With the backing of stakeholders, Merry-Go-Round Enterprises Inc. has agreed to pay a modest bonus -- $125,000 -- to the outgoing crisis management team that led the fashion retailer through a tumultuous period of store closings, layoffs and unrelenting financial losses.
Meridian Ventures, brought in on an interim basis in mid-January, could have collected as much as $1.3 million in bonuses had the consultants remained with the Joppa-based chain when it emerges from bankruptcy.
But under the revised deal, approved by U.S. Bankruptcy Court, Meridian will receive two installments -- $75,000 for closing on a $90 million line of credit, obtained last week, and $50,000 when Merry-Go-Round wins confirmation of a plan of reorganization under Chapter 11 bankruptcy protection.
"I don't think that we have a strong point of view [about the bonus] one way or another," said Wilbur Ross, a financial adviser to the equity committee of Merry-Go-Round shareholders.
He added, however, "Results didn't come through with what they had forecast."
The turnaround specialists, Thomas C. Shull and James Kenney, had drawn up a business plan in which they projected, among other things, a 10.5 percent increase in sales at stores open at least a year for fiscal 1996 ending in January.
But same-store sales, considered a strong indicator of performance because it factors out sales in new stores, have registered double-digit drops every month this year except April, when comparable sales were flat.
Moreover, June sales, the most recent figures released, were down $15 million, and the company lost $19.2 million for the first quarter ended April 29.
The interim managers, however, were credited with eliminating more than $60 million in annual expenses through store closings and layoffs and by slashing other costs.
In addition, in March, April and May, they met or surpassed their projections for cash flow -- profit before interest, taxes, reorganization fees and depreciation.
Merry-Go-Round's cash flow, an indicator of a company's operating health, was negative $8.5 million for the first quarter, exceeding its target of negative $8.8 million.
Mr. Shull and Mr. Kenney declined to comment.
Under terms of the revised agreement, Meridian's employment was extended a month to July 31, for which they will be paid $95,000.
The consultants will help in the transition of new Chief Executive Richard P. Crystal, a former R. H. Macy & Co. executive who agreed to a $550,000 signing bonus as part of a three-year contract with Merry-Go-Round.