debtor and debtor-in-possession in the above-captioned chapter 11 case (the Debtor ) and the

Transcription

1 IN THE UNITED STATES BANKRUPTCY COURT FOR THE DISTRICT OF DELAWARE X In re TSIC, Inc., f/k/a Sharper Image Corporation, Debtor X Chapter 11 Case No (KG) Hearing Date August 13, 2012 at 1000 a.m.(et) Objection Deadline July 30, 2012 at 400 p.m.(et) NOTICE OF HEARING ON JOINT MOTION OF THE DEBTOR AND THE OFFICIAL COMMITTEE OF UNSECURED CREDITORS, PURSUANT TO SECTIONS 105(a), 305(a), AND 1112(b) OF THE BANKRUPTCY CODE, FOR ENTRY OF AN ORDER (I) APPROVING PROCEDURES FOR (A) THE DISMISSAL OF THE DEBTOR S CHAPTER 11 CASE, (B) THE DISTRIBUTION OF CERTAIN FUNDS TO HOLDERS OF ALLOWED UNSECURED CLAIMS, AND (C) THE DISALLOWANCE OF CERTAIN GIFT CARD CLAIMS AND (II) GRANTING CERTAIN RELATED RELIEF PLEASE TAKE NOTICE that TSIC, Inc. f/k/a Sharper Image Corporation, as debtor and debtor-in-possession in the above-captioned chapter 11 case (the Debtor ) and the Official Committee of Unsecured Creditors (the Committee ) filed the Joint Motion Pursuant to Sections 105(a), 305(a), and 1112(b) of the Bankruptcy Code For Entry of an Order (I) Approving Procedures for (A) the Dismissal of the Debtor s Chapter 11 Case, (B) the Distribution of Certain Funds to Holders of Allowed Unsecured Claims and (C) the Disallowance of Certain Gift Card Claims and (II) Granting Certain Related Relief (the Joint Motion ), 1 with the United States Bankruptcy Court for the District of Delaware, 824 Market Street, 3rd Floor, Wilmington, Delaware (the Bankruptcy Court ). A copy of the Joint Motion and the exhibits and schedules thereto may be obtained from the following web address or by calling TSIC s claims agent, Kurtzman Carson Consultants LLC at Capitalized terms used but not defined herein shall have the meanings ascribed to them in the Joint Motion.

2 PLEASE TAKE FURTHER NOTICE that, by the Joint Motion, the Debtor and the Committee seek entry of an order (the Approval Order ) establishing procedures for the dismissal of the Debtor s chapter 11 case, the distribution of certain funds to holders of allowed unsecured claims, and the disallowance of certain gift card claims. Subject to approval by the Bankruptcy Court, the Debtor and Committee propose to distribute approximately $450,000 to holders of Allowed Unsecured Claims on a pro rata basis, thereby resulting in an estimated distribution to holders of Allowed Unsecured Claims of approximately 0.28% of the allowed amount of such claims. PLEASE TAKE FURTHER NOTICE that, by the Joint Motion, the Debtor and the Committee request that, with respect to those unsecured claims that have not, as of the Joint Motion, been resolved by prior order of the Bankruptcy Court, the claim amount asserted by a Claimant who has filed an unsecured claim (or, in the absence of a filing, the claim as provided on the Debtor s schedules) be deemed the allowed amount of such claim for purposes of the distribution to be made from the GUC Escrow Account. A schedule identifying the Claimants and the amounts of their proposed Allowed Unsecured Claims may be obtained from the following web address or by calling TSIC s claims agent, Kurtzman Carson Consultants LLC at PLEASE TAKE FURTHER NOTICE that, by the Joint Motion, the Debtor and the Committee propose that, if a Claimant or other party (a) disputes the amount of the Allowed Unsecured Claim set forth on the Claim Schedule or (b) wishes to assert a claim that is not reflected on the Claim Schedule, such Claimant or other party shall be encouraged to contact counsel for the Committee informally and attempt to resolve its dispute amicably, without the WCSR V2 2

3 need to file a formal claim or objection. 2 If an Objecting Party nevertheless wishes to file a formal claim or objection (collectively, a Claim Objection ), the Debtor and Committee propose that any such Objecting Party be required to file such claim or objection with the Court, together with documentation supporting its Claim Objection on or before the deadline to be set by the Court in the Approval Order (the Objection Deadline ) and serve such Claim Objection on counsel for the Debtor and the Committee so as to be received by the Objection Deadline. In any Claim Objection, the Objecting Party must state the grounds for its objection clearly and with particularity. The Committee seeks authority to resolve any Claim Objection without further order of the Court. If counsel for the Committee and the Objecting Party cannot agree on a resolution, then an omnibus hearing to consider any and all Claim Objections filed will be held on a date to be provided by the Court in the Approval Order (the Claims Hearing ). PLEASE TAKE FURTHER NOTICE that, by the Joint Motion, the Debtor and the Committee propose that, in the event that no Claim Objection is filed, or if all Claim Objections have been resolved prior to the Claims Hearing, counsel to the Committee will file with the Bankruptcy Court a proposed Distribution Order. The Distribution Order will (a) highlight any modifications made to the Claim Schedule, if any, to reflect agreements reached to resolve any formal or informal Claim Objections, (b) authorize Committee counsel to make distributions on account of the Allowed Unsecured Claims identified in the Claim Schedule annexed to the Distribution Order, and (c) schedule a final fee hearing. In the event that one or more Claim Objections is filed and not resolved prior to the Claims Hearing, counsel to the Committee will submit to the Court a proposed Distribution Order promptly following the Court s ruling on such Claim Objection(s). 2 Committee counsel should be contacted by at dkatz@cooley.com or by phone at (212) WCSR V2 3

4 PLEASE TAKE FURTHER NOTICE that, by the Joint Motion, the Debtor and the Committee seek a determination from the Bankruptcy Court that any Claimant or other interested party who does not timely file a Claim Objection shall be barred from subsequently asserting an unsecured claim against the Debtor or from challenging the proposed Allowed Unsecured Claim amounts set forth in the Claim Schedule. Distributions on account of Allowed Unsecured Claims will be made by Committee counsel from the funds held in the GUC Escrow Account within 30 days of the Court s entry of the Distribution Order. PLEASE TAKE FURTHER NOTICE that, by the Joint Motion, the Debtor and the Committee propose that Committee counsel shall be authorized to make a single distribution to creditors of the funds held in the GUC Escrow Account and that Committee counsel shall withhold from making any distribution on account of an Allowed Unsecured Claim where such distribution would be for the amount of less than $50 (the Distribution Threshold ). The Debtor and the Committee propose that any distributed check that has not been claimed and/or cashed within 60 days after distribution of the check (the Check Cashing Period ) shall be deemed void and the distribution on account of such claim shall be deemed forfeited by the creditor. Any funds remaining in the GUC Escrow Account after the expiration of the Check Cashing Period and funds not distributed because distribution amounts fell below the Distribution Threshold shall be remitted to the Debtor to be used to pay any administrative and/or priority claims not otherwise paid from estate funds. The Committee seeks authorization to reserve $50,000 from the GUC Escrow Account to pay the fees and expenses of Committee counsel incurred in connection with the preparation and prosecution of the Joint Motion, as well as the services to be rendered in connection with the making of distributions from the GUC Escrow Account and WCSR V2 4

5 dismissal of the Debtor s chapter 11 case, which fees and expenses will not be paid from estate funds as previously agreed upon by the parties. PLEASE TAKE FURTHER NOTICE that, by the Joint Motion, the Debtor and the Committee are objecting to certain Gift Card Claims as set forth in the Joint Motion and is asking the Bankruptcy Court to disallow all such claims. A schedule identifying such gift cards may be obtained from the following web address or by calling TSIC s claims agent, Kurtzman Carson Consultants LLC at The reason for disallowance of the claims is that they are attributable to either merchandise certificates or rewards cards and, pursuant to order of the Bankruptcy Court, not eligible to receive distributions. PLEASE TAKE FURTHER NOTICE that, by the Joint Motion, the Debtor and the Committee propose that if a gift card claimant wishes to object to the treatment of its claim as set forth on the Disallowed Gift Card Schedule, such claimant must file an objection with the Court on or before a deadline to be set by the Bankruptcy Court and serve such objection on counsel to the Committee and the Debtor by the Disallowed Gift Card Claim Objection Deadline. To the extent gift card claim filers have already submitted an objection in connection with the Debtor s Motion for Order Pursuant to Section 105(a) of the Bankruptcy Code Authorizing Payment of Gift Card Claims and Gift Card Class Counsel Fees and Expenses (D.I. No. 2441), such objection has been preserved and no further objection need be submitted by those objectors. In the event an objection (the Gift Card Objections ) is filed and not resolved, then an omnibus hearing to consider any and all Gift Card Objections will be held on a date to be provided by the Bankruptcy Court in the Approval Order (the Gift Card Claims Hearing ). In the event that no Gift Card Objection is filed, or if all Gift Card Objections WCSR V2 5

