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EXHIBIT 10.7
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April 7, 2000
Little Switzerland, Inc.
161-B Crown Bay
P.O. Box 930
St. Thomas, U.S. Virgin Islands 00804
Att: Robert L. Baumgardner, President
Re: PROPOSED STANDSTILL THROUGH AUGUST 1, 2000
Dear Mr. Baumgardner:
Thank you for your letter on behalf of Little Switzerland, Inc. (the
"Company") to The Chase Manhattan Bank dated March 5, 2000. The Chase Manhattan
Bank and the Bank of Nova Scotia (the "Lenders") are pleased to see the
Company's current efforts to address its financing requirements and welcome the
opportunity to review the Company's plans and progress toward achieving its
business plan and obtaining alternative financing from a credible lender. The
Company has represented in our recent discussions that it feels it is necessary
to obtain a fully underwritten commitment for financing by April 15, 2000 and is
diligently working toward meeting this deadline. Based on these representations,
the Lenders generally are amenable to the terms outlined in your March 5 letter
and will agree to standstill until August 1, 2000 (the "Standstill Period"),
subject to the following terms and conditions:
1. Upon receipt of this letter, please provide a copy of the letter
from Investment Bank ("Investment Bank") dated February 15, 2000,
which has been signed and accepted by the Company by February 15,
2000 as required therein.
2. On or before April 14, 2000, the Company shall execute (or cause one
or more of its subsidiaries, as appropriate, to execute) in
recordable form the mortgages over the leasehold real estate in St.
Thomas and the fee simple real property in St. Maarten owned by the
Company or such subsidiary(ies) substantially in the form previously
provided to the Company and its counsel for review. Please note that
our Virgin Islands counsel has advised us that a recorded mortgage
can be assigned and modified of record for nominal additional
recording fees, unless the amount of the mortgage increases in which
case the fee is based the amount of such increase. Similarly, our
St. Maarten counsel has advised that the St. Maarten mortgage may
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be assigned to a new lender relatively inexpensively. Therefore,
Investment Bank or another lender may obtain and modify the St.
Thomas and St. Maarten mortgages without causing substantial
additional mortgage recording fees.
3. The Lenders agree that the Company may obtain a bridge loan from
Investment Bank in an amount not exceeding $2,000,000 (the
"Investment Bank Loan") for purposes of working capital needed for
the period prior to the closing of the credit facility (as defined
below), which bridge loan may be secured by a mortgage over the St.
Maarten real property superior to the Lenders. Such superior
mortgage in favor of Investment Bank shall be accomplished in a
manner satisfactory to Investment Bank, the Lenders, and their
respective St. Maarten counsel. Upon payment in full of the
Investment Bank Loan, the mortgage in favor of Investment Bank shall
be assigned to the Lenders.
4. The Company will provide a binding commitment letter, accepted by
the Company, from Investment Bank or another lender on or before
April 30, 2000, which commitment letter shall provide for the
extension to the Company of fully underwritten credit facilities to
close on or before August 1, 2000 pursuant to commercially
reasonable terms and conditions, including the payoff of the
Company's outstanding indebtedness to the Lenders (the "Credit
Facility").
5. In connection with the sale of the Barbados inventory and other
assets the Company will provide to and obtain from the Government of
Barbados all documentation necessary to cause the discharge of the
letters of credit from The Bank of Nova Scotia. As you may be aware,
even if the Barbados store is sold or closed, the obligations of the
Bank of Nova Scotia under the Barbados letters of credit remain
outstanding until officially released by the applicable government
authority. The Bank of Nova Scotia has the right to request the
Government of Barbados to cancel the Barbados letters of credit upon
the sale or closure of the Barbados store or upon the occurrence of
a Termination Event as described in Paragraph 11 of this letter. All
proceeds of the sale of the Barbados inventory, store and other
assets shall be applied to repay the Bridge Loan, with the
remainder, if any, to be used for working capital.
6. The Lenders agree to the reduced minimum inventory collateral
position of two times the amount of the Company's funded
indebtedness to the Lenders set forth in your March 5 letter
provided that such inventory is located in the jurisdictions in
which the Lenders have a perfected security interest, currently, the
U.S. Virgin Islands, Alaska, St. Maarten, Aruba and Curacao.
7. The Security Agreement dated May 7, 1999 (the "Security Agreement")
and all security instruments and other documents executed and/filed
under the laws of any foreign jurisdiction to evidence and/or
perfect the Lenders' security interest granted under the Security
agreement shall continue in full force and effect.
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8. The Company shall cause its subsidiaries, upon full review of local
counsel and in no event later than April 30, 2000, to promptly
execute and deliver any security instrument or other document in
commercially reasonable form as is provided by the Lenders or their
counsel and as is necessary to evidence and/or perfect the Lenders'
security interest in inventory located in any foreign jurisdiction
in which the lien of the Lenders is not currently perfected.
9. The Company shall provide to the Lenders on a weekly basis a
schedule of inventory by store location. The Company shall further
provide to the Lenders on a monthly basis no later than the last day
of the following month copies of its consolidated and consolidating
reports of operations, including balance sheets, profit and loss
statements and a narrative review of the monthly operations for the
prior month. Preliminary year-end financial statements shall be
provided on or before June 30, 2000.
