<PAGE> 1
SCHEDULE 14A INFORMATION
PROXY STATEMENT PURSUANT TO SECTION 14(A) OF THE SECURITIES
EXCHANGE ACT OF 1934
Filed by the Registrant [ ]
Filed by a Party other than the Registrant [X]
Check the appropriate box:
<TABLE>
<S> <C>
[X] Preliminary Proxy Statement [ ] Confidential, for Use of the Commission
Only (as permitted by Rule 14a-6(e)(2))
[ ] Definitive Proxy Statement
[ ] Definitive Additional Materials
[ ] Soliciting Material Pursuant to sec.240.14a-11(c) or sec.240.14a-12
</TABLE>
LITTLE SWITZERLAND, INC.
- --------------------------------------------------------------------------------
(Name of Registrant as Specified in its Charter)
ASPEN INVESTMENTS INC.
- --------------------------------------------------------------------------------
(Name of Person(s) Filing Proxy Statement if other than the Registrant)
Payment of Filing Fee (Check the appropriate box):
[X] No fee required
[ ] Fee computed on table below per Exchange Act Rules 14a-6(i)(4) and 0-11
(1) Title of each class of securities to which transaction applies:
------------------------------------------------------------------------
(2) Aggregate number of securities to which transaction applies:
------------------------------------------------------------------------
(3) Per unit price or other underlying value of transaction computed
pursuant to Exchange Act Rule 0-11 (Set forth the amount on which the
filing fee is calculated and state how it was determined):
------------------------------------------------------------------------
(4) Proposed maximum aggregate value of transaction:
------------------------------------------------------------------------
(5) Total fee paid:
------------------------------------------------------------------------
[ ] Fee paid previously with preliminary materials.
[ ] Check box if any part of the fee is offset as provided by Exchange Act Rule
0-11(a)(2) and identify the filing for which the offsetting fee was paid
previously. Identify the previous filing by registration statement number,
or the Form or Schedule and the date of its filing.
(1) Amount Previously Paid:
------------------------------------------------------------------------
(2) Form, Schedule or Registration Statement No.:
------------------------------------------------------------------------
(3) Filing Party:
------------------------------------------------------------------------
(4) Date Filed:
------------------------------------------------------------------------
<PAGE> 2
PROXY STATEMENT
IN OPPOSITION TO THE SOLICITATION BY THE BOARD OF DIRECTORS OF
LITTLE SWITZERLAND, INC.
ANNUAL MEETING OF STOCKHOLDERS
OF LITTLE SWITZERLAND, INC.
TO BE HELD ON JANUARY 16, 1998
This Proxy Statement and the accompanying GOLD Proxy Card are being
furnished by Destination Retail Holdings Corporation, a Nevis corporation
(together with its predecessor, the Colombian Emeralds International group of
companies, "DRHC"), Mr. Stephen G.E. Crane, a resident of the Bahamas, and Aspen
Investments Inc., a Panama corporation ("Aspen", and together with DRHC and Mr.
Crane, the "DRHC Group"), to the stockholders of Little Switzerland, Inc., a
Delaware corporation (the "Company"), with its principal executive offices
located at 161-B Crown Bay Cruise Ship Port, St. Thomas, U.S. Virgin Islands
VI00802, to be used at the 1997 annual meeting of the stockholders of the
Company and any adjournments or postponements thereof (the "Annual Meeting").
DRHC operates 60 stores located throughout the Bahamas, the Eastern Caribbean
and Alaska. The merchandise presently offered at such stores consists of
emeralds and other gemstone jewelry, watches and other luxury products. The DRHC
Group understands that the Company (i) has selected December 10, 1997 as the
record date (the "Record Date") for determining the stockholders of the Company
entitled to notice of and to vote at the Annual Meeting and (ii) plans to hold
the Annual Meeting on January 16, 1998, at 10:30 a.m. local time at .
THIS SOLICITATION IS BEING MADE BY THE DRHC GROUP IN OPPOSITION TO THE
INCUMBENT BOARD OF DIRECTORS AND MANAGEMENT OF THE COMPANY.
On November 20, 1997, DRHC made an offer to the board of directors (the
"Board of Directors") of the Company to acquire all issued and outstanding
shares of common stock, par value $.01 per share (the "LSI Common Stock"), of
the Company pursuant to a merger (the "Proposed Merger") in which a wholly-owned
subsidiary of DRHC would be merged with and into the Company. At the effective
time of the Proposed Merger, each share of LSI Common Stock that is issued and
outstanding immediately prior to the effective time (other than shares of LSI
Common Stock in the treasury of the Company or owned by Mr. Crane, Aspen, DRHC
or any direct or indirect wholly-owned subsidiary of DRHC) would be converted
into the right to receive $ in cash. DRHC has received a firm financing
commitment from DLJ Bridge Finance, Inc. and Donaldson, Lufkin & Jenrette, Inc.
(collectively, "DLJ") to provide the funds necessary to consummate the Proposed
Merger.
In order to both facilitate and expedite the sale of the Company, the DRHC
Group is soliciting your proxy to elect Charles R. Scott and Ralph O. Hellmold
(the "DRHC Nominees") to the Board of Directors to serve until the year 2000
annual meeting of the stockholders of the Company and until their successors are
duly elected and qualified. Two Class III directors of the Company will be
elected at the Annual Meeting.
THE DRHC NOMINEES ARE COMMITTED, SUBJECT TO THEIR FIDUCIARY DUTIES TO THE
COMPANY'S STOCKHOLDERS, TO TAKE ALL ACTIONS NECESSARY OR APPROPRIATE TO CONVINCE
THE BOARD OF DIRECTORS TO PROMPTLY SELL THE COMPANY AT THE BEST AVAILABLE PRICE
AND ON THE MOST FAVORABLE TERMS. ABSENT A DEFINITIVE BONA FIDE OFFER AT A PRICE
AND ON TERMS MORE FAVORABLE TO THE COMPANY'S STOCKHOLDERS THAN THE PROPOSED
MERGER, THE DRHC NOMINEES INTEND, SUBJECT TO THEIR FIDUCIARY DUTIES TO THE
COMPANY'S STOCKHOLDERS, TO TAKE ALL ACTIONS NECESSARY OR APPROPRIATE TO CONVINCE
THE BOARD OF DIRECTORS TO CONSUMMATE THE PROPOSED MERGER.