6 have been resolved prior to the Gift Card Claims Hearing, counsel to the Debtor will file a proposed Gift Card Disallowance Order. The Gift Card Disallowance Order will (a) highlight any modifications made to the Disallowed Gift Card Schedule, if any, to reflect agreements reached to resolve any formal or informal Gift Card Objections. The Debtor proposes that any claimant or other interested party who does not timely file a Gift Card Objection shall be barred from subsequently asserting a claim based on a gift card against the Debtor. If the Bankruptcy Court disallows and expunges your claim, you will have no right to receive payment on or to otherwise enforce such claim. PLEASE TAKE FURTHER NOTICE that, by the Joint Motion, the Debtor and the Committee propose that after the gift card claims disallowance process and Claims Resolution Process has been completed, all distributions have been made, final fee and expense applications have been adjudicated and all accrued and as yet unpaid fees owing to the U.S. Trustee have been paid, the Bankruptcy Court enter an order (the Dismissal Order ), upon the filing of a Certification of Counsel and Request for Dismissal. The Certification of Counsel and Request for Dismissal will, among other things, (a) verify that distributions on account of Allowed Unsecured Claims were made by Committee counsel, (b) confirm that all accrued U.S. Trustee fees have been paid and (c) request entry of the Dismissal Order. PLEASE TAKE FURTHER NOTICE that any response or objection to the relief sought in the Joint Motion must be filed with the Bankruptcy Court on or before July 30, 2012 at 400 p.m. Eastern Time (the Objection Deadline ). PLEASE TAKE FURTHER NOTICE that at the same time, you must also serve a copy of the response or objection upon (i) counsel to the Debtor, Weil, Gotshal & Manges LLP, 767 Fifth Avenue, New York, New York 10153, Attn Harvey R. Miller, Esq. and WCSR V2 6

7 Abigail Zigman, Esq. and Womble Carlyle Sandridge & Rice, PLLC, 222 Delaware Avenue, Suite 1501, Wilmington, Delaware 19801, Attn Steven K. Kortanek, Esq. and Ericka F. Johnson, Esq.; (ii) counsel to the Committee, Cooley LLP, 1114 Avenue of the Americas, New York, New York 10036, Attn Seth Van Aalten, Esq. and Whiteford Taylor & Preston LLP, 1220 N. Market Street, Suite 608, Wilmington, Delaware 19801, Attn Thomas J. Francella, Esq.; and (iii) the Office of the United States Trustee for the District of Delaware, 844 King Street, Suite 2207, Lock Box 35, Wilmington, Delaware 19801, Attn Juliet Sarkessian, Esq. PLEASE TAKE FURTHER NOTICE THAT A HEARING TO CONSIDER THE RELIEF SOUGHT IN THE JOINT MOTION WILL BE HELD ON AUGUST 13, 2012 AT 1000 A.M. EASTERN TIME BEFORE THE HONORABLE CHIEF JUSTICE KEVIN GROSS AT 824 MARKET STREET, WILMINGTON, DELAWARE WCSR V2 7

8 PLEASE TAKE FURTHER NOTICE that this Notice of Hearing on Joint Motion is being served upon you without the Joint Motion and related schedules and exhibits. If you wish to obtain copies of the Joint Motion and related schedules and exhibits, you may obtain them (i) from the following web address (ii) by calling TSIC s claims agent, Kurtzman Carson Consultants LLC at ; or (iii) by submitting such request by electronic mail to counsel for the Debtor at abigail.zigman@weil.com. Dated July 16, 2012 Wilmington, Delaware WOMBLE CARLYLE SANDRIDGE & RICE PLLC /s/ Steven K. Kortanek Steven K. Kortanek (Del. Bar No. 3106) Ericka F. Johnson (Del. Bar No. 5024) 222 Delaware Avenue, Suite 1501 Wilmington, Delaware Telephone (302) Facsimile (302) WEIL, GOTSHAL & MANGES LLP Harvey R. Miller 767 Fifth Avenue New York, New York Telephone (212) Facsimile (212) Counsel for the Debtor WHITEFORD TAYLOR & PRESTON LLP /s/ Thomas J. Francella Thomas J. Francella (Del. Bar No. 3835) Renaissance Centre 405 King Street, Suite 500 Wilmington, Delaware Telephone (302) Facsimile (302) and- -and- COOLEY LLP Lawrence C. Gottlieb (LG 2565) Jay R. Indyke (JI 0353) Richard Kanowitz (RK 0677) Seth Van Aalten (SV 2663) 1114 Avenue of the Americas New York, New York Telephone (212) Facsimile (212) Counsel for Official Committee Of Unsecured Creditors WCSR V2 8

9 IN THE UNITED STATES BANKRUPTCY COURT FOR THE DISTRICT OF DELAWARE X In re TSIC, Inc., f/k/a Sharper Image Corporation, Debtor X Chapter 11 Case No (KG) Hearing Date August 13, 2012 at 1000 a.m. (ET) Objection Deadline July 30, 2012 at 4 p.m. (ET) JOINT MOTION OF THE DEBTOR AND THE OFFICIAL COMMITTEE OF UNSECURED CREDITORS, PURSUANT TO SECTIONS 105(a), 305(a), AND 1112(b) OF THE BANKRUPTCY CODE, FOR ENTRY OF AN ORDER (I) APPROVING PROCEDURES FOR (A) THE DISMISSAL OF THE DEBTOR S CHAPTER 11 CASE, (B) THE DISTRIBUTION OF CERTAIN FUNDS TO HOLDERS OF ALLOWED UNSECURED CLAIMS, AND (C) THE DISALLOWANCE OF CERTAIN GIFT CARD CLAIMS AND (II) GRANTING CERTAIN RELATED RELIEF TO THE HONORABLE KEVIN GROSS, CHIEF UNITED STATES BANKRUPTCY JUDGE TSIC, Inc., f/k/a Sharper Image Corporation, as debtor and debtor-in-possession in the above-captioned chapter 11 case (the Debtor or TSIC ) and the Official Committee of Unsecured Creditors (the Committee ) hereby submit this joint motion (the Joint Motion ) requesting entry of an order, substantially in the proposed form annexed hereto as Exhibit A (the Approval Order ), pursuant to sections 105(a), 305(a), and 1112(b) of the Bankruptcy Code 1 (i) approving procedures for (a) the dismissal of the Debtor s chapter 11 case, (b) the reconciliation, resolution and allowance of unsecured claims against the Debtor and the making of distributions to holders of such allowed claims, and (c) the disallowance of certain Gift Card 1 Terms used in the introductory paragraphs hereof but not defined shall have the meanings ascribed to them below.

10 Claims and (ii) granting certain related relief. In support of this Joint Motion, the Debtor and the Committee respectfully represent as follows INTRODUCTION 1. By this Joint Motion, the Debtor and the Committee seek authorization to implement a process to conclude this case in chapter 11. Although the liquidation sale of substantially all of the Debtor s assets did not render this estate administratively solvent, administrative solvency was achieved through a number of successful actions taken by the Debtor. The primary achievement of the Debtor was its prosecution of a fraudulent transfer action against TSIC s founder and former chief executive officer which resulted in a payment to the estate of over $3 million. Additional actions undertaken by the Debtor to maximize value for its creditors include negotiating settlements with TSIC s administrative creditors in order to reduce the potential liability therefor on the agreed terms, numerous settlements of certain of the largest preference actions, and collecting tax and debit balance refunds. Notwithstanding these efforts, however, TSIC lacks sufficient funds to pay its priority creditors in full and, accordingly, will not be in a position to satisfy the plan confirmation requirements of section 1129 of the Bankruptcy Code. In such circumstances the relief requested in the Joint Motion is appropriate and in the best interests of the chapter 11 case. 2. As of the filing of this Joint Motion, those of the Debtor s administrative creditors with allowed claims and those of the Debtor s priority creditors who will receive a distribution in this case have been paid in full, or will be paid in full prior to the conclusion of this chapter 11 case. 2 All of the Debtor s assets have been liquidated and all adversary 2 The estate will lack sufficient funds to pay in full those claims of the professionals in this chapter 11 case. Accordingly, it will be necessary to reduce amounts paid on account of professional fees approved by the Court by the amount of the shortfall on a pro rata basis. WCSR V2 2

