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SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
--------
FORM 8-K
CURRENT REPORT
PURSUANT TO SECTION 13 OR 15(d) OF THE
THE SECURITIES EXCHANGE ACT OF 1934
Date of Report (Date of earliest event reported) April 10, 1997
ANDOVER TOGS, INC.
(Exact Name of Registrant as Specified in Charter)
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<S> <C> <C>
DELAWARE 0-14674 13-5677957
(State or Other Jurisdiction of (Commission File Number) (I.R.S. Employer Identification Number)
Incorporation)
</TABLE>
1333 BROADWAY
NEW YORK, NEW YORK 10018
(Address of Principal Executive Offices) (Zip Code)
Registrant's telephone number, including area code 212-244-0700
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ITEM 3. BANKRUPTCY OR RECEIVERSHIP
THE ORDER
On January 30, 1997, Andover Togs, Inc., a Delaware corporation, (the
"Registrant"), together with its wholly-owned subsidiaries, Springdale Fashions,
Inc., a Delaware corporation, Tortoni Manufacturing Corp., a Delaware
corporation, and Stonehenge Financial Corp., a New York corporation,
(collectively, the "Debtors") filed a Joint Plan of Reorganization under Chapter
11 of the Bankruptcy Code (the "Plan"). On April 10, 1997, an order confirming
the Plan was entered by the United States Bankruptcy Court for the Southern
District of New York (the "Bankruptcy Court"). A copy of the Plan is attached
hereto as Exhibit 16 to this Current Report on Form 8-K.
MATERIAL FEATURES OF THE PLAN
Capitalized terms used herein shall have the same meaning ascribed to
such terms in the Plan. Under the Plan, distribution to claimants will provide
for a 100% recovery, including an initial distribution of Cash and the remainder
to be paid, with interest, pursuant to a note over five (5) years. A claimant
will receive a distribution only if it is the holder of an Allowed Claim. The
Plan classifies Claims and Equity Interests into 5 classes, according different
treatment and priority to each classification. It also provides for payment of
Administrative Expense Claims and Priority Tax Claims. The distributions to
holders of claims are classified in the following manner and will be paid in the
following order:
A. ADMINISTRATIVE EXPENSE CLAIMS
Administrative Expense Claims are claims constituting a cost or
expense of administration of the Chapter 11 proceedings. Under the Plan,
such claims will be paid in full, in Cash, on the later of the Effective
Date or the date such claims become Allowed Administrative Expense
Claims or as soon thereafter as practicable. It is estimated that
Administrative Expense Claims at the Effective Date shall be $1,685,000.
B. PRIORITY TAX CLAIMS
Priority Tax Claims are those claims for taxes entitled to
priority in payment under Section 507(a)(7) of the Bankruptcy Code.
Unless otherwise agreed by the holder of any Allowed Priority Tax Claim,
the Plan provides that each holder shall receive, at the Debtors'
option, either (i) Cash in an amount equal to such Allowed Claim, or
(ii) equal annual Cash payments, in an aggregate amount equal to such
Allowed Claim plus interest at 6% per annum paid over a
2
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period no longer than six (6) years from the date of assessment of such
Allowed Claim or upon such other terms determined by the Bankruptcy
Court. The Debtors anticipate that the amount of Allowed Priority Tax
Claims will be approximately $69,150.
C. CLASS 1 (UNSECURED PRIORITY CLAIMS)
Unsecured Priority Claims are Claims (other than Administrative
Expense Claims and Priority Tax Claims) which include unsecured claims
for accrued employee compensation earned within 90 days prior to the
commencement of the Chapter 11 proceedings to the extent of $4,000 per
employee, and contributions to employee benefit plans arising from
services rendered within 180 days prior to the commencement of the
Chapter 11 proceedings, up to a maximum of $4,000 per employee. Such
Claims will be paid in full, in Cash, on the later of the Effective Date
and the date on which such claims become Allowed Claims, or as soon
thereafter as practicable. The Debtors estimate that the amount of
Allowed Unsecured Priority Claims will not exceed $140,000.
D. CLASS 2 (CONVENIENCE CLAIMS)
Convenience Claims consist of Allowed General Unsecured Claims
(as such term is defined in the Plan) of $2,000 or less. Each claimant
will receive payment in Cash in an amount equal to its Allowed Claim, up
to $2,000, on the later of the Effective Date and the date on which such
claims become Allowed Claims, or as soon thereafter as practicable. The
Debtors estimate that the amount of Allowed Convenience Claims will not
exceed $163,000.
E. CLASS 3 (FIRST NATIONAL BANK OF SCOTTSBORO SECURED CLAIMS)
First National will receive the following in respect of its
Allowed Secured Claims: (i) a promissory note in the principal amount of
its Allowed Secured Claim, which note will mature within 4 years from
the Effective Date, and will bear interest at 8.25% per annum from the
Effective Date to the Maturity Date and is secured by a first lien on
the equipment which secures the Old First National Note and (ii) Cash as
soon as practicable after the Effective Date in the amount of all
accrued and unpaid interest on the Old First National Note from the
Filing Date through the Effective Date. Payments on the promissory note
will commence on June 30, 1997 and will be payable in 16 equal quarterly
installments. The principal amount of the promissory note will be
$205,090.
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F. CLASS 4 (GENERAL UNSECURED CLAIMS)
The Debtors estimate, and it is a condition to the occurrence of
the Effective Date, that the aggregate amount of all Allowed and
Disputed General Unsecured Claims on the Effective Date will not exceed
$5.5 million. This class includes the deficiency claims, if any, of
undersecured creditors.
On the Effective Date, or as soon thereafter as practicable, the
Debtors shall distribute to each holder of an Allowed Class 4 Claim the
following: (i) a Pro Rata Share (which determination shall include
consideration of all Disputed General Unsecured Claims) of the Class 4
Cash (estimated at approximately $786,000 in Cash) and (ii) a Note in
the principal amount equal to the balance of such claimant's Allowed
Class 4 Claim, provided that the principal amount of the Note or Notes
and Cash together shall not exceed the principal amount of such holder's
General Unsecured Claims. Each note will bear interest on the unpaid
principal balance thereof at the rate of 6% per annum from the Effective
Date to the Maturity Date. Each Note shall be payable as follows:
(i) quarterly installments of principal and interest commencing
on June 30, 1997 based on a ten-year amortization schedule with
the balance payable on the fifth anniversary of the Effective
Date; and
(ii) payments in Cash made out of 50% of the Debtors' Excess Cash
Flow for each fiscal year commencing on the last day of March
1998 in respect of Excess Cash Flow, if any, for fiscal year 1997
and on the last day of March each year thereafter through the
Maturity Date and shall be applied to the principal balance from
time to time outstanding on the Notes in the inverse order of
maturity; and
(iii) payments in an amount equal to the unpaid principal
balance, if any, of the Notes due on the Maturity Date.
The Notes will be secured by a second lien on the assets of the Debtors
which will secure the Exit Financing Facility, which collateral will be
administered by the Collateral Trustee. It is anticipated that holders of
Allowed General Unsecured Claims will receive the Cash and Notes in a principal
amount equal to 100% of their Allowed General Unsecured Claims, on the condition
that the total amount of all Allowed and Disputed General Unsecured Claims will
not exceed $5.5 million on the Effective Date.
The rights of the holders of the Notes will be governed by the Note
Agreement and subject to the terms of the Intercreditor Agreement. It is
anticipated that the Trustee for the
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Notes will be a bank, financial institution, trust company or individual, which
regularly acts as a corporate trustee.
G. CLASS 5 (EQUITY INTERESTS)
Under the Plan, Equity Interests are unimpaired by the Plan and
on the Effective Date, the holders of Equity Interests, including the
holders of outstanding Andover Common Stock and options to purchase
Andover Common Stock, will retain their ownership of such interests.
ASSETS AND LIABILITIES OF THE REGISTRANT
Information as to the assets and liabilities of the Registrant at
February 28, 1997 is set forth below in the form as filed by the Registrant with
the U.S. Bankruptcy Court.
STATEMENT OF ASSETS & LIABILITIES AS OF
FEBRUARY 28, 1997
ASSETS FEBRUARY 28, 1997
Cash $ 4,976,577
Accounts Receivable - Net 2,366,250
Inventory 2,719,670
Prepaid Expenses and Other Current Assets 254,357
CURRENT ASSETS 10,316,854
Property, Plant & Equipment 3,013,399
Assets Held For Sale (Note 4) 183,048
Other Assets 69,313
TOTAL ASSETS $13,582,614
5
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LIABILITIES FEBRUARY 28, 1997
DIP Facility (Note 3) $0
Accounts Payable 300,062
Other Accrued Expenses 2,460,302
---------
Contingent Liabilities (Note 5) 2,760,364
Other Liabilities 131,120
Pre-Petition Liabilities Subject to
Compromise (Notes 6) 5,940,454
- ---------
TOTAL LIABILITIES $8,831,938
EQUITY
----------
Common Stock $465,549
Paid in Capital 11,154,172
Deficit (6,228,571)
Treasury Stock (640,474)
---------
TOTAL EQUITY 4,750,676
---------
TOTAL LIABILITIES & EQUITY $13,582,614
===========
6
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1. SUMMARY OF SIGNIFICANT ACCOUNTING PRINCIPLES
GENERAL - Andover Togs, Inc. ("Andover") and its wholly-owned
subsidiaries, Springdale Fashions, Inc. ("Springdale") and Tortoni
Manufacturing Corporation ("Tortoni") are engaged in the design,
manufacture, import and sale of active sportswear primarily for infants,
toddlers, and children, principally to national retail stores.