This Proxy Statement and the accompanying GOLD Proxy Card are first being
sent or given on or about December , 1997 to the holders of record of LSI
Common Stock at the close of business on the Record Date. According to the
Company's Notice of Annual Meeting of Stockholders and Proxy Statement (the
"Company Proxy Statement") filed by the Company with the Securities and Exchange
Commission on December , 1997, as of the close of business on the Record Date,
there were shares of LSI Common Stock outstanding. Each share of LSI
Common Stock is entitled to one vote on all matters to come before the Annual
Meeting. The Company has no other class of voting securities outstanding.
<PAGE> 3
On December , 1997, Aspen was the beneficial owner of 300 shares of LSI
Common Stock and Mr. Crane was the beneficial owner of 261,100 shares of LSI
Common Stock. Neither DRHC nor either of the DRHC Nominees owns any shares of
LSI Common Stock. The DRHC Group believes that Aspen and Mr. Crane together own
% of the issued and outstanding shares of LSI Common Stock. Aspen and Mr.
Crane intend to vote their shares FOR the election of the DRHC Nominees.
IMPORTANT
Carefully review this Proxy Statement and the enclosed GOLD Proxy Card. No
matter how many or how few shares of LSI Common Stock you own, please vote FOR
the election of the DRHC Nominees to the Board of Directors by so indicating and
by signing, dating and mailing to the DRHC Group the GOLD Proxy Card promptly.
ONLY STOCKHOLDERS OF RECORD ON THE RECORD DATE ARE ENTITLED TO EXECUTE
PROXIES.
THE DRHC GROUP REQUESTS THAT YOU DO NOT VOTE ON OR RETURN TO THE COMPANY
ANY PROXY CARD PROVIDED TO YOU BY THE COMPANY OR ANY OTHER STOCKHOLDER OF THE
COMPANY, EVEN TO VOTE AGAINST THE INCUMBENT BOARD'S SLATE OR ANY OTHER SLATE OF
NOMINEES. RETURNING ANY PROXY CARD PROVIDED TO YOU BY THE COMPANY COULD REVOKE
THE GOLD PROXY CARD THAT YOU SIGN, DATE AND SEND TO THE DRHC GROUP.
If you own shares of LSI Common Stock, but your stock certificate is held
for you by a brokerage firm, bank or other institution, it is very likely that
the stock certificate is actually in the name of such brokerage firm, bank or
other institution. If so, only such entity can execute a GOLD Proxy Card and
vote your shares of LSI Common Stock. The brokerage firm, bank, or other
institution holding the shares of LSI Common Stock for you is required to
forward proxy materials to you and to solicit your instructions with respect to
the granting of proxies; it cannot vote your shares of LSI Common Stock unless
it receives your instructions. PLEASE INSTRUCT THE BROKERAGE FIRM, BANK, OR
OTHER INSTITUTION HOLDING THE SHARES OF LSI COMMON STOCK FOR YOU TO VOTE SUCH
SHARES FOR THE ELECTION OF THE DRHC NOMINEES TO THE BOARD OF DIRECTORS BY
SIGNING, DATING AND MAILING TO THE DRHC GROUP ON YOUR BEHALF THE GOLD PROXY CARD
PROMPTLY.
Any stockholder giving a proxy may revoke it at any time before it is voted
by attending the Annual Meeting and voting his or her shares of LSI Common Stock
in person, by giving written notice to the Secretary of the Company at 161-B
Crown Bay Cruise Ship Port, St. Thomas, U.S. Virgin Islands VI00802 stating that
the proxy has been revoked, or by delivery of a proxy bearing a later date.
A VOTE FOR THE DRHC NOMINEES WILL ENABLE YOU, AS THE OWNERS OF THE COMPANY,
TO SEND A MESSAGE TO THE BOARD OF DIRECTORS THAT YOU ARE IN FAVOR OF A SALE OF
THE COMPANY.
If you have any questions about giving your proxy or require assistance in
voting your shares of LSI Common Stock, please call:
LOGO
156 FIFTH AVENUE
NEW YORK, NY 10010
(212) 929-5500 (COLLECT)
OR
CALL TOLL-FREE (800) 322-2885
2
<PAGE> 4
WHY SHOULD YOU VOTE FOR THE DRHC NOMINEES
As indicated under "Background of the Proposed Merger" below, the incumbent
Board of Directors has rejected three formal offers by DRHC for a
stock-for-stock business combination between the Company and DRHC and has not
accepted a fourth all cash offer of $ per share. DRHC has been informed by the
Company's financial advisor that the Board of Directors has commenced a process
through which the Company may be sold, however, the Company has disclosed
publicly that there can be no assurance as to the timing of any such transaction
or whether any such transaction will be agreed to or consummated as a result of
the Board of Directors pursuing this sale process.
A vote for the DRHC Nominees will provide you, as the owners of the
Company, with at least two representatives on the Board of Directors who are
committed, subject to their fiduciary duties to the Company's stockholders, to a
prompt sale of the Company at the best available price and on the most favorable
terms, which, in the absence of a definitive bona fide offer at a price and on
terms more favorable to the Company's stockholders than those offered by DRHC,
would be provided by the Proposed Merger. Although they have been nominated by
Aspen, the DRHC Nominees are not affiliates of Aspen or DRHC, and they are fully
committed to acting independently as directors in the best interests of, and to
fulfilling their fiduciary duties to, the Company's stockholders.
If, like us, you believe that you should have the opportunity to decide the
future of your company and that you should have the chance to receive at least
$ per share for all of your shares of LSI Common Stock (a % premium over
the average last sale price ($4.69) of the LSI Common Stock during the one month
period preceding the joint filing of a Schedule 13-D by ValueVest Partners L.P.
and Donald L. Sturm on May 5, 1997, which the DRHC Group believes led to market
speculation, increased trading activity and a resulting increase in the price of
the LSI Common Stock), the DRHC Group urges you to vote your GOLD Proxy Card FOR
each of the DRHC Nominees.
