Hearing Date: November 10,1010 at 10:00 a.m.

Objection Deadline: November 3, 1010 at 4:00p.m.

DECHERTLLP
1095 A venue of the Americas
New York, New York 10036-6797
Telephone: (212) 698-3500
Facsimile: (212) 698-3599
Michael J. Sage
Brian E. Greer
Andrew L. Buck
Attorneys for Lehman ALI Inc.
UNITED STATES BANKRUPTCY COURT
SOUTHERN DISTRICT OF NEW YORK.
------------------------------------------------------------ ){
In re: Chapter 11
INNKEEPERS USA TRUST, et al. Case No. 10-13800
Debtors. Jointly Administered
------------------------------------------------------------ ){
OBJECTION OF LEHMAN ALI INC. TO DEBTORS' MOTION TO AUTHORIZE
PAYMENT OF INDEPENDENT COMMITTEE FEES AND EXPENSES
Lehman ALI Inc. ("Lehman")
1
submits this objection to the Debtors' Motion for the
Entry of an Order Pursuant to Section 363 of the Bankruptcy Code (i) Approving the Debtors'
Twenty of the Debtors (the "Floating Rate Debtors") in the above-captioned cases are borrowers under that
certain Loan Agreement, dated as of June 29, 2007, in the original principal amount of $250,000,000.00,
between and among the Floating Rate Debtors, as borrowers, and Lehman, as lender (as amended, the
"Floating Rate Loan Agreemenf"'). The Floating Rate Debtors' obligations under the Floating Rate Loan
Agreement are secured by twenty separate mortgages (each, a "Floating Rate Mortgage") that each grant
Lehman (i) a first lien mortgage on the applicable hotel property, (ii) a lien on all cash, accounts, and
proceeds of the applicable borrower, and (iii) an absolute assigmnent of rents of the applicable hotel
property. The Floating Rate Debtors are: (1) KPA/GP Valencia LLC;.(2) Grand Prix West Palm Beach
LLC; (3) KPA/GP Ft. Walton Beach LLC; (4) Grand Prix Ft. Wayne LLC; (5) Grand Prix Indianapolis
LLC; (6) KPA/GP Louisville (HI) LLC; (7) Grand Prix Bulfmch LLC; (8) Grand Prix Woburn LLC; (9)
Grand Prix Rockville LLC; (10) Grand Prix East Lansing LLC; (11) Grand Prix Grand Rapids LLC; (12)
Grand Prix Troy (Central) LLC; (13) Grand Prix Troy (SE) LLC; (14) Grand Prix Atlantic City LLC; (15)
Grand Prix Montvale LLC; (16) Grand Prix Morristown LLC; (17) Grand Prix Albany LLC; (18) Grand
Prix Addison (SS) LLC; (19) Grand Prix Harrisburg LLC; and (20) Grand Prix Ontario LLC:
16012172.6
Undertaking to Compensate Fried, Frank, Harris, Shriver & Jacobson LLP as Counsel to the
Independent Committee ofthe Board of Trustees oflnnkeepers USA Trust and Authorizing the
Payment of Such Compensation by the Debtors and (ii) Authorizing the Debtors to Compensate
the Members of the Independent Committee [Dkt. No. 587] (the "Motion"i and respectfully
states as follows:
Preliminary Statement
Lehman does not object to the Debtors' appointment of the Independent Committee, the
Independent Committee's determination to retain Fried Frank or the proposed fees for the
members of the Independent Committee set forth in the Motion. However, Lehman should not
be required to bear the cost of additional professionals when the Debtors are already represented
by sophisticated bankruptcy counsel and financial advisors.
The Motion is particularly concerning because (a) the Debtors have not demonstrated that
the fees and expenses incurred by Fried Frank are expenses which properly fall within the scope
of the indemnification provisions under the Debtors' organizational documents, (b) the Debtors
have not required Fried Frank to be paid from any applicable insurance proceeds in light of the
significant fees and expenses already charged by professionals retained by the estate, (c) the
Debtors have not demonstrated any basis for charging Lehman's cash collateral for such fees and
expenses, and (d) parties in interest and the Court are precluded from challenging Fried Frank's
fees and expenses.
Accordingly, the Motion should be denied and Fried Frank should seek reimbursement of
its fees and expenses solely from any applicable insurance policies maintained by the Debtors to
2
Capitalized terms used but not defmed herein shall have the meanings ascribed thereto in the Motion.
16012172.6 2
the extent that the Court determines that such insurance proceeds are not property of the Debtors'
estates.
