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TOGUT, SEGAL & SEGAL LLP One Penn Plaza Suite 3335 New York, New York 10119 (212) 594-5000 Albert Togut Scott E. Ratner Brian F. Moore Proposed Counsel to the Debtor and Debtor in Possession

UNITED STATES BANKRUPTCY COURT SOUTHERN DISTRICT OF NEW YORK ---------------------------------------------------------------X : In re: : : DEWEY & LEBOEUF LLP, : : Debtor. : : ---------------------------------------------------------------X

Chapter 11 Case No. 12-

DEBTORS MOTION FOR ENTRY OF INTERIM AND FINAL ORDERS PURSUANT TO 11 U.S.C. 105, 361, 362, 363 AND 507, RULES 2002, 4001 AND 9014 OF THE FEDERAL RULES OF BANKRUPTCY PROCEDURE ORDER (1) AUTHORIZING USE OF CASH COLLATERAL, (2) GRANTING ADEQUATE PROTECTION, (3) MODIFYING THE AUTOMATIC STAY, AND (4) SCHEDULING A FINAL HEARING Dewey & LeBoeuf LLP, as debtor and debtor in possession (DL, also referred to herein as the Firm or the Debtor), in the above-captioned case, by its proposed attorneys, Togut, Segal & Segal LLP, makes this Motion for entry of interim and final orders pursuant to sections 105, 361, 362, 363, and 507 of the United States Bankruptcy Code, 11 U.S.C. 101 et seq. (the Bankruptcy Code); Rules 2002, 4001 and 9014 of the Federal Rules of Bankruptcy Procedure (the Bankruptcy Rules); and Rule 4001-2 of the Local Rules for the United States Bankruptcy Court for the Southern District of New York, for entry of an interim order (the Interim Order), substantially in the form annexed hereto as Exhibit 1, and a final order (the Final Order): (i) authorizing the Debtors use of cash collateral (as defined in section 363(a) of the

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Bankruptcy Code) in which the Collateral Agent, Revolver Lenders and Noteholders (each as defined herein) have a lien, security interest or other interest (including, without limitation, any adequate protection liens or security interests), in each case whether existing on the Petition Date (as defined herein) or arising pursuant to an Interim Order, the Final Order or otherwise (the Cash Collateral); (ii) providing adequate protection to the Collateral Agent, Revolver Lenders and Noteholders for any diminution in value of their respective interests in the Prepetition Collateral (as defined herein), including the Cash Collateral; (iii) vacating and modifying the automatic stay imposed by section 362 of the Bankruptcy Code to the extent necessary to implement and effectuate the terms and provisions of this Interim Order; and (iv) scheduling a final hearing (the Final Hearing) to consider the relief requested in the Motion and entry of a Final Order and approving the form of notice with respect to the Final Hearing. (the Cash Collateral Motion), and respectfully represents: INTRODUCTION 1. As more fully described in this Cash Collateral Motion and the

declaration of Jonathan A. Mitchell in support of this Cash Collateral Motion (the Mitchell Declaration), and the First Day Declaration (defined below), after extensive efforts to engage in a strategic transaction with a third party that would have preserved the core of the Debtor as an operating law firm, the Firm determined to file for Chapter 11 protection to facilitate the wind down of its business and affairs. 2. While no longer operating as a global law firm, DL, as a debtor-in

possession, continues in control of its remaining operations and management of its property pursuant to sections 1107(a) and 1108 of the Bankruptcy Code. Accordingly, DL requires the use of cash collateral to pay various ongoing expenses to facilitate the wind-down, including the funding of employee payroll, insurance, file storage, and rent 2

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in accordance with an agreed upon budget (the Budget) attached as Exhibit A to the Interim Order. Paying these expenses is critical for the Debtor to continue to successfully wind down its business and affairs and to maximize the value of the Debtors assets for all creditors. 3. The ability of the Debtor to finance and continue its operations

requires the use of Cash Collateral, absent which serious, immediate and irreparable harm will result to the Debtor, its estate and its creditors. The Debtor does not have sufficient available sources of working capital and financing to operate its business in the ordinary course of business or to maintain its property without the use of Cash Collateral. The relief requested in this Cash Collateral Motion is therefore necessary, essential, and appropriate for the continued operation of the Debtors business and the management and preservation of its property. 4. The Debtors Prepetition Secured Lenders (defined below) and

Debtor have negotiated at arms length and in good faith regarding the Debtors use of Cash Collateral to fund the continued operation of the Debtors business during the Specified Period (as defined below). The Prepetition Secured Lenders have agreed to permit the Debtor to use their Cash Collateral for the Specified Period, subject to the terms and conditions set forth in the proposed Interim Order, which terms and conditions are fair and reasonable and have been agreed to by the Debtor in the exercise of its sound business judgment. 5. The Debtors Prepetition Secured Lenders are the only creditors

known by the Debtor to have an interest in the Cash Collateral, and they have consented to the use of Cash Collateral in accordance with the terms of the proposed Interim Order and the Budget, subject to the grant of adequate protection as described below. 3

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6.

For these and the other reasons discussed below, the Debtor

believes that entry of the proposed Interim Order is in the best interests of the Debtor and the estate. RELIEF REQUESTED 7. By this Cash Collateral Motion, the Debtor requests entry of an

Interim Order granting the following relief, and ultimately a Final Order upon the scheduling a final hearing (the Final Hearing): a. Cash Collateral: authorizing the consensual use of Cash Collateral within the meaning of section 363 in which the Prepetition Secured Lenders have an interest under the Prepetition Credit Documents, as defined herein, pursuant to sections 361 and 363 of the Bankruptcy Code; b. Budget: authorizing the consensual use of Cash Collateral in accordance with the Budget annexed as Exhibit A to the Interim Order solely for (i) the post-petition and other agreed operating expenses of the Debtor and (ii) payment of costs of administration of the Chapter 11 Case, to the extent set forth in the Budget; c. Adequate Protection: granting the Prepetition Secured Lenders the form of proposed Adequate Protection pursuant to sections 361, 362, 363(e), 503(b), and 507 of the Bankruptcy Code; d. Final Hearing: scheduling a Final Hearing pursuant to Bankruptcy Rules 2002, 4001(b)(c) and (d), to consider entry of the relief requested in this Cash Collateral Motion on a final basis and approve the form of notice with respect to the Final Hearing; e. Waiver of Stay: waiving any applicable stay as provided in the Bankruptcy Rules and providing for immediate effectiveness of the Interim Order; and f. Other: granting related relief and such other and further relief as the Court deems just and proper.