The DRHC Nominees support the prompt sale of the Company at the best
available price and on the most favorable terms and, if elected, will, subject
to their fiduciary duties to the Company's stockholders, seek to convince the
Board of Directors to take all steps necessary or appropriate to conduct a
prompt auction and sale of the Company at the best available price and on the
most favorable terms. If elected, the DRHC Nominees will seek to convince the
Board of Directors to conduct an auction process in which any parties who have
recently indicated or subsequently indicate a bona fide interest in acquiring
the Company would have the opportunity to submit definitive offers during the
two-week period following the date on which the DRHC Nominees take office (or
such longer period as the Board of Directors may determine is required by their
fiduciary duties in light of inquiries received at such time). The DRHC Nominees
would then, subject to their fiduciary duties to the Company's stockholders,
seek to convince the Board of Directors to negotiate and enter into an agreement
with the party submitting the offer which, in their independent judgment, is at
a price and on terms most favorable to the Company's stockholders, and would
seek to convince the Board of Directors to take all action necessary or
appropriate to permit the Company's stockholders to accept and/or approve such
transaction. Absent a definitive bona fide offer at a price and on terms more
favorable to the Company's stockholders than the Proposed Merger, the DRHC
Nominees intend, subject to their fiduciary duties to the Company's
stockholders, to take all such actions necessary or appropriate to convince the
Board of Directors to consummate the Proposed Merger. If a definitive bona fide
offer superior to the Proposed Merger is received, the DRHC Nominees would
expect to take similar actions in respect of such transaction.
If elected, the DRHC Nominees will constitute a minority of the six member
Board of Directors. Under the Company's Amended and Restated Certificate of
Incorporation and By-Laws, a majority of the whole Board of Directors
constitutes a quorum, and board action may be taken by the vote of a majority of
the directors when a quorum is present. Accordingly, the DRHC Nominees would
generally not be able, without the support of other directors, to unilaterally
take board action. Nonetheless, if elected, the DRHC Nominees will, subject to
their fiduciary duties to the Company's stockholders, seek to convince other
members of the Board of Directors to vote with them to approve the sale of the
Company, pursuant to the Proposed Merger or otherwise.
3
<PAGE> 5
There can be no assurance that election of the DRHC Nominees will result in
consummation of the Proposed Merger or any other sale of the Company in light of
what the DRHC Group believes to be continuing opposition thereto by the current
Board of Directors. The DRHC Group believes, however, that replacement of a
third of the Board of Directors represents the best means for the Company's
stockholders to express their support for the prompt sale of the Company,
pursuant to the Proposed Merger or otherwise.
The Proposed Merger is subject to certain conditions and will not be
consummated until those conditions are satisfied or waived. However, the
Proposed Merger is not conditioned upon DRHC obtaining financing or conducting
any due diligence investigation of the Company. Additional information
concerning the Proposed Merger is contained under "Terms and Conditions of the
Proposed Merger" below.
IF YOU BELIEVE THAT YOU SHOULD HAVE THE OPPORTUNITY TO DECIDE THE FUTURE OF
YOUR COMPANY AND THAT YOU SHOULD HAVE THE CHANCE TO RECEIVE AT LEAST $
PER SHARE FOR ALL OF YOUR SHARES OF LSI COMMON STOCK, THE DRHC GROUP URGES YOU
TO VOTE YOUR GOLD PROXY CARD FOR EACH OF THE DRHC NOMINEES.
THE SOLICITATION AND THE DRHC NOMINEES
INTRODUCTION
In order to pursue a business combination with the Company, DRHC, of which
Mr. Crane is the President and the controlling stockholder, determined that it
would cause the nomination of its designees for election to the Board of
Directors at the Annual Meeting. In order to nominate nominees for election at
the Annual Meeting, the Company's By-Laws require (i) the nominator to be a
record holder of LSI Common Stock both at the time the nomination is made and at
the time of the Annual Meeting and (ii) delivery of certain information about
the nominator and the nominees to the Company not less than 75 days nor more
than 120 days prior to the anniversary date of the prior year's annual meeting
of stockholders. On July 17, 1997, Aspen, at the request of Mr. Crane, purchased
100 shares of LSI Common Stock. At the request of Mr. Crane, on July 25, 1997,
Aspen submitted to the Secretary of the Company a Notice of Nomination pursuant
to the By-Laws of the Company (the "Notice"). The Notice set forth Aspen's
intention to nominate Mr. Crane and Mr. R. Christopher Cooper, the Chief
Financial Officer of DRHC, for election to the Board of Directors at the Annual
Meeting.
By letter dated August 14, 1997, the Company notified Aspen that its
nomination of Mr. Crane and Mr. Cooper had been rejected because Aspen was not a
record holder of LSI Common Stock as of the date of the Notice and was,
therefore, not in compliance with the advance notice nomination procedures set
forth in the Company's By-Laws. The DRHC Group believed that the Company's
By-Laws required Aspen to be a record holder as of the date the Notice was
delivered to the Company. In fact, Aspen was a record holder of LSI Common Stock
as of the date the Notice was delivered to the Company. Accordingly, on
September 16, 1997, Aspen commenced litigation in the Delaware Court of Chancery
to challenge the Company's rejection of its nomination. On September 18, 1997,
the Company and DRHC executed a stipulation in the Delaware Court of Chancery
which provided that Aspen would be permitted to nominate Mr. Crane and Mr.
Cooper for election as directors at the Annual Meeting.
On September 12, 1997, Aspen submitted a Demand for Stockholders List to
the Company pursuant to Section 220 of the General Corporation Law of the State
of Delaware for the purpose of permitting the DRHC Group to communicate with the
Company's stockholders concerning the matters set forth in this Proxy Statement.
The Company complied with such Demand for Stockholders List.
Notwithstanding the stipulation which was agreed to by the Company and
filed in the Delaware Court of Chancery, by letter dated November 12, 1997, the
Company advised Aspen that the Board of Directors had approved an amendment to
the Company's By-Laws which, if valid, prohibits competitors of the Company from
serving as directors of the Company. Since Mr. Crane and Mr. Cooper were now
allegedly disqualified by such amendment from serving as directors of the
Company, the Board of Directors gave Aspen ten days to nominate two other
nominees. On November 13, 1997, Aspen notified the Company that it reserved the
right to challenge the validity of the By-Laws amendment and requested an
extension of the period during which it could submit new nominations until
December 5, 1997. The Company granted the extension. On December 5, 1997, the
Company nominated Mr. Scott and Mr. Hellmold.
