FULBRIGHT & JAWORSKI L.L.P. 666 Fifth Avenue Paul Jacobs, Esq.

95427883.15

FULBRIGHT & JAWORSKI L.L.P. 666 Fifth Avenue New York, NY 10103 Telephone: 212-318-3000 Facsimile: 212-318-3400 David L. Barrack, Esq. Paul Jacobs, Esq. Warren J. Nimetz, Esq. Proposed Counsel to the Debtors and Debtors in Possession UNITED STATES BANKRUPTCY COURT SOUTHERN DISTRICT OF NEW YORK

--------------------------------------------------------------x In re: THE CONNAUGHT GROUP, LTD., et al., Debtors. --------------------------------------------------------------x

Chapter 11 Case No. 12-_____ (___) (Joint Administration Requested)

DECLARATION OF MAURY SATIN, CHIEF RESTRUCTURING OFFICER OF THE CONNAUGHT GROUP, LTD. ET AL., (A) IN

SUPPORT OF DEBTORS’ CHAPTER 11 PETITIONS AND FIRST DAY MOTIONS AND (B) PURSUANT TO LOCAL BANKRUPTCY RULE 1007-2

I, Maury Satin, declare as follows:

1. I serve as the Chief Restructuring Officer (“CRO”) of each of the above-captioned

debtors (collectively, the “Company” or the “Debtors”)1 in these chapter 11 cases. I was retained

as the CRO on December 29, 2011 and have been acting in that capacity since that date.

2. I served as the Executive Vice President and Chief Operating Officer of the New

York City Economic Development Corporation and the Chief of Staff of the New York City

Department of Citywide Administrative Services during the Rudolph Giuliani Administration.

1 The Debtors, together with the last four digits of each Debtor’s federal tax identification number are: The

Connaught Group, Ltd. (8384); Limited Editions for Her of Nevada LLC (7669); Limited Editions for Her of Branson LLC (8078); Limited Editions for Her LLC (2197); and WDR Retail Corp. (8865).

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Docket #0012 Date Filed: 2/9/2012

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3. In addition, I was President of New York City Off-Track Betting Corporation

where I instituted cost cutting and re-structuring measures to improve financial performance and

successfully re-position the corporation for sale for approximately $300,000,000.

4. I also served as Vice President of Giuliani Partners LLC, a consulting and

investment firm, where I advised domestic and international corporations on critical strategic

issues and crisis management.

5. I was the President of the Northeast Division of Vistage International, a leading

chief executive leadership organization, owned by Michael Milken.

6. I have acted as an advisor to half a dozen companies going through out-of-court

restructuring, and I am familiar with the fashion and garment business having engaged in and

been employed by businesses similar to the Debtors.

7. Since my retention as CRO, I have become generally familiar with the Debtors’

day-to-day operations, business affairs, and books and records, as well as the Debtors’ efforts to

improve cash flows and profitability, obtain DIP financing, negotiate with prospective buyers,

negotiate the current cash collateral agreement with the Debtors’ lenders, and sell their

businesses as going concerns. I have worked closely with the Debtor’s management, executive

officers and professionals, including, its financial advisors and accountants.

8. I submit this declaration (this “Declaration”) in accordance with Rule 1007-2 of

the Local Bankruptcy Rules for the Southern District of New York (the “Local Bankruptcy

Rules”) to assist this Court and parties in interest in understanding the circumstances that

compelled the commencement of these chapter 11 cases and in support of: (a) the Debtors’

petitions for relief under chapter 11 of title 11 of the United States Code (the “Bankruptcy

Code”) filed on the date hereof (the “Petition Date”); and (b) the emergency relief that the


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Debtors have requested from the Court pursuant to the motions and applications described herein

(collectively, the “First Day Pleadings”).

9. The First Day Pleadings seek relief necessary to avoid immediate and irreparable

harm to the Debtors by allowing them to continue their operations and minimize disruptions to

their businesses that could otherwise result from the commencement of these chapter 11 cases.

Specifically, the First Day Pleadings seek relief allowing the Debtors to: (a) stabilize and

maintain their business operations through, among other things, the use of cash collateral; (b)

preserve relationships with employees, independent contractors and other key constituencies; and

(c) limit disruption to the Debtors’ business by continuing the use of their pre-petition cash

management system.

10. Except as otherwise indicated, all facts set forth in this Declaration are based upon

my personal knowledge; my discussions with other members of the Debtors’ management team

and the Debtors’ advisors; my review of relevant documents and information concerning the

Debtors’ operations, financial affairs, and restructuring initiatives; or my opinions based upon

my experience and knowledge. If called as a witness, I could and would testify competently to

the facts set forth in this Declaration. I am authorized to submit this Declaration on behalf of the

Debtors.

PRELIMINARY STATEMENT

11. Section I of this Declaration provides background information with respect to the

Debtors’ businesses and corporate history as well as a description of the Debtors’ organizational

and capital structure. Section II describes the circumstances leading to the commencement of

these chapter 11 cases. Section III summarizes the relief requested in, and the facts supporting,

each of the First Day Pleadings. Section IV summarizes the relief requested in, and the facts

supporting, certain additional pleadings. Section V provides an overview of the exhibits attached


95427883.15 4

hereto that set forth certain additional information about the Debtors, as required by Local

Bankruptcy Rule 1007-2.

I. GENERAL BACKGROUND

A. Debtors’ Businesses and Overview

12. Headquartered in New York, NY, the Debtors are the largest direct seller of high-

end women’s apparel in the United States. For over 30 years, The Connaught Group, Ltd.

(“Connaught”) has cultivated a reputation for creating exquisite clothing held to couture-level

standards, which are all designed in-house. The Company maintains an experienced network of

1,300 independent sales consultants (“Wardrobe Consultants”) that provide wardrobe

consultations and highly personalized service to business executives, diplomats, TV personalities

and other busy professional and social women. Few companies have this type of access to high

net worth women. The Company’s consultants generally hold shows for their customers four

times per year and sell three distinct collections: Carlisle, Per Se and Etcetera. Through the

Wardrobe Consultants, Debtors are able to offer the personalized service and attention to detail

absent from the conventional shopping experience.

13. For many years, the Company has also operated stores through which it

liquidates prior season inventory. The current 10 stores, located in the U.S., operate under the

names Limited Editions for Her and Eccoci (together, “LEFH”), and LEFH also maintains a

limited e-commerce and informational website.2

14. Founded by William Rondina, Connaught is best known for its original label,

Carlisle. Carlisle offers couture dresses, suits, separates, and accessories with a sense of classic

style that is modern yet appropriate for any professional or social occasion. The beautiful,

2 A non-debtor Canadian subsidiary, The Connaught Group ULC, sells Debtors’ clothing to be liquidated in eight

(8) outlet stores in Canada. Three (3) of these Canadian stores are leased by The Connaught Group, Ltd.


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singular designs are a testament to Carlisle’s ongoing commitment to expert European fabric

suppliers and crafts people. Since the first privately held trunk show in 1982, Carlisle has

become a go-to brand for accomplished women across the nation. The Company also offers a

sizable and successful contemporary brand, Etcetera, as Connaught’s chic everyday lifestyle

brand for women on the go. Launched in 2000 and sold by a separate consultant group from

Carlisle and Per Se, Etcetera’s collections are sought after by women who like the line’s

confident, creative, and vivacious spirit. Each piece features luxurious styling and is created

with meticulous attention to detail.

15. Debtors’ sales process has built considerable brand loyalty by both Wardrobe

Consultants and their clients, the final consumers. At its height in 2007, Debtors’ revenue

surpassed $150 million but fell to approximately $108 million in 2010 as consumer spending fell

as a result of the global economic crisis.

16. Debtors produce four waves of new products each year to correspond with each

design season: spring, summer, fall, and holiday. The majority of goods from the Debtors’

spring collection are in their possession or are expected to be received in the week after the

Petition Date. Debtors began selling goods from their spring collections in the weeks prior to the

Petition Date.

B. The Debtors’ Organizational Structure and History

17. As indicated on the diagram of the Debtors’ corporate structure attached hereto as

Exhibit A (and as further discussed in this section), each of the Debtors are wholly-owned,

directly or indirectly, by William D. Rondina, their Chief Executive Officer. Mr. Rondina is also

the creative designer for all of the Debtors’ brands. All brands were brought together under

Connaught in 2010.


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18. Connaught, a Delaware corporation, is wholly owned by William D. Rondina.

Connaught is the sole owner of debtor subsidiaries Limited Editions for Her of Nevada LLC

(“LEFH Nevada”), a Nevada limited liability corporation; Limited Editions for Her of Branson

LLC (“LEFH Branson”), a Delaware limited liability corporation registered to do business in

Missouri; Limited Editions for Her LLC (“LEFH LLC”), a New York limited liability

corporation; and WDR Retail Corp. (“WDR”), a Delaware corporation.

19. In turn, WDR is the sole owner of The Connaught Group ULC, a non-debtor

entity incorporated in Alberta, Canada.