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JURISDICTION 8. This Court has subject matter jurisdiction to consider this Cash

Collateral Motion pursuant to 28 U.S.C. 1334. This is a core proceeding pursuant to 28 U.S.C. 157(b). Venue is proper before this Court pursuant to 28 U.S.C. 1408 and 1409. BACKGROUND 9. On the date hereof (the Petition Date), the Debtor filed a

voluntary petition in this Court for relief under Chapter 11 of the Bankruptcy Code. The factual background regarding the Debtor, including its operations, its capital and debt structure, and the events leading to the filing of this bankruptcy case, is set forth in detail in the Declaration of Jonathan A. Mitchell Pursuant to Local Bankruptcy Rule 1007-2 and in Support of Chapter 11 Petitions (the First Day Declaration) which is deemed fully incorporated herein by reference.1 10. The Debtor is authorized to continue to operate its business and

manage its properties as debtor in possession pursuant to sections 1107(a) and 1108 of the Bankruptcy Code. PREPETITION SENIOR SECURED INDEBTEDNESS i. The Revolver Agreement 11. On April 16, 2010, the Debtor entered into a credit facility (as

amended, supplemented, restated or otherwise modified prior to the Petition Date, the Revolver Agreement, and together with all other loan and security documents related to, referenced in or executed from time to time in connection therewith, the Revolver
1

Capitalized terms not otherwise defined herein shall have the meanings ascribed to them in the First Day Declaration.

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Documents) with JPMorgan Chase Bank, N.A. (JPMorgan), as Administrative Agent; Citibank, N.A., as the Documentation Agent; and Bank of America, N.A., as Syndication Agent -- on behalf of the lenders and issuing banks thereunder (collectively, the Revolver Lenders) pursuant to which the Revolver Lenders provided the Debtor with credit facilities consisting of revolving loans and letters of credit in an aggregate principal amount not to exceed $100 million. 12. The Debtors offices in London and Paris operate under the name

Dewey & LeBoeuf LLP, which is a partnership organized under the laws of England and Wales (DLUK). Upon its formation in December 2010, DLUK guaranteed the Debtors obligations under the Revolver Agreement pursuant to a Deed of Guarantee (the DLUK Credit Agreement Guaranty) ii. Secured Notes 13. On April 16, 2010, the Debtor entered into a Note Purchase

Agreement (as amended, supplemented, restated or otherwise modified prior to the Petition Date, the Note Agreement), pursuant to which the Debtor issued: (a) $40 million aggregate principal amount of 4.49% Series A Senior Secured Notes due April 16, 2013 (the Series A Notes); (b) $15 million aggregate principal amount of 5.39% Series B Senior Secured Notes due April 16, 2015 (the Series B Notes); (c) $40 million aggregate principal amount of 6.10% Series C Senior Secured Notes due April 16, 2017 (the Series C Notes); and (d) $55 million aggregate principal amount of 6.65% Series D Senior Secured Notes due April 16, 2020 (the Series D Notes and, together with the Series A Notes, the Series B Notes and the Series C Notes, the Notes, and together with the Note Agreement and all other documents, including, without limitation, loan, note and security documents related to, referenced in or

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executed from time to time in connection with the Note Agreement, the Note Documents). 14. DLUK also guaranteed the Debtors obligations under the Note

Documents pursuant to a Deed of Guarantee entered into at the same time as the DLUK Credit Agreement Guarantee (the DLUK Noteholder Guarantee and together with the DLUK Credit Agreement Guaranty, the DLUK Guarantees). iii. Prepetition Liens and Collateral; Intercreditor Agreement 15. To secure the obligations under the Revolver Agreement and the

Note Documents, pursuant to a security agreement entered into contemporaneously with the Revolver Agreement and Note Documents, the Debtor granted to JPMorgan, as collateral agent (Collateral Agent) under the Intercreditor Agreement (as defined below) on behalf of the Revolver Lenders and the holders of the Secured Notes (the Noteholders and together with the Revolver Lenders, the Prepetition Secured Lenders), valid, perfected, enforceable and non-avoidable first priority liens on and security interests in, among other things the following assets of the Debtor (as more particularly set forth in the security agreement, collectively, the Initial Prepetition Collateral): all accounts, contract rights, chattel paper (including, without limitation, tangible chattel paper and electronic chattel paper), instruments (including , without limitation, promissory notes), letter of credit rights, general intangibles (including, without limitation, payment intangibles) and other obligations of any kind, whether or not arising out of or in connection with the rendering of services and whether or not earned by performance, including, without limitation, the Debtors right to be compensated for its services and reimbursed for related costs and expenses, amounts disbursed or obligations incurred for the account of the Debtors clients for fees paid or payable to or goods or services obtained from the Debtors partners and employees or 7

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third parties, whether or not the Debtor has rendered a bill for such services or disbursements or entered the value of such services or disbursements in its books as accounts receivable, whether or not such services or disbursements have been completed and whether or not an express or implied agreement for compensation for such services or reimbursement for such disbursement exists, and all rights then or thereafter existing in and to all retainer agreements , security agreements, mortgages, liens, leases, letters of credit and other contracts securing or otherwise relating to the foregoing property, together with all proceeds of, collateral for, income, royalties and other payments due and payable with respect to, and supporting obligations relating to, any of such collateral (including, without limitation, payments under insurance, any indemnity, warranty or guaranty with respect to the foregoing collateral, tort claims, including without limitation, commercial tort claims, and cash). 16. In addition, as set forth in the Revolver Documents and Note

Documents, the DLUK Guarantees are secured by a lien on and security interest granted by DLUK in billed chargeable time, billed chargeable disbursements, billed value added tax, recorded but unbilled chargeable time, incurred but unbilled chargeable disbursements and applicable value added tax, in each case for matters managed by the partners of the Debtor or DLUK whose practice is substantially based in DLUK s offices located in London, England, together with all proceeds of, collateral for, income, royalties and other payments then or thereafter due and payable with respect to, and supporting obligations relating to the foregoing, and to the extent not otherwise included, all payments under insurance, or any indemnity, warranty or guaranty, payable by reason of loss or damage to or otherwise with respect to any of the foregoing, tort claims, including, without limitation, commercial tort claims, and cash and cash in account, in each case excluding any client accounts. Such lien and security 8