11 proceedings commenced by the Debtor have been resolved. Because there are no viable assets remaining for a chapter 7 trustee to marshal or monetize and no estate funds available for distribution to unsecured creditors, the best interests of this estate will be served through an orderly dismissal of TSIC s chapter 11 case. Conversion to chapter 7 would result in the unnecessary accrual of chapter 7 administrative expenses to the detriment of the Debtor s chapter 11 creditors. 3. The Committee joins the Debtor s belief that the best interests of TSIC s estate will be served by an orderly dismissal process. As described more fully below, Committee counsel is presently holding $500,000 of non-estate funds in escrow relating to the settlement of the Committee s objection to the sale of the Debtor s intellectual property and other assets. Pursuant to the Court s order approving that settlement, Committee counsel continues to hold these funds in escrow for the sole and exclusive benefit of TSIC s general unsecured creditors. Given the enormous size of the estimated $160 million allowed unsecured claims pool and the comparatively miniscule amount of funds available for distribution to unsecured creditors, the Debtor and Committee submit that the best interests of this estate will be served by (a) an informal unsecured claims resolution process that strikes a fair balance between the due process rights of unsecured claim holders and the economic realities of this case and (b) the making of distributions by Committee counsel to holders of such allowed unsecured claims in accordance with the guidelines set forth herein. Following the making of unsecured creditor distributions, the Debtor and Committee propose that a final professional fee hearing be scheduled and this chapter 11 case be promptly dismissed thereafter. WCSR V2 3

12 JURISDICTION 4. The Court has jurisdiction to consider the Joint Motion pursuant to 28 U.S.C. 157 and This matter is a core proceeding pursuant to 28 U.S.C. 157(b). Venue is proper before this Court pursuant to 28 U.S.C and The basis for relief requested herein is 105(a), 305(a), and 1112(b) of title 11 of the United States Code (the Bankruptcy Code ). BACKGROUND a. The Chapter 11 Filing 5. On February 19, 2008, TSIC filed a voluntary petition for relief with the Court under chapter 11 of the Bankruptcy Code. Pursuant to sections 1107 and 1108 of the Bankruptcy Code, the Debtor continues to manage its assets and properties as debtor-inpossession. No trustee or examiner has been appointed in this case. 6. On February 27, 2008, the Office of the United States Trustee for the District of Delaware (the U.S. Trustee ) appointed the statutory committee of unsecured creditors pursuant to section 1102 of the Bankruptcy Code. The Committee consists of the following seven members (i) Dixie M. Garner in her capacity as class representative; (ii) Simon Property Group, Inc.; (iii) United Parcel Service; (iv) TomTom, Inc.; (v) Quebecor World (USA) Inc.; (vi) Ion Audio, LLC; and (vii) General Growth Properties, Inc. b. Asset Sales and Creation of GUC Escrow Account 7. On March 4, 2008, the Debtor filed its Motion For an Order Approving Auction Procedures, Liquidation Agreement, Store Closing Sales, and Related Relief (D.I. No. 135), pursuant to which TSIC sought, inter alia, authorization to liquidate 96 of its 184 stores and one of its distribution centers through store closing sales to be conducted by the successful bidder at a public auction (the Store Closing Sales ). On March 12, 2008, the Court entered an WCSR V2 4

13 Order authorizing, inter alia, TSIC to hold a public auction for the right to conduct the Store Closing Sales and establishing procedures for the bidding and conduct of the auction (D.I. No. 244). Following the auction and a sale hearing held on March 14, 2008, this Court entered an Order (D.I. No. 271) approving the liquidation agreement between the Debtor and the successful auction bidder (a joint venture comprised of Hilco Merchant Resources LLC and Gordon Brothers Retail Partners LLC (the Joint Venture )) and authorizing the conduct of store closing sales. 8. On April 25, 2008, TSIC filed its Motion For Order Approving Procedures For Sale Of Assets Of Debtor And Other Related Relief (the Sale Motion ) (D.I. No. 469), pursuant to which it sought authorization to, inter alia, establish an orderly process for the sale of its remaining assets, including, without limitation, its trade name and other intellectual property (collectively, the IP ), its unexpired leases of non-residential real property and its remaining inventory. Subsequent to the filing of the Sale Motion, TSIC received bids from multiple prospective purchasers and, with the support of the Committee, entered into that certain Asset Purchase Agreement (the Initial Stalking Horse Agreement ) with the Joint Venture, dated as of May 13, An auction (the Auction ) for the sale of the Debtor s remaining assets was set to commence on May 28, On the eve of the Auction, however, certain legal issues arose concerning the transfer and use of the IP. As a result of these unresolved issues, the Debtor and the Joint Venture executed a revised stalking horse agreement (the Revised Stalking Horse Agreement ) on the evening of May 28, 2008, and adjourned and continued the Auction to May 29, 2008, in order to provide other bidders with an opportunity to submit a higher or better offer. WCSR V2 5

14 The Revised Stalking Horse Agreement contemplated a purchase price that was approximately $8 million less than the purchase price contemplated by the Initial Stalking Horse Agreement. 10. During the negotiation of the Revised Stalking Horse Agreement and following its execution, the Committee advised TSIC and the Joint Venture that it was prepared to file an objection to the Revised Stalking Horse Agreement (and/or sale of the Debtor s assets for any amount less than the purchase price contemplated by the Initial Stalking Horse Agreement) on the ground that any such sale would yield no benefit to the estate insofar as it would substantially reduce or quite possibly altogether eliminate any potential distribution to general unsecured creditors. At the conclusion of the Auction, the Joint Venture s final bid (a modification of the Revised Stalking Horse Agreement) was selected by TSIC as the highest and best offer for the sale of the Debtor s assets. Following substantial negotiations, the Committee agreed to resolve its objection to the sale transaction in exchange for the Joint Venture s agreement to transfer into an escrow account created and maintained by Cooley LLP, as counsel to the Committee, for the exclusive benefit of the Debtor s general unsecured creditors (the GUC Escrow Account ) an amount equal to the lesser of (i) $500,000 or (ii) 10% of the gross royalties earned and ultimately paid for the period of January 1, 2009 through December 31, 2009, in connection with the IP acquired from the Debtor in the sale transaction (excluding advances other than advances credited against royalties earned for calendar year 2009). 11. The resolution between the Committee and the Joint Venture was later memorialized in a May 29, 2008 letter agreement (the Letter Agreement ) annexed to the Committee s Motion Pursuant to Section 105(a) of the Bankruptcy Code and Bankruptcy Rule 9019 for Entry of an Order Approving Letter Agreement Between the Official Committee of Unsecured Creditors and the Joint Venture (the 9019 Motion ) (D.I. 907). On May 30, 2008, WCSR V2 6

15 the Court entered the Order Approving Asset Purchase Agreement, Agency Agreement, Store Closing Sales, And Related Relief (D.I. No. 763), pursuant to which the Court approved the sale of the Debtor s inventory and IP to the Joint Venture. On July 10, 2008, the U.S. Trustee filed an objection to the 9019 Motion, pursuant to which it argued, inter alia, that the proposed resolution of the Committee s sale objection ran afoul of the absolute priority rule of the Bankruptcy Code. On August 18, 2008, the Court published its Memorandum Opinion denying the U.S. Trustee s objection, granting the 9019 Motion and approving the Letter Agreement. In re TSIC, Inc. f/k/a Sharper Image Corp., 393 B.R. 71 (Bankr. D. Del. 2008). Ultimately, the Joint Venture funded the GUC Escrow Account in the amount of $500,000, which funds the Committee now seeks authorization to distribute to general unsecured creditors consistent with the relief requested herein. 12. As a result of the consummation of the sale of substantially all of the Debtor s assets, the Debtor has no further business to conduct and has been winding down its estate. c. Administrative Solvency and Wind-Down Efforts 13. Following the consummation of the asset sales discussed above, TSIC concentrated its efforts on two main tasks ensuring administrative solvency to maximize creditor recoveries and winding down the estate. To accomplish these tasks TSIC, among other things, commenced an adversary proceeding against TSIC s founder and former chief executive officer Richard Thalheimer pursuant to 11 U.S.C. 548(a)(1)(B)(ii)(IV) of the Bankruptcy Code which resulted in a settlement payment to the estate in the amount of $3,330,000. In addition, TSIC negotiated settlements with many of its administrative creditors, thereby reducing the estate s liabilities with respect to its administrative claims. TSIC also addressed certain of its priority creditors through the satisfaction of priority wage claims pursuant to section 507(a)(4) of WCSR V2 7