20. William D. Rondina is the sole director of Connaught and the sole manager of

LEFH Nevada. Connaught is the sole member of LEFH Branson and LEFH LLC. The directors

of WDR are William D. Rondina and Eileen Balaban-Eisenberg.

C. Prepetition Capital Structure

21. In accordance with the transactions described below, as of the Petition Date, the

Debtors had outstanding secured obligations in the aggregate amount of approximately

$12,395,949, consisting of amounts outstanding in respect of a $7 million line of credit (the

“Chase Line”) with JPMorgan Chase Bank, N.A. (“Chase”), Chase Supplemental Lines (defined

below) in the amount of $2,700,000, $353,917 in issued and outstanding letters of credit, a

balance of approximately $1,994 on a corporate credit card, a $4 million line of credit (the

“Citibank Line”) with Citibank, N.A. (“Citibank”, and, collectively with Chase, the “Prepetition

Lenders”). The Chase Line and the Citibank Line are referred to, collectively, as the “Secured

Credit Lines” and, each individually, a “Secured Credit Line”. The instruments evidencing the

Secured Credit Lines are described below. In addition, as of the Petition Date, the Debtors had

outstanding an aggregate of $31,406,356 in respect of unsecured loans to the Debtors by the sole

shareholder of Connaught, William D. Rondina (the “Shareholder Loans”).


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i. Secured Credit Lines

22. Connaught is the “borrower” under the Secured Credit Lines pursuant to amended

and restated promissory notes and line of credit letter agreements entered into with Citibank and

Chase as of September 30, 2011 (collectively the “Prepetition Credit Agreements” and together

with all related documents and agreements, the “Prepetition Credit Documents”). The Secured

Credit Lines mature on June 30, 20123 and bear variable interest at either the LIBOR or prime

rate, plus an applicable margin. The obligations of Connaught under the Prepetition Credit

Agreements are secured by a first priority security interest in all of the assets of Connaught and

are guaranteed by its sole shareholder, Mr. William Rondina, and the other Debtors4 (the

“Guarantors”). The obligations of Mr. Rondina in respect of the Secured Credit Lines are

secured pursuant to mortgage, security agreement and fixture financing statements in respect of

certain real property owned by Mr. Rondina in Connecticut. The obligations of the other

Guarantors in respect of the Secured Credit Lines are secured by first priority security interests in

all of the assets of such Guarantors.

23. I am advised that Chase and Citibank entered into a Third Amended and Restated

Intercreditor Agreement, dated as of September 30, 2011 (the “Intercreditor Agreement” or

“ICA”), that governs certain of their respective rights and interests in the Secured Credit Lines

relating to, among other things, their rights and the exercise of remedies in connection with an

Event of Default (as defined in the Intercreditor Agreement) and in the event of a bankruptcy

filing of Connaught and Guarantors.

3 The Secured Credit Lines are in default. 4 The following Debtors are guarantors of the obligations of Connaught under the Secured Credit Lines: Limited

Editions for Her of Nevada LLC, Limited Editions for Her of Branson LLC, Limited Editions for Her LLC and WDR Retail Corp. In addition, Limited Editions for Her of Puerto Rico, Inc., a dissolved former affiliate of the Debtors is also a guarantor of the obligations of Connaught under the Secured Credit Lines.


95427883.15 8

24. On December 21, 2011, Connaught entered into a Line Agreement with Chase

(the “Line Agreement”), providing for (a) an acknowledgement by Connaught and the

Guarantors of the existence of an event of default under the Prepetition Credit Agreements and

Prepetition Credit Documents, (b) the accrual of default in interest on the $7 million note issued

to Chase under the Prepetition Credit Agreements and Prepetition Credit Documents, and (c) the

funding by Chase of an additional $800,000 loan to Connaught against the issuance by

Connaught of a new note to Chase of a like principal amount. On December 29, 2011, the

Debtors entered into a Supplemental Line Agreement with Chase (the “Supplemental Line

Agreement”), providing for the funding by Chase of an additional $1.3 million loan to

Connaught against the issuance by Connaught of a new note to Chase of a like principal amount.

On January 12, 2012, Connaught entered into a Second Supplemental Line Agreement with

Chase (the “Second Supplemental Line Agreement”), providing for the funding by Chase of an

additional $600,000 loan to Connaught against the issuance by Connaught of a new note to

Chase of a like principal amount. The Line Agreement, Supplemental Line Agreement and

Second Supplemental Line Agreement are collectively referred to as the “Chase Supplemental

Lines”. The amounts outstanding under the Line Agreement, the Supplemental Line Agreement

and the Second Supplemental Line Agreement are secured, subject to the ICA, as amended, by a

first priority lien on the Debtors’ Prepetition Collateral and on a deposit account held at Chase

funded by Mr. Rondina in the amount $2.74 million and by a mortgage on certain residential real

estate owned by Mr. Rondina.

25. As of the Petition Date, the outstanding principal amount owed by Connaught and

the Guarantors under the Secured Credit Lines, the Chase Supplemental Lines and other amounts

owed (collectively, the “Prepetition Facilities”) was not less than $12,395,949, including


95427883.15 9

$353,917 of issued and outstanding letters of credit, which includes a standby letter of credit of

$150,000, but exclusive of attorney’s fees and related expenses and disbursements, and other

obligations owed to the Prepetition Lenders, whether or not contingent, whenever arising,

accrued, accruing, due, owing or chargeable in respect of any obligations under the Prepetition

Credit Documents, including all “Obligations” as described in the Prepetition Credit Agreement

and Prepetition Credit Documents (the “Prepetition Obligations”).

26. As more fully set forth in the Prepetition Credit Agreement and Prepetition Credit

Documents, prior to the Petition Date, the Debtors granted first priority security interests in and

liens on (the “Prepetition Liens”), among other things, substantially all of the assets of the

Debtors (collectively, the “Prepetition Collateral”) to the Prepetition Lenders.

ii. Shareholder Loans

27. The Shareholder Loans consist of (a) a loan in the aggregate principal amount of

$2,000,000, which matures on January 11, 2013 and bears interest at a rate of 2% per annum,

(b) a loan in the aggregate principal amount of $2,147,591.57, which matures on January 11,

2013 and bears interest at a rate of 2% per annum, (c) a loan in the aggregate principal amount of

$25,365,296.35, which matures on June 30, 2015 and bears interest at a rate of 2.5% per annum,

and (d) various demand loans in the aggregate principal amount of $1,057,212. In addition to the

Shareholder Loans and to aid in the Debtors’ liquidity, Mr. Rondina also agreed to accrue his

salary for the period January 22, 2009 to the present.

II. EVENTS LEADING TO THE CHAPTER 11 CASES

A. The Recent Economic Crisis and Its Impact on the Debtors

28. The Debtors’ operating revenues and profitability have declined due to the impact

of the global economic crisis on consumer spending. As sales decreased, Debtors have

encountered a substantial decrease in cash flow, causing their expenses to outweigh their


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revenues. Losses from declining sales in a weak economic climate were exacerbated by excess

inventory and markdowns. Revenues for 2009 were down $27 million from 2008 leading to an

operating loss of $15.3 million. Debtors’ restructuring efforts led to an operating loss of less

than $2.5 million in 2010, but were not enough to ensure sufficient cash flow.

29. Operating losses from 2008, 2009, 2010, and 2011, all combined to impair the

Debtors’ ability to meet their current debt obligations. Accordingly, Debtors are filing petitions

with the Court under chapter 11 of the Bankruptcy Code in order for the Debtors to continue to

operate, to preserve and maximize value for the benefit of all stakeholders, to utilize the benefits

of the automatic stay, to seek a buyer of their business through a section 363 sale, and to

continue to sell their goods through the Wardrobe Consultants.

B. Mr. Rondina’s Continued Efforts to Support the Debtors

30. Since 2008, while the Debtors have endured decreased revenue, Mr. Rondina has

made repeated efforts to ensure the Debtors maintain sufficient operating capital using his

personal funds and property.

31. In 2010, Debtors’ outstanding secured obligations due to Citibank and Chase were

approximately $40 million. Recognizing the company’s need for greater liquidity, Mr. Rondina

liquidated personal assets and made loans of approximately $29 million to the Debtors. See

I.C.ii. Shareholder Loans supra. These funds were used to substantially reduce the Debtors’

secured debt from $40 million to $10 million. In addition, Mr. Rondina used certain of his other

real and personal property to post collateral with the lenders which increased the availability

under the Debtors’ borrowing base.

32. As the Debtors’ cash needs increased prepetition, and in order to assure that the

lenders would make further advances, Mr. Rondina provided $2.7 million in cash collateral at the

request of a secured lender in order to allow additional loans to be made to the Debtors by such


95427883.15 11

secured lender. The availability of this debt allowed the Debtors to survive prepetition for a

substantial enough time to explore restructuring and refinancing options and, ultimately facing

very limited options, afforded the Debtors sufficient time to prepare for their chapter 11 filings.