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interest were granted in favor of JPMorgan, as Collateral Agent, on behalf of the Prepetition Secured Lenders. 17. The Revolver Agreement was set to mature on April 16, 2012, but

was extended to April 30, 2012 by agreement with the Revolver Lenders. As part of its prepetition wind-down negotiations, DL advised the Revolver Lenders of several potential defaults and events of default that would occur absent waivers involving certain covenants and asset coverage ratios. Accordingly, the Secured Credit Agreement was extended pursuant to an Amendment No. 2, Waiver and Reaffirmation Agreement, dated April 30, 2012 (the Second Amendment), which, among other things, extended the maturity date of the Revolver Agreement to May 14, 2012. 18. The events of default under the Revolver Documents and the Note

Documents mirror one another, and a default under either the Revolver Documents or the Note Documents would be a cross-default under the other documents. On or about April 30, 2012, DL advised the Noteholders that certain defaults and events of default had or would occur under the Note Documents. Accordingly, by an amendment and waiver dated May 2, 2012 (the First Secured Note Waiver), DL requested and obtained a waiver from the Noteholders to May 14, 2012. 19. The Revolver Lenders agreed to the Second Amendment, and the

Noteholders agreed to the First Secured Note Waiver in exchange for, inter alia, DLs agreement to concentrate its daily cash receipts in an account (the Concentration Account) maintained with JPMorgan, make its disbursements pursuant to an agreed upon budget, and provide a detailed wind-down plan. 20. As additional security for the obligations under Revolver

Documents and the Note Documents, in connection with the Second Amendment and the First Secured Note Waiver, pursuant to a supplemental security agreement, the 9

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Debtor granted the Collateral Agent, on behalf of the Revolver Lenders and the Noteholders, a lien on and security interest in the Debtors right, title and interest in, among other things, all cash (to the extent not otherwise included in the Initial Prepetition Collateral), all deposit accounts, all securities accounts and all proceeds of the foregoing (as more particularly set forth in the supplemental security agreement, collectively, the First Supplemental Collateral). 21. The Revolver Agreement was further extended pursuant to an

Amendment No. 3, Waiver and Reaffirmation Agreement, dated May 15, 2012 (the Third Amendment), which, among other things, extended the maturity of the Revolver Agreement through May 18, 2012 (the Maturity Date). 22. The Debtor also failed to comply with, and was in default with

respect to, certain provisions of the Note Documents, as amended by the First Secured Note Waiver. Accordingly, DL requested and obtained from the Noteholders an amendment and waiver dated May 15, 2012 (the Second Secured Note Waiver). 23. In addition to the conditions agreed to under the Second

Amendment and the First Secured Note Waiver, the Debtor agreed under the Third Amendment and the Second Secured Note Waiver, inter alia, to retain a chief restructuring officer, deliver a plan relating to the collection of accounts receivables (the Accounts Receivables Plan), and the Revolver Lenders and Noteholders agreed to allow for certain amounts permitted to be withdrawn from the Concentration Account under an approved budget. 24. Further, as additional security for the obligations under the Third

Amendment and the Second Secured Note Waiver arising from the transfer to and use of the First Supplemental Collateral and the proceeds of then existing Collateral by the Debtor on or after May 1, 2012, the Debtor, pursuant to a second supplemental security 10

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agreement, granted to the Collateral Agent, on behalf of the Revolver Lenders and the Noteholders, a lien on and security interest in, inter alia, the Initial Prepetition Collateral and, to the extent not already included in the Initial Prepetition Collateral or First Supplemental Collateral, the following assets of the Debtor (such additional assets, as more particularly set forth in such supplemental security agreement, the Second Supplemental Collateral; and together with the Initial Prepetition Collateral and the First Supplemental Collateral, collectively the Prepetition Collateral): equipment, inventory, goods, equity interests in subsidiaries and affiliates, certificated and uncertificated securities, investment property, security entitlements, trademarks, copyrights and other intellectual property, commercial tort claims (including, without limitation, causes of action against present or former partners or employees of the Debtor or any of its affiliates of its in respect of breaches of fiduciary duty and causes of action against any present and former partners or employees of the Debtor or its affiliates to recover any payments made by the Debtor or any of its subsidiaries or affiliates to such persons with respect to distributions, return of capital or any other payment and all causes of action against any present or former partners or employees of the Debtor or any of its affiliates arising out of or resulting from their respective departures from the Debtor or such affiliate ), rights to computer equipment and software, and books and records relating to the foregoing. 25. All of the Debtors cash, including the cash in its deposit accounts,

wherever located, whether as original collateral or proceeds of other Prepetition Collateral, constitute the cash collateral of the Prepetition Secured Lenders. Accordingly, the Prepetition Collateral includes cash collateral within the meaning of Section 363(a) of the Bankruptcy Code (Cash Collateral).

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26.

The Revolver Lenders and the Noteholders, agreed that the

obligations secured under the Revolver Agreement and the Note Documents (collectively, the Prepetition Credit Documents), and the priority of the lien rights and security interests in and to the Prepetition Collateral and the DLUK Guarantees are pari passu and governed pursuant to an Intercreditor Agreement, dated as of April 16, 2010 (the Intercreditor Agreement) and the related security agreements (as supplemented). 27. As of the Petition Date, the amount of obligations owing by the

Debtor under (i) the Revolver Documents was approximately $74,766,040.49 of principal and $1,688,658.85 face amount of letters of credit issued and outstanding under the Revolver Agreement (together with any amounts paid, incurred or accrued prior to the Petition Date in accordance with the Revolver Documents, plus, without limitation accrued and unpaid interest, any fees, expenses, and disbursements (including, without limitation, attorneys fees, consultant fees, related expenses and disbursements), indemnification obligations, secured hedging, letter of credit reimbursement obligations, letter of credit fees, secured cash management obligations and other charges or amounts of whatever nature, whether or not contingent, whenever arising, as each of the foregoing is provided in the Revolver Documents (the Revolver Obligations)) and (ii) the Note Document was an aggregate principal amount of approximately $150,000,000, (together with any amounts paid, incurred or accrued prior to the Petition Date in accordance with the Prepetition Credit Documents, plus, without limitation, accrued and unpaid interest, any fees, expenses, and disbursements (including, without limitation, attorneys fees, consultant fees, related expenses and disbursements), make-whole obligations, indemnification obligations, and other charges or amounts of whatever nature, whether or not contingent, whenever arising, 12

