prior to vesting or disposed of by you after vesting.
5. Voting Rights: You shall have full voting rights with respect to each
share of Restricted Stock, beginning with the Date of Grant, and shall retain
such rights so long as such share of Restricted Stock is not forfeited by you
prior to vesting or disposed of by you after vesting.
6. Vesting: One quarter (25%) of the shares of Restricted Stock shall be
deemed earned on the Date of Grant and shall vest and be delivered to you free
of any restriction imposed hereunder on the Date of Grant, one quarter (25%) of
the shares of Restricted Stock shall be deemed earned during the one-year period
ending on the first anniversary of the Date of Grant and shall vest and be
delivered to you free of any restriction imposed hereunder on the last day of
such period, one quarter (25%) of the shares of Restricted Stock shall be deemed
earned during the one-
HO1:\158500\01\3#@S01!.DOC\21901.0001
<PAGE>
year period ending on the second anniversary of the Date of Grant and shall vest
and be delivered to you free of any restriction imposed hereunder on the last
day of such period, and one quarter (25%) of the shares of Restricted Stock
shall be deemed earned during the one-year period ending on the third
anniversary of the Date of Grant and shall vest and be delivered to you free of
any restriction imposed hereunder on the last day of such period, provided
however, that except as provided in paragraph 8 below, such shares shall vest
and be delivered only if at the time set forth above for vesting and delivery
you are then in the employ of Samuels or one of its subsidiaries
("Subsidiaries"), as such term is defined in ss.424(f) of the Internal Revenue
Code of 1986, as amended ("Code"), and shall have been continuously so employed
since the Date of Grant. If there should come a time when you are no longer
employed by either Samuels or a Subsidiary of Samuels (collectively, the
"Company"), then at such time all shares of Restricted Stock not yet vested
shall be forfeited (except as provided in paragraph 8 below). Notwithstanding
the foregoing, the Board of Directors of Samuels in its sole discretion, may
accelerate the vesting schedule as set out above in whole or in part at any time
and from time to time.
7. Non-Transferability: No share of Restricted Stock shall be
transferable by you prior to vesting, except pursuant to (i) will or the laws of
descent and distribution upon your death or (ii) in connection with the Loan (as
such term is defined in the Employment Agreement between you and Samuels dated
as of even date herewith, as the same may be amended (as so amended, if amended,
the "Employment Agreement")).
8. Accelerated Vesting:
(a) Death or Disability: In the event of your death or
Disability while in the employ of the Company, all shares of Restricted Stock
not yet vested due to the restrictions set forth above shall become immediately
vested and, if not already delivered, shall be delivered to you or your estate.
As used herein, "Disability" shall mean the occurrence of an event or events
that renders you with respect to your physical or mental condition unable to
perform, in the view of the Board of Directors of Samuels and as certified in
writing by a competent medical physician, the duties of your position with the
Company and which results in your being entitled to benefits under Samuels'
disability insurance plan.
(b) Termination of Employment: In the event (i) your
employment by the Company is terminated Without Cause (as hereinafter defined)
or (ii) you voluntarily terminate your employment with the Company for Good
Reason (as hereinafter defined), then all shares of Restricted Stock not yet
vested due to the restrictions set forth above shall become immediately vested
and, if not already delivered, shall be delivered to you.
(c) Change in Control: In the event of a Change in Control (as
hereinafter defined), all shares of Restricted Stock not yet vested due to the
restrictions set forth above shall become immediately vested and, if not already
delivered, shall be delivered to you.
2
<PAGE>
9. Definitions:
(a) "Without Cause" means any termination of your employment
by the Company which is not a termination of employment for Cause or for
Disability. "Cause" means (i) your conviction for, or plea of nolo contendere
to, any felony; (ii) your willful fraud or material dishonesty in connection
with your performance of your duties in your position with the Company; (iii)
your failure, other than due to illness, Disability or death or as a result of
any event that constitutes Good Reason hereunder, to substantially perform your
duties in your position with the Company that results in material harm to the
Company; or (iv) your gross negligence in the performance of your duties in your
position with the Company (other than arising solely due to physical or mental
Disability) that results in material harm to the Company; in each case, for
purposes of clauses (iii) and (iv), after the Board of Directors of Samuels has
provided you with 30 days' written notice of such circumstances and the
possibility of an event giving rise to termination for Cause, and you fail to
cure such circumstances within those 30 days. For purposes of this definition,
no act, or failure to act, on your part shall be considered "willful" unless
done, or omitted to be done, by you in bad faith and without reasonable belief
that your action or omission was in the best interests of the Company. You shall
not be deemed to have been terminated for Cause unless and until the Board of
Directors of Samuels finds that your termination for Cause is justified and has
given you written notice of termination, specifying in detail the particulars of
your conduct found by the Board to justify such termination for Cause.
(b) "Good Reason," when used with reference to your voluntary
termination of your employment with the Company, means (i) a change in your
status, title, position or responsibilities (including reporting
responsibilities) which, in your reasonable judgment, represents an adverse
change from your status, title, position or responsibilities as in effect
immediately prior thereto; the assignment to you of any duties or
responsibilities which, in your reasonable judgment, are inconsistent with your
status, title, position or responsibilities; or any removal of you from or
failure to reappoint or reelect you to any of such offices or positions, except
in connection with the termination of your employment for Disability, Cause, as
a result of your death or by you other than for Good Reason; (ii) a breach by
the Company of the compensation and benefit provisions set forth in Sections 4
through 6 of the Employment Agreement; (iii) a written notice of non-renewal of
the Employment Agreement being given by Samuels to you pursuant to Section 3
thereof; (iv) the inability of Samuels and you to reach agreement on the terms
of a new employment agreement prior to the Expiration Date or any Renewal Date
(as such terms are defined in the Employment Agreement) that follows notice by
Samuels to you of its intent to renegotiate the terms of the Employment
Agreement; (v) any termination by you within twenty-four (24) months of the
occurrence of a Change in Control; (vi) a material breach by Samuels of any
other term of the Employment Agreement; provided, however, that none of the
events described in (i) through (vi) above shall be considered Good Reason, if
you consent, in writing, to the proposed action by Samuels which would otherwise
constitute Good Reason prior to the time the event actually occurs; and further
provided that no event described in clauses (i), (ii), or (vi) above shall be
considered Good Reason until you have provided Samuels with written notice which
(a) describes the event or occurrences which you believe constitute Good Reason
and (b) provide Samuels with a minimum of fifteen (15) days in which to correct
3
<PAGE>
or address such events or occurrences, after which if no such correction occurs
to your reasonable satisfaction, such event shall be deemed to be Good Reason.
(c) "Change of Control" shall mean the occurrence of (i) the
dissolution or liquidation of Samuels, (ii) a reorganization, merger or
consolidation of Samuels with one or more corporations as a result of which
Samuels is not the surviving corporation or as a result of which it is the
surviving corporation and its outstanding voting securities are converted to or
reclassified as cash, securities of another corporation or other property
(unless the principal purpose of such transaction is to change the state of
Samuels' incorporation), (iii) upon a sale of assets of Samuels having a fair
market value equal to more than 50% of the total fair market value of Samuels'
assets to an entity which is not controlling, controlled by or under common
control with Samuels, or (iv) the acquisition of a record or beneficial interest
in more than 30% of the then outstanding voting securities of Samuels, either in
a single transaction or a series of transactions, by an entity or "group" within
the meaning of Section 13(d) of the Securities Exchange Act of 1934, as amended,
and the rules and regulations promulgated thereunder, which is not an affiliate
of Samuels; provided, however, that two or more persons or entities shall not be
deemed to constitute a "person" or "group" for purposes hereof in respect of any
securities of Samuels received by them pursuant to the Plan of Reorganization
merely by virtue of the fact that such persons or entities were each Bondholders
(as such term is defined in the Plan of Reorganization).
(d) "Common Stock" means shares of the common stock of
Samuels, par value $.001 per share, authorized and issued pursuant to the terms
of the Plan of Reorganization.
(e) "Effective Date" shall have the meaning ascribed to that
term in the Plan of Reorganization.
(f) "Plan of Reorganization" means the Original Disclosure
Statement and Plan of Reorganization dated April 30, 1998 proposed by Barry's
Jewelers, Inc., as modified, as confirmed by the United States Bankruptcy Court
for the Central District of California (Case No. LA 97-27988 VZ).
10. Adjustment Upon Changes in Capitalization: In the event that each of
the outstanding shares of Common Stock of Samuels shall be changed into or
exchanged for a different number or kind of shares of stock or other securities
of Samuels or of another corporation or entity, whether by reason of stock
dividend, recapitalization, merger, consolidation, split-up, spinoff,
combination, exchange of shares or the like, then there shall be substituted for
each share of Restricted Stock the number and kind of shares of stock or other
securities into which each outstanding share of Common Stock of Samuels shall be
so changed or for which each such share shall be exchanged.