C. Pre-petition Restructuring Efforts

33. Given their financial situation, the Debtors implemented a number of

restructuring initiatives over the past two years. In 2010 and 2011, the Debtors pursued earnings

enhancement in their sales through Wardrobe Consultants through inventory management and

sell-through, as well as reducing operating expenses. At the same time, Debtors closed

underperforming outlet stores and aggressively liquidated the prior season’s merchandise.

34. In September 2011, Debtors restructured their secured debt obligations to create

greater liquidity and defer the maturity date on their secured debt until June 30, 2012.

35. Notwithstanding the Debtors’ various restructuring efforts, the Debtors’ current

financial condition requires the protections of this Court and the Bankruptcy Code. Each of the

Debtors has filed a petition with the Court under chapter 11 of the Bankruptcy Code to provide

the Debtors with the opportunity to preserve and maximize the value of their assets for the

benefit of all stakeholders through a sale of their businesses as going concerns and to maintain

their relationships with the Wardrobe Consultants to continue to sell inventory in the ordinary

course of business. The Debtors believe that these chapter 11 cases will serve to maximize the

value of the Debtors’ enterprise for the benefit of the Debtors’ estates and all stakeholders.

III. RELIEF SOUGHT IN THE DEBTORS’ FIRST DAY PLEADINGS

36. Contemporaneously herewith, the Debtors have filed a number of First Day

Pleadings in these chapter 11 cases seeking orders granting various forms of relief intended to

stabilize the Debtors’ business operations, facilitate the efficient administration of these chapter

11 cases, and expedite a swift and smooth restructuring of the Debtors’ balance sheet. I believe


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that the relief requested in the First Day Pleadings is necessary to allow the Debtors to operate

with minimal disruption during the pendency of these chapter 11 cases. A description of the

relief requested and the facts supporting each of the First Day Pleadings is set forth below.5

A. Motion of the Connaught Group, Ltd., et al., for the Entry of An Order Directing Joint Administration of Their Chapter 11 Cases (the “Joint Administration Motion”)

37. The Debtors request entry of an order directing the joint administration of these

cases, for procedural purposes only. The Debtors believe that many, if not most, of the motions,

applications, and other pleadings filed in these chapter 11 cases will relate to relief sought jointly

by all of the Debtors. For example, virtually all of the relief sought by the Debtors in the First

Day Pleadings is sought on behalf of all of the Debtors. Joint administration of the Debtors’

chapter 11 cases, for procedural purposes only, under a single docket entry, will also ease the

administrative burdens on the Court by allowing the Debtors’ cases to be administered through a

single docket.

38. I believe that the relief requested in the Joint Administration Motion is in the best

interests of the Debtors’ estates, their creditors, and all other parties in interest, and will enable

the Debtors to continue to operate their businesses in chapter 11 without disruption.

Accordingly, on behalf of the Debtors, I respectfully submit that the Joint Administration Motion

should be approved.

5 Capitalized terms used but not defined in this section have the meanings ascribed them in the respective First

Day Pleadings.


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B. Motion of the Connaught Group, Ltd., et al., for the Entry of an Order Authorizing the Debtors to (I) File a Consolidated List of the Debtors’ Thirty (30) Largest Unsecured Creditors and (II) Mail Initial Notices (the “Consolidated Creditor List Motion”)

39. The Debtors request entry of an order authorizing the Debtors to (I) file a

consolidated list of the Debtors’ thirty (30) largest unsecured creditors and (II) mail initial

notices.

40. Each Debtor’s list of its thirty (30) largest general unsecured creditors has

significant overlap with the lists from the other Debtors in these cases and, therefore, the Debtors

believe that filing separate lists of the thirty (30) largest general unsecured creditors would be of

limited utility. Also, the exercise of compiling separate lists of the thirty (30) largest general

unsecured creditors for each individual Debtor would consume an excessive amount of the

Debtors’ already scarce time and resources. Therefore, filing a consolidated list of the Debtors’

thirty (30) largest unsecured creditors is necessary and appropriate.

41. In addition, the Debtors request the Court’s approval to have Kurtzman Carson

Consultants LLC, as proposed claims and noticing agent, undertake all mailings directed by the

Court, the U.S. Trustee, or as required by the Bankruptcy Code, including the notice of

commencement of these chapter 11 cases. Having the Claims Agent mail the Notice of

Commencement relieves the Clerk of the Court and the U.S. Trustee of the administrative burden

of providing notice to the Debtors’ creditors.

42. I believe that the relief requested in the Creditor List Motion is in the best



Accordingly, on behalf of the Debtors, I respectfully submit that the Creditor List Motion should

be approved.


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C. Motion of The Connaught Group, Ltd., et al., for the Entry of an Order Extending the Deadline to File Schedules of Assets and Liabilities, Schedules of Executory Contracts and Unexpired Leases, and Statements of Financial Affairs (the “Schedules Extension Motion”)

43. The Debtors request an additional seven (7) days to file their schedules of assets

and liabilities, schedules of executory contracts and unexpired leases, and statements of financial

affairs (collectively, the “Schedules and Statements”), without prejudice to the Debtors’ ability to

request additional time, should it become necessary. The requested extension would give the

Debtors a total of twenty-one (21) days from the Petition Date to file their Schedules and

Statements.

44. Due to the complexity of the Debtors’ organizational structure, the scope of their

businesses and the diversity of their operations, the Debtors anticipate that they will be unable to

complete their Schedules and Statements in the fourteen (14) days provided under Bankruptcy

Rule 1007(c). To prepare their Schedules and Statements, the Debtors must collect and review

various records relating to the five entities, each of which has a sizeable number of assets,

liabilities and contracts. This task is further complicated by the fact that the Debtors must

continue to operate while responding to the demands of the bankruptcy cases.

45. I believe that the relief requested in the Schedules Extension Motion is in the best



Accordingly, on behalf of the Debtors, I respectfully submit that the Schedules Extension Motion

should be approved.


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D. Application for an Order Appointing Kurtzman Carson Consultants LLC as Claims and Noticing Agent for the Debtors Pursuant to 28 U.S.C. § 156(c), 11 U.S.C. § 105(a), S.D.N.Y. LBR 5075-1 and General Order M-409 (the “KCC Retention Application”)

46. Pursuant to the KCC Retention Application, the Debtors are seeking authority to

employ and retain Kurtzman Carson Consultants LLC (“KCC”) as their claims and noticing

agent (“Claims Agent”). The Debtors have evaluated three potential candidates to serve as

Claims Agent. Following that review, and in consideration of the number of anticipated

claimants and parties in interest, the nature of the Debtors’ businesses, and the scope of tasks for

which the Debtors will require the assistance of a Claims Agent, the Debtors submit that the

appointment of KCC as Claims Agent is both necessary and in the best interests of the Debtors’

estates.

47. Based on KCC’s considerable experience in providing similar services in large

chapter 11 cases, the Debtors believe that KCC is eminently qualified to serve as Claims Agent

in these chapter 11 cases. A detailed description of the services that KCC has agreed to render

and the compensation and other terms of the engagement are provided in the application. I have

reviewed the terms of the engagement and believe that the Debtors’ estates, creditors, parties in

interest, and this Court will benefit as a result of KCC’s experience and cost-effective methods.

48. I believe that the relief requested in the KCC Retention Application is in the best



Accordingly, on behalf of the Debtors, I respectfully submit that the KCC Retention Application

should be approved.


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E. Motion of the Connaught Group, Ltd., et al., for the Entry of Interim and Final Orders Authorizing the Continued Use of (A) Existing Cash Management System, (B) Existing Bank Accounts, and (C) Existing Business Forms (the “Cash Management Motion”)

49. The Debtors seek (a) authorization for the continued use of their: (i) existing cash

management system; (ii) existing bank accounts; and (iii) existing business forms, and (b)

granting such other relief as is just and proper. The Debtors also request an extension of time to

comply with section 345(b) of the Bankruptcy Code. The relief requested will help ensure the

Debtors’ orderly entry into chapter 11 and avoid many of the possible disruptions and

distractions that could divert the Debtors’ attention from more pressing matters during the initial

days of these chapter 11 cases.

50. I am familiar with the Debtors’ cash management system. The cash management

system constitutes an ordinary course, essential business practice providing significant benefits

to the Debtors including, (a) controlling corporate funds, (b) ensuring the availability of funds

when necessary, and (c) reducing costs and administrative expenses by facilitating the movement

of funds and the development of timely and accurate account balance information. Any

disruption of the cash management system could have a severe and adverse impact on the

Debtors’ efforts and would undoubtedly affect the underlying value of the Debtors’ assets. The

operation of the Debtors’ businesses requires that the cash management system continue to be

implemented during the pendency of these chapter 11 cases. Requiring the Debtors to adopt an

entirely new, segmented cash management system would be expensive, create unnecessary

administrative burdens, and be extraordinarily disruptive to the operation of the Debtors’

businesses. The cash management system has seamlessly and efficiently operated to collect the

revenue generated from the Wardrobe Consultants and outlet stores and disburse such funds to

operate the Debtors’ businesses. Consequently, continuation of the cash management system,


95427883.15 17

except as permitted in the order approving the Motion of the Connaught Group, Ltd., et al., for

the Entry of Agreed Interim and Final Orders: (I) Authorizing Use of Cash Collateral, (II)

Granting Adequate Protection; and (III) Granting Related Relief, is not only essential but in the

best interests of all creditors and other parties in interest.

