<PAGE>
SCHEDULE 14A
(Rule 14a-101)
INFORMATION REQUIRED IN PROXY STATEMENT
SCHEDULE 14A INFORMATION
Proxy statement pursuant to Section 14(a) of the Securities
Exchange Act of 1934
Filed by the Registrant [X]
Filed by a party other than the Registrant [ ]
Check the appropriate box:
[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
Rule 14a-11(c) or Rule 14a-12
Little Switzerland, Inc.
(Name of Registrant as Specified In Its Charter)
Little Switzerland, Inc.
(Name of Person(s) Filing Proxy Statement)
Payment of Filing Fee (Check the appropriate box):
[X] No fee required.
[ ] Fee computed on table below per Exchange Act Rules 14a-6(i)(1) 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 of 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>
LITTLE SWITZERLAND, INC.
161-B CROWN BAY CRUISE SHIP PORT
ST. THOMAS, U.S.V.I. 00804
_________, ____
Dear Fellow Stockholder:
The Annual Meeting of Stockholders of Little Switzerland, Inc. (the
"Company") scheduled for Tuesday, December 21, 1999 has been called for the
purposes of electing Class II Directors, for a term expiring at the 2002 annual
meeting, voting upon a proposal to effect a one-for-five reverse stock split of
the Company's common stock and considering and voting upon such other business
as may properly come before the Annual Meeting or any adjournments or
postponements thereof.
Your Board of Directors has recommend the one-for-five reverse stock split
in an effort to allow the Company to remain eligible for listing on Nasdaq.
Nasdaq previously had informed the Company that it would not remain eligible for
trading on Nasdaq unless it could show compliance with the continued listing
requirements.
Your Board of Directors recommends that you vote "FOR" election of the
proposed Class II Directors and "FOR" the one-for-five reverse stock split of
the Company's common stock.
On behalf of your Board of Directors, your continued interest and support
are greatly appreciated.
Very truly yours,
Robert L. Baumgardner
President & Chief Executive Officer
- --------------------------------------------------------------------------------
WHETHER OR NOT YOU PLAN TO ATTEND THE ANNUAL MEETING IN PERSON, YOU ARE
REQUESTED TO SIGN, DATE AND PROMPTLY MAIL THE ENCLOSED PROXY CARD IN THE
ENCLOSED ENVELOPE, WHICH REQUIRES NO POSTAGE IF MAILED IN THE UNITED
STATES. IF YOU ATTEND THE ANNUAL MEETING, YOU MAY VOTE IN PERSON IF YOU
WISH, EVEN IF YOU HAVE PREVIOUSLY RETURNED YOUR PROXY CARD. IF YOU HAVE ANY
QUESTIONS OR NEED ASSISTANCE, PLEASE CALL D.F. KING & CO., INC., WHICH IS
ASSISTING US, TOLL FREE AT (___)__________.
- --------------------------------------------------------------------------------
<PAGE>
LITTLE SWITZERLAND, INC.
161-B CROWN BAY CRUISE SHIP PORT
ST. THOMAS, U.S.V.I. 00804
(340) 776-2010
______________________
NOTICE OF ANNUAL MEETING OF STOCKHOLDERS
______________________
TO BE HELD ON TUESDAY, DECEMBER 21, 1999
NOTICE IS HEREBY GIVEN that the Annual Meeting of Stockholders of Little
Switzerland, Inc. (the "Company") will be held on Tuesday, December 21, 1999 at
______, local time, at _________________________ (the "Annual Meeting") for the
purpose of considering and voting upon:
1. The election of Class II Directors, for a term expiring at the 2002 annual
meeting and until such Director's successor is duly elected and qualified;
2. The amendment to the amended and restated certificate of incorporation of
the Company to effectuate a one-for-five reverse stock split of the
Company's common stock, par value $.01 per share; and
3. Such other business as may properly come before the Annual Meeting and any
adjournments or postponements thereof.
The Board of Directors has fixed the close of business on November 26, 1999
as the record date for determination of stockholders entitled to notice of and
to vote at the Annual Meeting and any adjournments or postponements thereof.
Only holders of common stock of record at the close of business on that date
will be entitled to notice of and to vote at the Annual Meeting and any
adjournments or postponements thereof.
By Order of the Board of Directors
Patrick J. Hopper
Secretary
St. Thomas, U.S.V.I.
__________, ____
<PAGE>
LITTLE SWITZERLAND, INC.
161-B CROWN BAY CRUISE SHIP PORT
ST. THOMAS, U.S.V.I. 00804
(340) 776-2010
______________________
PROXY STATEMENT
______________________
ANNUAL MEETING OF STOCKHOLDERS
TO BE HELD ON TUESDAY, DECEMBER 21, 1999
This Proxy Statement is furnished in connection with the solicitation of
proxies by the Board of Directors of Little Switzerland, Inc., a corporation
incorporated under the laws of the state of Delaware on May 23, 1991 (the
"Company"), for use at the Annual Meeting of Stockholders of the Company to be
held on Tuesday, December 21, 1999, at ______, local time, at
________________________________ and any adjournments or postponements thereof
(the "Annual Meeting"). Unless otherwise indicated, references to the "Company"
in this Proxy Statement include its various subsidiaries.
At the Annual Meeting, you will be asked to consider and vote upon the
following matters:
1. The election of Class II Directors, for a term to continue until the 2002
annual meeting and until such Director's successor is duly elected and
qualified;
2. An amendment to the amended and restated certificate of incorporation of
the Company (the "Certificate of Incorporation") to effectuate a one-for-
five reverse stock split of the common stock of the Company, par value $.01
per share ("Common Stock"); and
3. Such other business as may properly come before the Annual Meeting and
any adjournments or postponements thereof.
The Notice of Annual Meeting, Proxy Statement and Proxy Card are first being
mailed to stockholders of the Company on or about ____________, ____. The Board
of Directors has fixed the close of business on November 26, 1999 as the record
date (the "Record Date") for the determination of stockholders entitled to
notice of and to vote at the Annual Meeting. Only holders of the Company's
Common Stock of record at the close of business on the Record Date will be
entitled to notice of and to vote at the Annual Meeting. As of the Record Date,
there were [___________] shares of the Company's Common Stock outstanding and
entitled to vote at the Annual Meeting. Each holder of a share of Common Stock
outstanding as of the close of business on the Record Date will be entitled to
one vote for each share held of record for each matter properly submitted at the
Annual Meeting.
STOCKHOLDERS OF THE COMPANY ARE REQUESTED TO SIGN, DATE AND PROMPTLY MAIL
THE ACCOMPANYING PROXY CARD IN THE ENCLOSED ENVELOPE. COMMON STOCK REPRESENTED
BY PROPERLY EXECUTED PROXIES RECEIVED BY THE COMPANY AND NOT REVOKED WILL BE
VOTED AT THE ANNUAL MEETING IN ACCORDANCE WITH THE INSTRUCTIONS CONTAINED
THEREIN. IF INSTRUCTIONS ARE NOT GIVEN THEREIN, PROPERLY EXECUTED PROXIES WILL
BE VOTED "FOR" THE ELECTION OF ________________________________ AS CLASS II
DIRECTORS AND "FOR" THE REVERSE STOCK SPLIT. IT IS NOT ANTICIPATED THAT ANY
MATTERS OTHER THAN THE ELECTION OF DIRECTORS AND THE REVERSE STOCK SPLIT WILL BE
PRESENTED AT THE ANNUAL MEETING. IF OTHER MATTERS ARE PRESENTED, PROXIES WILL BE
VOTED IN ACCORDANCE WITH THE DISCRETION OF THE PROXY HOLDERS.
Any properly completed proxy may be revoked at any time before it is voted
on any matter (without, however, affecting any vote taken prior to such
revocation) by giving written notice of such revocation to the Secretary of the
Company at Little Switzerland, Inc., 161-B Crown Bay Cruise Port, St. Thomas,
U.S.V.I. 00804, or by signing and duly delivering a proxy bearing a later date,
or by attending the Annual Meeting and voting in person.
<PAGE>
The Company's Annual Report, including financial statements for the fiscal
year ended May 29, 1999 ("Fiscal 1999"), is being mailed to stockholders of the
Company concurrently with this Proxy Statement. The Annual Report, however, is
not a part of the proxy solicitation material.
PROPOSAL NUMBER 1
ELECTION OF DIRECTORS
The Board of Directors of the Company currently consists of six members, and
is divided into three classes, with two Directors in each of classes I, II and
III. Directors serve for three-year terms, with one class of Directors being
elected by the Company's stockholders at each annual meeting.
At the Annual Meeting, Class II Directors will be elected to serve until the
2002 annual meeting, and until such Director's successor is duly elected and
qualified. The Board of Directors has nominated _____________________________
for election as Class II Directors. Unless otherwise specified in the proxy, it
is the intention of the persons named in the proxy to vote the shares
represented by each properly executed proxy for the election of
___________________________________ as Class II Directors. Any nominee of the
Board of Directors has agreed to stand for election and to serve if elected as a
Director. However, if any such Board of Directors' nominee fails to stand for
election or is unable to accept election, properly executed proxies voting in
favor of such nominee of the Board of Directors will be voted for the election
of such other person as the Board of Directors may nominate.
THE BOARD OF DIRECTORS OF THE COMPANY RECOMMENDS THAT YOU VOTE FOR ITS
PROPOSAL TO ELECT ______________________________________ AS CLASS II DIRECTORS
OF THE COMPANY.
INFORMATION REGARDING DIRECTORS
The Board of Directors of the Company held thirty-three (33) meetings during
Fiscal 1999 to deal with, among other things, settlement of a proxy contest and
internal restructuring initiatives. During Fiscal 1999, each of the Directors
attended at least 75% of the total number of meetings of the Board of Directors
and of the committees of which he or she was a member. The Board of Directors
has established an Audit Committee and a Compensation Committee.
During certain portions of Fiscal 1999, the Audit Committee consisted of the
following Directors: C. William Carey, Timothy B. Donaldson, Kenneth W. Watson,
Richard C. Hunter and Melanie L. Sturm. The current members of the Audit
Committee are Messrs. Hunter and Watson and Ms. Sturm. The Audit Committee
reviews the financial statements of the Company and the scope of the annual
audit, monitors the Company's internal financial and accounting controls and
recommends to the Board of Directors the appointment of independent certified
public accountants. The Audit Committee met once during Fiscal 1999.
During certain portions of Fiscal 1999, the Compensation Committee of the
Board of Directors of the Company consisted of the following Directors: Timothy
B. Donaldson, Ilene B. Jacobs, C. William Carey, Melanie L. Sturm, Peter R.
McMullin and Adriane J. Dudley. The current members of the Compensation
Committee are Ms. Sturm and Mr. McMullin. The Compensation Committee approves
Company compensation policies and procedures and establishes compensation levels
for executive officers. The Compensation Committee also administers and grants
awards under the 1991 Option Plan (the "1991 Option Plan") and the Company's
Employee Stock Purchase Plan. The Compensation Committee met once during Fiscal
1999. The Board of Directors does not maintain a nominating committee. Instead,
its functions are carried out by the entire Board of Directors.
COMPENSATION OF DIRECTORS
Directors who are officers or employees of the Company receive no
compensation for service as Directors. Directors who are not officers or
employees of the Company receive such compensation for their services as the
Board
2
<PAGE>
of Directors may from time to time determine. Non-employee Directors each
receive an annual retainer of $5,000, plus a fee of $2,500 for each Board of
Directors meeting attended ($500 if such meeting is held via telephone
conference) and $1,000 for each committee meeting attended ($500 if such meeting
is held via telephone conference) if such meeting does not take place in
conjunction with a regularly scheduled Board of Directors meeting. All Directors
are reimbursed for expenses incurred in connection with attendance at meetings.
In order to more closely align stockholder and Director interests, in 1992
the Board of Directors established the 1992 Non-Employee Directors' Nonqualified
Stock Option Plan (the "1992 Option Plan"). Pursuant to the 1992 Option Plan,
each eligible non-employee Director automatically receives an option to purchase
3,000 shares of Common Stock on the last day of the Company's fiscal year. All
options granted pursuant to the 1992 Option Plan vest and are immediately
exercisable upon grant. All options granted under the 1992 Option Plan have an
exercise price equal to 100% of the fair market value of a share of Common Stock
on the grant date. On May 29, 1999, the then eligible non-employee Directors of
the Company each received an option to purchase 3,000 shares of Common Stock at
an exercise price of $.84375 per share, the fair market value of the Common
Stock on May 28, 1999.
