SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20579
FORM 8-K
CURRENT REPORT
Pursuant to Section 13 or 15(d) of the
Securities Exchange Act of 1934
Date of Report (Date of earliest event reported) - July 2, 1996
REUNITED HOLDINGS, INC.
(Exact name of registrant as specified in this charter)
Rhode Island 0-15238 05-0301429
(State or other (Commission (IRS Employer
jurisdiction of File Number) Identification No.)
incorporation or
organization)
Two Executive Drive, Fort Lee, NJ 07024
(Address of principal executive offices) (Zip Code)
Registrant's telephone number, including area code: (201) 585-2100
Victoria Creations, Inc., 30 Jefferson Park Rd., Warwick, RI 02888
(Former Name or Former Address, if Changed Since Last Report)
Item 2. Acquisition or Disposition of Assets.
Effective as of July 2, 1996, the Company sold
substantially all of its assets and certain of its lia-
bilities to Victoria Acquisition Group, Inc., a Rhode
Island corporation (the "Purchaser"), pursuant to an
Amended and Restated Asset Purchase Agreement dated as of
May 31, 1996 (the "Asset Purchase Agreement"). The
Company is a 79.8% owned subsidiary of United Merchants
and Manufacturers, Inc., a Delaware corporation ("UM&M").
The Company and UM&M have been operating under the pro-
tection of the United States Bankruptcy Court for the
Southern District of New York (the "Court") since filing
a voluntary petition for Chapter 11 relief (Jointly
Administered Chapter 11 Case No. 96 B 40941 (AJG)) on
February 22, 1996 (the "Filing Date"). The terms and
conditions of the Asset Purchase Agreement were approved
in all respects by an Order of the Court entered June 24, 1996.
In accordance with the terms of the Asset
Purchase Agreement, the Company sold, free and clear of
all liens, claims, interests, encumbrances, obligations
and liabilities (other than those assumed by the Purchas-
er, the "Assumed Liabilities") substantially all of the
assets used in its business, including, inter alia, all
of the Company's trademarks, licenses and license agree-
ments, accounts receivable, inventory, machinery and
equipment, customer lists, and goodwill, but excluding
the assets used in the operation of the Company's design
services business, cash on hand and certain other rights
enumerated in the Asset Purchase Agreement, for a pur-
chase price of approximately $24,517,460 (the "Purchase
Price"), subject to certain adjustments as described in
the Asset Purchase Agreement. The Purchase Price con-
sisted of (i) $4,966,724 in cash, (ii) assumption by the
Purchaser of the entire debt up to and including the
Filing Date (including all principal and interest and any
penalties thereon) owed by the Company to Foothill Capi-
tal Corp. (the "Foothill Debt"), and (iii) assumption by
the Purchaser of the Assumed Liabilities. The Purchase
Price was the result of arm's length negotiations between
the Company and the Purchaser and was determined to be
"fair and reasonable" by the Court.
As part of the transaction, the Purchaser
obtained the release of the Company and UM&M from certain
obligations respecting the Foothill Debt, including
UM&M's guaranty of the Foothill Debt. In addition, the
name "Victoria Creations, Inc." was included in the
assets sold and, accordingly, the Company has filed
Articles of Amendment to the Articles of Incorporation
with the Secretary of State of the State of Rhode Island
in order to change its name to "Reunited Holdings, Inc."
Robert Andreoli, a principal of the Purchaser,
is the original owner and founder of the Company. Mr.
Andreoli sold the business to Jonathan Logan in 1984
which in turn was acquired by UM&M later that year. Mr.
Andreoli's son, Richard Andreoli, has served as an execu-
tive of the Company since 1982.
The Asset Purchase Agreement and the Order
Under 11 U.S.C. ss.ss. 105(a), 363(b), (f), (m), and 365, and
Fed. R. Bankr. P. 2002, 6004, and 6006 (i) Approving
Asset Purchase Agreement with Victoria Acquisition Group,
Inc., (ii) Authorizing Sale of Substantially All Assets
of Victoria Creations, Inc., (iii) Authorizing Assumption
and Assignment of Executory Contracts and Leases, and
(iv) Granting Related Relief entered by the Court on June
24, 1996 are annexed hereto as Exhibit 2.1 and Exhibit
2.2, respectively, and incorporated herein by reference.
On July 3, 1996, the Company issued a press release
describing the sale of the assets, which is attached
hereto as Exhibit 99.1 and incorporated herein by reference.
Item 3. Bankruptcy or Receivership.
On February 22, 1996, the Company and UM&M,
each filed a voluntary petition for relief under Chapter
11 of the United States Bankruptcy Code, 11 U.S.C. ss.ss.
101-1330, as amended (the "Bankruptcy Code"). On Febru-
ary 22, 1996, the Company issued a press release announc-
ing that it filed a petition for relief under Chapter 11.
The February 22, 1996 press release is annexed hereto as
Exhibit 99.2 and is incorporated herein by reference.
The Company's bankruptcy case was assigned to
the Honorable Arthur J. Gonzalez and designated as Case
No. 96 B 40940. UM&M's bankruptcy case was assigned to
the Honorable Arthur J. Gonzalez and designated as Case
No. 96 B 40941. The cases are jointly administered and
consolidated for procedural purposes only pursuant to an
order entered on February 22, 1996. The Company contin-
ues to operate its business and manage its property as a
debtor-in-possession pursuant to sections 1107 and 1108
of the Bankruptcy Code.
Item 7. Pro Forma Financial Statements and Exhibits.
(b) Pro Forma Financial Information.
The required pro forma financial information is
attached hereto on pages F-1 through F-5.
(c) Exhibits.
2.1 Amended and Restated Asset Purchase Agreement
dated as of May 31, 1996 among Victoria Acqui-
sition Group, Inc. and Victoria Creations, Inc.
2.2 Order Under 11 U.S.C. ss.ss. 105(a), 363(b), (f),
(m), and 365, and Fed. R. Bankr. P. 2002, 6004,
and 6006 (i) Approving Asset Purchase Agreement
with Victoria Acquisition Group, Inc., (ii)
Authorizing Sale of Substantially All Assets of
Victoria Creations, Inc., (iii) Authorizing
Assumption and Assignment of Executory Con-
tracts and Leases, and (iv) Granting Related
Relief entered by the Court on June 24, 1996.
99.1 Press release dated July 3, 1996 describing the
sale of the assets.
99.2 Press release dated February 22, 1996, announc-
ing that the Company filed a petition for re-
lief under Chapter 11.
Signature
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.
Dated: July 17, 1996 Reunited Holdings, Inc.
By /s/Norman R. Forson
Name: Norman R. Forson
Title: Senior Vice President
(b) Pro Forma Financial Information Page
Pro Forma Financial Information - Condensed Balance
Sheet as of March 31, 1996
Pro Forma Financial Information - Condensed Statement
of Operations for the year ended June 30, 1995 and the
nine months ended March 31, 1996
EXHIBIT INDEX
Exhibit Page
2.1 Amended and Restated Asset Purchase Agreement
dated as of May 31, 1996 among Victoria Acqui-
sition Group, Inc. and Victoria Creations, Inc.
2.2 Order Under 11 U.S.C. ss.ss. 105(a), 363(b), (f),
(m), and 365, and Fed. R. Bankr. P. 2002, 6004,
and 6006 (i) Approving Asset Purchase Agreement
with Victoria Acquisition Group, Inc., (ii)
Authorizing Sale of Substantially All Assets of
Victoria Creations, Inc., (iii) Authorizing
Assumption and Assignment of Executory Con-
tracts and Leases, and (iv) Granting Related
Relief entered by the Court on June 24, 1996.
99.1 Press release dated July 3, 1996 describing the
sale of the assets.
99.2 Press release dated February 22, 1996, announc-
ing that the Company filed a petition for re-
lief under Chapter 11.
REUNITED HOLDINGS, INC. (formerly Victoria Creations,
Inc.), D.I.P.
PRO FORMA FINANCIAL STATEMENTS:
The following pro forma financial statements
reflect the sale on July 1, 1996 by the Company of most
of its operating assets for proceeds of $5.0 million in
cash and the assumption by the purchaser of $19.55 mil-
lion of the Company's liability to its senior secured
lender. The Company simultaneously used a portion of the
cash proceeds to payoff the balance owed to the senior
secured lender.
The sale of these operating assets resulted in a
non-cash loss of approximately $25 million which will be
included in the Company's financial statements for the
quarter and year ended June 30, 1996.
REUNITED HOLDINGS, INC. (formerly Victoria Creations,
Inc.), D.I.P.
Pro Forma Balance Sheet
The following pro forma condensed balance sheet
reflects the sale on July 1, 1996 by the Company of most
of its operating assets as if the sale had occurred on
March 31, 1996.
(000 omitted)
----------------------------------------
PRO FORMA
ADJUSTMENTS
--------------------
AS ASSETS PRO FORMA
MARCH 31, 1996 REPORTED SOLD PROCEEDS ADJUSTED
--------- --------- --------- ---------
ASSETS
Current Assets:
Cash....................... $759 $5,000 $5,567
(192)
Receivables, net .......... 8,704 ($8,704) 0
Inventories................17,392 (17,392) 0
Other current assets....... 1,335 (1,335) 0
--------- --------- --------- ---------
Total Current Assets $28,190 ($27,431) $4,808 $5,567
Plant and Equipment.........$5,306 ($5,306) $0
Less depreciation..........(4,190) 4,190 0
--------- --------- --------- ---------
Net Plant and Equipment $1,116 ($1,116) $0 $0
Other Assets:
Goodwill..................$20,168 ($20,168) 0
Other...................... 780 (780) 0
--------- --------- --------- ---------
Total Other Assets $20,948 ($20,948) $0 $0
--------- --------- --------- ---------
Total Assets $50,254 ($49,495) $4,808 $5,567
========= ========= ========= =========
LIABILITIES AND STOCKHOLDERS' EQUITY
Current Liabilities:
Accounts payable........... $424 $424
Accrued expenses........... 1,425 1,425
--------- --------- --------- ---------
Total Current Liablilties $1,849 $0 $0 $1,849
Liabilities subject to compromise:
Accounts payable...........$4,487 $4,487
Due to Parent Company......14,966 14,966
--------- --------- --------- ---------
Total Liabilities Subject
to Compromise $19,453 $0 $0 $19,453
Secured long-term debt......19,743 (19,551) 0
(192)
Stockholders' Equity:
Common stock............. $58 $58
Additional paid-in
capital................. 32,998 32,998
Retained earnings
(deficit).............. (23,847) (23,847)
Loss on sale............. ($49,495) $24,551 (24,944)
--------- --------- --------- ---------
Total Stockholders' Equity $9,209 ($49,495) $24,551 ($15,735)
--------- --------- --------- ---------
Total Liabilities and Equity $50,254 ($49,495) $4,808 $5,567
========= ========= ========= =========
REUNITED HOLDINGS, INC. (formerly Victoria Creations,
Inc.), D.I.P.
Pro Forma Statement of Operations
The following pro forma condensed statements of
operations reflect the sale on July 1, 1996 by the Compa-
ny of most of its operating assets as if the sale had
occurred on July 1, 1994. The pro forma adjustments
column deletes the results of operations of the operating
assets sold. The pro forma adjusted column reflects the
estimated results of operations of the design group which
was not included in the operating assets sold.
(000 omitted)
------------------------------
PRO FORMA
AS ADJUST- PRO FORMA
YEAR ENDED JUNE 30, 1995: REPORTED MENTS ADJUSTED
--------- --------- ---------
Net sales..........................$49,863 ($49,563) $300
Cost of sales......................(28,085) 27,805 (280)
Selling, general and administrative
expenses..........................(19,049) 19,049
Amortization of goodwill............. (720) 720
--------- --------- ---------
Operating Income $2,009 ($1,989) $20
Interest expense.....................(3,347) $3,347
Royalty income........................ 50 (50)
Income taxes.......................... (25) 25
--------- --------- ---------
Net Earnings ($1,313) $1,333 $20
========= ========= =========
Average common shares outstanding.....7,800 7,800
Net Earnings per Share...............($0.17) $0.003
(000 omitted)
------------------------------
PRO FORMA
AS ADJUST- PRO FORMA
NINE MONTHS ENDED MARCH 31, 1996: REPORTED MENTS ADJUSTED
--------- --------- ---------
Net sales...........................$37,451 ($37,226) $225
Cost of sales.......................(19,947) 19,737 (210)
Selling, general and administrative
expenses...........................(14,098) 14,098
Amortization of goodwill............ (540) 540
--------- --------- ---------
Operating Income $2,866 ($2,851) $15
Interest expense.....................(1,690) $1,690
Royalty income...................... 20 (20)
Income taxes........................ (19) 19
--------- --------- ---------
Net Earnings $1,177 ($1,162) $15
========= ========= =========
Average common shares outstanding.....7,800 7,800
Net Earnings per Share................$0.15 $0.002
_________________________________________________________
AMENDED AND RESTATED
ASSET PURCHASE AGREEMENT
among
VICTORIA ACQUISITION GROUP, INC.
and
VICTORIA CREATIONS, INC.
___________________________
Dated as of May 31, 1996
_________________________________________________________
TABLE OF CONTENTS
SECTION 1. SALE AND PURCHASE OF ASSETS; ASSUMPTION OF
LIABILITIES. . . . . . . . . . . . . . . . . . 3
SECTION 2. CONSIDERATION. . . . . . . . . . . . . . . . . 7
SECTION 3. THE CLOSING. . . . . . . . . . . . . . . . . . 10
SECTION 4. REPRESENTATIONS AND WARRANTIES OF SELLER. . . 12
SECTION 5. REPRESENTATIONS AND WARRANTIES OF BUYER. . . . 31
SECTION 6. DISCLAIMER OF ADDITIONAL AND IMPLIED
WARRANTIES . . . . . . . . . . . . . . . . . . 34
SECTION 7. CERTAIN COVENANTS AND AGREEMENTS. . . . . . . 34
SECTION 8. CONDITIONS TO OBLIGATIONS OF BUYER. . . . . . 44
SECTION 9. CONDITIONS TO OBLIGATIONS OF SELLER. . . . . . 48
SECTION 10. EMPLOYEES. . . . . . . . . . . . . . . . . . . 52
SECTION 11. EXPENSES: TRANSFER/SALES TAXES, ETC. . . . . 56
SECTION 12. GOVERNING LAW; JURISDICTION. . . . . . . . . . 57
SECTION 13. EXECUTION, AMENDMENT WAIVER. . . . . . . . . . 57
SECTION 14. NOTICES, ETC. . . . . . . . . . . . . . . . . 58
SECTION 15. GENERAL. . . . . . . . . . . . . . . . . . . . 60
SECTION 16. ASSIGNMENT. . . . . . . . . . . . . . . . . . 60
SECTION 17. TERMINATION OF AGREEMENT AND BANKRUPTCY COURT
APPROVAL OF SALE OTHER THAN TO BUYER. . . . . 61
SECTION 18. PRESS RELEASES. . . . . . . . . . . . . . . . 64
ASSET PURCHASE AGREEMENT
THIS ASSET PURCHASE AGREEMENT, dated as of May 24,
1996, as amended and restated as of May 31, 1996 (the
"Agreement"), is between VICTORIA ACQUISITION GROUP, INC., a
Rhode Island corporation ("Buyer"), and VICTORIA CREATIONS,
INC., DEBTOR-IN-POSSESSION, a Rhode Island corporation
("Seller").