Argument
I. The Debtors Have Not Demonstrated that Fried Franks' Fees and Expenses
are Indemnified Expenses Under the Debtors' Organizational Documents.
1. Without providing a legal or factual basis in support of the reimbursement of
Fried Frank's fees and expenses, the Debtors merely assert that the Board Resolutions appointing
the Independent Committee authorized that committee to retain counsel, and that the
Independent Committee has selected Fried Frank as that counsel. [Motion at p.2-3]. The
Debtors do not allege that the fees and expenses are indemnified expenses under the Debtors
organizational documents and that such fees should be paid by the Debtors and their estates.
2. In a small number of cases, courts have authorized the reimbursement of fees of
counsel to a debtor's employees or directors where doing so provided a benefit the estates and
the role of that counsel was clearly defined. See, e.g., Official Committee of Enron Corp. v.
Enron Corp. (In re Enron Corp.), 335 B.R. 22, (S.D.N.Y. 2005) (retention oflaw firm to
represent employees was necessary to ensure employee retention in an environment of intense
government scrutiny of the debtor's business); see also In re Tubular Techs., LLC, 372 B.R. 820,
823-24 (Bankr. D.S.C. 2007) (authorizing payment oflitigation expenses in connection with
malpractice action that offered a reasonable chance of recovering funds to pay administrative
creditors and provide creditor recoveries); In re RNI Wind Down Corp., Case No. 06-10110
(CSS) (Bankr. D. Del. July 17, 2006) ("RNr') (authorizing advancement of defense costs and
expenses in connection with committee investigation of causes of action against directors, to the
extent directors would be entitled to indemnification under organizational documents and
applicable law); In re Northwest Airlines Corp., Case No. 05-17930 (ALG) (Bankr. S.D.N.Y.
16012172.6 3
June 8, 2006) ("NWA") (authorizing advancement of defense costs with respect to litigation
involving directors where those directors were entitled to indemnification under organizational
documents and applicable law).
3
3. Here, the Debtors have not asserted any business justification for the payment of
such costs. Instead, the Motion offers only the conclusory statement that "the Debtors believe
that Fried Frank, in their role as counsel to the Independent Committee and in conjunction with
the significant role the Independent Committee will play, will provide services that benefit the
Debtors estates and creditors." [Motion a t ~ 18]. The Debtors' assertion that the Independent
Committee is serving an "enhanced role" is belied by the fact that the members of the
Independent Committee are members of the Board, with the exact same fiduciary duties in that
role as they do as members of the Independent Committee.
4. Moreover. the Debtors do not even attempt to defme the scope of Fried Frank's
services or how those services would differ meaningfully from those already being provided by
the Debtors' primary restructuring counsel. Rather, the Motion vaguely states that "Fried Frank
will advise, assist, and represent the Independent Committee and its members in connection with
(a) the Chapter 11 Cases and (b) other matters that the Independent Committee may request from
time to time." [Motion a t ~ 10].
5. Given the limitless scope of Fried Frank's proposed representation, it is
impossible to imagine a circumstance where Fried Frank's services would not duplicate those
already being provided by the Debtors' primary restructuring counsel.
6. Moreover, to the extent Fried Frank intends to provide advice to the Independent
Committee with respect to any claims asserted by the estate, as well as corporate governance
Copies of unpublished orders cited herein are attached hereto as Exhibit A ..
16012172.6 4
advice, it is inappropriate for Fried Frank to receive any compensation from the Debtors' estates.
The Debtors should not be paying the counsel of potential defendants. That is the purpose of
insurance. Therefore, the Motion should be denied.
II. Fried Frank Should be Compensated Solely From the
Proceeds of the Debtors' Applicable Insurance Policies.
7. These are large and complex chapter 11 cases that have required the services of
many professionals on behalf of numerous constituencies. To date, legal professionals retained
by the Debtors and their estates have sought Court approval for fees and expenses in excess of $5
million from the commencement of these cases through the end of September, representing
approximately two-and-a-half months of work. Although Lehman is not taking any position at
this time as to whether any incurred fees and expenses are reasonable, Lehman submits that it is
hard to justify the payment by the Debtors' estates of additional fees and expenses for counsel to
the Independent Committee when the Debtors are already represented by sophisticated legal
counsel and financial advisors.
8. Notwithstanding the substantial administrative expenses incurred to date, the
Motion does not identify the Debtors' director and officer insurance policies and does not
address whether the fees a n ~ expenses by Fried Frank may be reimbursable under such policies
as indemnified expenses.