16 the Bankruptcy Code and by establishing procedures to identify and make distributions to gift card holders pursuant to section 507(a)(7) of the Bankruptcy Code. 14. In addressing one of the estate s largest unsecured claims the $767 million unsecured class claim filed by the class representatives of the certified consumer class action styled Potter v. Sharper Image Corporation, Case No. CGC the Committee reached a settlement on behalf of TSIC with the Potter class representatives. Pursuant to the settlement, a distribution to the Potter class will be made in the amount of $200,000 from the GUC Escrow Account at the same time that the distributions are made to all other general unsecured creditors (the Allowed Potter Class Claim ). In addition to settling the Potter class claim, the Debtor s and the Committee s professionals have devoted significant time and resources to the reconciliation of other outstanding unsecured claims against the Debtor. Based upon their review and analysis of the claims filed, the Debtor and the Committee estimate that there is approximately $160 million in outstanding valid unsecured indebtedness chargeable to the estate, inclusive of the Allowed Potter Class Claim. 15. As noted above, notwithstanding these wind-down efforts, TSIC lacks sufficient funds to pay its priority creditors in full and, accordingly, moves for a structured dismissal of its chapter 11 case. RELIEF REQUESTED 16. TSIC requests that the Court approve the below described procedures for the dismissal of the Debtor s chapter 11 case, the distribution of certain funds to holders of allowed unsecured claims, and the disallowance of certain gift card claims. Granting the relief requested in the Joint Motion will result in prompt resolution of the estate which will minimize the burden on the Court and the parties of holding open the case. To be clear, entry of the WCSR V2 8

17 Approval Order granting the relief requested in the Joint Motion will not dismiss this chapter 11 case. Rather, the Approval Order authorizes procedures to implement a structured dismissal. Once the procedures are complete, TSIC will submit the proposed Dismissal Order (defined below) to effectuate the dismissal of the case. 17. The Debtors have approximately $875,000 in unencumbered assets. See Declaration of Kevin J. Palmer attached hereto as Exhibit 1 (the Palmer Declaration ). After review by both the Debtor and the Committee, other than the receivables, TSIC does not believe there are any other viable sources of recovery for this estate including chapter 5 avoidance actions. 18. The Debtor is not aware of any allowable outstanding administrative expense claims other than accrued and accruing wind-down costs (detailed below), U.S. Trustee fees, and professional fee claims. TSIC accrues approximately $23,000 per month in payroll, rent, storage, phone and web obligations (the Wind-Down Expenses ). In addition, TSIC anticipates making the following estimated one time payments (the Final Expenses ) upon dismissal of the case (i) $50,000 for document destruction, (ii) $15,000 for preparing and filing a final tax return, and (iii) $100,000 as an incentive bonus. 3 With respect to professional fee claims, the Debtor estimates that, including holdbacks, there will be in excess of approximately $900,000 in fee claims at the conclusion of this case. 19. In addition to the amounts listed above, there are asserted priority tax claims of approximately $1,500,000. As previously noted, general unsecured claims are estimated to be $160 million. While TSIC has satisfied its priority wage claims and priority gift card claims, there is simply not enough cash left in the estate to satisfy claims junior in priority 3 An incentive bonus of $100,000 to be paid to Kevin Palmer was approved by this Court on October 22, 2008 (D.I. No. 1430). WCSR V2 9

18 under section 507 of the Bankruptcy Code, including priority tax claims, or general unsecured claims (other than payment of such claims using funds held in the GUC Escrow Account pursuant to the procedures described below). Indeed, there will be insufficient cash in the estate to pay professional fee claims in full. 20. As demonstrated by the above discussion, it is practically and economically impossible to confirm a chapter 11 plan. The only two alternatives are dismissal of the case or conversion to a chapter 7. Conversion to chapter 7 benefits no creditor or other party in this case. The unencumbered cash would be consumed to pay chapter 7 administrative expenses. All a chapter 7 conversion would do is diminish funds available for wind-down expenses and professional fee claims. TSIC believes a better solution is to undertake a structured dismissal of this case while respecting the priority scheme of the Bankruptcy Code in the distribution of the remaining unencumbered funds in the estate. 21. In order to effectuate the dismissal, TSIC needs to distribute its cash in accordance with the priority of claims under the Bankruptcy Code. Because there is insufficient cash to make distributions to priority creditors, the only distributions to be made are on account of (i) Wind-Down Expenses, (ii) U.S. Trustee fees, (iii) professional fee claims, (iv) Final Expenses, and (v) general unsecured claims. Distributions on account of Wind-Down Expenses and U.S. Trustee Fees will be made in the ordinary course until the Dismissal Order is entered. Professional fee claims will be paid upon entry of an order approving final fee applications prior to the dismissal of this case. Final Expenses will be paid upon entry of the Dismissal Order. Finally, general unsecured claims will be paid prior to entry of the Dismissal Order, pursuant to the below described procedures (a) As noted above, based on their review of the Debtor s books and records, the Debtor and the Committee presently estimate that there is WCSR V2 10

19 approximately $160 million in outstanding valid unsecured indebtedness chargeable to the estate, inclusive of the Allowed Potter Class Claim. The $500,000 maintained in the GUC Escrow Account is the only source of funds available for distribution to general unsecured creditors. Accordingly, subject to Court approval of the relief requested herein, counsel to the Committee proposes to distribute approximately $450,000 4 to holders of Allowed Unsecured Claims (defined below) on a pro rata basis, which includes $200,000 on account of the Allowed Potter Class Claim, thereby resulting in an estimated distribution to holders of Allowed Unsecured Claims of approximately 0.28% of the allowed amount of such claims. 5 (b) (c) Given the enormous size of the unsecured claims pool (only a fraction of which will actually receive a distribution under the circumstances) and the comparatively miniscule amount of funds available for distribution, the Debtor and the Committee submit that the best interests of this estate will be served by a claims resolution process that strikes a fair balance between the due process rights of unsecured claim holders and the economic realities of this case. Accordingly, with respect to those unsecured claims that have not, as of this Joint Motion, been resolved by prior order of the Court, the Debtor and the Committee propose that the claim amount asserted by a person or entity (each a Claimant ) who has filed an unsecured claim (or, in the absence of a filing, the claim as provided on the Debtor s schedules) be deemed the allowed amount of such claim for purposes of the distribution to be made from the GUC Escrow Account (each an Allowed Unsecured Claim ). A schedule identifying the Claimants and the amounts of their proposed Allowed Unsecured Claims (the Claim Schedule ) is annexed hereto as Exhibit B. If a Claimant or other party (a) disputes the amount of the Allowed Unsecured Claim set forth on the Claim Schedule or (b) wishes to assert a claim that is not reflected on the Claim Schedule, such Claimant or other party (an Objecting Party ) shall be encouraged to contact counsel for the Committee informally and attempt to resolve its dispute amicably, without the need to file a formal claim or objection. 6 4 The Committee seeks authorization to reserve $50,000 from the GUC Escrow Account to pay the fees and expenses of Committee counsel incurred in connection with the preparation and prosecution of the Joint Motion, as well as the services to be rendered in connection with the making of distributions from the GUC Escrow Account and dismissal of this chapter 11 case, which fees and expenses will not be paid from estate funds as previously agreed upon by the parties. 5 To the extent that the amount of the Allowed Unsecured Claims exceeds the estimate of the Debtor and the Committee, the distribution made to holders of Allowed Unsecured Claims may be less than the estimated distribution. 6 Committee counsel should be contacted by at dkatz@cooley.com or by phone at (212) WCSR V2 11

20 (d) (e) (f) (g) If an Objecting Party nevertheless wishes to file a formal claim or objection, the Debtor and Committee propose that any such Objecting Party be required to file such claim or objection with the Court, together with documentation supporting its claim or objection (each a Claim Objection ) on or before the deadline to be set by the Court in the Approval Order (the Objection Deadline ) and serve such Claim Objection on counsel for the Debtor and the Committee so as to be received by the Objection Deadline. In any Claim Objection, the Objecting Party must state the grounds for its objection clearly and with particularity. The Committee seeks authority to resolve any Claim Objection without further order of the Court. If counsel for the Committee and the Objecting Party cannot agree on a resolution, then an omnibus hearing to consider any and all Claim Objections filed will be held on a date to be provided by the Court in the Approval Order (the Claims Hearing ). In the event that no Claim Objection is filed, or if all Claim Objections have been resolved prior to the Claims Hearing, counsel to the Committee will file with the Court a Certification of Counsel and Proposed Order Authorizing Distribution on Account of Allowed Unsecured Claims, substantially in the form annexed hereto as Exhibit C (the Distribution Order ). The Distribution Order will (a) highlight any modifications made to the Claim Schedule, if any, to reflect agreements reached to resolve any formal or informal Claim Objections, (b) authorize Committee counsel to make distributions on account of the Allowed Unsecured Claims identified in the Claim Schedule annexed to the Distribution Order, and (c) schedule a final fee hearing. In the event that one or more Claim Objections is filed and not resolved prior to the Claims Hearing, counsel to the Committee will submit to the Court a proposed Distribution Order promptly following the Court s ruling on such Claim Objection(s). The Debtor and Committee hereby seek a determination from the Court that any Claimant or other interested party who does not timely file a Claim Objection shall be barred from subsequently asserting an unsecured claim against the Debtor or from challenging the proposed Allowed Unsecured Claim amounts set forth in the Claim Schedule. In order to effectuate the foregoing claims resolution process (the Claims Resolution Process ), the Debtor and Committee request that the Court waive, to the extent otherwise applicable, the requirements of Rule 3007 of the Federal Rules of Bankruptcy Procedure (the Bankruptcy Rules ) and Rule of the Local Rules of Bankruptcy Practice and Procedure of the United States Bankruptcy Court for the District of Delaware (the WCSR V2 12