11. Taxes: When the shares of Restricted Stock vest or upon your earlier
election pursuant to Section 83(b) of the Code to be taxed at the time of the
transfer of the Restricted Stock, Samuels shall withhold from any delivery of
shares the amount required by law which is necessary to satisfy any federal and
state income tax, as well as any Federal Insurance Contributions Act ("FICA")
4
<PAGE>
withholding requirements. At such time, Samuels shall pay to the respective
taxing authority the amount of cash as is necessary (after taking into account
all federal, state and local income taxes and FICA taxes which would be payable
by you as a result of a deemed receipt of Samuels' payment) to place you in the
same after-tax position as you would have been in if no federal, state or local
income taxes were required to be withheld. For purposes of the preceding
sentence, it shall be conclusively presumed that your actual rate of income tax
shall equal the rate of withholding tax.
12. Right to Continued Employment: Nothing in this Agreement shall
confer upon you any right to continue in the employ of Samuels or any of its
Subsidiaries or interfere with the right of Samuels or any of its Subsidiaries
to terminate your employment at any time (subject to any rights you may have
under a separate employment agreement).
13. Investment Representation: In the event the Restricted Stock to be
delivered to you is not registered under the Securities Act of 1933, as amended
(the "1933 Act"), you represent to Samuels that the shares of Restricted Stock
to be received by you will be acquired for investment for your own account, not
as a nominee or agent, and not with a view to the sale or distribution of any
part thereof, and that at the time of receipt of such shares of Restricted Stock
you will have no present intention of selling, granting participation in or
otherwise distributing the same. You will reconfirm such investment
representation at the time of the future delivery of shares of Restricted Stock.
You further represent that you do not have any contract, undertaking, agreement
or arrangement with any person to sell, transfer or grant participation to such
person or to any third person with respect to any of the shares of Restricted
Stock.
You understand that if the Restricted Stock to be delivered to you is
not registered under the 1933 Act, on the grounds that the issuance of such
Restricted Stock is exempt from registration under the 1933 Act pursuant to
Section 4(2) thereof, Samuels' reliance on such exemption will be predicated on
your representations set forth herein.
You understand that the shares of Restricted Stock to be delivered to
you under this Restricted Stock Agreement may not thereafter be sold,
transferred or otherwise disposed of without registration under the 1933 Act or
an exemption therefrom.
In the event of any conflict between the terms of this Restricted Stock
Agreement and the Employment Agreement, the terms of the Employment Agreement
shall govern.
This Restricted Stock Agreement shall be governed by, construed, applied
and enforced in accordance with the laws of the state of Texas, except that no
doctrine of choice of law shall be used to apply any law other than that of
Texas, and no defense, counterclaim or right of set-off given or allowed by the
laws of any other state or jurisdiction, or arising out of the enactment,
modification or repeal of any law, regulation, ordinance or decree of any
foreign jurisdiction, shall be interposed in any action hereon.
5
<PAGE>
Any action or proceeding arising out of this Restricted Stock Agreement
(excluding any actions or proceedings subject to the mandatory arbitration
provisions set forth below, but including any action to confirm an award of such
arbitrators and enter judgment thereon) may be commenced in the courts of the
state of Texas located in the County of Travis or the United States District
Courts located in the County of Travis. Samuels and you consent to in personam
jurisdiction with respect to such courts, agree that venue will be proper in
such courts and waive any objections based upon forum non conveniens. This
choice of forum shall not be deemed to preclude the enforcement of any judgment
obtained in such forum or the taking of any action under this Restricted Stock
Agreement to enforce same in any other jurisdiction.
With the exception of actions to enforce an arbitration award, all
claims and disputes between Samuels and you in connection with this Restricted
Stock Agreement shall be submitted to final and binding arbitration administered
and conducted by the American Arbitration Association in Austin, Texas pursuant
to its Labor Arbitration Rules then in effect; provided, that, that the party
seeking to submit a claim or dispute hereunder to arbitration shall give the
other party written notice of any arbitration proceeding at least 60 days' prior
to such proceeding; provided, further, that the parties mutually agree to
negotiate in good faith to resolve their differences prior to such arbitration
proceeding.
Very truly yours,
SAMUELS JEWELERS, INC.
By: /s/ E. Peter Healey
--------------------------------------------
Name: E. Peter Healey
Title: Executive Vice President,
Chief Financial Officer and Secretary
Agreed to and accepted
/s/ Randy N. McCullough
- ----------------------------------------
Randy N. McCullough
6
EXHIBIT 10.5
SAMUELS JEWELERS, INC.
2914 Montopolis Drive, Suite 200
Austin, Texas 78741
September 29, 1998
Mr. E. Peter Healey
Dear Mr. Healey:
Samuels Jewelers, Inc. ("Samuels") hereby grants to you, as of the
Effective Date (as hereinafter defined) and subject to the conditions
hereinafter set forth, Seventy Five Thousand (75,000) shares of the Common Stock
(as hereinafter defined) of Samuels (the "Restricted Stock"). This letter
agreement (the "Restricted Stock Agreement") shall evidence such grant.
1. Date of Grant: This grant shall take effect on the Effective Date,
which for all purposes hereunder shall be deemed the Date of Grant.
2. Cost of Shares of Restricted Stock: This grant of Restricted Stock is
considered additional compensation, for the periods specified in paragraph 6,
and shall be at no cost to you.
3. Delivery of Restricted Stock: The Restricted Stock shall be issued to
you as a matter of record as of the Date of Grant but shall not be delivered to
you until certain specified conditions, hereinafter set forth, are met.
4. Dividend Rights: You shall have full dividend rights with respect to
each share of Restricted Stock, beginning with the Date of Grant, and shall
retain such rights so long as such share of Restricted Stock is not forfeited by
you prior to vesting or disposed of by you after vesting.
5. Voting Rights: You shall have full voting rights with respect to each
share of Restricted Stock, beginning with the Date of Grant, and shall retain
such rights so long as such share of Restricted Stock is not forfeited by you
prior to vesting or disposed of by you after vesting.
6. Vesting: One quarter (25%) of the shares of Restricted Stock shall be
deemed earned on the Date of Grant and shall vest and be delivered to you free
of any restriction imposed hereunder on the Date of Grant, one quarter (25%) of
the shares of Restricted Stock shall be deemed earned during the one-year period
ending on the first anniversary of the Date of Grant and shall vest and be
delivered to you free of any restriction imposed hereunder on the last day of
such period, one quarter (25%) of the shares of Restricted Stock shall be deemed
earned during the one-
HO1:\158498\01\3#@Q01!.DOC\21901.0001
<PAGE>
year period ending on the second anniversary of the Date of Grant and shall vest
and be delivered to you free of any restriction imposed hereunder on the last
day of such period, and one quarter (25%) of the shares of Restricted Stock
shall be deemed earned during the one-year period ending on the third
anniversary of the Date of Grant and shall vest and be delivered to you free of
any restriction imposed hereunder on the last day of such period, provided
however, that except as provided in paragraph 8 below, such shares shall vest
and be delivered only if at the time set forth above for vesting and delivery
you are then in the employ of Samuels or one of its subsidiaries
("Subsidiaries"), as such term is defined in ss.424(f) of the Internal Revenue
Code of 1986, as amended ("Code"), and shall have been continuously so employed
since the Date of Grant. If there should come a time when you are no longer
employed by either Samuels or a Subsidiary of Samuels (collectively, the
"Company"), then at such time all shares of Restricted Stock not yet vested
shall be forfeited (except as provided in paragraph 8 below). Notwithstanding
the foregoing, the Board of Directors of Samuels in its sole discretion, may
accelerate the vesting schedule as set out above in whole or in part at any time
and from time to time.
7. Non-Transferability: No share of Restricted Stock shall be
transferable by you prior to vesting, except pursuant to (i) will or the laws of
descent and distribution upon your death or (ii) in connection with the Loan (as
such term is defined in the Employment Agreement between you and Samuels dated
as of even date herewith, as the same may be amended (as so amended, if amended,
the "Employment Agreement")).
8. Accelerated Vesting:
(a) Death or Disability: In the event of your death or
Disability while in the employ of the Company, all shares of Restricted Stock
not yet vested due to the restrictions set forth above shall become immediately
vested and, if not already delivered, shall be delivered to you or your estate.
As used herein, "Disability" shall mean the occurrence of an event or events
that renders you with respect to your physical or mental condition unable to
perform, in the view of the Board of Directors of Samuels and as certified in
writing by a competent medical physician, the duties of your position with the
Company and which results in your being entitled to benefits under Samuels'
disability insurance plan.
(b) Termination of Employment: In the event (i) your
employment by the Company is terminated Without Cause (as hereinafter defined)
or (ii) you voluntarily terminate your employment with the Company for Good
Reason (as hereinafter defined), then all shares of Restricted Stock not yet
vested due to the restrictions set forth above shall become immediately vested
and, if not already delivered, shall be delivered to you.
(c) Change in Control: In the event of a Change in Control (as
hereinafter defined), all shares of Restricted Stock not yet vested due to the
restrictions set forth above shall become immediately vested and, if not already
delivered, shall be delivered to you.
