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

                  UNITED MERCHANTS AND MANUFACTURERS, INC.
          (Exact name of registrant as specified in this charter)

      Delaware              1-3185               13-1426280
      (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


          Item 2.   Acquisition or Disposition of Assets.

                    Effective as of July 2, 1996, Victoria
          Creations, Inc., a Rhode Island corporation (now known as
          Reunited Holdings, Inc. ("RHI")), the 79.8% owned
          subsidiary of the Company, sold substantially all of its
          assets and certain of its liabilities 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").  RHI and the Company have been
          operating under the protection 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, RHI sold, free and clear of all
          liens, claims, interests, encumbrances, obligations and
          liabilities (other than those assumed by the Purchaser,
          the "Assumed Liabilities") substantially all of the
          assets used in its business, including, inter alia, all
          of RHI's trademarks, licenses and license agreements,
          accounts receivable, inventory, machinery and equipment,
          customer lists, and goodwill, but excluding the assets
          used in the operation of RHI's design services business,
          cash on hand and certain other rights enumerated in the
          Asset Purchase Agreement, for a purchase price of
          approximately $24,517,460 (the "Purchase Price"), subject
          to certain adjustments as described in the Asset Purchase
          Agreement.  The Purchase Price consisted 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 Capital 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 RHI
          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 RHI and the Company from certain
          obligations respecting the Foothill Debt, including the
          Company's guaranty of the Foothill Debt.  In addition,
          the name "Victoria Creations, Inc." was included in the
          assets sold and, accordingly, RHI 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 RHI.  Mr. Andreoli
          sold the business to Jonathan Logan in 1984 which in turn
          was acquired by the Company later that year.  Mr.
          Andreoli's son, Richard Andreoli, has served as an
          executive of RHI 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 its 79.8%
          owned operating subsidiary, Victoria Creations, Inc.
          ("VCI"), 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 February 23, 1996, the Company issued a press release
          announcing that it filed a petition for relief under
          Chapter 11.  The February 23, 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 40941.  VCI's bankruptcy case was assigned to
          the Honorable Arthur J. Gonzalez and designated as Case
          No. 96 B 40940.  The cases are jointly administered and
          consolidated for procedural purposes only pursuant to an
          order entered on February 22, 1996.  The Company
          continues 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
                    Acquisition 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
                    Contracts 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 23, 1996,
                    announcing that the Company filed a petition
                    for relief 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 16, 1996    United Merchants and Manufacturers, 
                                      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
                    Acquisition 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
                    Contracts 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 23, 1996,
                    announcing that the Company filed a petition
                    for relief under Chapter 11.





     UNITED MERCHANTS AND MANUFACTURERS, INC., D.I.P.

     PRO FORMA FINANCIAL STATEMENTS:

     The following pro forma financial statements
     reflect the sale on July 1, 1996 by the Company's
     79%-owned subsidiary of most of its operating assets for
     proceeds of $5.0 million in cash and the assumption by
     the purchaser of $19.55 million of the subsidiary's
     liability to its senior secured lender.  The subsidiary
     simultaneously used a portion of the cash proceeds to
     payoff the balance owed to its senior secured lender.

     The sale of these operating assets resulted in
     a non-cash loss to the subsidiary of approximately $25
     million.  The Company's portion of such loss (approxi-
     mately $23 million) will be included in the Company's
     financial statements for the quarter and year ended June
     30, 1996.


     UNITED MERCHANTS AND MANUFACTURERS, 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's
     79%-owned subsidiary 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.......................  $812             $5,000    $5,620
                                                          (192)
          Receivables, net .......... 9,590   ($8,704)               886
          Inventories................17,392   (17,392)                 0
          Other current assets....... 1,469    (1,335)               134
                                   --------- --------- --------- -------
             Total Current Assets   $29,263  ($27,431)  $4,808    $6,640

         Property, plant & equipment.$7,237   ($5,306)            $1,931
          Less depreciation..........(5,440)    4,190            (1,250)
                                   --------- --------- --------- -------
                Net Property, Plant
                       and equipment $1,797   ($1,116)      $0      $681

         Other Assets:
          Goodwill..................$20,121  ($20,168)               (47)
          Other...................... 4,582      (780)             3,802
                                   --------- --------- --------- -------
                Total Other Assets  $24,703  ($20,948)      $0    $3,755
                                   --------- --------- --------- -------
                     Total Assets   $55,763  ($49,495)  $4,808   $11,076
                                    ========= ========= ======== =======

         LIABILITIES AND STOCKHOLDERS' EQUITY
         Current Liabilities:
          Accounts payable...........  $465                         $465
          Accrued expenses........... 2,172                        2,172
                                   --------- --------- --------- -------
           Total Current Liablilties $2,637        $0       $0    $2,637