Andover is headquartered in New York with manufacturing facilities
located in Alabama, North Carolina and the Dominican Republic.
Basis of Presentation - The consolidated statement of assets and
liabilities as of February 28, 1997 includes the accounts of
Andover and its wholly-owned subsidiaries, Springdale, Tortoni, and
Stonehenge Financial Corporation ("Stonehenge"), each of which are
Chapter 11 Debtors (collectively, the "Debtors"). All material
intercompany transactions and balances have been eliminated.
Use of Estimates - The preparation of the statement of assets and
liabilities as of February 28, 1997 in conformity with generally
accepted accounting principles requires management to make estimates
and assumptions that effect the reported amounts of assets and
liabilities during the reporting period. Actual results could differ
from those estimates.
Inventories - Inventories are stated at lower of cost or market. Cost is
determined on a first-in, first-out basis.
Property, Plant and Equipment - Property, plant and equipment is stated
at cost less accumulated depreciation - and amortization. Depreciation
and amortization are provided by the straight-line method over the
following estimated useful lives:
Years
Buildings 30 - 31.5
Machinery and equipment 3 - 10
Leasehold improvements Lesser of useful life or lease term
2. Consolidated Presentation - The Debtors' statement of assets and
liabilities as of February 28, 1997 has been presented on a
consolidated basis since Andover maintains all sales and relationships
with the customers. All operating costs and carrying costs of the
Debtors are on the books of Andover.
3. Dip Facility - On September 19, 1996 the debtors signed an agreement to
obtain debtor-in-possession financing from the CIT Group/Commercial
Services, Inc. for a two year $15 million revolving credit facility.
7
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4. ASSETS HELD FOR SALE - This represents property, plant and equipment
segregated and held for sale.
5. Contingent Liabilities - At February 28, 1997, Andover was contingently
liable for standby letters of credit of $610,000.
6. Commitments - Effective September 15, 1996, the Company negotiated a new
lease for its executive office and showroom located in New York. The new
lease expires December 31, 2001, and provides for minimum annual rental
payments ranging from approximately $224,680 to $267,104.
8
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ITEM 7. FINANCIAL STATEMENTS, PRO FORMA FINANCIAL INFORMATION AND EXHIBITS
(C) EXHIBITS
Exhibit No. Description
16 Debtors' Joint Plan of Reorganization under
Chapter 11 of the Bankruptcy Code dated
January 30, 1997.
9
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SIGNATURES
Pursuant to the requirements of the Securities Exchange Act of 1934, the
Registrant has duly caused this report to be signed on its behalf by the
undersigned hereunto duly authorized.
ANDOVER TOGS, INC.
(Registrant)
April 25, 1997
By: /s/ William L. Cohen
-----------------------
William L. Cohen,
Chairman, President and
Chief Executive Officer
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Norman N. Kinel (NK 0474)
WHITMAN BREED ABBOTT & MORGAN
200 Park Avenue
New York, New York 10166
Telephone: (212) 351-3000
Counsel for Debtors and
Debtors- in-Possession
UNITED STATES BANKRUPTCY COURT
SOUTHERN DISTRICT OF NEW YORK
- ----------------------------------
In re Chapter 11
ANDOVER TOGS, INC., Case No. 96 B 41437 (TLB)
Debtor.
- ----------------------------------
In re Chapter 11
SPRINGDALE FASHIONS, INC., Case No. 96 B 41438 (TLB)
Debtor.
- ----------------------------------
In re Chapter 11
TORTONI MANUFACTURING CORP., Case No. 96 B 41439 (TLB)
Debtor.
- ----------------------------------
In re Chapter 11
STONEHENGE FINANCIAL CORP., Case No. 96 B 41440 (TLB)
Debtor.
- ----------------------------------
DEBTORS' JOINT PLAN OF REORGANIZATION
Dated: New York, New York
January 30, 1997
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TABLE OF CONTENTS
<TABLE>
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PAGE
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ARTICLE I DEFINITION AND CONSTRUCTION OF TERMS ...................................................A-1
A. Definitions ..........................................................................A-5
B. Other Terms ..........................................................................A-5
C. Rules of Construction, Interpretation, Computation of Time, and Choice of
Law ..................................................................................A-5
1. Certain Terms .....................................................................A-5
2. Singular and Plural................................................................A-5
3. Captions and Headings..............................................................A-5
4. Certain References.................................................................A-5
5. Plan Controls......................................................................A-5
6. Amended Documents .................................................................A-5
7. Exhibits...........................................................................A-5
8. Computation of Time ...............................................................A-5
ARTICLE II CLASSIFICATION OF CLAIMS AND EQUITY INTERESTS .........................................A-6
A. General Rules for Classification .....................................................A-6
B. Classification........................................................................A-6
ARTICLE III TREATMENT OF UNCLASSIFIED CLAIMS .....................................................A-6
A. Administrative Expense Claims ........................................................A-6
1. Distribution.......................................................................A-6
2. Administrative Expense Claims Bar Date.............................................A-7
3. Post-Effective Date Fees and Expenses .............................................A-7
4. Repayment of DIP Financing Facility ...............................................A-7
B. Priority Tax Claims...................................................................A-7
1. Penalties and Interest ............................................................A-7
2. Distribution.......................................................................A-7
ARTICLE IV TREATMENT OF CLASSIFIED CLAIMS AND EQUITY INTERESTS ...................................A-7
1. Class 1 (Unsecured Priority Claims) ...............................................A-7
2. Class 2 (Convenience Claims) ......................................................A-7
3. Class 3 (First National Bank of Scottsboro Secured Claim) .........................A-8
4. Class 4 (General Unsecured Claims) ................................................A-8
5. Class 5 (Equity Interests) ........................................................A-9
ARTICLE V FUNDING AND IMPLEMENTATION OF THE PLAN .................................................A-9
A. Sources of Cash.......................................................................A-9
B. Corporate Actions on the Effective Date...............................................A-9
ARTICLE VI VOTING AND DISTRIBUTIONS UNDER THE PLAN ...............................................A-9
A. Voting of Claims .....................................................................A-9
B. Distributions Under the Plan .........................................................A-9
1. Disbursements......................................................................A-9
2. Distribution Date .................................................................A-9
3. Transmittal of Distributions......................................................A-10
4. Timing of Distributions ..........................................................A-10
5. Minimum Distributions.............................................................A-10
6. Unclaimed Distributions ..........................................................A-10
7. Cash Payments.....................................................................A-10
C. Administration of Reserve Accounts ..................................................A-10
1. Administrative Expense Disputed Claims Reserve ...................................A-10
2. General Unsecured Disputed Claims Reserve ........................................A-11
3. Other Disputed Claims Reserves ...................................................A-11
D. Resolution of Disputed Administrative Expense Claims and Disputed Claims ............A-11
E. Cancellation and Surrender of Existing Securities and Agreements ....................A-11
</TABLE>
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1. Cancellation......................................................................A-11
2. Surrender by Holders .............................................................A-11
F. Release of Liens by CIT .............................................................A-12
ARTICLE VII EXECUTORY CONTRACTS AND UNEXPIRED LEASES ............................................A-12
A. Assumption or Rejection of Executory Contracts and Unexpired Leases .................A-12
1. Executory Contracts ..............................................................A-12
2. Approval of Assumption or Rejection of Leases and Contracts ......................A-12
3. Cure of Defaults .................................................................A-12
4. Objections to Assumption or Rejection ............................................A-13
5. Bar Date for Filing Proofs of Claim Relating to Executory Contracts and
Unexpired Leases Rejected Pursuant to the Plan ..................................A-13
B. Compensation and Benefit Programs...................................................A-13
C. Retiree Benefits....................................................................A-13
ARTICLE VIII CONFIRMATION OF PLAN AND EFFECT OF CONFIRMATION ....................................A-13
A. Release of Certain Persons, etc.....................................................A-13
B. Discharge of the Debtors ...........................................................A-14
C. Intercompany Claims; Merger of Assets and Liabilities...............................A-14
D. Termination of Creditors' Committee and Creation of Post-Effective Date
Trade Committee ....................................................................A-14
1. Dissolution of Creditors' Committee .............................................A-14
2. Creation of Post-Effective Date Trade Committee .................................A-14
3. Post-Effective Date Trade Committee Procedures ..................................A-15
4. Post-Effective Date Trade Committee Compensation ................................A-15
5. Retention of Professionals ......................................................A-15
6. Liability........................................................................A-15
E. Avoidance Actions ..................................................................A-15
1. Preference Claims ...............................................................A-15
2. Fraudulent Transfer Claims ......................................................A-I5
ARTICLE IX EFFECTIVENESS OF THE PLAN ............................................................A-16
A. Occurrence of Effective Date .......................................................A-16
B. Conditions Precedent ...............................................................A-16
C. Conditions to Consummation .........................................................A-16
ARTICLE X RETENTION OF JURISDICTION .............................................................A-16
ARTICLE XI CONFIRMATION REQUEST .................................................................A-17
ARTICLE XII MISCELLANEOUS PROVISIONS ............................................................A-17
A. Effectuating Documents and Further Transactions ....................................A-17
B. Exemption from Transfer Taxes.......................................................A-17
C. Intentionally Left Blank ...........................................................A-17
D. Exculpation.........................................................................A-17
E. Intentionally Left Blank ...........................................................A-17
F. Amendment or Modification of the Plan; Severability ................................A-17
1. Debtors Reserve Right to Modify .................................................A-17
2. Severability ....................................................................A-18
G. Revocation or Withdrawal of the Plan ...............................................A-18
H. Binding Effect .....................................................................A-18
I. Notices.............................................................................A-18
J. Governing Law ......................................................................A-18
K. Withholding and Reporting Requirements .............................................A-18
L. Filing of Additional Documents .....................................................A-18
M. Officers and Directors .............................................................A-19
</TABLE>
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Andover Togs, Inc. (a Delaware corporation) ("Andover"), Springdale
Fashions, Inc. (a Delaware corporation) ("Springdale"), Tortoni Manufacturing
Corp. (a Delaware corporation) ("Tortoni") and Stonehenge Financial Corp. (a New
York corporation) ("Stonehenge") (collectively, the "Debtors"), the debtors in
the above-captioned cases pending under Chapter 11 of the Bankruptcy Code,
propose the following joint plan of reorganization pursuant to Section 1121(a)
of Title 11 of the United States Bankruptcy Code.