51. In addition, the Debtors seek a waiver of the U.S. Trustee requirement that their

bank accounts be closed and that new post-petition bank accounts be opened, to avoid delays in

payment to administrative creditors. The closing of the bank accounts, even if for a brief period

of time, would cause great harm to the Debtors’ operations and would jeopardize the ability of

the Debtors to collect and disburse funds in the ordinary course of their businesses. To ensure as

smooth a transition into chapter 11 as possible and to aid in the Debtors’ efforts to complete

these cases successfully and without delay, it is important that the Debtors be permitted to

continue to maintain their existing bank accounts.

52. I believe that the relief requested in the Cash Management Motion is in the best



Accordingly, on behalf of the Debtors, I respectfully submit that the Cash Management Motion

should be approved.

F. Motion of the Connaught Group, Ltd., et al., for the Entry of an Order (I) Prohibiting Utilities from Altering, Refusing, or Discontinuing Services to, or Discriminating Against, the Debtors on Account of Prepetition Invoices, (II) Determining that the Utilities Are Adequately Assured of Future Payment, and (III) Establishing Procedures for Determining Adequate Assurance of Payment (the “Utility Motion”)

53. The Debtors seek entry of an order (a) determining adequate assurance of

payment for future utility services, (b) prohibiting the alteration, refusal, or discontinuation of

utility services, or the discrimination against the Debtors on account of the Debtors’ bankruptcy


95427883.15 18

filing, pre-petition amounts outstanding, or any perceived inadequacy of the Debtors’ proposed

adequate assurance. The Debtors seek approval of certain procedures, as more fully explained in

the Utility Motion, which will require that the Debtors provide a deposit in an amount equal to

two weeks of Utility Service, calculated based on the historical average over the past 12 months,

to any requesting Utility Provider. I believe that the two-week deposit, together with the

Debtors’ demonstrated ability to pay for future Utility Services in the ordinary course of

business, provides more than adequate assurance of payment.

54. Uninterrupted Utility Services are essential to the ongoing operations of the

Debtors and the overall success of these chapter 11 cases. Should any Utility Provider refuse or

discontinue service, even for a brief period, the operations of the Debtors could be severely

disrupted, and such disruption would jeopardize the Debtors’ ability to manage their

reorganization efforts. Accordingly, it is essential that the Utility Services continue

uninterrupted during these chapter 11 cases.

55. I believe that the relief requested in the Utility Motion is in the best interests of

the Debtors’ estates, their creditors, and all other parties in interest, and will enable the Debtors

to continue to operate their businesses in chapter 11 without disruption. Accordingly, on behalf

of the Debtors, I respectfully submit that the Utility Motion should be approved.

G. Motion of the Connaught Group, Ltd., et al., for the Entry of an Order Authorizing Payment of Certain Critical Vendor Claims (the “Critical Vendor Motion”)

56. The Debtors request authority to pay certain undisputed prepetition obligations of

its service providers (the “Critical Vendors”) that the Debtors deem critical to preserve and

maximize the value of their assets for the benefit of all stakeholders through a sale of their

businesses as going concerns and to maintain their relationships with the Wardrobe Consultants

to continue to sell inventory in the ordinary course of business, and authorizing and directing


95427883.15 19

banks and other financial institutions to receive, process, honor, and pay all checks issued and

electronic payment requests made related to the foregoing.

57. In order to ensure finished products arrive in the United States and are delivered

to Wardrobe Consultants and customers, Debtors have established relationships with freight

companies, who transport Debtors’ finished products from the manufacturers, and carriers, who

ship Debtors’ goods to Wardrobe Consultants or the final customer. The Debtors’ relationships

with these Critical Venders generally are not governed by long-term contracts. Instead, the

Debtors typically do business with the Critical Vendors on a shipment-by-shipment basis. Thus,

the Debtors’ failure to honor obligations currently owed to the Critical Vendors could cause such

Critical Vendors to refuse to continue to do business with the Debtors and leave them without the

ability to obtain their goods and sell them to customers.

58. It is therefore essential for the Debtors to continue their relationships with the

Critical Vendors to ensure that the value of the Debtors’ assets is maximized. The Critical

Vendors possess prepetition claims against the Debtors on account of services provided to the

Debtors prior to the Petition Date (collectively, the “Critical Vendor Claims”). Absent payment

of the Critical Vendor Claims, the Debtors believe the Critical Vendors will cease to perform the

essential services required by the Debtors post-petition. The failure of the Debtors to continue to

obtain the benefit of the critical services post-petition could have an immediate and adverse

impact upon the Debtors’ operations.

59. The Debtors’ failure to pay Critical Vendor Claims pursuant to the terms and

conditions set forth in the Critical Vendor Motion would result in immediate and irreparable

harm because the refusal of any one of the Critical Vendors to continue transacting with the

Debtors could significantly harm the Debtors’ businesses operations and, thus, clearly jeopardize


95427883.15 20

the value of the estates. Therefore, I believe that the relief requested in the Critical Vendor

Motion is in the best interests of the Debtors’ estates, their creditors and all other parties in

interest, and will enable the Debtors to continue to operate their businesses.

H. Motion of the Connaught Group, Ltd., et al., for the Entry of Interim and Final Orders (I) Authorizing (A) the Payment of Certain Prepetition Wages, Compensation, and Employee Benefits, and (B) Continued Payment of Wages, Compensation, and Employee Benefits in the Ordinary Course of Business; and (II) Authorizing and Directing Banks and Other Financial Institutions to Receive, Process, Honor, and Pay Checks Issued and Electronic Payment Requests Relating to the Foregoing (the “Wage Motion”)

60. The Debtors seek (i) the authority, but not direction, to (a) pay certain prepetition

claims relating to Unpaid Compensation, Employment and Withholding Taxes, Miscellaneous

Payroll Deductions, Vacation, Sick Leave, Paid Time Off, Reimbursable Business Expenses,

Health and Welfare Programs, Retirement Savings Plans, Miscellaneous Programs, Processor

Obligation, and to pay Independent Contractors (collectively, the “Employee Obligations”), and

(b) maintain, honor and continue post-petition payment of wages, compensation, and employee

benefits in the ordinary course of business; and (ii) authorization and direction of banks and

other financial institutions to receive, process, honor, and pay all checks issued and electronic

payment requests made related to the foregoing. This relief is critical to the Debtors’ businesses

and reorganization efforts.

61. I believe that any delay in paying the Employee Obligations will adversely impact

the Debtors’ relationship with their Employees and Independent Contractors and will irreparably

impair the Employees’ and Independent Contractors’ morale, dedication, confidence and

cooperation in the chapter 11 process. At this early stage in these chapter 11 cases, the Debtors

cannot risk the substantial damage to their businesses that would inevitably result from a decline

in the Employees’ and Independent Contractors’ morale and cooperation attributable to the

Debtors’ failure to pay the Employee Obligations. In addition, without the requested relief, the


95427883.15 21

Debtors’ viability as going concerns would be undermined by a potential threat of the Employees

and Independent Contractors seeking other employment.

62. Further, the Debtors are not seeking to make any payment to an individual

Employee or Independent Contractor on account of prepetition Employee Obligations in excess

of the $11,725 statutory cap on priority claims pursuant to Bankruptcy Code section 507(a)(4).

63. Therefore, the Debtors believe, and I agree, that the requested relief in the Wage

Motion is in the best interest of the Debtors, their estates and creditors, and I respectfully request

that the Wage Motion be approved.

I. Motion of The Connaught Group, Ltd., et al., for the Entry of Interim and Final Orders Authorizing the Payment of Prepetition Taxes and Fees (the “Taxes and Fees Motion”)

64. The Debtors seek the authority, but not direction, to pay Taxes and Fees incurred

in the ordinary course of business, without regard to whether such obligations accrued or arose

before or after the Petition Date; provided, however, that in the first 21 days of these chapter 11

cases, the Debtors will only pay Taxes and Fees that become due and payable prior to the Final

Hearing. The Debtors also request that the Court authorize and direct the Banks, when the

Debtors in their sole discretion so request, to receive, process, honor, and pay, to the extent of

funds on deposit, any checks drawn and electronic funds transfers requested on the Debtors’

Bank Accounts to pay the Taxes and Fees, and the costs and expenses incident thereto, whether

those transfers were presented prior to or after the Petition Date.