9. Assuming the Debtors can demonstrate that the fees and expenses for such advice
are indemnified expenses under the Debtors' organizational documents, it is likely that Fried
Frank would be able to receive reimbursement from the Debtors' applicable insurers to the extent
that the Court determines thatsuch insurance proceeds are not property of the Debtors' estates.
In light of the foregoing, the Motion should be denied.
16012172.6 5
III. The Debtors Should Not be Permitted to Use
Lehman's Cash Collateral to Reimburse Fried Frank
10. Lehman does not consent to the use of its cash collateral to compensate Fried
Frank unless and until the Debtors can demonstrate that Fried Frank's services will directly
benefit the estates of the Floating Rate Debtors and will not be duplicative of fees and expenses
incurred by the Debtors' counsel. See In re Flagstaf!Foodservice Corp. (Flagstaff!), 739 F.2d
73, 75-76 (2d Cir. 1984) (holding that fees payable from a secured creditor's collateral over its
objection must be for fees that benefit that creditor, not merely the debtor or other creditors); see
also In re Flagstaf!Foodservice Corp. (Flagstaff II), 762 F.2d 10 (2d Cir. 1985); Harvis Trien &
Beck, P.C. v. Federal Home LoanMortgage Corp. (In re Blackwood Assocs., L.P.), 153 F.3d 61
(2d. Cir. 1998); In re Hotel Syracuse, Inc., 275 B.R. 679 (Bankr. N.D.N.Y. 2002).
11. Unless and until the Debtors can satisfy the requirements applied in the Second
Circuit with respect to the use of Lehman's cash collateral, the Motion should be denied.
IV. Payment of Independent Committee Expenses Must Be Subiect to Review
12. To the extent the Court permits the Debtors to reimburse Fried Frank from their
estates, the Court should impose a cap on the total amount of Fried Frank's fees, as well as
review Fried Frank's fees and expenses for reasonableness and Fried Frank should be required to
comply with the Order Establishing Procedures for Interim Compensation and Reimbursement of
Expenses for Professionals and Official Committee Members [Dk:t. No. 189] (the "Interim
Compensation Order") entered by this Court. The fee application process is designed to provide
all parties in interest and the Court with sufficient transparency to determine whether or not the
services provided are legitimate, appropriate, and reasonable.
13. In the handful of cases that have permitted the reimbursement of directors' and
officers' counsel fees from estate assets where the debtor has demonstrated a direct and actual
16012172.6 6
benefit to be derived from the payment of such fees, courts have placed caps on the total
authorized reimbursements. See, e.g., In re Genuity Inc., Case No. 02-43558 (PCB) (Bankr.
S.D.N.Y. Oct. 23, 2003) (authorizing payment ofpostpetition expenses ofpostpetition directors
up to an agreed $250,000 cap); In re Kmart Corp., Case No. 02-02474 (SPS) (Bankr. N.D. Ill.
Aug. 29, 2002) a t ~ ~ 2 and 3 (approving postpetition agreement to utilize funds for payment of
fees and expenses incurred by special counsel to independent directors to the agreed $750,000
cap, with right of parties in interest to review budgets prepared by such counsel); RNI at ~ ~ 3 and
5 (authorizing indemnification and advancement of defense costs and expenses to certain officers
and directors up to $500,000 and subject to fee applications); NWA at p. 2 (authorizing debtors to
advance legal defense costs of certain current and former directors up to insurance retention
amounts).
14. The Debtors, however, have not proposed any limits. Lehman can only assume,
therefore, that the Debtors are requesting approval to write Fried Frank a blank check without
any review by parties in interest and the Court.
15. The lack of appropriate limits on Fried Frank's potential compensation is
particularly egregious because the Debtors do not purport to give Lehman notice of any of Fried
Frank's fees and expenses to be paid, let alone those that would be paid from Lehman's cash
collateral. Instead, the Motion proposes only to provide the United States Trustee and certain
other parties - not including Lehman - with copies of Fried Frank's monthly invoices. [Motion
a t ~ 13]. However, those parties would not have the specific right to object to the payment of
Fried Frank's fees or otherwise seek redress from the Court. Instead, Fried Frank's fees and
expenses would simply be paid by the Debtors upon receipt of monthly invoices in the ordinary
course of business. That process is unacceptable and should not be countenanced by the Court.
16012172.6 7
16. To the extent the Debtors are permitted to reimburse Fried Frank from estate
assets, the Court should require the Debtors to submit monthly budgets and require that Fried
Frank comport with the Interim Compensation Order and participate in the fee application
process regardless of whether the retention is under section 363 or 327 of the Bankruptcy Code.
17. Absent the imposition of appropriate limits and the right to challenge Fried
Frank's fees, the Motion should be denied.