For a description of the consulting arrangement with Mr. Carey, a former
Director of the Company, during Fiscal 1999, see "--Compensation Committee
Interlocks and Insider Participation."
Set forth below is certain information regarding the Directors of the
Company as of November 1, 1999, based on information furnished by them to the
Company.
Name Age Director Since
- ---- --- --------------
CLASS I-TERM EXPIRES 2001
Robert L. Baumgardner................... 53 1999
Alex J. Nobile.......................... 47 1999
CLASS II-TERM EXPIRES 1999
Peter R. McMullin....................... 56 1999
Kenneth W. Watson....................... 56 1991
CLASS III-TERM EXPIRES 2000
Richard C. Hunter....................... 54 1999
Melanie L. Sturm........................ 37 1999
The principal occupation and business experience during at least the last
five years for each Director of the Company is set forth below.
CLASS I
Mr. Baumgardner joined the Company as its Chief Executive Officer and
President effective as of August 17, 1999. Mr. Baumgardner was Senior Vice
President of Zale Corporation's Bailey Banks and Biddle Division in Dallas from
September 1998 to August 1999. Prior to his tenure with Zale Corporation, Mr.
Baumgardner held senior management positions with Mayors of Coral Gables,
Florida from May 1994 to September 1998, and with Tiffany of New York from May
1987 to June 1994. Mr. Baumgardner began his retail career in 1971 at Bailey
Banks and Biddle, as Vice President of Stores.
Mr. Nobile has been an attorney and investment professional with Berkeley
International Capital Corporation, the venture capital arm of London Pacific
Group Limited, a diversified international financial services firm, since
3
<PAGE>
January 1997. Prior to joining Berkeley International Capital Corporation, Mr.
Nobile was Executive Vice President, General Counsel and Corporate Secretary for
Gruen Marketing Corporation ("Gruen") from 1991 to 1996. Mr. Nobile joined Gruen
after serving as Senior Vice President, Corporate Counsel and Secretary at
Gruen's predecessor, Jewelcor Inc. from 1978 to 1991.
CLASS II
Mr. McMullin is the co-founder of Southeast Research Partners, Inc. and has
been an Executive Vice President and a managing director of Southeast since its
inception in June 1990. Since 1997, Mr. McMullin has been the Executive Vice
President, Chief Investment Officer and a director of Research Partner
International, a company that provides institutional research, investment
banking, securities brokerage and trading services through its principal
subsidiaries. Prior to being nominated as a director of the Company, Mr.
McMullin followed and wrote about the Company since its initial public offering
in 1991.
Mr. Watson was the Acting Chief Executive Officer of the Company from April
7, 1999 until his resignation as of August 17, 1999. Mr. Watson also served as
Chief Executive Officer and President of the Company from January 1994 to
October 1994. Mr. Watson is currently serving as the Chief Operating Officer of
CyberSettle.com, an internet dispute resolution company, with which he has been
associated since March 1999. From October 1996 to March 1999, Mr. Watson served
as Vice President-Consumer Marketing of the New York Times Magazine Group, a
subsidiary of the New York Times Company. Mr. Watson served as Executive Vice
President of K-Mart Corporation from October 1994 through March 1996. Mr. Watson
was President of Louis Vuitton Stores, Inc. from July 1992 to March 1993.
Previously, he was Chairman and Chief Executive Officer of Gump's, a retailer of
jewelry, art and gift items from September 1989 to June 1992 and President and
Chief Executive Officer of Cartier, Inc. from 1985 to September 1989.
CLASS III
Mr. Hunter was the Senior Vice President for International Operations &
Development of Williams Sonoma, Inc. from November 1996 to April 1999. From
March 1996 to October 1996, Mr. Hunter was the President of RCH Consulting,
Inc., from January 1995 to February 1996 he was the Executive Vice President of
DFS Group Limited and from June 1992 to December 1994 he was the President of
DFS North America Division of DFS Group Limited.
Ms. Sturm is a private equity investor and serves on the Board of Directors
of FirstWorld Communications, an internet solutions and telecommunications
provider, and MD Network, a healthcare company, each based in Denver, Colorado.
From 1990 to 1996, Ms. Sturm served as an Investment Officer at International
Finance Corporation, the private sector affiliate of the World Bank, where she
specialized in project finance. From 1984 to 1988, Ms. Sturm specialized in
mergers and acquisitions at Morgan Stanley and Drexel Burnham Lambert. Ms. Sturm
holds a B.S. degree in Economics and a B.A. degree in International Relations
from Tufts University and a MBA from INSEAD in Fontainebleau, France.
Messrs. Hunter and McMullin and Ms. Sturm were nominated as Directors of the
Company pursuant to the terms of the Settlement Agreement, dated as of February
23, 1999, among the Company, Donald L. Sturm, ValueVest Partners L.P., Seymour
Holtzman, Jewelcor Management, Inc. and the other parties identified therein
(the "Settlement Agreement"). In addition, pursuant to the terms of the
Settlement Agreement, Mr. Watson was appointed as the Acting Chief Executive
Officer of the Company effective as of April 7, 1999 until a successor was
found. Mr. Baumgardner succeeded Mr. Watson effective August 17, 1999.
4
<PAGE>
EXECUTIVE OFFICERS
The names and ages of all executive officers of the Company and the
principal occupation and business experience during at least the last five years
for each of the executive officers who are not Directors of the Company are set
forth below as of November 1, 1999.
NAME AGE POSITION
- ---- --- --------
Robert L. Baumgardner.... 53 President, Chief Executive Officer and
Director
Patrick J. Hopper........ 37 Chief Financial Officer, Vice President and
Treasurer
William Canfield......... 52 Vice President of Store Operations
Michael M. Poole......... 56 Vice President and General Merchandise
Manager
Raoul Mills.............. 38 Vice President, Distribution
Mr. Canfield has been Vice President of Store Operations since June 1994.
In that position, he has been responsible for store operations, new store
development and strengthening the Company's position in jewelry throughout its
stores. Mr. Canfield was Managing Director of Colombian Emeralds International
from December 1979 to June 1994. In the past, he served as the President of the
St. Thomas Retail Association for two years.
Mr. Hopper joined the Company as its Vice President-Finance on June 7, 1999
and subsequently became the Chief Financial Officer, Vice President and
Treasurer of the Company on July 3, 1999. Prior to joining the Company, Mr.
Hopper was with Tesco PLC, serving as the Director of Central European Projects
from January 1998 to January 1999, and as Chief Financial Officer of Tesco PLC
for the Czech and Slovak Republic from April 1996 to January 1998. From January
1994 to April 1996, Mr. Hopper served as Director of Finance and Administration
of K-Mart Corporation in the Czech and Slovak Republic.
Mr. Mills has been Vice President of Distribution since December 1998. In
that position, he has been responsible for streamlining the Company's logistics
process. Mr. Mills joined the Company in February 1995 as Director of
Distribution, and served as Divisional Vice President of Distribution from
February 1997 to December 1998. Prior to joining the Company, Mr. Mills served
as General Manager for Sea Chest Hardware, Inc.
Mr. Poole has been the Vice President and General Merchandise Manager of the
Company since August 1998. Mr. Poole was the Director of Licensing for Combine
International Inc., a jewelry manufacturing company, from August 1996 to August
1998. From September 1991 to July 1996, Mr. Poole was the President of NXP,
d/b/a Jewels at A.H. Riise, a retail jewelry store in St. Thomas, U.S.V.I.
Each of the officers holds his respective office until the regular annual
meeting of the Board of Directors following the annual meeting of stockholders
and until his successor is elected and qualified or until his earlier
resignation or removal.
5
<PAGE>
EXECUTIVE COMPENSATION
As required by the rules of the Securities and Exchange Commission (the
"SEC"), the following sections of this Proxy Statement set forth and discuss the
compensation paid or awarded to (i) any individual who served as either the
Company's Chief Executive Officer or Acting Chief Executive Officer during
Fiscal 1999 and (ii) the three most highly compensated executive officers who
were serving as executive officers at the end of Fiscal 1999 and who earned in
excess of $100,000 during Fiscal 1999. Accordingly, this Proxy Statement
contains information concerning certain individuals who are no longer employed
by the Company.
SUMMARY COMPENSATION TABLE
The following table shows for the fiscal years ended May 31, 1997, May 30,
1998 and May 29, 1999 compensation paid by the Company to (i) any individual who
served as either the Company's Chief Executive Officer or Acting Chief Executive
Officer during Fiscal 1999 and (ii) the three most highly compensated executive
officers who were serving as executive officers at the end of Fiscal 1999 and
who earned in excess of $100,000 during Fiscal 1999.
<TABLE>
<CAPTION>
ANNUAL COMPENSATION LONG TERM COMPENSATION
------------------------------------------- ----------------------------------
AWARDS PAYOUTS
---------- ----------------------
RESTRICTED SECURITIES
OTHER ANNUAL STOCK UNDERLYING LTIP ALL OTHER
COMPENSATION AWARD(S) OPTIONS PAYOUTS COMPENSATION
NAME AND PRINCIPAL POSITION YEAR SALARY($) BONUS ($) ($) ($) (#) ($) ($)
- --------------------------- ---- -------- --------- ------------ ---------- ----------- -------- ------------
<S> <C> <C> <C> <C> <C> <C> <C> <C>
John E. Toler, Jr ............... 1999 $ 91,154 $ 4,000(5) $ -- -- -- -- $ 43,833(12)
President and Chief ............ 1998 $300,000 $140,000 $ 4,000(6) -- -- -- $ 6,688(13)(14)
Executive Officer(1) ........... 1997 $300,000 -- $ 3,000(6) -- 300,000(7) -- $ 3,894(13)
C. William Carey ................ 1999 $211,347 $ 91,250 -- -- 150,000(8) -- $359,162(15)
Acting Chief ................... 1998 -- -- -- -- -- -- --
Executive Officer(2) ........... 1997 -- -- -- -- --
Kenneth W. Watson ............... 1999 $ 45,692 -- -- -- --(9) -- $ 60,750(16)
Acting Chief ................... 1998 -- -- -- -- -- -- --
Executive Officer (3) .......... 1997 -- -- -- -- --
David J. Nace ................... 1999 $140,000 $ 50,000 -- -- 75,000(10) -- $ 50,000(17)
Chief Financial Officer,........ 1998 -- -- -- -- -- -- --
Executive Vice ................. 1997 -- -- -- -- -- --
President and Treasurer (4)
William Canfield ................ 1999 $181,446 -- -- -- -- -- $ 8,684(18)
Vice President of .............. 1998 $173,000 $ 28,000 -- -- -- -- $ 8,659(19)
Store Operations ............... 1997 $173,000 -- -- -- -- -- --
Michael M. Poole ................ 1999 $100,731 -- -- -- 50,000(11) -- --
Vice President and ............. 1998 -- -- -- -- -- -- --
General Merchandise ............ 1997 -- -- -- -- -- -- --
Manager
</TABLE>
__________________
(1) Mr. Toler resigned as the President and Chief Executive Officer of the
Company effective August 31, 1998. Mr. Toler continued to serve as a
Director of the Company until April 7, 1999.
(2) Mr. Carey assumed the role of Acting Chief Executive Officer of the Company
effective September 1, 1998 and resigned as such effective April 7, 1999.
(3) Mr. Watson assumed the role of Acting Chief Executive Officer of the
Company effective April 7, 1999 and resigned as such effective August 17,
1999. Mr. Watson is currently serving as a Class II Director of the
Company.
(4) Mr. Nace resigned as the Chief Financial Officer, Executive Vice President
and Treasurer of the Company effective July 2, 1999.
6
<PAGE>
(5) This amount represents a one-time stay bonus that Mr. Toler was awarded in
connection with his resignation as President and Chief Executive Officer of
the Company.
(6) These amounts represent the cost to the Company for one year of certain
automobile allowances.
(7) In connection with his appointment as President and Chief Executive Officer
of the Company, the Company granted Mr. Toler an option to purchase 300,000
shares of the Company's Common Stock pursuant to the 1991 Option Plan.
Pursuant to the terms of the Letter Agreement between the Company and Mr.
Toler, in connection with Mr. Toler's resignation, this option will expire
on September 1, 2000.
(8) In connection with his appointment as Acting Chief Executive Officer of the
Company, the Company granted Mr. Carey an option to purchase 150,000 shares
of the Company's Common Stock outside of the 1991 Option Plan as an
inducement for him entering into his employment agreement with the Company.