ARTICLE I
DEFINITION AND CONSTRUCTION OF TERMS
A. DEFINITIONS.
As used herein, the following terms have the meanings specified below,
unless the context requires otherwise.
Administrative Expense Claim means any Claim under Sections 503(b) and
507(a)(1) of the Bankruptcy Code, including, without limitation, any actual and
necessary expenses of preserving the estate of the Debtors, any actual and
necessary expenses of operating the business of the Debtors, all compensation or
reimbursement of expenses allowed by the Bankruptcy Court under Section 330 or
503 of the Bankruptcy Code, and any fees or charges assessed against the estate
of the Debtors under Section 1930 of Chapter 123 of Title 28 of the United
States Code.
Administrative Expense Disputed Claims Reserve means that reserve of Cash
(plus any interest earned thereon) established by Reorganized Andover for
Disputed Administrative Expense Claims.
Allowed means, with respect to a Claim or Equity Interest, any Claim or
Equity Interest, proof of which was timely and properly Filed or, if no proof of
claim or proof of interest was Filed, which has been or hereafter is listed by
the relevant Debtor on its Schedules as liquidated in amount and not disputed or
contingent, and, in either case and in the case of an Administrative Expense
Claim, Claim or Equity Interest as to which no objection to the allowance
thereof has been interposed including, without limitation, any objections
pursuant to Bankruptcy Code Section 502(d) on or before 180 days after the
Effective Date or such other applicable period of limitation fixed by the
Bankruptcy Code, Bankruptcy Rules, or the Bankruptcy Court, or hereunder, or as
to which any objection has been determined by a Final Order to the extent such
objection is determined in favor of the respective holder. Unless otherwise
specified herein or by order of the Bankruptcy Court "Allowed Administrative
Expense Claim," "Allowed Claim," or "Allowed Equity Interest" shall not, for
purposes of computation of distributions under the Plan, include interest on
such Administrative Expense Claim, Claim, or Equity Interest from and after the
Filing Date. In the event that a Claim or Equity Interest is Disputed in part
only, the undisputed portion will be treated as an Allowed Claim.
Andover means Andover Togs, Inc.
Bankruptcy Code means Title 11 of the United States Code, as amended from
time to time.
Bankruptcy Court or Court means the United States Bankruptcy Court for the
Southern District of New York.
Bankruptcy Rules means the Federal Rules of Bankruptcy Procedure, as
amended from time to time, as applicable to the Chapter 11 Cases, including the
Local Rules of the Bankruptcy Court.
Business Day means any day other than a Saturday, Sunday or any other day
on which commercial banks in New York City, New York are required or authorized
to close.
Cash means cash and cash equivalents, including, but not limited to, bank
deposits, wire transfers, checks and similar items held by the Debtors on the
Effective Date.
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Chapter 11 Cases means the cases under Chapter 11 of the Bankruptcy Code
commenced by the Debtors, In re Andover Togs, Inc., In re Springdale Fashions,
Inc., In re Tortoni Manufacturing Corp. and In re Stonehenge Financial Corp.,
currently pending in the Bankruptcy Court.
CIT means The CIT Group/Commercial Services, Inc.
Claim means (a) any right to payment from the Debtors, whether or not such
right is reduced to judgment, liquidated, unliquidated, fixed, contingent,
matured, unmatured, disputed, undisputed, legal, equitable, secured, or
unsecured or (b) any right to an equitable remedy for breach of performance if
such breach gives rise to a right of payment from the Debtors, whether or not
such right to an equitable remedy is reduced to judgment, fixed, contingent,
matured, unmatured, disputed, undisputed, secured, or unsecured.
Class means one of the classes of Claims or Equity Interests established
under and designated in Article II hereof.
Class 4 Cash means $786,000 in Cash.
Collateral Trustee means a person to be designated by the Debtors to
administer the collateral for the Exit Financing Facility and the Notes.
Common Stock means the shares of common stock $0.10 par value of
Reorganized Andover.
Confirmation means the entry of the Confirmation Order.
Confirmation Date means the date on which the Confirmation Order becomes a
Final Order.
Confirmation Order means the order of the Bankruptcy Court confirming the
Plan pursuant to Section 1129 of the Bankruptcy Code.
Convenience Claim means a Class 2 Claim that would otherwise be a General
Unsecured Claim described in Article II, Section B hereof.
Creditors' Committee means the Official Unsecured Creditors' Committee, if
any, as reconstituted from time to time, and as appointed by the Office of the
United States Trustee.
Cure Amounts means all pre-petition and post-petition arrearages and other
amounts, if any, required to cure defaults not previously paid.
Debtors means, individually and collectively, Andover, Springdale, Tortoni
and Stonehenge.
Debtors in Possession means the Debtors, as debtors in possession in the
Chapter 11 Cases.
DIP Financing Facility means the Replacement DIP Financing and Security
Agreement among the Debtors, CIT and Agent.
Disclosure Statement means the disclosure statement relating to the Plan,
as approved by the Bankruptcy Court pursuant to Section 1125 of the Bankruptcy
Code.
Disputed means, with respect to a Claim or Equity Interest, any such Claim
or Equity Interest proof of which was timely and properly Filed and which has
been or hereafter is listed on the Schedules as unliquidated, disputed, or
contingent or as to which the Debtors or any other party in interest have
interposed a timely objection (including, without limitation, any objections
pursuant to Bankruptcy Code Section 502(d)) or request for estimation in
accordance with the Bankruptcy Code and the Bankruptcy Rules, or an appeal is
pending with respect to such Claim, which objection, request for estimation or
appeal has not been withdrawn or determined by a Final Order, and any Claim as
to which a proof of claim was required to be Filed by order of the Bankruptcy
Court but as to which a proof of claim was not timely or properly Filed.
A-2
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Disputed Claim Amount means the amount set forth in the proof of claim
relating to a Disputed Claim or if a Claim is disputed in part, the Disputed
portion thereof, or, if the amount of a Disputed Claim is not specified in such
proof of claim or is unliquidated, in whole or in part, in an amount estimated
solely for purposes of Article VI, Section A hereof pursuant to an order of the
Bankruptcy Court.
Disputed Claims Reserve means the Administrative Expense Disputed Claims
Reserve, the General Unsecured Disputed Claims Reserve or any other disputed
claims reserve established by the Debtors, as the case may be.
Distribution Date means each date on which Cash and Notes are distributed
to holders of Allowed Claims in accordance with the Plan.
Effective Date means the date determined pursuant to Article IX hereof.
Equity Interest means any equity interest in the Debtors, and any option,
warrant or other agreement requiring the issuance of any such equity interest.
Excess Cash Flow means, with respect to any year, the Net Income of
Reorganized Andover and its consolidated subsidiaries (if any), plus
depreciation expense, amortization expense (if any), plus income taxes not
currently payable and any proceeds from the sale of capital assets, net of any
gains or losses from such sales reported in Reorganized Andover's income
statement in such year; less capital expenditures to be limited as follows:
(a) $500,000 per year plus (b) any cumulative unused portion from any prior
years, not to exceed an additional $250,000 per year; less any payments made
under the Plan in respect of Claims in Classes 2, 3 and 4 exclusive of interest
payments and Excess Cash Flow payments in such year, less current income taxes
paid but not included in Net Income, less an adjustment reserve of $200,000. In
addition, only for the fiscal year ending November 30, 1997, Excess Cash Flow
shall also include the cash book balance of Reorganized Andover and its
consolidated subsidiaries (if any) as reported on Reorganized Andover's 10-K
for that period; plus the net available borrowing as reported to CIT or any
other working capital lender of the Debtors as of November 30, 1997, less $6.0
million.
Exit Financing Facility means a working capital and letter of credit
facility to be entered into by Reorganized Andover on the Effective Date or any
refinancings or refundings thereof.
File or Filed means file or filed with the Bankruptcy Court in the Chapter
11 Cases.
Filing Date means March 19, 1996, the date on which the Debtors commenced
the Chapter 11 Cases.
Final Distribution Date means the Distribution Date following the date on
which all Disputed Claims have been resolved.
Final Order means an order of the Bankruptcy Court (a) as to which all
applicable appeal periods have expired, without appeal therefrom, or, (b) if
such order has been appealed, (i) all appeals shall have been finally resolved
and no further appeals may be taken therefrom or (ii) such order has not been
stayed pending appeal.
First National means First National Bank of Scottsboro.