Conclusion
WHEREFORE, Lehman respectfully requests that the Court (i) enter an order denying
the Motion; (ii) to the extent the Court determines to grant the Motion, require the Debtors to
provide a detailed budget of fees and expenses to be incurred by Fried Frank on a monthly basis
and require that Fried Frank seek reimbursement of its expenses in accordance with the Interim
Compensation Order and the fee application process; and (iii) grant Lehman such other and
further relief as is just and proper.
Dated: New York, New York
November 3, 2010
16012172.6
DECHERTLLP
By:ls/ Michael J. Sage
Michael J. Sage
Brian E. Greer
Andrew L. Buck
8
1095 Avenue of the Americas
New York, New York I 0036
Telephone: (212) 698-3500
Facsimile: (212) 698-3599
Exhibit A
16012172.6
In re:
IN THE UNITED STATES BANKRUPTCY COURT
FOR THE DISTRICT OF DELAWARE
Chapter 11
RNI WIND DOWN CORPORATION, et at.! Case No. 06-10110 (CSS)
Debtors. Jointly Administered
Ref. Docket No. 408 aad 5ZO
ORDER AUTHORIZING AND APPROVING ADVANCEMENT
OF DEFENSE COSTS AND EXPENSES TO: (A) CURRENT DIRECTORS AND
OFFICERS; (B) CERTAIN FORMER DIRECTORS AND OFFICERS; AND
(C) CERTAIN CURRENT AND FQRMER
This matter coming before the Court on the motion (the "Motion,'l of the above-
captioned debtors and debtors in possession (collectively. the "Debtors") for an order pursuant to
sections 105(a) and 363(b) of title 11 of the United States Code, II U.S.C. 101 - 1532 (the
"Bankruptcy Code .. ), authorizing the advancement of actual defense costs and expenses directly
incurred by: (a) the cUITent Dira,-tors and Officers ofthe DebloTS (the .. Current Directors and
Officers"); (b) certain former Directors and Officers of the Debtors who objected Motion
and requested to be included in the relief sought therein (the "Fonner Directors and Officcrs");
3
and (c) certain current and former employees of the Debtors (the "Employees". and collectively
with the Current Directors and Officers and the Former Directors and Officers, the "Covered
Individuals") in connection with the investigation of the Debtors being conducted by the Official
Committee of Equity Security Holders (the 'Investigation"); and the Court having reviewed the
I The Debtors are RNI Wmd Down Corporation, fonnerly known as Riverstone Networks, Inc. (Tax ID No. xx-
XXX6178), BlueCoast Software (Tax ID No. XX-XXX9415), The OASys Group, Inc. (Tax ID No. XX-XXX8093),
Riverstone Networks SPC, Inc. (Tax ID No. XX-XXX3518} and Pipal Systems, Inc. (Tax ID No. XX-XX:X6850)
eaeh with a mailing address of 5200 Great America Parkway, Santa Clara, CA 95054.
2
Capitalized lcnns not othcrwi=;e defined herein !!hall be given their meaning in the Motion.
3
1be Former Directors and Officers include, without limitation: Romulus Pereira, Suresh GoplllakTishnan, Robert
Stanton, John Kern, Christopher Paisley, and Andrew Feldman.
1-PU/2402!26.3
D002:S405S78.S ()64952.1001
objections thereto filed by the Former Directors and Officers, the Equity Holders Committee,
and the Creditors Committee, and the reply in support thereof filed by the Current Directors and
and the Court finding that (a) the Court has jurisdiction over this matter pu.rsuant to 28
U.S.C. 157 and 1334, (b) this is a core proceeding pursuant to 28 U.S.C. 157(b)(2){A) iind
(c) notice of the Motion was adequate under the circumstances and that no other or further notice
need be provided; and the Court having determined that the legal and factual bases set forth in
the Motion establish just cause for the relief granted herein; and the Court having determined
that the relief sought in the Motion is in the best interests of the Debtors and theiT estates; and
after due deliberation and sufficient cause appearing therefore,
NOW, THEREFORE, IT IS HEREBY ORDERED THAT:
1. The Motion is GRANTED as and to the extent set forth herein.
2. The objections to the Motion filed by the Equity Holders Committee and the
Creditors Committee are overruled.
3. Pursuant to sections lOS{a) and 363(b) ofthe Bankruptcy Code, the Debtors are
authori:.r.ed to advance and reimburse all reasonable, actual and necessary costs and expenses
incurred by the Covered Individuals to defend or to otherwise respond to the to the
extent that such Covered Individuals are entitled to the same pursuant to agreements with the
DebtoTs, the Organizational Documents or in accordance with applicable law ("Defense C..osts"),
up to an aggregate amount of $500,000 on an interim basis, subject to possible further
upon request and order of this Court.