2
<PAGE>
9. Definitions:
(a) "Without Cause" means any termination of your employment
by the Company which is not a termination of employment for Cause or for
Disability. "Cause" means (i) your conviction for, or plea of nolo contendere
to, any felony; (ii) your willful fraud or material dishonesty in connection
with your performance of your duties in your position with the Company; (iii)
your failure, other than due to illness, Disability or death or as a result of
any event that constitutes Good Reason hereunder, to substantially perform your
duties in your position with the Company that results in material harm to the
Company; or (iv) your gross negligence in the performance of your duties in your
position with the Company (other than arising solely due to physical or mental
Disability) that results in material harm to the Company; in each case, for
purposes of clauses (iii) and (iv), after the Board of Directors of Samuels has
provided you with 30 days' written notice of such circumstances and the
possibility of an event giving rise to termination for Cause, and you fail to
cure such circumstances within those 30 days. For purposes of this definition,
no act, or failure to act, on your part shall be considered "willful" unless
done, or omitted to be done, by you in bad faith and without reasonable belief
that your action or omission was in the best interests of the Company. You shall
not be deemed to have been terminated for Cause unless and until the Board of
Directors of Samuels finds that your termination for Cause is justified and has
given you written notice of termination, specifying in detail the particulars of
your conduct found by the Board to justify such termination for Cause.
(b) "Good Reason," when used with reference to your voluntary
termination of your employment with the Company, means (i) a change in your
status, title, position or responsibilities (including reporting
responsibilities) which, in your reasonable judgment, represents an adverse
change from your status, title, position or responsibilities as in effect
immediately prior thereto; the assignment to you of any duties or
responsibilities which, in your reasonable judgment, are inconsistent with your
status, title, position or responsibilities; or any removal of you from or
failure to reappoint or reelect you to any of such offices or positions, except
in connection with the termination of your employment for Disability, Cause, as
a result of your death or by you other than for Good Reason; (ii) a breach by
the Company of the compensation and benefit provisions set forth in Sections 4
through 6 of the Employment Agreement; (iii) a written notice of non-renewal of
the Employment Agreement being given by Samuels to you pursuant to Section 3
thereof; (iv) the inability of Samuels and you to reach agreement on the terms
of a new employment agreement prior to the Expiration Date or any Renewal Date
(as such terms are defined in the Employment Agreement) that follows notice by
Samuels to you of its intent to renegotiate the terms of the Employment
Agreement; (v) any termination by you within twenty-four (24) months of the
occurrence of a Change in Control; (vi) a material breach by Samuels of any
other term of the Employment Agreement; provided, however, that none of the
events described in (i) through (vi) above shall be considered Good Reason, if
you consent, in writing, to the proposed action by Samuels which would otherwise
constitute Good Reason prior to the time the event actually occurs; and further
provided that no event described in clauses (i), (ii), or (vi) above shall be
considered Good Reason until you have provided Samuels with written notice which
(a) describes the event or occurrences which you believe constitute Good Reason
3
<PAGE>
and (b) provide Samuels with a minimum of fifteen (15) days in which to correct
or address such events or occurrences, after which if no such correction occurs
to your reasonable satisfaction, such event shall be deemed to be Good Reason.
(c) "Change of Control" shall mean the occurrence of (i) the
dissolution or liquidation of Samuels, (ii) a reorganization, merger or
consolidation of Samuels with one or more corporations as a result of which
Samuels is not the surviving corporation or as a result of which it is the
surviving corporation and its outstanding voting securities are converted to or
reclassified as cash, securities of another corporation or other property
(unless the principal purpose of such transaction is to change the state of
Samuels' incorporation), (iii) upon a sale of assets of Samuels having a fair
market value equal to more than 50% of the total fair market value of Samuels'
assets to an entity which is not controlling, controlled by or under common
control with Samuels, or (iv) the acquisition of a record or beneficial interest
in more than 30% of the then outstanding voting securities of Samuels, either in
a single transaction or a series of transactions, by an entity or "group" within
the meaning of Section 13(d) of the Securities Exchange Act of 1934, as amended,
and the rules and regulations promulgated thereunder, which is not an affiliate
of Samuels; provided, however, that two or more persons or entities shall not be
deemed to constitute a "person" or "group" for purposes hereof in respect of any
securities of Samuels received by them pursuant to the Plan of Reorganization
merely by virtue of the fact that such persons or entities were each Bondholders
(as such term is defined in the Plan of Reorganization).
(d) "Common Stock" means shares of the common stock of
Samuels, par value $.001 per share, authorized and issued pursuant to the terms
of the Plan of Reorganization.
(e) "Effective Date" shall have the meaning ascribed to that
term in the Plan of Reorganization.
(f) "Plan of Reorganization" means the Original Disclosure
Statement and Plan of Reorganization dated April 30, 1998 proposed by Barry's
Jewelers, Inc., as modified, as confirmed by the United States Bankruptcy Court
for the Central District of California (Case No. LA 97-27988 VZ).
10. Adjustment Upon Changes in Capitalization: In the event that each of
the outstanding shares of Common Stock of Samuels shall be changed into or
exchanged for a different number or kind of shares of stock or other securities
of Samuels or of another corporation or entity, whether by reason of stock
dividend, recapitalization, merger, consolidation, split-up, spinoff,
combination, exchange of shares or the like, then there shall be substituted for
each share of Restricted Stock the number and kind of shares of stock or other
securities into which each outstanding share of Common Stock of Samuels shall be
so changed or for which each such share shall be exchanged.
11. Taxes: When the shares of Restricted Stock vest or upon your earlier
election pursuant to Section 83(b) of the Code to be taxed at the time of the
transfer of the Restricted Stock, Samuels shall withhold from any delivery of
shares the amount required by law which is necessary to satisfy any federal and
state income tax, as well as any Federal Insurance Contributions Act ("FICA")
4
<PAGE>
withholding requirements. At such time, Samuels shall pay to the respective
taxing authority the amount of cash as is necessary (after taking into account
all federal, state and local income taxes and FICA taxes which would be payable
by you as a result of a deemed receipt of Samuels' payment) to place you in the
same after-tax position as you would have been in if no federal, state or local
income taxes were required to be withheld. For purposes of the preceding
sentence, it shall be conclusively presumed that your actual rate of income tax
shall equal the rate of withholding tax.
12. Right to Continued Employment: Nothing in this Agreement shall
confer upon you any right to continue in the employ of Samuels or any of its
Subsidiaries or interfere with the right of Samuels or any of its Subsidiaries
to terminate your employment at any time (subject to any rights you may have
under a separate employment agreement).
13. Investment Representation: In the event the Restricted Stock to be
delivered to you is not registered under the Securities Act of 1933, as amended
(the "1933 Act"), you represent to Samuels that the shares of Restricted Stock
to be received by you will be acquired for investment for your own account, not
as a nominee or agent, and not with a view to the sale or distribution of any
part thereof, and that at the time of receipt of such shares of Restricted Stock
you will have no present intention of selling, granting participation in or
otherwise distributing the same. You will reconfirm such investment
representation at the time of the future delivery of shares of Restricted Stock.
You further represent that you do not have any contract, undertaking, agreement
or arrangement with any person to sell, transfer or grant participation to such
person or to any third person with respect to any of the shares of Restricted
Stock.
You understand that if the Restricted Stock to be delivered to you is
not registered under the 1933 Act, on the grounds that the issuance of such
Restricted Stock is exempt from registration under the 1933 Act pursuant to
Section 4(2) thereof, Samuels' reliance on such exemption will be predicated on
your representations set forth herein.
You understand that the shares of Restricted Stock to be delivered to
you under this Restricted Stock Agreement may not thereafter be sold,
transferred or otherwise disposed of without registration under the 1933 Act or
an exemption therefrom.
In the event of any conflict between the terms of this Restricted Stock
Agreement and the Employment Agreement, the terms of the Employment Agreement
shall govern.
This Restricted Stock Agreement shall be governed by, construed, applied
and enforced in accordance with the laws of the state of Texas, except that no
doctrine of choice of law shall be used to apply any law other than that of
Texas, and no defense, counterclaim or right of set-off given or allowed by the
laws of any other state or jurisdiction, or arising out of the enactment,
modification or repeal of any law, regulation, ordinance or decree of any
foreign jurisdiction, shall be interposed in any action hereon.
5
<PAGE>
Any action or proceeding arising out of this Restricted Stock Agreement
(excluding any actions or proceedings subject to the mandatory arbitration
provisions set forth below, but including any action to confirm an award of such
arbitrators and enter judgment thereon) may be commenced in the courts of the
state of Texas located in the County of Travis or the United States District
Courts located in the County of Travis. Samuels and you consent to in personam
jurisdiction with respect to such courts, agree that venue will be proper in
such courts and waive any objections based upon forum non conveniens. This
choice of forum shall not be deemed to preclude the enforcement of any judgment
obtained in such forum or the taking of any action under this Restricted Stock
Agreement to enforce same in any other jurisdiction.