Pursuant to the terms of the Stock Option Agreement between the Company and
Mr. Carey, this option will expire on April 7, 2001.
(9) In connection with his directorship, since 1991, the Company has granted
Mr. Watson options to purchase an aggregate of 20,000 shares of the
Company's Common Stock pursuant to the 1992 Option Plan and an option to
purchase 10,000 shares of the Company's Common Stock pursuant to the 1991
Option Plan.
(10) In connection with his appointment as Chief Financial Officer, Executive
Vice President and Treasurer of the Company, the Company granted Mr. Nace
an option to purchase 75,000 shares of the Company's Common Stock pursuant
to the 1991 Option Plan. This option expired on September 30, 1999.
(11) In connection with his appointment as Vice President and General
Merchandise Manager of the Company, the Company granted Mr. Poole an option
to purchase 50,000 shares of the Company's Common Stock outside of the 1991
Option Plan as an inducement for him entering into his employment agreement
with the Company.
(12) This amount includes $19,833 Mr. Toler was entitled to receive in
connection with his resignation as President and Chief Executive Officer
for, among other things, moving expenses, attorney's fees and living
expense. It also includes $24,000 Mr. Toler received as compensation for
his duties as a Director of the Company while not also employed as
President and Chief Executive Officer during Fiscal 1999.
(13) Effective June 1, 1996, the Company replaced its tax-qualified
discretionary contribution retirement plan (the "Retirement Plan") with a
401(k) Plan under which the Company matches each employee's contribution up
to 3% of compensation. In fiscal 1998, the Company contributed $2,423 to
the individual account maintained on behalf of Mr. Toler pursuant to the
401(k) Plan. In fiscal 1997, the Company contributed $3,894 to an
individual account maintained on behalf of Mr. Toler pursuant to the 401(k)
Plan.
(14) This amount includes $4,265 in insurance premiums paid by the Company with
respect to term life insurance for the benefit of Mr. Toler.
(15) This amount includes $21,138 reimbursed by the Company for the payment of
taxes, $30,357 reimbursed by the Company for living expenses, one month
severance of $29,167, consulting fees of $180,000 in connection with the
New Consulting Agreement (as defined below) and $50,000 in connection with
the CWC Consulting Agreement (as defined below), $37,500 in lieu of the
three-month notification necessary pursuant to the CWC Consulting Agreement
to terminate such agreement and $11,000 as compensation for his duties as a
Director of the Company while not employed as Acting Chief Executive
Officer during Fiscal 1999.
(16) This amount reflects compensation received by Mr. Watson for his duties as
a Director of the Company while not also employed as Acting Chief Executive
Officer during Fiscal 1999.
(17) This amount reflects $50,000 reimbursed by the Company for moving expenses.
(18) This amount represents $1,017 in insurance premiums paid by the Company
with respect to term life insurance for the benefit of Mr. Canfield and
$7,667 in insurance premiums paid by the Company with respect to whole life
insurance for the benefit of Mr. Canfield.
(19) This amount represents $1,092 in insurance premiums paid by the Company
with respect to term life insurance for the benefit of Mr. Canfield and
$7,567 in remainder of premiums paid by the Company due to Mr. Canfield's
interest in the cash surrender value under one such insurance policy.
7
<PAGE>
OPTION GRANTS IN LAST FISCAL YEAR
The following table sets forth the number of shares underlying stock options
granted during Fiscal 1999 to any person who acted as the Chief Executive
Officer or Acting Chief Executive Officer of the Company and each other
executive officer named in the Summary Compensation Table and certain other
information regarding such stock options.
<TABLE>
<CAPTION>
INDIVIDUAL GRANTS
----------------------------------------------------------- ALTERNATIVE
NUMBER OF PERCENT OF REALIZABLE VALUE TO (F) AND
SECURITIES TOTAL AT ASSUMED ANNUAL (G) : GRANT
UNDERLYING OPTIONS/ RATES OF STOCK DATE VALUE
-----------
OPTION SARS GRANTED EXERCISE PRICE APPRECIATION
/SARS TO EMPLOYEES OR BASE FOR OPTION TERM GRANT DATE
-------------------
GRANTED IN FISCAL PRICE EXPIRATION PRESENT
NAME (#) YEAR ($/SH)(1) DATE 5% ($) 10% ($) VALUE$
---- ---------- ------------ --------- ---- ------ ------- ------
<S> <C> <C> <C> <C> <C> <C> <C>
John E. Toler, Jr.... - - - - - - -
C. William Carey..... 150,000(2)(5) 55% $ 2.25 4/7/01 213,000 538,500 -
Kenneth W. Watson.... - - - - - - -
David J. Nace........ 75,000(3)(5) 27% $ 2.50 9/30/99 117,500 298,827 -
William K. Canfield.. - - - - - - -
Michael M. Poole..... 50,000(4)(5) 18% $2.0625 8/25/08 68,000 172,000 -
</TABLE>
_____________
(1) The exercise price is equal to the fair market value of a share of Common
Stock on the grant date. The amounts shown as potential realizable value
illustrate what might be realized upon exercise immediately prior to
expiration of the option term using the 5% and 10% appreciation rates
established in regulations of the SEC, compounded annually. The potential
realizable value is not intended to predict future appreciation of the price
of the Company's Common Stock. The values shown do not consider
nontransferability, vesting or termination of the options upon termination
of employment.
(2) Granted outside the Company's 1991 Option Plan as an inducement to Mr. Carey
entering into his employment agreement with the Company. Pursuant to the
terms of the Stock Option Agreement between the Company and Mr. Carey, this
option will expire on April 7, 2001.
(3) Pursuant to the terms of the Stock Option Agreement between the Company and
Mr. Nace, this option expired on September 30, 1999.
(4) Granted outside the Company's 1991 Option Plan as an inducement to Mr. Poole
entering into an employment agreement with the Company.
(5) Upon the execution of the Settlement Agreement, all unvested stock options
on the date of the execution of the Settlement Agreement automatically
vested. As such, each of Messrs. Carey, Nace and Poole's stock options
automatically vested on February 23, 1999.
8
<PAGE>
REPORT OF THE COMPENSATION COMMITTEE OF THE BOARD OF DIRECTORS ON EXECUTIVE
COMPENSATION
The Compensation Committee approves Company compensation policies and
procedures and establishes compensation levels for executive officers. The
Compensation Committee also administers and grants awards under the 1991 Option
Plan and the Company's Employee Stock Purchase Plan. The current members of the
Compensation Committee are Melanie L. Sturm and Peter R. McMullin.
COMPENSATION POLICIES FOR EXECUTIVE OFFICERS
The Compensation Committee's executive compensation philosophy is to provide
competitive levels of compensation, integrate management's pay with Company
performance, reward above average individual performance, and assist the Company
in attracting and retaining qualified management. The Compensation Committee has
determined that base salaries of executive officers should be set at levels that
are competitive within the local retail industry. In addition, the Compensation
Committee believes that it is appropriate to reward outstanding performance
through a combination of cash bonuses and stock option grants and, through stock
option grants, to provide a competitive compensation package that will enable
the Company to attract and retain the executives needed to achieve such
performance. The Compensation Committee also has determined that any stock
option or other equity-based compensation should involve long-term vesting to
encourage long-term tenure and enhancement of shareholder value over the long-
term.
Base salaries for executive officers are targeted according to the salaries
of employees holding similar offices and having similar responsibilities within
the local retail industry. The Compensation Committee also considers the
relative cost of living within the United States Virgin Islands. Annual salary
adjustments for executive officers are determined by evaluating the competitive
marketplace, the performance of the Company, the performance of the executive
officer and any change in the responsibilities assumed by the executive officer.
Salary adjustments, if any, are normally determined and made on an annual basis.
The base salary and salary adjustments for John E. Toler, Jr., President and
Chief Executive Officer of the Company during a portion of Fiscal 1999, were
established pursuant to his employment agreement, as described below under "--
Employment Contracts, Termination of Employment." See "--Compensation of John E.
Toler, Jr., Former Chief Executive Officer" below. The base salary and salary
adjustments for C. William Carey, Acting Chief Executive Officer of the Company
during a portion of Fiscal 1999, were established pursuant to his employment
agreement, as described below under "--Employment Contracts, Termination of
Employment." See "--Compensation of C. William Carey, Former Acting Executive
Officer" below. The base salary for Kenneth W. Watson, Acting Chief Executive
Officer of the Company during a portion of Fiscal 1999, was established pursuant
to the terms of his employment arrangement, as described below under "--
Employment Contracts, Termination of Employment." See "--Compensation of Kenneth
W. Watson, Former Acting Chief Executive Officer" below. The terms of employment
of William K. Canfield, Vice President of Store Operations, Michael M. Poole,
Vice President and General Merchandise Manager, and David Nace, the Chief
Financial Officer, Executive Vice President and Treasurer of the Company as of
the end of Fiscal 1999, were determined by the terms of their respective
employment agreements. The terms of employment of Raoul Mills, Vice President
of Distribution, were determined by the Compensation Committee and approved by
the Board of Directors.
Cash bonuses paid to executive officers generally are earned primarily
through the achievement of financial goals relative to each officer's
responsibilities. Such financial goals include targeted sales and profit levels,
earnings before interest and taxes ratios, selling, general and administrative
expense ratios, return on assets, inventory shrinkage and inventory turns. Cash
bonuses may also be paid to executive officers in accordance with the terms of
their employment agreements. Bonuses payable pursuant to such agreements
generally are earned through the achievement of the financial goals similar to
those discussed above and may also be awarded for executive retention purposes
in the sole discretion of the Compensation Committee. Pursuant to their
respective employment or termination contracts, Messrs. Nace, Poole, Canfield
and Mills were each eligible to earn a bonus of up to 25% of their respective
base salaries for Fiscal 1999. In addition, Mr. Toler was eligible to earn a
bonus of up to 50% of his base salary for Fiscal 1999 and Mr. Carey was eligible
to earn a bonus of up to a maximum of $50,000 per quarter for Fiscal 1999,
therefore Mr. Carey received cash bonuses of $41,250 for the second quarter of
Fiscal 1999 and $50,000 for the third quarter of Fiscal 1999. See "--
Compensation of John E. Toler, Jr., Former Chief Executive Officer," "--
Compensation of C. William Carey, Former Acting Chief Executive Officer" and
9
<PAGE>
"--Employment Contracts, Termination of Employment" below. Mr. Watson was not
entitled to receive a bonus for his services rendered as Acting Chief Executive
Officer of the Company during Fiscal 1999. Occasionally, cash bonuses are paid
to executive officers for the performance of services to the Company outside the
scope of their offices, as determined by the Compensation Committee of the Board
of Directors of the Company.
Stock options are designed to attract and retain executives who can make
significant contributions to the Company's success; reward executives for such
significant contributions; and give executives a longer-term incentive to
increase shareholder value. In determining whether to grant stock options to
executive officers, the Compensation Committee evaluates each officer's
performance by examining criteria similar to that involved in fixing cash
bonuses (but without any specific performance measures) and awards reflect
individual performance reviews. The Compensation Committee also may grant stock
options for executive retention purposes, taking into account, among other
things, general industry practice. Stock options typically vest over three to
five years in order to encourage outstanding performance over the long-term.
Historically, stock options generally have been granted with a ten-year term and
an exercise price equal to 100% of the fair market value of the Common Stock on
the grant date.
COMPENSATION OF JOHN E. TOLER, JR., FORMER CHIEF EXECUTIVE OFFICER
The base salary for Mr. Toler, the Company's President and Chief Executive
Officer during a portion of Fiscal 1999, was established by Mr. Toler's
employment agreement (the "Toler Employment Agreement"). For a complete
description see "--Employment Contracts, Termination of Employment." In
connection with his resignation, the Company entered into a Letter Agreement,
dated August 14, 1998 (the "Toler Letter Agreement"), pursuant to which Mr.
Toler received an aggregate amount equal to $19,883 as payment for certain fees
and expenses upon his resignation as President and Chief Executive Officer of
the Company. In addition, pursuant to the Toler Letter Agreement, Mr. Toler
received a one time stay bonus equal to $4,000 and was entitled to purchase any
and all of the Company's merchandise, at the Company's cost, up to a maximum
aggregate amount equal to $20,000 until August 31, 1999. See "--Employment
Contracts, Termination of Employment" below. Additionally, pursuant to the terms
of the Toler Employment Agreement, on November 1, 1995, the Company granted Mr.