4. The payment of Defense Costs shall be made directly to the law firms or
professionals retained by the Covered Individuals, except that any documented> reasonable and
necessary travel or other related expenses personally incurred and paid by a Covered Individual
Dfi02:5405S7lU
2
0649Sl.l001
to defend or to otherwise respond to the Investigation shall be paid directly to such Covered
Individual.
5. Any (i) Covered Individual or (ii) law finn or other professional retained by a
Covered Individual shaH file monthly fee applications with this Court {with copies to the
Committees and the U.S. Trustee) in accordance with, and shall otherwise comply with (and
shall be paid in accordance with), this Court's Order Establishing Procedures for Interim
Compensation and Reimbursement of Expenses of Professionals Pursuant to 1 OS(a) and 331
[Docket No. 203] (the "Fee Order") and Ru1e of the Local Rules of Bankruptcy Practice
and Procedure for the United States Bankruptcy Court for the District of Delaware. Defense
Costs jucurred by such professionals on behalf of the Covered Individuals shall be subject to
objection by parties in interest and review by this Court in accordance with the Fee Order.
6. Nothing in this Order shall prejudice or be deemed a waiver of(a) the rights of the
Debtors or any other party, including without limitation the Covered Individuals, to seck
recovery of any fees, expenses or other cosL-q from any insurance policy to which the Debtors or
any other party, including without limitation the Covered Indivjduals, arc a party or a beneficiary
or under which the Debtors or any other including without limitation the Covered
Individuals, may have any rights of recovery, or (b) the right of any party to seek disgorgcment
of any amounts paid hereunder (or any defenses to any such right or recovery).
I.>K02:540SS78.l
3
064952.1001
7. All amounts paid hereunder arc deemed to be paid subject to disgorgement and
final aJiowance by further order of this Court provided however, tllat Covered Individuals shall
be excused from the filing of any final fee application. This Court shall retain jurisdiction to
interpret and enforce the tenns of this Order.
Dated: (/ v /Jl /1 . . 2006
~ g t o , Delaware
D'B02: 5405578.1
4
(164952.1001

SOUTHERN DISTRICT OF NEW YORK
In re:
NORTHWEST AIRLINES CORPORATION, et al.,
Debtors.
---------------- -----
----x
Chapter 11
Case No. 05-17930 (ALG)
Jointly Administered
X
ORDER AUTIIORIZING mE DEBTORS TO ADVANCE
LEGAL DEFENSE COSTS OF CERTAIN
CURRENT AND FORMER DIRECTORS AND OFFICERS
Upon consideration of the motion (the "Motion")
1
of Northwest Airlines
Corporation (''NW A Corp."), and certain of its direct and indirect subsidiaries, as debtors and
debtors in possession (collectively, the "Debtors")/ seeking entry of an order authorizing the
Debtors to advance the legal defense costs of certain current and former directors and officers of
the Debtors who are defendants in certain ERISA and securities class actions; and the Court
having jurisdiction to consider the Motion and the relief requested therein in accordance with 28
U.S.C. 157 and 1334; and due notice of the Motion having been provided to the parties in
interest listed on the Master Service List (as defined in the Court's Order establishing notice
1
Capitalized terms not defined herein shall have the meaning ascribed to them in the Motion.
2
Specifically, in addition to NWA Corp., the Debtors consist of: NWA Fuel Services Corporation
("NFS"), Northwest Airlines Holdings Corporation ("Holdings"), NW A Inc. ("NWA Inc."), Northwest
Aerospace Training Corp. ("NATCO"), Northwest Airlines, Inc. ("Northwest Airlines"), MLT Inc.
("ML T''), Compass Airlines, Inc. flk/a Northwest Airlines Cargo, Inc. ("Compass"), NW A Retail Sales
Inc. ("NW A Retail''), Montana Enterprises, Inc. ("Montana"), NW Red Baron LLC ("Red Baron"),
Aircraft Foreign Sales, Inc. ("Foreign Sales"), NWA Worldclub, Inc. ("WorldClub") and NWA Aircraft
Finance, Inc. ("Aircraft Finance").