4
<PAGE> 6
THE SOLICITATION
The Company currently has six directors, divided into three classes of two
directors each, having staggered terms of three years each. The terms of two
incumbent directors, C. William Carey and John E. Toler, Jr., will expire at the
Annual Meeting. According to the Company Proxy Statement, the Board of Directors
is soliciting proxies in favor of the election of its two incumbent directors
(C. William Carey and John E. Toler, Jr.) as nominees for election as directors
to serve until the year 2000 annual meeting of the stockholders of the Company
and until their successors are duly elected and qualified. The DRHC Group is
soliciting your proxy for the election to the Board of Directors of Mr. Scott
and Mr. Hellmold to serve until the year 2000 annual meeting of the stockholders
of the Company and until their successors are duly elected and qualified.
THE DRHC NOMINEES
Biographical data on the DRHC Nominees is set forth below:
CHARLES R. SCOTT, age 69, has been the President and Chief Executive
Officer of Leadership Centers USA, Inc., which conducts business under the name
TEC-The Executive Committee, since 1994. From 1991 to 1994, Mr. Scott was the
President and Chief Executive Officer and a director of The Actava Group Inc.
(formerly known as Fuqua Industries, Inc.). From 1970 to 1991, Mr. Scott was the
Chairman, President and Chief Executive Officer of Intermark, Inc. Mr. Scott is
a director of Pier 1 Imports, Inc. and The Union Bank of California. Mr. Scott
received his undergraduate degree from The University of Texas in 1949. The
business address of Mr. Scott is c/o TEC-The Executive Committee, 365 King Road
NW, Atlanta, Georgia 30342. Mr. Scott does not own any shares of LSI Common
Stock.
RALPH O. HELLMOLD, age 57, is the founder and has been the President of
Hellmold Associates, Inc., an investment banking firm which specializes in
mergers and acquisitions and acts as general partner of a hedge fund, since
1990. From 1987 to 1990, Mr. Hellmold was a Managing Director at
Prudential-Bache Capital Funding, where he served as co-head of the Corporate
Finance Group, co-head of the Investment Banking Committee and head of the
Financial Restructuring Group. From 1974 to 1987, Mr. Hellmold was a partner at
Lehman Brothers and its successors, where he worked in Corporate Finance and
co-founded the Financial Restructuring Group. Mr. Hellmold received his
undergraduate degree magna cum laude from Harvard College in 1962 and an M.I.A.
from Columbia University in 1964. Mr. Hellmold is a director of Core Materials
Corp. (a plastics manufacturer), International Aircraft Investors (an aircraft
leasing company), AHL Shipping Company (a Jones Act shipping company), The
Gammon Group (a circuit board manufacturer) and Q.C. Leasing (a holding company
which controls The Gammon Group), and he is an independent trustee of Ridgewood
Electric Power Trusts II and III, Delaware business trusts. The business address
of Mr. Hellmold is c/o Hellmold Associates, Inc., 540 Fifth Avenue, New York,
New York 10019. Mr. Hellmold does not own any shares of LSI Common Stock.
Each of the DRHC Nominees has consented to serve as a director of the
Company and, if elected, intends to discharge his duties as a director in
compliance with all applicable legal requirements, including the general
fiduciary obligations imposed upon corporate directors.
Each of the DRHC Nominees, if elected, would serve as a director for the
term expiring in the year 2000.
Each of the DRHC Nominees has entered into a Nominee Agreement with DRHC
pursuant to which each such DRHC Nominee will be paid a fee of up to $10,000 and
will be indemnified by DRHC for any expenses or liabilities incurred by each
such DRHC Nominee in connection with his nomination to serve on the Board of
Directors.
5
<PAGE> 7
BACKGROUND OF THE PROPOSED MERGER
INTRODUCTION
In June 1997, Mr. Crane decided to pursue a business combination between
DRHC, of which he is the President and the controlling stockholder, and the
Company. Mr. Crane believes that significant synergies and economies of scale
can be achieved in the areas of marketing, purchasing, distribution and
management, among others, by combining the business operations of the Company
and DRHC. To facilitate such a combination, Mr. Crane began acquiring shares of
LSI Common Stock in July, 1997.
As indicated below, the incumbent Board of Directors has rejected three
formal offers by DRHC for a stock-for-stock business combination between the
Company and DRHC and has not accepted a fourth all cash offer of $ per
share. DRHC has been informed by the Company's financial advisor that the Board
of Directors has commenced a process through which the Company may be sold,
however, the Company has disclosed publicly that there can be no assurance as to
the timing of any such transaction or whether any such transaction will be
agreed to or consummated as a result of the Board of Directors pursuing this
sale process.
FOUR FORMAL OFFERS BY DRHC
On July 11, 1997, DRHC submitted to the Board of Directors a written offer
(the "First Offer") for the Company to enter into a stock-for-stock transaction
with DRHC pursuant to which the controlling stockholder of DRHC would own at
least a majority of the issued and outstanding shares of LSI Common Stock
following consummation of the transaction. DRHC expressed its belief that a
business combination with DRHC would provide the Company with a proven regional
management team, excellent communication and distribution capabilities and the
ability to increase the Company's revenues and earnings. In addition, DRHC made
known its preparedness to enter into immediate negotiations with the Company to
effectuate the proposed transaction or to discuss alternative transaction forms
that the Company might suggest. The Company did not formally respond to the
First Offer or publicly disclose its receipt.
DRHC submitted a second offer to the Board of Directors on July 23, 1997
(the "Second Offer"). The Second Offer contained a definitive offer by DRHC to
enter into a stock-for-stock transaction with the Company pursuant to which (i)
DRHC would contribute all of the capital stock of the entities which comprise
DRHC to the Company and (ii) the controlling stockholder of DRHC would own
approximately 75% of the issued and outstanding shares of LSI Common Stock
following consummation of the transaction. Once again, DRHC expressed its desire
to enter into immediate negotiations with the Company to effectuate the proposed
transaction and its willingness to discuss any alternative transaction forms
that the Company might suggest. The Company did not publicly disclose receipt of
the Second Offer.