Toler an option to purchase 300,000 shares of the Company's Common Stock at
$3.50 per share pursuant to the 1991 Option Plan. This option automatically
vested upon the execution of the Agreement and Plan of Merger dated as of
February 4, 1999, with Destination Retail Holdings Corporation ("DRHC") and
certain of its affiliates pursuant to the terms of the 1991 Option Plan. In
connection with his resignation, the Board of Directors amended Mr. Toler's
option agreement so that he may exercise this option after the termination of
his employment with the Company at any time prior to September 1, 2000, upon
which date the option shall expire.
COMPENSATION OF C. WILLIAM CAREY, FORMER ACTING CHIEF EXECUTIVE OFFICER
The base salary for Mr. Carey, Acting Chief Executive Officer of the Company
during a portion of Fiscal 1999, was established by Mr. Carey's Employment
Agreement, dated September 1, 1998 (the "CWC Employment Agreement"). For a
complete description see "--Employment Contracts, Termination of Employment." In
connection with his resignation, the Company entered into a Severance Agreement,
dated February 23, 1999 (the "CWC Severance Agreement") pursuant to which Mr.
Carey received an aggregate amount equal to $29,167 in base salary on the
effective date of his resignation as Acting Chief Executive Officer of the
Company. In addition, pursuant to the terms of the CWC Severance Agreement, Mr.
Carey (i) received $50,000 as a bonus for the Company's third quarter of Fiscal
1999, (ii) is entitled to purchase any and all of the Company's merchandise, at
the Company's cost, for his personal use until April 7, 2002, (iii) will be
reimbursed for the premiums associated with continuation of medical coverage
under COBRA and (iv) was reimbursed for the legal expenses he incurred in
connection with the negotiation of the CWC Severance Agreement. In connection
with his appointment as the Acting Chief Executive Officer of the Company, the
Company granted Mr. Carey an option to purchase 150,000 shares of the Company's
Common Stock at $2.25 per share outside of the 1991 Option Plan as an inducement
to Mr. Carey entering into his employment agreement with the Company. Pursuant
to the terms of Mr. Carey's Stock Option Agreement, this option automatically
vested as a result of the execution of the Settlement Agreement. In connection
with his resignation and pursuant to the terms of the Stock Option Agreement,
Mr. Carey may exercise this option until April 7, 2001.
10
<PAGE>
COMPENSATION OF KENNETH W. WATSON, FORMER ACTING CHIEF EXECUTIVE OFFICER
The base salary for Mr. Watson, Acting Chief Executive Officer of the
Company during a portion of Fiscal 1999, was established by terms set forth in
Schedule C of the Settlement Agreement. Mr. Watson received a monthly salary of
$30,000 per month. In addition, Mr. Watson received reimbursement for all
reasonable living expenses. Mr. Watson was not entitled to receive a bonus for
his services rendered as Acting Chief Executive Officer of the Company.
FEDERAL TAX REGULATIONS
As a result of Section 162(m) of the Internal Revenue Code (the "Code"), the
Company's deduction of executive compensation may be limited to the extent that
a "covered employee" (i.e., the chief executive officer or one of the four
highest compensated officers who is employed on the last day of the Company's
taxable year and whose compensation is reported in the summary compensation
table in the Company's proxy statement) receives compensation in excess of
$1,000,000 in such taxable year of the Company (other than performance-based
compensation that otherwise meets the requirements of Section 162(m) of the
Code). The Company intends to take appropriate action to comply with such
regulations, if applicable, in the future.
The report of the Compensation Committee of the Board of Directors on
executive compensation is made by each of the current members of the
Compensation Committee listed below:
/s/ Melanie L. Sturm /s/ Peter R. McMullin
COMPENSATION COMMITTEE INTERLOCKS AND INSIDER PARTICIPATION
Mr. Carey served as a member of the Compensation Committee of the Board of
Directors of the Company during a portion of Fiscal 1999. Mr. Carey also served
as the Chairman of the Board of Directors of the Company until September 1, 1998
and, on such date, became the Acting Chief Executive Officer of the Company. Mr.
Carey resigned as the Acting Chief Executive Officer of the Company effective as
of April 7, 1999 and did not stand for re-election as a Director of the Company
at the Annual Meeting of Stockholders held on April 7, 1999.
On June 2, 1996, Mr. Carey entered into a consulting agreement with the
Company (the "CWC Consulting Agreement"). Pursuant to the CWC Consulting
Agreement, Mr. Carey provided consulting services to the Company, including,
without limitation, advice with respect to business and product planning,
marketing strategy, leasing and new store development and executive recruitment,
in exchange for a consulting fee at the annual rate of $150,000, payable in
monthly installments. In addition, Mr. Carey was entitled to receive
reimbursement for all reasonable expenses incurred by him on behalf of the
Company in connection with the performance of his obligations thereunder. In
connection with his position as Acting Chief Executive Officer of the Company,
the Company terminated the CWC Consulting Agreement effective September 1, 1998.
Mr. Carey received $37,500 in lieu of the three-month notification necessary
pursuant to the CWC Consulting Agreement to terminate such agreement.
In connection with his resignation as Acting Chief Executive Officer, the
Company entered into a severance agreement with Mr. Carey. For a description of
certain terms of this severance agreement see "--Employment Agreements,
Termination of Employment."
In connection with his resignation as Acting Chief Executive Officer,
effective April 7, 1999, the Company entered into a new consulting agreement
with Mr. Carey (the "New Consulting Agreement"), which expired on October 7,
1999. Pursuant to this New Consulting Agreement, Mr. Carey agreed to provide
consulting services to the Company similar to those he provided under the CWC
Consulting Agreement in exchange for a consulting fee equal to an aggregate of
$180,000, which was paid on April 7, 1999. Mr. Carey also was entitled to
receive reimbursement for all reasonable expenses incurred by him on behalf of
the Company in connection with such consulting services.
11
<PAGE>
On February 23, 1999, the Company entered into an amended and restated
success fee agreement with Mr. Carey, which expires on January 15, 2000.
Pursuant to the terms of this agreement, under certain circumstances, Mr. Carey
will be entitled to receive a fee upon the successful completion of certain
transactions involving the Company. For a more detailed description of this
agreement, see "Certain Relationships and Related Transactions."
The other members of the Compensation Committee of the Board of Directors of
the Company during portions of Fiscal 1999 were Timothy B. Donaldson, Ilene B.
Jacobs, Melanie L. Sturm, Peter R. McMullin and Adriane Dudley. Messes. Jacobs
and Dudley and Mr. Donaldson each resigned as a member of the Board of Directors
and the Compensation Committee of the Board of Directors effective September 14,
1998, June 4, 1999 and April 7, 1999, respectively. During Fiscal 1999, the
Company retained and continues to retain, Dudley, Clark & Chan, of which Ms.
Dudley is the senior partner, as its local law firm in St. Thomas, U.S.V.I.
Messrs. Donaldson and McMullin, and Messes. Jacobs, Dudley and Sturm have never
been officers or employees of the Company and, except as otherwise described
herein, have never had any other reportable relationship with the Company other
than through his/her position as a Director of the Company.
12
<PAGE>
SHAREHOLDER RETURN PERFORMANCE GRAPH
Set forth below is a line graph comparing the yearly percentage change in
the cumulative total shareholder return on the Company's Common Stock, based on
the market price of the Company's Common Stock and assuming reinvestment of
dividends, with the total return of companies within the Nasdaq Stock Market,
Inc. ("NASDAQ") stock market and the companies within the NASDAQ Retail Trade
Stocks Index prepared by the Center for Research in Security Prices at The
University of Chicago Graduate School of Business. The calculation of total
cumulative return assumes a $100 investment in the Company's Common Stock, the
NASDAQ stock market and the NASDAQ Retail Stocks Index on May 31, 1994.
COMPARISON OF FIVE-YEAR CUMULATIVE TOTAL RETURNS
PERFORMANCE REPORT FOR
LITTLE SWITZERLAND, INC.
Prepared by the Center for Research in Security Prices
Produced on 9/10/99 including data to 5/28/99
Company Index: CUSIP Ticker Class Sic Exchange
53752810 LSVI 5940 NASDAQ
Fiscal Year-End is 5/31/99
Market Index: Nasdaq Stock Market (US Companies)
Peer Index: Nasdaq Retail Trade Stocks
SIC 5200-5599, 5700-5799, 5900-5999 US & Foreign
Company Market Peer
Date Index Index Index
---- ----- ----- -----
05/31/1994 100.000 100.000 100.000
06/30/1994 96.154 96.344 97.994
07/29/1994 96.154 98.323 98.155
08/31/1994 100.000 104.588 105.527
09/30/1994 100.000 104.322 107.134
10/31/1994 82.692 106.356 108.440
11/30/1994 82.692 102.832 104.323
12/30/1994 80.769 103.111 101.277
01/31/1995 63.462 103.704 97.722
02/28/1995 80.769 109.186 99.738
03/31/1995 76.923 112.427 100.172
04/28/1995 69.231 115.968 99.625
05/31/1995 73.077 118.968 101.991
06/30/1995 67.308 128.602 110.340
07/31/1995 65.385 138.046 116.333
08/31/1995 92.308 140.849 116.007
09/29/1995 61.538 144.091 118.116
10/31/1995 57.692 143.261 116.025
11/30/1995 59.615 146.622 115.407
12/29/1995 59.615 145.846 111.551
01/31/1996 63.462 146.576 110.417
02/29/1996 63.462 152.163 117.715
03/29/1996 61.538 152.674 125.443
04/30/1996 89.423 165.322 136.781
05/31/1996 90.385 172.907 140.013
06/28/1996 80.769 165.113 134.080
07/31/1996 70.192 150.415 125.870
08/30/1996 67.308 158.851 134.791
09/30/1996 66.346 170.994 141.553
10/31/1996 75.000 169.101 135.709
11/29/1996 70.192 179.593 139.044
12/31/1996 70.192 179.443 132.982
01/31/1997 75.962 192.177 135.814
02/28/1997 73.077 181.547 131.140
03/31/1997 69.231 169.710 126.508
04/30/1997 75.962 174.995 122.291
05/30/1997 88.462 194.818 135.128
06/30/1997 92.308 200.806 142.919
07/31/1997 108.654 221.966 149.383
08/29/1997 109.615 221.634 151.945
09/30/1997 101.923 234.775 162.023
10/31/1997 100.000 222.545 153.251
11/28/1997 102.885 223.730 156.715
12/31/1997 108.654 219.881 156.241
01/30/1998 114.423 226.839 158.470
02/27/1998 118.750 248.171 172.880
03/31/1998 118.269 257.327 187.514
04/30/1998 123.077 261.661 187.780
05/29/1998 85.577 247.137 180.890
06/30/1998 69.231 264.398 191.416
07/31/1998 50.962 261.295 177.909
08/31/1998 36.538 209.704 131.439
09/30/1998 50.000 238.814 138.790
10/30/1998 47.115 249.137 154.215
11/30/1998 39.423 274.291 176.360
12/31/1998 35.577 309.836 189.985
01/29/1999 34.615 354.760 193.764
02/26/1999 30.769 322.982 178.816
03/31/1999 29.808 346.230 189.524
04/30/1999 14.423 355.415 192.769
05/28/1999 12.981 347.115 183.262
13
<PAGE>
EMPLOYMENT CONTRACTS, TERMINATION OF EMPLOYMENT
The following is a description of the employment arrangements with the
persons who were officers of the Company during portions of Fiscal 1999, but who
are no longer officers of the Company.
On November 1, 1995, Mr. Toler entered into the Toler Employment Agreement
with the Company, pursuant to which Mr. Toler was to serve as President and
Chief Executive Officer of the Company for a five-year term. Mr. Toler resigned
as Chief Executive Officer and President of the Company effective August 31,
1998. Under the Toler Employment Agreement, Mr. Toler received a base salary of
$300,000 over each twelve-month period employed. The Toler Employment Agreement
did not provide for any adjustment of base salary over the term. Pursuant to the
Toler Employment Agreement, Mr. Toler was entitled to receive a bonus if certain
performance criteria were satisfied, ranging from 33.33% of base salary for
fiscal 1996 to 50% of base salary for Fiscal 1999 and each fiscal year
thereafter. In the event the Company terminated Mr. Toler's employment without
cause, Mr. Toler was entitled to receive the salary plus the pro rata share of
any cash bonus he would have received if he had continued his employment for 18
months following the date of such termination. Mr. Toler was subject to certain
non-competition provisions during the term of his employment and, in certain
circumstances, for a period of 18 months subsequent to his leaving the Company.