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as each of the foregoing is provided in the Prepetition Credit Documents, the Note Obligations, and together with the Revolver Obligations, the Prepetition Obligations). 28. Currently, there are no alternative financing options available to

facilitate the administration of the Chapter 11 estate and continue the orderly winddown of the Debtors affairs, including: (a) liquidation of the Firms assets, including approximately $255 million in face amount of accounts receivable and work in progress generated by DLs U.S. offices and various pieces of artwork; (b) disposition of the Firms former clients files; (c) closure of the Debtors offices and the return of leased property through the rejection of office and equipment leases; (d) evaluation and administration of claims against the Debtors estate; (e) investigation and pursuit of potential estate claims and causes of actions; and (f) confirmation of a Chapter 11 plan. 29. For these reasons, the Prepetition Secured Lenders have consented

to the Debtors use of Cash Collateral subject to the grant of adequate protection. CONCISE SUMMARY OF TERMS 30. In accordance with Bankruptcy Rule 4001 and Local Rule 4001-2,

the Debtor provides the following concise summary of the material provisions and key conditions for the use of Cash Collateral under the Interim Order. 31. The Prepetition Secured Lenders have consented to the Debtors

use of Cash Collateral subject to the grant of adequate protection. The Interim Order imposes certain conditions and restrictions on the Debtors use of Cash Collateral and

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grants certain relief and adequate protection for the benefit of the Prepetition Secured Lenders, including without limitation, the following:2 Parties with Interest in Cash Collateral: JPMorgan as Revolver Agent on behalf of the lenders under the Revolver Agreement (the Revolver Lenders). JP Morgan as the Collateral Agent for the Revolver Lenders and the Noteholders. Borrower: The Debtor. Budget: Attached as Exhibit A to the Interim Order. Specified Period: The Debtor is authorized to use Cash Collateral for the period from the Petition Date through the date which is the earlier to occur of (a) 11:59 p.m. (Eastern time) on the fifth (5th) day following the Termination Declaration Date (as defined in the Interim Order), or (b) 11:59 p.m. (Eastern time) on July 1, 2012. See Interim Order IO at 3. Use of Cash Collateral: Operating Expenses of the Borrower and other costs and expenses of administration of the Chapter 11 Case solely up to the amounts, at the times, and for the purposes identified in the Budget. All Cash Collateral use must be strictly in accordance with the terms of the Budget, subject to (i) with respect to non-Case Professional and non-Committee Member line items, a permitted aggregate and cumulative variance of 5%, which shall be measured on a bi-weekly basis and at the end of the Specified Period, and (ii) with respect to Case Professional categories, a permitted aggregate and cumulative variance of 5% for the Debtor Professional Fees and a permitted aggregate and cumulative variance for Committee Fees and Expenses, which in each case shall be measured on a bi-weekly basis and at the end of the Specified Period, provided, however, that in no event shall the collective variances to the Budget with respect to the Debtor Professional Fees and Committee Fees and Expenses cause the Debtor to use Cash Collateral in respect of such categories in an amount greater than one hundred percent (100%) of the Budget for such categories for the Specified Period. See IO at 3. Adequate Protection Liens: the Collateral Agent, for the benefit of the Revolver Lenders and Noteholders, will be granted additional and replacement continuing valid, binding, enforceable, nonavoidable, and automatically perfected postpetition security
2

The descriptions of the terms of the Interim Order set forth in this Cash Collateral Motion are summaries only. To the extent of any inconsistency between the summaries set forth in this Cash Collateral Motion and the terms of the Interim Order, the terms of the Interim Order shall govern.

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interests in and liens on (the Adequate Protection Liens) any and all presently owned and hereafter acquired personal property, real property and all other assets of the Debtor, wherever located, including, without limitation, all Prepetition Collateral, the Debtors rights under section 506(c) of the Bankruptcy Code, and all rights, claims and causes of action (including, without limitation, avoidance claims or causes of action arising under chapter 5 of the Bankruptcy Code and, upon entry of a Final Order, authority to settle such avoidance claims or causes of action), and together with any proceeds, recoveries, product, offspring or profits thereof (collectively, the Collateral), to the extent of any Diminution in Value and the Indemnity Obligations. The Adequate Protection Liens shall be junior only to the: (A) Carve Out (defined below); (B) Permitted Prior Liens (as defined in the Interim Order); and (C) Prepetition Liens. See I.O. at 5. Extraordinary Provision: Adequate Protection Liens include liens on avoidance claims or causes of action arising under Chapter 5 of the Bankruptcy Code and, upon entry of a Final Order, authority to settle such avoidance claims or causes of action). See I.O. 5. Adequate Protection Superpriority Claims: The Prepetition Agents, Revolver Lenders and Noteholders will be hereby granted as and to the extent provided by sections 361, 363, 503(b) and 507(b) of the Bankruptcy Code an allowed superpriority administrative expense claim in the Chapter 11 case (an Adequate Protection Superpriority Claim). The Adequate Protection Superpriority Claims shall be junior only to the Carve Out. See I.O. at 6. Adequate Protection Payments: The Debtor shall make adequate protection payments to the: (i) Revolver Agent, on behalf of the Revolver Lenders, and the Noteholders, in the form of payment of the reasonable fees, costs and expenses of the Revolver Agent and Noteholders, their respective counsel Kramer Levin Naftalis & Frankel LLP and Bingham McCutchen LLP; and (ii) Collateral Agent, for its fees, costs and expenses, including, without limitation, the fees and expenses of FTI Consulting and Gulf Atlantic Capital, as financial advisors for the Collateral Agent. See I.O. at 7. Excess Cash Collateral: The Debtor shall pay all cash on hand (determined as of the close of business on Friday of each week) in excess of $10 million plus (i) accrued but unpaid fees, costs and expenses of Case Professionals and Accrued Employee PTO in an amount to not to exceed their respective budgeted line item for 15