With the exception of actions to enforce an arbitration award, all
claims and disputes between Samuels and you in connection with this Restricted
Stock Agreement shall be submitted to final and binding arbitration administered
and conducted by the American Arbitration Association in Austin, Texas pursuant
to its Labor Arbitration Rules then in effect; provided, that, that the party
seeking to submit a claim or dispute hereunder to arbitration shall give the
other party written notice of any arbitration proceeding at least 60 days' prior
to such proceeding; provided, further, that the parties mutually agree to
negotiate in good faith to resolve their differences prior to such arbitration
proceeding.
Very truly yours,
SAMUELS JEWELERS, INC.
By: /s/ Randy N. McCullough
----------------------------------------------
Name: Randy N. McCullough
Title: President and Chief Executive Officer
Agreed to and accepted
/s/ E. Peter Healey
- ---------------------------------
E. Peter Healey
6
EXHIBIT 10.6
SAMUELS JEWELERS, INC.
2914 Montopolis Drive, Suite 200
Austin, Texas 78741
September 29, 1998
Mr. Chad C. Haggar
Dear Mr. Haggar:
Samuels Jewelers, Inc. ("Samuels") hereby grants to you, as of the
Effective Date (as hereinafter defined) and subject to the conditions
hereinafter set forth, Twenty Five Thousand (25,000) shares of the Common Stock
(as hereinafter defined) of Samuels (the "Restricted Stock"). This letter
agreement (the "Restricted Stock Agreement") shall evidence such grant.
1. Date of Grant: This grant shall take effect on the Effective Date,
which for all purposes hereunder shall be deemed the Date of Grant.
2. Cost of Shares of Restricted Stock: This grant of Restricted Stock is
considered additional compensation, for the periods specified in paragraph 6,
and shall be at no cost to you.
3. Delivery of Restricted Stock: The Restricted Stock shall be issued to
you as a matter of record as of the Date of Grant but shall not be delivered to
you until certain specified conditions, hereinafter set forth, are met.
4. Dividend Rights: You shall have full dividend rights with respect to
each share of Restricted Stock, beginning with the Date of Grant, and shall
retain such rights so long as such share of Restricted Stock is not forfeited by
you prior to vesting or disposed of by you after vesting.
5. Voting Rights: You shall have full voting rights with respect to each
share of Restricted Stock, beginning with the Date of Grant, and shall retain
such rights so long as such share of Restricted Stock is not forfeited by you
prior to vesting or disposed of by you after vesting.
6. Vesting: One quarter (25%) of the shares of Restricted Stock shall be
deemed earned on the Date of Grant and shall vest and be delivered to you free
of any restriction imposed hereunder on the Date of Grant, one quarter (25%) of
the shares of Restricted Stock shall be deemed earned during the one-year period
ending on the first anniversary of the Date of Grant and shall vest and be
delivered to you free of any restriction imposed hereunder on the last day of
such period, one quarter (25%) of the shares of Restricted Stock shall be deemed
earned during the one-
HO1:\158503\01\3#@V01!.DOC\21901.0001
<PAGE>
year period ending on the second anniversary of the Date of Grant and shall vest
and be delivered to you free of any restriction imposed hereunder on the last
day of such period, and one quarter (25%) of the shares of Restricted Stock
shall be deemed earned during the one-year period ending on the third
anniversary of the Date of Grant and shall vest and be delivered to you free of
any restriction imposed hereunder on the last day of such period, provided
however, that except as provided in paragraph 8 below, such shares shall vest
and be delivered only if at the time set forth above for vesting and delivery
you are then in the employ of Samuels or one of its subsidiaries
("Subsidiaries"), as such term is defined in ss.424(f) of the Internal Revenue
Code of 1986, as amended ("Code"), and shall have been continuously so employed
since the Date of Grant. If there should come a time when you are no longer
employed by either Samuels or a Subsidiary of Samuels (collectively, the
"Company"), then at such time all shares of Restricted Stock not yet vested
shall be forfeited (except as provided in paragraph 8 below). Notwithstanding
the foregoing, the Board of Directors of Samuels in its sole discretion, may
accelerate the vesting schedule as set out above in whole or in part at any time
and from time to time.
7. Non-Transferability: No share of Restricted Stock shall be
transferable by you prior to vesting, except pursuant to (i) will or the laws of
descent and distribution upon your death or (ii) in connection with the Loan (as
such term is defined in the Employment Agreement between you and Samuels dated
as of even date herewith, as the same may be amended (as so amended, if amended,
the "Employment Agreement")).
8. Accelerated Vesting:
(a) Death or Disability: In the event of your death or Disability while
in the employ of the Company, all shares of Restricted Stock not yet vested due
to the restrictions set forth above shall become immediately vested and, if not
already delivered, shall be delivered to you or your estate. As used herein,
"Disability" shall mean the occurrence of an event or events that renders you
with respect to your physical or mental condition unable to perform, in the view
of the Board of Directors of Samuels and as certified in writing by a competent
medical physician, the duties of your position with the Company and which
results in your being entitled to benefits under Samuels' disability insurance
plan.
(b) Termination of Employment: In the event (i) your employment by the
Company is terminated Without Cause (as hereinafter defined) or (ii) you
voluntarily terminate your employment with the Company for Good Reason (as
hereinafter defined), then all shares of Restricted Stock not yet vested due to
the restrictions set forth above shall become immediately vested and, if not
already delivered, shall be delivered to you.
(c) Change in Control: In the event of a Change in Control (as
hereinafter defined), all shares of Restricted Stock not yet vested due to the
restrictions set forth above shall become immediately vested and, if not already
delivered, shall be delivered to you.
2
<PAGE>
9. Definitions:
(a) "Without Cause" means any termination of your employment by the
Company which is not a termination of employment for Cause or for Disability.
"Cause" means (i) your conviction for, or plea of nolo contendere to, any
felony; (ii) your willful fraud or material dishonesty in connection with your
performance of your duties in your position with the Company; (iii) your
failure, other than due to illness, Disability or death or as a result of any
event that constitutes Good Reason hereunder, to substantially perform your
duties in your position with the Company that results in material harm to the
Company; or (iv) your gross negligence in the performance of your duties in your
position with the Company (other than arising solely due to physical or mental
Disability) that results in material harm to the Company; in each case, for
purposes of clauses (iii) and (iv), after the Board of Directors of Samuels has
provided you with 30 days' written notice of such circumstances and the
possibility of an event giving rise to termination for Cause, and you fail to
cure such circumstances within those 30 days. For purposes of this definition,
no act, or failure to act, on your part shall be considered "willful" unless
done, or omitted to be done, by you in bad faith and without reasonable belief
that your action or omission was in the best interests of the Company. You shall
not be deemed to have been terminated for Cause unless and until the Board of
Directors of Samuels finds that your termination for Cause is justified and has
given you written notice of termination, specifying in detail the particulars of
your conduct found by the Board to justify such termination for Cause.
(b) "Good Reason," when used with reference to your voluntary
termination of your employment with the Company, means (i) a change in your
status, title, position or responsibilities (including reporting
responsibilities) which, in your reasonable judgment, represents an adverse
change from your status, title, position or responsibilities as in effect
immediately prior thereto; the assignment to you of any duties or
responsibilities which, in your reasonable judgment, are inconsistent with your
status, title, position or responsibilities; or any removal of you from or
failure to reappoint or reelect you to any of such offices or positions, except
in connection with the termination of your employment for Disability, Cause, as
a result of your death or by you other than for Good Reason; (ii) a breach by
the Company of the compensation and benefit provisions set forth in Sections 4
through 6 of the Employment Agreement; (iii) a written notice of non-renewal of
the Employment Agreement being given by Samuels to you pursuant to Section 3
thereof; (iv) the inability of Samuels and you to reach agreement on the terms
of a new employment agreement prior to the Expiration Date or any Renewal Date
(as such terms are defined in the Employment Agreement) that follows notice by
Samuels to you of its intent to renegotiate the terms of the Employment
Agreement; (v) any termination by you within twenty-four (24) months of the
occurrence of a Change in Control; (vi) a material breach by Samuels of any
other term of the Employment Agreement; provided, however, that none of the
events described in (i) through (vi) above shall be considered Good Reason, if
you consent, in writing, to the proposed action by Samuels which would otherwise
constitute Good Reason prior to the time the event actually occurs; and further
provided that no event described in clauses (i), (ii), or (vi) above shall be
considered Good Reason until you have provided Samuels with written notice which
(a) describes the event or occurrences which you believe constitute Good Reason
3
<PAGE>
and (b) provide Samuels with a minimum of fifteen (15) days in which to correct
or address such events or occurrences, after which if no such correction occurs
to your reasonable satisfaction, such event shall be deemed to be Good Reason.
