EFTA01108728.pdf

D.PORTHAULT - Summary of key issues 1. Critical, winning acquisition criteria Based on various communications with both Mandataire Judiciaire and Administrator, key decision factors are: 100% employment guarantee at the Cambrai production site (HR costs: approx. EUR 120 k incl. social charges) - Repayment of all social and state charges (EUR 1.1m) - Long term (3-4 years), valid BP and strategy - Investor's "soft- factors and credentials ("What does he bring to the business?") 2. Debt break-down (in EUR '000's) 1. The Montaigne lease debt must to be settled if one wishes to Social charges and taxes 1,100 preserve the right to sell the key fee. A firm EUR 3.7m, EUR 1.8m annual lease offer is in the hands of realtor. Agreement General Suppliers and prof. 514 with landlord to sell key is still pending (meeting in next few services (uncontested) days), however he previously indicated that he would, based on Montaigne Lease 900 incremental revaluation of lease of 40%, which potential buyers Cambrai Lease (CM CIC) 586 2 have also agreed to. Also refer to protective 2.5 clause of lease TOTAL 3,100 agreement. Question: Does the bank guarantee of EUR 700k also needs to be rebuilt to avoid lease "resiliation"? 2. Include capital repayment of EUR 261k, which was suspended during the interest only "Redressement" period (see legal issues below) 3. Acquisition price — minimum capital requirements scenario 1 — "secure Montaigne lease for later sale scenario 2 — "abandon Montaigne" (in EUR 000's) of key fee" (in EUR 000v Montaigne debt 900 I Social charges and taxes 1,100 Bank guarantee Montaigne (optional)2 700 I Non-contested suppliers debt 520 Social charges and taxes 1,100 Cambrai lease' 586 Non-contested suppliers debt 520 TOTAL 2,200 Cambrai lease' 586 TOTAL 3,800 1. of which 261 on escrow. over remainder of lease period 2. Will depend on agreement with landlord as to whether necessary 4. BP capital requirements, 12 months (base case) Key assumptions — Revenues (EUR 4.66m in 2011) - Retail figures are only slightly lower than 2011 levels (- 10%, EUR — 270k), as current trading and very loyal client base is relatively unaffected Hospitality sales continue to suffer and stay low during the period and at post,Redressment, 2011 levels (EUR 900k vs EUR 2m in 2010-2009). Aggressive sale efforts and re acquistion of French market (see "commercial agent" below) bear fruits after one year only B2B sales increase to EUR 650k from EUR 180k, thanks to large order book and active client acquisitions initiatives (yachts, jets, interior designers) Wholesale US are maintained at normalized levels, also thanks to increased prices going forward Harrods has now fully paid for itself and can be expected to generate a profit of annual EUR 350k Incremental Sales from planned transactional website (EUR 120k) Conclusion: In spite of goodwill destruction, thanks to i.) new revenue streams and ii.) renewed confidence in DP iii.) Harrods being fully amortized and iv.) "reinvigorated" sales team and efforts, overall revenue levels are maintained (EUR 4.66m), conservatively, at "annul horribilis" 2011 levels Key assumptions — Costs (EUR 7.1m in 2011) - EUR 550k to EUR 650k of annual cost savings to be expected from relocation of Paris retail outlet (based on numerous site visits) Extraordinary cost of EUR 550k are non recurring in 2012 (Post redressement costs, litigations, investment in Harrods) Marginal net HR costs savings due to lay-offs of 5 non performers of EUR 220k EFTA01108728 Conclusions: During the period, based on above assumptions, basic cash flow liquidity needs are estimated at EUR 900k to EUR 1,100k Key assumptions — Investments (First phase,12 months) - Paris retail outlet: EUR 0.8 to 1 m key fee / bank guarantee EUR 300 to 400k / refit EUR 200 to 300k - New wholly owned concessions: EUR 350k to EUR 450k per location (ex Tsum, Middle East) - Buy out of commercial agent, hospitality France: EUR 150 to 200k - PR and marketing: EUR 250k - Transactional website (incl. photography, rights, inventory): EUR 150K - Adequate MIS and IT: EUR 35k - Allowance new product dev. (ex. New lines, yachts etc): EUR 30k Conclusions: approx. EUR 2.6 to 3.4m are required for the strategic implementation of a 12 month BP 5. Legal issues - Secure agreement with Cambrai lessor CM CIC (TBD with legal rep.) - Potential Prud'homme liability: Jean-Francois Muller, hearing in July 2012 (low risk however, worst case at EUR 70k to EUR 100k) 6. Open issues - Obtain clarity on country specific DP rights and trademarks (I obtained comfort re DP trademarks from Administrator; also see expert opinion in dataroom) - Argentan production site (printing only, 3 people, leased and very old infrastructure) - SNDP Inc (USA) 7. To discuss Montaigne EUR 3.7 firm offer and pending actions with landlord Potential bid from Wertheimer family (my sources have indicated Qatari have withdrawn from bid) - Other EFTA01108729