NYLIB5 898793.3
procedures and a master service list, dated September 15, 2005); and it appearing that no other or
further notice of the Motion need be provided; and the Court having determined that the relief
sought in the Motion is in the best interests of the Debtors, their estates and all parties in interest;
and upon the Motion, the Declaration of Douglas M. Steenland, dated as of the Petition Date, and
the Declaration of Neal S. Cohen Pursuant to Local Bankruptcy Rule 1007-2 and in Support of
the Debtors' Chapter 11 Petitions and First Day Orders, dated as ofthe Petition Date; and all of
the proceedings had before the Court; and after due deliberation and sufficient cause appearing
therefor, it is
ORDERED that the Motion is granted; and it is further
ORDERED that the Debtors may advance the legal defense costs incurred by
those former and current Northwest Airlines directors and officers and other employees who are
named as defendants in certain ERISA and securities class actions, including the Class Actions,
and who are entitled under applicable state law and Northwest Airlines' bylaws to
indemnification by the Debtors, up to the retention amounts under the Policies; and it is further
ORDERED that within ten (10) business days of the date of this Order, the
Debtors shall report to the Official Committee of Unsecured Creditors (the "Committee") the
amount of all legal defense costs incurred by the Class Action Defendants in connection with the
Class Actions as of such date, and shall provide subsequent quarterly reports to the Committee of
legal defense costs advanced pursuant to this Order, as and to the extent such additional amounts
are advanced by the Debtors; and it is further
ORDERED that this Court shall retain jurisdiction with respect to any matters,
claims, rights or disputes arising from or related to the implementation of this Order; and it is
further
NYLIBS 898793.3
2
ORDERED that service of the Motion as provided therein shall be deemed good
and sufficient notice of such Motion; and it is further
ORDERED that the requirement under Rule 9013-1 (b) of the Local Bankruptcy
Rules for the Southern District of New York for the filing of a memorandum of law is waived.
Dated: New York, New York
June 8,2006
NYLIB5 898793.3
Is/ Allan L. Gropper __________ _
UNITED STATES BANKRUPTCY JUDGE
3
UNI1ED STAlES BANKRUPTCY COURT
SOUTHERN DISTRICT OF NEW YORK
------------------------------X
In re
GENUITY INC.,
Debtors.
------------------------------x
Chapter II
Case No. 02-43558 (PCB)
(Jointly Administered)
ORDER UNDER 11 U.S. C. 363 AND 503 AUTIIORIZlNG PAYMENT OF
POST-PETITION EXPENSES OF DIRECTORS
Upon the Motion dated October 16,2003 (the "Motion")
1
of the above-captioned
debtors and debtors-in-possession (collectively, the "Debtors"), for an orderunder II
U.S.C. 363 and 503 authorizing payment of post-petition expenses of directors, as set
forth in the Motion; and the Court having jurisdiction to consider and determine the
Motion; and it that notice of the Motion was good and sufficient under the
particular circumstances and that no other or further notice need be given; and upon the
record in these cases; and after due deliberation thereon; and good and sufficient cause
appearing therefor, it is hereby
ORDERED, ADJUDGED AND DECREED THAT:
1. The Motion is GRANlED.
2. The Debtors are authorized pursuant to Bankruptcy Code Sections I 05 and
363; to pay the fees and expenses ofSRZ, as counsel to the directors of Genuity Inc., in
an amount not to exceed $250,000 plus actual expenses.
1
Unless otherwise defmed herein, capitalized terms used herein shall have the
meanings ascribed to them in the Motion.
3. The requirement under Local Bankr. R 90 13-l {b) for the service and
filing of a separate memorandum of law is satisfied by the Motion.
Dated: New York, New York
October 22, 2003
Is/ Prudence Carter Beatty
The Honorable Prudence C. Beatty
United States Bankruptcy Judge
Case 02-02474 Doc 6132-1 Filed 08/29/02 Entered 09/04/02 00:00:00 Desc
Pleading Page 1 of 5
Eor-- SEP 4
IN THE UNITED STATES BANKRUPTCY COURT . - 2flOZ
FOR THE NORTHERN DISTRicr OF ILLINOIS
EASTERN DIVISION
In re: ) Case No. 02-802474
KMART CORPORATION. et al .
) (Jointly Administered)
)Chaptcrll
Debtors.
) Hon. Susan Pierson Sonderby
) Hearing Date: August 29, 2002
) Hearing Time: 11 :00 a.m.