GAAP means generally accepted accounting principles in the United States of
America as in effect from time to time and for the period as to which such
accounting principles are to apply.
General Unsecured Claim means any Claim that is not a Secured Claim,
Administrative Expense Claim, Priority Tax Claim, Unsecured Priority Claim or
Convenience Claim and is not cured, paid, released or waived pursuant to the
Plan, including deficiency claims of holders of undersecured Claims, if any.
General Unsecured Disputed Claims Reserve means that reserve of Cash (plus
any interest earned thereon) and Notes established by Reorganized Andover for
Disputed General Unsecured Claims.
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Maturity Date means the date of maturity of the Notes, which will be five
years from the Effective Date.
Net Income means with respect to any person, the net income (loss) of such
person determined in accordance with GAAP.
New First National Note means the secured note dated the Effective Date to
be issued by Reorganized Andover on the Effective Date to First National.
Note Agreement means the agreement to be entered into by Andover and the
Note Trustee, as trustee, effective on the Effective Date, under which the Notes
will be issued to holders of Allowed Class 4 Claims, the form of which agreement
will be filed with the Court no later than 15 days prior to the commencement of
the hearing on Confirmation.
Notes means the promissory notes or certificates of interest in a master
note to be issued by Andover to the holders of Allowed General Unsecured Claims
pursuant to the Plan on the financial terms set forth herein for each such
holder, substantially in the form of Exhibit G to the Disclosure Statement.
Note Trustee means a person to be designated by the Debtor prior to the
Confirmation Date and approved by the Court pursuant to the Confirmation Order
to act as indenture trustee under the Note Indenture.
Old First National Note means the note dated as of September 2, 1992 issued
by Andover to First National.
Person means any individual, corporation, general partnership, limited
partnership, association, joint stock company, joint venture, estate, trust,
government or any political subdivision, governmental unit (as defined in
Section 101(27) of the Bankruptcy Code), official committee appointed by the
Office of the United States Trustee, unofficial committee of Creditors or
holders of Equity Interests, or other entity.
Plan means this Chapter 11 plan of reorganization, including all exhibits
and schedules annexed hereto, either in its present form or as it may be
altered, amended or modified from time to time.
Plan Documents means the documents that aid in effecting the Plan, as
specifically identified herein, which will be substantially in the respective
forms thereof Filed by the Debtors with the Bankruptcy Court no later than
fifteen (15) days prior to commencement of the Plan Confirmation hearing.
Priority Tax Claim means a Claim of a governmental unit of the kind
specified in sections 502(i) and 507(a)(7) of the Bankruptcy Code.
Professional Person means a Person, including any examiner or disbursing
agent, retained or to be compensated pursuant to order of the Bankruptcy Court
or under Sections 326, 327, 328, 330, 503(b)(2) or (4), 1103, or 1107(b) of the
Bankruptcy Code.
Pro Rata Share or Pro Rata means a proportionate share, so that the ratio
of the consideration distributed on account of an Allowed Claim in a Class to
the amount of such Allowed Claim is the same as the ratio of the amount of the
consideration distributed on account of all Allowed Claims in such Class to the
amount of all Allowed Claims in such class.
Reorganized Andover means Andover on or after the Effective Date.
Secured Claim means a Claim held by any entity to the extent of the value,
as set forth in the Plan or as determined by a Final Order of the Bankruptcy
Court pursuant to Section 506(a) of the Bankruptcy Code, of any interest in
property of the Debtors' estates securing such Claim.
Schedules means the schedules of assets and liabilities and the statements
of financial affairs Filed by Debtors as required by Section 521 of the
Bankruptcy Code and Bankruptcy Rule 1007, and all amendments thereto through the
Confirmation Date.
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Springdale means Springdale Fashions, Inc.
Stonehenge means Stonehenge Financial Corp.
Tortoni means Tortoni Manufacturing Corp.
Unsecured Priority Claim means any Claim entitled to priority in right of
payment under Section 507(a)(3), 507(a)(4), or 507(a)(6) of the Bankruptcy Code.
B. OTHER TERMS.
A term used herein that is not deemed herein shall have the meaning
ascribed to that term, if any, in the Bankruptcy Code.
C. RULES OF CONSTRUCTION, INTERPRETATION, COMPUTATION OF TIME, AND CHOICE OF
LAW.
1. Certain Terms.
The words "herein," "hereof," "hereto," "hereunder," and others of similar
import refer to the Plan as a whole and not to any particular section,
subsection, or clause contained in the Plan.
2. Singular and Plural
Wherever from the context it appears appropriate, each term stated in
either the singular or the plural shall include the singular and the plural and
pronouns stated in the masculine, feminine or neuter gender shall include the
masculine, the feminine and the neuter.
3. Captions and Headings.
Captions and headings to Articles and Sections in the Plan are inserted for
convenience of reference only and shall neither constitute a part of the Plan
nor in any way affect the interpretation of any provision hereof.
4. Certain References.
Unless specified otherwise in a particular reference, all references in the
Plan to Articles, Sections, Subsections, and Exhibits are references to
Articles, Sections, Subsections and Exhibits of or to the Plan. Any reference in
the Plan to a contract, document, instrument, Exhibit, or other agreement or
document being in a particular form or on particular terms and conditions means
that such document shall be substantially in such form or substantially on such
terms and conditions.
5. Plan Controls.
The provisions of the Plan shall control over the contents of the
Disclosure Statement. The provisions of the Confirmation Order shall control
over the contents of the Plan.
6. Amended Documents.
Any reference in the Plan to an existing document, schedule or Exhibit
means such document, schedule or Exhibit as it may have been amended, restated,
modified, or supplemented as of the Effective Date.
7. Exhibits.
All Exhibits to the Plan are incorporated into the Plan, and shall be
deemed to be included in the Plan, regardless of when Filed.
8. Computation of Time.
In computing any period of time prescribed or allowed by the Plan, the
provisions of Bankruptcy Rule 9006(a) shall apply.
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ARTICLE II
CLASSIFICATION OF CLAIMS AND EQUITY INTERESTS
A. GENERAL RULES FOR CLASSIFICATION.
The following is a designation of the Classes of Claims and Equity
Interests under this Plan. In accordance with Section 1123(a)(1) of the
Bankruptcy Code, Administrative Expense Claims and Priority Tax Claims described
in Article III of the Plan have not been classified and are excluded from the
following Classes. A Claim or Equity Interest is classified in a particular
Class only to the extent that the Claim or Equity Interest qualifies within the
description of that Class and is classified in another Class or Classes to the
extent that any remainder qualifies within the description of such other Class
or Classes. A Claim or Equity Interest is classified in a particular Class only
to the extent that the Claim or Equity Interest is an Allowed Claim or Allowed
Equity Interest in that Class and has not been paid, released or otherwise
satisfied in whole or in part, as the case may be, before the Effective Date.
B. CLASSIFICATION
Class 1. Unsecured Priority Claims (other than Administrative Expense
Claims and Priority Tax Claims)--Claims entitled to priority in
right of payment under Section 507(a)(3), 507(a)(4), or
507(a)(6) of the Bankruptcy Code.
Class 2. Convenience Claims--All Unsecured Claims of between $1 and
$2,000.
Class 3. First National Bank of Scottsboro Secured Claims--The Claims of
First National Bank of Scottsboro arising under the Old First
National Note.
Class 4. General Unsecured Claims (Non-Priority)--All General Unsecured
Claims against the Debtors that are not entitled to priority
under Section 507(a) of the Bankruptcy Code and that are not
classified in any other Class, including, without limitation,
General Unsecured Claims of trade creditors, deficiency claims
of undersecured creditors and General Unsecured Claims arising
from the rejection of executory contracts and unexpired leases.
Class 5. Equity Interests--All Equity Interests in the Debtors, and any
option, warrant or other agreement requiring the issuance of any
such Equity Interest.
ARTICLE III
TREATMENT OF UNCLASSIFIED CLAIMS
A. ADMINISTRATIVE EXPENSE CLAIMS.
1. Distribution.
Except to the extent that the holder of an Allowed Administrative Expense
Claim agrees to a different treatment or as otherwise provided herein, the
Debtors shall pay to each holder of an Allowed Administrative Expense Claim
(including, but not limited to, fees incurred by any Professional Persons prior
to the Effective Date and allowed by the Bankruptcy Court and all fees due and
payable by Debtors under Section 1930 of Title 28 of the United States Code)
Cash in an amount equal to such Allowed Administrative Expense Claim on the
later of the Effective Date and the date such Administrative Expense Claim
becomes an Allowed Administrative Expense Claim, or as soon thereafter as is
practicable; provided, however, that Allowed Administrative Expense Claims
representing obligations incurred in the ordinary course of business of the
Debtors (including amounts owed to vendors or suppliers that have supplied goods
or furnished services to the Debtors since the Filing Date) shall be paid in
full and assumed and performed by the Debtors in accordance with the terms and
conditions of the particular transactions and any agreements relating thereto.
To the extent that any lease of equipment or real property has been or is
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assumed as of the Effective Date, the Debtors shall pay all Cure Amounts, if
any, unless otherwise agreed by the parties, ordered by the Bankruptcy Court or
an objection to such payment has been made.
2. Administrative Expense Claims Bar Date.
At or before the hearing on Confirmation, the Bankruptcy Court will
establish a bar date by which claims for Administrative Expense Claims, other
than Claims of Professional Persons, arising before the Confirmation Date must
be filed.