On August 14, 1998, Mr. Toler entered into the Toler Letter Agreement with the
Company, pursuant to which Mr. Toler received an aggregate amount equal to
$19,883 as payment for certain fees and expenses upon his resignation as
President and Chief Executive Officer of the Company. In addition, pursuant to
the Toler Letter Agreement, Mr. Toler received a one time stay bonus equal to
$4,000 and was entitled to purchase any and all of the Company's merchandise, at
the Company's cost, up to a maximum aggregate amount equal to $20,000 until
August 31, 1999. For a description of the options granted to Mr. Toler see "--
Report of the Compensation Committee of the Board of Directors on Executive
Compensation--Compensation of John E. Toler, Jr., Former Chief Executive
Officer."
Mr. Carey entered into the CWC Employment Agreement with the Company
effective as of September 1, 1998. Under the terms of the CWC Employment
Agreement, Mr. Carey was to serve as Acting Chief Executive Officer and
President of the Company for a one-year term, or until such time as a successor
Chief Executive Officer and President of the Company commenced employment. Mr.
Carey was to receive a base salary of $350,000 over the twelve-month period
employed, but such amount was not subject to adjustment over the term. In
addition, Mr. Carey was entitled to receive a minimum of six months' salary if
the Company employed him for more than three months of the term of the
employment (minus the amount of base salary actually paid to Mr. Carey). Upon
the achievement of certain performance and other criteria, Mr. Carey was
entitled to receive up to a maximum of $50,000 per quarter (and up to 100% of
such amount for each quarter or part thereof worked) as a quarterly bonus. The
Board of Directors authorized a payment of $41,250 to Mr. Carey as a bonus for
the second quarter of Fiscal 1999. Mr. Carey also received payment for certain
expenses, including living expenses, relocation expenses and travel related
expenses. Mr. Carey was subject to certain non-competition provisions during the
term of this employment. Additionally, on September 1, 1998, the Company granted
Mr. Carey an option to purchase 150,000 shares of the Company's Common Stock at
$2.25 per share. The Company granted this option outside of the 1991 Option
Plan.
Mr. Carey resigned as the Acting Chief Executive Officer of the Company
effective April 7, 1999. In connection with his resignation, on February 23,
1999, Mr. Carey entered into the CWC Severance Agreement with the Company.
Pursuant to the terms of the CWC Severance Agreement, Mr. Carey received an
aggregate amount equal to $29,167 in base salary on the effective date of his
resignation as Acting Chief Executive Officer of the Company. In addition,
pursuant to the terms of the CWC Severance Agreement, Mr. Carey (i) received
$50,000 as a bonus for the Company's third quarter of Fiscal 1999, (ii) is
entitled to purchase any and all of the Company's merchandise, at the Company's
cost, for his personal use until April 7, 2002, (iii) will be reimbursed for
the premiums associated with continuation of medical coverage under COBRA and
(iv) was reimbursed for the legal expenses he incurred in connection with the
negotiation of the CWC Severance Agreement. Pursuant to the terms of his Stock
Option Agreement, the option granted to Mr. Carey in connection with his
appointment as the Acting Chief Executive Officer of the Company automatically
vested as a result of the execution of the Settlement Agreement and is
exercisable until April 7, 2001.
14
<PAGE>
Mr. Watson was appointed as the Acting Chief Executive Officer of the
Company effective as of April 7, 1999 and resigned on August 17, 1999. Mr.
Watson served as the Acting Chief Executive Officer of the Company from month to
month until a successor President and Chief Executive Officer of the Company
commenced employment. Mr. Watson received a salary equal to $30,000 per month
for each month employed, but such amount was not subject to adjustment over the
term. Mr. Watson also received reimbursement of his reasonable living expenses
during his term as Acting Chief Executive Officer.
Mr. Nace entered into an employment agreement with the Company (the "Nace
Employment Agreement") effective as of September 10, 1998 pursuant to which Mr.
Nace was to serve as the Chief Financial Officer, Executive Vice President and
Treasurer of the Company for a two-year term. Mr. Nace resigned as such
effective July 2, 1999. Mr. Nace received a base salary of $200,000 over each
twelve-month period employed, but such amount was not subject to adjustment over
the term. Upon achievement of certain performance criteria, Mr. Nace was
entitled to receive a bonus in an amount of up to 25% of his base salary in each
year. Mr. Nace's employment could have been terminated immediately by the
Company with "cause" (as defined in the Nace Employment Agreement). If Mr.
Nace's employment was terminated by the Company due to his disability, without
cause or within one year from the date of a change of control of the Company,
then he was entitled to receive, on the date of such termination, a lump sum
payment equal to twelve months of base salary plus the pro rata share of any
accrued and unpaid cash bonus Mr. Nace earned prior to his termination. Mr. Nace
was subject to certain non-competition provisions during the term of his
employment. Additionally, on September 10, 1998, the Company granted Mr. Nace an
option to purchase 75,000 shares of the Company's Common Stock at $2.50 per
share pursuant to the 1991 Option Plan. Due to his resignation, this option
expired on September 30, 1999.
The following is a description of the employment arrangements of the current
executive officers of the Company.
Mr. Baumgardner entered into an employment agreement with the Company (the
"Baumgardner Employment Agreement") effective as of August 17, 1999. Under the
terms of the Baumgardner Employment Agreement, Mr. Baumgardner will serve as the
President and Chief Executive Officer of the Company for a two-year term. Mr.
Baumgardner receives a base salary of $200,000 over each twelve-month period
employed, but such amount will not be subject to adjustment over the term. Upon
achievement of certain performance criteria Mr. Baumgardner will be entitled to
receive a bonus in an amount of up to 75% of his base salary in each year. In
addition, Mr. Baumgardner received a special bonus upon inception of employment
in an aggregate amount equal to $125,000, payable in twelve monthly
installments, which commenced on September 1, 1999. Mr. Baumgardner's employment
may be terminated immediately by the Company for "cause" (as defined in the
Baumgardner Employment Agreement). If Mr. Baumgardner's employment is terminated
by the Company without cause, then he is entitled to receive a lump sum payment
equal to twelve months of base salary, plus any accrued but unpaid annual bonus
which he has earned. If, within one year from the date of a Change of Control
(as defined in the Baumgardner Employment Agreement), Mr. Baumgardner's
employment is terminated by the Company or its successor entity for any reason
other than death, cause or disability, then he is entitled to receive a lump sum
payment equal to (a) the number of months of base salary remaining in the term
of employment in the event such termination occurs on or prior to August 17,
2000 or (b) twelve months of base salary in the event such termination occurs
after August 18, 2000, whichever is applicable. Mr. Baumgardner will be subject
to certain non-competition provisions during the term of his employment.
Additionally, on August 17, 1999, the Company granted Mr. Baumgardner an option
to purchase 350,000 shares of the Company's Common Stock at $.4375 per share.
The Company granted this option outside the 1991 Option Plan as an inducement to
Mr. Baumgardner entering into his employment agreement with the Company.
Mr. Hopper entered into an employment agreement with the Company (the
"Hopper Employment Agreement") effective as of June 7, 1999. Under the terms of
the Hopper Employment Agreement, Mr. Hopper served as Vice President of Finance
until July 2, 1999 and as Chief Financial Officer and Treasurer of the Company
thereafter. Mr. Hopper is employed for a period of one year, but the Hopper
Employment Agreement is automatically extended for periods of one year, unless
either party elects not to extend the term. Mr. Hopper receives a base salary of
$150,000 over each twelve-month period employed, but such amount will not be
subject to adjustment over the term. Upon achievement of certain performance
criteria, Mr. Hopper is entitled to receive a bonus in an amount of up to 25% of
his base salary in each year. Mr. Hopper's employment may be terminated
15
<PAGE>
immediately by the Company for "cause" (as defined in the Hopper Employment
Agreement). If Mr. Hopper's employment is terminated by the Company without
cause or if a Terminating Event (as defined in the Hopper Employment Agreement)
occurs within one year from the date of a change of control of the Company, then
he will be entitled to receive, on the date of termination, among other things,
a lump sum payment equal to (a) six months of Base Salary in the event such
termination occurs on or prior to December 7, 1999; (b) seven months of Base
Salary in the event such termination occurs after December 8, 1999 but on or
prior to January 7, 2000; (c) eight months of Base Salary in the event such
termination occurs after January 8, 2000 but on or prior to February 7, 2000;
(d) nine months of Base Salary in the event such termination occurs after
February 8, 2000 but on or prior to March 7, 2000; (e) ten months of Base Salary
in the event such termination occurs after March 8, 2000 but on or prior to
April 7, 2000; (f) eleven months of Base Salary in the event such termination
occurs after April 8, 2000 but on or prior to May 7, 2000; or (g) twelve months
of Base Salary if such termination occurs after May 8, 2000, plus any accrued
but unpaid annual bonus which he has earned prior to his termination.
Additionally, on June 7, 1999, the Company granted Mr. Hopper an option to
purchase 50,000 shares of the Company's Common Stock at $.6875 per share
pursuant to the 1991 Option Plan.
Mr. Poole entered into an employment agreement with the Company (the "Poole
Employment Agreement") effective as of August 25, 1998. Under the terms of the
Poole Employment Agreement, Mr. Poole will serve as Vice President and General
Merchandise Manager of the Company for a two-year term. Mr. Poole receives a
base salary of $135,000 over each twelve-month period employed, but such amount
will not be subject to adjustment over the term. Upon achievement of certain
performance criteria, Mr. Poole is entitled to receive a bonus in an amount of
up to 25% of his base salary in each year. Mr. Poole's employment may be
terminated immediately by the Company for "cause" (as defined in the Poole
Employment Agreement). If Mr. Poole's employment is terminated by the Company
without cause or within one year from the date of a change of control of the
Company, then he will be entitled to receive, on the date of such termination, a
lump sum payment equal to twelve months of base salary plus the pro rata share
of any accrued and unpaid cash bonus Mr. Poole earned prior to his termination.
Additionally, on August 25, 1998, the Company granted Mr. Poole an option to
purchase 50,000 shares of the Company's Common Stock at $2.0625 per share. The
Company granted this option outside of the 1991 Option Plan as an inducement to
enter into his employment agreement. This option automatically vested upon the
execution of the Settlement Agreement pursuant to the terms of Mr. Poole's Stock
Option Agreement.
On June 16, 1994, Mr. Canfield entered into an employment agreement with the
Company (the "Canfield Employment Agreement"), pursuant to which Mr. Canfield
serves as the Vice President of Store Operations of the Company for a five-year
term. On November 13, 1998, Mr. Canfield entered into an amendment to the
Canfield Employment Agreement that, in part, extends the term of his employment
until June 15, 2000. Under the Canfield Employment Agreement, Mr. Canfield
receives a base salary ranging from $157,000 over the twelve-month period ended
on June 15, 1996 to $182,000 over the twelve-month period ending on June 15,
2000, and upon the achievement of certain performance criteria, a bonus in an
amount of up to 25% of his base salary in each year. Pursuant to the Canfield
Employment Agreement, Mr. Canfield received a signing bonus equal to $50,000 on
the date he became Vice President of Store Operations of the Company. In the
event Mr. Canfield's employment is terminated by the Company due to his
disability, for non-performance or without cause, Mr. Canfield is entitled to
receive the salary he would have received had he continued his employment for 60
days, 90 days or 12 months, respectively, following the date of such
termination. Pursuant to the amendment to the Canfield Employment Agreement, in
the event that Mr. Canfield is terminated by the Company without cause within
one year from the date of a change of control of the Company, Mr. Canfield will
be entitled to receive, on the date of such termination, a lump sum payment
equal to twelve months of base salary plus the pro rata share of any accrued and
unpaid bonus which Mr. Canfield earned prior to his termination. Mr. Canfield is
subject to certain non-competition provisions during the term of his employment
and, in certain circumstances, for a period of up to one year subsequent to his
leaving the Company.
Mr. Mills entered into a Termination Subsequent of Change in Control
Agreement (the "Mills Termination Agreement") effective as of October 1, 1998.
Under the terms of this agreement, if Mr. Mills' employment is terminated by the
Company pursuant to a Terminating Event (as defined in the Mills Termination
Agreement) within one year from the date of a change of control of the Company,
then as of the date of such Terminating Event he will be entitled to receive a
lump sum payment equal to twelve (12) months base salary plus any accrued and
unpaid
16
<PAGE>
annual bonus which he earned prior to his termination. While Mr. Mills has not
entered into an employment agreement with the Company, pursuant to the terms of
the Mills Termination Agreement he is entitled to receive a bonus in an amount
up to 25% of his base salary in each year.