WHEREAS, Seller engages in the business of
designing, manufacturing and distributing costume jewelry
throughout the United States and also exports such products
principally to Japan and Western Europe (collectively the
"Operation"); and
WHEREAS, Seller desires to sell, and Buyer desires
to purchase certain of the assets and business, as a going
concern, of the Operation, on the terms and conditions and
for the consideration provided herein; and
WHEREAS, Seller has filed a petition for Chapter
11 reorganization relief on February 22, 1996 ("Filing
Date") in the United States Bankruptcy Court for the
Southern District of New York ("Bankruptcy Court"), and
since the Filing Date has operated its business as a debtor-
in possession in its pending reorganization case
("Reorganization Case"); and
WHEREAS, United Merchants and Manufacturers Inc.,
a Delaware corporation ("UM&M") is the owner of
approximately seventy-nine (79%) percent of the issued and
outstanding capital stock of Seller; and
WHEREAS, UM&M also filed a voluntary petition for
Chapter 11 reorganization on the Filing Date in the
Bankruptcy Court and operates its business as a debtor-in-
possession in its pending reorganization case ("UM&M
Reorganization Case"); and
WHEREAS, UM&M is the owner of 30 Jefferson Park
Road, Warwick, Rhode Island (the "Jefferson Park Road
Premises") and 560 Metacom Avenue, Warren, Rhode Island (the
"R. J. Premises"); and
WHEREAS, UM&M leases the Jefferson Park Road
Premises and the R. J. Premises to Seller for use in the
Operation; and
WHEREAS, Buyer desires to lease the Jefferson Park
Road Premises and the R. J. Premises from UM&M in connection
with its acquisition of certain assets from Seller.
NOW THEREFORE, in consideration of the mutual
benefits, representations, warranties, promises and
covenants contained herein, Seller and Buyer hereby agree as
follows:
SECTION 1. SALE AND PURCHASE OF ASSETS;
ASSUMPTION OF LIABILITIES.
(a) Sale and Purchase of Assets. Upon the terms
and subject to the conditions contained herein, on the
Closing Date (as defined in Section 3 hereof) Seller shall
sell, convey, assign, transfer and deliver to Buyer, and
Buyer shall purchase from Seller, all assets, properties and
rights as of the Closing Date (other than the Excluded
Assets (as defined in Section 1(c) hereof), owned by Seller
of every kind, nature and description, real, personal or
mixed, tangible or intangible and wherever situated
(collectively, the "Assets"). The Assets shall include,
without limitation, the following:
(i) all machinery, equipment, furniture and
fixtures relating to the Operation, including, without
limitation, those items set forth on Schedule 6 hereto
("Machinery");
(ii) all inventory held for use in the
conduct of the Operations, including finished goods, work in
process and raw materials and supplies on hand
("Inventory");
(iii) all accounts receivable which relate to
the conduct of the Operation ("Accounts");
(iv) all customer lists, lists of suppliers,
salesmen lists, sales reports, cost sheets, and bills of
material, technical information, engineering data,
production data, licenses, and license agreements relating
to the Operation;
(v) all books, records and other data owned
or controlled by Seller relating to the Assets and the
Operation;
(vi) all contract claims and rights relating
to the Operation, other than such contracts, claims and
rights that pertain to the Excluded Assets;
(vii) all of Seller's goodwill and going
concern value relating to the Operation or the Assets;
(viii) all licenses, permits, approvals and
authorizations by governmental authorities relating to the
Operation or the Assets; and
(ix) all names, trade names (including
without limitation, the trade names listed on Schedule 4
hereto, trade secrets, know-how, inventions, patents,
processes, methods, technical information, engineering data,
production data, license agreements, copyrights and
trademarks used in the Operation.
(b) No Encumbrances. The sale, conveyance,
assignment, transfer and delivery of the Assets hereunder
shall be made free and clear of (i) all liens, claims,
interests, and encumbrances (except for those liens, claims,
interests and encumbrances listed on Schedule 3 hereto and
hereinafter referred to as "Permitted Encumbrances"), with
all such liens, claims, interests, and encumbrances to
attach to the proceeds of the sale, and (ii) all obligations
and liabilities of Seller, except for the Assumed
Liabilities (as hereinafter defined in Section 1(d) below)
and, if not paid in full by Buyer at the Closing, the
Foothill Debt (as hereinafter defined in Section 2(a)
hereof).
(c) Excluded Assets. For purposes of this
Agreement, the term "Excluded Assets" shall mean (i) refunds
or claims for refunds of taxes relating to the Operation for
all periods prior to the Closing Date, (ii) bank accounts
and all cash on hand, (iii) rights under all insurance
programs relating to the Operation or the Assets, (iv) all
tax records, if any, in Seller's possession pertaining to
tax periods of the Operation ending on or prior to the
Closing Date, (v) all fixtures located at the Jefferson Park
Road Premises and the R. J. Premises, which fixtures are
identified and described on Schedule 3 hereto, and (vi)
assets pertaining to the Seller's design workshop (the
"Victoria Design Workshop"), which assets are identified and
described on Schedule 21 hereto.
(d) Assumption of Liabilities and Obligations.
At the Closing, Buyer shall assume and agrees to pay,
perform and discharge the following obligations and
liabilities of Seller (collectively, the "Assumed Liabilities"):
(i) all royalties arising from sales
occurring after the Closing Date under license agreements
set forth on Schedule 4 hereto;
(ii) all obligations of Seller arising after
the Closing Date under the agreements to which Seller is a
party and which are listed on Schedule 12 hereto as
contracts to be assumed by Buyer ("Assumed Contracts");
(iii) to the extent payment has not been
received by Seller therefor, all obligations to perform
after the Closing Date under purchase orders received by
Seller from any of its customers (or sales contracts sent to
customers by Seller reflecting confirmation of either a
written or verbal order) as identified on Schedule 15
hereto, or received by Seller in the ordinary course of
business between the date Schedule 15 hereto was prepared
and the Closing Date, together with any sales commissions
owing to any third party with respect to such purchase
orders;
(iv) all obligations due after the Closing
Date under commitments and purchase orders (a) given by the
Seller to its vendors (or sales contracts sent to Seller by
vendors reflecting confirmation of either written or verbal
orders) as identified on Schedule 15 hereto, or (b) given by
Seller in the ordinary course of business between the date
Schedule 15 hereto was prepared and the Closing Date; and
(v) the obligation, if any, to provide
severance pay in accordance with the provisions of Section
10(b) hereof.
(e) Excluded Liabilities, Obligations. With the
exception of (i) the Assumed Liabilities, (ii) if not paid
in full by Buyer at the Closing Date, the Foothill Debt (as
defined in Section 2(a)) and (iii) all obligations pursuant
to Section 10 of this Agreement, the Buyer assumes no
liabilities or other obligations, commercial or otherwise,
of Seller, known or unknown, fixed or contingent, choate or
inchoate, liquidated or unliquidated, secured or unsecured
or otherwise (such unassumed liabilities and obligations of
Seller, are hereinafter referred to collectively as the
"Excluded Liabilities" and individually as an "Excluded
Liability").
SECTION 2. CONSIDERATION.
(a) Consideration. Subject to the terms and
conditions of this Agreement, in consideration of, and as
full payment for, the sale, conveyance, assignment, transfer
and delivery of the Assets, on the Closing Date Buyer shall
(i) deliver to or for the account of Seller $5,000,000 in
cash (the "Cash Consideration"); (ii) either pay or assume
the entire debt up to and including the Filing Date
(including all principal and interest and any penalties
thereon up to the Filing Date) owed by Seller to Foothill
Capital Corporation ("Foothill"), which debt (acknowledged
by Seller and Buyer to be $19,550,737) is secured by the
Assets (the "Foothill Debt"); and (iii) assume the Assumed
Liabilities as of the Closing Date; and (iv) obtain the
release of Seller from any obligation (including repayment)
respecting the Foothill Debt; and (v) obtain the release of
UM&M from any obligation respecting the Foothill Debt,
including UM&M's guaranty of the Foothill Debt
(collectively, the "UM&M Guaranty").
As used in this Agreement, the "Purchase Price"
shall mean the aggregate of the following: (i) the payment
of the Cash Consideration; (ii) the payment or assumption of
the Foothill Debt, concurrently with the release of the UM&M
Guaranty and Seller's obligations pursuant to the Foothill
Debt; and (iii) the assumption of the Assumed Liabilities.
At the Closing, Buyer shall execute and deliver to Seller
instruments of assignment and assumption, in a form
satisfactory to Seller, providing for the assumption by
Buyer of the Foothill Debt (if not paid in full) and of the
Assumed Liabilities ("Instruments of Assumption").
(b) Interim Financing. As a deposit, Buyer shall
loan to Seller, or make credit available to Seller, in the
form of cash advances or guarantees of letters of credit,
for purposes approved by Buyer, the sum of FIVE HUNDRED
THOUSAND and 00/100 ($500,000.00) DOLLARS ("Committed D.I.P.
Financing"), which Committed D.I.P. Financing shall be
entitled to a priority in the Seller's Reorganization Case
pari passu with the priority afforded Foothill's claims
pursuant to an order to be entered by the Bankruptcy Court
in substantially the form of Exhibit D attached hereto and
made a part hereof ("D.I.P. Financing Order"). In
accordance with the terms of the D.I.P. Financing Order, the
Committed D.I.P. Financing shall be repaid to Buyer,
together with interest at the Prime Rate quoted by Citibank
N.A. from the date such advance or credit is extended to the
date of repayment, if this Agreement is terminated in
accordance with Section 17 hereof; provided, however, that
the Seller shall be under no obligation to repay the
Committed D.I.P. Financing and shall be entitled to retain
for Seller's account, as liquidated damages and not as a
penalty, all amounts received pursuant to the Committed
D.I.P. Financing if the Closing does not occur because of
the Buyer's failure to perform its obligations hereunder.
Upon payment of the aforesaid liquidated damages by
cancellation of the Committed D.I.P. Financing obligation,
the Buyer shall have no further liability to Seller.
At the time this Agreement is executed, Buyer
shall deposit $500,000 with Seller's counsel, Skadden, Arps,
Slate, Meagher & Flom, to be held in escrow pursuant to the
Escrow Agreement set forth as Exhibit H hereto pending
receipt of the D.I.P. Financing Order.
The D.I.P. Financing Order shall further provide
that the Buyer may, in its sole discretion, advance
additional funds or extend additional credit in excess of
the Committed D.I.P. Financing ("Optional D.I.P.
Financing"). The Optional D.I.P. Financing (together with
interest at the Prime Rate quoted by Citibank N.A. from the
date (or dates) any such additional funds are advanced by
Buyer to the date of repayment), shall be repaid by Seller
if this Agreement terminates pursuant to Section 17 hereof.
SECTION 3. THE CLOSING.
(a) Time and Place. Subject to the terms and
conditions set forth herein, the closing (the "Closing") of
the purchase and sale of the Assets pursuant hereto shall
take place at the offices of Skadden, Arps, Slate, Meagher &
Flom, 919 Third Avenue, New York, New York on the second
business day immediately following the date on which this
sale is approved by the Bankruptcy Court and such approval
is evidenced by a Final Order ("Closing Date"), or, prior to
entry of the Final Order, at Buyer's sole option and with
seven business days' prior written notice to Seller, on any
date on or after June 28, 1996, or on such other date and at
such other time or place as the parties may mutually agree.
A "Final Order" is an order which has not been stayed,
vacated or otherwise rendered ineffective when either (i)
all applicable periods for appeal of such order shall have
passed without any appeal therefrom having been taken, or
(ii) if any such appeal shall have been taken, such appeal
shall have been dismissed and all applicable periods for
further appeal of the order shall have passed.
(b) Effectiveness of Transactions. All
transactions, deliveries and payments to take place at the
Closing shall be deemed to take place simultaneously, and no
transaction, delivery of any opinion, certificate, consent
or other document, or payment shall be deemed made until all
transactions, deliveries and payments at the Closing are
completed.
(c) Delivery of Closing Date Report. At the
Closing, the Seller shall deliver to Buyer a statement
indicating Seller's best estimate of the receivables,
payables and inventory of the Operation as of seven business
days prior to the Closing Date ("Closing Date Report"). The
Closing Date Report shall be prepared in accordance with
generally accepted accounting principals ("GAAP"), except to
the extent set forth in the notes to the Closing Date
Report, and on a basis consistent with the financial
statements for preceding accounting periods delivered
pursuant to Section 4(d) hereof.
(d) Delivery of Cash Statement Report. At the
Closing, the Seller shall deliver to Buyer a statement (the
"Cash Statement Report") showing (i) all cash collected by
Seller from the date of the Closing Date Report to the
Closing Date and (ii) all cash expended by Seller from the
date of the Closing Date Report to the Closing Date.
SECTION 4. REPRESENTATIONS AND WARRANTIES OF
SELLER. The representations and warranties set forth in
this Section, if breached by Seller, shall not provide the
basis for any claim against Seller (or any Affiliates of
Seller) as to matters of which Buyer or any of its
respective directors, officers, attorneys or accountants
has, or was in a position to have knowledge or awareness on
the Closing Date. As used in this Agreement, Seller's "Best
Knowledge" shall mean the best knowledge of Seller after
reasonable inquiry, and "Affiliate" shall have the meaning
ascribed to it in Rule 12b-2 of the General Rules and
Regulations under the Securities and Exchange Act of 1934,
as amended (the "1934 Act"). Further, as used in this
Agreement, the term "Material Adverse Effect" means a
material adverse effect on the business of the Operation and
the Assets, taken as a whole. Seller hereby represents and
warrants to Buyer as of the date hereof and as of the
Closing Date as follows:
(a) Organization and Good Standing. Seller is a
corporation duly organized, validly existing and in good
standing under the laws of the State of Rhode Island and has
all requisite corporate power to carry on its business as it
is now being conducted. Seller is duly qualified to do
business as a foreign corporation in California and New York
and is in good standing in each such state and in each other
jurisdiction in which such qualification is necessary under
applicable law as a result of the conduct of the business of
the Operation, except where the failure to be so qualified
would not have a Material Adverse Effect.
(b) Authority; Execution and Delivery. The
execution, delivery and performance of this Agreement and of
each of the agreements and other documents and instruments
delivered or to be delivered by Seller to Buyer pursuant to
this Agreement (collectively the "Seller Delivered
Agreements") are within Seller's corporate powers and have
been duly authorized by the Board of Directors of Seller.