3. Post-Effective Date Fees and Expenses.
Fees and expenses of Professional Persons incurred for services rendered to
the Debtors after the Effective Date shall be paid by the Debtors in the
ordinary course of business without the necessity of an order by the Court,
except as otherwise provided herein.
4. Repayment of DIP Financing Facility.
On the Effective Date, any amounts payable under the DIP Financing Facility
will be paid to CIT.
B. PRIORITY TAX CLAIMS.
1. Penalties and Interest.
Except as set forth herein, the holder of any Allowed Priority Tax Claim
shall not be entitled to receive any payment on account of post-Filing Date
interest, or on account of any penalty arising with respect to or in connection
with the Allowed Priority Tax Claim.
2. Distribution.
Except to the extent that the holder of an Allowed Priority Tax Claim
agrees to a different treatment, the Debtors shall pay to each holder of an
Allowed Priority Tax Claim, on account of such Claim, at the option of the
Debtors, either (a) Cash in an amount equal to such Allowed Priority Tax Claim
on the later of the Effective Date and the date such Priority Tax Claim becomes
an Allowed Priority Tax Claim, or as soon thereafter as is practicable, or (b)
equal annual Cash payments in an aggregate amount equal to such Allowed Priority
Tax Claim, together with simple interest at a fixed annual rate equal to six
percent (6%), over a period through the sixth anniversary of the date of
assessment of such Allowed Priority Tax Claim, or upon such other terms
determined by the Bankruptcy Court to provide the holder of such Allowed
Priority Tax Claim deferred Cash payments having a value, as of the Effective
Date, equal to such Allowed Priority Tax Claim; provided, however, that the
Debtors reserve the right to pay or to prepay any Allowed Priority Tax Claim, or
any remaining balance thereof, in full at any time on or after the Effective
Date, without premium or penalty.
ARTICLE IV
TREATMENT OF CLASSIFlED CLAIMS AND EQUITY INTERESTS
1. Class 1 (Unsecured Priority Claims).
Class 1 is unimpaired by the Plan. Each holder of a Claim in Class 1 is
conclusively presumed to have accepted the Plan and is not entitled to vote to
accept or reject the Plan.
Each holder of an Allowed Claim in Class 1 shall receive Cash in an amount
equal to such Allowed Claim on the later of the Effective Date and the date such
Claim becomes an Allowed Claim, or as soon thereafter as practicable.
2. Class 2 (Convenience Claims).
Class 2 is unimpaired by the Plan. Each holder of a Claim in Class 2 is
conclusively presumed to have accepted the Plan and is not entitled to vote to
accept or reject the Plan.
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Each holder of an Allowed Class 2 Convenience Claim of between $1 and
$2,000 shall receive Cash in an amount equal to such Allowed Convenience Claim
on the later of the Effective Date and the date such Claim becomes an Allowed
Claim, or as soon thereafter as practicable.
3. Class 3 (First National Bank of Scottsboro Secured Claims).
Class 3 is impaired by the Plan. The holder of the Claims in Class 3 is
entitled to vote to accept or reject the Plan.
The holder of the Allowed Claims in Class 3 will receive (i) the New
First National Note in the principal amount of its Allowed Secured Claims,
bearing interest at the rate of 8 1/4% per annum from the Effective Date,
payable in 16 equal quarterly installments maturing on the date which is four
years from the Effective Date and secured by a first lien on the equipment
which secures the Old First National Note and (ii) Cash as soon as practicable
after the Effective Date in the amount of all accrued and unpaid interest on the
Old First National Note from the Filing Date through the Effective Date.
4. Class 4 (General Unsecured Claims).
General Unsecured Claims are impaired by the Plan and each holder of an
Allowed General Unsecured Claim is entitled to vote to accept or reject the
Plan.
On the Effective Date or the quarterly Distribution Date next succeeding
the date a Disputed Claim becomes an Allowed General Unsecured Claim, whichever
is later, each holder of an Allowed General Unsecured Claim will receive in
respect of such Claim (x) its Pro Rata Share (which determination shall include
consideration of all Disputed General Unsecured Claims) of Class 4 Cash and (y)
a Note in a principal amount equal to the balance of such holder's Allowed Class
4 Claim, provided that the principal amount of the Notes issued in respect of an
Allowed General Unsecured Claim when added to the Cash received in respect of
the Allowed General Unsecured Claim will not exceed the principal amount of such
Allowed General Unsecured Claim. Each Note will bear interest on the unpaid
principal balance thereof at the rate of 6% per annum from the Effective Date,
pay quarterly installments of principal and interest commencing on June 30, 1997
based on a ten-year amortization schedule with the balance payable on the fifth
anniversary of the Effective Date. The Notes will be secured by a second lien on
the assets of the Reorganized Debtors that secure the Exit Financing Facility,
which collateral will be administered by the Collateral Trustee.
The principal of the Notes shall also be subject to repayment on the
last day of March in each year commencing on the last day of March 1998 in an
amount equal to 50% of the Debtors' Excess Cash Flow for the immediately
preceding fiscal year and shall be applied to the principal balance from time to
time outstanding on the Notes in the inverse order of maturity.
The Debtors will hold in the General Unsecured Disputed Claims Reserve
Cash and Notes (and any Cash issued in payment thereof) pending determination of
Disputed Claims. On each Quarterly Payment Date, the Trustee for the Notes shall
distribute to each holder of a Disputed Claim that has become, in whole or in
part, an Allowed General Unsecured Claim such holder's Pro Rata Share of Class 4
Cash and Notes held in the General Unsecured Disputed Claims Reserve (and any
Cash paid in respect of such Notes) in a principal amount of Notes not to exceed
in the aggregate (together with the Cash payment) the Allowed General Unsecured
Claim of such holder of an Allowed Class 4 Claim.
On each Quarterly Payment Date, the Trustee shall distribute to
Reorganized Andover the Pro Rata Share of Class 4 Cash attributable to the
portion of any Disputed Claim that has been disallowed, together with Notes (and
any Cash paid in respect thereof) equal to the balance of such disallowed
Disputed Claim.
In the event that on the Final Distribution Date Cash and Notes
remaining in the General Unsecured Disputed Claims Reserve exceed the amount
necessary to pay Allowed General Unsecured Claims in full, all Cash and Notes
(and any Cash paid in respect of the Notes) will be transferred to Reorganized
Andover.
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In the event that holders of more than one-half in number of Class 4
Claims and at least two-thirds in amount of Class 4 Claims voting on the Plan do
not vote to accept the Plan, the Debtors will nonetheless seek to confirm the
Plan pursuant to Section 1129(b) of the Bankruptcy Code.
5. Class 5 (Equity Interests).
Equity Interests are unimpaired by the Plan and each holder of an
Allowed Equity Interest is deemed to have accepted the Plan and is not entitled
to vote to accept or reject the Plan.
On the Effective Date, the holders of Equity Interests will be entitled
to retain such interests.
ARTICLE V
FUNDING AND IMPLEMENTATION OF THE PLAN
A. SOURCES OF CASH.
Funds required to make Cash payments required by the Plan shall be made
from Cash held by the Debtors on the Effective Date and, to the extent
necessary, from funds available under the Exit Financing.
B. CORPORATE ACTIONS ON THE EFFECTIVE DATE
On the Effective Date:
1. The executory contracts and leases specified in Exhibit A hereto
shall be assumed by the Debtors in accordance with Section 365 of the Bankruptcy
Code.
2. The Note Indenture and the related security documents shall be
executed and delivered.
3. The Exit Financing Agreement and the related security documents shall
be executed and delivered.
4. The New First National Note shall be executed and delivered.
5. Any outstanding promissory notes and rejected executory contracts and
leases shall be deemed cancelled.
ARTICLE VI
VOTING AND DISTRIBUTIONS UNDER THE PLAN
A. VOTING OF CLAIMS.
Each holder of Claims in an impaired Class of Claims shall be entitled
to vote separately to accept or reject the Plan. For purposes of calculating the
number of Allowed Claims in a Class of Claims held by holders of Allowed Claims
in such Class that have voted to accept or reject the Plan under Section 1126(c)
of the Bankruptcy Code.
B. DISTRIBUTIONS UNDER THE PLAN.
1. Disbursements.
All distributions under the Plan shall be made by the Debtors in
accordance with the Plan and the Debtors shall establish and administer all
reserve accounts provided for under the Plan.
2. Distribution Date.
Except as otherwise provided in the Plan or agreed to by a holder of an
Allowed Claim, the initial distribution date shall be the Effective Date.
Thereafter, distributions of Cash and Notes shall be made on the last day of
March, June, September and December.
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3. Transmittal of Distributions.
All distributions shall be deemed made upon placing such distribution in
the United States mail, postage prepaid. Except as otherwise provided in the
Plan, any property to be distributed on account of an Allowed Claim shall be
distributed by mail as follows: (i) to the latest mailing address Filed for the
party entitled thereto or to the holder of a power of attorney designated by the
holder of the Allowed Claim to receive such distribution, or (ii) if no such
mailing address has been so Filed, the mailing address reflected on the
Schedules or in Debtors' books and records.
4. Timing of Distributions.
Any payment or distribution required to be made under the Plan on a day
other than a Business Day shall be due on the next succeeding Business Day.
5. Minimum Distributions.
No payment of Cash less than one hundred dollars shall be made to any
holder of a Claim unless a request therefor is made in writing to the Debtors,
or upon the final Distribution Date.