17
<PAGE>
CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS
Mr. Carey, a former director and officer of the Company, entered into the
CWC Consulting Agreement with the Company on June 2, 1996, which provided, among
other things, that Mr. Carey would receive in exchange for certain services a
consulting fee at the annual rate of $150,000 over a three-year term, as well as
reimbursement for all reasonable expenses incurred by him on behalf of the
Company in connection with the performance of his obligations thereunder. In
connection with his position as Acting Chief Executive Officer of the Company,
the Company terminated the CWC Consulting Agreement effective September 1, 1998.
Mr. Carey received $37,500 in lieu of the three-month notification necessary
pursuant to the CWC Consulting Agreement to terminate such agreement. See
"Executive Compensation--Compensation Committee Interlocks and Insider
Participation."
In connection with his resignation as Acting Chief Executive Officer of the
Company, Mr. Carey entered into a severance agreement. In addition, Mr. Carey
entered into a new consulting agreement with the Company, which expired on
October 7, 1999. For a description of certain terms of such agreements, see
"Executive Compensation--Compensation Committee Interlocks and Insider
Participation" and "--Employment Contracts, Termination of Employment."
To modify a previously existing agreement, on February 23, 1999, the Company
entered into an amended and restated success fee agreement with Mr. Carey (the
"Amended Success Fee Agreement") which narrowed the scope of the Success Fee
Agreement, dated as of January 15, 1999 (the "Old Success Fee Agreement"),
between the Company and Mr. Carey. The Old Success Fee Agreement provided for
the payment of a fee if Mr. Carey actively participated in the negotiation,
structuring and closing of a transaction or a series of related transactions
approved by the Board of Directors of the Company that are a tender or exchange
offer, merger, reorganization, consolidation or other business combination that
directly result in the sale or other disposition of all or substantially all of
the assets of the Company or a sale of all or substantially all of the issued
and outstanding stock of the Company. Under the Amended Success Fee Agreement,
the Company is only obligated to pay Mr. Carey a fee if the Company requests in
writing that he participate in such a transaction. If the Company requests Mr.
Carey's participation in such a transaction, as compensation for all such
services, Mr. Carey is entitled to receive an amount equal to 83.33% of two-
thirds of one percent of the aggregate value (as defined in the Amended Success
Fee Agreement) of any such transaction. In addition, no payment will be due Mr.
Carey if such transaction involves any person, company or entity (i) that is
operated by Mr. Carey, (ii) for which Mr. Carey is performing or has performed,
in the twelve (12) months preceding the execution of the definitive documents
relating to such transaction, any material advisory or consulting services,
(iii) that employs Mr. Carey or (iv) in which Mr. Carey owns or has an agreement
to own more than an one percent (1%) equity interest in a privately-held
corporation or a five percent (5%) equity interest in a publicly-held
corporation. The Amended Success Fee Agreement automatically terminates on
January 15, 2000 if the closing of any such transaction does not occur by such
date.
Mr. Toler, a former director of the Company, served as President and Chief
Executive Officer of the Company until his resignation as such on August 31,
1998. In connection with his resignation, the Company entered into the Toler
Letter Agreement. For a description of the terms of Mr. Toler's employment
agreement and the Toler Letter Agreement, see "Executive Compensation--
Employment Contracts, Termination of Employment."
During Fiscal 1999, the Company retained and continues to retain,
Dudley, Clark & Chan, of which Ms. Dudley, a former Director of the Company, is
the senior partner, as its local law firm in St. Thomas, U.S.V.I. Based on
information provided to the Company by Ms. Dudley, the fees received by Dudley,
Clark & Chan from the Company during Fiscal 1999 did not exceed 5% of such
firm's gross revenues for its last fiscal year.
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<PAGE>
PRINCIPAL AND MANAGEMENT STOCKHOLDERS
BENEFICIAL OWNERSHIP
The table sets forth below, to the best knowledge and belief of the Company,
certain information regarding the beneficial ownership of the Company's Common
Stock as of November 1, 1999 by (i) each person known by the Company to be the
beneficial owner of more than 5% of the outstanding Common Stock, (ii) each of
the Company's Directors, (iii) each of the named executive officers in the
Summary Compensation Table and (iv) all of the Company's current executive
officers and Directors as a group.
<TABLE>
<CAPTION>
SHARES BENEFICIALLY PERCENT OF
DIRECTORS, EXECUTIVE OFFICERS AND 5% STOCKHOLDERS OWNED(1) CLASS(2)
- --------------------------------------------------- ------------------- ----------
<S> <C> <C>
Jewelcor Management, Inc......................................... 1,402,000(3) 16.3%
Seymour Holtzman
Steven Holtzman
Trust F/B/O A. Holtzman Garcia
Custodial Account F/B/O Chelsea Holtzman
100 N. Wilkes-Barre Boulevard
Wilkes-Barre, PA 18702
ValueVest Partners L.P........................................... 1,177,400(4) 13.6%
1 Sansome Street, 39 Floor,
San Francisco, CA 94104
Donald L. Sturm
3033 East First Avenue, Suite 200,
Denver, CO 80206
Franklin Advisory Services, Inc.................................. 813,000(5) 9.4%
One Parker Plaza, 16th Floor
Fort Lee, NJ 07024
Franklin Resources
Charles B. Johnson
Rupert H. Johnson, Jr.
77 Mariners Island Boulevard
San Mateo, CA 94404
C. William Carey................................................. 665,000(6) 7.6%
150 federal Street
Boston, MA 02110
Robert L. Baumgardner............................................ 70,000(7) *
William Canfield................................................. 60,000(8) *
Patrick J. Hopper................................................ 10,000(9) *
Richard C. Hunter................................................ 3,000(10) *
Peter R. McMullin................................................ 7,700(11) *
Raoul Mills...................................................... 5,000(12) *
David J. Nace.................................................... 0(13)
Alex J. Nobile................................................... 0
Michael M. Poole................................................. 50,000(14) *
Melanie L. Sturm................................................. 3,000(15) *
John E. Toler, Jr................................................ 300,000(16) 3.4%
Kenneth W. Watson................................................ 30,000(17) *
All current directors and executive officers
as a group (10 persons)........................................ 238,700 2.8%
</TABLE>
__________________________
* Less than 1%.
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<PAGE>
(1) Beneficial share ownership is determined pursuant to Rule 13d-3 under the
Exchange Act. Accordingly, a beneficial owner of a security includes any
person who, directly or indirectly, through any contract, arrangement,
understanding, relationship or otherwise has or shares the power to vote
such security or the power to dispose of such security. The amounts set
forth above as beneficially owned include shares owned, if any, by spouses
and relatives living in the same home as to which beneficial ownership may
be disclaimed. The amounts set forth as beneficially owned include shares of
Common Stock which such persons had the right to acquire within 60 days of
November 1, 1999, pursuant to stock options.
(2) Percentages are calculated on the basis of 8,627,209 shares of Common Stock
outstanding as of November 1, 1999.
(3) The above information is based on copies of a statement on Schedule 13D
filed with the SEC on September 4, 1998, as amended by Amendment No. 1 to
Schedule 13D filed with the SEC on September 24, 1999, Amendment No. 2 to
Schedule 13D filed with the SEC on October 15, 1998, Amendment No. 3 to
Schedule 13D filed with the SEC on October 13, 1998, Amendment No. 4 to
Schedule 13D filed with the SEC on January 28, 1999, Amendment No. 5 to
Schedule 13D filed with the SEC on March 1, 1999, Amendment No. 6 to
Schedule 13D filed with the SEC on April 1, 1999 and Amendment No. 7 to
Schedule 13D filed with the SEC on June 18, 1999, which indicates that
Jewelcor Management, Inc. has sole voting and sole dispositive power with
respect to 1,341,000 shares, Seymour Holtzman and Steven Holtzman have
shared voting and shared dispositive power with respect to 48,000 shares,
the Custodial Account F/B/O Chelsea Holtzman, has sole voting and sole
dispositive power with respect to 3,000 shares, and the Trust F/B/O Allison
Holtzman Garcia, has sole voting and sole dispositive power with respect to
10,000 shares. For purposes of the reporting requirements of the Exchange
Act, each of Jewelcor Management, Inc., Jewelcor Inc., S.H. Holdings, Inc.,
Seymour Holtzman, Steven Holtzman, Evelyn Holtzman, the Custodial Account
F/B/O Chelsea Holtzman and the Trust F/B/O Allison Holtzman Garcia may be
deemed to be a beneficial owner of such securities; however, each such
person expressly disclaims beneficial ownership of any Common Stock of the
Company beneficially owned by any other such person, except that Seymour
Holtzman acknowledges beneficial ownership of the Common Stock owned by
Jewelcor Management, Inc.
(4) The above information is based on copies of a statement on Schedule 13D
filed with the SEC on May 5, 1997, as amended by Amendment No. 1 to Schedule
13D filed with the SEC on August 4, 1997, Amendment No. 2 filed with the SEC
on October 30, 1998, and Amendment No. 3 filed with the SEC on March 5,
1999, which indicates that ValueVest Partners L.P. has sole voting and sole
dispositive power with respect to 395,300 shares and Donald L. Sturm has
sole voting and sole dispositive power with respect to 782,100 shares.
(5) The above information is based on copies of a statement on Schedule 13G
filed with the SEC on February 13, 1997, as amended by Amendment No. 1 to
Schedule 13G filed with the SEC on November 12, 1997, Amendment No. 2 to
Schedule 13G filed with the SEC on February 5, 1998, and Amendment No. 3 to
Schedule 13G filed with the SEC on February 2, 1999, which indicates that
the Franklin Advisory Services, Inc. has sole voting power with respect to
513,000 shares and sole dispositive power with respect to all 813,000
shares. These securities are owned by one or more open or closed-end
investment companies or other managed accounts, which are advised by direct
and indirect investment advisory subsidiaries of Franklin Resources, Inc.
For purposes of the reporting requirements of the Securities Exchange Act of
1934, as amended (the "Exchange Act"), each of Franklin Advisory Services,
Inc., Franklin Resources, Inc., Charles B. Johnson and Rupert B. Johnson may
be deemed to be a beneficial owner of such securities; however, each such
person expressly disclaims any economic interest or beneficial ownership in
any of such securities.
(6) The above information is based, in part, on a copy of a statement on
Schedule 13D filed with the SEC on September 3, 1999, which indicates that
Mr. Carey has sole voting and sole dispositive power with respect to 515,000
shares. Also, includes 150,000 shares of Common Stock deemed to be
beneficially owned by Mr. Carey which are subject to options previously
granted outside of the 1991 Option Plan. This option expires on April 7,
2001.
(7) Represents shares of Common Stock deemed to be beneficially owned by Mr.
Baumgardner which are subject to options previously granted outside the
Company's 1991 Option Plan as an inducement to Mr. Baumgardner entering into
an employment agreement with the Company.
(8) Represents shares of Common Stock deemed to be beneficially owned by Mr.
Canfield which are subject to options previously granted pursuant to the
1991 Option Plan.
(9) Represents shares of Common Stock deemed to be beneficially owned by Mr.
Hopper which are subject to options previously granted pursuant to the 1991
Option Plan.
(10) Represents shares of Common Stock deemed to be beneficially owned by Mr.
Hunter which are subject to options previously granted pursuant to the 1992
Option Plan.
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<PAGE>
(11) Includes 3,000 shares of Common Stock deemed to be beneficially owned by
Mr. McMullin which are subject to options previously granted pursuant to
the 1992 Option Plan.
(12) Represents shares of Common Stock deemed to be beneficially owned by Mr.
Mills which are subject to options previously granted pursuant to the 1991
Option Plan.
(13) In connection with Mr. Nace's appointment as Chief Financial Officer, the
Company granted him an option for 75,000 shares pursuant to the 1991 Option
Plan. This option expired on September 30, 1999.
(14) Represents shares of Common Stock deemed to be beneficially owned by Mr.
Poole which are subject to options previously granted outside the Company's
1991 Option Plan as an inducement to Mr. Poole entering into an employment
agreement with the Company.
(15) Represents shares of Common Stock deemed to be beneficially owned by Ms.
Sturm which are subject to options previously granted pursuant to the 1992
Option Plan.
(16) Represents shares of Common Stock deemed to be beneficially owned by Mr.
Toler which are subject to options previously granted pursuant to the 1991
Option Plan. This option expires on September 1, 2000.