No other corporate proceedings on the part of Seller are
necessary to authorize this Agreement and the transactions
contemplated herein. This Agreement has been, and the
Seller Delivered Documents will be, duly executed and
delivered by Seller. This Agreement is, and the Seller
Delivered Agreements will be, the valid and binding
obligation of Seller, enforceable in accordance with their
respective terms.
(c) Consents, No Conflict, Etc. The execution
and delivery by Seller of this Agreement, and the
consummation by Seller of the transactions contemplated
hereby, do not and will not, (i) violate or conflict with
any provision of the Certificate of Incorporation or Bylaws
of Seller, (ii) except as set forth in Schedule 1 hereto,
conflict with, or result in the breach, modification or
termination of, cause the maturity of any debt obligation,
require the consent or authorization of or waiver by, or
filing with, any other parties to, or result in the creation
of any encumbrances upon the Assets under, or constitute a
default under, any license, franchise, contract, lease,
mortgage, indenture, agreement or other instrument to which
Seller is a party or by which any of the Assets are bound or
from which they derive benefit, (iii) violate any law,
ordinance, rule or regulation, or any judgment, writ,
injunction or order of any court, arbitrator or
governmental, administrative or self-regulatory body or
authority, applicable to Seller, the Operation or the
Assets. Except for approval of the Bankruptcy Court, and
filings required pursuant to the 1934 Act and stock
exchanges on which the securities of Seller and UM&M are
traded, no governmental license, permit or authorization,
and no registration, declaration or filing with any
governmental authority or regulatory agency is required in
connection with the execution, delivery or performance of
this Agreement.
(d) Financial Statements.
(i) Seller has heretofore delivered to
Buyer, or promptly upon their completion, will deliver to
Buyer, complete copies of the following financial statements
(the "Financial Statements"), all of which have been or will
be prepared from the books and records of Seller in
accordance with GAAP, and which, except to the extent set
forth in the notes to the Financial Statements, are prepared
on a basis consistent with that of preceding accounting
periods and present fairly the financial position of the
Seller and the results of its operations and cash flows as
of the date or for the periods indicated:
(ii) the balance sheets of Seller as at June
30, 1995 and June 30, 1994, certified by KPMG Peat Marwick
LLP, and the unaudited balance sheet of Seller at March 30,
1996 (the "March 1996 Balance Sheet"); and
(iii) the statements of income and
statements of cash flows of Seller for the fiscal years
ended June 30, 1995 and June 30, 1994, certified by KPMG
Peat Marwick LLP, and the unaudited statement of income and
statement of cash flow of Seller for the nine month period
ended March 30, 1996.
(e) Other Liabilities. Except as set forth in
Schedule 20 hereto, there are, and will be on or prior to
the Closing Date, no liabilities or obligations of Seller,
either accrued, absolute, contingent, matured, unmatured,
liquidated, unliquidated, disputed or undisputed or
otherwise, relating to the Operation except: (i) those
reflected on the March 1996 Balance Sheet, (ii) those
incurred, consistent with past practice in the ordinary
course of business since March 30, 1996, or (iii) those
specifically disclosed on Schedule 20 hereto.
(f) Assets.
(i) Except as set forth on Schedule 21
hereto, the Assets, the Victoria Design Workshop, the
Jefferson Park Road Premises and the R. J. Premises
constitute all of the assets and rights necessary to conduct
the Operation as now operated and conducted by Seller.
(ii) Except for the Permitted Encumbrances
and as set forth on Schedule 20 hereto, at the Closing Date
Sellers will have, subject to Bankruptcy Court approval,
complete and unrestricted power and the unqualified right to
convey the Assets to Buyer. At the Closing, Seller will
convey to Buyer, and upon consummation of the transactions
contemplated by this Agreement, Buyer will acquire, good,
valid and marketable title to the Assets, free and clear of
all mortgages, liens, security interests, pledges,
guaranties, conditional sale agreements, charges, claims,
restrictions, options, commitments, third party rights and
other encumbrances or claims of any nature whatsoever
(collectively, the "Asserted Interests"), with all such
Asserted Interests to attach to the proceeds of the sale.
(iii) The inventories of the Operation
reflected on the March 1996 Balance Sheet, and the
inventories of the Seller existing on the date hereof and on
the Closing Date as reflected in the Closing Date Report are
of a quality and quantity saleable or useable in the
ordinary course of the Operation. All inventories are
carried at the lower of cost or market (first in, first out)
in the aggregate in accordance with GAAP consistently
applied in accordance with Seller's past practices.
Seller's inventory reserves have been calculated in
accordance with GAAP consistently applied in accordance with
Seller's past practices. Purchase commitments for raw
materials and inventory are not, in the aggregate, in excess
of normal requirements. To Seller's Best Knowledge, sales
commitments for finished goods have been, in the aggregate,
at prices in excess of prices used in valuing inventory
items or of estimated costs of manufacture of items not in
inventory after allowing for selling expenses and a normal
profit margin, except in instances of sale promotions or
product introductions consistent with past practices. Since
the Filing Date, no inventory has been sold or disposed of
except through sales in the ordinary course of business.
(iv) All of the Accounts arose from bona
fide transactions in the ordinary course of Seller's
business, consistent with past practices, and represent
accounts validly due for goods sold or services rendered or
validly incurred indebtedness on the part of those obligated
thereon. The Accounts and the reserves for doubtful
accounts have been accounted for and valued in accordance
with GAAP on a basis consistent with Seller's past
practices. To Seller's Best Knowledge, the reserves
accurately reflect, consistent with past practices, all
claims, offsets and counterclaims asserted against the
Accounts.
(v) All of the personal property leased by
the Seller is listed on Schedule 6 hereto, and copies of all
of the lease documents have been delivered to the Buyer.
(vi) Except as described on Schedule 6
hereto, all of the Assets of the Seller are located on the
premises owned or leased by the Seller as set forth on such
Schedule 6 and all the assets located on such premises are
owned or leased by the Seller.
(g) Absence of Certain Changes or Events. Except
as disclosed on Schedule 17 hereto, since the March 1996
Balance Sheet, Seller has operated the business of the
Operation in the ordinary course consistent with its past
practices and there has not been any;
(i) unfair labor practice charge or
complaint pending, work stoppage, union organizing effort,
strike (nor, to Seller's Best Knowledge, have any of such
actions been threatened) involving Seller and any of the
Operation's employees (collectively, the "Operation
Personnel");
(ii) addition to or modification of the
employee benefit plans, except as required by law, affecting
Operation Personnel other than (A) contributions made in
accordance with the normal practices of Seller with respect
to the Operation or (B) the extension of coverage to other
Operation Personnel who became eligible after the Filing
Date;
(iii) capital expenditures or capital
commitments in excess of Twenty Five Thousand ($25,000)
Dollars for repairs or additions to property, plant,
equipment or tangible capital assets of the Operation;
(iv) change in any method of accounting or
accounting principle with respect to the Operation; or
(v) any agreement, written or oral, by
Seller to do any of the foregoing.
(h) Lists of Properties, Contracts and Personnel
Data. Schedules 2 through 14 hereto contain lists of the
following as of the date of the respective schedules:
(i) SCHEDULE 2. QUALIFICATION. All
jurisdictions in which Seller is duly qualified to do
business as a foreign corporation as a result of the
Operation.
(ii) SCHEDULE 3. REAL PROPERTY. All real
property used by the Operation; all leases or subleases of
real property used in connection with the Operation; all
premises occupied by the Operation under rental arrangements
without leases and all Permitted Encumbrances.
(iii) SCHEDULE 4. INTELLECTUAL PROPERTIES.
All patents, patent applications, registrations of
trademarks and of other marks, all registrations of trade
names, labels or other trade rights, all registered user
entries and all pending applications for any such
registrations or entries; all copyright registrations and
pending applications therefor; all patents and pending
applications therefor; all other registered and unregistered
copyrights, trademarks and other marks, trade names and
other trade rights, and all licenses and other contracts
relating thereto, all to the extent that the foregoing items
are owned in whole or in part or used by Seller and relate
to or are used by the Operation (such properties
collectively referred to herein as "Intellectual
Properties").
(iv) SCHEDULE 5. COMPUTER SOFTWARE. All
computer software (including without limitation, all
computer programs, data bases and documentation) owned in
whole or in part or used, leased or licensed by Seller and
relating to the Operation.
(v) SCHEDULE 6. PERSONAL PROPERTY. All
items of machinery, equipment, computer hardware, motor
vehicles, office furniture, fixtures and similar personal
property used in the Operation having a current value,
replacement value or depreciated book value greater than an
amount equivalent to Fifty Thousand ($50,000) Dollars, in
the case of owned items, and having annual lease payments in
excess of an amount equivalent to Fifty Thousand ($50,000)
Dollars or having an unexpired term extending beyond 12
months after the date hereof, in the case of leased items.
Notwithstanding the foregoing, some items listed may have
values of less than Fifty Thousand ($50,000) Dollars.)
(vi) SCHEDULE 7. LABOR CONTRACTS. All
labor contracts, employment agreements, collective
bargaining agreements and consulting agreements relating to
Operation Personnel.
(vii) SCHEDULE 8. EMPLOYEE BENEFITS. All
current employee profit-sharing, incentive, deferred
compensation, welfare (including severance pay), pension,
retirement, group insurance and other employee benefit
plans, programs, policies, arrangements and agreements
(including trust agreements) maintained or contributed to by
the Seller for the benefit of present or former Operation
Personnel and any other material policies or agreements
relating to Operation Personnel (collectively, "Seller
Employee Plans").
(viii) SCHEDULE 9. COMPENSATION AND
EMPLOYEES. The names and current wages or annual salary
rates, as the case may be, and hire date for the purpose of
all Seller Employee Plans, of all current Operation
Personnel.
(ix) SCHEDULE 10. POWERS OF ATTORNEY. The
names of all persons holding powers of attorney from Seller
to act for the Operation.
(x) SCHEDULE 11. BANK ACCOUNTS. The name
of each institution in which Seller has a bank account or a
safe-deposit box relating to the Operation and the names of
all persons authorized to draw thereon or have access
thereto.
(xi) SCHEDULE 12. MATERIAL CONTRACTS. All
contracts and commitments relating to the Assets or the
Operation not otherwise listed in the Schedules above,
involving payment by Seller of more than an amount
equivalent to Fifteen Thousand ($15,000) Dollars or
otherwise materially affecting the Operation.
(xii) SCHEDULE 13. PERMITS AND LICENSES.
Each material permit, license, approval, certificate,
registration, consent, franchise and authorization of
administrative agencies and other governmental authorities
(collectively, "Permits and Licenses") that has been granted
to or obtained by Seller in connection with the conduct of
the business of the Operation and that is in effect on the
Closing Date. To the Best Knowledge of Seller, no other
Permits or Licenses are needed in connection with the
Operation.
(xiii) SCHEDULE 14. LAWSUITS, PROCEEDINGS.
All pending lawsuits, investigations and proceedings
relating to the Operation or the Assets involving Seller as
a party.
(i) Compliance with Laws.
(i) Seller has complied and is in compliance
in all respects with all applicable statutes, regulations,
orders, ordinances and other laws of the United States of
America and all state, local, foreign and other governments,
and agencies of any of the foregoing to which it is subject
in connection with the conduct of the business of the
Operation or the Assets, the noncompliance with which,
either individually or in the aggregate, is reasonably
likely to have a Material Adverse Effect. Seller has not
received any written notice to the effect that it is not in
compliance with any of such statutes, regulations and
orders, ordinances or other laws.
(ii) Seller has, to its Best Knowledge,
obtained all authorizations, kept all records and made all
filings with respect to the Operation required by applicable
Environmental Laws (as such term is defined below). The
term "Environmental Law" means any currently effective
federal, state or local statute, ordinance or promulgated
rule or regulation, any judicial or administrative order or
judgment (whether or not by consent), any duties imposed by
common law and any provision or condition of any permit,
license or other operating authorization relating to (a) the
protection of (i) the environment, or (ii) the public
welfare from actual or potential exposure (or the effects of
exposure) to any actual or potential release, discharge,
disposal or emission (whether past or present) of any
Hazardous Substance (as defined below), or (b) the
manufacturer, processing, distribution, use, treatment,
storage, disposal, transport or handling, of any Hazardous
Substance. "Hazardous Substance" shall mean any flammable
substances, asbestos, explosives, radioactive materials,
polychlorine biphenyls, petroleum products, hazardous waste,
toxic substances or related materials, including without
limitation any substances defined as or included in the
definition of "hazardous substances," "hazardous waste,"
pollutants," "contaminants," "hazardous materials," or
"toxic substances" under any existing applicable laws or
which existing laws designate as potentially dangerous to
public health and/or safety when present in the environment.
(j) Contracts. Each written contract, agreement,
commitment or understanding relating to the Operation to
which the Seller is a party or to which the Assets are
subject which is material to the Operation (including
contracts, if any, relating to the Assumed Liabilities), is
listed or, in the case of standard agreements with
customers, generally described on the schedules to this
Agreement, all of which are referred to herein as
"Contracts." The Seller is not in default in connection
with any Contracts, and to Seller's Best Knowledge, no other
party is in default under any of the Contracts. To the
Seller's Best Knowledge, no act or event has occurred which,
with notice or lapse of time, or both, would constitute a
default under any of the Contracts. There is no outstanding
notice of cancellation or termination in connection
therewith which has been given or received by the Seller.
Each of the Contracts is a valid and binding obligation of
the Seller and, to the Best Knowledge of Seller, the other
party to such Contract.
(k) Litigation. Except as set forth on Schedule
14 hereto, there is no action, suit, investigation (whether
formal or informal), subpoena or proceeding pending or, to
Seller's Best Knowledge, threatened against the Seller.
Except as set forth on Schedule 14 hereto, no order, writ,
injunction, subpoena or decree has been issued by or, to
Seller's Best Knowledge, requested of any court or
governmental agency which might result in a Material Adverse
Effect or which might materially adversely affect the
transactions contemplated by this Agreement.
(l) Intellectual Properties. The Seller owns or
has valid rights to use all Intellectual Property rights
used in or necessary to conduct the Operation as heretofore
conducted. All Intellectual Properties set forth in
Schedule 4 hereto and computer software set forth in
Schedule 5 hereto used by Seller in connection with the
Operation are, except as indicated on such Schedules 4 and
5, respectively, owned by Seller. To the Best Knowledge of
Seller, Seller is not, in connection with the Operation,
infringing upon or otherwise violating any third party's
Intellectual Property rights. To the Best Knowledge of
Seller, there is no infringement or other adverse claim
against the rights of Seller threatened with respect to any
of the Intellectual Properties used or owned by Seller in
connection with the Operation, and there is no infringement
or other adverse claim against the rights of Seller pending
with respect to any of the Intellectual Properties used or
owned by Seller in connection with the Operation.