21 Local Rules ) with regard to substantive claims objections and omnibus claims objections. 7 (h) Distributions on account of Allowed Unsecured Claims will be made by Committee counsel from the funds held in the GUC Escrow Account within 30 days of the Court s entry of the Distribution Order. 22. Given the minimal amount of funds available for distribution ($450,000), the considerable size of the claims pool (approximately $160 million) and the estimated distribution percentage, the Debtor and Committee respectfully request that the Court approve the following guidelines governing distributions on account of Allowed Unsecured Claims (a) (b) Committee counsel shall be authorized to make a single distribution to creditors of the funds held in the GUC Escrow Account. Committee counsel shall withhold from making any distribution on account of an Allowed Unsecured Claim where such distribution would be for the amount of less than $50 (the Distribution Threshold ). (c) Any distributed check that has not been claimed and/or cashed within 60 days after distribution of the check (the Check Cashing Period ) shall be deemed void and the distribution on account of such claim shall be deemed forfeited by the creditor. (d) (e) Any funds remaining in the GUC Escrow Account after the expiration of the Check Cashing Period and funds not distributed because distribution amounts fell below the Distribution Threshold shall be remitted to the Debtor to be used to pay any administrative and/or priority claims not otherwise paid from estate funds. The Committee seeks authorization to reserve $50,000 from the GUC Escrow Account to pay the fees and expenses of Committee counsel incurred in connection with the preparation and prosecution of this Joint Motion, as well as the services to be rendered in connection with the 7 This Court has previously granted relief from Local Rule where circumstances have warranted, and is well authorized to approve appropriate procedures that further the fair and efficient administration of this estate and conclusion of this chapter 11 case. See In re G.I. Joe s Holding Corp., et al., Case No (KG), Docket No. 735 (Bankr. D. Del. 2011) (granting relief from Local Rule to allow estate representatives to administer informal claims resolution process in connection with chapter 11 dismissal); In re Mervyn s Holdings, LLC, et al., Case No (KG), Docket No (Bankr. D. Del. 2010) (granting debtors relief from Local Rule with respect to omnibus objections to claims on substantive grounds); In re KB Toys, Inc., Case No , Docket No. 914 (Bankr. D. Del. 2009) (granting relief from Local Rule to allow debtors to administer similar informal claims resolution process in furtherance of orderly chapter 11 dismissal). WCSR V2 13

22 making of distributions from the GUC Escrow Account and dismissal of this chapter 11 case, which fees and expenses will not be paid from estate funds as previously agreed upon by the parties. 23. Because available funds are severely limited, this estate cannot afford an extensive unsecured claims resolution process that would serve to reduce the already limited estate funds available to pay administrative creditors. This is true regardless of whether this case is concluded by a structured dismissal, as the Debtor and Committee submit is in the best interests of this estate, or if this case were to be converted to chapter 7 in the alternative. Because the Debtor and Committee propose to accept the unsecured claim amounts asserted by Claimants for purposes of allowance and distribution from the GUC Escrow Account, it is not anticipated that a significant number of objections to the Claim Schedule will be filed or even raised informally. Moreover, as noted above, the Debtor s and the Committee s professionals have spent considerable time and effort working with holders of certain of the largest unsecured claims against the Debtor and have reached consensual resolutions concerning these claim allowances. 24. In addition to the above described Claims Resolution Process, the Joint Motion seeks disallowance of certain gift card claims. A schedule identifying such gift cards is annexed hereto as Exhibit D (the Disallowed Gift Card Schedule ). The Disallowed Gift Card Schedule includes, among other things, the claim number, the name of the claimant, the claim amount as filed, and the reason for disallowance of the claim. As set forth on the Disallowed Gift Card Schedule, the reason for disallowance of the claims is that they are attributable to either merchandise certificates or rewards cards and, pursuant to order of the Court, not eligible to receive distributions. 8 8 This Court disallowed certain gift card claims pursuant to its Order Approving Gift Card Distribution Proposal dated May 16, 2012 (D.I. No. 2436). Since entry of that order, TSIC has become aware of WCSR V2 14

23 25. If a claimant wishes to object to the treatment of its claim as set forth on the Disallowed Gift Card Schedule, such claimant must file an objection with the Court on or before the deadline set by the Court in the Approval Order (the Disallowed Gift Card Claim Objection Deadline ) and serve such objection on counsel to the Committee and the Debtor by the Disallowed Gift Card Claim Objection Deadline. 9 In the event an objection (the Gift Card Objections ) is filed and not resolved, then an omnibus hearing to consider any and all Gift Card Objections will be held on a date to be provided by the Court in the Approval Order (the Gift Card Claims Hearing ). In the event that no Gift Card Objection is filed, or if all Gift Card Objections have been resolved prior to the Gift Card Claims Hearing, counsel to the Debtor will file with the Court a Certification of Counsel and Proposed Order Disallowing the Gift Card Claims, substantially in the form annexed hereto as Exhibit E (the Gift Card Disallowance Order ). The Gift Card Disallowance Order will (a) highlight any modifications made to the Disallowed Gift Card Schedule, if any, to reflect agreements reached to resolve any formal or informal Gift Card Objections. The Debtor hereby seeks a determination from the Court that any claimant or other interested party who does not timely file a Gift Card Objection shall be barred from subsequently asserting a claim based on a gift card against the Debtor. The Debtor requests that the Court waive, to the extent otherwise applicable, the requirements of Bankruptcy Rule 3007 and Local Rule with regard to substantive claims objections and omnibus claims objections. additional gift card claims that must be disallowed because such claims have been filed on account of either merchandise certificates or rewards cards. 9 To the extent gift card claim filers have already submitted an objection in connection with the Debtor s Motion for Order Pursuant to Section 105(a) of the Bankruptcy Code Authorizing Payment of Gift Card Claims and Gift Card Class Counsel Fees and Expenses (D.I. No. 2441), such objections have been preserved and no further objection need be submitted by those objectors. WCSR V2 15

24 26. After the above described gift card claims disallowance process and Claims Resolution Process has been completed, all distributions have been made, final fee and expense applications have been adjudicated and all accrued and as yet unpaid fees owing to the U.S. Trustee have been paid, TSIC and the Committee request that the Court enter an order, substantially in form annexed hereto as Exhibit F (the Dismissal Order ), upon the filing of a certification of counsel and request for entry of a dismissal order, substantially in the form annexed hereto as Exhibit G (the Certification of Counsel and Request for Dismissal ). The Certification of Counsel and Request for Dismissal will, among other things, (a) verify that distributions on account of Allowed Unsecured Claims were made by Committee counsel, (b) confirm that all accrued U.S. Trustee fees have been paid and (c) request entry of the Dismissal Order. APPLICABLE AUTHORITY a. Dismissal of This Case Is Warranted Under Section 1112(b) of the Bankruptcy Code 27. Under section 1112(b) of the Bankruptcy Code, a court shall convert a case under this chapter to a case under chapter 7 or dismiss a case under this chapter, whichever is in the best interests of creditors and the estate, for cause. 11 U.S.C. 1112(b) (emphasis added); In re Albany Partners, Ltd., 749 F.2d 670, 674 (11th Cir. 1984); In re Blunt, 236 B.R. 861, 864 (Bankr. M.D. Fla. 1999). A determination of cause is made by the court on a case-bycase basis. Albany Partners, 749 F.2d at 674. The decision to dismiss or convert a case is particularly delegated to the bankruptcy court s sound discretion. See In re Camden Ordinance Mfg. Co. of Arkansas, Inc., 1999 WL , at *2 (Bankr. E.D. Pa. July 21, 1999) (citing In re Atlas Supply Corp., 837 F.2d 1061, 1063 (5th Cir. 1988)). Therefore, it is clear that the Court is authorized to dismiss TSIC s chapter 11 case upon a showing of cause. WCSR V2 16