6. Unclaimed Distributions.
Any Cash or other distributions pursuant to the Plan, including any
Notes, that are unclaimed for a period of one year after distribution thereof
shall be returned to the Debtors for reallocation and distribution according to
the terms of the Plan.
7. Cash Payments.
Cash payments made pursuant to the Plan shall be in U.S. dollars by
check drawn on a domestic bank.
C. ADMINISTRATION OF RESERVE ACCOUNTS.
1. Administrative Expense Disputed Claims Reserve.
Distributions under the Plan shall be effected by the Debtors pursuant
to the Plan to any holder of a Disputed Administrative Expense Claim when, and
to the extent that, such Disputed Claim becomes an Allowed Administrative
Expense Claim. Such distribution shall be made in accordance with the Plan to
the holder of such Claim based upon the amount in which such Disputed Claim
becomes an Allowed Administrative Expense Claim. On the Effective Date the
Debtors shall deposit Cash to be reserved on the basis of Disputed
Administrative Expense Claims in the Administrative Expense Disputed Claims
Reserve, including Disputed Cure Amounts (as provided below) and all Claims for
undisputed fees and expenses of Professional Persons for services rendered
through the Confirmation Date which have not been approved by Final Order. In
the event that the validity or extent of an Administrative Expense Claim other
than a Claim for unpaid fees and expenses of Professional Persons is disputed,
the Debtors shall reserve the undisputed portion. The Debtors shall reserve in
the Administrative Expense Disputed Claims Reserve an amount equal to all unpaid
fees and expenses claimed by Professional Persons pending Final Order by the
Bankruptcy Court with respect to such Claims. All Cash held in the
Administrative Expense Disputed Claims Reserve (or in any other reserve account)
shall be invested by the Debtors in Cash investments permitted under Section 345
of the Bankruptcy Code. To the extent that a Disputed Claim becomes an Allowed
Administrative Expense Claim, the Cash (together with any interest earned
thereon) reserved on behalf of such Claim in the Administrative Expense Disputed
Claims Reserve shall be distributed to the holder entitled thereto. To the
extent that a Disputed Administrative Expense Claim is disallowed by Final
Order, the Cash (together with any interest earned thereon) reserved on behalf
of such Claim in the Administrative Expense Disputed Claims Reserve shall be
distributed first to holders of Allowed Administrative Expense Claims, if any,
that have not been paid in full according to the terms of the Plan, and
thereafter no less frequently than quarterly. Upon the resolution of all
Disputed Administrative Expense Claims there shall be a final distribution of
all Cash remaining in the Administrative Expense Disputed
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Claims Reserve to the Debtors. To the extent that funds held in the
Administrative Expense Disputed Claims Reserve are insufficient to pay all
Allowed Administrative Expense Claims, the Debtors shall use funds received by
them to pay such Claims before payment of any other Claims.
2. General Unsecured Disputed Claims Reserve.
Distributions under the Plan shall be effected by the Debtors to any
holder of a Disputed Claim in Class 4 when, and to the extent that, such
Disputed Claim becomes an Allowed Claim. Accordingly, the Debtors will hold in
the General Unsecured Disputed Claims Reserve Cash and Notes (and any Cash
issued in payment thereof) pending determination of Disputed Claims. On each
Quarterly Payment Date, the Trustee for the Notes shall distribute to each
holder of a Disputed Claim that has become, in whole or in part, an Allowed
General Unsecured Claim such holder's Pro Rata Share of Class 4 Cash and Notes
held in the General Unsecured Disputed Claims Reserve (and any Cash paid in
respect of such Notes) in a principal amount of Notes not to exceed in the
aggregate (together with the Cash payment) the Allowed General Unsecured Claim
of such holder of an Allowed Class 4 Claim.
On each Quarterly Payment Date, the Trustee shall distribute to
Reorganized Andover the Pro Rata Share of Class 4 Cash attributable to the
portion of any Disputed Claim that has been disallowed together with Notes (and
any Cash paid in respect thereof) equal to the balance of such disallowed
Disputed Claim. Under the Plan, Cash held in the General Unsecured Disputed
Claims Reserve shall be invested by the Debtors in investments permitted under
Section 345 of the Bankruptcy Code. In the event that on the Final Distribution
Date Cash and Notes remaining in the General Unsecured Disputed Claims Reserve
exceed the amount necessary to pay Allowed General Unsecured Claims in full, all
Cash and Notes (and any Cash paid in respect of the Notes) will be transferred
to Reorganized Andover.
3. Other Disputed Claims Reserves.
In the event that any Claim in a Class other than Class 4 that is to
receive Cash under the Plan is Disputed, the Debtors shall establish such
reserves as they deem appropriate or as the Court orders and to the extent such
Claims are ultimately disallowed, funds in the Disputed Claims Reserve shall
first be distributed to holders of Allowed Claims in such Class and then to
Reorganized Andover.
D. RESOLUTION OF DISPUTED ADMINISTRATIVE EXPENSE CLAIMS AND DISPUTED CLAIMS.
After the Effective Date, unless otherwise ordered by the Bankruptcy
Court after notice and a hearing, the reorganized Debtors shall have the right
to object to all Claims. All objections to Claims shall be filed no later than
180 days after the Effective Date, unless extended by order of the Bankruptcy
Court.
E. CANCELLATION AND SURRENDER OF EXISTING SECURITIES AND AGREEMENTS.
1. Cancellation
On the Effective Date the promissory notes, rejected executory contracts
and leases, deeds of trust, and other instruments evidencing any Claim shall be
deemed canceled without further act or action under any applicable agreement,
law, regulation, order or rule and the obligations of the Debtors under such
documents or instruments shall be discharged.
2. Surrender by Holders.
Each holder of a promissory note, lease, deed of trust, or other
instrument evidencing a Claim shall surrender such promissory note, lease, or
instrument to the Debtors. No distribution of property hereunder shall be made
to or on behalf of any such holders unless and until such promissory note or
instrument is received by the Debtors or the unavailability of such note or
instrument is established to the reasonable satisfaction of the Debtors. The
Debtors may require any entity delivering an affidavit of loss and indemnity to
furnish a bond in form and substance (including, without limitation, with
respect to amount) reasonably satisfactory to the Debtors. Any holder that fails
within one year after the date of entry of the
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Confirmation Order (i) to surrender or cause to be surrendered such promissory
note or instrument, (ii) to execute and deliver an affidavit of loss and
indemnity reasonably satisfactory to the Debtors, and (iii) if requested, to
furnish a bond reasonably satisfactory to the Debtors shall be deemed to have
forfeited all rights, Claims, and interests and shall not participate in any
distribution hereunder, provided that, any holder of a Claim that arises out of
a promissory note, lease, deed of trust or other instrument which is disputed by
the Debtors shall not be required to surrender such promissory note, lease, deed
of trust or other instrument, or forfeit any such rights in respect thereof,
until 30 days after resolution of the dispute by Final Order.
F. RELEASE OF LIENS BY CIT.
Upon payment of any amounts outstanding under the DIP Financing Facility
on the Effective Date, CIT shall release all liens under the DIP Financing
Facility on the Effective Date.
ARTICLE VII
EXECUTORY CONTRACTS AND UNEXPIRED LEASES
A. ASSUMPTION OR REJECTION OF EXECUTORY CONTRACTS AND UNEXPIRED LEASES.
1. Executory Contracts.
All executory contracts and unexpired leases, and any agreements,
documents or instruments relating thereto, that exist between any of the Debtors
and any Person are hereby rejected, except for any executory contract or
unexpired lease (i) which has been assumed pursuant to an order of the
Bankruptcy Court entered prior to the Confirmation Date, (ii) which has been
entered into by any of the Debtors as debtors in possession in the ordinary
course of business or pursuant to an order of the Bankruptcy Court, (iii) as to
which a motion for approval of the assumption of such contract has been Filed
and served 15 days prior to the hearing on confirmation of the Plan for which no
objection has been timely Filed as of the Effective Date, (iv) which is set
forth in Exhibit A attached hereto, provided, however, that Debtors reserve the
right to amend or modify Exhibit A at any time prior to 15 days prior to the
hearing on confirmation of the Plan, and the listing of any agreement in Exhibit
A does not, and shall not be deemed to, constitute an admission that the
agreement in question is a "true lease" for purposes of determining whether to
assume such agreement or for any other reason, or (v) with respect to which the
Bankruptcy Court determines in the Confirmation Order need not be assumed or
rejected prior to the Effective Date.
2. Approval of Assumption or Rejection of Leases and Contracts.
Entry of the Confirmation Order shall constitute (i) the approval,
pursuant to Section 365(a) of the Bankruptcy Code, of the assumption of
executory contracts and unexpired leases assumed pursuant to Article VII,
Section (A)(1) hereof, and (ii) the approval, pursuant to Section 365(a) of the
Bankruptcy Code, of the rejection of the executory contracts and unexpired
leases rejected pursuant to Article VII, Section (A)(1) hereof.
3. Cure of Defaults.
On the Effective Date or as soon thereafter as is practicable, the
Debtors shall cure any and all monetary defaults under any executory contract or
unexpired lease assumed pursuant to the Plan in accordance with Section
365(b)(1) of the Bankruptcy Code, provided, however, that in the event of a
dispute regarding the amount of any cure payment or any other matter pertaining
to assumption, the cure payments required by Section 365(b)(1) of the Bankruptcy
Code shall be made following entry of a Final Order resolving the dispute and
approving assumption. In the event that there is an appeal pending as to whether
any contract is an "executory contract" or unexpired lease, there shall be
deposited into the Disputed Administrative Expense Claims Reserve the amount
believed by the Debtors to be the Cure Amount unless the Bankruptcy Court orders
otherwise after notice and a hearing.
