Thursday, February 5, 2015

Details On RadioShack Consulting Agreement With Hilco/Gordon Brothers/Tiger Capital Group for Store Closing Sales

In October, 2014, the Debtors and their advisors identified two categories of stores that were providing limited benefit to the Debtors (respectively, "Phase One Stores" and "Phase Two Stores").

The Debtors identified approximately 275 Phase One Stores, all of which are losing money and are in non-strategic locations. In recognition of the limited benefits of operating the Phase One Stores, the Debtors stopped replenishing inventory in these stores as of October 2014, and began sales of the inventory in these stores at up to a 25% discount. By January 2015, the Phase One Stores were selling inventory at up to a 50% discount.

The Debtors identified approximately 730 Phase Two Stores. Although the locations of the Phase Two Stores performed slightly better than the locations of the Phase One Stores, nearly all of the Phase Two Stores are also losing money. In December 2014, the Debtors stopped replenishing inventory of the Phase Two Stores and began sales of inventory at up to a 25% discount. [...]

Under the terms of the Consulting Agreement, subject to this court's approval of the attached Interim Order and Final Order, the Consultant will continue assisting the Debtors to close three categories of stores (respectively, the "Initial Tranche Stores," the "Second Tranche Stores" and the "Third Tranche Stores") using the procedures outlined in the Sale Guidelines. The Debtors intend to finish the sales at most of the Initial Tranche Stores by February 17, 2015. The Debtors intend to finish the sales at most the Second Tranche Stores by February 28, 2015. Finally, the Debtors intend to finish the sales at the Third Tranche Stores by March 31, 2015.

The main services to be provided by the Consultant can be summarized as follows:
(i) Consultant shall provide the Debtors with an appropriate number of Supervisors to supervise and assist the Debtors in their conduct of the Sale. All Supervisors shall have industry-specific experience conducting "store closing," "bankruptcy liquidation," or similarly themed sales and shall act in a professional manner.
(ii) The Consultant shall recommend and implement appropriate point of purchase, point of sale and external advertising to effectively sell the Merchandise during the Sale Term, consistent with the theme of the Sale and the Sale Guidelines.
(iii) The Consultant shall advise the Debtors as to appropriate discounting of Merchandise (subject in all respects to any pricing limitations imposed by the Cellular Carrier Agreement), appropriate staffing levels for the Closing Locations, and appropriate deferred compensation and incentive programs for Store Employees.
(iv) The Consultant shall vacate the Closing Locations in a broom clean condition, provided, that Consultant shall be entitled to abandon in place all unsold assets of Merchant in each Closing Location as of the applicable Sale Termination Date.

The compensation available to the Consultant under the Consulting Agreement can be summarized as follows:
(i) Base Consulting Fee. The Debtors shall pay to Consultant, from Gross Sales, a Consulting Fee in an amount equal to: (i) $500.00 for each Closing Location, and (ii) 1.5% of the Gross Sales at all of the Closing Locations (the "Base Consulting Fee").
(ii) Additional Incentive Compensation: In addition to the Base Consulting Fee, Consultant shall have the opportunity to earn the following Additional Incentive Compensation:
• to the extent that the Sale at 90% or more of the "Initial Tranche Stores" is completed and the associated stores are vacated by the Consultant on or before February 17, 2015, then Consultant shall be entitled to receive 0.5% of the aggregate proceeds from the Sale at all of the Initial Tranche Stores; plus
• to the extent that the Sale at 90% or more of the "Second Tranche Stores" is completed and the associated stores are vacated by the Consultant on or before February 28, 2015, then Consultant shall be entitled to receive 0.5% of the aggregate proceeds from the Sale at all of the Second Tranche Stores; plus
• to the extent that the Sale at 90% or more of the "Third Tranche Stores" is completed and the associated stores are vacated by the Consultant on or before March 31, 2015, then Consultant shall be entitled to receive an amount equal to 0.5% of the aggregate proceeds from the Sale at all of the Third Tranche Stores.
(iii) FF&E. Consultant shall retain 17.5% of the gross receipts (net only of applicable sales taxes and FF&E Budgeted

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