(c) "Change of Control" shall mean the occurrence of (i) the dissolution
or liquidation of Samuels, (ii) a reorganization, merger or consolidation of
Samuels with one or more corporations as a result of which Samuels is not the
surviving corporation or as a result of which it is the surviving corporation
and its outstanding voting securities are converted to or reclassified as cash,
securities of another corporation or other property (unless the principal
purpose of such transaction is to change the state of Samuels' incorporation),
(iii) upon a sale of assets of Samuels having a fair market value equal to more
than 50% of the total fair market value of Samuels' assets to an entity which is
not controlling, controlled by or under common control with Samuels, or (iv) the
acquisition of a record or beneficial interest in more than 30% of the then
outstanding voting securities of Samuels, either in a single transaction or a
series of transactions, by an entity or "group" within the meaning of Section
13(d) of the Securities Exchange Act of 1934, as amended, and the rules and
regulations promulgated thereunder, which is not an affiliate of Samuels;
provided, however, that two or more persons or entities shall not be deemed to
constitute a "person" or "group" for purposes hereof in respect of any
securities of Samuels received by them pursuant to the Plan of Reorganization
merely by virtue of the fact that such persons or entities were each Bondholders
(as such term is defined in the Plan of Reorganization).
(d) "Common Stock" means shares of the common stock of Samuels, par
value $.001 per share, authorized and issued pursuant to the terms of the Plan
of Reorganization.
(e) "Effective Date" shall have the meaning ascribed to that term in the
Plan of Reorganization.
(f) "Plan of Reorganization" means the Original Disclosure Statement and
Plan of Reorganization dated April 30, 1998 proposed by Barry's Jewelers, Inc.,
as modified, as confirmed by the United States Bankruptcy Court for the Central
District of California (Case No. LA 97-27988 VZ).
10. Adjustment Upon Changes in Capitalization: In the event that each of
the outstanding shares of Common Stock of Samuels shall be changed into or
exchanged for a different number or kind of shares of stock or other securities
of Samuels or of another corporation or entity, whether by reason of stock
dividend, recapitalization, merger, consolidation, split-up, spinoff,
combination, exchange of shares or the like, then there shall be substituted for
each share of Restricted Stock the number and kind of shares of stock or other
securities into which each outstanding share of Common Stock of Samuels shall be
so changed or for which each such share shall be exchanged.
11. Taxes: When the shares of Restricted Stock vest or upon your earlier
election pursuant to Section 83(b) of the Code to be taxed at the time of the
transfer of the Restricted Stock, Samuels shall withhold from any delivery of
shares the amount required by law which is necessary to satisfy any federal and
state income tax, as well as any Federal Insurance Contributions Act ("FICA")
4
<PAGE>
withholding requirements. At such time, Samuels shall pay to the respective
taxing authority the amount of cash as is necessary (after taking into account
all federal, state and local income taxes and FICA taxes which would be payable
by you as a result of a deemed receipt of Samuels' payment) to place you in the
same after-tax position as you would have been in if no federal, state or local
income taxes were required to be withheld. For purposes of the preceding
sentence, it shall be conclusively presumed that your actual rate of income tax
shall equal the rate of withholding tax.
12. Right to Continued Employment: Nothing in this Agreement shall
confer upon you any right to continue in the employ of Samuels or any of its
Subsidiaries or interfere with the right of Samuels or any of its Subsidiaries
to terminate your employment at any time (subject to any rights you may have
under a separate employment agreement).
13. Investment Representation: In the event the Restricted Stock to be
delivered to you is not registered under the Securities Act of 1933, as amended
(the "1933 Act"), you represent to Samuels that the shares of Restricted Stock
to be received by you will be acquired for investment for your own account, not
as a nominee or agent, and not with a view to the sale or distribution of any
part thereof, and that at the time of receipt of such shares of Restricted Stock
you will have no present intention of selling, granting participation in or
otherwise distributing the same. You will reconfirm such investment
representation at the time of the future delivery of shares of Restricted Stock.
You further represent that you do not have any contract, undertaking, agreement
or arrangement with any person to sell, transfer or grant participation to such
person or to any third person with respect to any of the shares of Restricted
Stock.
You understand that if the Restricted Stock to be delivered to you is
not registered under the 1933 Act, on the grounds that the issuance of such
Restricted Stock is exempt from registration under the 1933 Act pursuant to
Section 4(2) thereof, Samuels' reliance on such exemption will be predicated on
your representations set forth herein.
You understand that the shares of Restricted Stock to be delivered to
you under this Restricted Stock Agreement may not thereafter be sold,
transferred or otherwise disposed of without registration under the 1933 Act or
an exemption therefrom.
In the event of any conflict between the terms of this Restricted Stock
Agreement and the Employment Agreement, the terms of the Employment Agreement
shall govern.
This Restricted Stock Agreement shall be governed by, construed, applied
and enforced in accordance with the laws of the state of Texas, except that no
doctrine of choice of law shall be used to apply any law other than that of
Texas, and no defense, counterclaim or right of set-off given or allowed by the
laws of any other state or jurisdiction, or arising out of the enactment,
modification or repeal of any law, regulation, ordinance or decree of any
foreign jurisdiction, shall be interposed in any action hereon.
5
<PAGE>
Any action or proceeding arising out of this Restricted Stock Agreement
(excluding any actions or proceedings subject to the mandatory arbitration
provisions set forth below, but including any action to confirm an award of such
arbitrators and enter judgment thereon) may be commenced in the courts of the
state of Texas located in the County of Travis or the United States District
Courts located in the County of Travis. Samuels and you consent to in personam
jurisdiction with respect to such courts, agree that venue will be proper in
such courts and waive any objections based upon forum non conveniens. This
choice of forum shall not be deemed to preclude the enforcement of any judgment
obtained in such forum or the taking of any action under this Restricted Stock
Agreement to enforce same in any other jurisdiction.
With the exception of actions to enforce an arbitration award, all
claims and disputes between Samuels and you in connection with this Restricted
Stock Agreement shall be submitted to final and binding arbitration administered
and conducted by the American Arbitration Association in Austin, Texas pursuant
to its Labor Arbitration Rules then in effect; provided, that, that the party
seeking to submit a claim or dispute hereunder to arbitration shall give the
other party written notice of any arbitration proceeding at least 60 days' prior
to such proceeding; provided, further, that the parties mutually agree to
negotiate in good faith to resolve their differences prior to such arbitration
proceeding.
Very truly yours,
SAMUELS JEWELERS, INC.
By: /s/ Randy N. McCullough
----------------------------------------------
Name: Randy N. McCullough
Title: President and Chief Executive Officer
Agreed to and accepted
/s/ Chad C. Haggar
- -----------------------------------
Chad C. Haggar
6
EXHIBIT 10.7
SAMUELS JEWELERS, INC.
2914 Montopolis Drive, Suite 200
Austin, Texas 78741
September 29, 1998
Mr. Bill R. Edgel
Dear Mr. Edgel:
Samuels Jewelers, Inc. ("Samuels") hereby grants to you, as of the
Effective Date (as hereinafter defined) and subject to the conditions
hereinafter set forth, Twenty Five Thousand (25,000) shares of the Common Stock
(as hereinafter defined) of Samuels (the "Restricted Stock"). This letter
agreement (the "Restricted Stock Agreement") shall evidence such grant.
1. Date of Grant: This grant shall take effect on the Effective Date,
which for all purposes hereunder shall be deemed the Date of Grant.
2. Cost of Shares of Restricted Stock: This grant of Restricted Stock is
considered additional compensation, for the periods specified in paragraph 6,
and shall be at no cost to you.
3. Delivery of Restricted Stock: The Restricted Stock shall be issued to
you as a matter of record as of the Date of Grant but shall not be delivered to
you until certain specified conditions, hereinafter set forth, are met.
4. Dividend Rights: You shall have full dividend rights with respect to
each share of Restricted Stock, beginning with the Date of Grant, and shall
retain such rights so long as such share of Restricted Stock is not forfeited by
you prior to vesting or disposed of by you after vesting.
5. Voting Rights: You shall have full voting rights with respect to each
share of Restricted Stock, beginning with the Date of Grant, and shall retain
such rights so long as such share of Restricted Stock is not forfeited by you
prior to vesting or disposed of by you after vesting.
6. Vesting: One quarter (25%) of the shares of Restricted Stock shall be
deemed earned on the Date of Grant and shall vest and be delivered to you free
of any restriction imposed hereunder on the Date of Grant, one quarter (25%) of
the shares of Restricted Stock shall be deemed earned during the one-year period
ending on the first anniversary of the Date of Grant and shall vest and be
delivered to you free of any restriction imposed hereunder on the last day of
such period, one quarter (25%) of the shares of Restricted Stock shall be deemed
earned during the one-
HO1:\158501\01\3#@T01!.DOC\21901.0001
<PAGE>
year period ending on the second anniversary of the Date of Grant and shall vest
and be delivered to you free of any restriction imposed hereunder on the last
day of such period, and one quarter (25%) of the shares of Restricted Stock
shall be deemed earned during the one-year period ending on the third
anniversary of the Date of Grant and shall vest and be delivered to you free of
any restriction imposed hereunder on the last day of such period, provided
however, that except as provided in paragraph 8 below, such shares shall vest
and be delivered only if at the time set forth above for vesting and delivery
you are then in the employ of Samuels or one of its subsidiaries
("Subsidiaries"), as such term is defined in ss.424(f) of the Internal Revenue
Code of 1986, as amended ("Code"), and shall have been continuously so employed
since the Date of Grant. If there should come a time when you are no longer
employed by either Samuels or a Subsidiary of Samuels (collectively, the
"Company"), then at such time all shares of Restricted Stock not yet vested
shall be forfeited (except as provided in paragraph 8 below). Notwithstanding
the foregoing, the Board of Directors of Samuels in its sole discretion, may
accelerate the vesting schedule as set out above in whole or in part at any time
and from time to time.