65. Payment of the Taxes and Fees is critical to the Debtors’ continued and

uninterrupted operations. The Debtors’ failure to pay prepetition Taxes and Fees may cause the

Authorities to take precipitous action, including, but not limited to, conducting audits, filing

liens, preventing the Debtors from doing business in certain jurisdictions, seeking to lift the

automatic stay, or pursuing payment of the Taxes and Fees from the Debtors’ officers and


95427883.15 22

directors, all of which would greatly disrupt the Debtors’ operations and ability to focus on their

reorganization efforts.

66. I believe that the relief requested in the Taxes and Fees Motion is in the best



Accordingly, on behalf of the Debtors, I respectfully submit that the Taxes and Fees Motion

should be approved.

J. Motion of the Connaught Group, Ltd., et al., for the Entry of Agreed Interim and Final Orders: (I) Authorizing Use of Cash Collateral; (II) Granting Adequate Protection; and (III) Granting Related Relief (the “Cash Collateral Motion”)

67. The Debtors seek entry of an order authorizing use of cash collateral on an interim

basis. A careful consideration of the Debtors’ reasonable and necessary near-term expenses

shows that the Debtors require the use in Cash Collateral as set forth in the Budget to continue to

operate their businesses for the first 30 days of Debtors’ chapter 11 cases, in addition to any costs

of restructuring professionals who will enable the Debtors to reorganize their businesses and

restructure their obligations. These estimates were obtained by the Debtors and their financial

advisors by analyzing the budget line-by-line in order to eliminate any and all costs above what

is necessary to maintain the Debtors’ assets. This conservative estimate, therefore, represents the

minimum operating budget required by the Debtors in order to preserve the Debtors’ businesses.

68. As further explained below, the Debtors require the use of Cash Collateral on an

interim basis to pay in the ordinary course of business certain employees, professionals,

consultants, and third-party vendors who, in the judgment of the Debtors’ management, provide

the essential services needed to operate, maintain, and insure the Debtors’ assets. Taken

together, the services provided by these people and other entities are integral to the preservation

of the Debtors’ business and enterprise value. The Debtors will also use Cash Collateral to pay


95427883.15 23

for certain office-related expenses, including rent, without which the Debtors cannot continue to

operate.

69. In the ordinary course of business, the Debtors’ employees and consultants

perform a variety of tasks that are critical to the sale of the Debtors’ goods and operation of the

Debtors’ businesses. Wardrobe Consultants in particular are essential to the sale of Debtors’

clothing, and continued and regular payments to the Wardrobe Consultants are key to the

Debtors’ ability to sell their inventory. As of the filing date, the Debtors are in the early stages

of the Spring selling season. As such, they need cash collateral to fund working capital needs in

the 30 days post-filing to conduct this season’s sales and secure the balance of inventory

requirements for Spring 2012 to fulfill orders, without which the Debtors cannot meet their sales

targets. The Debtors’ logistical and administrative personnel ensure Debtors’ goods are

produced to specifications, shipped to the United States, and eventually delivered to customers.

70. In addition to their employees, professionals, and consultants, the Debtors also

rely upon several essential vendors. As noted elsewhere in this declaration and in the Critical

Vendor Motion, the Debtors have created unique relationships with various clothing

manufacturers and freight companies, among others. The failure of the Debtors to obtain the

ongoing support and cooperation of these Critical Vendors will cause irreparable harm to the

Debtors’ continued operations and cause a loss of value of the their assets.

71. In short, the ordinary course expenses outlined here with respect to certain

employees, professionals, consultants, and critical vendors are essential to the ongoing

operations of the Debtors’ businesses and the protection of the Debtors’ assets for the Debtors

and all of their stakeholders. In that regard, the Debtors’ proposed use in Cash Collateral to meet

those necessary expenses over the next 30 days, represents a reasonable, threshold estimate of


95427883.15 24

the Debtors’ needs during these periods of time. Without the use of Cash Collateral, the

Debtors’ operations will effectively cease.

72. I believe that the relief requested in the Cash Collateral Motion is in the best



Accordingly, on behalf of the Debtors, I respectfully submit that the Cash Collateral Motion

should be approved.

IV. RELIEF SOUGHT IN CERTAIN ADDITIONAL PLEADINGS

73. Contemporaneously herewith, the Debtors have filed several additional pleadings

in these chapter 11 cases seeking orders granting various forms of relief. I believe that the relief

requested in these additional pleadings is in the best interests of the Debtors’ estates, their

creditors, and all other parties in interest. A description of the relief requested and the facts

supporting each of the additional pleadings is set forth below.6

A. First Omnibus Motion of The Connaught Group, Ltd., et al., for Approval of Rejection of Certain Unexpired Leases of Non-Residential Real Property as of Their Respective Vacated Dates (the “Lease Rejection Motion”)

74. The Debtors seek entry of an order approving the Debtors’ rejection of certain

unexpired leases of nonresidential real property effective as of their respective vacated dates.

75. Prior to the Petition Date, the Debtors reviewed and analyzed their lease portfolio

and their operations at each of the leased locations. In connection therewith, the Debtors

determined, in their business judgment, that it was no longer in their best interest to continue

operations at 16 E 52nd Street, New York, New York or to continue leasing three Canadian

stores occupied by a non-debtor subsidiary, The Connaught Group ULC. Accordingly, the

6 Capitalized terms used but not defined in this section have the meanings ascribed them in the respective

pleadings.


95427883.15 25

Debtors are seeking to reject those leases related to those premises described in the Lease

Rejection Motion as of their respective vacated dates also described in the Lease Rejection

Motion (the “Vacated Dates”). Because the Debtors and their non-debtor subsidiary will no

longer occupy those leased premises, continued compliance with the terms of the leases related

to those premises would be burdensome and would provide no corresponding benefit to the

Debtors or the stakeholders in these chapter 11 cases. I believe that the relief requested in the

Lease Rejection Motion is in the best interests of the Debtors and their estates. Accordingly, on

behalf of the Debtors, I respectfully submit that the Lease Rejection Motion should be approved.

B. Motion of The Connaught Group, Ltd., et al., for the Entry of an Order Authorizing the Retention and Compensation of Certain Professionals Utilized in the Ordinary course of Business (the “Ordinary Course Professional Motion”)

76. The Debtors seek entry of an order authorizing the Debtors to retain and

compensate certain professionals utilized in the ordinary course of business.

77. The Debtors customarily retain the services of various attorneys, accountants,

consultants, and other professionals in the ordinary course of their business operations (each an

“Ordinary Course Professional” or “OCP” and, collectively, the “OCPs”). The OCPs provide

services to the Debtors in a variety of discrete matters unrelated to these chapter 11 cases,

including, but not limited to, general corporate, accounting, auditing, and litigation matters.

78. The OCPs have a great deal of background knowledge, expertise, and familiarity

with the Debtors and their business operations. In light of the costs associated with the

preparation of employment applications for professionals who will receive relatively modest

fees, the Debtors submit that it would be impractical and inefficient for the Debtors and their

legal advisors to prepare and submit individual applications and proposed retention orders for

each OCP. I believe that the relief requested in the Ordinary Course Professional Motion is in


95427883.15 26

the best interests of the Debtors and their estates. Accordingly, on behalf of the Debtors, I

respectfully submit that the Ordinary Course Professional Motion should be approved.

V. INFORMATION REQUIRED BY LOCAL BANKRUPTCY RULE 1007-2

79. Local Bankruptcy Rule 1007-2 requires certain information related to the Debtors,

which I have provided in the exhibits attached hereto as Exhibit B through Exhibit M.

Specifically, these exhibits contain the following information with respect to the Debtors (on a

consolidated basis), unless otherwise noted:7

• Pursuant to Local Bankruptcy Rule 1007-2(a)(3), Exhibit B hereto provides the names and addresses of the members of, and attorneys for, any committee organized prior to the order for relief in these chapter 11 cases, and a brief description of the circumstances surrounding the formation of the committee and the date of the formation.

• Pursuant to Local Bankruptcy Rule 1007-2(a)(4), Exhibit C hereto provides the following information with respect to each of the holders of the Debtors’ thirty (30) largest unsecured claims, excluding claims of insiders: the creditor’s name; the address (including the number, street, apartment, or suite number, and zip code, if not included in the post office address); the telephone number; the name(s) of person(s) familiar with the Debtors’ account; the nature and approximate amount of the claim; and an indication of whether the claim is contingent, unliquidated, disputed, or partially secured.

• Pursuant to Local Bankruptcy Rule 1007-2(a)(5), Exhibit D hereto provides the following information with respect to each of the holders of the five largest secured claims against the Debtors: the creditor’s name; address (including the number, street, apartment, or suite number, and zip code, if not included in the post office address); the amount of the claim; a brief description of the claim; an estimate of the value of the collateral securing the claim; and an indication of whether the claim or lien is disputed at this time.

• Pursuant to Local Bankruptcy Rule 1007-2(a)(6), Exhibit E hereto provides a summary of the Debtors’ assets and liabilities.