25 28. Case law interpreting section 1112(b) of the Bankruptcy Code indicates that a court has wide discretion to use its equitable powers to dispose of a debtor s case. In re Preferred Door Co., 990 F.2d 547, 549 (10th Cir. 1993) (stating that a court has broad discretion to dismiss a bankruptcy case); In re Sullivan Cent. Plaza I, Ltd., 935 F.2d 723, 728 (5th Cir. 1991) (stating that a determination of whether cause exists under section 1112(b) of the Bankruptcy Code rests in the sound discretion of the bankruptcy court); In re Koerner, 800 F.2d 1358, 1367 & n.7 (5th Cir. 1986) (stating that a bankruptcy court is afforded wide discretion under section 1112(b) of the Bankruptcy Code); Albany Partners, 749 F.2d at 674 (same). 29. Section 1112(b) of the Bankruptcy Code provides a nonexclusive list of 16 grounds for dismissal. 11 U.S.C. 1112(b)(4)(A)-(P); Frieouf v. U.S., 938 F.2d 1099, 1102 (10th Cir. 1991) (stating that section 1112(b) of the Bankruptcy Code s list is nonexhaustive); In re Blunt, 236 B.R. at 864 (same). One such ground is where a party-in-interest establishes that there is an inability to effectuate substantial consummation of a confirmed plan [of reorganization] U.S.C. 1112(b)(2)(A); Preferred Door Co., 990 F.2d at 549; Sullivan Cent. Plaza I, 935 F.2d at 728. Inability to effectuate a plan arises when a debtor lacks the capacity to formulate a plan or carry one out or where the core for a workable plan of reorganization does not exist. See Preferred Door, 990 F.2d at 549 (quoting Hall v. Vance, 887 F.2d 1041, 1044 (10th Cir. 1989)) (finding an inability to effectuate a plan arises where debtor lacks capacity to formulate a plan or carry one out); In re Blunt, 236 B.R. at 865 (finding cause to dismiss debtor s case under section 1112(b)(2) of the Bankruptcy Code where core for 10 In addition to the Debtor, the Committee is a party-in-interest in the Debtor s chapter 11 case. 11 U.S.C. 1109(b); In re Piper Aircraft Corp., 244 F.2d 1289, 1303 n.11 (11th Cir. 2001) (finding that a creditors committee is a party in interest in a chapter 11 proceeding). WCSR V2 17

26 a workable plan of reorganization found to be nonexistent). Accordingly, the Court may dismiss the Debtor s chapter 11 case because the Debtor is unable to effectuate a plan. 30. As explained above, it is simply not possible for TSIC to confirm a chapter 11 plan because TSIC has liquidated all of its assets, wound down its estate, has no business to reorganize and there are insufficient funds available to confirm a plan of liquidation while satisfying the Bankruptcy Code s confirmation requirement that certain administrative expense and priority claims be paid in full under a chapter 11 plan. See Palmer Declaration at 5. By continuing in bankruptcy, the Debtor would likely incur additional administrative expenses beyond its ability to pay. In sum, the Debtor has met its burden of proof to show that cause exists to dismiss this chapter 11 case under section 1112(b) of the Bankruptcy Code due to its inability to effectuate a plan of reorganization. 31. Once a court determines that cause exists to dismiss a chapter 11 case, the court must also evaluate whether dismissal is in the best interests of the estate and creditors. See In re Superior Sliding & Window, Inc., 14 F.3d 240, 243 (4th Cir. 1994); In re Mazzocone, 183 B.R. 402, 411 (Bankr. E.D. Pa. 1995); In re Warner, 83 B.R. 807, 809 (Bankr. M.D. Fla. 1988). A variety of factors demonstrates that it is in the best interests of the Debtor s estate and creditors to dismiss this chapter 11 case and authorize the relief sought herein. 32. The dismissal of a debtor s chapter 11 case meets the best interests of creditors test where a debtor has nothing left to reorganize and the debtor s assets are fixed and liquidated. See In re BTS, Inc., 247 B.R. 301, 310 (Bankr. N.D. Okla. 2000); In re Camden Ordinance Mfg. Co. of Arkansas, Inc., 245 B.R. 794, 799 (E.D. Pa. 2000) (finding that a reorganization to salvage a business which ceased doing business was not feasible); In re Brogdon Inv. Co., 22 B.R. 546, 549 (Bankr. N.D. Ga. 1982) (dismissing chapter 11 case in part WCSR V2 18

27 where there was simply nothing to reorganize and no reason to continue the reorganization). As noted above, the Debtor has nothing left to reorganize, as virtually all of the Debtor s assets have been liquidated. Additionally, dismissal of this chapter 11 case is warranted because the alternative conversion to chapter 7 would not serve the best interests of the Debtor s estate and creditors, because it would significantly deplete the already limited funds available to pay the Debtor s administrative expenses by virtue of the fact that chapter 7 administrative accruals enjoy priority in payment over chapter 11 administrative claims. One element of the best interests test focuses on whether the economic value of the estate is greater inside or outside of bankruptcy. In re Clark, 1995 WL , at *5 (N.D. Ill. Aug. 17, 1995); In re Staff Inv. Co., 146 B.R. 256, 261 (Bankr. E.D. Cal. 1993). The prime criterion for assessing the best interests of the estate is the maximization of value as an economic enterprise. See id. Here, dismissal will maximize the value of the Debtor s estate because conversion to chapter 7 would impose substantial and unnecessary additional administrative costs upon TSIC with no hope that this estate and creditors would receive more consideration than provided under the Joint Motion. Simply put, there is nothing for a chapter 7 trustee to do here. 33. Numerous courts, both in this district and throughout the country, have approved orderly dismissals under similar circumstances to the Debtor s case, where the debtor lacks the requisite financial ability to confirm a chapter 11 plan and/or where the costs associated with plan confirmation would eliminate the possibility of a meaningful creditor recovery. See, e.g., In re Beacon Power Corp., et. al., Case No , Docket No. 341 (Bankr. D. Del. 2012); In re G.I. Joe s Holding Corp and G.I. Joe s, Inc., Case No , Docket Nos. 753, 773 (Bankr. D. Del. 2011); In re KB Toys, Inc., Case No , Docket No. 914 (Bankr. D. Del. 2009); In re CFM U.S. Corporation, et. al., Case No , Docket No (Bankr. WCSR V2 19

28 D. Del. 2009); In re Wickes Holdings, LLC, et al., Case No , Docket No (Bankr. D. Del. 2009); In re Bag Liquidation, Ltd, Case No , Docket No. 688 (Bankr. N.D. Tex. 2009); In re Levitz Home Furnishings, Inc., et. al., Case. No , Docket No (Bankr. S.D.N.Y. 2008). b. Dismissal of This Case Is Warranted Under Section 305(a)(1) of the Bankruptcy Code 34. Alternatively, cause exists to dismiss this chapter 11 case pursuant to section 305(a) of the Bankruptcy Code, which provides, in pertinent part (a) The court, after notice and a hearing, may dismiss a case under this title or may suspend all proceedings in a case under this title, at any time if 11 U.S.C. 305(a). (1) the interests of creditors and the debtor would be better served by such dismissal or suspension; In applying section 305(a), courts have considered a wide range of factors, including, but not limited to (1) economy and efficiency of administration; (2) whether federal proceedings are necessary to reach a just and equitable solution; (3) whether there is an alternative means of achieving an equitable distribution of assets; and (4) whether the debtor and the creditors are able to work out a less expensive out-of-court arrangement which better serves the interests in the case. See In re Crown Village Farm, LLC, Case No (KG), 415 B.R. 86, 97 (Bankr. D. Del. 2009) (enumerating 305(a) factors and denying motion only because dismissal or abstention would have a deleterious effect on the administration of the debtor s chapter 11 case which would languish while core issues were tried elsewhere ); see also In re Mazzocone, 200 B.R. WCSR V2 20

29 568, 575 (E.D. Pa. 1996). However, the exact factors to be considered and the weight to be given to each of them is highly sensitive to the facts of each individual case. Mazzocone, 200 B.R. at Dismissal of this case is warranted under section 305(a)(1) for the same reasons that cause exists to dismiss this case pursuant to section 1112(b) dismissal of the case will effectuate an efficient administration of this estate and represents the least expensive and most equitable alternative for the distribution of assets. Indeed, courts have approved dismissals similar to that proposed by the instant Joint Motion under section 305(a) of the Bankruptcy Code. See, e.g. In re Beacon Power Corp., et. al., Case No (KJC), Docket No. 341 (Bankr. D. Del. 2012); In re CSI, Inc., et al., Case No (REG), Docket No. 284 (Bankr. S.D.N.Y. 2006). 36. The relief requested herein represents the parties negotiated resolution of this chapter 11 case. Authorizing the distributions contemplated herein and allowing the dismissal of this chapter 11 case furthers the efficient administration of the Debtor s estate and maximizes value. NOTICE 37. Notice of the hearing on this Joint Motion will be given to (a) the U.S. Trustee, (b) the Claimants, (c) those claimants listed on the Disallowed Gift Card Schedule, (d) those entities who asserted administrative claims against the Debtor not otherwise adjudicated by the Court, (e) parties that have requested service of papers pursuant to Bankruptcy Rule 2002, (f) all claimants whose claims have not been adjudicated by order of this Court, (g) the Securities and Exchange Commission, and (h) the Internal Revenue Service. The Debtor and Committee respectfully submit that no other or further notice is required. WCSR V2 21