) Obj. Date: August 22. 2002
ORDER PURSUANT TO 11 U.S.C. 3(j3(b) APPROVING
POST -PE I IliON AGREEMENT TO UTILIZE ESTATE FUNDS
FOR PAYMENT OF FEES AND EXPENSES INCURRED BY SPECIAL
COUNSEL TO THE INDEPENDENT DIRECfQRS GROUP
Upon the motion dated August 9. 2002 (the "Motion") of Kmart Corporation
{"Kmart") and certain of its affiliates, each a debtor and debtor-in-possession in the
cases (collectively, the "Debtors"), for entry of an order, pursuant to
Section 363(b) ofTitle 11 oftbe United States Code, 11 U.S.C. 101, mim (the
"Bankruptcy Code"), approving the Debtors' agreement, as described in this Order, to
use estate funds outside the ordinary course ofbusiness to pay Dewey Ballantine LLP
("Dewey Ballantine") for services rendered to the independent members ofKmart's
Board of Directors (the "Independent Directors Group") as their special counsel
("Special Counsel"); and due and adequate notice of the Motion having been given;
and it appearing that no other :notice need be given; and it appearing that Dewey
Ballantine neither holds nor represents any interest adverse to the Debtots' estates
Case 02-02474 Doc 6132-1 Filed 08/29/02 Entered 09/04/02 00:00:00 Desc
Pleading Page 2 of 5
with respect to the matters for which Dewey Ballantine is to be paid as described in
this Order; and it appearing that the Official Financial Institutions Committee (the
tbe Official Unsecured Creditors' Committee (the "UCC"). and the Official
Committee of Equity Security Holders (the "Equity Committee" and. together with
the FJC and the UCC, the "Conunittces") consent to entry of this order; and it
appearing that the relief requested in the Motion is in the best interest of the estates
and their creditors, and after due deliberation that the relief should be granted
as set forth below,
IT IS HEREBY ORDERED, ADJUDGED, AND DECREED THAT
1. Pursuant to Section 363(b) .of the Bankruptcy Code, and subject to tbe tenns
contained herein, the Debtors, as arc authorized to utilize estate
funds to pay Dewey Ballantine from and after the petition date as Special Counsel to
represent the Independent Directors Group in connection with these Chapter 11 cases
and, more specifically. the perforotance of only the following legal services.
(a) review developments in these Chapter 1 1 cases and advise the Inde-
pendent Directors Group in connection with these Chapter 11 cases;
(b) provide legal advice to the Independent Directors Group in support of
the Independent Directors Group s ongoing responsibilities with respect to the
Debtors operations, including attendance at meetings of the K.mart Board of
Directors, its committees and other third parties;
(c) represent the individuals comprising the Independent Directors Group
in connection with specific matters involving the stewardship investigation,
the Securities and Exchange Commission and the Department of Just1ce
2
Case 02-02474 Doc 6132-1 Filed 08/29/02 Entered 09/04/02 00:00:00 Desc
Pleading Page 3 of 5
(including through the U.S. Attorney's Office fur the Eastern District of
Michigan);
{d) appear betbrc the Bankruptcy Court. any district or appe11atc
and the United States Trustee on behalf of the Independent Directors Group
with respect to the matters referred to above; and
(e) provide the full range oflegal services and advice normally associated
with the matters referred to above.
2. All compensation and reimbursement of expenses to be paid to Dewey
Ballantine shall be subject to the protocols of the Joint Fee Review Committee.
including the rights of the Committees to review budgets proposed by Dewey
Ballantine; to object to such budgets; and to object. in accordance with such proto-
to payment of requested amounts to Dewey Ballantine.
3. Dewey Ballantine shall be paid from the estates for post-petition services
rendered to the Independent Directors Group; provided, however. that Dewey
Ballantine shall not be paid from the estates an amount in excess of$750,000
(including amounts already incurred) unless the Committees consent in writing or,.
absent such consent. the Court enters an order permitting such further payment. If
such consent is not obtainecL Dewey Ballantine may immediately withdraw from its
representation of the Independent Directors Group with respect to the matter de-
scribed in paragraph 1 hereof.
4. Notwithstanding anything in this Order to the this Order does not
authorize the Debtors to pay Dewey Ballantine for any fees or expenses incurred in
3
Case 02-02474 Doc 6132-1 Filed 08/29/02 Entered 09/04/02 00:00:00 Desc
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connection with providing legal services to any members of the Independent Direc-
tors Group to the extent that such legal services are rendered (i) in connection with
claims made or actions asserted by or on behalf of the Debtors or the Committees or
(ii) in connection with matters in which such members hold an interest adverse to the
Debtors. For purposes of this paragraph. the Debtors shall be solely responsible for
in the :ti.Th1 instance and in their reasonable discretion, whether an
adverse interest exists; however, that nothing herein shall be deemed to
impair the ability of this Court or the right oftbe U.S. Trustee to consider at any time
whether an adverse interest exists. The existence of the stewardship investigation
referenced in paragraph l(e) of this Order shall not, in and ofitself. constitute or be
deemed to create an adverse interest. In the event an adverse interest is determined
to exist, the Independent Directors Group and Dewey Ballantine shall be promptly
notified in writing of such determination. Subject to the limitations set forth in this
Order, the Debtors shall be entitled to pay Dewey Ballantine from the Debtors' estates
for services rendered to the Indcpcndmt Directors Group up to the date of their
receipt of such notice.