• Pursuant to Local Bankruptcy Rule 1007-2(a)(8), Exhibit F hereto provides the following information with respect to any property in possession or custody of any custodian, public officer, mortgagee, pledgee, assignee of rents, or secured creditors, or agent for

7 The information contained in the Exhibits attached to this Declaration shall not constitute an admission of

liability by, nor is it binding on, the Debtors. The Debtors reserve all rights to assert that any debt or claim listed herein is a disputed claim or debt, and to challenge the priority, nature, amount, or status of any such claim or debt. The descriptions of the collateral securing the underlying obligations are intended only as brief summaries. In the event of any inconsistencies between the summaries set forth and the respective corporate and legal documents relating to such obligations, the descriptions in the corporate and legal documents shall control.


such entity: the name; address; and telephone number of such entity and the court inwhich any proceeding relating thereto is pending.

• Pursuant to Local Bankruptcy Rule 1007-2(a)(9), Exhibit G hereto provides a list of theproperty comprising the premises owned, leased or held under other arrangement fromwhich the Debtors operate their businesses.

• Pursuant to Local Bankruptcy Rule 1007-2(a)(l 0), Exhibit H hereto sets forth thelocation of the Debtors' substantial assets, the location oftheir books and records, and thenature, location, and value of any assets held by the Debtors outside the territorial limitsof the United States.

• Pursuant to Local Bankruptcy Rule 1007-2(a)(7), Exhibit I attached hereto providesinformation on the Debtors' outstanding publicly held securities.

• Pursuant to Local Bankruptcy Rule 1007-2(a)(lI), Exhibit J hereto provides a list of thenature and present status of each action or proceeding, pending or threatened, against theDebtors or their property where a judgment or seizure oftheir property may be imminent.

• Pursuant to Local Bankruptcy Rule 1007-2(a)(12), Exhibit K hereto sets forth a list ofthenames of the individuals who comprise the Debtors' existing senior management, theirtenure with the Debtors, and a brief summary of their relevant responsibilities andexpenence.

• Pursuant to Local Bankruptcy Rule 1007-2(b)(I)-(2)(A), Exhibit L hereto provides theestimated amount ofpayroll to the Debtors' employees (not including officers, directors,and equity holders) and the estimated amounts to be paid to officers, equity holders,directors, and financial and business consultants retained by the Debtors, for the 30-dayperiod following the Petition Date.

• Pursuant to Local Bankruptcy Rule 1007-2(b)(3), Exhibit M hereto provides a schedule,for the 30-day period following the Petition Date, of estimated cash receipts anddisbursements, net cash gain or loss, obligations and receivables expected to accrue butremain unpaid, other than professional fees, for the 30-day period following the filing ofthese chapter 11 cases, and any other information relevant to an understanding of theforegoing.

Pursuant to 28 U.S.C. § 1746, I declare under penalty ofperjury that the foregoing is trueand correct.

Dated: February 8,2012

95427883.15

Respectfully submitted,

~Ma ry SatinChief Restructuring OfficerThe Connaught Group, Ltd., et al.

27


95427883.15

EXHIBIT A

DEBTORS’ CORPORATE STRUCTURE CHART

1

1 Limited Editions for Her of Puerto Rico, Inc. was a non-debtor affiliate prior to its dissolution in January 2012.

William D. Rondina

The Connaught Group, Ltd.

Limited Editions for Her of Nevada LLC

Limited Editions for Her of Branson LLC

Limited Editions for Her LLC

WDR Retail Corp.

The Connaught Group ULC

100%

100% 100% 100% 100%

100%

Non-Debtor1

Debtor

12-10512-smb Doc 12-1 Filed 02/09/12 Entered 02/09/12 14:20:27 Exhibit A (Debtors Corporate Structure Chart) Pg 1 of 1

95427883.15

EXHIBIT B

INFORMAL COMMITTEES ORGANIZED PRIOR TO THE ORDER FOR RELIEF

There were no informal committees organized prior to the order for relief in the Debtors’ chapter 11 cases.

12-10512-smb Doc 12-2 Filed 02/09/12 Entered 02/09/12 14:20:27 Exhibit B (Informal Committees Organized Prior to the Order for Relief) Pg 1 of 1

95427883.15

EXHIBIT C

CONSOLIDATED LIST OF THE HOLDERS OF THE DEBTORS’ 30 LARGEST UNSECURED CLAIMS

Pursuant to Local Bankruptcy Rule 1007-2(a)(4), the following is a consolidated list of the Debtors’ creditors holding the thirty (30) largest unsecured claims (the “Consolidated Creditor List”) based on the Debtors’ unaudited books and records as of the Petition Date. The Consolidated Creditor List has been prepared in accordance with Bankruptcy Rule 1007(d) and does not include (i) persons who come within the definition of “insider” set forth in section 101(31) of the Bankruptcy Code or (ii) secured creditors, unless the value of the collateral is such that the unsecured deficiency places the creditor among the holders of the thirty (30) largest unsecured claims.

The information contained herein shall not constitute an admission of liability by, nor is it binding on, the Debtors. The Debtors reserve all rights to assert that any debt or claim included herein is a disputed claim or debt, and to challenge the priority, nature, amount, or status of any such claim or debt. In the event of any inconsistencies between the summaries set forth below and the respective corporate and legal documents relating to such obligations, the descriptions in the corporate and legal documents shall control.

Name of Creditor, Complete Mailing Address, Fax

Number and Employee, Agent, or Department of Creditor

Familiar with Claim

Nature of Claim

(trade debt, bank loan, government

contracts, etc.)

Indicate if Claim is

Contingent, Unliquidated, Disputed or Subject to

Setoff

Amount of Claim

(if secured, also state value of

security)

1.

ROYAL SPIRIT LTD. 7/F, Dragon Industrial Bldg. 93 King Lam Street Lai Chi Kok, Kowloon, Hong Kong Fax: +852 2371 0107 Attn: Grace Lee Attn: Louisa Chan Attn: Jacqueline Tsui

Trade Debt 3,967,001

2.

U.S. Customs C/O Genghis Khan Freight Service Inc. 161-15 Rockaway Blvd STE 306 Jamaica, NY 11434 Fax: 718 749-0127 Attn: Alan Siegal, Customs Broker

Customs Duty 978,524

12-10512-smb Doc 12-3 Filed 02/09/12 Entered 02/09/12 14:20:27 Exhibit C (Consolidated List of the Holders of the Debtors 30 Largest Unse Pg 1 of 6

95427883.15



Familiar with Claim

Nature of Claim


contracts, etc.)



Setoff

Amount of Claim


security)

3.

Fashion Trend Development Ltd. Flat/Rm 2701, 27/F New Treasure Centre 10 Ng Fong Street San Po Kong, Kowloon, Hong KongFax: 852-2267-6800 Attn: William

Trade Debt 569,332

4.

Body Fashion Company, Ltd. Unit A, 20/F Chiap King Ind. Building, 114 King Fuk Street San Po Kong, Kowloon, Hong KongFax: 852-3188-0136 Attn: Raymond

Trade Debt 454,791

5.

Le Gale Fashion Garment Factory Flat 4,11/Fl, Sunwise Ind Bldg 16-26 Wang Wo Tsai Street Tsuen Wan, N.T. Hong Kong Fax: 852-3529-2037 Attn: Amy

Trade Debt 437,861

6.

Trigon 52 LLC P.O. Box 3028 Hicksville, NY 11802-3028 Fax: 212 888-5470 Attn: Joanne Agoglia

Real Property Lease 418,656

7.

West 55th Street Building LLC C/O Winter Management P.O. Box 532 Laurel, NY 11948-0532 Fax: 212-616-8985 Attn: Doug Layton


8.

Fedex P.O. Box 371461 Pittsburgh, PA 15250 Fax: 800-548-3020 Attn: Thomas Wares

Trade Debt 315,585


95427883.15



Familiar with Claim

Nature of Claim


contracts, etc.)



Setoff

Amount of Claim


security)

9.

Modell’s NY, Inc 498 Seventh Ave, 20th Fl. Attn: Property Management Dept. New York, NY 10018 Fax: 917-351-3468 Attn: Jay Perry


10.

Blue Star Silk Corp. 108 West 39th Street New York, NY 10018 Fax: 212-302-8124 Attn: David Stern

Trade Debt 279,628

11.

United Parcel Service P.O. Box 650580 Dallas, TX 75265 Fax: 800-811-1648 Attn: Humberto Hernandez

Trade Debt 274,361

12.

B.C America 131 West 35th St., 10th Fl. New York, NY 10001 Fax: 212-279-3523 Attn: Carl

Trade Debt 237,222

13.

Eaglewings Freight Services, Inc. 149-15 177th Street Suite 268 Jamaica, NY 11434 Fax: 718-656-8168 Attn: Barbara/Amie Chen

Trade Debt 229,374

14.

Prima USA Ltd. 242 West 38th Street 11th Fl. New York, NY 10018 Fax: 212-398-4838 Attn: Helen/Matthew

Trade Debt 207,781

15.