On August 7, 1997, DRHC's financial advisors met with the Company's
financial advisors to explore the Company's willingness to negotiate a business
combination with DRHC. This meeting was followed by several telephone
discussions between their respective financial advisors. On August 14, 1997, the
Company's financial advisors contacted DRHC's financial advisors to inform them
that the Company was not prepared to discuss a business combination as
contemplated by the Second Offer.
On August 29, 1997, the Company issued a press release stating that it
would not timely file its Form 10-K for fiscal year 1997 because certain
transactions might have been recorded in error on the books of the Company.
Due to the unavailability of the Company's fiscal year 1997 financial
results, on September 8, 1997, DRHC made a revised written offer to the Board of
Directors (the "Third Offer") based on the 1996 fiscal year-end and 1997
quarterly financial results. The Third Offer contemplated the following business
combination transaction (the "Transaction"): (i) DRHC would contribute all of
the capital stock or assets of the entities which comprise DRHC to the Company,
(ii) the Company would issue such number of shares of LSI Common Stock to the
controlling stockholder of DRHC so as to give such stockholder a fully-diluted
77.5% interest in the Company upon consummation of the Transaction, and (iii)
record holders of LSI Common Stock on the business day immediately prior to the
Transaction closing date would be granted a one-time, non-transferable right to
put the shares of LSI Common Stock held by them of record as of such date to the
Company on the first anniversary of the Transaction closing date at a price of
$6.15 per share. In addition, the Third Offer provided that if the Company's
stockholders should desire increased liquidity following consum-
6
<PAGE> 8
mation of the Transaction, the Company would, subject to the satisfaction of any
necessary SEC registration requirements, offer such stockholders the opportunity
to participate in a registered secondary redistribution of their shares of LSI
Common Stock.
On September 15, 1997, the Company's financial advisor notified DRHC's
financial advisor that the Company would defer consideration of the Third Offer
because the Company's Form 10-K for fiscal year 1997 had not yet been filed. The
Company did not publicly disclose receipt of the Third Offer.
Based on the notification that the Company had decided to defer
consideration of the Third Offer, on September 17, 1997, DRHC sent a letter to
the Company encouraging the Company to meet with DRHC to discuss the Third
Offer.
On October 31, 1997, the Company's financial advisor notified DRHC's
financial advisor that the Company had rejected the Third Offer.
By letter dated November 7, 1997, the Company's financial advisor notified
DRHC that the Company had engaged them to explore a possible sale of the Company
and invited DRHC to submit a cash offer for the Company.
On November 20, 1997, DRHC submitted a proposal to the Board of Directors
(the "Fourth Offer") to acquire all issued and outstanding shares of LSI Common
Stock by means of a merger in which each share of LSI Common Stock would be
exchanged for $ in cash.
By letter dated November 24, 1997, the Company's financial advisor notified
DRHC that the Company had received the Fourth Offer and indications of interest
from other prospective purchasers. The Company's financial advisor invited DRHC
to schedule a meeting with representatives of the Company's management and
indicated that the Company would be soliciting another round of bids from DRHC
and certain other prospective purchasers in the future.
TERMS AND CONDITIONS OF THE PROPOSED MERGER
On November 20, 1997, DRHC submitted a proposal to the Board of Directors
to acquire all issued and outstanding shares of LSI Common Stock by means of a
merger in which each share of LSI Common Stock would be exchanged for
$ in cash. DRHC has received a firm financing commitment from DLJ to
provide the funds necessary to consummate the Proposed Merger. Accordingly, the
Proposed Merger is not conditioned upon the availability of financing. In
addition, the offer to enter into the Proposed Merger is not conditioned upon
DRHC or its representatives conducting any due diligence investigation of the
Company. The offer to enter into the Proposed Merger is, however, subject to the
execution of a merger agreement acceptable to the Company and DRHC with respect
to the Proposed Merger, which shall include customary terms and conditions,
including, among others, fiduciary termination provisions for the benefit of the
Board of Directors and the payment to DRHC of a termination fee upon termination
of the Proposed Merger under certain specified circumstances. Consummation of
the Proposed Merger would also be conditioned upon, among other things,
satisfaction of certain customary conditions at or prior to closing, including:
(i) approval of the Proposed Merger by the Board of Directors and the requisite
vote of the Company's stockholders; (ii) no material adverse change in the
Company's business, assets, liabilities, financial condition or prospects since
August 31, 1997; and (iii) the receipt of any required regulatory approvals and
third party consents.
OTHER MATTERS TO BE CONSIDERED
AT THE ANNUAL MEETING
Except as set forth above, the DRHC Group is not aware of any proposals to
be brought before the Annual Meeting. Should other proposals be brought before
the Annual Meeting, the attorneys-in-fact named on the GOLD Proxy Card will
abstain from voting on such proposals unless such proposals adversely affect the
nomination or election of the DRHC Nominees or the consummation of the Proposed
Merger, as determined by the DRHC Group in its sole discretion, in which event
such persons will vote on such proposals in their discretion.
The GOLD Proxy Card will be voted in accordance with your instructions on
such card. IF YOU SIGN THE GOLD PROXY CARD AND NO MARKING IS MADE, YOU WILL BE
DEEMED TO HAVE
7
<PAGE> 9
GIVEN A DIRECTION TO VOTE THE SHARES OF LSI COMMON STOCK REPRESENTED BY THE GOLD
PROXY CARD IN FAVOR OF THE ELECTION OF THE DRHC NOMINEES.
VOTING AND PROXY PROCEDURES
The presence in person or by proxy of a majority of the outstanding shares
of LSI Common Stock will constitute a quorum at the Annual Meeting. Each
outstanding share of LSI Common Stock is entitled to one vote on each matter
properly presented at that meeting and a majority vote of the shares of LSI
Common Stock present in person or by proxy at that meeting will be required to
approve each matter.
Directors of the Company are elected by a plurality of the votes cast by
the stockholders entitled to vote at a meeting at which a quorum is present. A
plurality means that the nominees with the largest number of votes are elected
as directors, up to the maximum number of directors to be chosen at the meeting.
