Turnaround and Performance Improvement Advisors

Scott AcquisitionTo whom it may Concern:

Renaissance Partners L.C. was employed by the debtor in its Chapter 11 case as financial and restructuring advisor on September 13, 2004. During the duration of the case Renaissance provided all services requested by the debtor, its senior secured lender and unsecured creditor’s committee in a highly exemplary, efficient, cost effective and professional manner. The services provided included, but were not limited to, the following:

1. Operational and financial review and analysis.
2. Financial and Business Plan preparation under various scenarios of going-forward stores after first determining the historical and projected 4-wall profitability of each location (stores, outlet centers and sub-let properties). Renaissance prepared such plans in support of and with management of the debtor and input from its bankruptcy counsel.
3. Expense review, analysis, plans by location and corporate workcenter instrumental in (2) above.
4. Inventory analysis to determine optimum going-forward inventory based on the various store count scenarios analyzed.
5. Projected trade support required on going-forward business for the business to operate on a reasonable basis.
6. Reviewed all cases and contracts, prepared lease summaries and calculated projected lease rejection claim amounts by location and projected contract claims.
7. Review Workers’ Compensation Claims and advised debtor and counsel regarding estimated claims value for liquidation analysis purposes.

8. Prepared preliminary liquidation analysis and comparisons with go-forward operating scenarios.
9. Prepared detailed cash flow models / budgets on a monthly basis and on weekly basis consistent with the financial models utilized.
10. Review of the above described plans with debtor’s management, its counsel, senior secured lender and creditor’s committee.
11. Preparation, with the debtor, of all schedules, UST reports and Monthly Operating Reports required by the Chapter 11 cases.
12. Requests for Proposal and analysis of bids submitted for three rounds of liquidation scenarios including full liquidation and partial liquidation under store count scenarios analyzed. Such liquidations bids included merchandise, furniture and fixtures FFE, real estate and intellectual property as well as the affect of augmentation merchandise and consignment rugs. Bids were solicited on a guarantee and fee basis with final bids submitted by liquidators on only a fee basis.
13. Renaissance along with debtor’s counsel negotiated fnall agreements with liquidators and selected the final and best bid for the merchandise, FFE and real estate.
14. Renaissance assisted Hilco Real Estate in preparation or data required for marketing Scotty’s leased and owned properties via website, email and print. Renaissance assisted Hilco Real Estate and the debtors in analysis of real estate bids at auction and otherwise relating to those bids that were ultimately selected as highest and best bids.
15. Renaissance assisted Hilco Merchant Services and Hudson Capital joint venture in analysis of their initial and revised liquidation phasing plans.
16. Renaissance tracked, at the request of debtor and its senior secured lender, liquidation performance by location by component on a daily basis throughout the liquidation sale, advising the debtor on re-projected liquidation outcome, shortage, possible inventory transfers and early store closings. Renaissance challenged the liquidators throughout the sale period regarding potential lower liquidation results.
17. Renaissance prepared weekly reports of actual versus plan cash flow by receipts and disbursement line-items for the debtors and its senior secured lender that was required by the lender to ensure continued funding of payroll, rents, utilities and other necessary expenses throughout the liquidation sale until the senior secured lender was paid in full.  During this period Renaissance negotiated with the senior secured lender on behalf of the debtor to ensure that sales taxes and other critical non-operating expenses were paid when due.
18. Renaissance updated weekly cash flow projection models each week based on actual receipts trends and disbursements timing for the debtor, its counsel and senior secured lender.
19. Renaissance prepared daily liquidation tracking reports and analysis throughout the sale period and at sale end provided the debtor and its senior secured lender with final reports, as requested by the lender.
20. Throughout the case and during the wind-down period Renaissance provided valuable insights and direction in other related matters including record  retention, KERP, models, communications to associates, taxes, and insurance.

 

In summary, Renaissance Partners’ services were essential to the conduct of the case and creation of the highest possible liquidation values in a timely manner. Due to Scotty’s limited staffing end experience in Chapter 11 the services provided by Renaissance were requested by and required by the debtors and were found to be provided in a highly effective manner and its objective communications with all stakeholders ensured that decisions required in the case were executed on a timely basis.

Sincerely yours,

Robert S. Pacos

Vice President (Former)

Scott Acquisition Corp., et al

Executive Vice-President (Former)

Scotty’s Inc.