         Liabilities subject to compromise:
          Accounts payable...........$5,824                       $5,824
          Accrued expenses...........   962                          962
          Long-term debt.............55,693                       55,693
          Other long-term liabilities 5,976                        5,976
                                   --------- --------- --------- -------
          Total Liabilities Subject
                     to Compromise  $68,455        $0       $0   $68,455

         Secured long-term debt..... 27,099            (19,551)    7,356
                                                          (192)
         Other long-term liabilities. 2,613                        2,613

         Minority interest........... 1,862             (1,862)        0

         Stockholders' Equity:
          Before sale..............($46,903)                    ($46,903)
          Loss on sale...............        ($49,495) $26,413   (23,082)
                                   --------- --------- --------- --------
        Total Stockholders' Equity ($46,903) ($49,495) $26,413  ($69,985)
                                   --------- --------- --------- --------
       Total Liabilities and Equity $55,763  ($49,495)  $4,808   $11,076
                                   ========= ========= ========= ========


     UNITED MERCHANTS AND MANUFACTURERS, 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
     Company's 79%-owned subsidiary 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.
                                                     (000 omitted)
                                            -----------------------------
                                                       PRO FORMA
                                                 AS     ADJUST-  PRO FORMA
         YEAR ENDED JUNE 30, 1995:            REPORTED   MENTS    ADJUSTED
                                             --------- --------- ---------
         Net sales............................$59,493  ($49,563)   $9,930
         Cost of sales........................(34,814)   27,805    (7,009)
         Selling, general and administrative                            0
          expenses............................(30,079)   19,049   (11,030)
         Amortization of goodwill..............  (720)      720         0
         Loss on termination of operations.....  (513)               (513)
                                             --------- --------- ---------
                      Operating Loss          ($6,633)  ($1,989)  ($8,622)

         Interest expense.....................(11,007)    3,347    (7,660)
         Other Income (expense)................   (25)      (50)      (75)
         Loss on sale of operation.............  (835)               (835)
         Minority interest.....................   270      (270)        0
         Income taxes..........................  (100)       25       (75)
                                             --------- --------- ---------
         Net Loss from Continuing Operations ($18,330)   $1,063  ($17,267)

         Dividends applicable to
                   Preferred Shares. .......... 4,500               4,500
                                             ---------           ---------
         Net Loss from Continuing Operations
          Applicable to Common Shares        ($22,830)           ($21,767)
                                              =========           =========

         Average common shares outstanding.....17,845              17,845

         Net Loss from Continuing Operations
                    per Common Share           ($1.28)             ($1.22)


     UNITED MERCHANTS AND MANUFACTURERS, INC., D.I.P.

     Pro Forma Statement of Operations

                                                     (000 omitted)
                                            ------------------------------
                                                       PRO FORMA
                                                 AS     ADJUST-  PRO FORMA
         NINE MONTHS ENDED MARCH 31, 1996:   REPORTED    MENTS    ADJUSTED
                                             --------- --------- ---------
         Net sales............................$37,607   ($37,226)     $381
         Cost of sales........................(19,781)    19,737       (44)
         Selling, general and administrative
          expenses........................... (18,218)    14,098    (4,120)
         Amortization of goodwill..............  (540)       540         0
                                             ---------  --------- ---------
                    Operating Income            ($932)   ($2,851)  ($3,783)

         Interest expense......................(4,882)     1,690    (3,192)
         Gain from reduction of liability
          for postretirement benefits other
          than pensions........................14,726               14,726
         Gain on sale of assets not
          used in operations................... 5,121                5,121
         Other income..........................   436        (20)      416
         Minority interest.....................  (238)       238         0
         Reorganization expenses...............   (25)                 (25)
         Income taxes..........................   (75)        19       (56)
                                             --------- --------- ---------
                        Net Earnings          $14,131      ($924)  $13,207

         Dividends applicable to
                   Preferred Shares. .......... 3,375                3,375
                                             ---------           ---------
         Net Earnings Applicable to
                       Common Shares          $10,756               $9,832
                                             =========           =========


         Average common shares outstanding.....17,845               17,845

         Net Earnings per Share................ $0.60                $0.55
[{"type": "8-K", "sequence": "1", "description": "FORM 8-K", "secsgml_size_bytes": 19977}]
{"company-data": {"conformed-name": "UNITED MERCHANTS & MANUFACTURERS INC /NEW/", "cik": "0000101357", "assigned-sic": "3960", "irs-number": "131426280", "state-of-incorporation": "DE", "fiscal-year-end": "0630"}, "filing-values": {"form-type": "8-K", "act": "34", "file-number": "001-03185", "film-number": "96595955"}, "business-address": {"street1": "2 EXECUTIVE DRIVE", "street2": "SUITE 780", "city": "FORT LEE", "state": "NJ", "zip": "07024", "phone": "201-585-1310"}, "mail-address": {"street1": "1650 PALISADE AVENUE", "city": "TEANECK", "state": "NJ", "zip": "07666"}}
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

                  UNITED MERCHANTS AND MANUFACTURERS, INC.
          (Exact name of registrant as specified in this charter)

      Delaware              1-3185               13-1426280
      (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

          Item 2.   Acquisition or Disposition of Assets.