(m) No Brokers. Seller has not entered into, nor
will it enter into, any agreement, arrangement or
understanding with any person or firm which will result in
the obligation of Buyer or Seller to pay any finder's fee,
brokerage commission or similar payment in connection with
the transactions contemplated hereby and will indemnify and
hold Buyer harmless in connection with any claims for
commissions or other compensation made by any broker or
finder to have been employed by or on behalf of Seller.
(n) Employee Benefit Plans. Except as
specifically set forth on Schedule 8 hereto:
(i) no Seller Employee Plan is subject to
Title IV of the Employee Retirement Income Security Act of
1987, as amended ("ERISA") under any Seller Employee Plan;
(ii) no post-retirement medical and life
insurance benefit obligations exist with respect to
Operation Personnel;
(iii) neither Seller nor any entity that is
or at any time was a member of a "controlled group" within
the meaning of Section 412(n)(6)(B) of the Internal Revenue
Code of 1986, as amended (the "Code") that includes or
included the Seller have any unpaid liability under Title IV
of ERISA with respect to liability arising in connection
with any termination or withdrawal from any employee benefit
plan subject thereto;
(iv) no Seller Employee Plan is a
multiemployer plan as defined in Section 3(37) of ERISA and
the Seller has not incurred any material liability with
respect to any multiemployer plan; and
(v) for each Seller Employee Plan that is
intended to qualify under the provisions of Section 401(a)
of the Code, each such plan is so qualified and the Seller
has obtained a favorable determination letter from the
Internal Revenue Service.
(o) Suppliers and Customers. Schedule 18 hereto
is a list of the Operation's principal current customers and
suppliers. To Seller's Best Knowledge, no such customer is
expected to cease or make any material reduction in, its
purchases of goods from Seller.
(p) Insurance. All insurance set forth in
Schedule 19 hereto is duly in force on the date hereof.
Such insurance policies insure against such losses and risks
as are adequate in accordance with customary industry
practice to protect the Assets and business of the
Operation. Seller has not received notice from any insurer
or agent of such insurer that substantial capital
improvements or other expenditures will have to be made in
order to continue such insurance. Buyer understands and
agrees that all such insurance shall cease to cover the
Operation following the Closing Date.
(q) Accuracy of Other Information. To the Best
Knowledge of Seller, neither this Agreement, nor any
exhibits or schedules hereto contain any untrue statement of
a material fact or intentionally omit to state a material
fact necessary in order to make the statements contained
herein or therein not misleading.
(r) Transactions with Affiliates. The Seller is
not a party to, nor is it or any of the Assets subject to or
otherwise bound by any existing contracts or agreements
between the Seller and any Affiliate of the Seller, except
for (a) compensation to officers and employees at the rates
disclosed pursuant to this Agreement and reimbursement to
such officers and employees for ordinary expenses incurred
in connection with their employment, (b) the Operation's
occupancy arrangement with UM&M for the Jefferson Park Road
Premises and the R. J. Premises, (c) indebtedness of the
Seller to UM&M in the amount of approximately Fifteen
Million ($15,000,000) Dollars, (d) a service agreement
between Seller and UM&M, which shall be terminated at the
Closing Date, and (e) the stock option agreement between
Victoria Creations, Inc. and UM&M.
(s) Labor Relations. There is no unfair labor
practice charge or complaint against the Seller with regard
to the Operation pending or, to Seller's Best Knowledge,
threatened. There are no proceedings pending or, to
Seller's Best Knowledge, threatened before the National
Labor Relations Board with respect to the Operation. There
is no labor strike or similar dispute pending or, to
Seller's Best Knowledge, threatened against or involving the
Operation. To the Best Knowledge of Seller, no union claims
to represent the Operation Personnel nor is there a pending
representation question involving the Operation Personnel.
The Seller is not a party to or bound by any collective
bargaining agreement applicable to Operation Personnel, and
no collective bargaining agreement is currently being
negotiated by the Seller with respect to Operation
Personnel.
(t) Discrimination Charges. There are no
discrimination charges (relating to sex, age, race, national
origin, citizenship, disability or veteran status) pending
or, to Seller's Best Knowledge, threatened against the
Seller with regard to the Operation Personnel before any
federal, state, county or local agency, board, commission,
authority or other subdivision thereof.
(u) Copies of Documents. Seller has previously
delivered, or simultaneously herewith delivers to Buyer true
and complete copies of:
(i) the Certificate of Incorporation and By-
laws of Seller certified, as of a recent date by its
secretary, as in full force and effect as of the Closing
Date;
(ii) all deeds and other title documents and
other evidence of title of all owned real or personal
property listed in Schedules 3, 4, 5 and 6 hereto;
(iii) all leases of real or personal
property listed in Schedules 3, 4, 5 and 6 hereto;
(iv) all Intellectual Properties listed in
Schedule 4 hereto;
(v) all contracts, agreements, plans and
arrangements listed in Schedule 8 hereto and all related
summary plan descriptions (as currently in effect)
distributed to Operation Personnel;
(vi) all instruments evidencing a power of
attorney listed in Schedule 10 hereto;
(vii) all contracts and commitments listed
in Schedule 12 hereto;
(viii) all Permits and Licenses listed in
Schedule 13 hereto; and
(ix) all commitments and purchase orders
listed in Schedule 15 hereto.
(v) Retained Assets. Seller is not retaining any
assets presently used by the Operation or necessary to the
conduct of the Operation's business, except for the Excluded
Assets.
SECTION 5. REPRESENTATIONS AND WARRANTIES OF
BUYER. As used herein, Buyer's "Best Knowledge" shall mean
the best knowledge of Buyer after reasonable inquiry. Buyer
hereby represents and warrants to Seller as follows:
(a) Organization and Good Standing. Buyer is a
corporation duly organized, validly existing and in good
standing under the laws of the State of Rhode Island. Buyer
has all requisite corporate power and authority and all
necessary licenses and permits to carry on its business as
it has been and is currently being conducted, to own, lease
and operate the properties and assets used in connection
therewith and, subject to the obtaining of any necessary
licenses and permits, to enter into and perform this
Agreement and consummate the transactions contemplated
hereby.
(b) Authority; Execution and Delivery. The
execution, delivery and performance of this Agreement and of
each of the agreements and other documents and instruments
delivered or to be delivered by Buyer pursuant to this
Agreement (the "Buyer Delivered Agreements") are within
Buyer's corporate powers and have been duly authorized by
Buyer. No other corporate proceedings on the part of Buyer
are necessary to authorize this Agreement, the Buyer
Delivered Documents and the transactions contemplated
herein. This Agreement has been, and the Buyer Delivered
Documents will be, duly executed and delivered by Buyer.
This Agreement is, and the Buyer Delivered Documents will
be, the valid and binding obligation of Buyer enforceable
against Buyer in accordance with their respective terms.
(c) Consents, No Conflicts, Etc. The execution
and delivery of this Agreement by Buyer does not, and the
consummation of the transactions contemplated hereby will
not, (i) violate or conflict with any of the provisions of
the certificate of incorporation or by-laws of Buyer or (ii)
result in a breach or violation by Buyer of any of the
material terms, conditions or provisions of any law, rule,
ordinance or regulation or any order, injunction, judgment
or decree of any court, governmental authority or regulatory
agency. Except for Bankruptcy Court approval, no
governmental license, permit or authorization, and no
registration, declaration or filing with any governmental
authority or regulatory agency, is required in connection
with the execution, delivery and performance by Buyer of
this Agreement.
(d) No Brokers. Buyer has not entered into and
will not enter into any agreement, arrangement or
understanding with any person or firm which will result in
the obligation of Seller to pay any finder's fee, brokerage
commission or similar payment in connection with the
transaction contemplated hereby and Buyer will indemnify and
hold Seller harmless in connection with any claims for
commissions or other compensation made by any broker or
finder to have been employed by or on behalf of Buyer.
(e) Available Funds to Purchase Assets. Buyer
has obtained any and all financing commitments (the
"Financing Commitments") necessary to permit Buyer to
consummate the purchase of Assets contemplated by this
Agreement. Copies of the Financing Commitments are attached
hereto and made a party hereof as Exhibit B.
SECTION 6. DISCLAIMER OF ADDITIONAL AND
IMPLIED WARRANTIES. Buyer acknowledges that it is not
relying on Seller with respect to any matter (including, but
not limited to, projections, assessments, plans, statements,
promises, whether express or implied, written or oral) in
connection with its evaluation of the Operation and the
Assets, except to the extent that particular matters are
specifically represented and warranted by Seller in Section
4. Except with respect to the explicit representations set
forth in this Agreement, Buyer agrees to take title to the
Assets "AS IS," on the Closing Date. ALL IMPLIED WARRANTIES
OF MERCHANTABILITY AND FITNESS FOR A PARTICULAR PURPOSE ARE
EXPRESSLY EXCLUDED.
SECTION 7. CERTAIN COVENANTS AND AGREEMENTS.
(a) Nonsolicitation. For a period of one year
following the Closing, Seller will not solicit any Operation
Personnel to become officers, directors, employees or agents
of Seller, its Affiliates or anyone else.
(b) Noncompetition. For a period of one year
following the Closing, Seller will not, directly or
indirectly, by ownership of debt or equity interests in, or
by participation in the management or operations of, other
corporations or business enterprises or by the solicitation
of the customers or suppliers of the Operation, engage in
any business in the continental United States that is in
competition with the business of the Operation being
acquired hereunder. Notwithstanding the foregoing,
ownership by Seller, in the aggregate, of less than 10% of
the outstanding shares of capital stock (or other equity
interest) or debt of any entity with one or more classes of
its capital stock listed on a national securities exchange
or publicly traded in the over-the-counter market shall not
constitute a violation of the foregoing.
(c) Name. From and after the Closing Date, Buyer
shall possess, to the exclusion of Seller and its
Affiliates, all rights of the Seller to the use of the names
or marks used in the Operation. On the Closing Date Seller
shall file an amendment to its Articles of Incorporation
changing its name to a name which does not resemble Victoria
Creations, Inc. in any way.
(d) Further Assurances.
(i) From time to time, at Buyer's request,
and without further consideration, Seller will (and will use
its best efforts to cause its officers, directors,
employees, Affiliates and agents to) execute and deliver
such other instruments of conveyance and transfer and take
such other action as Buyer may reasonably request to more
effectively convey, transfer to and vest in Buyer, and to
put Buyer in possession and operating control of, all or any
part of the Assets.
(ii) After the Closing Date, Seller and
Buyer shall cooperate with and assist each other in
connection with the investigation, prosecution, defense,
conduct and settlement of all claims, suits and proceedings,
whether arising before or after the Closing Date, involving
Buyer or Seller, relating to the Assets or the Operation.
Such cooperation and assistance shall include, without
limitation, making available at no cost or expense and for
reasonable periods of time during normal business hours the
time of those employees whose assistance is reasonably
necessary or required in connection with the investigation,
prosecution, defense, conduct or settlement of such claims,
suits and proceedings; provided, however, that the party
requesting such assistance shall reimburse the other for
reasonable out-of-pocket costs and expenses (including
without limitation, transportation, meals and lodging
expenses incurred by such employees).
(e) Books and Records. As promptly as possible
following the Closing, Seller shall deliver to Buyer all
files, documents, papers, agreements, books of accounts and
other records pertaining to the Assets and to the Operation
(the same being hereinafter referred to collectively as the
"Records"). Seller shall be permitted to retain copies of
all such records as relate to financial and accounting
matters and to have access to all original Records so
delivered to Buyer at reasonable times for any reasonable
business purpose for a period of five years after the
Closing Date. Buyer may, at any time, choose to return all
or any portion of the Records to Seller and to be relieved
of the obligation, as to those Records returned, to allow
Seller access to such Records.
(f) Conduct of Business. Except as set forth in
Schedule 17 hereto, between the date hereof and the Closing
Date, Seller will:
(i) operate the business in the ordinary
course consistent with past practice;
(ii) use reasonable commercial efforts to
maintain the Assets in their current condition subject to
reasonable wear, tear, natural deterioration, fire and other
casualty;
(iii) maintain the Records in the ordinary
course consistent with past practice;
(iv) not change the character of the
Operation in any material manner;
(v) subject to Section 1(b) hereof, not
mortgage, pledge or create any lien, security interest,
charge or encumbrance upon any of the Assets, except if made
in the ordinary course of business and consistent with past
practice;
(vi) not sell or transfer any of the Assets,
except for sales or transfers made in the ordinary course of
business and consistent with past practice;
(vii) not terminate or modify any material
lease, license, permit, contract or other agreement included
in the Assets, except in the ordinary course of business;
(viii) not otherwise incur any obligation or
liability (fixed or contingent), except normal trade or
business obligations incurred in the ordinary course of
business and consistent with past practice and except in
connection with this Agreement and the transactions
contemplated hereby;
(ix) not cancel any material debts or waive
any claims or rights of substantial value, except in the
ordinary course of business and consistent with past
practice;
(x) not increase the compensation or bonus
of any Operation Personnel whose current salary exceeds
Fifty Thousand ($50,000) Dollars per annum other than in the
ordinary course or as required by any contract or agreement
(including any such increase pursuant to an existing Seller
Employee Plan); and
(xi) pay all post-petition payables when
due.
(g) Covenant of Seller to Seek Bankruptcy Court
Approval. Seller covenants and agrees that it will file or
cause to be filed with the Bankruptcy Court any and all
motions, pleadings and/or notices, in form and substance
reasonably acceptable to Buyer, necessary or appropriate to
obtain Bankruptcy Court approval of the within sale of
Assets including, without limitation, a Notice of Intended
Sale pursuant to SECTION 363(b) of the Bankruptcy Code ("Notice"),
which Notice shall substantially be in the form of Exhibit C
attached hereto and made a part hereof. The order approving
the sale shall provide, inter alia, (i) that at the Closing,
Seller shall pay, from the proceeds of the Cash
Consideration paid by the Buyer, all post-petition interest,
fees, expenses and charges due from Seller to Foothill, and
(ii) that all unsecured claims of UM&M against Seller shall
be subordinated in right of payment to the allowed unsecured
claims of Seller's trade creditors. Seller further
covenants and agrees that it will file or cause to be filed
with the Bankruptcy Court any and all motions, pleadings
and/or notices necessary or appropriate to obtain Bankruptcy
Court approval of the topping fee referenced in Section 17
hereof, and Seller will use its best efforts to obtain such
approval no later than May 31, 1996, which approval shall be
in substantially the form of Exhibit D attached hereto and
made a part hereof. Any such order shall, inter alia, (i)
require that the initial bid to purchase the Assets made by
a prospective purchaser other than Buyer ("Alternative
Purchaser"): (A) shall offer a purchase price equal to (or
greater than) the sum of (x) One Hundred Three (103%)
Percent of the Buyer's Purchase Price (which, for this
purpose, shall be deemed to be the amount of $24,550,737,
and (y) $500,000, (B) shall be on the same terms as this
Agreement except to the extent such terms are more favorable
to Seller, and (C) shall require the Alternative Purchaser,
as a deposit (the "Deposit"), to pay the Seller $1,400,000
at the time the Alternative Purchaser's purchase agreement
with Seller is executed, which Deposit shall be subject to
the same terms and conditions as set forth in Section 2(b)
hereof with respect to the Committed D.I.P. Financing, (ii)
require that all bids submitted subsequent to the initial
bid by an Alternative Purchaser shall be in increments of
Five Hundred Thousand ($500,000) Dollars, and (iii) require
that Buyer will have a security interest in the proceeds of
any Deposit made by an Alternative Purchaser to secure
repayment of the Committed D.I.P. Financing and payment of
any amount of Expense Reimbursement to which Buyer shall be
entitled pursuant to the terms of this Agreement.