7. Non-Transferability: No share of Restricted Stock shall be
transferable by you prior to vesting, except pursuant to (i) will or the laws of
descent and distribution upon your death or (ii) in connection with the Loan (as
such term is defined in the Employment Agreement between you and Samuels dated
as of even date herewith, as the same may be amended (as so amended, if amended,
the "Employment Agreement")).
8. Accelerated Vesting:
(a) Death or Disability: In the event of your death or
Disability while in the employ of the Company, all shares of Restricted Stock
not yet vested due to the restrictions set forth above shall become immediately
vested and, if not already delivered, shall be delivered to you or your estate.
As used herein, "Disability" shall mean the occurrence of an event or events
that renders you with respect to your physical or mental condition unable to
perform, in the view of the Board of Directors of Samuels and as certified in
writing by a competent medical physician, the duties of your position with the
Company and which results in your being entitled to benefits under Samuels'
disability insurance plan.
(b) Termination of Employment: In the event (i) your
employment by the Company is terminated Without Cause (as hereinafter defined)
or (ii) you voluntarily terminate your employment with the Company for Good
Reason (as hereinafter defined), then all shares of Restricted Stock not yet
vested due to the restrictions set forth above shall become immediately vested
and, if not already delivered, shall be delivered to you.
(c) Change in Control: In the event of a Change in Control (as
hereinafter defined), all shares of Restricted Stock not yet vested due to the
restrictions set forth above shall become immediately vested and, if not already
delivered, shall be delivered to you.
2
<PAGE>
9. Definitions:
(a) "Without Cause" means any termination of your employment
by the Company which is not a termination of employment for Cause or for
Disability. "Cause" means (i) your conviction for, or plea of nolo contendere
to, any felony; (ii) your willful fraud or material dishonesty in connection
with your performance of your duties in your position with the Company; (iii)
your failure, other than due to illness, Disability or death or as a result of
any event that constitutes Good Reason hereunder, to substantially perform your
duties in your position with the Company that results in material harm to the
Company; or (iv) your gross negligence in the performance of your duties in your
position with the Company (other than arising solely due to physical or mental
Disability) that results in material harm to the Company; in each case, for
purposes of clauses (iii) and (iv), after the Board of Directors of Samuels has
provided you with 30 days' written notice of such circumstances and the
possibility of an event giving rise to termination for Cause, and you fail to
cure such circumstances within those 30 days. For purposes of this definition,
no act, or failure to act, on your part shall be considered "willful" unless
done, or omitted to be done, by you in bad faith and without reasonable belief
that your action or omission was in the best interests of the Company. You shall
not be deemed to have been terminated for Cause unless and until the Board of
Directors of Samuels finds that your termination for Cause is justified and has
given you written notice of termination, specifying in detail the particulars of
your conduct found by the Board to justify such termination for Cause.
(b) "Good Reason," when used with reference to your voluntary
termination of your employment with the Company, means (i) a change in your
status, title, position or responsibilities (including reporting
responsibilities) which, in your reasonable judgment, represents an adverse
change from your status, title, position or responsibilities as in effect
immediately prior thereto; the assignment to you of any duties or
responsibilities which, in your reasonable judgment, are inconsistent with your
status, title, position or responsibilities; or any removal of you from or
failure to reappoint or reelect you to any of such offices or positions, except
in connection with the termination of your employment for Disability, Cause, as
a result of your death or by you other than for Good Reason; (ii) a breach by
the Company of the compensation and benefit provisions set forth in Sections 4
through 6 of the Employment Agreement; (iii) a written notice of non-renewal of
the Employment Agreement being given by Samuels to you pursuant to Section 3
thereof; (iv) the inability of Samuels and you to reach agreement on the terms
of a new employment agreement prior to the Expiration Date or any Renewal Date
(as such terms are defined in the Employment Agreement) that follows notice by
Samuels to you of its intent to renegotiate the terms of the Employment
Agreement; (v) any termination by you within twenty-four (24) months of the
occurrence of a Change in Control; (vi) a material breach by Samuels of any
other term of the Employment Agreement; provided, however, that none of the
events described in (i) through (vi) above shall be considered Good Reason, if
you consent, in writing, to the proposed action by Samuels which would otherwise
constitute Good Reason prior to the time the event actually occurs; and further
provided that no event described in clauses (i), (ii), or (vi) above shall be
considered Good Reason until you have provided Samuels with written notice which
(a) describes the event or occurrences which you believe constitute Good Reason
3
<PAGE>
and (b) provide Samuels with a minimum of fifteen (15) days in which to correct
or address such events or occurrences, after which if no such correction occurs
to your reasonable satisfaction, such event shall be deemed to be Good Reason.
(c) "Change of Control" shall mean the occurrence of (i) the
dissolution or liquidation of Samuels, (ii) a reorganization, merger or
consolidation of Samuels with one or more corporations as a result of which
Samuels is not the surviving corporation or as a result of which it is the
surviving corporation and its outstanding voting securities are converted to or
reclassified as cash, securities of another corporation or other property
(unless the principal purpose of such transaction is to change the state of
Samuels' incorporation), (iii) upon a sale of assets of Samuels having a fair
market value equal to more than 50% of the total fair market value of Samuels'
assets to an entity which is not controlling, controlled by or under common
control with Samuels, or (iv) the acquisition of a record or beneficial interest
in more than 30% of the then outstanding voting securities of Samuels, either in
a single transaction or a series of transactions, by an entity or "group" within
the meaning of Section 13(d) of the Securities Exchange Act of 1934, as amended,
and the rules and regulations promulgated thereunder, which is not an affiliate
of Samuels; provided, however, that two or more persons or entities shall not be
deemed to constitute a "person" or "group" for purposes hereof in respect of any
securities of Samuels received by them pursuant to the Plan of Reorganization
merely by virtue of the fact that such persons or entities were each Bondholders
(as such term is defined in the Plan of Reorganization).
(d) "Common Stock" means shares of the common stock of
Samuels, par value $.001 per share, authorized and issued pursuant to the terms
of the Plan of Reorganization.
(e) "Effective Date" shall have the meaning ascribed to that
term in the Plan of Reorganization.
(f) "Plan of Reorganization" means the Original Disclosure
Statement and Plan of Reorganization dated April 30, 1998 proposed by Barry's
Jewelers, Inc., as modified, as confirmed by the United States Bankruptcy Court
for the Central District of California (Case No. LA 97-27988 VZ).
10. Adjustment Upon Changes in Capitalization: In the event that each of
the outstanding shares of Common Stock of Samuels shall be changed into or
exchanged for a different number or kind of shares of stock or other securities
of Samuels or of another corporation or entity, whether by reason of stock
dividend, recapitalization, merger, consolidation, split-up, spinoff,
combination, exchange of shares or the like, then there shall be substituted for
each share of Restricted Stock the number and kind of shares of stock or other
securities into which each outstanding share of Common Stock of Samuels shall be
so changed or for which each such share shall be exchanged.
11. Taxes: When the shares of Restricted Stock vest or upon your earlier
election pursuant to Section 83(b) of the Code to be taxed at the time of the
transfer of the Restricted Stock, Samuels shall withhold from any delivery of
shares the amount required by law which is necessary to satisfy any federal and
state income tax, as well as any Federal Insurance Contributions Act ("FICA")
4
<PAGE>
withholding requirements. At such time, Samuels shall pay to the respective
taxing authority the amount of cash as is necessary (after taking into account
all federal, state and local income taxes and FICA taxes which would be payable
by you as a result of a deemed receipt of Samuels' payment) to place you in the
same after-tax position as you would have been in if no federal, state or local
income taxes were required to be withheld. For purposes of the preceding
sentence, it shall be conclusively presumed that your actual rate of income tax
shall equal the rate of withholding tax.
12. Right to Continued Employment: Nothing in this Agreement shall
confer upon you any right to continue in the employ of Samuels or any of its
Subsidiaries or interfere with the right of Samuels or any of its Subsidiaries
to terminate your employment at any time (subject to any rights you may have
under a separate employment agreement).
13. Investment Representation: In the event the Restricted Stock to be
delivered to you is not registered under the Securities Act of 1933, as amended
(the "1933 Act"), you represent to Samuels that the shares of Restricted Stock
to be received by you will be acquired for investment for your own account, not
as a nominee or agent, and not with a view to the sale or distribution of any
part thereof, and that at the time of receipt of such shares of Restricted Stock
you will have no present intention of selling, granting participation in or
otherwise distributing the same. You will reconfirm such investment
representation at the time of the future delivery of shares of Restricted Stock.