                    Effective as of July 2, 1996, Victoria
          Creations, Inc., a Rhode Island corporation (now known as
          Reunited Holdings, Inc. ("RHI")), the 79.8% owned
          subsidiary of the Company, sold substantially all of its
          assets and certain of its liabilities 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").  RHI and the Company have been
          operating under the protection 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, RHI sold, free and clear of all
          liens, claims, interests, encumbrances, obligations and
          liabilities (other than those assumed by the Purchaser,
          the "Assumed Liabilities") substantially all of the
          assets used in its business, including, inter alia, all
          of RHI's trademarks, licenses and license agreements,
          accounts receivable, inventory, machinery and equipment,
          customer lists, and goodwill, but excluding the assets
          used in the operation of RHI's design services business,
          cash on hand and certain other rights enumerated in the
          Asset Purchase Agreement, for a purchase price of
          approximately $24,517,460 (the "Purchase Price"), subject
          to certain adjustments as described in the Asset Purchase
          Agreement.  The Purchase Price consisted 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 Capital 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 RHI
          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 RHI and the Company from certain
          obligations respecting the Foothill Debt, including the
          Company's guaranty of the Foothill Debt.  In addition,
          the name "Victoria Creations, Inc." was included in the
          assets sold and, accordingly, RHI 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 RHI.  Mr. Andreoli
          sold the business to Jonathan Logan in 1984 which in turn
          was acquired by the Company later that year.  Mr.
          Andreoli's son, Richard Andreoli, has served as an
          executive of RHI 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 its 79.8%
          owned operating subsidiary, Victoria Creations, Inc.
          ("VCI"), 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 February 23, 1996, the Company issued a press release
          announcing that it filed a petition for relief under
          Chapter 11.  The February 23, 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 40941.  VCI's bankruptcy case was assigned to
          the Honorable Arthur J. Gonzalez and designated as Case
          No. 96 B 40940.  The cases are jointly administered and
          consolidated for procedural purposes only pursuant to an
          order entered on February 22, 1996.  The Company
          continues 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
                    Acquisition 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
                    Contracts 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 23, 1996,
                    announcing that the Company filed a petition
                    for relief 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 16, 1996    United Merchants and Manufacturers, 
                                      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
                    Acquisition 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
                    Contracts 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 23, 1996,
                    announcing that the Company filed a petition
                    for relief under Chapter 11.

     UNITED MERCHANTS AND MANUFACTURERS, INC., D.I.P.

     PRO FORMA FINANCIAL STATEMENTS:

     The following pro forma financial statements
     reflect the sale on July 1, 1996 by the Company's
     79%-owned subsidiary of most of its operating assets for
     proceeds of $5.0 million in cash and the assumption by
     the purchaser of $19.55 million of the subsidiary's
     liability to its senior secured lender.  The subsidiary
     simultaneously used a portion of the cash proceeds to
     payoff the balance owed to its senior secured lender.

     The sale of these operating assets resulted in
     a non-cash loss to the subsidiary of approximately $25
     million.  The Company's portion of such loss (approxi-
     mately $23 million) will be included in the Company's
     financial statements for the quarter and year ended June
     30, 1996.

     UNITED MERCHANTS AND MANUFACTURERS, 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's
     79%-owned subsidiary 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.......................  $812             $5,000    $5,620
                                                          (192)
          Receivables, net .......... 9,590   ($8,704)               886
          Inventories................17,392   (17,392)                 0
          Other current assets....... 1,469    (1,335)               134
                                   --------- --------- --------- -------
             Total Current Assets   $29,263  ($27,431)  $4,808    $6,640

         Property, plant & equipment.$7,237   ($5,306)            $1,931
          Less depreciation..........(5,440)    4,190            (1,250)
                                   --------- --------- --------- -------
                Net Property, Plant
                       and equipment $1,797   ($1,116)      $0      $681