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such Case Professionals items (subject to any allowed variance permitted under this Interim Order) plus (ii) accrued but unpaid fees, costs and expenses payable under Paragraph 7(a) hereunder, (the Excess Cash Collateral) to the Collateral Agent at or before Monday of each week, which Excess Cash Collateral shall be applied in accordance with the Intercreditor Agreement. In the event it is determined that the Prepetition Secured Lenders are oversecured, such payments may be treated as payments of interest as provided in the Prepetition Credit Documents. Cash equal to the accrued and unpaid items set forth above in (i) and (ii) shall be segregated until such items are paid and shall be used for no other purpose. See I.O. at 8. Carve-Out: means the following expenses: (i) statutory fees and interest payable to the United States Trustee or the clerk of the Court pursuant to 28 U.S.C. 1930(a)(6); (ii) the allowed winddown costs and expenses of a chapter 7 trustee appointed in the Case or Successor Case in an aggregate amount not to exceed $50,000; and (iii) with respect to professional fees and disbursements incurred by the Debtor (the Debtor Professional Fees) and any Statutory Committee (the Committee Professional Fees) for any professional (the Case Professionals) retained by final order of the Court (which order is not the subject of a stay, vacatur, appeal or reconsideration) by the Debtor and any Statutory Committee under section 327 or 1103(a) of the Bankruptcy Code and expenses incurred by members of the Statutory Committee (a Committee Member) in the performance of such members duties in connection with the Case (but excluding fees and expenses of any professionals retained by such members, and together with the Committee Professional Fees, the Committee Fees and Expenses) (A) prior to the Termination Declaration Date, the lesser of (1) with respect to each Case Professional and Committee Member, the reasonable amounts accrued prior to the Termination Declaration Date and allowed by order of the Court (which order is not the subject of a stay, vacatur, appeal or reconsideration) and (2) with respect to each Case Professional and Committee Member, the accrued and unpaid amount shown on the Budget with respect thereto, as applicable, and (B) on and after the Termination Declaration Date, the reasonable Debtor Professional Fees and Committee Fees and Expenses accrued from and after such Termination Declaration Date and allowed by order of the Court (which order is not the subject of a stay, vacatur, appeal or reconsideration) in an aggregate amount not to exceed $250,000. See I.O. 16. Events of Default: See I.O. 14. the violation of or failure by the Debtor to perform, in any respect, any of the terms, provisions, conditions, covenants, 16

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or obligations under this Interim Order (including the Budget); the obtaining of credit or the incurring of indebtedness that is (i) secured by a security interest, mortgage or other lien on all or any portion of the Collateral which is equal or senior to any security interest, mortgage or other lien of the Collateral Agent, Revolver Lenders and Noteholders, or (ii) entitled to priority administrative status which is equal or senior to that granted to the Prepetition Agents, Revolver Lenders or Noteholders in the Interim Order; subject to a Final Order, the institution of a Challenge (as defined in the Interim Order) after a party in interest has been granted standing by order of the Court. any lien or security interest purported to be created under the Prepetition Credit Documents shall cease to be, or shall be asserted by the Debtor not to be, a valid and perfected lien on or security interest in any Prepetition Collateral, with the priority required by the Prepetition Credit Documents or the Interim Order; the entry of an order by the Court granting relief from or modifying the automatic stay of section 362 of the Bankruptcy Code (i) to allow any creditor to execute upon or enforce a lien on or security interest in any Collateral, or (ii) with respect to any lien of or the granting of any lien on any Collateral to any state or local environmental or regulatory agency or authority, which in either case would have a material adverse effect on the business, operations, property, assets, or condition, financial or otherwise, of the Debtor; reversal, vacatur, or modification of the Interim Order; dismissal of the Chapter 11 case or conversion of the Case to a chapter 7 case, or appointment of a chapter 11 trustee or examiner with enlarged powers or other responsible person; the termination, resignation of, or material modification of the duties or authority of Jonathan A. Mitchell, as CRO; any material misrepresentation of fact made after the Petition Date by the Debtor or its agent to the Prepetition Agents, Revolver Lenders, Noteholders, or to agents for the Prepetition Agents, Revolver Lenders, or Noteholders about the financial condition of the Debtor, the nature, extent, location or quality of any Collateral, or the disposition or use of any Collateral, including Cash Collateral; 17

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a default by the Debtor in reporting financial information as and when required in the Interim Order or under the Prepetition Credit Documents, and the continuance of such default for a period of one (1) business day following written notice by the Collateral Agent to the Debtor of such default; the sale of any portion of the Debtors assets outside the ordinary course of business without the prior written consent of the Majority Creditors (as defined in the Intercreditor Agreement), in their sole discretion; the Debtors failure to obtain entry of a Final Order by July 1, 2012; the failure to comply with Prepetition Credit Documents, other than as otherwise modified in the Interim Order or as prohibited by the Bankruptcy Code; the granting of any motion providing for reconsideration, stay, or vacatur of this Interim Order; the failure to maintain cash receipts in respect of accounts receivable in an amount of at least 90% of the amount set forth in the Budget on a cumulative, aggregate rolling basis, which shall be measured bi-weekly as of the close of business on Friday of each week; or

Remedies Provision: Upon the occurrence and during the continuation of an Event of Default, the Collateral Agent shall declare a termination, reduction or restriction of the ability of the Debtor to use any Cash Collateral, except for certain limited uses (a Termination Declaration). Any automatic stay otherwise applicable to the Collateral Agent, Revolver Lenders and Noteholders will be modified so that five (5) days after a Termination Declaration (the Remedies Notice Period), the Collateral Agent, Revolver Lenders and Noteholders shall be entitled to exercise their rights and remedies to satisfy the Prepetition Obligations, Adequate Protection Superpriority Claims, Adequate Protection Liens, Adequate Protection Payments, Indemnity Obligations and any other obligation under this Interim Order (in accordance with the Intercreditor Agreement). During the Remedies Notice Period, the Debtor shall be entitled to seek an emergency hearing with the Court for the sole purpose of contesting whether an Event of Default has occurred and/or is continuing. See I.O. 15. Waiver of Automatic Stay: The automatic stay otherwise applicable to the Collateral Agent, Revolver Lenders and