You further represent that you do not have any contract, undertaking, agreement
or arrangement with any person to sell, transfer or grant participation to such
person or to any third person with respect to any of the shares of Restricted
Stock.
You understand that if the Restricted Stock to be delivered to you is
not registered under the 1933 Act, on the grounds that the issuance of such
Restricted Stock is exempt from registration under the 1933 Act pursuant to
Section 4(2) thereof, Samuels' reliance on such exemption will be predicated on
your representations set forth herein.
You understand that the shares of Restricted Stock to be delivered to
you under this Restricted Stock Agreement may not thereafter be sold,
transferred or otherwise disposed of without registration under the 1933 Act or
an exemption therefrom.
In the event of any conflict between the terms of this Restricted Stock
Agreement and the Employment Agreement, the terms of the Employment Agreement
shall govern.
This Restricted Stock Agreement shall be governed by, construed, applied
and enforced in accordance with the laws of the state of Texas, except that no
doctrine of choice of law shall be used to apply any law other than that of
Texas, and no defense, counterclaim or right of set-off given or allowed by the
laws of any other state or jurisdiction, or arising out of the enactment,
modification or repeal of any law, regulation, ordinance or decree of any
foreign jurisdiction, shall be interposed in any action hereon.
5
<PAGE>
Any action or proceeding arising out of this Restricted Stock Agreement
(excluding any actions or proceedings subject to the mandatory arbitration
provisions set forth below, but including any action to confirm an award of such
arbitrators and enter judgment thereon) may be commenced in the courts of the
state of Texas located in the County of Travis or the United States District
Courts located in the County of Travis. Samuels and you consent to in personam
jurisdiction with respect to such courts, agree that venue will be proper in
such courts and waive any objections based upon forum non conveniens. This
choice of forum shall not be deemed to preclude the enforcement of any judgment
obtained in such forum or the taking of any action under this Restricted Stock
Agreement to enforce same in any other jurisdiction.
With the exception of actions to enforce an arbitration award, all
claims and disputes between Samuels and you in connection with this Restricted
Stock Agreement shall be submitted to final and binding arbitration administered
and conducted by the American Arbitration Association in Austin, Texas pursuant
to its Labor Arbitration Rules then in effect; provided, that, that the party
seeking to submit a claim or dispute hereunder to arbitration shall give the
other party written notice of any arbitration proceeding at least 60 days' prior
to such proceeding; provided, further, that the parties mutually agree to
negotiate in good faith to resolve their differences prior to such arbitration
proceeding.
Very truly yours,
SAMUELS JEWELERS, INC.
By: /s/ Randy N. McCullough
----------------------------------------------
Name: Randy N. McCullough
Title: President and Chief Executive Officer
Agreed to and accepted
/s/ Bill R. Edgel
- -----------------------------------
Bill R. Edgel
6
EXHIBIT 10.8
SAMUELS JEWELERS, INC.
2914 Montopolis Drive, Suite 200
Austin, Texas 78741
September 29, 1998
Mr. Paul W. Hart
Dear Mr. Hart:
Samuels Jewelers, Inc. ("Samuels") hereby grants to you, as of the
Effective Date (as hereinafter defined) and subject to the conditions
hereinafter set forth, Twenty Five Thousand (25,000) shares of the Common Stock
(as hereinafter defined) of Samuels (the "Restricted Stock"). This letter
agreement (the "Restricted Stock Agreement") shall evidence such grant.
1. Date of Grant: This grant shall take effect on the Effective Date,
which for all purposes hereunder shall be deemed the Date of Grant.
2. Cost of Shares of Restricted Stock: This grant of Restricted Stock is
considered additional compensation, for the periods specified in paragraph 6,
and shall be at no cost to you.
3. Delivery of Restricted Stock: The Restricted Stock shall be issued to
you as a matter of record as of the Date of Grant but shall not be delivered to
you until certain specified conditions, hereinafter set forth, are met.
4. Dividend Rights: You shall have full dividend rights with respect to
each share of Restricted Stock, beginning with the Date of Grant, and shall
retain such rights so long as such share of Restricted Stock is not forfeited by
you prior to vesting or disposed of by you after vesting.
5. Voting Rights: You shall have full voting rights with respect to each
share of Restricted Stock, beginning with the Date of Grant, and shall retain
such rights so long as such share of Restricted Stock is not forfeited by you
prior to vesting or disposed of by you after vesting.
6. Vesting: One quarter (25%) of the shares of Restricted Stock shall be
deemed earned on the Date of Grant and shall vest and be delivered to you free
of any restriction imposed hereunder on the Date of Grant, one quarter (25%) of
the shares of Restricted Stock shall be deemed earned during the one-year period
ending on the first anniversary of the Date of Grant and shall vest and be
delivered to you free of any restriction imposed hereunder on the last day of
such period, one quarter (25%) of the shares of Restricted Stock shall be deemed
earned during the one-
HO1:\158504\01\3#@W01!.DOC\21901.0001
<PAGE>
year period ending on the second anniversary of the Date of Grant and shall vest
and be delivered to you free of any restriction imposed hereunder on the last
day of such period, and one quarter (25%) of the shares of Restricted Stock
shall be deemed earned during the one-year period ending on the third
anniversary of the Date of Grant and shall vest and be delivered to you free of
any restriction imposed hereunder on the last day of such period, provided
however, that except as provided in paragraph 8 below, such shares shall vest
and be delivered only if at the time set forth above for vesting and delivery
you are then in the employ of Samuels or one of its subsidiaries
("Subsidiaries"), as such term is defined in ss.424(f) of the Internal Revenue
Code of 1986, as amended ("Code"), and shall have been continuously so employed
since the Date of Grant. If there should come a time when you are no longer
employed by either Samuels or a Subsidiary of Samuels (collectively, the
"Company"), then at such time all shares of Restricted Stock not yet vested
shall be forfeited (except as provided in paragraph 8 below). Notwithstanding
the foregoing, the Board of Directors of Samuels in its sole discretion, may
accelerate the vesting schedule as set out above in whole or in part at any time
and from time to time.
7. Non-Transferability: No share of Restricted Stock shall be
transferable by you prior to vesting, except pursuant to (i) will or the laws of
descent and distribution upon your death or (ii) in connection with the Loan (as
such term is defined in the Employment Agreement between you and Samuels dated
as of even date herewith, as the same may be amended (as so amended, if amended,
the "Employment Agreement")).
8. Accelerated Vesting:
(a) Death or Disability: In the event of your death or Disability while
in the employ of the Company, all shares of Restricted Stock not yet vested due
to the restrictions set forth above shall become immediately vested and, if not
already delivered, shall be delivered to you or your estate. As used herein,
"Disability" shall mean the occurrence of an event or events that renders you
with respect to your physical or mental condition unable to perform, in the view
of the Board of Directors of Samuels and as certified in writing by a competent
medical physician, the duties of your position with the Company and which
results in your being entitled to benefits under Samuels' disability insurance
plan.
(b) Termination of Employment: In the event (i) your employment by the
Company is terminated Without Cause (as hereinafter defined) or (ii) you
voluntarily terminate your employment with the Company for Good Reason (as
hereinafter defined), then all shares of Restricted Stock not yet vested due to
the restrictions set forth above shall become immediately vested and, if not
already delivered, shall be delivered to you.
(c) Change in Control: In the event of a Change in Control (as
hereinafter defined), all shares of Restricted Stock not yet vested due to the
restrictions set forth above shall become immediately vested and, if not already
delivered, shall be delivered to you.
2
<PAGE>
9. Definitions:
(a) "Without Cause" means any termination of your employment by the
Company which is not a termination of employment for Cause or for Disability.
"Cause" means (i) your conviction for, or plea of nolo contendere to, any
felony; (ii) your willful fraud or material dishonesty in connection with your
performance of your duties in your position with the Company; (iii) your
failure, other than due to illness, Disability or death or as a result of any
event that constitutes Good Reason hereunder, to substantially perform your
duties in your position with the Company that results in material harm to the
Company; or (iv) your gross negligence in the performance of your duties in your
position with the Company (other than arising solely due to physical or mental
Disability) that results in material harm to the Company; in each case, for
purposes of clauses (iii) and (iv), after the Board of Directors of Samuels has
provided you with 30 days' written notice of such circumstances and the
possibility of an event giving rise to termination for Cause, and you fail to
cure such circumstances within those 30 days. For purposes of this definition,
no act, or failure to act, on your part shall be considered "willful" unless
done, or omitted to be done, by you in bad faith and without reasonable belief
that your action or omission was in the best interests of the Company. You shall
not be deemed to have been terminated for Cause unless and until the Board of
Directors of Samuels finds that your termination for Cause is justified and has
given you written notice of termination, specifying in detail the particulars of
your conduct found by the Board to justify such termination for Cause.