10. During the Standstill Period, the Company shall have no obligation
to make payments to the Lenders, other than (a) a regularly
scheduled interest payments; (b) the payment of one-quarter of net
cash proceeds of transactions as set forth in your March 5 letter,
except that the transaction period shall cover not only the
Company's fourth quarter but also so much of the first quarter of
the following fiscal year that is part of the Standstill Period; and
(c) payment of all reasonable costs and expenses of the Lenders
incurred in connection with this letter agreement, the Mortgages,
the Security Agreement and any collateral documentation filed in or
executed pursuant to the laws of any jurisdiction in which the
collateral pledged to the Lenders under the Security Agreement is
located.
11. Notwithstanding the foregoing, the Standstill Period shall terminate
prior to August 1, 2000, in the even of an earlier Termination
Event. Each of the following shall constitute a Termination Event:
a. The Company shall fail to make any regularly scheduled
interest payment when due (subject to any applicable notice
and cure periods in the loan documents evidencing and
governing the indebtedness of the Company and its subsidiaries
to the Lenders), time being of the essence with respect to any
and all of such payments.
b. The Company or any subsidiary otherwise shall fail to comply
with any term of this letter agreement, the Mortgages or the
Security Agreement (subject to any applicable notice and cure
periods therein).
c. The rendition by any court of a final judgment against the
Company or any subsidiary in a stated amount in excess of
$250,000.00 (or more than one such judgment shall be entered
against any one or more of them in an aggregate stated amount
in excess of $250,000.00); or the attachment of any property
of the Company or any subsidiary not bonded or insured against
or remedied within sixty (60) days.
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d. The filing of a tax lien against the Company or any subsidiary
by the Internal Revenue Service or the taxing authority having
authority over the jurisdiction in which any such entity is
located no remedied within thirty (30) days.
e. The commencement of any action or proceeding against any one
or both of the Lenders by the Company or any subsidiary or
other entity affiliated with, controlled by or under common
control with the Company.
f. The commencement of any bankruptcy or insolvency proceeding by
or against the Company or any subsidiary.
At any time five (5) days after either of the Lenders shall have made written
demand on the Company following the occurrence of a Termination Event described
in subparagraphs a, b, c or d above, and immediately upon the occurrence of a
Termination Event described in subparagraphs e or f above, each Lender may, at
its option, acting alone or together with the other Lender; (i) terminate the
Standstill Period described above; (ii) declare all amounts outstanding to be
due and payable forthwith, whereupon the same shall be immediately due and
payable forthwith, whereupon the same shall be immediately due and payable; and
(iii) take any other action which the Lenders or either of them deems necessary
or appropriate to collect the outstanding obligations and to enforce the rights
and remedies under the loan documents evidencing and governing the indebtedness
of the Company and its subsidiaries to the Lenders, the Security Agreement, any
document executed or filed in connection with or pursuant to the Security
Agreement, and under applicable law.
If the Company and its subsidiaries are in agreement with the foregoing,
please sign as indicated below and return a signed original of this letter to
the Lenders.
THE CHASE MANHATTAN BANK
By: /s/ Roger Odell
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Roger Odell, Managing Director
THE BANK OF NOVA SCOTIA
By: /s/ Robert Edwards
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Sr. Commercial Banking Manager
The foregoing is acknowledged and agreed to by:
LITTLE SWITZERLAND, INC., a Delaware corporation
By: /s/ Robert L. Baumgardner
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Robert L. Baumgardner, President
L.S. WHOLESALE, INC., a Massachusetts corporation
By: /s/ Robert L. Baumgardner
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Robert L. Baumgardner, President
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L.S. HOLDING, INC., a U.S. Virgin Islands corporation
By: /s/ Robert L. Baumgardner
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Robert L. Baumgardner, President
WORLD GIFT IMPORTS (BARBADOS) LIMITED, a Barbados company
By: /s/ P.J. Hopper
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Patrick J. Hopper, Director
WORLD GIFT IMPORTS, N.V., a St. Maarten Netherlands Antilles limited liability
company
By: /s/ P.J. Hopper
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Patrick J. Hopper, Director
S.A.R.L. MONTRES ET BIJOUX, a St. Martin company
By: /s/ P.J. Hopper
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LITTLE SWITZERLAND, N.V., an Aruba limited liability company
By: L.S. HOLDING (ARUBA), N.V., Managing Director
By: /s/ Robert L. Baumgardner
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Robert Lee Baumgardner, President of the Managing Board
L.S. HOLDING (ARUBA) N.V., an Aruba limited liability company
By: /s/ Robert L. Baumgardner
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Robert Lee Baumgardner, President of the Managing Board
L.S. HOLDING CURACAO, N.V., a Curacao limited liability company
By: /s/ Robert L. Baumgardner
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Robert L. Baumgardner, President and Managing Director
LITTLE SWITZERLAND (ST. LUCIA) LIMITED, a St. Lucia company
By:
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L.S. HOLDING (U.S.A.), INC., an Alaska corporation
By: /s/ Robert L. Baumgardner
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Robert L. Baumgardner, President