New Star Tex Co., Ltd. 1384 Broadway #1209 New York, NY 10018 Fax: 212-398-5705 Attn: Mr. Kim

Trade Debt 201,875


95427883.15



Familiar with Claim

Nature of Claim


contracts, etc.)



Setoff

Amount of Claim


security)

16.

Willis of New Jersey Inc. P.O. Box 415165 Boston, MA 02241 Fax: 973 410-4600 Attn: Drew Karpinski

Insurance 170,866

17.

Sandy Duftler Designs 775 Brooklyn Avenue Suite 105 Baldwin, NY 11510 Fax: 516-379-4156 Attn: Erwin

Trade Debt 167,011

18.

Angel Textiles, Inc. P.O. Box 638 New Platz, NY 12561-0638 Fax: 212-313-9447 Attn: Sarah Woodruff

Trade Debt 163,122

19.

Sino American Knitwear (HK) Ltd. Unit A.10/F, Dragon Industrial Building 93-95 King Lam Street Fax: 852-2418-6267 Attn: Cy Lee/Wendy

Trade Debt 143,018

20.

Rathbone Studio Ltd. 330 W 38th St. New York, NY 10018 Fax: N/A Attn: Travis Rathbone

Trade Debt 140,764

21.

Crespi C/O Da Solo Ltd. 488 Seventh Ave. Suite 11F New York, NY 10018 Fax: 212-695-5878 Attn: Dina Greaker

Trade Debt 122,158

22.

Bonami Trading Co. RM505, 3 Dong Ace Tech City 54-66 Mullae-Dong 3GA Seoul, Korea, 150-992 Fax: 822-2695-6729 Attn: Chan/Sukee

Trade Debt 107,898


95427883.15



Familiar with Claim

Nature of Claim


contracts, etc.)



Setoff

Amount of Claim


security)

23.

Yuen Hing Fashion Company Block A/4/F,Wong King Ind Bldg 2 Tai Yau Street San Po Kong, Kowloon, Hong KongFax: 852-2323-4281 Attn: Wallace

Trade Debt 101,505

24.

Textil Dobert S.A. Bernat Metge, 142 08205 Sabadell, Spain Fax: (34) 93 711 3999 Attn: Joan Bellart

Trade Debt 93,452

25.

Lanificio Mario Bellucci c/o LM Tessuti 485 Fashion Avenue New York, NY 10018 Fax: 212-354-0520 Attn: Michael Baldini

Trade Debt 92,262

26.

Profit Good Trading Limited 2/Fl. Room 18A Block C Hong Kong Ind. Centre 489-491 Castle Peak Road Lai Chi Kok, Kowloon, Hong Kong

Trade Debt 86,582

27.

Roma Industries LLC P.O. Box 1130 Largo, FL 33779 Fax: 212-695-2527 Attn: Paul Horowitz

Trade Debt 86,249

28.

Preview Textile Group 225 West 37th Street 11th Floor New York, NY 10018 Fax: 212-764-1396 Attn: Elliot Glantz

Trade Debt 82,929


95427883.15



Familiar with Claim

Nature of Claim


contracts, etc.)



Setoff

Amount of Claim


security)

29.

B Productions 333 West 52nd Street #805 New York, NY 10019 Fax: 212-397-0098

Trade Debt 81,295

30.

Omni Berkshire Place 21 East 52nd St. Attn: Financial Services New York, NY 10022 Fax: 212-754-5018 Attn: Joseph Villano

Trade Debt 80,336


95427883.15

EXHIBIT D

CONSOLIDATED LIST OF THE HOLDERS OF THE DEBTORS’ FIVE LARGEST SECURED CLAIMS

Pursuant to Local Bankruptcy Rule 1007-2(a)(5), the following is a list of creditors holding the five largest secured claims against the Debtors, on a consolidated basis, as of the Petition Date.

The information contained herein shall not constitute an admission of liability by, nor is it binding on, the Debtors. The Debtors reserve all rights to assert that any debt or claim included herein is a disputed claim or debt, and to challenge the priority, nature, amount, or status of any such claim or debt. The descriptions of the collateral securing the underlying obligations are intended only as brief summaries. In the event of any inconsistencies between the summaries set forth below and the respective corporate and legal documents relating to such obligations, the descriptions in the corporate and legal documents shall control.

Creditor Name and Address Amount of Claim Collateral Description

J.P. Morgan Chase, N.A. $8,393,057 All Assets

Citibank, N.A. $4,000,000 All Assets

12-10512-smb Doc 12-4 Filed 02/09/12 Entered 02/09/12 14:20:27 Exhibit D (Consolidated List of the Holders of the Debtors Five Largest Se Pg 1 of 1

95427883.15

EXHIBIT E

SUMMARY OF THE DEBTORS’ ASSETS AND LIABILITIES

Pursuant to Local Bankruptcy Rule 1007-2(a)(6), the following are estimates of the Debtors’ total assets and liabilities on a consolidated basis. The following financial data is the latest available information and reflects the Debtors’ financial condition, as consolidated with its affiliated Debtors and non-Debtors as of the Petition Date.

The information contained herein shall not constitute an admission of liability by, nor is it binding on, the Debtors. The Debtors reserve all rights to assert that any debt or claim included herein is a disputed claim or debt, and to challenge the priority, nature, amount, or status of any such claim or debt.

Assets and Liabilities Amount

Total Assets $38.464,940 million

Total Liabilities $61.3 million (including $31,406,356 in Shareholder Loans)

12-10512-smb Doc 12-5 Filed 02/09/12 Entered 02/09/12 14:20:27 Exhibit E (Summary of the Debtors Assets and Liabilities) Pg 1 of 1

95427883.15

EXHIBIT F

SUMMARY OF DEBTORS’ PROPERTY HELD BY THIRD PARTIES

Pursuant to Local Rule 1007-2(a)(8), the following lists the Debtors’ property, as of the Petition Date, that is in the possession or custody of any custodian, public officer, mortgagee, pledgee, assignee of rents, secured creditor, or agent for any such entity.

Name, Address, & Telephone Number

of Person or Entity in Possession

of the Property

Location of CourtProceeding

(if applicable) Summary of Property

Trigon 52 LLC P.O. Box 3028 Hicksville, NY 11802-3028 Attn: Joanne Agoglia, Controller

N/A $331,364.30 – Security deposit for leased premises

West 55th Street Building LLC C/O Winter Management P.O. Box 532 Laurel, NY 11948-0532 Attn: Doug Layton

N/A $360,528.00 – Security deposit for leased premises

12-10512-smb Doc 12-6 Filed 02/09/12 Entered 02/09/12 14:20:27 Exhibit F (Summary of Debtors Property Held by Third Parties) Pg 1 of 1

95427883.15

EXHIBIT G

SUMMARY OF DEBTORS’ PROPERTY FROM WHICH THE DEBTORS OPERATE THEIR BUSINESSES

Pursuant to Local Bankruptcy Rule 1007-2(a)(9), the following lists the location of the premises owned, leased, or held under other arrangement from which the Debtors operate their businesses as of the Petition Date.

Debtor Leased Premises

The Connaught Group, Ltd. 16 E 52nd Street New York, NY 10022

The Connaught Group, Ltd. 423 W 55th St. New York, NY 10019

The Connaught Group, Ltd. 34-24 Vernon Blvd Long Island City, NY 11106

The Connaught Group, Ltd. 283 Greenwich Ave Second Floor Greenwich, CT 06830

The Connaught Group, Ltd. 7752 Woodmont Ave Bethesda, MD 20814

The Connaught Group, Ltd. 2400 Augusta Drive Suite #295 Houston, TX 77057

The Connaught Group, Ltd. Two Hillcrest Green 12720 Hillcrest Road Suite 220 Dallas, TX 75230

The Connaught Group, Ltd. 1 Church St. Suite 40 & 41 Flemington, NJ 08822

The Connaught Group, Ltd. 317 7th Ave Unit 253 Calgary, AB, Canada T2P2Y9

The Connaught Group, Ltd. 5111 Northland Drive NW Unit 860 Calgary, AB, Canada T2L2J8

The Connaught Group, Ltd. 1984, 8882 – 170th St., #B108 Edmonton, AB, Canada T5T3J7

Limited Editions for Her of Nevada LLC 32100 Las Vegas Blvd. South Suite 138 Primm, NV 89019

Limited Editions for Her of Nevada LLC 605 S. Grand Central Parkway Suite 1220 Las Vegas, NV 89106

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Debtor Leased Premises

Limited Editions for Her of Nevada LLC 7400 Las Vegas Blvd. South Suite 40 Las Vegas, NV 89123

Limited Editions for Her of Nevada LLC 4300 Meadows Lane, Suite #1190 Las Vegas, NV 89107

Limited Editions for Her of Nevada LLC 750 S. Rampart Ave. Suite 8 Las Vegas, NV 89145

Limited Editions for Her of Nevada LLC 3680 S. Maryland Pkwy. Suite 210 Las Vegas, NV 89109

Limited Editions for Her of Nevada LLC 6671 Las Vegas Boulevard South Suite A-133 Las Vegas, NV 89119

Limited Editions for Her of Branson LLC 1207 Branson Landing Blvd. Branson, MO 65616

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EXHIBIT H

LOCATION OF THE DEBTORS’ SUBSTANTIAL ASSETS, BOOKS AND RECORDS, AND NATURE AND LOCATION OF DEBTORS’ ASSETS OUTSIDE THE UNITED

STATES

Pursuant to Local Bankruptcy Rule 1007-2(a)(10), the following provides the location of the Debtors’ substantial assets, books and records, and the nature, location, and value of any assets held by the Debtors outside the territorial limits of the United States as of the Petition Date.