(h) Access; Confidentiality.
(i) Except as otherwise granted, limited or
addressed in this Agreement, from the date hereof to the
Closing Date (or the earlier termination of this Agreement),
the Seller shall, during normal business hours and subject
to and upon the terms and conditions set forth in this
subsection (h), (i) provide to Buyer and its representatives
reasonable access to files, books, records, documents, and
other information of Seller that relates to the Operation
and the Assets, and (ii) make available for inspection and
copying by Buyer copies of any documents relating to the
foregoing.
(ii) The rights of access contained in this
subsection (h) are granted subject to, and on, the following
terms and conditions:
(1) any such investigation will be conducted
in such a manner as not to interfere unreasonably with the
Operation;
(2) Seller may limit such access to the
extent such access could, in the reasonable opinion of
Seller's counsel, violate or give rise to liability under
applicable law, order, judgment or decree of any court or
agreement applicable to the Seller or its properties;
(3) such rights of access shall be subject
to the existing lease, license or occupancy agreements; and
(4) all other provisions of this Agreement
limiting or otherwise relating to Buyer's access to Seller's
properties, assets, employees, books, records and other
information.
(iii) Seller shall permit Buyer's
accountants to have reasonable access to Seller's books,
records and personnel for the purpose of reviewing the
preparation of the Closing Date Report and the Cash
Statement Report.
(iv) During the period from the date hereof
to the Closing Date, all information provided to Buyer or
its representatives by or on behalf of Seller or its
representatives will be governed and protected by the
Confidentiality Agreement dated March 28, 1995 between
Seller and Robert Andreoli, a principal to Buyer, and his
associates (the "Confidentiality Agreement"). The parties
hereby amend such Confidentiality Agreement to provide that
the Confidentiality Agreement shall terminate on the Closing
Date.
(i) Victoria Design Workshop Services. Buyer and
Seller shall use their respective best efforts to reach an
agreement concerning the licensing and use by the Buyer,
from and after the Closing Date, of the services of the
Victoria Design Workshop retained by Seller as part of the
Excluded Assets. The terms of such arrangements shall be
satisfactory to Buyer and shall be set forth in an Agreement
(the "Design Services Agreement") to be executed and
delivered by Buyer and Seller on or before the Closing Date.
(j) Interim Budget. Within fourteen days after
the execution of this Agreement, Seller shall deliver to
Buyer a cash flow budget (the "Interim Budget"), which shall
be reasonably satisfactory to Buyer, showing Seller's best
estimate of its anticipated expenses, payables and cash
receipts on a weekly basis between the date this Agreement
is executed and the Closing Date. The Interim Budget will
be prepared in a manner consistent with Seller's past
practices with respect to budget preparation. During the
seven business days immediately preceding the Closing Date,
Seller shall not expend, in the aggregate, more cash than is
allocated for such period in the Interim Budget.
(k) No Solicitation. From and after the date
hereof, Seller will not, directly or indirectly, solicit or
initiate any discussions or negotiations concerning any sale
of the Assets, or any proposal therefor, or furnish or cause
to be furnished any information concerning the Assets to any
party in connection with any transaction involving the
acquisition of the Assets by any entity other than Buyer.
Notwithstanding the foregoing, Seller may (a) furnish
information concerning its business, property or assets to
any entity pursuant to customary confidentiality agreements
and (b) accept an Alternative Transaction, if (i) Seller
believes in good faith that (x) the fiduciary duties of
Seller's board of directors, or (y) applicable non-
bankruptcy law, requires such action, or (ii) the Bankruptcy
Court, upon the application of a third-party, so orders.
For purposes hereof, "Alternative Transaction" means a sale
of the Assets to a party other than Buyer, which transaction
was not solicited after the date of this Agreement (except
to the extent ordered by the Bankruptcy Court) by Seller,
and which transaction constitutes a higher or better offer
for the Assets. Notwithstanding the foregoing, Seller may,
without limitation, discuss the sale of the Assets and
related matters with The Monet Group, Inc., an entity that,
prior to the date hereof, expressed an interest in acquiring
the Assets.
SECTION 8. CONDITIONS TO OBLIGATIONS OF BUYER.
All the obligations of Buyer to consummate the transactions
contemplated by this Agreement on the Closing Date are
expressly subject to the fulfillment of each of the
following conditions unless specifically waived in writing
by the Buyer:
(a) Representations and Warranties True as of
Closing Date. Seller's representations and warranties
contained in this Agreement, the Schedules and Exhibits
hereto and in any list, agreement, certificate or written
statement referred to herein or delivered pursuant hereto
shall be true and correct in all material respects at and as
of the date hereof and shall be true and correct in all
material respects at and as of the Closing Date with the
same effect as though such representations and warranties
were made on and as of the Closing Date.
(b) Compliance with this Agreement. Seller shall
have performed and complied in all material respects with
all agreements and conditions contained in this Agreement
that are required to be performed or complied with by it
prior to or at the Closing.
(c) Opinion of Seller's Counsel. Seller shall
have delivered to Buyer an opinion addressed to Buyer, of
Edward D. Taffet, counsel of the Seller, in the form set
forth as Exhibit E hereto.
(d) Instruments of Conveyance and Transfer.
Seller shall have executed and delivered to Buyer the any
conveyance documents required to transfer the Assets to
Buyer, as provided Section 2 hereof.
(e) Consents and Approvals. Buyer and Seller
shall have obtained the approvals, consents and
authorizations for all third persons and governmental
agencies necessary for the consummation of the transactions
contemplated hereby in accordance with the requirements of
applicable laws and agreements, including, without
limitation: (i) an Order of the Bankruptcy Court approving
the topping fee (the "Order") described in Section 17
hereof, which Order shall be entered no later than May 31,
1996; (ii) the consents to the assignment of the Assumed
Contracts and the consents identified on Schedule 1 hereto;
and (iii) a Final Order of the Bankruptcy Court approving
and authorizing the sale of Assets in accordance with the
terms and provisions hereof.
(f) Certificate of Good Standing. Seller shall
deliver to Buyer a certificate of the Secretary of State of
the State of Rhode Island dated not more than thirty (30)
days prior to the Closing attesting to the existence,
qualification and good standing of Seller.
(g) Corporate Resolutions. Seller shall deliver
to Buyer resolutions by the Board of Directors of Seller
authorizing the execution and delivery of this Agreement and
the performance of the transactions contemplated hereby,
certified by the Secretary of the Seller.
(h) UM&M Lease. Buyer and UM&M shall have
entered into lease agreements with respect to the Jefferson
Park Road Premises and the R. J. Premises (collectively the
"UM&M Lease") upon mutually acceptable terms and provisions
which shall include, inter alia, (i) a term of three years,
with two one (1) year options to renew such lease, at
Buyer's discretion, with annual rent of Three Hundred and
Fifty Thousand ($350,000) Dollars on a triple net basis with
a rent escalator for the option terms of 3.5% or in
accordance with increases reflected in the Consumer Price
Index ("CPI"), whichever is greater and (ii) indemnification
of tenant by UM&M for any liability to the tenant arising
out of any environmental condition existing on the Jefferson
Road Premises or the R.J. Premises on the Closing Date, with
Buyer entitled, following due process of law, to set off its
claims for indemnification against rent due and owing
pursuant to the lease, and UM&M shall have received a Final
Order of the Bankruptcy Court in the UM&M Reorganization
Case approving and authorizing the UM&M Lease.
(i) No Suit or Other Proceedings. The
consummation of this Agreement shall not be precluded by any
order or injunction of a court of competent jurisdiction
(each party agreeing to use its best efforts to have any
such order reversed or injunction lifted) nor shall there be
pending a suit challenging the consummation of this
Agreement which states a claim with respect to this
Agreement not without merit, the upholding of which would
restrain, prohibit or condition, in any material respect,
some or all of the transactions contemplated hereby.
(j) Damage or Destruction. Neither the Seller
nor the Operation shall have suffered prior to the Closing
Date any loss on account of fire, flood, accident or any
other calamity or casualty to an extent that would interfere
with the conduct of the Operation or impair the value of the
Operation as a going concern, regardless of whether any such
loss or losses have been insured against.
(k) Minimum Value of the Assets. (i) The
aggregate value of the Inventory and Accounts of Seller, net
of applicable reserves, as reflected in the Closing Date
Report, shall equal or exceed Twenty Four Million
($24,000,000) Dollars; and (ii) the value of the Accounts,
net of applicable reserves, as reflected in the Closing Date
Report, shall equal or exceed Eight Million ($8,000,000)
Dollars; and (iii) the amount of the Foothill Debt shall not
exceed $19,550,737.
(l) Maximum Amount of Seller Liabilities.
Excluding the Foothill Debt and any other amounts due or
owing to Foothill and any debt owed to UM&M, the total
liabilities of Seller, as reflected in the Closing Date
Report, shall not, in the aggregate, exceed the sum of six
million five hundred thousand dollars ($6,500,000).
(m) Closing Cash Adjustment. If the amount of
cash collected by the Seller between the date of the Closing
Date Report and the Closing Date exceeds the amount of cash
expended by Seller during such period, as shown on the Cash
Statement Report, then Seller shall pay such excess to Buyer
at the Closing in cash.
SECTION 9. CONDITIONS TO OBLIGATIONS OF
SELLER. All the obligations of Seller to consummate the
transactions contemplated by this Agreement on the Closing
Date are expressly subject to the fulfillment of each of the
following conditions unless specifically waived in writing
by the Seller.
(a) Representations and Warranties True as of
Closing Date. Buyer's representations and warranties
contained in this Agreement, the Schedules and Exhibits
hereto and in any list, agreement, certificate or written
statement referred to herein or delivered pursuant hereto
shall be true and correct in all material respects at and as
of the date hereof and shall be true and correct in all
material respects at and as of the Closing Date with the
same effect as though such representations and warranties
were made on and as of the Closing Date.
(b) Compliance with This Agreement. Buyer shall
have performed and complied in all material respects with
all agreements and conditions contained in this Agreement
that are required to be performed or complied with by it
prior to or at the Closing.
(c) Opinion of Buyer's Counsel. Buyer shall have
delivered to Seller an opinion addressed to Seller, of
counsel of the Buyer, in the form set forth as Exhibit F
hereto.
(d) Instruments of Assumption. Buyer shall have
executed and delivered to Seller any appropriate Instruments
of Assumption, as provided by Section 2 hereof.
(e) Consents and Approvals. Buyer and Seller
shall have obtained the approvals, consents and
authorizations for all third persons and governmental
agencies necessary for the consummation of the transactions
contemplated hereby in accordance with the requirements of
applicable laws and agreements, including, without
limitation: (i) the Order approving the topping fee
described in Section 17 hereof, which Order shall be entered
no later than May 31, 1996; (ii) a Bankruptcy Court order
approving the assignment of the Assumed Contracts on
Schedule 12 hereto; and (iii) a Final Order of the
Bankruptcy Court approving and authorizing the sale of
Assets in accordance with the terms and provisions hereof.
(f) Certificate of Good Standing. Buyer shall
deliver to Seller a certificate of the Secretary of State of
the State of Rhode Island dated not more than thirty (30)
days prior to the Closing attesting to the existence,
qualification and good standing of Buyer.
(g) Corporate Resolutions. Buyer shall deliver
to Seller resolutions by the Board of Directors of Buyer
authorizing the execution and delivery of this Agreement and
the performance of the transactions contemplated hereby,
certified by the Secretary of the Buyer.
(h) UM&M Lease. Buyer and UM&M shall have
entered into the UM&M Lease, and UM&M shall have received a
Final Order of the Bankruptcy Court in the UM&M
Reorganization Case approving and authorizing the UM&M
Lease.
(i) No Suit or Other Proceedings. The
consummation of this Agreement shall not be precluded by any
order or injunction of a court of competent jurisdiction
(each party agreeing to use its best efforts to have any
such order reversed or injunction lifted) nor shall there be
pending a suit challenging the consummation of this
Agreement which states a claim with respect to this
Agreement not without merit, the upholding of which would
restrain, prohibit or condition in any material respect some
or all of the transactions contemplated hereby.
(j) Closing Cash Adjustment. If the amount of
cash expended by Seller between the date of the Closing Date
Report and the Closing Date exceeds the amount of cash
collected by Seller during such period, as shown on the Cash
Statement Report, then Buyer shall pay such excess to Seller
at the Closing in cash.
SECTION 10. EMPLOYEES.
(a) WARN Act. Buyer covenants and agrees that it
will not, within one year of the Closing Date, effectuate a
"plant closing" or "mass layoff" (as such terms are defined
in the Worker Adjustment and Retraining Notification Act
("WARN Act")) nor engage in layoffs or terminations
sufficient in number to trigger the application of any
similar state or local law affecting any site of employment,
or one or more facilities or operating units within any site
of employment, of the Operation.
(b) Employees, Employee Benefit Plans.
(i) Buyer shall offer to employ, effective
as of the Closing Date, all of the Operation Personnel
(except for the employees listed on Schedule 21 hereto
("Victoria Design Employees")) on substantially the same
terms and conditions as the terms and conditions of their
employment by Seller immediately prior to the Closing Date
(Operation Personnel (other than Victoria Design Employees)
who accept such employment shall hereafter be referred to as
"Continued Employees") and Seller shall use reasonable
efforts to facilitate the orderly hiring of those employees
by Buyer. Nothing herein shall confer upon any employee any
right to continue in the employ of the Buyer, except to the
extent such right arises under any Assumed Contract.
Nothing herein shall confer to any Employee the right to
continue employment on any particular terms and conditions,
except to the extent such right arises under any Assumed
Contract.