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4. Objections to Assumption or Rejection.
To the extent any party to an executory contract or unexpired lease
identified for assumption objects to a proposed assumption, all such objections
shall be Filed and served within the same deadline and in the same manner
established for filing objections to Confirmation. Failure to File an objection
within the time period set forth above shall constitute consent to the proposed
assumption.
5. Bar Date for Filing Proofs of Claim Relating to Executory Contracts
and Unexpired Leases Rejected Pursuant to the Plan.
Claims arising out of the rejection of an executory contract or
unexpired lease pursuant to the Plan, or any prior rejection for which no bar
date has been set, must be Filed with the Bankruptcy Court no later than thirty
(30) days after the later of (i) notice of entry of an order approving the
rejection of such contract or lease and (ii) notice of entry of the Confirmation
Order. Any Claims not Filed within such time will be forever barred from
assertion against the Debtors, reorganized Debtors, their estates, and their
property, and each of their employees, officers, directors, agents, attorneys
and financial advisors. Unless otherwise ordered by the Bankruptcy Court, all
Allowed Claims arising from the rejection of executory contracts and unexpired
leases shall be treated as Class 4 Claims under the Plan.
B. COMPENSATION AND BENEFIT PROGRAMS.
All employment and severance practices and policies, and all
compensation and benefit plans, policies, and programs of the Debtors applicable
to their directors, officers or employees, including, without limitation, all
savings plans, retirement plans, health care plans, severance benefit plans,
incentive plans, worker's compensation programs and life, disability and other
insurance plans are treated as executory contracts under the Plan and are
assumed as of the Effective Date pursuant to Section 365(a) of the Bankruptcy
Code.
C. RETIREE BENEFITS.
Payments, if any, due to any person for the purpose of providing or
reimbursing payments for retired employees and their spouses and dependents for
medical, surgical, or hospital care benefits, or benefits in the event of
sickness, accident, disability, or death under any plan, fund, or program
(through the purchase of insurance or otherwise) maintained or established in
whole or in part by the Debtors prior to the Filing Date shall be continued for
the duration of the period the Debtors have obligated themselves to provide such
benefits.
ARTICLE VIII
CONFIRMATION OF PLAN AND EFFECT OF CONFIRMATION
A. RELEASE OF CERTAIN PERSONS, ETC.
On and after the Effective Date, this Plan shall satisfy and release in
full all claims against the Debtors, any officer, director, shareholder,
advisor, attorney and financial advisor for the Debtors, the Creditors'
Committee, the members of the Creditors' Committee (as then constituted on the
Confirmation Date), any advisor, attorney and financial advisor for the
Creditors' Committee, from any claim arising out of or in connection with any
action or failure to act in connection with their rights and duties from the
Filing Date to and including the Effective Date. On and after the Effective
Date, as to every satisfied or released claim, all Persons shall be precluded
from asserting against the Debtors, any officer, director, shareholder, agent,
employee, advisor, attorney or financial advisor for the Debtors, the Creditors'
Committee (as then constituted on the Confirmation Date), the members of the
Creditors' Committee, any advisor, attorney and financial advisor for the
Creditors' Committee, or their assets or properties, any further claim based on
any document, instrument or act, omission, transaction or other activity of any
kind or nature that occurred on or prior to the Effective Date in connection
with any released claim. Except as
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expressly provided in the Plan or any other document executed or to be executed
in connection with the Plan, neither the Debtors, any directors, officers,
agents, attorneys, representatives, financial advisors or employees for the
Debtors, nor the Creditors' Committee, the members of the Creditors' Committee,
any advisor, attorney (as then constituted on the Confirmation Date) and
financial advisor for the Creditors' Committee, shall have any liability for
actions taken or omitted to be taken under or in connection with the Plan or
the Chapter 11 Cases.
The payments and distributions to be made to holders of Allowed Claims under
the Plan will be in complete and full satisfaction of such Claims.
B. DISCHARGE OF THE DEBTORS.
The rights afforded by this Plan and the treatment herein of Claims
against the Debtors shall be in exchange for and in complete satisfaction,
discharge and release of all Claims against the Debtors of any nature
whatsoever, including any interest accrued or expenses incurred against the
Debtors in respect thereof from and after the Petition Date of the Debtors and
their estates, properties and interests in property. Except as otherwise
provided herein, on the Effective Date, all Claims against the Debtors will be
fully satisfied, discharged and released in exchange for the consideration
provided hereunder. All holders of Claims shall be enjoined and precluded from
asserting against the Debtors, their successor(s), assets, properties or
interests in property any other Claims based upon any act or omission,
transaction or other activity of any kind or nature that occurred prior to the
Effective Date.
C. INTERCOMPANY CLAIMS; MERGER OF ASSETS AND LIABILITIES.
The Debtors shall continue to maintain their separate corporate
existences for all purposes other than the treatment of Claims under the Plan.
The Confirmation Order will provide that on the Effective Date: (i) all
intercompany Claims by and among the Debtors will be eliminated; (ii) all assets
and all proceeds thereof and all liabilities of the Debtors will be treated as
though they were merged into and with the assets and liabilities of the Debtors
only for purposes of distributions under the Plan; (iii) all guarantees of the
Debtors of the obligations of any other Debtor will be eliminated so that any
Claim against any Debtor and any guarantee thereof executed by another Debtor
and any joint or several liability of the Debtors will be deemed to be one
obligation of the consolidated Debtors; and (iv) each and every Claim filed in
the Chapter 11 Case of any of the Debtors will be deemed filed against the
consolidated Debtors, and will be deemed one Claim against and one obligation of
the consolidated Debtors.
D. TERMINATION OF CREDITORS' COMMITTEE AND CREATION OF POST-EFFECTIVE DATE TRADE
COMMITTEE.
1. Dissolution of Creditors' Committee.
On the Effective Date, the Creditors' Committee shall be deemed
disbanded and the duties of the Creditors' Committee, and the retention of its
counsel and other retained professionals, shall automatically terminate. The
professionals retained by the Creditors' Committee shall be entitled to
compensation and reimbursement of expenses for any services rendered through the
Effective Date. Such compensation will be subject to Bankruptcy Court approval
and the Bankruptcy Court shall retain jurisdiction to approve such fees and
expenses.
2. Creation of Post-Effective Date Trade Committee.
From and after the Effective Date, a committee shall be formed and
constituted and shall consist of three (3) members who have previously served on
the Creditors' Committee (the "Post-Effective Date Trade Committee") in an
official or ex officio capacity. The Post-Effective Date Trade Committee shall
have the duties set forth in the exhibits hereto.
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3. Post-Effective Date Trade Committee Procedures.
A majority of the Post-Effective Date Trade Committee shall constitute a
quorum. One member of the Post-Effective Date Trade Committee shall be
designated by the majority of its members as its chairperson (the
"Chairperson"). Meetings of the Post-Effective Date Trade Committee shall be
called by the Chairperson upon such notice and in such manner as its Chairperson
may deem advisable. The Post-Effective Date Trade Committee shall function by
decisions made by a majority of its members in attendance at any meeting. The
Post-Effective Date Trade Committee shall adopt by-laws which shall otherwise
control its functions.
4. Post-Effective Date Trade Committee Compensation.
The members of the Post-Effective Date Trade Committee shall serve
without compensation. Reasonable expenses of the members of the
Post-Effective Date Trade Committee shall be reimbursed and paid by the
Reorganized Debtors upon submission of bills to the Reorganized Debtors or upon
Final Order of the Bankruptcy Court.
5. Retention of Professionals.
In accordance with the terms of the Note Agreement or the exhibits
hereto, the Post-Effective Date Trade Committee shall have the right to retain
the services of attorneys and accountants which are necessary to assist the
Post-Effective Date Trade Committee in the performance of its duties.
6. Liability.
Neither the Post-Effective Date Trade Committee nor any of its members,
designees, counsel or accountants or any duly designated agent or representative
of the Post-Effective Date Trade Committee shall be liable for the act, default
or misconduct of any other member of the Post-Effective Date Trade Committee,
nor shall any member be liable for anything other than such member's gross
negligence, willful misconduct or fraud. None of the Post-Effective Date Trade
Committee's members, designees, agents or representatives or their respective
employees shall incur or be under any liability or obligation by reason of any
act done or omitted to be done by any member of the Post-Effective Date Trade
Committee, designee, agent or representative. The Post-Effective Date Trade
Committee may, in connection with the performance of its functions, and in its
sole and absolute discretion, consult with counsel, accountants and its agents,
and shall not be liable for anything done or omitted or suffered to be done in
accordance with such advice or opinions. If the Post-Effective Date Trade
Committee determines not to consult with counsel, accountants or its agents,
such determination shall not be deemed to impose any liability on the Post
Effective Date Trade Committee, or its members and/or its designees.
E. AVOIDANCE ACTIONS.
1. Preference Claims.
If not asserted prior to the Effective Date, the Reorganized Debtors do
not intend to assert any claims for the return of any allegedly preferential
transfers under section 547 of the Bankruptcy Code.
2. Fraudulent Transfer Claims.
If not asserted prior to the Effective Date, the Reorganized Debtors do
not intend to bring any fraudulent transfer claims.