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Noteholders will be modified upon expiration of Remedies Notice Period. See I.O. 15. Section 506(c): In consideration for the Carve Out and the payments made under the Budget to administer the case using Cash Collateral, no costs for expenses of administration shall be charged against or recovered from the Collateral Agent, Revolver Lenders and Noteholders or their Collateral pursuant to section 506(c) of the Bankruptcy Code. See I.O. 20. Indemnification: The Interim Order provides that the Prepetition Agents, Revolver Lenders and Noteholders, and their respective professionals each have acted in good faith, and without negligence or violation of public policy or law, in respect of all actions taken by them in connection with or related in any way to the negotiating, implementing, documenting or obtaining requisite approval of the use of Cash Collateral, including in respect of the granting of the Adequate Protection Liens, any challenges or objections to the use of Cash Collateral, and all documents related to and all transactions contemplated by the foregoing. Accordingly, the Prepetition Agents, Revolver Lenders, Noteholders, and their respective professionals shall be indemnified and held harmless by the Debtor in respect of any claim or liability incurred in respect thereof or in any way related thereto, provided that no such parties will be indemnified for any cost, expense or liability to the extent determined in a final, non-appealable judgment of a court of competent jurisdiction to have resulted primarily from such parties gross negligence or willful misconduct (the Indemnity Obligations). The Interim Order also provides that no exception or defense in contract, law or equity exists as to any obligations set forth, as the case may be in the Interim Order or in the Prepetition Credit Documents, to indemnify and/or hold the Prepetition Agents, Revolver Lenders, Noteholders, and their respective professionals harmless, and any such defenses are waived. See I.O. 27. Release: The Debtor expressly, forever and irrevocably waives, discharges, releases and acquits all former, current and future Prepetition Agents, Revolver Lenders and Noteholders, and each of their respective former, current and future officers, directors, employees, managers, owners, shareholders, members, partners, agents, representatives, attorneys, advisors, consultants, accountants and other professionals, affiliates, predecessors and successors in interest of and from any and all claims, demands, liabilities, responsibilities, disputes, remedies, causes of action, indebtedness and obligations, rights, assertions, allegations, actions, suits, controversies, defenses, offsets, objections, counterclaims, causes of actions, choses of action, proceedings, losses, damages, injuries, attorneys fees, costs, expenses, or judgments of every type, 19

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whether known, unknown, asserted, unasserted, suspected, unsuspected, accrued, unaccrued, fixed, contingent, pending or threatened, including, without limitation, all legal and equitable theories of recovery arising under common law, statute or regulation or by contract, of every nature and description, arising out of, in connection with, or relating to the Prepetition Credit Documents and/or the transactions contemplated hereunder or thereunder, including, without limitation, (1) any so-called lender liability or equitable subordination claims or defenses, (2) any and all claims and causes of action under the Bankruptcy Code, and (3) any and all claims and causes of action with respect to the Prepetition Liens or Prepetition Obligations, including, without limitation, to the validity, priority, perfection or avoidability of the liens or claims of the Prepetition Agents, Revolver Lenders and Noteholders; and (g) the Debtor expressly, forever and irrevocably waives, discharges, and releases rights it may have to challenge any of the Prepetition Liens or the Prepetition Obligations. See I.O. E.(v). DEBTORS PROPOSED USE OF CASH COLLATERAL A. The Debtors Immediate and Urgent Need for the Use of Cash Collateral 32. As described in the Mitchell Declaration, the Debtor has reached an

agreement with the Collateral Agent and the Prepetition Secured Lenders for the consensual use of Cash Collateral to pay various ongoing expenses to facilitate the winddown, including the funding of employee payroll, insurance, file storage, and rent, as well as the investigation, analysis and either prosecution or defense (as the case may be) of claims asserted by or against the Debtors estate, in accordance with an agreed upon Budget. Paying these expenses is critical for the Debtor to continue to successfully wind down its business and affairs and to maximize the value of the Debtors assets for all creditors. 33. Without access to Cash Collateral, the Firm will be unable to con-

tinue the orderly wind-down of the Debtors affairs, including: (a) liquidation of the Firms assets, including approximately $255 million in face amount of accounts receivable and work in progress and various pieces of artwork; (b) disposition of the Firms 20

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former clients files; (c) closure of the Debtors offices and the return of leased property through the rejection of office and equipment leases; (d) evaluation and administration of claims against the Debtors estate; and (e) investigation and pursuit of potential estate claims and causes of action. Consequently, absent immediate authority to use Cash Collateral on an interim basis, the Debtors estate would suffer irreparable harm. For these reasons, the Debtor submits that proposed use of Cash Collateral is necessary and in the best interests of the Debtors estate and its creditors. B. The Budget Reflects Debtors Reasonable and Necessary Costs 34. As described in the Mitchell Declaration, DL has concluded that the

value-maximizing course for the estate was to wind down its affairs in a Chapter 11 case, rather than an abrupt, unplanned liquidation. 35. The Debtors minimum cash needs are reflected in the weekly

Budget of receipts and disbursements prepared on a cash basis for five weeks, which is attached as Exhibit A to the Interim Order. 36. Under the Budget, which was prepared in consultation with the

Debtors professionals, the Debtor estimates it currently has available approximately $6 million in cash on hand. The Budget anticipates approximately $13.4 million in disbursements during the first twenty-one (21) days, as well as additional bankruptcyrelated costs (including professionals) of $2.6 million, as well as additional reserves. 37. The Debtor believes the Budget is narrowly tailored and reflects the

reasonable and necessary costs and expenses, including the costs attendant to the Chapter 11 case, to wind down the Debtors affairs. Access to its cash with the consent of Prepetition Secured Lenders will enable the Debtor to implement an orderly winddown to maximize recoveries to creditors. Therefore, the Debtor represents that

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without immediate access to cash, the Debtors estate and its stakeholders will suffer substantial, immediate and irreparable harm. The Debtors need for access to the Cash Collateral is urgent. 38. Moreover, the terms and conditions of the use of Cash Collateral as

described herein and set forth in the Interim Order are fair and reasonable and were negotiated by the parties in good faith and at arms length. The Debtor has determined, therefore, that seeking the use of Cash Collateral is an exercise of its reasonable business judgment. BASIS FOR RELIEF A. The Debtors Request for Use of Cash Collateral and the Proposed Adequate Protection are Appropriate 39. Section 363(c)(2) of the Bankruptcy Code provides that the Court,

after notice and a hearing, may authorize the Debtor to use cash collateral, with or without the consent of the secured parties having an interest therein. See 11 U.S.C. 363(c)(2)(B). In considering whether to authorize use of cash collateral, however, upon a partys request, a court must find that the interests of the holder of the secured claim are adequately protected. 11 U.S.C. 363(e). 40. Bankruptcy Rule 4001(b)(2) provides that a final hearing on the use

of cash collateral may commence no earlier than 14 days after service of the Cash Collateral Motion but, [i]f the Cash Collateral Motion so requests, the court may conduct a preliminary hearing before such 14 day period expires, but the court may authorize the use of only that amount of cash collateral as is necessary to avoid immediate and irreparable harm to the estate pending a final hearing. At the preliminary hearing, the court may authorize the use of cash collateral only if there is a reasonable likelihood that the debtor will prevail at the final hearing under section 22