(ii) As soon as practicable after the Closing
Date, but in no event later than 90 days after the Closing
Date, Buyer shall establish or designate a defined
contribution plan and trust intended to qualify under
Section 401(a) and Section 501(a) of the Code (the "Buyer's
Savings Plan") which shall (for a period of two years
immediately following the Closing Date) be substantially
similar to the Seller's Retirement Savings Plan. Seller
shall direct the trustee of the Seller's Retirement Savings
Plan to transfer to the trustee of the Buyer's Savings Plan
the cash value of the account balances (whether or not then
vested) under the Seller's Retirement Savings Plan as of the
date of transfer in respect of all Continued Employees.
Upon such transfer, Buyer's Savings Plan shall assume all
liabilities for all accrued benefits under the Seller's
Retirement Savings Plan in respect of all Continued
Employees, but only to the extent the value of such accrued
benefits for any Continued Employee is transferred pursuant
to the preceding sentence, and the Seller's Retirement
Savings Plan shall be relieved of all liabilities for such
accrued benefits. Buyer and Seller shall cooperate in the
filing of documents required by the transfer of assets and
liabilities described herein and, notwithstanding anything
contained herein to the contrary, unless this requirement is
waived by the Seller, no such transfer shall take place
until the receipt by Seller of a copy of a favorable
determination letter issued by the IRS with respect to
Buyer's Savings Plan or (ii) an opinion of Buyer's counsel
(which counsel shall be satisfactory to Seller) to the
effect that the terms of the Buyer's Savings Plan and its
related trust satisfy the requirements of Section 401(a) and
Section 501(a) of the Code. Seller will make or cause to be
made to the Seller's Retirement Savings Plan, all
contributions that are attributable to services rendered
prior to the Closing Date or are required to be made to such
plan prior to the Closing Date. For a period of two years
immediately following the Closing Date, Buyer shall continue
to maintain, and shall not terminate or amend in a manner
adverse to plan participants, Buyer's Retirement Savings
Plan.
(iii) Effective as of the Closing Date,
Buyer shall establish a severance plan for Continued
Employees that is substantially similar to the Seller
severance plan (set forth in Schedule 8 hereto) with respect
to Operation Personnel other than Victoria Design Employees
("Buyer Severance Plan"). For a period of one year
immediately following the Closing Date, the Buyer shall
continue to maintain, and shall not terminate or amend in a
manner adverse to employees covered by the plan, the Buyer
Severance Plan and shall give Continued Employees full
credit for all purposes under the Buyer Severance Plan for
such participants' service with the Seller or any Affiliate
of the Seller to the same extent recognized by the Seller
immediately prior to the Closing Date. Notwithstanding the
foregoing, Buyer shall not assume any obligation for
severance with respect to any termination of employment that
occurs prior to the Closing Date.
(iv) Continued Employees shall, for
eligibility purposes only, under Buyer's (or Buyer's
Affiliate's) employee benefit plans, be given credit for
their prior service with Seller as though such prior service
had been with Buyer (or Buyer's Affiliate). Coverage of
Continued Employees under Buyer's (or Buyer's Affiliate's)
welfare benefit plans, if any, will commence as of the
Closing Date for claims incurred on or after the Closing
Date. Seller shall be responsible for the payment of all
benefits under the Seller Employee Plans for all claims,
whether by Continued Employees incurred prior to or after
the Closing. Seller shall retain all responsibility for
providing benefits required under Part 6 of Title I of ERISA
("COBRA benefits") to (i) Operation Personnel and their
qualified beneficiaries in respect of qualifying events
occurring prior to the Closing Date and (ii) all Victoria
Design Employees. Buyer shall provide COBRA benefits to
Operation Personnel (including Operation Personnel who do
not become Continued Employees but excluding Victoria Design
Employees) and their qualified beneficiaries in respect of
qualifying events occurring on or after the Closing Date.
(c) Miscellaneous. No employee or any other
person (except the parties to this Agreement) shall be
entitled to assert any claim against Buyer or Seller (or any
of their respective Affiliates) relating to employment,
compensation, employee benefits or benefit plans or programs
based on or arising from any provisions of this Agreement.
SECTION 11. EXPENSES: TRANSFER/SALES TAXES,
ETC. Except as otherwise provided in this Agreement, Seller
agrees that all fees and expenses incurred by Seller in
connection with this Agreement shall be borne by Seller and
Buyer agrees that all fees and expenses incurred by Buyer in
connection with this Agreement shall be borne by Buyer.
Unless exempt under Section 1146(c) of the Bankruptcy Code,
Buyer shall bear and pay the costs of any transfer,
documentary or stamp taxes in connection with the transfer
of the Assets, including the real property, if any, relating
to the Operation, together with the related fees for
recording all deeds related to the transfer of such real
property. Any federal, state or local sales, use, transfer,
excise, value-added or other similar tax imposed in
connection with the transactions contemplated by this
Agreement shall be borne by the party required under
applicable law to collect and/or pay such tax.
SECTION 12. GOVERNING LAW; JURISDICTION. This
Agreement shall be construed, performed and enforced in
accordance with, and governed by, the laws of the State of
New York, without giving effect to the principles of
conflicts of laws thereof. For so long as the Seller is
subject to the jurisdiction of the Bankruptcy Court and,
except as specifically provided herein, the parties hereto
irrevocably elect as the sole judicial forum for the
adjudication of any matters arising under or in connection
with the Agreement, and consent to the jurisdiction of, the
Bankruptcy Court. After the Seller is no longer subject to
the jurisdiction of the Bankruptcy Court, the parties hereto
irrevocably elect as the sole judicial forum for the
adjudication of any matters arising under or in connection
with this Agreement, and consent to the jurisdiction of, the
courts of the County of New York, State of New York or of
the United States of America for the Southern District of
New York.
SECTION 13. EXECUTION, AMENDMENT WAIVER. This
Agreement sets forth the entire agreement and understanding
of the parties in respect of the transactions contemplated
hereby and supersedes all prior agreements, arrangements and
understandings relating to the subject matter hereof. No
representation, promise, inducement or statement of
intention has been made by Seller or Buyer which is not
embodied in this Agreement, the Schedules, Exhibits, Annexes
or the written statements, certificates or other documents
delivered pursuant hereto and neither Seller nor Buyer shall
be bound by or liable for any alleged representation,
promise, inducement or statement of intention not so set
forth. This Agreement may be amended or modified and any of
the terms, covenants, representations or warranties may be
waived, only by an instrument in writing executed by the
parties hereto or, in the case of a waiver, by the party
waiving compliance. Any waiver by any party of any
condition, or of the breach of any provision, term,
covenant, representation or warranty contained in this
Agreement, in any one or more instances, shall not be deemed
to be nor construed as furthering or continuing waiver of
any such condition, or of the breach of any other provision,
term, covenant, representation or warranty of this
Agreement.
SECTION 14. NOTICES, ETC. All notices,
requests, demands and other communications hereunder shall
be in writing and shall be deemed to have been duly given,
when (i) delivered in person (evidenced by a signed receipt)
or sent by facsimile (evidenced by a confirmation slip), or
(ii) received if mailed by certified or registered mail,
postage prepaid, return receipt requested:
If to Seller:
Victoria Creations, Inc., Inc.
385 Fifth Avenue
New York, New York 10018
Attention: Treasurer
Fax: (212) 684-2390
with a copy to:
United Merchants and Manufacturers, Inc.
2 Executive Drive
Fort Lee, New Jersey 07024
Attention: Treasurer
Fax: (201) 585-1973
and
Skadden, Arps, Slate, Meagher & Flom
919 Third Avenue
New York, New York 10022
Attention: Nancy L. Henry
Fax: (212) 735-2000
If to Buyer:
Robert M. Andreoli
Chairman
Victoria Acquisition Group, Inc.
1039 Reservoir Avenue
Cranston, Rhode Island 02910
with a copy to:
Robert D. Wieck, Esq.
MacAdams & Wieck Incorporated
101 Dyer Street
Providence, Rhode Island 02903
Morgan, Lewis & Bockius LLP
101 Park Avenue
New York, New York 10178-0060
Attn: Mark Gorman
Fax: 212-309-6273
Recovery Equity Investors II, L.P.
901 Mariner's Island Boulevard
Suite 465
San Mateo, CA 94404-1596
Attn: Jeffrey A. Lipkin
Fax: 415-578-9842
Any party may, by written notice to the other,
change the address to which notices to such party are to be
delivered or mailed.
SECTION 15. GENERAL. This Agreement (i) shall
inure to the benefit of and be binding upon successors and
assigns of Buyer and Seller, nothing in this Agreement,
expressed or implied, being intended to confer upon any
other person any rights or remedies hereunder, and (ii) may
be executed in two or more counterparts, each of which shall
be deemed an original but all of which together shall
constitute one and the same instrument. The Section and
other headings contained in this Agreement are for reference
purposes only and shall not affect in any way the meaning or
interpretation of this Agreement. All representations and
warranties contained in Sections 4 and 5 hereof shall
terminate on the Closing Date.
SECTION 16. ASSIGNMENT. No party hereto shall
assign this Agreement or any rights or obligations hereunder
without the prior written consent of the other party hereto
and any such attempted assignment without such prior written
consent shall be void and of no force and effect.
SECTION 17. TERMINATION OF AGREEMENT AND
BANKRUPTCY COURT APPROVAL OF SALE
OTHER THAN TO BUYER.
(a) Termination. At any time prior to the
Closing Date, this Agreement may be terminated (i) by the
consent of Buyer and Seller, (ii) by Seller if there has
been a material misrepresentation, breach of warranty or
breach of agreement or covenant by Buyer in its
representations, warranties, agreements and covenants set
forth herein or any change to Buyer's Financing Commitment
Letter; (iii) by Buyer if there has been a material
misrepresentation, breach of warranty or breach of agreement
or covenant by Seller in its representations, warranties,
agreements and covenants set forth herein; (iv) by Seller if
the conditions stated in Section 9 hereof have not been
satisfied on or prior to the Closing Date; (v) by Buyer if
the conditions stated in Section 8 hereof have not been
satisfied on or prior to the Closing Date; or (vi) by Buyer
or Seller if the Closing has not occurred on or before the
close of business on July 31, 1996.
(b) Bankruptcy Court Approval of Sale Other Than
to Buyer and Credit to Buyer in the Event of Topping Bids.
(i) In the event that the Bankruptcy Court
approves a sale of the Assets to an Alternative Purchaser,
then this Agreement shall terminate and Buyer shall be
entitled to reimbursement of up to Five Hundred Thousand
($500,000) Dollars of its out-of-pocket expenses (including,
but not limited to, legal, accounting and other expenses and
fees paid to financing sources and reimbursement for Buyer's
time and effort expended in negotiating, structuring, and
transacting this Agreement and the sale contemplated
thereby, including, without limitation, any amounts
attributable to services, with respect to this transaction
performed by the parties identified on Exhibit G hereto)
("Expense Reimbursement"), plus a topping fee in an amount
not to exceed Three (3%) Percent of the Purchase Price
(which for these purposes shall be deemed to be $24,550,737
("Topping Fee"), payable in accordance with the provisions
of this Section 17(b). From the proceeds of any sale of the
Assets, other than a sale pursuant to this Agreement, Buyer
shall be first entitled to the Expense Reimbursement, and
then Buyer and Seller shall share any proceeds of such sale
in excess of $25,050,737 on an equal basis until such time
as Buyer's share equals Three (3%) Percent of the deemed
Purchase Price of $24,550,737.
The Expense Reimbursement and repayment of the
Committed D.I.P. Financing shall be paid from the proceeds
of the Deposit to Buyer upon the execution of an asset
purchase agreement by Seller and an Alternative Purchaser,
and the Topping Fee shall be paid to Buyer upon Closing of
the sale to an Alternative Purchaser or upon termination of
a definitive agreement with an Alternative Purchaser;
provided, however, that if (x) Seller enters into a
definitive agreement with an Alternative Purchaser, but such
agreement terminates for any reason, and (y) Seller
subsequently consummates the transaction contemplated by
this Agreement with the Buyer at a purchase price that does
not materially exceed the Purchase Price provided for in
this Agreement, then Buyer shall not be entitled to receive,
in whole or in part, the Topping Fee. Buyer's entitlement
to repayment of the Committed D.I.P. Financing shall have
priority over any and all creditors and claimants to the
proceeds of such sale, except for any claims of Foothill
which will share pari passu.
(ii) In the event that the Bankruptcy Court
approves a sale of the Assets to Buyer for a purchase price
in excess of the Purchase Price ("Higher Approved Purchase
Price"), the Buyer shall be entitled to a credit against
said Higher Approved Purchase Price in an amount equal to
the Expense Reimbursement and Topping Fee that would
otherwise be payable to Buyer pursuant to Section 17(b)(i)
hereof if said sale were approved to a person, partnership,
corporation or other legal entity other than the Buyer.
(c) Effect of Termination. In the event this
Agreement is terminated as provided for in Sections 17(a) or
17(b) hereof, Buyer shall promptly return to Seller all
written and printed material of every nature and kind
(including all copies) that Buyer has either (x) obtained
from Seller, its employees or agents, or (y) compiled from
information supplied by Seller, its employees or agents, in
connection with the transaction contemplated herein,
including, without limitation, any such material obtained
through Buyer's due diligence. If this Agreement shall be
terminated as provided in Section 17(a) or 17(b), all
obligations of the parties hereunder shall terminate without
liability except as otherwise stated in this Agreement,
provided, however, that in no event and under no
circumstances shall any director, officer, affiliate,
stockholder, attorney and/or accountant of either Seller or
Buyer have any liability or obligation under this Agreement,
or arising out of or resulting from any breach or
termination of this Agreement. Any damages that Buyer is
entitled to pursuant to this Agreement shall be accorded an
administrative expense priority in Seller's Reorganization
Case.
SECTION 18. PRESS RELEASES. Neither Seller nor
Buyer will issue any press releases or public announcements
of any of the transactions contemplated by this Agreement
except as may be agreed to in writing by the parties, or as
Seller and Buyer may be required to make under applicable
law or under the rules of any stock exchange.
IN WITNESS WHEREOF, the parties hereto have duly
executed this Agreement the day and year first above
written.
WITNESS: VICTORIA CREATIONS, INC.,
Debtor in Possession, as
Seller
/s/Judith A. Nadzick By: /s/Uzi Ruskin
Title: Chairman
WITNESS: VICTORIA ACQUISITION GROUP, INC.,
as Buyer
Steven O'Neil By: /s/Robert M. Andreoli
Title: Chairman
* * * *
UM&M hereby joins this Agreement solely for the
purpose of agreeing to negotiate with Buyer and prepare a
formal lease agreement for the Jefferson Park Road Premises
and the R. J. Premises. The lease shall incorporate the
provisions described in Sections 8(h) and 9(h) hereof. UM&M
covenants and agrees that it will file or cause to be filed
with the Bankruptcy Court any and all motions, pleadings
and/or notices necessary or appropriate to obtain Bankruptcy
Court approval of the UM&M Lease.