(17) Represents 10,000 shares and 20,000 shares of Common Stock deemed to be
beneficially owned by Mr. Watson which are subject to options previously
granted pursuant to the 1991 Option Plan and 1992 Option Plan,
respectively.
21
<PAGE>
PROPOSAL NUMBER 2
REVERSE STOCK SPLIT
PROPOSED AMENDMENT TO CERTIFICATE OF INCORPORATION TO
EFFECTUATE A ONE-FOR-FIVE REVERSE STOCK SPLIT
The Board of Directors has determined and declared that it is advisable, and
is therefore submitting to you for your approval, a proposed amendment to the
Certificate of Incorporation that will exchange each five shares of the
Company's issued and outstanding Common Stock into one new share of post split
common stock, par value $.05 per share (the "Post Split Common Stock"). The
text of the proposed certificate of amendment is set forth in Exhibit A to this
Proxy Statement. The Company's five million (5,000,000) shares of authorized
preferred stock will not be affected by the proposed reverse stock split.
Presently there are no outstanding shares of preferred stock. If the
stockholders of the Company approve this proposal, then the reverse stock split
will become effective as of 5:00 p.m. eastern time, on the date that the
certificate of amendment to the Company's Certificate of Incorporation is filed
with the Secretary of the State of Delaware (the "Effective Date"). If for any
reason the Board of Directors deems it advisable, the proposed amendment may be
abandoned at any time before the Effective Date, whether before or after the
Annual Meeting (even if the proposal has been approved by the stockholders).
New shares of Post Split Common Stock will be issued in connection with the
reverse stock split. As soon as practicable after the Effective Date, the
Company will send a letter to each holder of record of a stock certificate or
certificates which represent issued Common Stock outstanding on the Effective
Date. The letter will instruct you on how to surrender your certificate(s) to
State Street Bank and Trust Company, the Company's transfer agent, in exchange
for certificates representing the number of shares of the Post Split Common
Stock into which your shares of Common Stock have been converted as a result of
the reverse stock split. You will not receive any new certificates until you
have surrendered your old certificate(s) together with a completed and executed
form letter (which the Company will provide, along with the instructions) to the
transfer agent. See "--Exchange of Stock Certificates."
THE BOARD OF DIRECTORS OF THE COMPANY RECOMMENDS THAT YOU VOTE FOR THE
PROPOSED AMENDMENT TO THE COMPANY'S CERTIFICATE OF INCORPORATION THAT, IF
APPROVED, WILL EFFECT A ONE-FOR-FIVE REVERSE STOCK SPLIT OF THE COMPANY'S COMMON
STOCK.
PURPOSES AND EFFECT OF REVERSE STOCK SPLIT
On June 7, 1999, NASDAQ notified the Company that the Company would not
remain eligible for continued listing on The Nasdaq National Market System
("NMS") unless its Common Stock demonstrated compliance with NASDAQ's $1.00
minimum bid price requirement during the period ending September 6, 1999. On
July 9, 1999, NASDAQ notified the Company that the Company also was not in
compliance with NASDAQ's $5 million minimum public float value requirement for
listing on NMS. The Company requested a panel hearing as permitted by
applicable NASDAQ procedure, which was held on October 14, 1999. Prior to the
hearing, the Company was notified that the NASDAQ staff had recommended that the
hearing panel delist the Company from NMS as a result of its belief that the
Company did not provide a definitive plan to achieve near term compliance with
the continued listing requirements or to sustain such compliance over an
extended period of time. At the hearing, the Company presented a plan to
transfer from NMS to the NASDAQ SmallCap Market and effectuate a one-for-five
reverse stock split of the Company's Common Stock. NASDAQ informed the Company
that the delisting procedures have been stayed pending resolution of such
hearing. The Company expects to receive notification of NASDAQ's determination
shortly. The Company cannot guarantee that NASDAQ will approve the application
to transfer to the NASDAQ SmallCap Market, that even with the reverse stock
split it will meet all of NASDAQ's SmallCap Market's continued listing criteria,
or that the price for shares of the Company's Common Stock after the reverse
stock split will be five times the price for shares immediately before the split
or will be maintained for any period of time.
The Board believes that if the proposed amendment is approved at the Annual
Meeting and the reverse stock split is effected, the Company should regain
compliance with the $1.00 per share minimum bid price required to
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<PAGE>
transfer to the NASDAQ SmallCap Market. However, the Company also needs to
satisfy other criteria to meet the maintenance requirements. These other
criteria consist of maintaining (i) a market capitalization of at least
$35,000,000, or net tangible assets of $2,000,000, or net income of $500,000 in
the latest fiscal year or two of the last three fiscal years, (ii) a public
float (i.e., shares held other than by officers, directors and owners of more
than 10% of the total shares outstanding) of at least 500,000 shares, (iii) a
market value of the public float of at least $1 million, (iv) at least 300
stockholders (round lot holders), (v) at least two market makers and (vi)
compliance with certain corporate governance requirements. At this time, the
Company believes it will be able to satisfy these requirements. However, even if
the proposed amendment is approved and the reverse stock split is effected,
there can be no assurance that the Company will continue to satisfy these
maintenance criteria.
The delisting of the Company's Common Stock from NMS could adversely affect
the liquidity of the Company's Common Stock. If the Company's Common Stock were
to be delisted from NMS, it would likely be quoted in the "pink sheets"
maintained by the National Quotation Bureau, Inc. or the OTC Bulletin Board
maintained by NASDAQ. If the Company's Common Stock is listed on the OTC
Bulletin Board or the pink sheets, then the spread between the bid and ask price
of shares of the Company's Common Stock is likely to be greater than at present
and stockholders may experience a greater degree of difficulty in engaging in
trades of shares of the Company's Common Stock.
As long as the Company's Common Stock has a market price of less than $5.00
per share, if it is not traded on NASDAQ and another exception is not available,
it will be considered a "penny stock" within the meaning of relevant SEC
regulations. Under these regulations, any transaction involving a penny stock,
unless exempt, requires the delivery, prior to the transaction, of a disclosure
schedule prepared by the SEC relating to the penny stock market. The broker-
dealer also must disclose the commissions payable to both the broker-dealer and
the registered representative, current quotations for the securities and, if the
broker-dealer is the sole market-maker, the broker-dealer must disclose this
fact and the broker dealer's presumed control over the market. Finally, monthly
statements must be sent disclosing recent price information for the penny stock
held in the account and information on the limited market in penny stocks.
These penny stock rules may restrict the ability of broker-dealers to sell the
Company's securities and may affect the ability of purchasers to sell the
Company's securities in the secondary market, particularly if the Company is
delisted from NASDAQ.
In addition, the Board of Directors believes that the present market price
of the Company's Common Stock makes it less attractive to members of the
financial community and the investing public. Theoretically, the number of
shares outstanding should not, by itself, affect the marketability of the stock,
the type of investor who acquires it or a company's reputation in the financial
community. However, in practice, this is not necessarily the case, as many
investors look upon low priced stock as unduly speculative in nature and, as a
matter of policy, avoid investment in such stocks. Certain policies and
practices of the securities industry also may tend to discourage individual
brokers within brokerage firms from dealing in lower-priced stocks. Some of
those policies and practices involve time-consuming procedures that make the
handling of lower-priced stocks economically unattractive. In addition, the
structure of trading commissions also tends to have an adverse impact upon
holders of low priced stock because the brokerage commission on a sale of low
priced stock generally represents a higher percentage of the sales price than
the commission on higher priced issues. The reverse stock split may lessen
these adverse effects if it results in a higher price per share of the Company's
Post Split Common Stock.
The Board of Directors believes that the decrease in the number of shares of
Post Split Common Stock outstanding as a consequence of the proposed reverse
stock split and the resulting anticipated increased price level could encourage
greater interest in the Post Split Common Stock by the financial community and
promote greater liquidity for the holders of the Post Split Common Stock. It is
possible, however, that liquidity could be affected adversely by the reduced
number of shares outstanding after the proposed reverse stock split.
The Board of Directors caution you that the effect of the reverse stock
split upon the market prices for the Company's Post Split Common Stock cannot be
accurately predicted. In particular, there is no assurance that the market
prices for the Company's Post Split Common Stock will be five times the market
prices immediately prior to the reverse stock split. Furthermore, the Company
cannot be certain that the proposed reverse stock split will achieve the desired
results which have been outlined above, nor can the Company be certain that the
reverse stock
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<PAGE>
split will not adversely impact the market price of the Post Split Common Stock
or, alternatively, that any increase in the market price of the Company's Post
Split Common Stock immediately after the reverse stock split will be sustained.
In addition, the reverse stock split may have the effect of creating odd lots of
stock for some stockholders, i.e., a number of shares less than 100. Odd lots
may be more difficult to sell or have higher brokerage commissions associated
with their sale.
A further effect of the reverse stock split would be adjustments in the
number of shares granted and reserved under the Company's 1991 Option Plan and
the 1992 Option Plan. These plans provide that the number of shares granted and
reserved thereunder are to be adjusted appropriately to give effect to any
reverse stock split. If the reverse stock split is approved, the number of
shares reserved for issuance under the existing 1991 Option Plan will be
decreased from 900,000 to 180,000 shares. Also, the number of shares reserved
for issuance under the existing 1992 Option Plan will be decreased from 150,000
to 30,000. In addition, stock options granted outside of the 1991 Option Plan
also would be decreased accordingly. Thus, adoption of Proposal Number Two
would require adjustments in the outstanding options granted, which would
decrease the number of shares issuable upon exercise of the options and increase
the exercise price per share, each by a factor of five.
An additional effect of the adoption of Proposal Number Two would be a
change in the par value of the Company's Common Stock to $.05 per share. This
change is being made to ensure that shares of Post Split Common Stock will not
be confused with shares of the old Common Stock. The change in par value is not
expected to have a material effect upon the Company and its stockholders. Par
value represents the minimum consideration which may be received by the Company
for the issuance of a share of stock.
As a result of the reverse stock split, the number of shares of Common Stock
which you hold as of the close of business on the Effective Date will be equal
to the number of shares you hold immediately prior to the close of business on
the Effective Date divided by five, including any fractional shares, resulting
from the reverse stock split. The number of shares of Post Split Common Stock
issued and outstanding will be reduced. The reverse stock split will not affect
your percentage ownership interest in the Company or proportional voting power.
The terms of the Company's Common Stock and preferred stock, and the rights and
privileges of the holders of such shares, will be unaffected by the reverse
stock split.
Dissenting stockholders will not have appraisal rights under Delaware law or
under the Company's Certificate of Incorporation or By-laws.
The Company's Common Stock is currently registered under Section 12(g) of
the Exchange Act and, as a result, the Company is subject to the periodic
reporting and other requirements of the Exchange Act. The reverse stock split
will not affect the registration of the Company's Common Stock under the
Exchange Act and the Company has no current intention of terminating its
registration under the Exchange Act.
EXCHANGE OF STOCK CERTIFICATES
As soon as practicable after the Effective Date, the Company will ask you to
exchange your stock certificates ("Old Certificates") for new certificates ("New
Certificates") representing the number of shares of the Post Split Common Stock
into which your shares of Common Stock have been converted as a result of the
reverse stock split. Fractional shares of the Post Split Common Stock will be
issued if the division described above results in a quotient which contains a
fraction. At the appropriate time the Company will furnish you with the
necessary materials and instructions for the surrender and exchange of your
stock certificates by the Company's transfer agent. The Company will not
require any stockholder to exchange his or her certificate(s) of old Common
Stock for Post Split Common Stock. You will not be required to pay a transfer
or other fee in connection with the exchange of certificates. You should not
submit any certificates to the Exchange Agent until requested to do so.
24
<PAGE>
FEDERAL INCOME TAX CONSEQUENCES OF THE REVERSE STOCK SPLIT
The following is a general discussion of the material federal income tax
consequences of the proposed reverse stock split. This discussion does not
purport to deal with all aspects of federal income taxation that may be relevant
to you as a holder of the Company's Common Stock. It is also not intended to be
applicable to all categories of investors, some of which, such as dealers in
securities, banks insurance companies, tax-exempt organizations and foreign
persons, may be subject to special rules. Furthermore, the following discussion
is based upon federal income tax law as currently in effect. Please consult
with your own tax advisor regarding the federal, state, local and foreign tax
consequences of the reverse stock split.
The Company believes that the reverse stock split will constitute a
reorganization within Section 368(a) of the Internal Revenue Code of 1986, as
amended. Accordingly, you will recognize no gain or loss upon your exchange of
old shares of Common Stock for shares of the Post Split Common Stock.