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363(e). 11 U.S.C. 363(c)(3). In examining requests for interim relief under this rule, courts apply the same business judgment standard applicable to other business decisions. See, e.g., In re Ames Dep't Stores Inc., 115 B.R. 34, 38 (Bank. S.D.N.Y. 1990). The request for use of cash collateral on a final basis is not limited to those amounts necessary to prevent destruction of the debtors business. A debtor is entitled to use cash collateral that it believes prudent in the operation of its business. See, e.g., In re Simasko Production Co., 47 B.R. 444, 449 (D. Co. 1985); Ames Dep't Stores, 115 B.R. at 36. 41. Section 363(e) of the Bankruptcy Code provides that on request of

an entity that has an interest in property used by the debtor, the court, with or without a hearing, is required to prohibit or condition such use as is necessary to provide adequate protection of such interest.3 The Bankruptcy Code does not explicitly define adequate protection, but it does contain a non-exclusive list of the means by which a debtor may provide adequate protection, including a cash payment or periodic cash payments, additional liens, replacement liens, and the indubitable equivalent of such entitys interest in such property. 11 U.S.C. 361. Accordingly, what constitutes adequate protection must be decided on a case-by-case basis. See In re Mosello, 195

Under section 363(p), the debtor has the burden of proof on the issue of adequate protection, and the entity asserting an interest in the cash collateral has the burden of proof on the issue of the validity, priority, or extent of such interest. 11 U.S.C. 363(p). There is no controlling authority from the Second Circuit Court of Appeals or the Southern District of New York on the standard of proof required for the debtor to establish adequate protection. Some courts, including the bankruptcy court for the Northern District of New York, hold that the debtor must establish by clear and convincing evidence that the value of the secured creditors interest in the collateral will remain adequately protected. In re O.P. Held, 74 B.R. 777, 784 (Bankr. N.D.N.Y. 1987); Northern Trust Co. v. Leavell (In re Leavell), 56 B.R. 11, 13 (Bankr. S.D. Ill. 1985); In re Sheehan, 38 B.R. 859, 868 (Bankr. D. S.D. 1984). Other courts require proof by a preponderance of the evidence. In re Ernst Home Center, Inc., 209 B.R. 955 (Bankr. W.D. Wash. 1997); In re Glasstream Boats, Inc., 110 B.R. 611 (Bankr. M.D. Ga. 1990); In re McCombs Properties VI, Ltd., 88 B.R. 261 (Bankr. C.D. Cal. 1988). The Debtor believes that in this case, as shown below, they satisfy both standards.

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B.R. 277, 289 (Bankr. S.D.N.Y. 1996); In re Realty Southwest Assocs., 140 B.R. 360 (Bankr. S.D.N.Y. 1992). 42. As codified in Bankruptcy Code section 361, the principal purpose

of adequate protection is to protect a secured creditor from diminution in value of its interest in collateral caused by the debtors use of that collateral during the period that the collateral is used. In re Carbone Companies, 395 B.R. 631, 635 (Bankr. N.D. Ohio 2008) (test is whether the secured partys interest is protected from diminution or decrease as a result of the proposed use of cash collateral); In re Continental Airlines, Inc., 146 B.R. 536, 539 (Bankr. D. Del. 1992) (noting that Post-Timbers courts have uniformly required a movant seeking adequate protection to show a decline in value of its collateral); In re Alyucan Interstate Corp., 12 B.R. 803, 809-09 (Bankr. D. Utah 1981) (opining that creditor entitled to adequate protection only for impairment in collateral attributable to the stay and that not every decline in value must be recompensed, only those which, but for the stay, could be and probably would be prevented or mitigated). 43. Thus, the focus of the adequate protection requirement is to

preserve the secured creditors position at the time of the bankruptcy filing and protect the secured creditor from diminution in the value of its collateral during the reorganization process. In re Mosello, 195 B.R. at 288 (citation omitted); see In re WorldCom, Inc., 304 B.R. 611, 618-19 (Bankr. S.D.N.Y. 2004) (The legislative history for section 361 of the Bankruptcy Code, which sets forth how adequate protection may be provided under section 363, makes clear that the purpose is to insure that the secured creditor receives the value for which the creditor bargained for prior to the debtors bankruptcy. However, neither the legislative history nor the Bankruptcy Code require the Court to protect a creditor beyond what was bargained for by the parties.)

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44.

Here, the Prepetition Secured Lenders have consented to the

Debtors use of Cash Collateral subject to (i) the use of such funds under the Budget and reporting requirements, (ii) the making of Adequate Protection Payments, and (iii) the granting of the Adequate Protection Liens on all assets of the Debtor, which replacement liens shall be junior only to the Carve-Out, and any Permitted Prior Liens, and Adequate Protection Superpriority Claims, subject only to the Carve-Out. As to the latter, the Debtor proposes to give the Prepetition Secured Lenders replacement liens and superpriority claims under section 507(b), provided that the claims and liens shall be granted to the extent of any diminution in the value of their respective interests in the Prepetition Collateral resulting from the use of Cash Collateral, the authorized use, sale or lease of Prepetition Collateral, the subordination of the Prepetition Liens to the Carve Out, and the imposition of the automatic stay (collectively, the Diminution in Value) pursuant to sections 361, 362, and 363 of the Bankruptcy Code, and to secure the Indemnity Obligations. 45. Additionally, the Guidelines for Financing Requests of the

Bankruptcy Court of the Southern District of New York (the Guidelines) require disclosure of any so-called Extraordinary Provisions that ordinarily will not be approved without substantial cause shown, compelling circumstances and reasonable notice. Courts in this District have recognized that adequate protection may include liens on avoidance actions and their proceeds. See e.g., In re Grubb & Ellis Company, Case No. 12-10685 (MG) (Bankr. S.D.N.Y. February 22, 2012) (Docket No. 27, interim order); In re Lyondell Chem. Co., Case No. 09-10023 (REG) (Bankr. S.D.N.Y. January 9, 2009) (Docket No. 79) (granting DIP Lenders first lien on, inter alia, proceeds of avoidance actions); see generally, Official Comm. of Unsecured Creditors of Motors Liquidation Co. v. U.S. Dep't of the Treasury (In re Motors Liquidation Co.), 460 B.R. 25