WITNESS: UNITED MERCHANTS AND
MANUFACTURERS, INC., as Debtor
In Possession
/s/Judith A. Nadzick By: /s/Uzi Ruskin
Title: Chairman
Exhibits
A. Intentionally Omitted
B. Buyer's Financing Commitments
C. Form of SECTION 363 Notice of Intended Sale
D. Form of Bankruptcy Court Order Approving the Sale
Procedures
E. Opinion of Seller's Counsel
F. Opinion of Buyer's Counsel
G. Buyer's Representatives' Costs and Fees
H. Escrow Agreement
Schedules
1. Conflicts and Consents.
2. Qualification.
3. Real Property.
4. Intellectual Properties.
5. Computer Software.
6. Personal Property.
7. Labor Contracts.
8. Employee Benefits.
9. Compensation and Employees.
10. Powers of Attorney.
11. Bank Accounts.
12. Material Contracts.
13. Permits and Licenses.
14. Lawsuits, Proceedings.
15. Commitments and Purchase Orders.
16. Obligations to Perform; Accounts Payable.
17. Changes Since Filing Date.
18. Suppliers and Customers.
19. Insurance Policies.
20. Other Liabilities.
21. Victoria Design Workshop Assets.
Michael L. Cook (MC 7887) Return Date:
Lawrence V. Gelber (LG 9384) June 24, 1996
SKADDEN, ARPS, SLATE, MEAGHER & FLOM 10:00 a.m.
919 Third Avenue
New York, New York 10022-3897
(212) 735-3000
Attorneys for United Merchants
and Manufacturers, Inc. and
Victoria Creations, Inc.
UNITED STATES BANKRUPTCY COURT
SOUTHERN DISTRICT OF NEW YORK
- - - - - - - - - - - - - - - - - - - x
In re :
UNITED MERCHANTS AND MANUFACTURERS, : Jointly Administered
INC. and VICTORIA CREATIONS, INC., Chapter 11 Case No.
: 96 B 40941 (AJG)
Debtors.
:
- - - - - - - - - - - - - - - - - - - x
ORDER UNDER 11 U.S.C. SS.SS. 105(a), 363(b), (f), (m),
AND 365, AND FED. R. BANKR. P. 2002, 6004, AND 6006
(i) APPROVING ASSET PURCHASE AGREEMENT WITH VICTORIA
ACQUISITION GROUP, INC., (ii) AUTHORIZING SALE OF
SUBSTANTIALLY ALL ASSETS OF VICTORIA CREATIONS, INC.,
(iii) AUTHORIZING ASSUMPTION AND ASSIGNMENT OF EXECUTORY
CONTRACTS AND LEASES, AND (iv) GRANTING RELATED RELIEF
This matter having come before the court upon
the motion (the "Sale Motion"), dated June 4, 1996, of
Victoria Creations, Inc., debtor-in-possession ("VCI"),
for an order under 11 U.S.C. ss.ss. 105(a), 363(b), (f), (m),
and 365, and Fed. R. Bankr. P. 2002, 6004, and 6006 (i)
approving the asset purchase agreement, dated as of May
24, 1996, as amended and restated on May 31, 1996 (the
"Asset Purchase Agreement")(1), a copy of which is annexed
to the Sale Motion as Exhibit A, between VCI and Victoria
Acquisition Group, Inc. ("VAG"), (ii) authorizing the
sale by VCI of substantially all of its assets (the
"Asset Sale") to (a) VAG, or (b) that entity making a
Competitive Bid that is determined to be the highest
and/or best bid for the Assets (in either instance, the
"Purchaser"), (iii) authorizing VCI to assume and assign
certain executory contracts and unexpired leases (the
"Executory Contracts") to the Purchaser, and (iv)
granting related relief; and
Upon this court's order dated May 31, 1996
scheduling a hearing with respect to the sale of the
__________________
1 Unless otherwise defined, capitalized terms used
herein shall have the meanings ascribed to them in
the Sale Motion and the Asset Purchase Agreement.
Assets, prescribing the form and manner of notice
thereof, and approving certain provisions of the Asset
Purchase Agreement relating to debtor-in-possession
financing, competitive bidding procedures, expense
reimbursement, and a topping fee (the "Sale Procedures
Order"); and
Due notice of the proposed Asset Sale, the Sale
Procedure Order, the Hearing (as defined below), and the
assumption and assignment of the Executory Contracts
having been given to all parties entitled thereto under
the Sale Procedures Order, as evidenced by the affidavits
of service and publication previously filed with this
court (the "Affidavits"); and
The CIT Group/Commercial Services, Inc. ("CIT")
having filed a "limited objection" to the proposed sale
on June 16, 1996; and VCI having objected on June 21,
1996 to the allowance of the claim filed by CIT on May
10, 1996 (the "CIT Claim") against VCI; and
A hearing (the "Hearing") having been held
before this court on June 24, 1996 to consider the Asset
Sale and the assumption and assignment of the Executory
Contracts, at which time all parties in interest were
afforded an opportunity to be heard; and
The court having received evidence and heard
arguments of counsel in support of approval of the Asset
Sale and the assumption and assignment of the Executory
Contracts; and
Based upon the court's review of the
Affidavits; upon all of the evidence proffered or adduced
at, memoranda and objections filed in connection with,
and arguments of counsel made at, the Hearing; upon the
entire record of the Hearing; after due deliberation
thereon; and good cause appearing therefor;
IT IS HEREBY FOUND AND DETERMINED THAT:(2)
A. The court has jurisdiction over this Sale
Motion, which is a core proceeding, pursuant to 28 U.S.C.
ss.ss. 157(b)(2) and 1334, and the "Standing Order of
Referral of Cases to Bankruptcy Judges," dated July 10,
1984 of District Judge Robert T. Ward.
B. Venue of these cases and this Sale Motion
in this district is proper pursuant to 28 U.S.C. SECTION 1408
and 1409.
C. The statutory predicates for the relief
sought in the Sale Motion are sections 105(a), 363(b),
(f), (m), and 365 of the Bankruptcy Code and Fed. R.
Bankr. P. 2002, 6004 and 6006.
D. VCI has followed the procedures for notice
of the Sale Motion and the Hearing on the Asset Sale set
forth in the Sale Procedures Order.
E. Proper, timely, adequate and sufficient
notice of the Sale Motion, the Hearing and the Asset Sale
has been provided in accordance with sections 102(l) and
363 of the Bankruptcy Code and Fed. R. Bankr. P. 2002,
6004, and 6006, and the Sale Procedures Order, and no
other or further notice of the Sale Motion, the Hearing,
or of the entry of this Sale Order is required.
____________________
2 Findings of fact shall be construed as conclusions
of law and conclusions of law shall be construed as
findings of fact when appropriate. See Fed. R.
Bankr. P. 7052.
F. A reasonable opportunity to object or be
heard regarding the relief requested in the Sale Motion
has been afforded to all interested persons and entities,
including (i) the United States Trustee, (ii) the
creditors' committee, (iii) all entities known to have
expressed an interest in a transaction regarding VCI and
the Assets during the past twelve (12) months, (iv) all
parties to the Executory Contracts proposed to be assumed
and assigned pursuant to the Asset Purchase Agreement,
(v) all entities who have filed a notice of appearance
and request for service of papers in these cases, and
(vi) all of VCI's creditors and equity security holders.
G. VCI has (i) full corporate power and
authority to execute the Asset Purchase Agreement and all
other documents contemplated thereby and the sale of the
Assets by VCI has been duly and validly authorized by all
necessary corporate action of VCI, (ii) all the corporate
power and authority necessary to consummate the
transactions contemplated by the Asset Purchase
Agreement; no consents or approvals, other than those
expressly provided for in the Asset Purchase Agreement,
are required for VCI to consummate such transactions.
H. Approval of the Asset Purchase Agreement
and consummation of the Asset Sale at this time are in
the best interests of VCI, its creditors, and its estate.
I. VCI has articulated good and sufficient
business justification for the Asset Sale pursuant to
section 363(b) of the Bankruptcy Code outside of a plan
of reorganization, and the assumption and assignment of
the Executory Contracts, in that, among other things:
(1) In view of the uncertainty created by the
commencement of VCI's case and the possibility that the
value of VCI's franchise might suddenly and quickly be
diminished by the erosion of confidence by its
suppliers, vendors, customers, employees and others
transacting business with VCI, VCI must consummate a
sale of the Assets at the earliest opportunity to
prevent further wasting of the assets of the estate.
The sale of the Assets to the Purchaser pursuant to the
Asset Purchase Agreement represents the best and
perhaps the only existing alternative to achieve that
result;
(2) In the absence of a prompt Asset Sale, the
value of the Assets will steadily decline due to VCI's
inadequate capitalization and inability to meet its
immediate need to fund a build-up of inventory and an
investment in sales support items for the upcoming fall
season. Since the Petition Date, VCI's operations have
been financed solely by its use of Foothill's cash
collateral pursuant to court order. VCI's only source
of capital is the proceeds from the collection of its
accounts receivable. These proceeds are not sufficient
to fund VCI's preparation for the fall season
adequately, and some of VCI's major customers have
expressed serious concerns about VCI's ability to
deliver and support the major programs that are the
backbone of the fall season;
(3) A sale pursuant to section 363(b) is likely
to produce a greater return to VCI's creditors than if
the Assets were sold later in a plan of reorganization.
A plan of reorganization would be less conducive to
competitive bidding and would thus deprive VCI and its
estate of the opportunity to realize the maximum value
of the Assets;
(4) Claims against VCI's estate will be minimized
as a result of the prompt consummation of a sale of the
Assets and the concomitant assumption and assignment of
the Executory Contracts to the Purchaser;
(5) A sale of the Assets at this time will result
in the highest possible sale premium. As VCI's
business deteriorates, any sale premium that might be
obtained in a bulk sale of the Assets will be lost.
Unless a sale is concluded expeditiously as provided
for in the Sale Motion and under the Asset Purchase
Agreement, (i) the value of the Assets will decline
precipitously and (ii) VCI, its estate and its
creditors may realize no significant value for the
Assets;
(6) With each passing day, the possibility looms
larger that VCI's largest customers will provide VCI
with fewer and smaller orders, and will seek
alternative sources of merchandise as a hedge for the
upcoming fall season. To preserve the value of VCI's
franchise, and to maximize the value of its Assets for
the benefit of all creditors, it is imperative that VCI
be authorized to sell the Assets expeditiously.
(7) The consideration offered by the Purchaser
under the Asset Purchase Agreement would satisfy in
full VCI's obligations with respect to the pre-petition
portion of the Foothill Debt. In addition, the Cash
Proceeds of the Asset Sale would be distributed, in
part, to VCI's administrative and unsecured creditors
under the terms of a confirmed reorganization plan.
Moreover, the prompt consummation of the Asset Sale
would permit the continued employment of VCI's more
than 600 employees.
J. The Asset Purchase Agreement represents the highest
and best offer for the Assets, and the purchase price is fair and
reasonable.
K. VCI may sell the Assets free and clear of all
liens, claims, interests, and encumbrances because, as required
by section 363(f) of the Bankruptcy Code, (i) Foothill has
consented to the Asset Sale, and (ii) the consideration to be
paid by the Purchaser for the Assets exceeds the aggregate amount
of all liens on the Assets.
L. The cure amounts listed on Exhibit A to each notice
sent to a non-debtor party to an Executory Contract with VCI, or
as otherwise determined by the court (the "Cure Amounts"), are
the sole amounts necessary to cure all defaults, if any, and to
pay all actual or pecuniary losses that have resulted from such
defaults under the Executory Contracts.
M. The Purchaser has provided adequate assurance of
its future performance under the Executory Contracts within the
meaning of sections 365(b)(1)(C) and (f)(2)(B) of the Bankruptcy
Code.
N. The assumption and assignment of the Executory
Contracts are in the best interest of VCI, its estate, and its
creditors.
O. The Asset Purchase Agreement was negotiated,
proposed and entered into by the parties without collusion, in
good faith, and from arm's length bargaining positions. The
Purchaser is a good faith purchaser under section 363(m) of the
Bankruptcy Code and, as such, is entitled to the protections
afforded thereby. Neither VCI nor the Purchaser has engaged in
any conduct that would cause or permit the Asset Purchase
Agreement to be avoided under section 363(n) of the Bankruptcy
Code.
P. In the absence of a stay pending appeal, the
Purchaser will be acting in good faith within the meaning of
section 363(m) of the Bankruptcy Code in closing the transactions
contemplated by the Asset Purchase Agreement, including
assumption and assignment of the Executory Contracts, at any time
after the entry of this Sale Order.
Q. The transfer of the Assets and the assignment of
the Executory Contracts to the Purchaser (i) are legal, valid,
and effective transfers of the Assets and the Executory
Contracts, (ii) vest the Purchaser with all right, title, and
interest of VCI in and to the Assets and Executory Contracts free
and clear of (x) all liens, claims, interests, and encumbrances
pursuant to section 363(f) of the Bankruptcy Code and (y) all
obligations and liabilities of VCI (other than the Assumed
Liabilities), and (iii) constitute a transfer for reasonably
equivalent value and fair consideration under Title 11 of the
United States Code and the laws of the State of New York.
R. All amounts to be paid by VCI pursuant to the Asset
Purchase Agreement constitute administrative expenses under
sections 503(b) and 507(a)(1) of the Bankruptcy Code and are
immediately payable as and when VCI's obligations arise under the
Asset Purchase Agreement, without further order of the court.
S. The transfer of the Assets and the assignment of
the Executory Contracts do not and will not subject the Purchaser
to any liability for claims against VCI by reason of such
transfer under the laws of the United States, any state,
territory or possession thereof or the District of Columbia
applicable to such transactions.
T. United Merchants and Manufacturers, Inc. ("UM&M"),
the owner of 79.8% of VCI's outstanding common stock, has joined
the Asset Purchase Agreement solely for the purpose of agreeing
to negotiate with the Purchaser and prepare a formal lease
agreement (the "UM&M Lease") for the Jefferson Park Road Premises
and the R.J. Premises, which shall incorporate the provisions
described in sections 8(h) and 9(h) of the Asset Purchase
Agreement.
U. Pursuant to the terms of the Asset Purchase
Agreement, UM&M has agreed that any and all of its unsecured
claims against VCI will be subordinated in right of payment to
the allowed unsecured claims of VCI's trade creditors.
V. In connection with the satisfaction of the pre-
petition portion of the Foothill Debt, VCI and UM&M have waived,
on behalf of themselves and on behalf of their respective
estates, any and all avoidance actions which may have been
assertable against Foothill including, without limitation, any
causes of action under sections 544, 547, 548 and 550 of the
Bankruptcy Code and similar causes of action under applicable
non-bankruptcy law.
W. All of the provisions of this Sale Order are
nonseverable and mutually dependent, subject to paragraph 2
below.