30 NO PRIOR REQUEST 38. No prior request for the relief sought in this Joint Motion has been made to this or any other Court. WHEREFORE the Debtor and the Committee respectfully request that the Court enter an order, substantially in the form annexed hereto as Exhibit A, granting the relief requested herein and such other and further relief as the Court deems just and proper. Dated July 16, 2012 Wilmington, Delaware WOMBLE CARLYLE SANDRIDGE & RICE PLLC /s/ Steven K. Kortanek Steven K. Kortanek (Del. Bar No. 3106) Ericka F. Johnson (Del. Bar No. 5024) 222 Delaware Avenue, Suite 1501 Wilmington, Delaware Telephone (302) Facsimile (302) WEIL, GOTSHAL & MANGES LLP Harvey R. Miller 767 Fifth Avenue New York, New York Telephone (212) Facsimile (212) Counsel for the Debtor WHITEFORD TAYLOR & PRESTON LLP /s/ Thomas J. Francella Thomas J. Francella (Del. Bar No. 3835) Renaissance Centre 405 King Street, Suite 500 Wilmington, Delaware Telephone (302) Facsimile (302) and- -and- COOLEY LLP Lawrence C. Gottlieb (LG 2565) Jay R. Indyke (JI 0353) Richard Kanowitz (RK 0677) Seth Van Aalten (SV 2663) 1114 Avenue of the Americas New York, New York Telephone (212) Facsimile (212) Counsel for Official Committee Of Unsecured Creditors WCSR V2 22

31 EXHIBIT A Approval Order WCSR V2

32 IN THE UNITED STATES BANKRUPTCY COURT FOR THE DISTRICT OF DELAWARE x In re Chapter 11 TSIC, Inc. f/k/a Sharper Image Corporation, 1 Case No (KG) Debtor. Related Docket No x ORDER GRANTING JOINT MOTION OF THE DEBTOR AND THE OFFICIAL COMMITTEE OF UNSECURED CREDITORS, PURSUANT TO SECTIONS 105(a), 305(a), AND 1112(b) OF THE BANKRUPTCY CODE, FOR ENTRY OF AN ORDER (I) APPROVING PROCEDURES FOR (A) THE DISMISSAL OF THE DEBTOR S CHAPTER 11 CASE, (B) THE DISTRIBUTION OF CERTAIN FUNDS TO HOLDERS OF ALLOWED UNSECURED CLAIMS, AND (C) THE DISALLOWANCE OF CERTAIN GIFT CARD CLAIMS AND (II) GRANTING CERTAIN RELATED RELIEF Upon the joint motion (the Joint Motion ) of TSIC, Inc., f/k/a Sharper Image Corporation, as debtor and debtor-in-possession in the above-captioned chapter 11 case (the Debtor ) and the Official Committee of Unsecured Creditors (the Committee ), pursuant to sections 105(a), 305(a), and 1112(b) of the Bankruptcy Code, for the entry of an order (I) approving procedures for (a) the dismissal of the Debtor s chapter 11 case, (b) the reconciliation, resolution and allowance of unsecured claims against the Debtor and the making of distributions to holders of such allowed claims, and (c) the disallowance of certain gift card claims and (II) granting certain related relief; and this Court having reviewed the Joint Motion and the Palmer Declaration 2 and having conducted a hearing on the Joint Motion, at which time the Debtor, the Committee and all parties-in-interest were given an opportunity to be heard; and 1 The address of the Debtor s principal executive offices is 1255 Treat Blvd, Suite 300, Walnut Creek, California The Debtor s EIN is Capitalized terms used and not defined herein shall have the meanings ascribed to them in the Joint Motion. WCSR V2

33 it appearing that sufficient notice of the Joint Motion having been given to parties-in-interest; and the Court finding that (a) the Court has jurisdiction over this matter pursuant to 28 U.S.C. 157 and 1334 and this is a core proceeding pursuant to 28 U.S.C. 157(b)(2), (b) notice of the Joint Motion and the opportunity for a hearing thereon was adequate and sufficient under the circumstances and no other or further notice need be given, (c) the legal and factual bases set forth in the Joint Motion constitute just cause for the relief granted herein, and (d) the relief requested in the Joint Motion is in the best interests of the Debtor s estate and creditors; and after due deliberation and sufficient cause appearing therefor, it is ORDERED, ADJUDGED AND DECREED THAT 1. The Joint Motion is hereby GRANTED as set forth herein. 2. Counsel for the Committee is authorized to distribute the funds held in the GUC Escrow Account pursuant to the terms of this Order. 3. The following procedures shall govern the reconciliation, resolution and allowance of all unsecured claims asserted against the Debtor and the distributions to be made to holders of Allowed Unsecured Claims (the Claims Resolution Process ) a. with respect to those unsecured claims that have not, as of the Joint Motion, been resolved by prior order of the Court, the claim amount asserted by a person or entity (each a Claimant ) who has filed an unsecured claim (or, in the absence of a filing, the claim as provided on the Debtor s schedules shall be deemed the allowed amount of such claim for purposes of the distribution to be made from the GUC Escrow Account (each an Allowed Unsecured Claim ); WCSR V2 2

34 b. if a Claimant or other party (a) disputes the amount of the Allowed Unsecured Claim set forth on the Claim Schedule or (b) wishes to assert a claim that is not reflected on the Claim Schedule, such Claimant or other party (an Objecting Party ) shall be encouraged to contact counsel for the Committee informally and attempt to resolve its dispute amicably, without the need to file a formal claim or objection; 3 c. if an Objecting Party nevertheless wishes to file a formal claim or objection, the Objecting Party shall be required to file such objection with the Court, together with documentation supporting its claim or objection (each a Claim Objection ) on or before 400 p.m. Eastern Time on, 2012 (the Objection Deadline ) and serve such Claim Objection on counsel for the Debtor and the Committee so as to be received by the Objection Deadline. In any Claim Objection, the Objecting Party must state the grounds for its objection clearly and with particularity; d. the Committee shall be authorized to resolve any Claim Objection without further order of the Court. If counsel for the Committee and the Objecting Party cannot agree on a resolution, then an omnibus hearing to consider any such Claim Objection(s) will be held on, 2012 at Eastern Time (the Claims Hearing ); e. in the event that no Claim Objection is filed, or if all Claim Objections have been resolved prior to the Claims Hearing, counsel to the Committee will file with the Court a Certification of Counsel and Proposed Order 3 Committee counsel should be contacted by at dkatz@cooley.com or by phone at (212) WCSR V2 3

35 Authorizing Distribution on Account of Allowed Unsecured Claims, substantially in the form annexed to the Joint Motion as Exhibit C (the Distribution Order ). The Distribution Order will (a) highlight any modifications made to the Claim Schedule, if any, to reflect agreements reached to resolve any formal or informal Claim Objections (b) authorize Committee counsel to make distributions on account of the Allowed Unsecured Claims identified in the Claim Schedule annexed to the Distribution Order, and (c) schedule a final fee hearing; f. in the event that one or more Claim Objections is filed and not resolved prior to the Claims Hearing, counsel to the Committee will submit to the Court a proposed Distribution Order promptly following the Court s ruling on such Claim Objection(s); g. any Claimant or other interested party who does not timely file a Claim Objection shall be barred from subsequently asserting an unsecured claim against the Debtor or from challenging the proposed Allowed Unsecured Claim amounts set forth in the Claim Schedule; and h. distributions on account of Allowed Unsecured Claims will made by Committee counsel from the funds held in the GUC Escrow Account within 30 days of the Court s entry of the Distribution Order. 4. Service of the notice of the filing of and hearing on the Joint Motion upon the Claimants, those claimants included on the Disallowed Gift Card Schedule, and the other entities and claimants listed in the Joint Motion shall constitute good and sufficient notice of the filing of the Joint Motion and all relief requested therein. WCSR V2 4

36 5. Committee counsel shall be permitted to reserve $50,000 from the GUC Escrow Account to pay the fees and expenses of Committee counsel incurred in connection with the preparation and prosecution of the Joint Motion, as well as the services to be rendered in connection with prosecuting the Claim Objections, to the extent any are filed, making of distributions from the GUC Escrow Account and dismissal of the chapter 11 case. 6. The requirements of Bankruptcy Rule 3007 and Local Rule , with regard to claims objections and omnibus claims objections, are waived to the extent inconsistent with the Claims Resolution Process and the gift card claims disallowance process. 7. Counsel to the Committee shall administer distributions to holders of Allowed Unsecured Claims from the funds held in the GUC Escrow Account in accordance with the following guidelines governing distributions a. the Committee shall be authorized to make a single distribution to creditors of the funds held in the GUC Escrow Account; b. the Committee shall withhold from making any distribution on account of an Allowed Unsecured Claim where such distribution would be for the amount of less than $50; c. any distributed check that has not been claimed and/or cashed within 60 days after distribution of the check (the Check Cashing Period ) shall be deemed void and the distribution on account of such claim shall be deemed forfeited by the creditor; and d. any funds remaining in the GUC Escrow Account after the expiration of the Check Cashing Period and funds not distributed because distribution amounts fell below the Distribution Threshold shall be remitted to the WCSR V2 5

