Companies representing Dame Elizabeth Taylor and Kathy Ireland have terminated their licensing agreements with House of Taylor saying that the company is insolvent, according to a Securities and Exchange Commission filing on Tuesday.
The company also said that it can no longer operate under the Taylor name and its loan company is threatening to take possession of all inventory. In addition, Lyle M. Rose, House of Taylor president and chief executive officer, left the company after it failed to pay his salary.
The two celebrities were among the principal shareholders and were the identity for the West Hollywood-based company, which specialized in the manufacturing, marketing, and distribution of jewelry under the "Elizabeth," "House of Taylor Jewelry," and "Kathy Ireland Jewelry" brands; as well as the sale of loose diamonds.
The other principal shareholders, Jack Abramov, the former chairman, president, and chief executive officer, and Monty Abramov, former secretary and vice president, resigned from their positions in April.
The struggling company, whose stock was recently delisted in May from the Nasdaq Stock Market, said it will be forced to change its name, which may mean the end of the business after a run of just over three years.
"The termination of the License Agreements will have a material adverse impact on our relationship with our suppliers, retailers and consumers and it is unlikely that Registrant can remain in business and may be compelled to liquidate," the company said in its filing.
On June 20, the company received near identical termination letters from attorneys representing Interplanet Productions, Ltd., the marketing entity through which Taylor brings her jewelry line of branded products to the marketplace, and from Sandbox Jewelry, LLC, a subsidiary of Kathy Ireland Worldwide—a conglomeration of fashion, home decor, gardening, and cooking products.
Both letters say they were informed that House of Taylor has "become insolvent and unable to pay or discharge its liabilities in the ordinary course of its business, … stopped payment to its creditors generally, and … ceased or threatened to cease to carry on its business or a substantial part thereof."
Both letters state these items and others as "grounds for immediate termination of the agreement."
In addition, House of Taylor said that under its loan agreement with New Stream Secured Capital, L.P., all funds received by the company are deposited into a restricted account of New Stream to which it has no access. To maintain operations, House of Taylor is dependent on funds that New Stream advances against a percentage of available collateral as determined under the Loan Agreement.
House of Taylor said that New Stream has substantially "over-advanced" the company against the available collateral of inventory and accounts receivable and that it is not in compliance with the loan agreement.
"New Stream has informed it that it is evaluating all rights and remedies that may be available to it under the loan agreements and applicable law, including without limitation the right to take possession of all inventory, work in process, and other tangible and intangible collateral," the company said in its filing.
"Upon exercise of those steps by New Stream, Registrant expects that it will be compelled to liquidate its assets and operations. Registrant has been exploring all funding options but has no immediate likelihood of obtaining any funds as of this date."
The statement continues, "On June 17, 2008, New Stream significantly reduced the amount of the funds provided to the company which has resulted in the company no longer able to pay the salaries of all the employees."
As such, the company terminated five employees and informed Rose that it could no longer pay his salary. Rose said in the filing that he considers the non payment of his salary, as his termination.
"As a result of these and other business conditions including the economy, Registrant’s business has continued to deteriorate materially and especially in light of the terminations of our licenses as described above, it is unlikely that Registrant can remain in business and may be compelled to liquidate," the company said.
In addition, Peter Mainstain resigned as director of the Registrant, according to the SEC filing. Rose advised Mainstain that he is entitled to a severance payment for the balance of one year’s salary or approximately $150,000.