NOW THEREFORE, IT IS HEREBY ORDERED, ADJUDGED, AND
DECREED THAT:
1. The Sale Motion be, and it hereby is, granted.
2. All objections to the Sale Motion or the relief
requested therein that have not been withdrawn, waived, or
settled, and all reservations of rights included therein, are
overruled on the merits; provided, however, that any rights of
(a) CIT to challenge the subordination of UM&M's claim and/or to
claim a right of payment pari passu with all other creditors of
VCI, and (b) VCI and UM&M to dispute the CIT Claim against VCI
and all other assertions of CIT are preserved pending further
disposition by the court.
3. The terms and conditions of the Asset Purchase
Agreement are hereby approved in all respects, and the sale of
the Assets pursuant to the Asset Purchase Agreement is hereby
authorized under section 363(b) of the Bankruptcy Code.
4. VCI is authorized and directed to execute and
deliver, and empowered to perform under, consummate and
implement, the Asset Purchase Agreement, together with all
additional instruments and documents that may be reasonably
necessary or desirable to implement the Asset Purchase Agreement,
and to take all further actions as may reasonably be requested by
the Purchaser for the purpose of assigning, transferring,
granting, conveying and conferring to the Purchaser, or reducing
to possession, any or all of the Assets, or as may be necessary
or appropriate to the performance of the obligations as
contemplated by the Asset Purchase Agreement.
5. Pursuant to sections 105(a) and 363(f) of the
Bankruptcy Code, the Assets shall be transferred to the
Purchaser, and upon the Closing under the Asset Purchase
Agreement shall be free and clear of all mortgages, security
interests, conditional sale or other title retention agreements,
pledges, liens, judgments, demands, encumbrances, easements,
restrictions or charges of any kind or nature, if any, including,
but not limited to, any restriction on the use, voting, transfer,
receipt of income or other exercise of any attributes of
ownership (collectively, "Liens"), and all debts arising in any
way in connection with any acts of VCI, claims (as that term in
defined in the Bankruptcy Code), obligations, demands,
guaranties, options, rights, contractual commitments,
restrictions, interests and matters of any kind and nature,
whether arising prior to or subsequent to the commencement of
these cases, and whether imposed by agreement, understanding,
law, equity or otherwise (collectively, "Claims"), with all such
Liens and Claims to attach to the Cash Proceeds of the Asset Sale
in the order of their priority, with the same validity, force and
effect which they now have as against the Assets.
6. Except as expressly permitted by the Asset Purchase
Agreement, all persons and entities holding Liens or Claims of
any kind and nature with respect to the Assets hereby are barred
from asserting such Liens and Claims of any kind and nature
against the Purchaser, its successors or assigns, or the Assets.
7. The Cash Proceeds of the Asset Sale shall be held
by VCI pending further order of the court; provided, however,
that (a) at the Closing, VCI shall pay, from the Cash Proceeds
paid by the Purchaser, all post-petition interest, fees, expenses
and charges due from VCI to Foothill, and (b) nothing contained
in this paragraph 7 shall affect VCI's rights and obligations
with respect to the payment or repayment of (x) Cure Amounts
pursuant to paragraph 9 of this Sale Order and (y) the Expense
Reimbursement, Topping Fee, and Committed DIP Financing pursuant
to the terms of the Asset Purchase Agreement.
8. VCI is hereby authorized and directed in accordance
with section 365 of the Bankruptcy Code to (a) assume and assign,
effective upon the Closing of the Asset Sale, to the Purchaser
each of the Executory Contracts listed on Exhibit C to the Sale
Motion, pursuant to the provisions of sections 365 of the
Bankruptcy Code, in each case free and clear of all Liens, and
(b) execute and deliver to the Purchaser such documents or other
instruments as may be necessary to assign and transfer the
Executory Contracts to the Purchaser.
9. VCI is hereby authorized and directed to pay all
Cure Amounts, as listed on Exhibit A to each notice sent to a
non-debtor party to an Executory Contract described in Exhibit C
to the Sale Motion, or as otherwise determined by the court, by
paying within twenty (20) business days of the Closing or
reserving for payment, pending further order of the court, all
such Cure Amounts from the proceeds of the Asset Sale or other
available cash.
10. The Executory Contracts will be transferred to,
and remain in full force and effect in accordance with their
respective terms for the benefit of the Purchaser,
notwithstanding any provision in such Executory Contracts
(including those described in sections 365(b)(2) and (f)(1) and
(3) of the Bankruptcy Code) that prohibits such assignment or
transfer, and, pursuant to section 365(k) of the Bankruptcy Code,
VCI shall be relieved from any further liability with respect to
the Executory Contracts after such assignment.
11. Each non-debtor party to an Executory Contract is
hereby barred from asserting against VCI or the Purchaser any
default existing as of the date of the Hearing if such default
was not raised or asserted in accordance with the provisions of
the Sale Procedures Order.
12. On the date of the Closing of the Asset Purchase
Agreement (the "Closing Date"), each of VCI's creditors is
authorized and directed to execute such documents and take all
other actions as may be necessary to release its Liens on or
Claims against the Assets, if any, as such Liens or Claims may
have been recorded or may otherwise exist.
13. This Sale Order (a) is and shall be effective as a
determination that, on the Closing Date, all Liens existing as to
the Assets prior to the Closing have been unconditionally
released, discharged and terminated, and that the conveyance
described in decretal paragraph 5 hereof has been effected, and
(b) is and shall be binding upon and govern the acts of all
entities including without limitation, all filing agents, filing
officers, title agents, title companies, recorders of mortgages,
recorders of deeds, registrars of deeds, administrative agencies,
governmental departments, secretaries of state, federal, state,
and local officials, and all other persons and entities who may
be required by operation of law, the duties of their office, or
contract, to accept, file, register or otherwise record or
release any documents or instruments, or who may be required to
report or insure any title or state of title in or to any of the
Assets.
14. Each and every federal, state, and local
governmental agency or department is hereby directed to accept
any and all documents and instruments necessary and appropriate
to consummate the transactions contemplated by the Asset Purchase
Agreement.
15. If any person or entity that has filed financing
statements or other documents or agreements evidencing Liens on
or interests in the Assets shall not have delivered to VCI prior
to the Closing, in proper form for filing and executed by the
appropriate parties, termination statements, instruments of
satisfaction, releases of all Liens or other interests which the
person or entity has with respect to the Assets, VCI is hereby
authorized and directed to execute and file such statements,
instruments, releases and other documents on behalf of the person
or entity with respect to the Assets.
16. All entities who are presently, or on the Closing
Date may be, in possession of some or all of the Assets are
hereby directed to surrender possession of the Assets to the
Purchaser on the Closing Date.
17. As of the Closing Date, all agreements of any kind
whatsoever and all orders of this court entered prior to the date
hereof shall be deemed amended and/or modified to the extent
required to permit the consummation of the transactions
contemplated by the Asset Purchase Agreement.
18. Except as otherwise expressly provided in the
Asset Purchase Agreement or related instruments or as otherwise
provided in this Sale Order, (a) the Purchaser shall have no
liability or responsibility for any liability or other obligation
of VCI arising under or related to the Assets other than for the
Purchase Price (as defined in the Asset Purchase Agreement), and
(b) all persons are enjoined from in any way pursuing the
Purchaser to recover any claim which such person has against VCI,
except with respect to (i) Assumed Liabilities and (ii) any claim
which is independently assertable against the Purchaser.
19. This court retains jurisdiction (a) to enforce and
implement the terms and provisions of the Asset Purchase
Agreement, all amendments thereto, any waivers and consents
thereunder, and of each of the agreements executed in connection
therewith, (b) to compel delivery of the Assets to the Purchaser,
(c) to resolve any disputes arising under or related to the Asset
Purchase Agreement, except as otherwise provided therein, and (d)
to interpret, implement and enforce the provisions of this Sale
Order.
20. Nothing contained in any plan of reorganization
(or liquidation) confirmed in these cases or the order of
confirmation confirming any plan of reorganization (or
liquidation) shall conflict with or derogate from the provisions
of the Asset Purchase Agreement or the terms of this Sale Order.
21. The Purchaser is a purchaser in good faith of the
Assets, and is entitled to all of the protections afforded by
section 363(m) of the Bankruptcy Code.
22. In the absence of a stay pending appeal, if the
Purchaser elects to close under the Asset Purchase Agreement at
any time after entry of this Sale Order, then, with respect to
the Asset Purchase Agreement, including the assumption and
assignment of the Executory Contracts approved and authorized
herein, the Purchaser shall be entitled to the protections of
section 363(m) of the Bankruptcy Code if this Sale Order or any
authorization contained herein is reversed or modified on appeal.
23. The terms and provisions of the Asset Purchase
Agreement, together with the terms and provisions of this Sale
Order, shall be binding in all respects upon, and shall inure to
the benefit of, UM&M, VCI, its estate, and its creditors, the
Purchaser, and their respective affiliates, successors and
assigns, and any affected third parties including, but not
limited to, Foothill, all non-debtor parties to the Executory
Contracts to be assigned to the Purchaser pursuant to the Asset
Purchase Agreement and all persons asserting a claim against or
interest in VCI's estate or any of the Assets to be sold to the
Purchaser pursuant to the Asset Purchase Agreement,
notwithstanding any subsequent appointment of any trustee for VCI
or UM&M under any chapter of the Bankruptcy Code, as to which
trustee such terms and provisions likewise shall be binding in
all respects.
24. The failure specifically to include any particular
provisions of the Asset Purchase Agreement in this Sale Order
shall not diminish or impair the effectiveness of such provision,
it being the intent of the court that the Asset Purchase
Agreement be authorized and approved in its entirety.
25. The Asset Purchase Agreement and any related
agreements, documents or other instruments may be modified,
amended or supplemented by the parties thereto, in a writing
signed by both parties, and in accordance with the terms thereof
without further order of the court, provided that any such
modification, amendment or supplement is not material.
26. UM&M is authorized to execute and deliver, and
empowered to fully perform under, consummate and implement the
UM&M Lease for the Jefferson Park Road Premises and the R.J.
Premises, incorporating the provisions described in sections 8(h)
and 9(h) of the Asset Purchase Agreement, without further order
of the court.
27. UM&M's unsecured claims against VCI shall be, and
they hereby are, subordinated in right of payment to the allowed
unsecured claims of VCI's trade creditors, subject to paragraph 2
above.
28. The transfer of the Assets to the Purchaser is not
subject to taxation under any state or local law imposing a
stamp, transfer or similar tax in accordance with section 1146(c)
of the Bankruptcy Code.
29. Upon the Closing of the Asset Purchase Agreement,
UM&M shall be deemed to have waived, and UM&M, VCI, any
creditors' committee appointed in their respective Chapter 11
cases, and all other creditors and parties in interest in such
Chapter 11 cases shall forever be barred and enjoined from
asserting any and all causes of action which may now or hereafter
be assertable against Foothill arising from or relating to the
Foothill Debt, including, but not limited to, any and all causes
of action arising under sections 544, 547, 548 and 550 of the
Bankruptcy Code and similar causes of action arising under
applicable non-bankruptcy law. All payments received by Foothill
in connection with the Closing of the Asset Purchase Agreement
shall be indefeasible, and not recoverable from Foothill or for
any reason.
30. As provided by Fed. R. Bankr. P. 7062, this Sale
Order shall be effective and enforceable immediately upon entry.
31. The transfer of the Assets and the assignment of
the Executory Contracts do not and will not subject the Purchaser
to any liability for claims against VCI by reason of such
transfer under the laws of the Untied States, any state,
territory or possession thereof or the District of Columbia
applicable to such transactions.
Dated: New York, New York
June 24,1996
/s/ Arthur J. Gonzalez
United States Bankruptcy Judge
NEWS FROM ....
VICTORIA CREATIONS, INC.
30 Jefferson Park Road, Warwick, RI 02888
(201) 585-2100
FOR IMMEDIATE RELEASE JULY 3, 1996
Victoria Creations, Inc. has announced today the
consummation of the transaction whereby it sold
substantially all of its assets as a going concern to
Victoria Acquisition Group, Inc. The transaction
included the assumption of certain liabilities by the
acquiring company. Victoria Creations, Inc., a 79% owned
subsidiary of United Merchants and Manufacturers, Inc.,
has been operating under the protection of the United
States Bankruptcy Court for the Southern District of New
York (the "Court") since filing for Chapter 11 relief on
February 22 of this year. The sale was effectuated in
accordance with an order entered by the Court on June 24, 1996.
The name "Victoria Creations" was included in the assets
sold, and Victoria Creations, Inc. will be changing its
name to "Reunited Holdings, Inc." Reunited Holdings,
Inc. will remain a Rhode Island Corporation with its
corporate offices located at Two Executive Drive, Fort
Lee, New Jersey 07024. It will be in the business of
providing design services for the fashion jewelry
industry.
V I C T O R I A C R E A T I O N S, I N C.
P R E S S R E L E A S E
FOR IMMEDIATE RELEASE
New York, New York. February 22, 1996 -- Victoria
Creations, Inc. ("Victoria" or the "Company"), a leading
firm in the fashion jewelry industry and a 79%-owned
subsidiary of United Merchants and Manufacturers, has
announced today that it and U M & M have filed for
protection under Chapter 11 of the United States
Bankruptcy Code, in the United States Bankruptcy Court,
for the Southern District of New York.
Victoria has achieved a strong turnaround over the past
two years. As currently reported, the Company generated
net income of $1,200,000 for the six months ended
December 31, 1995, which represented an increase over the
$35,000 net income in 1994 and a net loss of $1,900,000
in the same period in fiscal 1993. Operating profit
increased to $2,300,000 for the six months ended December
31, 1995 as compared to an operating profit of $1,900,000
and an operating loss of $1,200,000 for the six months
ended December 31, 1994 and 1993, respectively. Net
sales for the six months ended December 31, 1995
decreased 8% over those of the comparable period ended
December 31, 1994 and increased 21% over those of the
same 1993 fiscal period, with the decrease between 1995
and 1994 being the result of working capital shortfall
experienced in the July-August timeframe which affected
fill-rates for on-hand orders.
Despite this positive trendline, Victoria's lender
refused to make available to the Company additional funds
for the Spring Season buildup which has made it
impossible for the Company to meet all of its financial
commitments. After a thorough review of all
alternatives, the Company was compelled to take this
action to preserve its assets, provide for continuing
operations and protect the interests of its shareholders,
creditors, customers, employees and suppliers.
The Company's product lines--branded as well as private
label store brands--continue to gain share of market with
strong retail performance, both in the United States and
international markets. This performance has provided a
platform for sales growth, while management has at the
same time been successful in streamlining operations for
greater profitability as evidenced by reductions in cost
of goods sold which as a percentage of net sales
decreased two percentage points; selling, general and
administrative expenses which as a percentage of net
sales were flat with the same six months period in 1994.
Victoria plans to continue to operate its business, as
debtor-in-possession, while the reorganization is
pending. The current management team remains in place
and is committed to lead the company to a successful
outcome.