(b) "Good Reason," when used with reference to your voluntary
termination of your employment with the Company, means (i) a change in your
status, title, position or responsibilities (including reporting
responsibilities) which, in your reasonable judgment, represents an adverse
change from your status, title, position or responsibilities as in effect
immediately prior thereto; the assignment to you of any duties or
responsibilities which, in your reasonable judgment, are inconsistent with your
status, title, position or responsibilities; or any removal of you from or
failure to reappoint or reelect you to any of such offices or positions, except
in connection with the termination of your employment for Disability, Cause, as
a result of your death or by you other than for Good Reason; (ii) a breach by
the Company of the compensation and benefit provisions set forth in Sections 4
through 6 of the Employment Agreement; (iii) a written notice of non-renewal of
the Employment Agreement being given by Samuels to you pursuant to Section 3
thereof; (iv) the inability of Samuels and you to reach agreement on the terms
of a new employment agreement prior to the Expiration Date or any Renewal Date
(as such terms are defined in the Employment Agreement) that follows notice by
Samuels to you of its intent to renegotiate the terms of the Employment
Agreement; (v) any termination by you within twenty-four (24) months of the
occurrence of a Change in Control; (vi) a material breach by Samuels of any
other term of the Employment Agreement; provided, however, that none of the
events described in (i) through (vi) above shall be considered Good Reason, if
you consent, in writing, to the proposed action by Samuels which would otherwise
constitute Good Reason prior to the time the event actually occurs; and further
provided that no event described in clauses (i), (ii), or (vi) above shall be
considered Good Reason until you have provided Samuels with written notice which
(a) describes the event or occurrences which you believe constitute Good Reason
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and (b) provide Samuels with a minimum of fifteen (15) days in which to correct
or address such events or occurrences, after which if no such correction occurs
to your reasonable satisfaction, such event shall be deemed to be Good Reason.
(c) "Change of Control" shall mean the occurrence of (i) the dissolution
or liquidation of Samuels, (ii) a reorganization, merger or consolidation of
Samuels with one or more corporations as a result of which Samuels is not the
surviving corporation or as a result of which it is the surviving corporation
and its outstanding voting securities are converted to or reclassified as cash,
securities of another corporation or other property (unless the principal
purpose of such transaction is to change the state of Samuels' incorporation),
(iii) upon a sale of assets of Samuels having a fair market value equal to more
than 50% of the total fair market value of Samuels' assets to an entity which is
not controlling, controlled by or under common control with Samuels, or (iv) the
acquisition of a record or beneficial interest in more than 30% of the then
outstanding voting securities of Samuels, either in a single transaction or a
series of transactions, by an entity or "group" within the meaning of Section
13(d) of the Securities Exchange Act of 1934, as amended, and the rules and
regulations promulgated thereunder, which is not an affiliate of Samuels;
provided, however, that two or more persons or entities shall not be deemed to
constitute a "person" or "group" for purposes hereof in respect of any
securities of Samuels received by them pursuant to the Plan of Reorganization
merely by virtue of the fact that such persons or entities were each Bondholders
(as such term is defined in the Plan of Reorganization).
(d) "Common Stock" means shares of the common stock of Samuels, par
value $.001 per share, authorized and issued pursuant to the terms of the Plan
of Reorganization.
(e) "Effective Date" shall have the meaning ascribed to that term in the
Plan of Reorganization.
(f) "Plan of Reorganization" means the Original Disclosure Statement and
Plan of Reorganization dated April 30, 1998 proposed by Barry's Jewelers, Inc.,
as modified, as confirmed by the United States Bankruptcy Court for the Central
District of California (Case No. LA 97-27988 VZ).
10. Adjustment Upon Changes in Capitalization: In the event that each of
the outstanding shares of Common Stock of Samuels shall be changed into or
exchanged for a different number or kind of shares of stock or other securities
of Samuels or of another corporation or entity, whether by reason of stock
dividend, recapitalization, merger, consolidation, split-up, spinoff,
combination, exchange of shares or the like, then there shall be substituted for
each share of Restricted Stock the number and kind of shares of stock or other
securities into which each outstanding share of Common Stock of Samuels shall be
so changed or for which each such share shall be exchanged.
11. Taxes: When the shares of Restricted Stock vest or upon your earlier
election pursuant to Section 83(b) of the Code to be taxed at the time of the
transfer of the Restricted Stock, Samuels shall withhold from any delivery of
shares the amount required by law which is necessary to satisfy any federal and
state income tax, as well as any Federal Insurance Contributions Act ("FICA")
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withholding requirements. At such time, Samuels shall pay to the respective
taxing authority the amount of cash as is necessary (after taking into account
all federal, state and local income taxes and FICA taxes which would be payable
by you as a result of a deemed receipt of Samuels' payment) to place you in the
same after-tax position as you would have been in if no federal, state or local
income taxes were required to be withheld. For purposes of the preceding
sentence, it shall be conclusively presumed that your actual rate of income tax
shall equal the rate of withholding tax.
12. Right to Continued Employment: Nothing in this Agreement shall
confer upon you any right to continue in the employ of Samuels or any of its
Subsidiaries or interfere with the right of Samuels or any of its Subsidiaries
to terminate your employment at any time (subject to any rights you may have
under a separate employment agreement).
13. Investment Representation: In the event the Restricted Stock to be
delivered to you is not registered under the Securities Act of 1933, as amended
(the "1933 Act"), you represent to Samuels that the shares of Restricted Stock
to be received by you will be acquired for investment for your own account, not
as a nominee or agent, and not with a view to the sale or distribution of any
part thereof, and that at the time of receipt of such shares of Restricted Stock
you will have no present intention of selling, granting participation in or
otherwise distributing the same. You will reconfirm such investment
representation at the time of the future delivery of shares of Restricted Stock.
You further represent that you do not have any contract, undertaking, agreement
or arrangement with any person to sell, transfer or grant participation to such
person or to any third person with respect to any of the shares of Restricted
Stock.
You understand that if the Restricted Stock to be delivered to you is
not registered under the 1933 Act, on the grounds that the issuance of such
Restricted Stock is exempt from registration under the 1933 Act pursuant to
Section 4(2) thereof, Samuels' reliance on such exemption will be predicated on
your representations set forth herein.
You understand that the shares of Restricted Stock to be delivered to
you under this Restricted Stock Agreement may not thereafter be sold,
transferred or otherwise disposed of without registration under the 1933 Act or
an exemption therefrom.
In the event of any conflict between the terms of this Restricted Stock
Agreement and the Employment Agreement, the terms of the Employment Agreement
shall govern.
This Restricted Stock Agreement shall be governed by, construed, applied
and enforced in accordance with the laws of the state of Texas, except that no
doctrine of choice of law shall be used to apply any law other than that of
Texas, and no defense, counterclaim or right of set-off given or allowed by the
laws of any other state or jurisdiction, or arising out of the enactment,
modification or repeal of any law, regulation, ordinance or decree of any
foreign jurisdiction, shall be interposed in any action hereon.
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Any action or proceeding arising out of this Restricted Stock Agreement
(excluding any actions or proceedings subject to the mandatory arbitration
provisions set forth below, but including any action to confirm an award of such
arbitrators and enter judgment thereon) may be commenced in the courts of the
state of Texas located in the County of Travis or the United States District
Courts located in the County of Travis. Samuels and you consent to in personam
jurisdiction with respect to such courts, agree that venue will be proper in
such courts and waive any objections based upon forum non conveniens. This
choice of forum shall not be deemed to preclude the enforcement of any judgment
obtained in such forum or the taking of any action under this Restricted Stock
Agreement to enforce same in any other jurisdiction.
With the exception of actions to enforce an arbitration award, all
claims and disputes between Samuels and you in connection with this Restricted
Stock Agreement shall be submitted to final and binding arbitration administered
and conducted by the American Arbitration Association in Austin, Texas pursuant
to its Labor Arbitration Rules then in effect; provided, that, that the party
seeking to submit a claim or dispute hereunder to arbitration shall give the
other party written notice of any arbitration proceeding at least 60 days' prior
to such proceeding; provided, further, that the parties mutually agree to
negotiate in good faith to resolve their differences prior to such arbitration
proceeding.
Very truly yours,
SAMUELS JEWELERS, INC.
By: /s/ Randy N. McCullough
----------------------------------------------
Name: Randy N. McCullough
Title: President and Chief Executive Officer
Agreed to and accepted
/s/ Paul W. Hart
- ---------------------------------
Paul W. Hart
6
EXHIBIT 23.2
INDEPENDENT AUDITORS' CONSENT
We consent to the incorporation by reference in this
Registration Statement of Samuels Jewelers, Inc. (formerly Barry's Jewelers,
Inc.) on form S-8 of our report dated August 25, 1998 (which report expresses an
unqualified opinion and includes explanatory paragraphs referring to Barry's
Jewelers, Inc.'s ability to continue as a going concern as a result of the
filing for reorganization under Chapter 11 of the Federal Bankruptcy Code),
appearing in the Annual Report on Form 10-K of Barry's Jewelers, Inc. and to the
reference to us under the heading "Experts" in the Prospectus, which is part of
this Registration Statement.
DELOITTE & TOUCHE LLP
/s/ Deloitte & Touche LLP
Los Angeles, California
June 4, 1999