         Other Assets:
          Goodwill..................$20,121  ($20,168)               (47)
          Other...................... 4,582      (780)             3,802
                                   --------- --------- --------- -------
                Total Other Assets  $24,703  ($20,948)      $0    $3,755
                                   --------- --------- --------- -------
                     Total Assets   $55,763  ($49,495)  $4,808   $11,076
                                    ========= ========= ======== =======

         LIABILITIES AND STOCKHOLDERS' EQUITY
         Current Liabilities:
          Accounts payable...........  $465                         $465
          Accrued expenses........... 2,172                        2,172
                                   --------- --------- --------- -------
           Total Current Liablilties $2,637        $0       $0    $2,637

         Liabilities subject to compromise:
          Accounts payable...........$5,824                       $5,824
          Accrued expenses...........   962                          962
          Long-term debt.............55,693                       55,693
          Other long-term liabilities 5,976                        5,976
                                   --------- --------- --------- -------
          Total Liabilities Subject
                     to Compromise  $68,455        $0       $0   $68,455

         Secured long-term debt..... 27,099            (19,551)    7,356
                                                          (192)
         Other long-term liabilities. 2,613                        2,613

         Minority interest........... 1,862             (1,862)        0

         Stockholders' Equity:
          Before sale..............($46,903)                    ($46,903)
          Loss on sale...............        ($49,495) $26,413   (23,082)
                                   --------- --------- --------- --------
        Total Stockholders' Equity ($46,903) ($49,495) $26,413  ($69,985)
                                   --------- --------- --------- --------
       Total Liabilities and Equity $55,763  ($49,495)  $4,808   $11,076
                                   ========= ========= ========= ========

     UNITED MERCHANTS AND MANUFACTURERS, 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
     Company's 79%-owned subsidiary 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.
                                                     (000 omitted)
                                            -----------------------------
                                                       PRO FORMA
                                                 AS     ADJUST-  PRO FORMA
         YEAR ENDED JUNE 30, 1995:            REPORTED   MENTS    ADJUSTED
                                             --------- --------- ---------
         Net sales............................$59,493  ($49,563)   $9,930
         Cost of sales........................(34,814)   27,805    (7,009)
         Selling, general and administrative                            0
          expenses............................(30,079)   19,049   (11,030)
         Amortization of goodwill..............  (720)      720         0
         Loss on termination of operations.....  (513)               (513)
                                             --------- --------- ---------
                      Operating Loss          ($6,633)  ($1,989)  ($8,622)

         Interest expense.....................(11,007)    3,347    (7,660)
         Other Income (expense)................   (25)      (50)      (75)
         Loss on sale of operation.............  (835)               (835)
         Minority interest.....................   270      (270)        0
         Income taxes..........................  (100)       25       (75)
                                             --------- --------- ---------
         Net Loss from Continuing Operations ($18,330)   $1,063  ($17,267)

         Dividends applicable to
                   Preferred Shares. .......... 4,500               4,500
                                             ---------           ---------
         Net Loss from Continuing Operations
          Applicable to Common Shares        ($22,830)           ($21,767)
                                              =========           =========

         Average common shares outstanding.....17,845              17,845

         Net Loss from Continuing Operations
                    per Common Share           ($1.28)             ($1.22)

     UNITED MERCHANTS AND MANUFACTURERS, INC., D.I.P.

     Pro Forma Statement of Operations

                                                     (000 omitted)
                                            ------------------------------
                                                       PRO FORMA
                                                 AS     ADJUST-  PRO FORMA
         NINE MONTHS ENDED MARCH 31, 1996:   REPORTED    MENTS    ADJUSTED
                                             --------- --------- ---------
         Net sales............................$37,607   ($37,226)     $381
         Cost of sales........................(19,781)    19,737       (44)
         Selling, general and administrative
          expenses........................... (18,218)    14,098    (4,120)
         Amortization of goodwill..............  (540)       540         0
                                             ---------  --------- ---------
                    Operating Income            ($932)   ($2,851)  ($3,783)

         Interest expense......................(4,882)     1,690    (3,192)
         Gain from reduction of liability
          for postretirement benefits other
          than pensions........................14,726               14,726
         Gain on sale of assets not
          used in operations................... 5,121                5,121
         Other income..........................   436        (20)      416
         Minority interest.....................  (238)       238         0
         Reorganization expenses...............   (25)                 (25)
         Income taxes..........................   (75)        19       (56)
                                             --------- --------- ---------
                        Net Earnings          $14,131      ($924)  $13,207

         Dividends applicable to
                   Preferred Shares. .......... 3,375                3,375
                                             ---------           ---------
         Net Earnings Applicable to
                       Common Shares          $10,756               $9,832
                                             =========           =========

         Average common shares outstanding.....17,845               17,845

         Net Earnings per Share................ $0.60                $0.55