Consequently, election of the DRHC Nominees requires the affirmative vote of a
plurality of the votes cast in the election at the Annual Meeting, assuming a
quorum is present or otherwise represented at the Annual Meeting. All other
matters submitted at the Annual Meeting will be determined by a majority of the
votes cast.
Shares of LSI Common Stock represented by proxies that withhold authority
with respect to the election of one or more nominees for election as director
and proxies which are marked "abstain" on other proposals, will not be counted
in determining whether a plurality or majority vote was obtained on such
matters. If no directions are given and the signed GOLD Proxy Card is returned,
the attorneys-in-fact appointed in the proxy will vote the shares of LSI Common
Stock represented by that GOLD Proxy Card FOR the election of the DRHC Nominees.
In instances where brokers are prohibited from exercising customary
discretionary authority for beneficial owners who have not returned proxies to
the brokers, those shares of LSI Common Stock will not be counted in the vote
total.
Stockholders of record as of the close of business on the Record Date will
be entitled to vote at the Annual Meeting. IF YOU WERE A STOCKHOLDER OF RECORD
ON THE RECORD DATE, YOU WILL RETAIN THE VOTING RIGHTS IN CONNECTION WITH THE
ANNUAL MEETING EVEN IF YOU SELL OR SOLD YOUR SHARES OF LSI COMMON STOCK AFTER
THE RECORD DATE. Accordingly, it is important that you vote the shares of LSI
Common Stock held by you on the Record Date or grant a proxy to vote such shares
whether or not you will own such shares.
At the Annual Meeting, two Class III directors are to be elected to hold
office until the year 2000 annual meeting of the stockholders of the Company and
until their successors have been duly elected and qualified. The DRHC Group is
soliciting your proxy in support of the election of the DRHC Nominees. If you
wish to vote for the DRHC Nominees by proxy, you must submit the GOLD Proxy Card
furnished to you by the DRHC Group and must NOT submit the Board of Directors'
White Proxy Card. A stockholder may not submit a proxy card to vote for both the
DRHC Nominees and the Company's nominees; if a stockholder submits both a GOLD
Proxy Card and the Company's White Proxy Card, only the latest dated proxy will
be counted.
THE DRHC GROUP REQUESTS THAT YOU DO NOT VOTE ON OR RETURN TO THE COMPANY
ANY PROXY CARD PROVIDED TO YOU BY THE COMPANY, EVEN TO VOTE AGAINST THE
INCUMBENT BOARD'S SLATE OF NOMINEES. RETURNING ANY PROXY CARD PROVIDED TO YOU BY
THE COMPANY COULD REVOKE THE GOLD PROXY CARD THAT YOU SIGN, DATE AND SEND TO THE
DRHC GROUP.
Any stockholder giving a proxy may revoke it at any time before it is voted
by attending the Annual Meeting and voting his or her shares of LSI Common Stock
in person, by giving written notice to the Secretary of the Company at 161-B
Crown Bay Cruise Ship Port, St. Thomas, U.S. Virgin Islands VI00802 stating that
the proxy has been revoked, or by delivery of a proxy bearing a later date.
An executed proxy card may be revoked at any time before its expiration by
marking, dating, signing and delivering a written revocation before the time
that the action authorized by the executed proxy becomes effective. A revocation
may be in any written form validly signed by the record holder as long as it
clearly states that the proxy card which is properly completed will constitute a
revocation of an earlier consent. Although a revocation is effective if
delivered to the Company, the DRHC Group requests that either the original or
photostatic copies of all revocations of proxies be mailed or delivered to
MacKenzie Partners, Inc.,
8
<PAGE> 10
at the address set forth below, so that it will be aware of all revocations and
can more accurately determine which proxies that have been received are valid.
STOCKHOLDERS OF RECORD ON THE RECORD DATE ARE ELIGIBLE TO VOTE ON THE
MATTERS DISCUSSED ABOVE. ANYONE OWNING SHARES OF LSI COMMON STOCK BENEFICIALLY
(BUT NOT OF RECORD), SUCH AS A PERSON WHOSE OWNERSHIP OF SHARES IS THROUGH A
BROKER, BANK OR OTHER FINANCIAL INSTITUTION, SHOULD CONTACT THAT BROKER, BANK OR
FINANCIAL INSTITUTION WITH INSTRUCTIONS TO EXECUTE THE GOLD PROXY CARD ON HIS OR
HER BEHALF OR TO HAVE THE BROKER, BANK OR FINANCIAL INSTITUTION'S NOMINEE
EXECUTE THE GOLD PROXY CARD.
SOLICITATION OF PROXIES
Proxies may be solicited by the DRHC Group and by its agents by mail,
telephone, telegraph and personal solicitation. Banks, brokerage houses and
other custodians, nominees and fiduciaries will be requested to forward proxy
solicitation material to the beneficial owners of the LSI Common Stock that such
institutions hold of record.
The entire expense of preparing and mailing this Proxy Statement and the
total expenditures relating to the solicitation of proxies (including, without
limitation, costs, if any, related to advertising, printing, fees of attorneys,
financial advisors, solicitors, consultants, accountants, public relations,
transportation and litigation) will be borne by the DRHC Group.
The DRHC Group has retained MacKenzie Partners, Inc. (the "Agent") to
assist it in the solicitation of proxies and for related services. The DRHC
Group has agreed to pay the Agent an estimated fee of up to $ and has
agreed to reimburse it for its reasonable out-of-pocket expenses. The Agent will
solicit proxies for the Annual Meeting from individuals, brokers, banks,
nominees and other institutional holders. Approximately persons will
be used by the Agent in its solicitation efforts. The DRHC Group estimates that
its total expenditures relating to this proxy solicitation will be approximately
$ . Total expenditures to date relating to this proxy solicitation have
been approximately $ .
The DRHC Group does not intend to seek reimbursement from the Company for
its expenses in connection with this proxy solicitation.
ADDITIONAL INFORMATION
DRHC operates 60 stores located throughout the Bahamas, the Eastern
Caribbean and Alaska. The merchandise presently offered at such stores consists
of emeralds and other gemstone jewelry, watches and certain other luxury
products. Aspen is a privately held investment company. The principal address of
DRHC is International Bazaar, P.O. Box F-40349, Freeport, Bahamas. The principal
address of Aspen is P.O. Box F-42544, Freeport, Bahamas.