37 Debtor to be used to pay administrative and/or priority claims not otherwise paid from estate funds. 8. After all distributions to holders of Allowed Unsecured Claims are made, but before the Certification of Counsel and Request for Dismissal is filed, the Debtor shall schedule a final omnibus fee hearing and professionals shall each be required to file a final request for allowance and payment of all fees and expenses incurred during this case. 9. If a claimant wishes to object to the treatment of its claim as set forth on the Disallowed Gift Card Schedule, such claimant must file an objection with the Court on or before 400 p.m. Eastern Time on, 2012 (the Disallowed Gift Card Claim Objection Deadline ) and serve such objection on counsel to the Committee and the Debtor by the Disallowed Gift Card Claim Objection Deadline. In the event an objection (the Gift Card Objections ) is filed, then an omnibus hearing to consider any and all Gift Card Objections will be held on, 2012 at Eastern Time (the Gift Card Claims Hearing ). 10. In the event that no Gift Card Objection is filed, or if all Gift Card Objections have been resolved prior to the Gift Card Claims Hearing, counsel to the Debtor will file with the Court a Certification of Counsel and Proposed Order Disallowing the Gift Card Claims, substantially in the form annexed to the Joint Motion as Exhibit E (the Gift Card Disallowance Order ). The Gift Card Disallowance Order will (a) highlight any modifications made to the Disallowed Gift Card Schedule, if any, to reflect agreements reached to resolve any formal or informal Gift Card Objections. Any claimant or other interested party who does not timely file a Gift Card Objection shall be barred from subsequently asserting a claim based on a gift card against the Debtor. WCSR V2 6

38 11. After the gift card claim disallowance process and Claims Resolution Process has been completed, all distributions have been made, final fee and expense applications have been adjudicated and all accrued and as yet unpaid fees owing to the U.S. Trustee have been paid, the Court shall enter an order, substantially in the form annexed to the Joint Motion as Exhibit F (the Dismissal Order ), upon the filing of a certification of counsel and request for entry of a dismissal order, substantially in the form annexed to the Joint Motion as Exhibit G (the Certification of Counsel and Request for Dismissal ). The Certification of Counsel and Request for Dismissal will, among other things, (a) verify that distributions on account of Allowed Unsecured Claims were made by Committee counsel, (b) confirm that all accrued U.S. Trustee fees have been paid and (c) request entry of the Dismissal Order. 12. The Court shall retain jurisdiction with respect to any matters, claims, rights or disputes arising from or relating to the implementation of this or any other Order of this Court entered in this chapter 11 case. 13. To the extent applicable, Bankruptcy Rule 6004(h) is waived and this Order shall be effective and enforceable immediately upon entry. Dated Wilmington, Delaware Honorable Kevin Gross Chief United States Bankruptcy Judge WCSR V2 7

39

40

41

42

43

44

45

46

47 EXHIBIT C Distribution Order WCSR V2

48 IN THE UNITED STATES BANKRUPTCY COURT FOR THE DISTRICT OF DELAWARE x In re Chapter 11 TSIC, Inc. f/k/a Sharper Image Corporation, 1 Case No (KG) Debtor. Related Docket Nos x CERTIFICATION OF COUNSEL AND PROPOSED ORDER AUTHORIZING DISTRIBUTION ON ACCOUNT OF ALLOWED UNSECURED CLAIMS The undersigned counsel to TSIC, Inc. f/k/a Sharper Image Corporation, as debtor and debtor-in-possession in the above-captioned chapter 11 case (the Debtor ), and the Official Committee of Unsecured Creditors (the Committee ) hereby certify as follows 1. On, 2012, the Court entered an order (the Approval Order ) granting the Joint Motion Pursuant to Sections 105(a), 305(a), and 1112(b) of the Bankruptcy Code For Entry of an Order (I) Approving Procedures for (a) the Distribution of Certain Funds to Holders of Allowed Unsecured Claims, (b) the Dismissal of the Debtor s Chapter 11 Case, (c) the Disallowance of Certain Gift Card Claims and (II) Granting Certain Related Relief (the Joint Motion ), 2 pursuant to which the Court, inter alia, approved procedures governing the reconciliation, resolution and allowance of unsecured claims asserted against the Debtor. 1 The address of the Debtor s principal executive offices is 1255 Treat Blvd, Suite 300, Walnut Creek, California The Debtor s EIN is Capitalized terms used but not defined herein shall have the meanings ascribed to them in the Joint Motion. WCSR V2

49 2. Pursuant to the Approval Order, Claimants were encouraged to contact counsel for the Committee to attempt to informally reconcile any disputes concerning the Claim Schedule and counsel for the Committee was authorized to resolve any such disputes by agreement with Claimants without the need to obtain a further order of the Court. The Committee reached agreements with the following Claimants on an informal basis and the Claim Schedule has been revised to reflect these claim allowances (the Revised Claim Schedule ). A copy of the Revised Claim Schedule is annexed to the Proposed Distribution Order (defined below). Claimant Claim Allowance 3. Pursuant to the Approval Order, the deadline for Claimants to file and serve Claim Objections was, 2012 at 400 p.m. Except as provided herein, no other Claim Objection was filed. 4. The Debtors and Committee respectfully request entry of an order (the Proposed Distribution Order ), substantially in the form annexed hereto, authorizing and approving the making of the distributions reflected in the Revised Claim Schedule and scheduling a hearing to consider approval of final fee and expense applications of estate WCSR V2 2

50 professionals. Dated Wilmington, Delaware WOMBLE CARLYLE SANDRIDGE & RICE PLLC WHITEFORD TAYLOR & PRESTON LLP Steven K. Kortanek (Del. Bar No. 3106) Ericka F. Johnson (Del. Bar No. 5024) 222 Delaware Avenue, Suite 1501 Wilmington, Delaware Telephone (302) Facsimile (302) WEIL, GOTSHAL & MANGES LLP Harvey R. Miller Abigail Zigman 767 Fifth Avenue New York, New York Telephone (212) Facsimile (212) Counsel for the Debtor Thomas J. Francella (Del. Bar No. 3835) 1220 N. Market Street, Suite 608 Wilmington, Delaware Telephone (302) Facsimile (302) and- -and- COOLEY LLP Lawrence C. Gottlieb (LG 2565) Jay R. Indyke (JI 0353) Richard Kanowitz (RK 0677) Seth Van Aalten (SV 2663) 1114 Avenue of the Americas New York, New York Telephone (212) Facsimile (212) Counsel for Official Committee Of Unsecured Creditors WCSR V2 3

51 IN THE UNITED STATES BANKRUPTCY COURT FOR THE DISTRICT OF DELAWARE x In re Chapter 11 TSIC, Inc. f/k/a Sharper Image Corporation, 1 Case No (KG) Debtor. Related Docket Nos x ORDER AUTHORIZING DISTRIBUTION ON ACCOUNT OF ALLOWED UNSECURED CLAIMS AND SCHEDULING FINAL FEE HEARING Pursuant to that Order Granting Joint Motion of the Debtor and the Official Committee of Unsecured Creditors, Pursuant to Sections 105(a), 305(a), and 1112(b) of the Bankruptcy Code, For Entry of an Order (I) Approving Procedures for (a) the Distribution of Certain Funds to Holders of Allowed Unsecured Claims, (b) the Dismissal of the Debtor s Chapter 11 Case, and (c) the Disallowance of Certain Gift Card Claims and (II) Granting Certain Related Relief, entered on (the Approval Order ) 2 and (ii) Certification of Counsel and Proposed Order Authorizing Distribution on Account of Allowed Unsecured Claims, dated, it is ORDERED, ADJUDGED AND DECREED THAT 1. The Committee is authorized to make the unsecured creditor distributions reflected in Schedule A hereto from the funds held in the GUC Escrow Account. 1 The address of the Debtor s principal executive offices is 1255 Treat Blvd, Suite 300, Walnut Creek, California The Debtor s EIN is Capitalized terms used but not defined herein shall have the meanings ascribed to them in the Approval Order. WCSR V2

52 2. A hearing to consider approval of final fee and expense applications of estate professionals shall be held by the Court on and the objection deadline with respect to any such applications is. 3. The Court shall retain jurisdiction with respect to any matters, claims, rights or disputes arising from or relating to the implementation of this or any other Order of this Court entered in this chapter 11 case. 4. To the extent applicable, Bankruptcy Rule 6004(h) is waived and this Order shall be effective and enforceable immediately upon entry. Dated Wilmington, Delaware Honorable Kevin Gross Chief United States Bankruptcy Judge WCSR V2 2

53 WCSR V2 Schedule A

54

55

56

57

58

59