HI Flier of Bankruptsy? Two sides.2009-11-10 07:54 ET - News Release
Mr. Lawrence Rosen of RoseArt Industries reports
ROSENS ANNOUNCE AND ADD COMMENT ON SETTLEMENT WITH MEGA BRANDS
Lawrence and Jeffrey Rosen, former owners of RoseArt Industries, have settled their litigation against Mega Brands Inc. in connection with their sale of RoseArt to Mega Brands over four years ago. The settlement allows the Rosens to recover approximately $20-million in taxes which they prepaid in expectation of Mega Brands' ability to satisfy its $50-million earn-out payment obligation which had been achieved by the Rosens as stipulated in Mega Brands' fourth-quarter 2005 report.
The Rosens said that faced with the worsening of Mega Brands' already bleak financial condition, Moody's downgrade of the company to a junk rating and the increasing prospects of Mega Brands filing for bankruptcy, they agreed to drop their earn-out claim. The collection of such a large judgment against Mega Brands would be impossible and would not justify incurring further legal costs in the litigation, they said. In return Mega Brands' $200-million counterclaim against the Rosens will be dismissed and the Rosens will withdraw their opposition to Mega Brands' claims to sums held in escrow, a significant portion of which involved postsale taxes.
"Mega Brands' withdrawal of its $200-million counterclaim for damages allegedly caused by undisclosed defects in Magnetix, in the middle of trial, was certainly no victory for them, and validates our position that the counterclaim was totally unfounded. In fact, they have provided no explanation for dropping their counterclaim and rejected this exact same settlement several months ago," Lawrence Rosen said. "Mega Brands' debt obligations still exceed $370-million even after the adjustment of settlement amounts. The $72-million which according to the company buoyed its bottom line almost entirely reflects accounting adjustments.
"This settlement allows me to put all my focus and resources on competing with Mega Blocks in the marketplace rather than in the court room," he said.
Lawrence Rosen said his new company Cra-Z-Art, a division of LaRose LLC, headquartered in Randolph, N.J., is the fastest growing art and craft manufacturer in the USA. Sales in the first year will exceed $50-million, he said. Product lines include art materials, activity and craft kits, cork and wipe off boards, writing instruments, games and puzzles.
"Our Cra-Z-Art staff, which includes 45 former RoseArt personnel, is thrilled to be back doing what we do best in creating new exciting innovative products," Lawrence Rosen said.