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ARTICLE IX
EFFECTIVENESS OF THE PLAN
A. OCCURRENCE OF EFFECTIVE DATE.
The Effective Date shall be a date selected by the Debtors (a) that is
not later than the later of (i) thirty (30) days after the Confirmation Date and
(ii) the first Business Day on which no stay of the Confirmation Order is and
remains in effect that is at least ten (10) days (as calculated in accordance
with Bankruptcy Rule 9006(a)) following the Confirmation Date; and (b) on which
each of the conditions precedent specified in Section B below have been
satisfied.
B. CONDITIONS PRECEDENT.
The occurrence of the Effective Date shall be conditioned upon
satisfaction of each of the following conditions:
(a) a Confirmation Order confirming the Plan (as such Plan may have been
modified with the consent of Debtors) has been entered and is a Final Order and
(b) the aggregate amount of all Allowed and Disputed General Unsecured Claims
does not exceed S5.5 million on the Effective Date. In the event the Effective
Date does not occur on or before June 30, 1997, the Debtors may extend the
deadline for the occurrence of the Effective Date, waive any conditions thereto
or alter, modify or amend the Plan.
C. CONDITIONS TO CONSUMMATION.
The following are conditions to consummation of this Plan on the
Effective Date:
(a) The Note Indenture and all related security agreements shall
have been executed and delivered by each of the parties thereto.
(b) The Exit Financing Facility and all related security agreements
shall have been executed and delivered by each of the parties
thereto.
(c) CIT shall have released all liens that secure the indebtedness
under the DIP Financing Facility.
ARTICLE X
RETENTION OF JURISDICTION
The Bankruptcy Court shall have exclusive jurisdiction over all matters
arising out of, and related to, the Chapter 11 Cases and the Plan pursuant to,
and for the purposes of, Sections 105(a) and 1142 of the Bankruptcy Code and
for, among other things, the following purposes: (1) To hear and determine
pending applications for the assumption or rejection of executory contracts or
unexpired leases, if any are pending, and the allowance of Claims resulting
therefrom; (2) to determine any and all adversary proceedings, applications, and
contested matters; (3) to hear and determine any objection to Claims; (4) to
enter and implement such orders as may be appropriate in the event the
Confirmation Order is for any reason stayed, revoked, modified, or vacated; (5)
to issue orders in aid of execution of the Plan, to the extent authorized by
Section 1142 of the Bankruptcy Code; (6) to consider any modifications of the
Plan, to cure any defect or omission, or reconcile any inconsistency in any
order of the Bankruptcy Court, including, without limitation, the Confirmation
Order; (7) to hear and determine all applications for compensation and
reimbursement of expenses of professionals under sections 330, 331 and 503(b) of
the Bankruptcy Code and all applications for compensation and reimbursement of
Professional Persons retained by the Creditors' Committee; (8) to hear and
determine disputes arising in connection with the interpretation, consummation,
implementation, or enforcement of the Plan; (9) to recover all assets of the
Debtors and property of the estate, wherever located; (10) to hear and determine
matters concerning any dispute regarding state, local and federal taxes in
accordance with Sections 346, 505 and 1146 of the Bankruptcy
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Code; (11) to hear and determine matters relating to any civil proceedings which
may be commenced by the Debtors relating to the Plan; (12) to hear any other
matter not inconsistent with the Bankruptcy code; and (13) to enter a final
decree closing the Chapter 11 Cases.
ARTICLE XI
CONFIRMATION REQUEST
The Debtors request Confirmation of the Plan under Section 1129(b) of
the Bankruptcy Code if the holders of Allowed Claims in Classes 3 and 4 do not
accept the Plan.
ARTICLE XII
MISCELLANEOUS PROVISIONS
A. EFFECTUATING DOCUMENTS AND FURTHER TRANSACTIONS.
On and prior to the Effective Date, each of the officers of Debtors is
authorized in accordance with their authority under the resolutions of the
Boards of Directors of Debtors to execute, deliver, File or record such
contracts, instruments, releases, indentures and other agreements or documents
and take such actions as may be necessary or appropriate to implement and
effectuate and further evidence the terms and conditions of the Plan and any
notes or securities issued pursuant to the Plan.
B. EXEMPTION FROM TRANSFER TAXES.
Pursuant to Section 1146(c) of the Bankruptcy Code, the issuance,
transfer or exchange of notes or equity securities under the Plan, the creation
of any mortgage, deed of trust or other security interest, the making or
assignment of any lease or sublease, or the making or delivery of any deed or
other instrument of transfer under, in furtherance of, or in connection with the
Plan shall not be subject to any stamp, real estate transfer, mortgage recording
or other similar tax.
C. INTENTIONALLY LEFT BLANK.
D. EXCULPATION.
Neither the Debtors, the Creditors' Committee (as then constituted on
the Confirmation Date), the members of the Creditors' Committee in connection
with their duties as a member of the Creditors' Committee, nor any of their
respective officers, directors, employees, advisors, attorneys, financial
advisors or agents, shall have or incur any liability to any holder of a Claim
or Equity Interest for any act or omission in connection with, or arising out
of, the pursuit of confirmation of the Plan, the consummation of the Plan or the
administration of the Plan or the property to be distributed under the Plan
except for willful misconduct or gross negligence, and, in all respects, the
Debtors, the Creditors' Committee (as then constituted on the Confirmation Date)
and each of their respective officers, directors, employees, advisors,
attorneys, financial advisors and agents, shall be entitled to rely upon the
advice of counsel with respect to their duties and responsibilities under the
Plan.
E. INTENTIONALLY LEFT BLANK.
F. AMENDMENT OR MODIFICATION OF THE PLAN; SEVERABILITY.
1. Debtors Reserve Right to Modify.
Subject to the restrictions on plan of reorganization modifications set
forth in Section 1127 of the Bankruptcy Code, the Debtors reserve the right to
alter, amend or modify the Plan before its substantial consummation.
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2. Severability.
In the event that the Bankruptcy Court determines, prior to the
Confirmation Date, that any provision in the Plan is invalid, void or
unenforceable, such provision shall be invalid, void or unenforceable with
respect to the holder or holders of such Claims or Equity Interests as to which
the provision is determined to be invalid, void or unenforceable. The
invalidity, voidness or unenforceability of any such provision shall in no way
limit or affect the enforceability and operative effect of any other provision
of the Plan.
G. REVOCATION OR WITHDRAWAL OF THE PLAN.
The Debtors reserve the right to revoke or withdraw the Plan prior to
the Confirmation Date. If the Debtors revoke or withdraw the Plan prior to the
Confirmation Date, then the Plan shall be deemed null and void. In such event,
nothing contained herein shall be deemed to constitute a waiver or release of
any Claims by or against, or any Equity Interests in the Debtors or any other
Persons or to prejudice in any I manner the rights of the Debtors or any Person
in any further proceedings involving any of the Debtors.
H. BINDING EFFECT.
The Plan shall be binding upon and inure to the benefit of the Debtors,
the holders of Claims and Equity Interests, and their respective successors and
assigns.
I. NOTICES.
Any notice required or permitted to be provided under the Plan shall be
in writing and served by either (a) certified mail, return receipt requested,
postage prepaid, (b) hand delivery, or (c) reputable overnight delivery service,
freight prepaid, to be addressed as follows:
ANDOVER TOGS, INC.
1333 Broadway
New York, New York 10018
Attn: William L. Cohen
With a copy to:
WHITMAN BREED ABBOTT & MORGAN
200 Park Avenue
New York, New York 10166
Attn: Norman N. Kinel, Esq.
J. GOVERNING LAW.
Except to the extent the Bankruptcy Code or Bankruptcy Rules are
applicable, the rights and obligations arising under this Plan shall be governed
by, and construed and enforced in accordance with the laws of the State of New
York, without giving effect to the principles of conflicts of law thereof.
K. WITHHOLDING AND REPORTING REQUIREMENTS.
In connection with the Plan and all instruments issued in connection
therewith and distributions thereon, the Debtors shall comply with all
withholding and reporting requirements imposed by any federal, state, local or
foreign taxing authority and all distributions hereunder shall be subject to any
such withholding and reporting requirements.
L. FILING OF ADDITIONAL DOCUMENTS.
At least 15 days prior to the Confirmation Date the Debtors shall file
the Plan Documents.
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M. OFFICERS AND DIRECTORS.
Debtors' officers and directors shall be entitled to the benefits of any
insurance that insures them against the costs of defending any suit arising
out of their duties as officers and directors, or otherwise.
Dated: January 30, 1997
ANDOVER TOGS, INC.,
a Delaware corporation
By: /s/ WILLIAM L. COHEN
---------------------------------
Name: William L. Cohen
Title: President
SPRINGDALE FASHIONS, INC.,
a Delaware corporation
By: /s/ WILLIAM L. COHEN
---------------------------------
Name: William L. Cohen
Title: President
TORTONI MANUFACTURING CORP.,
a Delaware corporation
By: /s/ WILLIAM L. COHEN
---------------------------------
Name: William L. Cohen
Title: President
STONEHENGE FINANCIAL CORP.,
a New York corporation
By: /s/ WILLIAM L. COHEN
---------------------------------
Name: William L. Cohen
Title: President
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EXHIBIT A
Executory Contracts To Be Assumed (1)
American Honda Finance Corporation
Pitney Bowes Credit Corporation
(1) Pursuant to Court order, the Debtors are permitted to amend this Exhibit
by filing such amendment with the Court on or before March 26, 1997 or such
later date as authorized by the Court.
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