Certain information about the directors and executive officers of DRHC and
Aspen is set forth in Schedule I attached hereto. Schedule II attached hereto
sets forth certain information relating to shares of LSI Common Stock owned by
DRHC, Aspen, their respective directors and executive officers, and the DRHC
Nominees, and certain transactions between any of them and the Company.
Stockholders are referred to the Company Proxy Statement with respect to
the compensation and remuneration paid and payable and other information related
to the Company's officers and directors, beneficial ownership of the Company's
securities and the procedures for submitting proposals for consideration at the
1998 annual meeting of the stockholders of the Company.
The DRHC Group assumes no responsibility for the accuracy or completeness
of any information contained herein which is based on, or incorporated by
reference to, the Company Proxy Statement.
DESTINATION RETAIL HOLDINGS CORPORATION
STEPHEN G.E. CRANE
ASPEN INVESTMENTS INC.
December , 1997
9
<PAGE> 11
IMPORTANT
1. If your shares of LSI Common Stock are registered in your own name,
please sign, date and return the GOLD Proxy Card furnished to you by the
DRHC Group.
2. If your shares of LSI Common Stock are held in the name of a brokerage
firm, bank nominee or other institution, only it can sign a GOLD Proxy
Card with respect to your shares.
3. Time is critically short. Only your latest dated Proxy Card will count.
Please sign, date and mail the enclosed GOLD Proxy Card today in the
envelope provided.
If you have any questions about giving your proxy or require assistance in
voting your shares of LSI Common Stock, please call:
LOGO
156 Fifth Avenue
New York, NY 10010
(212) 929-5500 (Collect)
or
CALL TOLL-FREE (800) 322-2885
10
<PAGE> 12
SCHEDULE I
INFORMATION CONCERNING THE DIRECTORS AND EXECUTIVE OFFICERS OF DRHC
AND ASPEN
The following table sets forth the name and the present principal
occupation or employment, and the name, principal business and address of any
corporation or other organization in which such employment is carried on, of (1)
the directors and executive officers of DRHC, and (2) the directors and
executive officers of Aspen. Unless otherwise indicated, the principal business
address of (i) each director, or executive officer of DRHC named below is c/o
Destination Retail Holdings Corporation, International Bazaar, P.O. Box F-40349,
Freeport, Bahamas, and (ii) the principal business address of each director, or
executive officer of Aspen named below is P.O. Box F-42544, Freeport, Bahamas.
DIRECTORS AND EXECUTIVE OFFICERS OF DRHC
<TABLE>
<CAPTION>
PRESENT OFFICE OR OTHER
NAME PRINCIPAL OCCUPATION OR EMPLOYMENT
- ----------------------- -------------------------------------------------------------
<S> <C> <C>
Stephen G.E. Crane President, Chief Executive Officer and a Director of DRHC
President of the Retail Group of Adanac Investment Co., Ltd.
R. Christopher Cooper Chief Financial Officer, Treasurer and a Director of DRHC
Chief Financial Officer of Adanac Investment Co., Ltd.
David S. McPhail Chief Operating Officer, Secretary and a Director of DRHC
Vice President -- Operations of Adanac Investment Co., Ltd.
</TABLE>
DIRECTORS AND EXECUTIVE OFFICERS OF ASPEN
<TABLE>
<CAPTION>
PRESENT OFFICE OR OTHER
NAME PRINCIPAL OCCUPATION OR EMPLOYMENT
- ----------------------- -------------------------------------------------------------
<S> <C> <C>
Robert E. Cordes President and a Director of Aspen
Principal of Management and Service Company Limited
Wenche J. Cordes Vice President, Treasurer and a Director of Aspen
Lynn Turnquest Secretary and a Director of Aspen
</TABLE>
<PAGE> 13
SCHEDULE II
SHARES HELD BY DRHC, ASPEN, THEIR RESPECTIVE DIRECTORS AND EXECUTIVE OFFICERS,
AND THE DRHC NOMINEES
Mr. Crane is the beneficial owner of 261,100 shares of LSI Common Stock.
The following table sets forth information with respect to all purchases and
sales of shares of LSI Common Stock by Mr. Crane during the past two years. Each
of these transactions was effected on the open market. Other than as noted, the
price per share excludes brokerage commissions and other charges.
<TABLE>
<CAPTION>
NUMBER OF SHARES
PURCHASED DATE PRICE PER SHARE
- ---------------- ------------- ---------------
<C> <S> <C>
8,100 July 14, 1997 $ 6.50
23,000 July 15, 1997 $ 6.4891
33,700 July 21, 1997 $ 6.8417
200 July 22, 1997 $ 6.90625
43,500 July 23, 1997 $ 7.061
67,200 July 24, 1997 $ 7.159
2,000 July 25, 1997 $ 7.125
23,400 July 29, 1997 $ 7.187
60,000 July 30, 1997 $ 7.318
</TABLE>
Aspen is the record owner of 300 shares of LSI Common Stock. Robert E.
Cordes, the President and a director of Aspen, is the beneficial owner of such
300 shares of LSI Common Stock. The following table sets forth information with
respect to all purchases and sales of shares of LSI Common Stock by Aspen during
the past two years. Each of these transactions was effected on the open market.
Other than as noted, the price per share excludes brokerage commissions and
other charges.
<TABLE>
<CAPTION>
NUMBER OF SHARES
PURCHASED DATE PRICE PER SHARE
- ---------------- ------------- ---------------
<C> <S> <C>
100 July 9, 1997 $6.3125
100 July 9, 1997 $6.0625
100 July 17, 1997 $7.25
</TABLE>
Except as disclosed in this Schedule II, none of DRHC, Aspen, any of their
respective directors or executive officers, or the DRHC Nominees owns any
securities of Company or any subsidiary of the Company, beneficially or of
record, has purchased or sold any of such securities within the past two years
or is or was within the past year a party to any contract, arrangement or
understanding with any person with respect to any such securities. Except as
disclosed in this Schedule II, to the best knowledge of the DRHC Group, no
associate of DRHC, Aspen, any of their respective directors or executive
officers, or the DRHC Nominees beneficially owns, directly or indirectly, any
securities of the Company.