5. This Order does not address and does not affect the ability of any individual
member of the Independent Directors Group to retain Dewey Ballantine to represent
him or her individually, and is without prejudice to the rightc; of the Independent
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Directors Group or Dewey Ballantine to request payment of administrative expenses
from the Debtors' estates in accordance with applicable law.
Dated: Chicago
1


5
onorable Susan Pierson Sonderhy
United States Bankruptcy Judge
objections thereto filed by the Fonner Directors and Officers, the Equity Holders Committee;
and the Creditors Committee, and the reply in support thereof filed by the Current Directors and
Officers; and the Court finding that (a) the Court has jurisdiction over this matter pursuant to 28
U.S.C. 157 and 1334, {b) lhis is a core procced.fng pursuant to 28 U.S.C. 157(b)(2){A) and
(c) notice of the Motion was adequate under the circumstances and that no other or further notice
need be provided; and the Court having determined that the legal and factual bases set forth in
the Motion estabHsh just cause for the relief granted herein; and the Court having determined
that the relief sought in the Motion is in the best interests of the Debtors and thejr estates; and
after due deliberation and sufficient cause appearing therefore,
NOW, THEREFORE. TT IS HEREBY ORDERED THAT:
1. The Motion is GRANTED as and to the extent set forth herein.
2. The objections to the Motion filed by the Equity Holders Committee and the
Creditors Committee are overruled.
3. Pursuant to sections lOS(a) and 363(b) ofthe Bankruptcy Code, the Debtors are
authorit.ed to advance and reimburse all reasonable, actual and necessary costs and expenses
incurred by the Covered Individuals to defend or to olherwise respond to the Investigation to the
extent that such Covered Individuals are entitled to the same pursuant to agreements with the
DebtoTS, the Organizational Documents or in accordance with applicable Jaw ("Defense Costs"),
up to an aggregate ammmt of$500,000 on an interim basis, subject to possible further increases
upon request and order of this Court.
4. The payment of Defense Costs shall be made directly to the law firms or
professionals retained by the Covered Individuals, except that any documented, reasonable and
necessary travel or other related expenses personally incurred and paid by a Covered Individual
DSi02:5405571U
2
064952.1001
to defend or to otherwise I'eb'J)Ond to the Investigation shall be paid directly to such Covered
Individual.
5. Any (i) Covered Individual or (ii) law fiiDl OT other professional retained by a
Covered Individual shall file monthly fee applications with this Court {with copies to the
Committees and the U.S. Trustee) in accordance with, and shall otherwise comply with (and
shall be paid in accordance with), this Court's Order Establishing Procedures for Interim
Compensation and Reimbursement of Expenses of Professionals Pursuant to 105(a) and 331
[Docket No. 203] (the "Fee Order") and Ru1e 2016-2 ofthe Local Rules of Bankruptcy Practice
and Procedure for the United States Bankruptcy Court for the District of Delaware. Defense
Costs incurred by such professionals on behalf ofthe Covered Individuals shall he subject to
objection by parties in interest and review by this Court in accordance with the Fee Order.
6. Nothing in this Order shall prejudice or be deemed a waiver of (a) the rights of the
Debtors or any other party, including without limitation the Covered Individuals, to seck
recovery of any fees, expenses or other cosLo:; from any insurance poljcy to which the Debtors or
any other party, including without limitation the Covered Indivjduals, arc a party or a beneficiary
or under which the Debtors or any other party; including without limitation the Covered
Individuals. may have any rights of recovery, or (b) the right of any party to seek disgorgcment
of any amounts paid hereunder (or any defenses to any such right of recovery).
I)H02:S40SS78.1
3
064952.1001
7. All amounts paid hereunder arc deemed to be paid subject to disgorgement and
final allowance by further order of this Court provided however. that Covered Individuals shall
be excused from the filing of any final fee application. This Court shall retain jurisdiction to
jntcrpret and eJ.iforce the terms of this Order.
Dated: . (}..,f'Jl /} . , 2006
Wfulitngto , Delaware
~ 1 ~ ~ ~ r u
United States Bankruptcy Judge
DB02:S405571U
4
0649S2.1 001