Your aggregate basis in the shares of Post Split Common Stock you receive in
exchange for the old Common Stock will equal your aggregate adjusted basis in
your shares of old Common Stock immediately prior to the reverse stock split.
Your holding period for the Post Split Common Stock will include your holding
period for your old shares of Common Stock which you exchanged for the new
shares, provided that all such shares exchanged were held as capital assets
immediately prior to the reverse stock split.
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SOLICITATION OF PROXIES
This solicitation of proxies for use at the Annual Meeting is being made by
the Board of Directors of the Company. The cost of this proxy solicitation will
be borne by the Company. In addition to solicitations by mail, solicitations
also may be made by advertisement, telephone, telegram, facsimile transmission
or other electronic media, and personal meetings and interviews. In addition to
solicitation services to be provided by D.F. King & Co., Inc. ("D.F. King"), as
described below, proxies may be solicited by the Company and its directors,
officers and employees (who will receive no compensation therefor in addition to
their regular salaries). Arrangements also will be made with brokerage houses
and other custodians, nominees and fiduciaries to forward solicitation materials
to the beneficial owners of the Common Stock of the Company, and such persons
will be reimbursed for their expenses. The Company has retained D.F. King at a
fee estimated not to exceed $_____ plus reimbursement of reasonable out-of-
pocket expenses, to assist in the solicitation of proxies. The Company has also
agreed to indemnify D.F. King against certain liabilities and expenses,
including liabilities under the Federal securities laws.
SUBMISSION OF STOCKHOLDER PROPOSALS FOR 2000 ANNUAL MEETING
Stockholder proposals intended to be presented at the 2000 annual meeting
must be received by the Company on or before ____________, ______ in order to be
considered for inclusion in the Company's proxy statement and form of proxy for
that meeting. These proposals must also comply with the rules of the SEC
governing the form and content of proposals in order to be included in the
Company's proxy statement and form of proxy. Any such proposals should be mailed
to: Secretary, Little Switzerland, Inc., 161-B Crown Bay Cruise Port, St.
Thomas, U.S.V.I. 00804.
A record stockholder who wishes to present a proposal at the next annual
meeting, other than a proposal to be considered for inclusion in the Company's
proxy statement described above, must provide written notice of such proposal
and appropriate supporting documentation, as set forth in the Company's By-laws,
to the Company at its principal executive office not less than 75 days nor more
120 days prior to the first anniversary of the date of the preceding year's
annual meeting; provided, however, that in the event the annual meeting is
advanced by more than seven days from the anniversary date, notice must be so
delivered not later than (i) the 20th day after public disclosure of the date of
such meeting or (ii) if such public disclosure occurs more than 75 days prior to
such scheduled date of such meeting, then the later of the 20th day after the
date of public disclosure or the 75th day prior to such scheduled date of such
meeting. Proxies solicited by the Board of Directors will confer discretionary
voting authority with respect to these proposals, subject to SEC rules governing
the exercise of this authority. Any such proposal should be mailed to:
Secretary, Little Switzerland, Inc., 161-B Crown Bay Cruise Port, St. Thomas,
U.S.V.I. 00804.
INDEPENDENT ACCOUNTANTS
The Company has selected Arthur Andersen LLP as the independent public
accountants for the Company for the fiscal year ending May 27, 2000. The firm of
Arthur Andersen LLP has served as the Company's independent public accountants
since its incorporation and has served as the accountant for certain of its
subsidiaries since 1980. A representative of Arthur Andersen LLP will be present
at the Annual Meeting and will be given the opportunity to make a statement if
he or she so desires. The representative will be available to respond to
appropriate questions.
SECTION 16(A) BENEFICIAL OWNERSHIP REPORTING COMPLIANCE
Section 16(a) of the Exchange Act requires the Company's officers and
directors, and persons who own more than 10% of the Company's outstanding shares
of Common Stock, to file reports of ownership and changes in ownership with the
SEC and NASDAQ. Officers, directors and greater than ten percent stockholders
are required by SEC regulations to furnish the Company with copies of all
Section 16(a) forms they file. Based solely on its review of the copies of such
forms received by it, or written representations from certain reporting persons
that no Section 16(a) reports were required for those persons, the Company
believes that during Fiscal 1999, Jewelcor Management, Inc., Seymour Holtzman,
Steven Holtzman, Trust F/B/O/A, Holtzman Garcia and Custodial Account F/OB/O
Chelsea Holtzman and ValueVest Partners L.P. and Donald L. Sturm inadvertently
failed to timely file the
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requisite Section 16(a) reports. Each of these reporting persons may be deemed
to beneficially own more than 10% of the Company's outstanding shares of Common
Stock. See "Principal and Management Stockholders--Beneficial Ownership." Each
of these reports has been filed. In addition, the Company believes that during
Fiscal 1999, Messrs. Mills, Poole, McMullin and Hunter and Ms. Dudley
inadvertently each failed to timely file a Form 3. Messrs. Mills, Poole,
McMullin and Hunter and Ms. Dudley each subsequently filed the required forms.
VOTING INFORMATION
The presence, in person or by proxy, of a majority of the total number of
outstanding shares of Common Stock is necessary to constitute a quorum for the
transaction of business at the Annual Meeting. A quorum being present, Directors
will be elected by a plurality of the votes cast and the affirmative vote of a
majority of the outstanding shares of Common Stock is necessary to approve the
amendment to the Certificate of Incorporation to effectuate the reverse stock
split. Shares that reflect abstentions or "broker non-votes" (i.e., shares
represented at the meeting held by brokers or nominees as to which instructions
have not been received from the beneficial owners or persons entitled to vote
such shares and with respect to which the broker or nominee does not have
discretionary voting power to vote such shares) will be counted for purposes of
determining whether a quorum is present for the transaction of business at the
Annual Meeting. In addition, abstentions will be treated as votes cast against
a particular proposal while broker non-votes will have no impact on the outcome
of the vote on a particular proposal. With respect to the election of Directors,
votes may only be cast in favor of or withheld from the nominee; there is no
ability to abstain.
Your vote is important. Please sign, date and mail promptly the enclosed
proxy card in the enclosed self-addressed stamped envelope. Your Board of
Directors recommends that you vote "FOR" ________________
____________ as Class II Directors of the Company and FOR the one-for-five
reverse stock split of the Company's Common Stock on the enclosed proxy card.
The Board of Directors does not know of any matters other than those
described in this Proxy Statement which will be presented for action at the
Annual Meeting. If any other matters properly come before the Annual Meeting,
the proxy holders intend to vote such proxies in accordance with their best
judgment. Unrevoked proxy cards returned without direction will be voted "FOR"
the election of any Class II nominee of the Board of Directors and "FOR" the
reverse stock split.
If your shares are registered in your name, please mail your blue proxy card at
your earliest convenience. If your shares are held in "street name," immediately
instruct your broker or the person responsible for your account to sign a proxy
card on your behalf. You should also sign, date and mail your proxy card
immediately upon receipt from your broker or bank, using the postage-paid
envelope provided. Please do so for each account you maintain. If you have
further questions or need assistance, please call:
D.F. King & Co., Inc.
77 Water Street
New York, New York 10005
Call Toll Free ( ) ____________
- -----------------------------------------------------------------------------
WHETHER OR NOT YOU PLAN TO ATTEND THE ANNUAL MEETING IN PERSON, YOU ARE
REQUESTED TO SIGN, DATE AND MAIL THE ENCLOSED PROXY CARD IN THE ENCLOSED
ENVELOPE, WHICH REQUIRES NO POSTAGE IF MAILED IN THE UNITED STATES. PLEASE
ACT TODAY.
- -----------------------------------------------------------------------------
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EXHIBIT A
RESOLVED: The following paragraph shall be inserted (i) in lieu of sentence one
of Article IV, Section 1 and (ii) after the last paragraph of
Article IV, Section 1, respectively, of the amended and restated
certificate of incorporation of Little Switzerland, Inc. (the
"Corporation"):
(i) this sentence will be inserted in lieu of the first sentence
of Article IV, Section 1, "As of 5:00 PM, Eastern time, on the date
on which this amendment is filed with the Secretary of the State of
Delaware (the "Effective Date"), the total number of shares of
capital stock which the Corporation shall have the authority to
issue is twenty-five million (25,000,000) shares, of which (a)
twenty million (20,000,000) shares shall be common stock, par value
$.05 per share (the "common stock") and (b) five million (5,000,000)
shares shall be preferred stock, par value $.01 per share (the
"preferred stock")."
(ii) this paragraph shall be inserted after the last paragraph
of Article IV, Section 1, "As of the Effective Date, each FIVE
outstanding shares of old common stock par value $.01 per share,
shall thereupon be reclassified and changed into one new share of
common stock, par value $.05 per share. Upon such Effective Date,
each holder of old common stock shall thereupon automatically be and
become the holder of One new share of common stock for every FIVE
shares of old common stock then held by such holder prior thereto.
Upon such Effective Date, each certificate formerly representing a
stated number of shares of old common stock shall thereupon be
deemed for all Corporate purposes to evidence ownership of common
stock in the appropriately reduced whole number of shares.
Stockholders as of the date of the reclassification will be notified
thereof and upon their delivery of their certificates of old common
stock to the Corporation or its designated agent, will be sent stock
certificates representing their shares of common stock."
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P
R
O
X
Y
C
A
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D
LITTLE SWITZERLAND, INC.
PROXY SOLICITED BY THE BOARD OF DIRECTORS OF LITTLE SWITZERLAND, INC. FOR THE
ANNUAL MEETING OF STOCKHOLDERS TO BE HELD ON TUESDAY, DECEMBER 21, 1999
The undersigned hereby constitutes and appoints Robert L. Baumgardner and
Richard C. Hunter, and each of them, as Proxies of the undersigned, with full
power to appoint his substitute, and authorizes each of them to represent and to
vote all shares of common stock, par value $.01 per share, of Little
Switzerland, Inc. (the "Company") held of record by the undersigned as of the
close of business on November 26, 1999 at the Annual Meeting of Stockholders
(the "Annual Meeting") to be held at ______________________________, at _____
local time, on Tuesday, December 21, 1999 and at any adjournments or
postponements thereof.
When properly executed, this proxy will be voted in the manner directed herein
by the undersigned stockholder(s). Neither proposal is conditioned on the
approval of the other proposal. IF NO DIRECTION IS GIVEN, THIS PROXY WILL BE
VOTED FOR PROPOSALS 1 AND 2. In their discretion, the Proxies are each
authorized to vote upon such other business as may properly come before the
Annual Meeting and any adjournments or postponements thereof. A stockholder
wishing to vote in accordance with the Board of Directors' recommendations need
only sign and date this proxy and return it in the enclosed envelope.
The undersigned hereby acknowledge(s) receipt of a copy of the accompanying
Notice of Annual Meeting of Stockholders, the Proxy Statement with respect
thereto and the Company's Annual Report to Stockholders and hereby revoke(s) any
proxy or proxies heretofore given. This proxy may be revoked at any time before
it is exercised.
PLEASE SIGN AND DATE ON REVERSE SIDE AND RETURN PROMPTLY IN ENCLOSED ENVELOPE.
<PAGE>
FOR WITHHOLD
Proposal 1. Election of ____________________ [ ] [ ]
as Class II Directors, for a term
expiring at the 2002 annual meeting.
TO WITHHOLD AUTHORITY TO VOTE FOR A
PARTICULAR NOMINEE, WRITE THAT
NOMINEE'S NAME BELOW. YOUR SHARES
WILL BE VOTED FOR THE REMAINING
NOMINEE(S).
________________________________
FOR AGAINST ABSTAIN
[ ] [ ] [ ]
Proposal 2. The amendment to the amended and
restated certificate of incorporation
to effectuate a one-for-five reverse
stock split of the common stock.
_____________________
In their discretion, the Proxies are
each authorized to vote upon such other
business as may properly come before the
Annual Meeting and any adjournments or
postponements thereof.
Please sign name exactly as shown here. If more than one
holder, each should sign. When signing as an attorney,
administrator, executor, guardian or trustee, please add
your title as such. If executed by a corporation or
partnership, the proxy should be signed by a duly authorized
person, indicating title or authority.
Please be sure to sign and date this Proxy.
Date:____________________________________
____________________________________
Shareholder(s) signature(s)
PLEASE, SIGN, DATE AND PROMPTLY MAIL YOUR PROXY.