Other than as disclosed in this Schedule II and in the Proxy Statement, to
the knowledge of the DRHC Group, none of DRHC, Aspen, any of their respective
directors or executive officers, or the DRHC Nominees has any substantial
interest, direct or indirect, by security holdings or otherwise, in any matter
to be acted upon at the Annual Meeting.
Other than as disclosed in this Schedule II and in the Proxy Statement, to
the knowledge of the DRHC Group, none of DRHC, Aspen, any of their respective
directors or executive officers, or the DRHC Nominees is, or has been within the
past year, a party to any contract, arrangement or understanding with any person
with respect to any class of securities of the Company, including, but not
limited to, joint ventures, loan or option arrangements, puts or calls,
guarantees against loss or guarantees of profit, division of losses or profits,
or the giving or withholding of proxies.
Other than as set forth in this Schedule II, and except for the Proposed
Merger, to the knowledge of the DRHC Group, none of DRHC, Aspen, any of their
respective directors or executive officers, or the DRHC
<PAGE> 14
Nominees, or any of their respective associates, have had or will have a direct
or indirect material interest in any transaction or series of similar
transactions since the beginning of the Company's last fiscal year or any
currently proposed transactions, or series of similar transactions, to which the
Company or any of its subsidiaries was or is to be a party in which the amount
involved exceeds $60,000.
According to Company's public filings, if elected as directors of the
Company, the DRHC Nominees who are not employees of the Company would receive an
annual retainer of $5,000, plus $2,500 for each meeting of the Board of
Directors attended (or $500 for attendance at a telephonic meeting) and $1,000
for each committee meeting attended (or $500 for attendance at a telephonic
meeting). All directors of the Company would be reimbursed for expenses incurred
in connection with their services as directors of the Company. In addition,
non-employee directors of the Company would receive on the last day of the
Company's fiscal year nonqualified stock options to purchase an aggregate of
3,000 shares of LSI Common Stock at a price per share equal to the fair market
value of such shares on the date of grant. Such options would vest and become
immediately exercisable on the date of grant and expire on the tenth anniversary
of the date of grant. The DRHC Nominees, if elected, will be indemnified for
service as a director of the Company to the same extent indemnification is
provided to directors of the Company under the Company's Amended and Restated
Certificate of Incorporation. In addition, the DRHC Group believes that upon
election, the DRHC Nominees will be covered by the Company's officer and
director liability insurance. The DRHC Group disclaims any responsibility for
the accuracy of the foregoing information extracted from the Company's public
filings.
Other than as set forth in this Schedule II and in the Proxy Statement, to
the knowledge of the DRHC Group, none of DRHC, Aspen, any of their respective
directors or executive officers, or the DRHC Nominees, or any of their
respective associates, have any arrangements or understandings with any person
or persons with respect to any future employment by the Company or its
affiliates or with respect to any future transactions to which the Company or
any of its affiliates will or may be a party.
To the knowledge of the DRHC Group, no occupation or employment was carried
on by either of the DRHC Nominees with the Company or any corporation or
organization which is or was a parent, subsidiary or other affiliate of the
Company and neither of the DRHC Nominees has ever served on the Board of
Directors.
<PAGE> 15
THIS PROXY IS SOLICITED IN OPPOSITION TO THE INCUMBENT BOARD OF DIRECTORS
AND MANAGEMENT OF THE COMPANY IN CONNECTION WITH
THE 1997 ANNUAL MEETING OF STOCKHOLDERS OF
LITTLE SWITZERLAND, INC.
The undersigned stockholder of LITTLE SWITZERLAND, INC. (the "Company") hereby
appoints each of Stephen G.E. Crane and R. Christopher Cooper as lawful attorney
and proxy, with several power of substitution, for and in the name of the
undersigned to represent and vote, as designated below, all shares of the common
stock, par value $.01 per share, of the Company which the undersigned is
entitled to vote at the 1997 annual meeting of stockholders of the Company, to
be held on January 16, 1997 at commencing at 10:30 a.m., or at any
adjournment, postponement or rescheduling thereof (collectively, the "Annual
Meeting"). The undersigned hereby revokes any and all previous proxies with
respect to the matters covered by this proxy and the voting of such shares at
the Annual Meeting.
A. ELECTION OF DIRECTORS: Nominees of the DRHC Group:
[ ] FOR the nominees listed below
[ ] WITHHOLD AUTHORITY for the nominees listed below.
NOMINEES: CHARLES R. SCOTT
RALPH O. HELLMOLD
THE SOLICITING STOCKHOLDER IS NOT SEEKING, AND THE PROXY WILL NOT VOTE, FOR ANY
NOMINEES OTHER THAN THE NOMINEES NAMED ABOVE.
B. ADJOURNMENTS: If a quorum is not present, to vote upon any motion for
adjournment or postponement made by or supported by the DRHC
Group.
<TABLE>
<S> <C> <C> <C> <C>
[ ] FOR [ ] AGAINST [ ] ABSTAIN
</TABLE>
C. DISCRETIONARY AUTHORITY: In his discretion, the proxy is authorized to vote
upon such other business as may properly come
before the Annual Meeting.
PLEASE MARK, SIGN, DATE AND RETURN THIS PROXY CARD PROMPTLY IN THE ENCLOSED
POSTAGE-PAID ENVELOPE.
<PAGE> 16
This Proxy Card, when properly executed, will be voted as directed herein. IF NO
INSTRUCTIONS ARE GIVEN, THE SHARES REPRESENTED BY THIS PROXY WILL BE VOTED "FOR"
THE NOMINEES LISTED ABOVE, "FOR" ANY ADJOURNMENT OR POSTPONEMENT SUPPORTED BY
THE SOLICITING STOCKHOLDER, AND IN THE DISCRETION OF THE PROXY AS TO ALL OTHER
MATTERS.
PLEASE DATE AND SIGN THIS PROXY EXACTLY AS YOUR NAME APPEARS HEREON.
Dated:
Signature:
Signature:
Title:
If stock is jointly held, each joint owner should sign. When signing as attorney
in fact, executor, administrator, trustee, guardian, corporate officer or
partner, please give full title.
PLEASE SIGN, DATE AND RETURN THIS PROXY