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603 (Bankr. S.D.N.Y. 2011) (there is no hard and fast prohibition against granting liens on avoidance actions); citing In re AppliedTheory, 2008 WL 1869770, at *1 (Bankr. S.D.N.Y. April 24, 2008) (further stating that granting secured lenders a lien on avoidance proceeds on interim and final basis was appropriate in exchange for the debtors use of cash collateral); see also Unsecured Creditors Comm. v. Jones Truck Lines, Inc., 156 B.R. 608, 610 (Bankr. W.D. Ark. 1992) (Post-petition liens, however, may be extended to avoidance actions . . . .). 46. Here, the proposed granting of liens on avoidance actions and the

proceeds therefrom, and upon entry of a Final Order, authority to settle such avoidance claims or causes of action is warranted because (a) this case cannot be administered without the use of the Prepetition Secured Lenders collateral and (b) there is no additional collateral or other unencumbered assets of the estate available to protect the Prepetition Secured Lenders against any Diminution in Value thereof. In re Ellingsen MacLean Oil Co., Inc., 98 B.R. 284 (Bankr. W.D. Mich. 1989) (Property of the estate includes preferences recovered by the trustee). 47. The proposed adequate protection package is reasonable, necessary

and appropriate to preserve and protect against the diminution in value of the Prepetition Collateral and the Prepetition Secured Lenders interests therein. As a practical matter, without use of the Cash Collateral, DL has no available means of preserving its records, protecting employee entitlements to accrued benefits, protecting remaining client documents, and administering its estate. The use of Cash Collateral prescribed in the Budget to facilitate the wind-down of the Debtors business and liquidate its assets in an orderly fashion will help to preserve value for all interested stakeholders. Also, the proposed granting of liens on avoidance actions and the 26

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proceeds therefrom is warranted because there is no additional collateral or other unencumbered assets of the estate available to protect the Prepetition Secured Lenders against any Diminution in Value. Therefore, the grant of liens on all avoidance actions is the only adequate protection available. As such, the terms and conditions of the use of Cash Collateral are fair and reasonable and were negotiated by the parties in good faith and at arms length. The Debtor has determined, therefore, that seeking the use of Cash Collateral is an exercise of its reasonable business judgment. Accordingly, the Debtor should be authorized to use Cash Collateral as set forth herein. B. Modification of the Automatic Stay on a Limited Basis is Warranted 48. The relief requested herein contemplates a modification of the

automatic stay pursuant to Bankruptcy Code section 362(a) to the extent necessary to permit the Prepetition Secured Lenders upon the continuation of any Event of Default, all rights and remedies provided for in the Prepetition Credit Documents, the Interim Order, and the Final Order, after five (5) business days notice thereof, and to take various actions without further order of or application to the Court. 49. Stay modification provisions of this sort are ordinary and usual

features of, in the Debtors business judgment, are reasonable under the present circumstances. Accordingly, the Court should modify the automatic stay to the extent contemplated by the proposed Orders. C. Interim Approval and Scheduling of Final Hearing 50. As set forth above, Bankruptcy Rules 4001(b) and (c) provide that a

final hearing on a motion to use cash collateral pursuant to section 363 of the Bankruptcy Code may not be commenced earlier than fourteen (14) days after the service of such motion. Upon request, however, the Court is empowered to conduct a 27

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preliminary expedited hearing on the motion and to authorize the use of cash collateral and the obtaining of credit to the extent necessary to avoid immediate and irreparable harm to a debtors estate. 51. Given the immediate and irreparable harm to be suffered by the

Debtor absent interim relief, the Debtor respectfully requests that the Court schedule and conduct a preliminary hearing on the motion and (a) authorize the Debtor, from the entry of the Interim Order until the Final Hearing to utilize Cash Collateral, and (b) schedule the Final Hearing. D. Waiver of Bankruptcy Rules 6004(a) and (h) 52. The Debtor believes an efficient and expeditious approval to

utilize Cash Collateral is in the best interest of i t s creditors and other parties in interest. Accordingly, the Debtor seeks waiver of the notice requirements under Bankruptcy Rule 6004(a) and the 14-day stay of orders authorizing the use, sale, or lease of property under Bankruptcy Rule 6004(h). NOTICE 53. Notice of this Cash Collateral Motion has been provided by either

facsimile, electronic transmission, overnight delivery, or hand delivery to: (i) the U.S. Trustee; (ii) the Internal Revenue Service; (iii) the Office of the United States Attorney for the Southern District of New York; (iv) the entities listed on the Debtors List of Creditors Holding the twenty (20) Largest Unsecured Claims filed pursuant to Bankruptcy Rule 1007(d); (v) Kramer Levin Naftalis & Frankel LLP, 1177 Avenue of Americas, New York, New York 10036, Attn: Kenneth Eckstein and Robert Schmidt (as counsel to the Administrative Agent and Collateral Agent); (vi) Bingham McCutchen LLP, 399 Park Avenue, New York, NY 10022, Attn: Michael J. Reilly and Ronald J.

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Silverman (as counsel to the noteholders); (viii) any known secured creditors of record; (ix) any known parties asserting liens against the Debtors assets; and (x) any parties required to be served under any applicable Bankruptcy Rule or Local Rules. 54. The Debtor submits that, under the circumstances, no other or

further notice is necessary. NO PRIOR REQUEST 55. No prior request for the relief sought herein has been made to this

Court or any other court. WHEREFORE, the Debtor respectfully requests that this Court: (i) enter an Interim Order substantially in the form attached as Exhibit 1 granting the relief sought herein; (ii) enter a Final Order after a Final Hearing; and (iii) grant such other and further relief to the Debtor as the Court may deem proper. Dated: New York, New York May 28, 2012 DEWEY & LEBOEUF LLP By Its Proposed Counsel TOGUT, SEGAL & SEGAL LLP By: /s/Albert Togut ALBERT TOGUT SCOTT E. RATNER Members of the Firm One Penn Plaza, Suite 3335 New York, New York 10119 (212) 594-5000

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