Debtors’ Assets Location

Debtors’ Substantial Assets See Exhibit G – Leased Property1

Debtors’ Books and Records

423 W 55th St. New York, NY 10019

34-24 Vernon Blvd

Long Island City, NY 11106

Debtors’ Assets Outside the United States

The following entities are in possession of Debtors’ fabrics outside the United States as of Dec 31, 2011.

Entities in bold are Debtors holding one of the 30 largest claims. See Exhibit C.

Royal Spirit Ltd. $1,794,397

Fashion Trend Development Ltd. $1,262,547

Body Fashion Company $995,616

Le Gale Fashion Garment Factory $592,799

Goldtrila Limited Room 806, 8/F, Block A, Wah Tat Industrial Center, 8-10 Wah Sing Street, Kwai Chung, Hong Kong

$445,970

Yuen Hing Fashion Company $404,096

Profit Good Trading Limited $162,129

1 On the Petition Date, all of Debtors’ substantial assets in the United States are located at their leased premises

with the exception of 169 sample sets from the Debtors’ spring lines valued at $3.8 million and in the possession of Debtors’ Wardrobe Consultants.

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Debtors’ Assets Outside the United States (continued)

Newtimes Limited 12th Fl. Formosa Plastic Bldg No. 201-2, Tun Hua North Rd. Taipei, Taiwan

$118,000

Splendid Garment Room 601, Kai Min Lau Cho Yiu Estate, NT, Hong Kong

$116,518

Sunshine Trading Company 12/F No. 345-1 Sec2 Ho Ping E. Road Taipei, 106 Taiwan

$17,400

Bagatelle International Inc. 8300, Cote De Liesse, Suite 204 St. Laurent, QC, Canada H4T 1G7

$4,000

Silvereed (Hong Kong) Limited 9/F Centennial Bldg. 924-926 Cheung Sha Wan Road Kowloon, Hong Kong

$4,000

Golden Sword Factory 4/F No. 57 Xin Po Tang Lu, Heng Gang Shen, Long Gang Qu, Shenzhen, China

$3,216

Chatham Industries Ltd. Flat A, South China Cold Storage Bldg Hong Kong

$2,600

Great Wind International Ltd. 3/F., Novel Industrial Bldg. 850-870 Lai Chi Kok Road, Cheung Sha Wan, Kowloon, Hong Kong

$1,000

Sino American Knitwear (HK) Ltd. $1,000

Camelot Apparel Group (Asia) Ltd. 21/Fl., Ho Lee Commercial Bldg 38-44 D’Aguilar St. Hong Kong

$215

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EXHIBIT I

SUMMARY OF THE PUBLICLY HELD SECURITIES OF THE DEBTORS

Pursuant to Local Bankruptcy Rule 1007-2(a)(7), the following lists the number and classes of shares of stock, debentures, or other securities of the Debtors that are publicly held, and the number of holders thereof as of the Petition Date.

There are no shares of stock, debentures, or other securities of the Debtors that are publicly held. The Debtors’ directors and officers do not own any shares of publicly-held securities of the Debtors.

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EXHIBIT J

SUMMARY OF LEGAL ACTIONS AGAINST THE DEBTORS

Pursuant to Local Bankruptcy Rule 1007-2(a)(11), the following lists material actions and proceedings pending or threatened against the Debtors or their properties where a judgment against the Debtors or a seizure of their property may be imminent as of the Petition Date. This list reflects actions or proceedings considered material by the Debtors and, if necessary, will be supplemented in the corresponding schedules to be filed by the Debtors in these chapter 11 cases.

Debtor Entity Potential Counterparty Nature of the Action Status

The Connaught Group, Ltd. Caroline Desjardins

Alleged violation of the Family Medical Leave

Act and age discrimination under New York State law.

Pending in Southern District of New York

(No. 11-8965)

The Connaught Group, Ltd. Linda Liakopoulos

Personal injury claim arising out of traffic

accident involving one of the Company’s drivers.

Pending in Supreme Court, Kings County,

New York (No. 12819/10)

The Connaught Group, Ltd.

Starnet Insurance Company as subrogee of

Gumuchian Fils, Ltd. Unknown

Filed in Civil Court of the City of New York, but defendant not yet

served (No. 321/12)

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EXHIBIT K

DEBTORS’ SENIOR MANAGEMENT

Pursuant to Local Bankruptcy Rule 1007-2(a)(12), the following provides the names of the individuals who constitute the Debtors’ existing senior management, their tenure with the Debtors, and a brief summary of their responsibilities and relevant experience as of the Petition Date.

Name / Position Relevant Experience / Responsibility Tenure

William D. Rondina Chief Executive Officer

Mr. Rondina operated his own design studio from 1973 until 1981, when he founded the Carlisle Collection. As the Chairman and Chief Executive Officer of The Connaught Group, Ltd., Mr. Rondina oversees both the Carlisle and Per Se Collections, as well as Etcetera, an affiliated brand and company.

31 years

Caroline Bowen President

Ms. Bowen began her career at The Connaught Group, Ltd. in 1982 as a Wardrobe Consultant. Ms. Bowen’s management career at The Connaught Group, Ltd. includes seven years as a district manager, two years as director of Carlisle’s Master Consultant Program and five years as the president of Etcetera, an affiliated company. Ms. Bowen oversees and manages day-to-day operations of The Connaught Group, Ltd.

30 years

Eileen Balaban-Eisenberg Executive Vice-President

Ms. Balaban-Eisenberg joined The Connaught Group, Ltd. in 1989 as Production Manager for the Carlisle Collection. Ms. Balaban-Eisenberg became Vice President of Production in April 2002 and advanced to her current position as Executive Vice President in 2004. As Executive Vice President, Ms. Balaban-Eisenberg is responsible for worldwide production and importation of all of the collections, including Carlisle, Per Se, and Etcetera.

23 years

Larry Klein Chief Financial Officer

Mr. Klein has been The Connaught Group’s chief financial officer since joining the company in 1997. He oversees corporate finance, accounting, and reporting. Before joining The Connaught Group, Mr. Klein served as CFO and COO for Jays Industries, having begun his career there as controller.

15 years

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EXHIBIT L

DEBTORS’ PAYROLL FOR THE THIRTY (30) DAY PERIOD FOLLOWING THE FILING OF THE

DEBTORS’ CHAPTER 11 PETITIONS

Pursuant to Local Rules 1007-2(b)(1)-(2)(A) and (C), the following provides, for the 30-day period following the Petition Date, the estimated amount of weekly payroll to the Debtors’ employees (exclusive of officers, directors, and stockholders), the estimated amount paid and proposed to be paid to officers, stockholders, and directors, and the amount paid or proposed to be paid to financial and business consultants retained by Debtors.

Payments Estimated Payment Amount

Estimated Weekly Payroll to Employees (Not Including Officers, Directors, and Stockholders)

for the 30-Day Period Following the Petition Date1$230,000

Estimated Total Payments to Officers, Stockholders, and Directors for the 30-Day Period

Following the Petition Date $38,000

Estimated Total Payments to Financial and Business Consultants for the 30-Day Period

Following the Petition Date $270,000

1 This amount is the estimated weekly gross pay to employees for the period including funds to be remitted as

employee payroll taxes and deductions for retirement, health insurance, and other miscellaneous programs.

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EXHIBIT M

DEBTORS’ ESTIMATED CASH RECEIPTS AND DISBURSEMENTS FOR THE THIRTY (30) DAY PERIOD FOLLOWING THE FILING OF THE CHAPTER 11

PETITIONS

Pursuant to Local Rule 1007-2(b)(3), the following provides, for the 30-day period following the Petition Date, the Debtors’ estimated cash receipts and disbursements, net cash gain or loss, and obligations and receivables expected to accrue that remain unpaid, other than professional fees.

Type Amount

Cash Receipts $6,253,000

Cash Disbursements $5,889,000

Net Cash Gain/Loss $364,000

Unpaid Obligations (excluding professional fees) $1,225,000

Unpaid Receivables (excluding professional fees) $5,701,000

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FULBRIGHT & JAWORSKI L.L.P. 666 Fifth Avenue Paul Jacobs, Esq.

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Transcript of FULBRIGHT & JAWORSKI L.L.P. 666 Fifth Avenue Paul Jacobs, Esq.